This is completely wrong and absurd. We've had a gradual inflation rate since the beginning of the U.S. Dollar. We were headed toward a deflation without the QEs, which would've been a disaster in a highly illiquid economy. The QEs simply brought the inflation back to a good, gradual rate, and put more liquidity into the economy so businesses can start hiring again.
"We were headed toward a deflation without the QEs, which would've been a disaster in a highly illiquid economy."
Right, this according to the brilliant minds who created the crisis in the first place.
Clearly the financial situation is bad. Your 'good, gradual inflation rate' is WHY we're on the precipice of disaster. It's not like we now have a choice between an economic meltdown and a land full of unicorns and rainbows if only we keep stamping more paint on more pieces of paper. Our only option is damage control, but you'd rather keep piling on the damage.
Google some of the predictions made by Bernanke and his colleagues in the years and months leading up to the crisis. They've been dead wrong every step of the way. Yet now we are supposed to believe that inflation is no concern when food and commodity prices are at all time highs and causing revolts around the world? Talk about absurd.
> Inflation helps the proletariat, you know. Most of them are net debtors, so inflation makes it easier to pay off their debts.
Not so fast. Lenders factor in expected inflation, so it's only unexpected inflation that benefits debtors.
And, making payments isn't the only way to handle debt - bankruptcy works too. You don't get any more "pay later" pizzas, but you get to keep the ones that you already ate.
However, inflation hurts folks whose income doesn't match inflation. After they stop paying their debts, they still need to buy food.
My cat's favorite food went up 25% last month. Since she was already on the cheap stuff....
It's unclear why/how though, as the vast majority of new US mortgages end up with a GSE that is heavily dependent on govt support, so the increase was a political decision.
Only if their wages also get inflated, which does not always follow with price inflation of goods. And apparently would not happen on the free market, or else the government would not have to force it with minimum wage legislation.
The fundamental flaw in this idea is the assumption that increased production/consumption will in turn increase employment. At the end of the last two recessions, production and consumption have increased, but employment has not. The old theories no longer work.
