Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

In Fed and Out, Many Now Think Inflation Helps
New York Times ^ | October 26, 2013 | BINYAMIN APPELBAUM

Posted on 10/27/2013 1:10:29 PM PDT by reaganaut1

WASHINGTON — Inflation is widely reviled as a kind of tax on modern life, but as Federal Reserve policy makers prepare to meet this week, there is growing concern inside and outside the Fed that inflation is not rising fast enough.

Some economists say more inflation is just what the American economy needs to escape from a half-decade of sluggish growth and high unemployment.

The Fed has worked for decades to suppress inflation, but economists, including Janet Yellen, President Obama’s nominee to lead the Fed starting next year, have long argued that a little inflation is particularly valuable when the economy is weak. Rising prices help companies increase profits; rising wages help borrowers repay debts. Inflation also encourages people and businesses to borrow money and spend it more quickly.

The school board in Anchorage, Alaska, for example, is counting on inflation to keep a lid on teachers’ wages. Retailers including Costco and Walmart are hoping for higher inflation to increase profits. The federal government expects inflation to ease the burden of its debts. Yet by one measure, inflation rose at an annual pace of 1.2 percent in August, just above the lowest pace on record.

“Weighed against the political, social and economic risks of continued slow growth after a once-in-a-century financial crisis, a sustained burst of moderate inflation is not something to worry about,” Kenneth S. Rogoff, a Harvard economist, wrote recently. “It should be embraced.”

The Fed, in a break from its historic focus on suppressing inflation, has tried since the financial crisis to keep prices rising about 2 percent a year. Some Fed officials cite the slower pace of inflation as a reason, alongside reducing unemployment, to continue the central bank’s stimulus campaign.

(Excerpt) Read more at nytimes.com ...


TOPICS: Business/Economy; Front Page News
KEYWORDS: federalreserve; inflation
Navigation: use the links below to view more comments.
first 1-5051-100101-132 next last
When you have a fiat currency, watch out when policymakers say they want more inflation. They will get it.

The problem with the economy is that government regulation and taxation, along with the welfare state, discourage businesses from expanding and people from working. Inflation fell during the Reagan administration, and the economy grew (after an initial recession).

High inflation raises the tax rate on investment, since the definitions of capital gains and investment income for tax purposes do not account for inflation.

1 posted on 10/27/2013 1:10:29 PM PDT by reaganaut1
[ Post Reply | Private Reply | View Replies]

To: reaganaut1

Inflating the currency is what you do when you have racked up a mountain of debt and you don’t have a clue of how to meaningfully grow the economy.


2 posted on 10/27/2013 1:12:32 PM PDT by fhayek
[ Post Reply | Private Reply | To 1 | View Replies]

To: reaganaut1

Inflation is good? I’m never going to get used to communism.


3 posted on 10/27/2013 1:12:35 PM PDT by FlingWingFlyer (ObamaCare should have been tested on politicians before being released to the public!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: reaganaut1

Oh boy.

Weimar and Zimbabwe aren’t examples enough??


4 posted on 10/27/2013 1:12:39 PM PDT by GeronL
[ Post Reply | Private Reply | To 1 | View Replies]

To: reaganaut1
"the definitions of capital gains and investment income for tax purposes do not account for inflation. "

Inflation is theft.

5 posted on 10/27/2013 1:13:51 PM PDT by Paladin2
[ Post Reply | Private Reply | To 1 | View Replies]

To: reaganaut1

Hey, if you’re the president of an out-of-control government, and taxes are already sky-high, screwing people out of their money via inflation is a heck of a lot easier than reining in your spending and paying off your debts.


6 posted on 10/27/2013 1:14:01 PM PDT by Jack Hammer (American)
[ Post Reply | Private Reply | To 1 | View Replies]

To: reaganaut1

“a sustained burst of moderate inflation is not something to worry about...”

Tell us that when we have hyperinflation & we start using our dollars for toilet paper.


7 posted on 10/27/2013 1:14:02 PM PDT by Twotone (Marte Et Clypeo)
[ Post Reply | Private Reply | To 1 | View Replies]

To: reaganaut1

I am so sick of the Washington Post or the TV Money Shows with the experts telling us that the inflation is the solution to getting us out of our debt problems.


8 posted on 10/27/2013 1:17:48 PM PDT by bmwcyle (People who do not study history are destine to believe really ignorant statements.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Paladin2
Inflation is theft.

Yeah the comment that inflation is, "widely reviled as a kind of tax on modern life," struck me.

Inflation is a tax on savings, and if anything, "saving" is not an aspect of "modern" life.

9 posted on 10/27/2013 1:18:56 PM PDT by 1rudeboy
[ Post Reply | Private Reply | To 5 | View Replies]

To: reaganaut1
"Rising prices help companies increase profits; rising wages help borrowers repay debts. Inflation also encourages people and businesses to borrow money and spend it more quickly."

There so many things wrong with that statement that I must now be living on a different planet.

10 posted on 10/27/2013 1:21:46 PM PDT by A Navy Vet (An Oath is Forever!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: reaganaut1

“The Fed has worked for decades to suppress inflation, ....”

What complete and utter B.S.! The Fed (along with central banks in other countries, including Canada) has spent over a decade fighting deflation. That’s the exact opposite of working to “suppress inflation. What does the New York Times think QEI, QEII, etc. were all about?


11 posted on 10/27/2013 1:22:34 PM PDT by USFRIENDINVICTORIA
[ Post Reply | Private Reply | To 1 | View Replies]

To: FlingWingFlyer

I’ve heard that the root cause of inflation is increasing the money supply.

In recent years, the Federal Reserve Bank has been buying government bonds, or in effect, creating money.

The inflation rate has been low because the economy has been in a prolonged slump.

But, if the economy picks up steam, all of this money which has been created out of thin air starts circulating more, and then we will see inflation.

We can have economic growth with low inflation, as we have seen at other times in history, such as the Reagan years.

Can’t wait to see who or what Obama blames inflation on, if we see sharp increases in inflation. I’m sure he would claim credit for an economic rebound, but would seek to cast blame elsewhere for a rebound of inflation.


12 posted on 10/27/2013 1:25:40 PM PDT by Dilbert San Diego
[ Post Reply | Private Reply | To 3 | View Replies]

To: reaganaut1

Inflation is good? Sure,except that they will keep interest rates low too. 10% inflation, 1% CD rates and 0% wage growth. What’s not to luv?


13 posted on 10/27/2013 1:26:11 PM PDT by rbg81
[ Post Reply | Private Reply | To 1 | View Replies]

To: reaganaut1
I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs. - Jefferson
14 posted on 10/27/2013 1:26:24 PM PDT by Errant
[ Post Reply | Private Reply | To 1 | View Replies]

To: USFRIENDINVICTORIA

The NY Times has so abdicated their journalistic responsibility that they will accept, even trumpet, this drivel without a second of thought or hesitation.


15 posted on 10/27/2013 1:27:47 PM PDT by rbg81
[ Post Reply | Private Reply | To 11 | View Replies]

To: reaganaut1

The famous quote of Hitlery...”What difference, at this point, does it make”

Damned if you do, Damned if you don’t!


16 posted on 10/27/2013 1:28:28 PM PDT by PoloSec ( Believe the Gospel: how that Christ died for our sins, was buried and rose again)
[ Post Reply | Private Reply | To 1 | View Replies]

To: 1rudeboy

I have a standing theory, a paradigm really. Governments, especially democratically elected governments have a voracious need to spend. They begin by financing their spending by direct taxation. Taxation is a tax on present income. They tax everything they can, and push those taxes to the limit. When they run out of taxation (politically), they proceed to tax the future by borrowing money. When they borrow so much that they can borrow no more, they proceed to tax the past through inflation. Inflation is a tax on money that you earned in past and had socked away. Inflation is the last option (short of out and out confiscation of property) that governments have to feed their spending addiction. After that, collapse.


17 posted on 10/27/2013 1:29:43 PM PDT by fhayek
[ Post Reply | Private Reply | To 9 | View Replies]

To: reaganaut1

As the Clinton Administration took office in 1993 they believed that some of their policies could increase inflation. They did a study to try to find possible positive outcomes of inflation. What I remember is that they said the real estate industry would gain from inflation.


18 posted on 10/27/2013 1:31:08 PM PDT by Brad from Tennessee (A politician can't give you anything he hasn't first stolen from you.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: FlingWingFlyer
Inflation is good? I’m never going to get used to communism.

Considering the government shutdown debacle, in which the big loser was the idea that anyone will put up with cutting the budget, the only political choice left is to try and spark inflation. I don't think it is that easy though, because of the velocity of money factor. People are just taking the money and paying off debt, or saving it, not spending it and increasing the velocity. Without velocity, there is no inflation.

19 posted on 10/27/2013 1:32:49 PM PDT by Vince Ferrer
[ Post Reply | Private Reply | To 3 | View Replies]

To: Paladin2
inflation is theft

Near-zero interest rates on savings is theft.

20 posted on 10/27/2013 1:33:29 PM PDT by grania
[ Post Reply | Private Reply | To 5 | View Replies]

To: reaganaut1

Umberto Calvini:
"The government bankers want to control the debt,
And whoever controls the debt, controls everything.
This is the essence of the banking industry,
to make us all slaves to debt."

21 posted on 10/27/2013 1:34:04 PM PDT by Diogenesis
[ Post Reply | Private Reply | To 1 | View Replies]

To: reaganaut1

We’re so screwed.


22 posted on 10/27/2013 1:36:04 PM PDT by riri (Plannedopolis-look it up. It's how the elites plan for US to live.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: reaganaut1

... Is there any truth to the rumor that the plan is after all of the Quantitative Easing is completed that the US Dollar will need to be necessarily devalued upwards to 40% (depending on how many QE’s perpetrated)over the next 20 years to cover the volume of currency that has been printed?


23 posted on 10/27/2013 1:41:36 PM PDT by R_Kangel ( "A Nation of Sheep ..... Will Beget ..... a Nation Ruled by Wolves.")
[ Post Reply | Private Reply | To 1 | View Replies]

To: Dilbert San Diego

“if the economy picks up....”

Under obamanomics?!? Bwahahahahahaaaaaa!!!!


24 posted on 10/27/2013 1:42:25 PM PDT by Caipirabob (Communists... Socialists... Democrats...Traitors... Who can tell the difference?)
[ Post Reply | Private Reply | To 12 | View Replies]

To: reaganaut1
The school board in Anchorage, Alaska, for example, is counting on inflation to keep a lid on teachers’ wages.

This reporter is an idiot. They froze wages, higher inflation will not benefit the school board.

Higher inflation will cause the teachers (successfully or not) to seek higher wages in the next contract.

25 posted on 10/27/2013 1:42:49 PM PDT by Toddsterpatriot (Science is hard. Harder if you're stupid.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: grania
Near-zero interest rates on savings is theft.

Why?

26 posted on 10/27/2013 1:43:22 PM PDT by Toddsterpatriot (Science is hard. Harder if you're stupid.)
[ Post Reply | Private Reply | To 20 | View Replies]

To: reaganaut1

Since the Fed wrongly decrees that pay raises cause inflation, does this mean they’ll now allow people to make more money?


27 posted on 10/27/2013 1:44:58 PM PDT by Moonman62 (The US has become a government with a country, rather than a country with a government.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: reaganaut1
No wonder the Post is going belly up when they have insane commentary like this.

Sheesh, have any of these people ever balanced a checkbook or had a real wages job or bought something on time or have their assets depreciate or even shopped for groceries? Someone lead them to the nearest insane asylum because that's where they should be. Oh, sorry, the PC term would be "The Federal Institution for the Mentally Impaired".

This makes as much since as when Pelosi said "...it's good that more people are on unemployment insurance since they can buy more goods and stimulate the economy". Do your own extrapolation for such economic nonsense.

Someone wake me up from this nightmare...or just shoot me.

28 posted on 10/27/2013 1:45:14 PM PDT by A Navy Vet (An Oath is Forever!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: reaganaut1
When you have a fiat currency, watch out when policymakers say they want more inflation. They will get it.

Perhaps at some point. But the fact that politicians want inflation is a very good indicator they are up to their eyeballs in debt, and want inflation to make it all disappear. Does that mean they won't get it?

I have no idea where we are headed. Inflation? Yes, we have massive money printing. Deflation? Yes, I see a hugely indebted government and population struggling to pay its bills now.

Otherwise, I absolutely agree that our nationalized money system and interest rates are grossly distorting this economy. As a side note - the Federal Reserve is the underpinning of progressive government. Kill it, and you kill every progressive government social engineering scheme with it. THAT should be the goal for Conservatives

29 posted on 10/27/2013 1:46:41 PM PDT by PGR88
[ Post Reply | Private Reply | To 1 | View Replies]

To: R_Kangel

I wonder if in 10 years they will debate whether to lop off a few 0’s from the currency we will be using then.


30 posted on 10/27/2013 1:46:55 PM PDT by GeronL
[ Post Reply | Private Reply | To 23 | View Replies]

To: Toddsterpatriot
re: why is near-zero interest rates on savings theft

The banks keep your money. They charge fees. They loan out money at a profit. Many people who are retired or nearly so have saved an amount such that 4% interest (or so) would supplement their retirement, and that interest would be money pretty much completely spent in local economies.

Now you have a model where banks can profit from your money but not have to give you part of the return. But still their executives and largest stock holders get very nice returns and bailouts if they mess up. If you don't have a large enough balance, they'll charge the saver a fee for safe-keeping of the money.

It's not a sustainable model. Older baby boomers and retirees have mostly prepared for the future. How are most younger people going to be anything but indigent when they retire?

31 posted on 10/27/2013 1:52:18 PM PDT by grania
[ Post Reply | Private Reply | To 26 | View Replies]

To: reaganaut1

With 10% inflation, 4% bonds look like they are easy to pay off.
Never mind the havoc it causes for everyone else.


32 posted on 10/27/2013 1:52:21 PM PDT by tbw2
[ Post Reply | Private Reply | To 1 | View Replies]

To: bmwcyle

It is if the “our” to which you are referring is the government. Debtors LOVE inflation.


33 posted on 10/27/2013 1:54:55 PM PDT by GeorgeTex (Obama-The Ultimate Terrorist Weapon.)
[ Post Reply | Private Reply | To 8 | View Replies]

To: USFRIENDINVICTORIA

The value of the dollar has been on a steady down. Its sitting at support and looking for direction.

http://stockcharts.com/c-sc/sc?chart=$USD,uu[800,a]daclyyay[pb50!b200!f][vc60][iue12,26,9!lc20


34 posted on 10/27/2013 1:55:16 PM PDT by Orange1998
[ Post Reply | Private Reply | To 11 | View Replies]

To: tbw2

That would EASILY push the DOW to 20,000. The mad rush out of Bonds and into stocks (corporations have hard assets) would be FRIGHTENING.


35 posted on 10/27/2013 1:57:10 PM PDT by Orange1998
[ Post Reply | Private Reply | To 32 | View Replies]

To: grania
"Near-zero interest rates on savings is theft."

Disagree. As yet, no one is forcing you to put your dollars into a private institution like a bank. You can always keep your fiat currency under your mattress or send it off-shore (Cayman Islands) or buy gold. Yeah, bank/money market interest rates suck, but it's still your option. At least you have that for now...

36 posted on 10/27/2013 1:57:14 PM PDT by A Navy Vet (An Oath is Forever!)
[ Post Reply | Private Reply | To 20 | View Replies]

To: 1rudeboy

It’s another way to redistribute wealth from the middle class. They’re not likely to have the kind of shelters for their wealth like the rich have. They might have savings accounts in dollars. So inflation makes their wealth go down while the poor don’t lose anything. It leads us to greater income equality on the backs of the middle class, perfectly consistent with all of Obama’s policies.


37 posted on 10/27/2013 2:00:14 PM PDT by JediJones (The #1 Must-see Filibuster of the Year: TEXAS TED AND THE CONSERVATIVE CRUZ-ADE)
[ Post Reply | Private Reply | To 9 | View Replies]

To: grania; Toddsterpatriot

Be careful grania, Toddsterpatriot is the resident Financial No It All. You can easily fall into his Lair. :)


38 posted on 10/27/2013 2:00:52 PM PDT by Orange1998
[ Post Reply | Private Reply | To 31 | View Replies]

To: grania
Near-zero interest rates on savings is theft.

How much are your savings going to be worth after inflation?

39 posted on 10/27/2013 2:04:17 PM PDT by JediJones (The #1 Must-see Filibuster of the Year: TEXAS TED AND THE CONSERVATIVE CRUZ-ADE)
[ Post Reply | Private Reply | To 20 | View Replies]

To: reaganaut1
WAR IS PEACE

FREEDOM IS SLAVERY

IGNORANCE IS STRENGTH

40 posted on 10/27/2013 2:07:31 PM PDT by matt1234 (Hitler blamed the Jews. Obama blames the Tea Party.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: reaganaut1

Inflation is nothing more than debasing our currency. It kills the country embracing it after destroying the wealth of its citizens.

For this to be done purposely is worthy of the death penalty to its perpetrators.


41 posted on 10/27/2013 2:09:31 PM PDT by DakotaGator (Weep for the lost Republic! And keep your powder dry!!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: A Navy Vet

> “Rising prices help companies increase profits; rising wages help borrowers repay debts. Inflation also encourages people and businesses to borrow money and spend it more quickly.”
There so many things wrong with that statement that I must now be living on a different planet.

Communists are sick minded puppies. They’re like pissed off homos that seek revenge by spreading their HIV so that they’re not alone...


42 posted on 10/27/2013 2:10:05 PM PDT by jsanders2001
[ Post Reply | Private Reply | To 10 | View Replies]

To: A Navy Vet

> “Rising prices help companies increase profits; rising wages help borrowers repay debts. Inflation also encourages people and businesses to borrow money and spend it more quickly.”
There so many things wrong with that statement that I must now be living on a different planet.

Communists are sick minded puppies. They’re like pissed off homos that seek revenge by spreading their HIV so that they’re not alone...


43 posted on 10/27/2013 2:10:06 PM PDT by jsanders2001
[ Post Reply | Private Reply | To 10 | View Replies]

To: reaganaut1

It’s amazing, Obama keeps the economy and unemployment in ruins, but so many point the finger everywhere else but towards him where it belongs.

America doesn’t need inflation, it needs a regime change.


44 posted on 10/27/2013 2:13:12 PM PDT by Cubs Fan (EVERYTHING IS RACISM!!! except hating whitey)
[ Post Reply | Private Reply | To 1 | View Replies]

To: JediJones

bump


45 posted on 10/27/2013 2:13:22 PM PDT by GeronL
[ Post Reply | Private Reply | To 39 | View Replies]

To: grania

It simply means you should be doing something else with the money.


46 posted on 10/27/2013 2:13:50 PM PDT by GeronL
[ Post Reply | Private Reply | To 20 | View Replies]

To: fhayek
Your paradigm is well stated and spot on.

Confiscation of wealth will follow inflation (remember FDR stole every American’s gold). Finally war will be induced.

This is always the cycle. It is always caused by a government seized by totalitarians under whatever name they choose to call themselves.

Here and now they call themselves Democrats.

47 posted on 10/27/2013 2:19:18 PM PDT by DakotaGator (Weep for the lost Republic! And keep your powder dry!!)
[ Post Reply | Private Reply | To 17 | View Replies]

To: Errant
If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation,

Love that fake Jefferson quote.

Deflation, in this context, didn't come into common usage until long after Jefferson died.

48 posted on 10/27/2013 2:30:24 PM PDT by Toddsterpatriot (Science is hard. Harder if you're stupid.)
[ Post Reply | Private Reply | To 14 | View Replies]

To: R_Kangel
the US Dollar will need to be necessarily devalued

Devaluation? That's when a currency is pegged, either to another currency or to a commodity. FDR devalued the currency by making it worth less gold. We don't peg the dollar, so the government can't suddenly decide it's worth less.

The market can, of course, decide very suddenly that the dollar is worth less.

49 posted on 10/27/2013 2:33:49 PM PDT by Toddsterpatriot (Science is hard. Harder if you're stupid.)
[ Post Reply | Private Reply | To 23 | View Replies]

To: grania
Near-zero interest rates on savings is theft.

The real theft is the difference between the miniscule interest your savings earn and their loss of purchasing power (value.) Every dollar the Fed prints and circulates devalues existing dollars. It's like watering whiskey -- the bottle's full again but Uncle Sam stole the good stuff.

50 posted on 10/27/2013 2:34:11 PM PDT by Bernard Marx
[ Post Reply | Private Reply | To 20 | View Replies]


Navigation: use the links below to view more comments.
first 1-5051-100101-132 next last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson