July 24, 2017

NOTHING COSTS MORE THAN IT USED TO, NOR EVER WILL:

U.S. Inflation Remains Low, and That's a Problem (BINYAMIN APPELBAUM, JULY 24, 2017, NY Times)

The Federal Reserve thinks modest inflation has important economic benefits, and it has aimed since 2012 to keep prices rising at an annual pace of 2 percent. The problem is that the Fed is on track to fail for the sixth straight year. Inflation has been stubbornly sluggish.

A little inflation can brighten the economic mood, causing wages and corporate profits to rise more quickly. Economists like to point out that this is an illusion. If everyone is making more money, then no one can buy more stuff. Prices just go up. But the evidence suggests people enjoy the illusion and, importantly, they respond to the illusion by behaving in ways that increase actual economic growth, for example by working harder.

When our biggest problem is that technology and trade are creating too much wealth too cheaply for prices to go up, it's no wonder our partisan differences are so trivial.

After 40 years of this though, it would be helpful if the Fed admitted they won the war on inflation and prepared people for neoliberal/neoconomic reality.

Posted by at July 24, 2017 9:06 AM

  

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