The Real Effects of Inflation
In a series of speeches defending his record company, Alan Greenspan, until recently, every once a symbol of both the new economy and stock exchange effervescence, the orthodoxy of central banks. His work, which repeatedly wrong, just to get prices and ensuring monetary stability. I could not guess, and in fact the market. He has always avoided the thorny issue of how it would destabilize the economy of the explosion of speculative bubbles, and how their policies may have contributed to the foam.
Greenspan and his acolytes seem old war against a long-dead monster to beat. The obsession with price stability, political violence, and gave way to deflation, inflation resulted – perhaps a bad economic situation much worse than inflation. Deflation, with negative savings and costs of the huge debt it may be linked to longer zero growth or negative. Moreover, in the zealous crusade against the global financial and monetary expansion – the merits and benefits of inflation have often been neglected.
Because economists often make again and again, inflation is the inevitable consequence of growth. It merely reflects the output gap between actual and potential GDP. Although the gap is negative – meaning that while the economy is drowning in spare capacity – inflation lies dormant. The gap is widening, if growth below potential and the anemic economy. Thus, growth can actually be accompanied by deflation.
In fact, one could argue that inflation was low – in America as elsewhere – by the farsighted policies of central banks. A better explanation might be overcapacity – both domestic and global – for decades, the causes of inflation distorts investment decisions. Excess capacity led, coupled with increased competition, globalization, privatization and deregulation – a fierce price war, and ever lower prices. Read the rest of this entry »
