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View Diary: Insolvency, tax cuts, military spending and social security (188 comments)

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  •  Long answer to your tricky question :-) (0+ / 0-)

    Plenty of economists think inflation is a good thing. Krugman, Baker. People whose econ is pretty decent, but not quite right. They want to inflate in order to counter debt-deflation, balance sheet recessions, excessive & unpayable private debt. A laudable, necessary goal. Inflation may have some place in the ultimate ideal scheme of things to cure giant crises like this one.

    But some of the policies they assume are inflationary - "loose money" - "financing deficits" by "printing money" are actually disinflationary in the long run, as shown by centuries of evidence. The standard econ of the last few decades gets everything backwards. A lot of MMT is just returning to the superior, logical, empirically correct econ of the leading thinkers of say the late 20s to the 50s.

    MMTers, real Keynesians, real Institutionalists - are not so much inflationists - and they've said so - they get the Austrian weltanschauung. But the Austrian theory of money is the heart of bad economics.

    To answer your question:

    As long as you have a  job &-or money deflation is dandy. That's why the rich love depressions.

    But the problem is that deflation causes/ correlates with depressions and unemployment, which wreck the real economy.

    So accomodated deflation, deflation with a Job Guarantee, deflation with full employment, is Basically Good. Everybody is working & has the dough, which buys more & more stuff!

    2% Inflation has no such automatic destructive effects, and can help debtors, e.g. some of its effect during the 70s were good for many, so it is Not So Good, but Not Really So Bad either.

    Continued untreated serious deflation, probably 1% is bad enough, with the accompanying unemployment is horrendous, massively destructive. Very, Very Bad.  

    And it where the world, especially Europe, is at or near. Becomes a negative sum game, where the rich get relatively richer, but the misery they inflict on the poor is far greater.

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