Social Unrest?

Monetary policy of the fed controls inflation. It is only a problem if the price for the goods rise with the increase in wages. Keep the price of the goods stable. Cut into the outrageous disparity between executives and low wage earners and the mega profits of those corporations.Everyone 'champions' inflation. No economist champions deflation.

Deflation is bad for the people because it can lead to a fall in demand which can lead to the lay-off of personnel and so on until you get into a deflationary spiral. It also can force a liquidity trap when investors start hoarding money instead of investing it stiffling the creation of new jobs.

LOL. I'm not sure where your confusion begins. I understand that inflation is the rise in the price of goods/services over time. I am suggesting that the profit be shifted toward the worker end of the spectrum which does not mean an increase in the price of the goods. There is no net increase in the amount of money in ciculation and no need to increase the price of the goods. A return to the prosperity of the post-war and pre-reagan economy. Then I guess you don't like to see the value of your assets and investments increase. Sucks to be you.

What is your explanation for the boom in the American economy when the top marginal tax rates were in the 90's? Do you feel that a larger tax base doesn't allow the government to spend more domestically, thus providing more job opportunities? You believe that leveling the playing field has no effect on GDP?It has been shown that rising tax rates do not have a negative effect on GDP. No I don't. Inflation is what I said it is. I didn't say anything about the cause of inflation. You are discounting the effect that economic growth has on mitigating the effect of an increase in money supply. If you have a lower rate of economic growth and an increase in the money supply, then yes that will cause sustained inflation. You're also discounting the effect that the Fed's monetary policies has on controlling inflation. (How do they take money out of the system? ) What effect does people spending money have on economic growth and how does that effect the inflation rate? A clue is above. I admit I had a hard time discerning what you were trying to say there but I gathered what you meant so no worries.

Without inflation the value of your assets do not increase. You seriously want the value of your property and investments to stagnate or deflate?Perhaps there is some confusion here. Who is advocating hyperinflation? I am certainly not by any means.A low to moderate rate of inflation is good for you and the economy. Do you disagree that having a larger tax base to rely upon allows the government to spend more within the domestic economy? Do you think that the government can not create jobs as well as increase the productivity of the poeple by spending on them? Edited by DBlevins, : No reason given.

Perhaps you didn't catch my meaning. One of the ways to increase prosperity is implied in the question. Commodities and other hard assets DO appreciate in value with inflation. Why do you think they are used as a hedge against inflation?As a piece of paper you are absolutely correct that it has little value, but money is not just a measure of value it is also a medium of exchange. That is why it has value independent of its actual worth. Because it is in limited supply and we both wouldn't mind having more of it in order to satisfies our wants and needs. Let me be clear that when I generally speak of inflation I am talking about a low rate of inflation. Most mainstream economists would agree that that is good for the economy.Why?Because it can give people debt relief for one. If you owe a debt at a fixed nominal interest rate and inflation increases, you will actually be paying a lower rate over time. We also lower the risk of liquidity traps, as well as the impact of recessions, and an insentive to investment in capital projects. What happens when the government decides to give you a nice bonus tax refund check. Why and when would they do that? What are people likely to do with that check? [qs]The end product of an economy is product. For the record, i agree that the war caused prosperity, but not at ALL by the same way you mean it. The government took a large chunk of money from the economy that could have been used to make products for the use of the citizens, and instead that money was thrown into tanks and bullets, which were eventually expended.The gov't diverted production of capital or consumer goods into military goods, which did not increase prosperity.For the record, when I say 'post-war' I mean after world war 2.As a side note, what was one of the consequence of military soldiers coming home from the war with those big fat paychecks?

That is not really correct. The price for goods can increase independent of the money supply and an increase in M does not automatically cause inflation, though it obviously can. It depends really on whether you are talking about low or high rates of inflation. Low or moderate rates of inflation can be due to drops in output, thus lowering supply of products and therefor increasing their value in the economy. (Think of the Oil shocks of the 1970's and 80's) It can also be due to an increase in demand for products beyond the ability of the economy to produce said products. Inflation is the rise in prices over time. One [underline]cause[/underline] of inflation can be when more money becomes active.(Global warming is NOT greenhouse gases. Global warming is the increase in the aggregate temperature of the planet. Greenhouse gases can cause Global warming but not necessarily the only cause.) I don't believe that is what he said, though. Having more money (increasing M) can have the effect of increasing demand. That is why governments in recessions dole out the dough. They want to increase demand and thus increase the products produced in response to said demand. It may very well lead to inflation, but that is what you want when you are in a recession. You would be right if you were valueing money based on its inherent properties, but you're wrong in that there is meaningful value to money because it is what we use as a medium of exchange and people like you and me want to have it. Let's put it this way. If Jill offers you 100 dollars for your pencil and I offer you 135 dollars the next day, what would that mean about the value of my dollar versus Jill's? What do you mean by the 'real' price of his labor? How does an increase in demand for his labor not increase the value of that labor? What sense would it make if increasing demand for pencils does not increase their value? Inflation is not inherently bad. We want to have some amount of inflation. While poeple may confuse wealth with inflation, I do not believe that is the case here.For the last time, Money has value.

To ease congestion I thought I would combine my response to Jon. Post 74I never addressed the issue because I never said I was talking about during the war, but afterward. Your question didn't seem relevant to my statement about the economy, unless you could be more clear about why you bring up the economy during the war versus the economy after. Flippant but perhaps I deserved that. M increased, but what happened to the economy? Jeebus. I'm not sure if we are talking around each other or you are purposely being obtuse. It depends on what they do with it, wouldn't you say .Let's get back to the real world. We expect that if the economy is working properly, an increase in monetary supply will cause inflation, but it will also likely cause an increase in productivity, which has the effect of eventually suppressing inflationary pressures. Of course any large shock due to pricing caused by supply and demand pressures or any shock induced by monetary policies can induce either hyperinflation (bad) or stagflation (bad) but if everything works and there are no shocks then most economists would agree that having that little bit of inflation is a good thing. Not if your purchasing power has not been significantly affected, which would be the case when productivity has increased. You're telling me that you would rather pay 6% interest on your house than you would 4%? Now on to post 78Not necessarily. While I agree that prima facie it would appear to be the case that my dollars are worth less, that would be the case IF everything else cost more as well. It might even lead to inflation if this happened in significant portions, but this is a one time occurence where the value of the dollar remains the same, it is the subjective value of the pencil that has increased. If you can buy more things because you sold that pencil for more, the dollars value with respect to your purchasing power has basically remained the same.I am tending to disagree that this is off-topic, in the sense that this topic seems relevant to the opening post, (I was tracking toward wage pressures and inflation but perhaps I was being too slow to begin) and so I will gladly shift back toward the topic of Phats post if that is what people want. I am sure wage pressures and inflation will turn up again.With that in mind, he did ask you: