Quote:
Originally Posted by Shek
Some inflation is good - it's like a lubrication for the economy, and the key is that it's a stable amount. In the US, 2.0% is considered to be ideal. No inflation or deflation is bad. Just ask those who lived through the great depression or the Japanese and see what they thought of falling real prices. Thus, 0% inflation or less is not what we are after. The key here is to link price stability to growth.
In terms of the gold standard vs. fiat, we can look at past history to consider price stability and its effects. The US went off the gold standard in 1973 for good. Compare price stability and the stability of growth prior to 1972 and after.
For the look at price stability, pull up the attached file. Notice the relationship between price stability in the Voelker/Greenspan/Bernanke era and stable growth: the two longest expansions in post-WWII era combined with very soft recessions. |
Yes, Yes, YEs, but I think the current dynamics are changing especially since foreign consumsers of U.S. debt are losing confidence in Bond investments and the Fed is acting very irresponsibily with its constant rate cuts. If it keeps doing this, the Fed will paint itself into a tricky situation like Japan only 5 years ago where the interest rate on bands were negative. Moreover, supply issues are effecting exchange rates of the Dollar compared to the Yuan, Yen, Won, and Euro, which will harm consumption because the US is an import driven economy.