re: #484 Kenneth

That is true, and interesting, but… the gov’t is aiming to create inflation for the simple reason the alternative, rapid deflation, is even more destructive to the economy. As you noted, there are several deflationary pressures in the economy now. The massive stimulus bill with involves the printing & spending of massive amounts of cash, and the particular tax cuts which will go into either more spending (more inflationary pressure) or savings (to be eating by inflation), is designed to push the economy into inflation.

Sure. Inflation = growth, at least of a sort, and growth is what’s needed. Although the usual formulation is growth = inflation; chasing the obverse may not be such a good idea.

But without an external spike in some input - like energy - the deflationary pressures will win until people start spending again, and they aren’t going to start spending as long as the threat of unemployment (or the fact of it) hangs over their heads on a daily basis; as long as they can’t borrow against home equity that no longer exists; and as long as they can’t tap into suddenly non-existent savings.

Inflationary pressure coupled to increased spending is pretty much what everyone wants right now - it would mean an end to the recession. Inflation tied to input increases - increased oil prices, for example - is what no one wants. We had plenty of that during the Carter era, and called it “stagflation,” an increase in prices without any increase in growth to accompany it.

I don’t think we’ll see demand-driven inflation until well into next year, at the earliest. But I wouldn’t necessarily mind being wrong.