RCP: The Growing Case for Inflation

So argues Steve Chapman:

The best part of inflation is that it avoids the need for the government to embrace vast spending initiatives and micromanage capitalist enterprises it is not equipped to run. And unlike government programs, inflation doesn’t last forever.

One of the historic evils of inflation is that by reducing the value of debt, it rewards borrowers while punishing lenders. But this time, both sides may gain from a rising consumer price index — borrowers because their properties will be worth more than they owe, and lenders because their customers will find it easier to meet their obligations.

Once inflation has performed its useful role, it will have to be tamed. But the Fed has a lot of experience doing that. What it doesn’t have is experience bringing the economy out of a deep recession or a depression.

An interesting theory, though such a solution would absolutely destroy the value of the dollar overseas. Deflationary pressures would encourage savings, reduce the cost of many items, and force firms to innovate better products and methods.

Inflationary pressures allow the same mediocre system to persist.

Of course, the real elephant in the room — a vast reduction of government spending — hasn’t even been discussed much less contemplated.

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