socialmedian: Inflation Smackdown: Laffer vs. Blinder

Hi there. I'm Jason, one of the founders of socialmedian.

socialmedian delivers the news, filtered by your network.

We'd love to have you join in.

You can use facebook connect to sign in.

Add News Flash

User-submitted headlines for this story

Clips

Inflation Smackdown: Laffer vs. Blinder

Source: CARPE DIEM

Jun 21, 2009

Summary

Arthur Laffer in the WSJ on June 11, "Get Ready for Inflation and Higher Interest Rates":

As bad as the fiscal picture is, panic-driven monetary policies portend to have even more dire consequences. We can expect rapidly rising prices and much, much higher interest rates over the next four or five years, and a concomitant deleterious impact on output and employment not unlike the late 1970s.

The percentage increase in the monetary base is the largest increase in the past 50 years by a factor of 10. It is so far outside the realm of our prior experiential base that historical comparisons are rendered difficult if not meaningless.

Banks now have huge amounts of excess reserves, enabling them to make lots of net new loans. At present, banks are doing just what we would expect them to do. They are making new loans and increasing overall bank liabilities (i.e., money). The 12-month growth rate of M1 is now in the 15% range, and close to its highest level in the past half century.

Alan Blinder counters in today's NY Time article "Why Inflation Isn’t the Danger:"

The mo ...Read the full article

Comments (0)

Add Your Comment