KINGSTON, NY, 4 November 2015 – Once upon a time, not too long ago, central bank wizards began telling a fairytale that economies need inflation. But not just any inflation. In their Goldilocks make-believe world, the not too hot, not too cold, just right dose of two percent is needed to keep an economy healthy.
While there is absolutely no quantifiable data or economic model that proves or supports this oft-cited fairytale, the business media keep repeating it, selling the fiction that a two-percent inflation rate will somehow create jobs and spur economic growth.
‘Worry Over Low Inflation Kept Fed at Bay,’ screeched the Wall Street Journal, 9 October headline, following the release of Federal Reserve minutes in which they decided not to raise interest rates.
Who made this up? How is inflation – paying more for goods and services – the perfect financial tonic for working people to swallow?
In the United States, for example, with wages trending between decline and stagnation, more inflation means paying more to get less. With median household income below 1999 levels, how can higher inflation stimulate more spending? How can higher inflation be beneficial when, according to new Social Security data, 63 percent of Americans make less than $40,000 per year?
This post was published at Lew Rockwell on November 5, 2015.
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