Friday, May 3, 2013
The Tail End of Economic Recovery- New Challenges
Paul Krugman's article Not Enough Inflation reminds us that unemployment is not our only economic concern. Another two articles in the times report optimistic growth in jobs overall Job Data Ease Fear of Sharp Slowdown but particularly for educated Americans Idled Young Americans. He argues that if we allow lack of inflation to continue we may permanently establish a cycle of economic failure. It is a nice change of pace however to hear concerns over inflation instead of the immediate problems of unemployment. The stock market is improving due to the positive job numbers and means that the United States may be restoring reputation as a stable economy. Issues with the European Central Bank and their follies should help us remember that we must keep both unemployment and inflation on the radar as real concerns.
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The increasing rate of inflation within our economy is an important cause that must addressed by the political leaders within America. As Krugman states, the Federal Reserve reactions to the financial crisis was merely to “print Money”, as a remedy to the systemic problem that confronted our economy. This practice of creating money to infuse into the economy, will ‘weaken the strength’ of the dollar in relation to other sovereign currencies. The expansionist capacity of the American government can be seen as a cause for the problem of our monetary debasement. By increasing the amount of money that circulates within our economy, the lower efficacy (purchasing power) our money retains. In order to better the economy fortunes of future American generations, the federal government must halt their activities of deficit spending and printing money in order to stem the tide of rising inflation.
ReplyDeleteI think this is one of the few times I've read an article by an economist that focuses on fixing short-term issues than long-term ones. He does have a valid point that if the US Government fails to act now and fix our short-term mess, then it will eventually be a prolonged economic failure that will never be fixed in the future. It would've been better if he would elaborate on spending.
ReplyDeleteI think unemployment remains the regular discussion in America because it is easier to understand. Inflation is a concept lost on many people, and doesn't immediately effect most citizens on a daily basis unless it becomes drastic. Inflation will always take a back seat to unemployment until that is no longer a concern.
ReplyDeleteI always enjoy reading a Paul Krugman article that illustrates how little Paul Ryan and company understand economics. I totally agree that because inflation is too low it's a problem we need to address in the short term to avoid a chronic long term problem. A "liquidity trap" is an interesting concept because of as Krugman says, "Economists who had studied such traps — a group that included Ben Bernanke and, well, me — knew that some of the usual rules of economics are in abeyance as long as the trap lasts." It is certainly an issue that needs to be addressed and as Peter said inflation will always be superseded by unemployment in most economic discussions.
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