I wrote:
> > what Alan G. and the Feds want. They hope, of course, that the US
> economy will attain the Holy Grail of monetary policy, "the soft landing"
> (a slower, but not negative, GDP growth rate). I don't know if they're
> conscious of the possibilities for a "hard landing" or worse resulting
> from consumer indebtedness, the large US deficit on the current account,
> the accelerator effect, etc.
Tom Walker writes:
>As usual, I agree entirely. Another factor to look for is the
>non-synchronization of the effects of monetary policy on employment and
>prices. I suspect we're in for a period of accelerating inflation and
>rising unemployment -- the obverse of Goldilocks.
Yes, accelerating inflation in the face of recession is quite possible. (1)
We've already seen a little bit and it may have gained momentum; while (2)
if the US dollar falls in value, as it should eventually due to the
current-account deficit, that unleashes the Phillips-Curve inflation that
been suppressed by the increase in foreign competition for US exporters and
import-competers that has resulted from the high dollar; and (3) to some
extent, the falling dollar will cause imported raw materials to become more
expensive. The exception to the last is the oil price, which is set in
dollars, but the falling purchasing power of oil dollars to the producing
countries may encourage OPEC to hike oil prices again (though that's hard
to arrange).
BTW, today's L.A. TIMES has the following on the front page: "Bad News for
Main Street .... [refers to "unemployment rate jumps"] ... is Good News for
Wall Street [refers to "NASDAQ soars, finishing best week ever"]."
Jim Devine [EMAIL PROTECTED] & http://liberalarts.lmu.edu/~JDevine
