Good points, Charles. What also needs to be recognized is that the Clinton-era
expansion was fueled by unprecedented private sector borrowing, which is
spending in excess of its income by an amount equal to about 6.5% of GDP. All
the recent economic data, however, indicate that borrowing by households and
firms is declining, as they try to bring spending more into line with incomes.
Why can't we simply rely on the Fed to lower interest rates and thus boost
borrowing and spending? Because the private sector is already burdened with debt
accumulated as a result of unprecedented (private sector) deficit spending.
Monetary easing could work only if households would actually increase their
borrowing and cause the nation's saving rate (already negative) to continue to
decline.
-----Original Message-----
From: Charles Brown [mailto:[EMAIL PROTECTED]]
Sent: Thursday, February 01, 2001 11:37 AM
To: [EMAIL PROTECTED]
Subject: [PEN-L:7655] GDP Byte by Dean Baker, 1/31/01
On one level, isn't the creditor class's ( and its executive committee , the
Fed) constant concern about inflation , and method of fighting it by raising
interest rates as simple as:
1) When interest rates go up, creditors get more profits just straight up ( so
the claim that the interest rates are raised to fight inflation is a fig leaf
for just directly increasing their profits), and
2) Inflation helps debtors and hurts creditors.
CB
>>> [EMAIL PROTECTED] 02/01/01 11:22AM >>>
As Vickrey pointed out, it is unexpected changes in the rate of inflation and
not inflation in and of itself that is of potential concern (in general, not
under current conditions in our economy). As the Nobel-winner also emphasized,
unemployment has greater cost social and economic costs than even unexpected
changes in the rate of inflation, and the 'cure' for inflation hurts more than
inflation itself.
-----Original Message-----
From: Jim Devine [mailto:[EMAIL PROTECTED]]
Sent: Wednesday, January 31, 2001 4:10 PM
To: [EMAIL PROTECTED]
Subject: [PEN-L:7613] Re: Re:GDP Byte by Dean Baker, 1/31/01
At 02:03 PM 1/31/01 -0800, you wrote:
>What are asset price bubbles if not inflation?
"inflation," when unqualified, almost always refers to consumer price
inflation. It's okay to add qualifications and thus to talk about asset
inflation, inflation of rhetoric, grade inflation, cost-of-living
inflation, etc., though.
Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine
