posted on Apr, 10 2009 @ 03:23 PM
reply to post by Ciphor
There technically should ALWAYS be a degree of inflation. If you have no inflation that means nothing is being created.. your not producing wealth.
Your stagnate. Obscene inflation is bad, deflation indicates negative growth. the objective is to have inflation relative to the GDP .. that is to
say the inflation of currency should not extend beyond that of the economy's own natural inflation or growth. Most would say inflation at around
2-3% is ideal for our economy, the economy should produce at least .5%-2% gdp growth and we should be adding 250,000-500,000 jobs/m to show positive
signs of growth.
While we are in a Deflationary spiral at the moment, it is ideal to increase the availability of cash -- inflate the currency, to make it more
competitive for our corporations over seas. In August-December our currency was so devalued and competitive that many F500 companies only posted
profits due to currency exchange. Granted, the only reason they received more Dollars was because it was worth less.
The problem with forced inflation at this point however is that it does not coincide with economic growth. This is to say we are inflating the
currency while the economy contracts, making the inflation actually worse as consumer revenue drops, corporate profits slump and yet the money supply
expands. If however just the right amount of inflation is pumped into the economy, the effects will bring us out of this recession. If the money is
available so that it can be circulated through loans then capital is at hand to expand business. This is why the "Credit Crunch" of last year into
this year has so drastically reduced our economy into shambles. Capital dried up, credit dried up, no one had the cash they needed to continue
operation, so they laid people off, consumers dried up, credit reduced, corporate profits follow suit and you end up in a deflationary spiral. Self
However, if we extend to much capital and credit to fast we will see gradual inflation, get out of the deflationary spiral and slowly inflation would
excel as more and more of the cash, capital and credit is used and exploited. The policies today fighting Deflation could lead to a mild Inflationary
expansion.. which would devalue our Dollar I would say as much as 20% over the next 2-3 years not unlike what happened under the Bush Administration
when they made credit so cheap and available we saw over expansion. If you have not caught the subtle undertones, I do not have much faith that
Status Quo will ever be achieved.
The Administration is trying to get back to the way we where in 2006, but they fail to see that it was a mirage. Wealth was not really there, it was
just a devalued dollar. But they want to see an inflationary expansion to imitate wealth .. Which I believe is going to be disastrous to say the
least. What we need is to dismantle the largest institutions and allow smaller regional banks to fill the void.. start a fresh.
[edit on 4/10/2009 by Rockpuck]