Saturday, August 28, 2010

Reduction (3)

From this morning's post:

The problem is not that we have inflation. The problem is not that economic growth is weak. The problem is that we need an inflationary increase in the money in order to get decent growth. Since we have chosen to keep inflation at a low level, we are limited to a low level of economic growth. This problem cannot be solved by thinking of inflation and growth as two separate problems.

The solution we applied since the 1980s included a great increase our reliance on credit, as evidenced by the growth of public and private debt.

The great irony is, the cost of existing debt was the source of the problem in the first place. Our solution only made the problem worse.

The great mistake is, we failed to use accelerated repayment of debt to fight inflation.

No comments: