Wednesday, 19 October 2016

No. Inflation does not stimulate the economy.

 

Every central banker and central bank cheerleader in the world argues “we need more inflation.” They assume that rising prices are a mark of prosperity. They assume this because, in their Keynesian world-view, all growth comes of out credit that’s been borrowed into existence -- and because this counterfeit capital tends to be inflationary which, they further assume, will encourage people to spend which is (in their fevered imaginations) from whence all prosperity springs.

Indeed, just this week, the world’s central banker Janet Yellen was breathlessly relating the fever dream of letting inflation exceed the central bank’s 2% target so as to seek out the stimulus that (to a central banker) only a “modest” inflation can bring.

So does price inflation actually stimulate the economy? No, says Nobel laureate Robert Lucas. This is bullshit.

 

 

[Hat tip Jim Rose]

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