Inflation Exaggeration

The latest scare tactic being pushed by the status quo is that we cannot stimulate the economy anymore because all our debt is going to cause inflation.

A couple of things about this:

Debt as a percentage of GDP is not even close to the post WWII level. Obviously we can sustain higher levels of debt to revitalize the economy without worrying about inflation. Let’s not forget that, historically, the period from the mid 1940s to the early 1970s, which began with huge levels of debt (up to 120 percent of GDP after WWII), also saw the U.S.’s largest growth rate.

Second, most of those saying we need more stimuli also realize the need to rein it in after we have more clear signs that the economy is improving – employment increasing, house prices stabilizing, etc. Those pretending this is some sinister plan of never-ending government spending are only spinning such nonsense so that they can reassert their own false messiah – tax cuts. And, we know who has primarily benefited from the tax cuts of the last 30 years. Plus, inflation tends to hurt lenders more than borrowers. Who are they really protecting in the battle against inflation? [It would be nice if the Fed, in their supposed dual mandate, focused as much on full employment as they do on price stabilization.]

Some are saying house prices have hit bottom and therefore we can disregard any and all stimulative efforts. But this is a simple misreading of seasonal housing data that misrepresents reality. [Although it should be noted the Milwaukee market has shown amazing resiliency in comparison to other areas of the country.]

Be careful of the latest Paul Reveres crusading against inflation. It is more likely the usual distractionary politics masking typically upwardly redistributive policies.