09/24/2010

Demand Pull is the ONLY Good Inflation

Good Stuff:

winterspeak.com/2010/09/real-problem-with-higher-inflation.html

"
In the current environment, yes, I am saying that only large fiscal stimulus will raise inflation rates.

More generally, the non-Govt sector has some endogenously determined desire to net save. This desire can only be funded by Govt deficits (via the fiscal channel). If the desire is underfunded, you get deflation. If it's overfunded, you get (demand pull) inflation. if it's funded just right, you get full employment with no inflation.

This desire also changes over time, so Govt needs to always fund it appropriately."

Sep 24, 2010 9:21:58 PM | Economy, Solutions, Weblogs

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