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WELCOME TO A TRILLION-DOLLAR DEFICIT, MR. PRESIDENT
If you are a typical citizen, you like deflation. You want your wages and investment income to stretch as far as possible. Falling prices, or rising purchasing power, are a sign of economic progress – the progress resulting from productivity gains and competition.
If you are a modern central banker, anxious to implement your ivory-tower theories, deflation is enemy No. 1. (For the sake of clarity, by “inflation,” I mean rising prices, and by “deflation,” I mean falling prices).
Central bankers must be the only people who celebrate a 3 or 4% annual reduction in purchasing power.
Why is this? Because “moderate” inflation…
29Aug2008 | Daily Reckoning | Comments Off | Continued
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