Howard_T

Are Budget Deficits Inflationary?

Livingwithin, I haven't thought about underdamping since a circuit theory course in my sophomore year (and we EEs didn't know anything about money and banking). It is an apt analogy.

Mr. McTeer cites Prof. Waller as saying that in a deep recession, the printing of money will not be inflationary because it will be used to increase production, and thus employment. This might have been true in the '60s, but now there is a much reduced industrial base to produce those goods. Could it be automobiles? That would be a great stimulant to the economies of Japan, Germany, and South Korea. How about aircraft? In view of greatly reduced travel, and thus demand for new aircraft, that won't carry us. Also, look at how much of Boeing's 787 (and even some of their legacy aircraft) is being built overseas and merely taken to final assembly in Everett, WA. I don't believe that there is a manufacturing sector that has not been weakened, or even eliminated, by foreign competition. Simply enough, unless American workers are willing to settle for a lot less in their paychecks, or the government is willing to risk international retaliation and begin protecting our industries as our so-called trading partners do, the current monetary policies are sure to cause inflation.

Will we become a modern day Weimar Republic? I don't think it will go that far, but there will be pain among those of us who have worked and saved, only to have it taken away by the dual forces of taxation and inflation.