Don't Panic, Inflation Will Save Us

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It is strange how many people I have heard say: "we should inflate as much as possible and worry about it later." Remember the poor Ukrainian peasants in 1918, saying 'what could be worse than the Czar?' Things can always get worse. As if the problems caused by an inflationary spiral are not bad. Clearly, it would solve the indebtedness issue. Yet, the inflationary decades in our history are hardly ones of great economic times, and end with nasty recessions.

The following chart shows M1 growth 13 months after the onset of the last 8 recessions:

Recession Start M1 Growth
Apr-60 2.4%
Dec-69 6.6%
Nov-73 4.9%
Jan-80 8.6%
Jul-81 7.0%
Jul-90 7.4%
Mar-01 7.1%
Dec-07 15.4%

So, Bernanke is trying. Unfortunately, it's not working yet. But, when I was a freshman and we would drink grain alcohol until we felt it, that never ended well.

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