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In Fed and Out, Many Now Think Inflation Helps
New York Times ^ | October 26, 2013 | BINYAMIN APPELBAUM

Posted on 10/27/2013 1:10:29 PM PDT by reaganaut1

WASHINGTON — Inflation is widely reviled as a kind of tax on modern life, but as Federal Reserve policy makers prepare to meet this week, there is growing concern inside and outside the Fed that inflation is not rising fast enough.

Some economists say more inflation is just what the American economy needs to escape from a half-decade of sluggish growth and high unemployment.

The Fed has worked for decades to suppress inflation, but economists, including Janet Yellen, President Obama’s nominee to lead the Fed starting next year, have long argued that a little inflation is particularly valuable when the economy is weak. Rising prices help companies increase profits; rising wages help borrowers repay debts. Inflation also encourages people and businesses to borrow money and spend it more quickly.

The school board in Anchorage, Alaska, for example, is counting on inflation to keep a lid on teachers’ wages. Retailers including Costco and Walmart are hoping for higher inflation to increase profits. The federal government expects inflation to ease the burden of its debts. Yet by one measure, inflation rose at an annual pace of 1.2 percent in August, just above the lowest pace on record.

“Weighed against the political, social and economic risks of continued slow growth after a once-in-a-century financial crisis, a sustained burst of moderate inflation is not something to worry about,” Kenneth S. Rogoff, a Harvard economist, wrote recently. “It should be embraced.”

The Fed, in a break from its historic focus on suppressing inflation, has tried since the financial crisis to keep prices rising about 2 percent a year. Some Fed officials cite the slower pace of inflation as a reason, alongside reducing unemployment, to continue the central bank’s stimulus campaign.

(Excerpt) Read more at nytimes.com ...


TOPICS: Business/Economy; Front Page News
KEYWORDS: federalreserve; inflation
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To: reaganaut1

Inflation is nothing more than debasing our currency. It kills the country embracing it after destroying the wealth of its citizens.

For this to be done purposely is worthy of the death penalty to its perpetrators.


41 posted on 10/27/2013 2:09:31 PM PDT by DakotaGator (Weep for the lost Republic! And keep your powder dry!!)
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To: A Navy Vet

> “Rising prices help companies increase profits; rising wages help borrowers repay debts. Inflation also encourages people and businesses to borrow money and spend it more quickly.”
There so many things wrong with that statement that I must now be living on a different planet.

Communists are sick minded puppies. They’re like pissed off homos that seek revenge by spreading their HIV so that they’re not alone...


42 posted on 10/27/2013 2:10:05 PM PDT by jsanders2001
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To: A Navy Vet

> “Rising prices help companies increase profits; rising wages help borrowers repay debts. Inflation also encourages people and businesses to borrow money and spend it more quickly.”
There so many things wrong with that statement that I must now be living on a different planet.

Communists are sick minded puppies. They’re like pissed off homos that seek revenge by spreading their HIV so that they’re not alone...


43 posted on 10/27/2013 2:10:06 PM PDT by jsanders2001
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To: reaganaut1

It’s amazing, Obama keeps the economy and unemployment in ruins, but so many point the finger everywhere else but towards him where it belongs.

America doesn’t need inflation, it needs a regime change.


44 posted on 10/27/2013 2:13:12 PM PDT by Cubs Fan (EVERYTHING IS RACISM!!! except hating whitey)
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To: JediJones

bump


45 posted on 10/27/2013 2:13:22 PM PDT by GeronL
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To: grania

It simply means you should be doing something else with the money.


46 posted on 10/27/2013 2:13:50 PM PDT by GeronL
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To: fhayek
Your paradigm is well stated and spot on.

Confiscation of wealth will follow inflation (remember FDR stole every American’s gold). Finally war will be induced.

This is always the cycle. It is always caused by a government seized by totalitarians under whatever name they choose to call themselves.

Here and now they call themselves Democrats.

47 posted on 10/27/2013 2:19:18 PM PDT by DakotaGator (Weep for the lost Republic! And keep your powder dry!!)
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To: Errant
If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation,

Love that fake Jefferson quote.

Deflation, in this context, didn't come into common usage until long after Jefferson died.

48 posted on 10/27/2013 2:30:24 PM PDT by Toddsterpatriot (Science is hard. Harder if you're stupid.)
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To: R_Kangel
the US Dollar will need to be necessarily devalued

Devaluation? That's when a currency is pegged, either to another currency or to a commodity. FDR devalued the currency by making it worth less gold. We don't peg the dollar, so the government can't suddenly decide it's worth less.

The market can, of course, decide very suddenly that the dollar is worth less.

49 posted on 10/27/2013 2:33:49 PM PDT by Toddsterpatriot (Science is hard. Harder if you're stupid.)
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To: grania
Near-zero interest rates on savings is theft.

The real theft is the difference between the miniscule interest your savings earn and their loss of purchasing power (value.) Every dollar the Fed prints and circulates devalues existing dollars. It's like watering whiskey -- the bottle's full again but Uncle Sam stole the good stuff.

50 posted on 10/27/2013 2:34:11 PM PDT by Bernard Marx
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To: reaganaut1
there is growing concern inside and outside the Fed that inflation is not rising fast enough.

There can only be so much product shrinkage. Coffee is already down to about 10 oz packaging at around $5. If the packages shrink much more, they will need new carts with slats closer together to keep things from slipping through and falling on the floor.

Inflation is alive and well and showing itself in every supermarket across the country.
51 posted on 10/27/2013 2:48:00 PM PDT by TomGuy (.)
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To: grania
Many people who are retired or nearly so have saved an amount such that 4% interest (or so) would supplement their retirement, and that interest would be money pretty much completely spent in local economies.

There are plenty of very secure bonds that pay 4%.

But still their executives and largest stock holders get very nice returns and bailouts if they mess up.

Stock holders lost tons of money when the banks messed up. Even jerks like Dick Fuld and Jimmy Cayne lost hundreds of millions.

How are most younger people going to be anything but indigent when they retire?

The ones who can afford a house have hopefully locked in a 30 year under 4%.......

52 posted on 10/27/2013 2:48:56 PM PDT by Toddsterpatriot (Science is hard. Harder if you're stupid.)
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To: Orange1998

Don’t worry Orange, I can’t make you learn anything if you don’t want to. ;^)


53 posted on 10/27/2013 2:50:25 PM PDT by Toddsterpatriot (Science is hard. Harder if you're stupid.)
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To: fhayek
Inflating the currency is what you do when you have racked up a mountain of debt and you don’t have a clue of how to meaningfully grow the economy.

DNG DING DING !!! WINNER !!!

54 posted on 10/27/2013 2:50:32 PM PDT by Hoodat (BENGHAZI - 4 KILLED, 2 MIA)
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To: TomGuy

I noticed at the store when I bought orange juice that the half gallon (64 fl oz) is now only 59 fl oz


55 posted on 10/27/2013 2:51:37 PM PDT by Mr. K (Lies, Damned Lies, Statistics, and then Democrat Talking Points.)
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To: reaganaut1

Inflation is how politicians steal from the savings of the wise and prudent and hardworking, and give it to the spendthrifts and loafers and moochers who always outnumber them. It’s just another form of tax.


56 posted on 10/27/2013 2:54:15 PM PDT by ccmay (Too much Law; not enough Order.)
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To: JediJones
How much are your savings going to be worth after inflation?

More than they are now. I'll be able to spend the interest on savings associated with inflation. Now, I have to hold as much money as I can for a rainy day. As far as stuff I have to buy, I'm pretty well stocked up and things are in repair and the big ticket items bought and paid for.

Here's the problem. Retired baby boomers and older getting interest on their savings is a very fine way to stimulate the economy. Just about every penny of that interest gets spent, mostly in local economies. Thus, it has a good local multiplier effect.

The recession deepened and the job situation got worse when interest rates on savings nosedived. Coincidence?....I don't much believe in coincidence, especially with economic issues.

57 posted on 10/27/2013 2:56:00 PM PDT by grania
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To: fhayek

“Inflating the currency is what you do when you have racked up a mountain of debt and you don’t have a clue of how to meaningfully grow the economy.”

Yep...we could pay the Chinese back pronto, with a wheelbarrow of $10,000,000 dollar bills...I think that they would be rather unhappy about it, though.


58 posted on 10/27/2013 2:56:52 PM PDT by The Antiyuppie ("When small men cast long shadows, then it is very late in the day.")
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To: R_Kangel
... Is there any truth to the rumor that the plan is after all of the Quantitative Easing is completed that the US Dollar will need to be necessarily devalued upwards to 40% (depending on how many QE’s perpetrated)over the next 20 years to cover the volume of currency that has been printed?

40% over the next twenty years? I wish. Try 40% over the next year or two.

I think that creditor nations are getting very close to punting on the Yellen dollar.

59 posted on 10/27/2013 2:58:27 PM PDT by RugerMini14
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To: RugerMini14

Peter Schiff is a bit self-aggrandizing but his grasp of economics is spot on. Hold Yellens at your peril.

http://schiffradio.com/


60 posted on 10/27/2013 3:04:03 PM PDT by RugerMini14
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