| SamuelRSmith said: I've studied the graphs for hours on end, Akvod, and, frankly, all real world data points towards Government deficits being inflationary. Hell, inflation didn't really even exist in the USA before the 1900s, indicating that, actually, Government deficits are the sole cause of inflation. Now, of course, you can argue that it's because the deficit has been sustained during periods of growth. Which I agree with, and, in fact, the data also shows that if the deficit is quickly reduced, inflation will quickly fall with it. However, this is only when the deficit has come from the Government spending money on projects that have a greater long-term gain. If the Government borrows a tonne of money, for example, to improve the infrastructure, inflation will fall as the benefit derived from the infrastructure increases - in essence, as the projects pay for themselves. The problem is that during recession, and the kind of policies that Keynesian politicians usually go for - generating bulking deficits to increase consumption - are policies that not only don't generate as much long term benefit for an economy (£20 billion spent on subsidising cars will not generate as much long term benefit as £20 billion spent on roads, for example). It all just boils down to the fact that Keynesian economics are all ridiculously short-term. Unfortunately, the only terms shorter are terms of mandate for a Government, and they only really ever focus on the next 5 years, not the next 50. To quote Keynes, "in the long run, we're all dead". |
Frankly, you're denying things taught in Principle Macroeconomics class, but yes, expansionary policy, or in fact you can call it, INFLATIONARY policy are in fact, inflationary. All I'm saying is that if there is a DEMAND (not a supply, aka staglfation), there should be a reduction in output AND inflation rates. Therefore, increasing the aggregate demand curve, by increasing G, should bring it back to its original levels. Of course, you can also do this by increasing I (investment), by lowering the interest rates.
Monetary policy is the focus, but when Cramer is talking about "academic" he's talking about the Fed listening to FRIEDMAN, trying to priortize inflation and following an rule, rather than simply engaging in discretionary policies.
