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Strategies & Market Trends : John Pitera's Market Laboratory

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To: Jon Koplik who wrote (12401)	6/26/2009 3:52:16 AM
From: ahhaha	4 Recommendations Read Replies (2) of 33421

And the United States itself emerged from World War II with debt exceeding 120 percent of G.D.P. In none of these cases did governments resort to inflation to resolve their problems. Several years after WW2 the US had its worst bout of inflation since the 19th century, worse than the '70s. Why did it occur? Gubment created money that could be spent but the economy was still oriented around wartime output and wasn't able to supply goods and services demanded by the public. Extra demand plus constraint on supply equals inflation. You don't hear anything about that several years from '48 to '50. It's noteworthy to reflect upon this period of history because similarly now the public has the potential demand wherewithal plus constraint on supply(White man does no work). But it’s hard to escape the sense that the current inflation fear-mongering is partly political, coming largely from economists who had no problem with deficits caused by tax cuts Deficits are caused by tax cuts? Deficits are caused by too much spending independently of tax cuts. Assume taxes are increased. Deficits will rise faster with raised taxes. Why? Because more money to spend means more and more money will be spent. but suddenly became fiscal scolds when the government started spending money to rescue the economy. Since when did any government spending rescue the economy? Who produces? The US government? Hardly. All government does is spend money choosing some one or other producer to provide what government chooses to provide, not what people demand. Thus, the wherewithal is squandered and this constrains demanded supply. And their goal seems to be to bully the Obama administration into abandoning those rescue efforts. He better hope they're successful, for if they aren't, Krugman will be out of a job. Needless to say, the president should not let himself be bullied. The economy is still in deep trouble and needs continuing help. The economy needs continuing help? This is a prescription for disaster, It's a statement that mankind is born into a state of poverty and must remain there unless government can steal from the yet to be born to bail Him out. Even then he stays in poverty since why work when the government pays the bills. It should be clear that Krugman has no adequate understanding of the concepts enunciated by the Founding Fathers, the basic idea of which is that man can create what he needs as long as tyranny isn't in place to stop Him. Yes, we have a long-run budget problem, and we need to start laying the groundwork for a long-run solution. What happened to his quickly forgotten prescription for "continuing help"? But when it comes to inflation, the only thing we have to fear is inflation fear itself. The only thing we have to fear is apparachiks like Krugman.

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