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Monday, April 11, 2011

Inflation Is GOOD for the Economy

Holding Inflation below five-percent (5%) actually decreases capital available necessary for a healthy economy, i.e. 100% employment. So, why do central banks all over the world (i.e. The Federal Reserve) have policies that try to hold inflation as close to zero as possible? Because those with capital investments gain from predictable markets (i.e. no innovations) and inflation competes with their return on investment. Ideal inflation should stay in flux between 5%-10% to create markets that have maximum employment and productivity. (Caveat- if your markets are hot and maximized the competition tends to create its own problems, like environmental degradation and corrupt business practices that require government regulation because their solutions are not profitable) If you want to make money - you need to create things, real-property that can be traded for currency. The danger is that only those with capital have the industrial foundation to make stuff efficiently enough to be competitive. The only things that you can create without physical capital, are ideas, and those require sharing to become useful.

From THE REAL NEWS NETWORK interview with Ha-Joon Chang author of "23 Things they don't tell you about Capitalism"

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