Despite denials by the Fed and stock market advisors, inflation continues to be a serious threat.
Read Inflation Is a Clear and Present Danger, Brian Wesbury’s opinion piece in today’s Wall Street Journal.
As I wrote in Democrats, the Fed, and Milton Friedman (November 22, 2006):
Neither the Democratic Party left wing, nor the Fed has learned the fundamental truth documented by the late Milton Friedman and Anna Schwartz in “A Monetary History of the United States, 1867-1960”...
One of Professor Friedman’s messages is that, when the government attempts to regulate the economy it almost always does more harm than good. Another is that the economy will grow faster and more steadily when the Fed acts to keep the money supply in a stable relationship to GDP. This promotes price stability, i.e., the absence of inflation.
The real economy grows and more jobs are created, not as a consequence of management by government planners, but because private businesses make long-term investments to produce more goods and services. As we saw in the 1930s Depression, businesses don’t make long-term investments when taxes are being raised, inflation is rampant, and they are continually harassed by harmful rounds of government regulations…
English economist John Maynard Keynes and his Harvard economics department acolyte Alvin Hansen were primary sources of these now discredited socialistic policies that exacerbated an ordinary recession into eight years of the Great Depression under President Franklin Roosevelt, a period when, at its lowest, unemployment never averaged less than three times today’s level under President George W. Bush.
Twenty years later, confident that they finally had deciphered the gnostic content of history, Keynesian liberal economists declared that the new era of permanent prosperity was at hand. Within months their hubris, and the economy, collapsed. We were mired deeply in the worst economic conditions since the Depression: the stagflation of the 1970s, with its large-scale unemployment, bankrupt manufacturing businesses in what became the Midwestern “rust bowl,” and the worst inflation in our history. Men were forced to “moonlight” with two or three jobs and mothers were forced into the full-time workforce, just to pay the rent and grocery bills.
Never forget that our two worst economic and social periods – the Depression and the 1970s stagflation – were caused by liberals’ social engineering.
Our present-day big problem is that liberal-progressive Democrat/Socialists either have forgotten the 1930s Depression and the 1970s stagflation, or they are so cynical that they don’t care what happens to you and to our nation, so long as they win elections with phony promises.
Senator Obama’s plan to jack up taxes will cause business to crater, while his proposed vast expansion of welfare-state expenditures, financed by more excess money from the Fed, will light a rocket under inflation.
In that event, we face the real probability of 1970s conditions: soaring inflation, loss of value in our savings, diversion of investment from long-term production increases into non-productive tax shelters, and large-scale and protracted unemployment.
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