A colleague keeps sending me articles about the dangers of inflation, including this op-ed today by Larry Summers. What's a good way to refute the argument Summers is laying out. I don't really know econ/finance stuff particularly well.

  • Owl [he/him]
    ·
    3 years ago

    1. Why does inflation only matter when money is spent on public programs, not when spent on tax cuts, military spending, or buying securities?

    2. You can prevent and reverse inflation by raising taxes. Why are people concerned about inflation never proposing this?

    Aaaand TFA:

    The consumer price index rose at a 7.5 percent annual rate in the first quarter, and inflation expectations jumped at the fastest rate since inflation indexed bonds were introduced a generation ago. Already, consumer prices have risen almost as much as the Fed predicted for the whole year.

    Inflation was wildly under-target last year. If you view it as a two year period, literally nothing happened.

    • FunkyColdMedina [none/use name]
      ·
      3 years ago

      Thank you for this answer. What does TFA mean though?

      And when you suggest raising taxes, I assume you mean on the mega wealthy?

      • Owl [he/him]
        ·
        3 years ago

        when you suggest raising taxes, I assume you mean on the mega wealthy?

        I'd prefer to raise taxes on the wealthy, but that is not what I mean.

        The value of the dollar is (loosely, don't @ me economists) the total value of things you can purchase with dollars divided by the number of dollars in circulation. When the government prints money to do things, there are more dollars in circulation, so the value of each dollar goes down (inflation). When the government collects taxes, it removes dollars from circulation, so the value of each dollar goes up (deflation).

        If someone is worried about inflation, increasing taxes is just as logical a solution as decreasing spending. (But they're not actually worried about inflation, so they'll never suggest this.)

        • CptKrkIsClmbngThMntn [any]
          ·
          3 years ago

          Yep, that's the kicker. We're in a hard monetarist ideology that says the only way to deal with inflation is interest rate hikes, but whoever is crafting budgets has the ability to take money in and out of the system.