Apr 28, 2009

Cato Senior Fellow advocates inflation as economic cure

Recent massive injections of bank reserves by the Fed are probably intended to reverse expectations of price declines. Under current conditions, slightly higher inflation and inflationary expectations could be the very balm essential for pulling the economy out of recession. Of course, it remains true that the Fed must later ensure that demand-driven inflation does not spin out of control. But that's a balancing act for the future, the need for which would not arise unless the economy recovers. Currently, price increase expectations appear to be a precondition rather than a hindrance to achieving an economic recovery.

~ Jagadeesh Gokhale, Senior Fellow, Cato Institute, "Inflation at Cato," LewRockwell.com Blog, April 27, 2009, by David Gordon

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