Inflation Must Increase In Order To Reduce Unemployment
by I. M. Vronsky, Editor-in-Chief, Gold-Eagle.com. March 1, 2010
Most competent market analysts, objective economists and honest politicians concur the current 26-year high in the UNEMPLOYMENT RATE at near 10% is totally unacceptable. To be sure it is today’s gravest problem weighing on the country’s population. America is in dire and urgent need to create jobs, Jobs and more JOBS.
This begs the question: “HOW CAN THE WASHINGTON ADMINISTRATION accomplish this feat in a timely manner?
To answer this pressing question, we need only to review a period in US history that also suffered with unacceptably high UNEMPLOYMENT, but successfully implemented measures to resolve the problem Of course I am referring to the period of Jimmy Carter’s presidency from 1976 to 1979. History is testament Carter’s Administration orchestrated HIGHER inflation, which had the positive effect of yearly reducing the UNEMPLOYMENT RATE. Here are the data produced under Carter’s watch.
Year………..Inflation Rate (%)…………….Unemployment Rate (%)
(Source: Statistical Abstract of the United States)
The above financial history is IRREFUTABLE proof that an ever rising level of inflation will indeed decrease unemployment.
FAST FORWARD TO 2010…
THREE TOP US ECONOMISTS (Obama Advisors) Promote High Inflation by Mankiw, Rogoff & Krugman (*)
“Three top US economists urge the Fed to generate higher inflation for years with a view to reduce the UNEMPLOYMENT RATE.” The reason is because: HIGH INFLATION IS PREFERRED OVER HIGH UNEMPLOYMENT.
“Economists, Gregory Mankiw (Nobel Prize winner in Economics), Kenneth Rogoff (also Nobel Prize winner in Economics), former IMF economist, submit that a prolonged period of high inflation is the best way to combat the economic crisis in order to alleviate the onus of the nation’s burgeoning debt -- and additionally to promote consumption – but more specifically to reduce UNEMPLOYMENT.
The USA needs inflation…NOT moderate inflation but rather high inflation…ie much higher than the Fed’s targeted 2% per annum. Gregory Mankiw who was economic advisor to President Bush insists on the necessity to artificially stimulate an increase in prices via non-conventional policies to be implemented by the Fed like PRINTING MONEY (ie increasing the Money Supply)…and keeping basic interest rates near ZERO PERCENT.
In total accord with Economist Mankiw are Nobel Prize winner Paul Krugman and Kenneth Rogoff (former IMF economist). All three suggest a wave of high inflation over a prolonged period will facilitate the payment of private debt (e.q. home mortgages) and the burgeoning National Debt. Moreover, the increase in prices would foster greater consumption.
Harvard Professor Rogoff is further convinced an inflation rate of 6% for at least two years would disarm the ‘Ticking Debt Bomb’ that menaces the entire US population…in addition to the humongous US government debt.”
In summary, the above article clearly demonstrates that three staunch supporters of President Obama are probably recommending Washington implement a policy of materially increased inflation to 6% per year for at least two years with the objective of SIGNIFICANTLY REDUCING UNEMPLOYMENT.
(*) Source: Translated from Spanish article, “Mankiw, Rogoff y Krugman Animan A La Fed, A Crear Una Inflacíon Alta En EEUU Durante Dos Años,” Júlio 2009 del SPOTLIGHT INTERNACÍONAL.
WHAT TO EXPECT IN THE NEXT 3 YEARS
Under President Obama's watch UNEMPLOYMENT is stuck around 10%.....THAT'S SUBSTANTIALLY WORSE THAN DURING JIMMY CARTER'S PERIOD. Consequently, one might hope to expect the Obama Administration to crank up inflation with the specific objective of winding down THE WORST US UNEMPLOYMENT IN THE LAST 26 YEARS!
Expected Consequences of Ratcheting Up Inflation in 2010-2012
- Unemployment slowly diminishes to acceptable levels
- Real Estate values nationwide begin to recover
- Underwater mortgages evaporate
- Home foreclosures sharply decrease
- Insolvent banks come off FDIC’s toxic watch list
- The US Dollar Index slowly falls in value
- Perennial Export Deficits turn into yearly Surpluses
- US Automotive Industry comes off the Endangered List
- The overall economy begins to come out of recession
- Disarm the ‘Ticking Debt Bomb’ that menaces the US
- Gasoline prices rise relentlessly higher
- Gold, silver, platinum & palladium repeatedly make new highs
During President Carter's inflationary years the price of gold soared well over 400%. And so it is highly probable to happen again as the Obama Administration ratchets up inflation, which might begin in the 2cd half of 2010. During Carter’s four years (1976-1980) the gold price went parabolic:
Protect your family's net worth and its purchasing power by investing in some form of precious metals, because in my opinion an Inflationary Tsunami looms on the horizon.
© 2010 I. M. Vronsky
I. M. Vronsky started one of the first gold internet sites in 1997 -- way ahead of the pack. Many have copied, but few can compete with Gold-Eagle.com for metals market insight, charts, editorials, and a premier Forum.