Comment and analysis on all things Charlotte

Your Quarterly Inflation Nightmare Warning

Not entirely certain I buy what Peter Schiff is selling — primarily because the velocity of money — the domestic demand for dollars — remains so low due to high unemployment. Now, suppose employment does notch up in the next few months, all those dollars that were in “hiding” flood the market — yeah, bang — big inflation number coupled with still high joblessness.

2 Responses to “Your Quarterly Inflation Nightmare Warning”

  • Mar
    30
    2011

    I very much enjoyed this twisted view of the issue.

    So, the New York Sun asked, why not float the kilogram? After all, when you go into the grocery to buy a pound of hamburger, why should you worry about how much hamburger you get—so long as it’s a pound’s worth? A pound is supposed to be .45359237 of a kilogram. But if Congress can permit Mr. Bernanke to use his judgment in deciding what a dollar is worth, why shouldn’t he—or some other Ph.D. from M.I.T.—be able to decide from day to day what a kilogram is worth?

    No doubt some will cavil that the fact that the dollar floats makes it all the more reason for the kilogram to be constant. But what’s so special about the kilogram? If the fiat dollar floats, one has no idea what it will be worth when it comes time to spend it. If the kilogram also floats, it will simply be twice as hard to figure out what something we’re buying will be worth. So what if, when we unwrap our hamburger, the missus has to throw a little more sawdust in the meatloaf?

    Or let us consider a compromise. Let’s go to a fiat kilogram—that is, permit the kilogram to float—but apply the new urgency to fixing the dollar at a specified number of grains of gold. To those who say it would be ridiculous to fix the dollar but let the butcher hand you whatever amount of hamburger he wants when you ask for a kilogram, I say, what’s the difference as to whether it’s the measure of money or of weight that floats?

    http://www.hillsdale.edu/news/imprimis/archive/issue.asp?year=2011&month=02

  • Mar
    30
    2011

    Haver,

    It’s easier to get people to understand what the Fed is doing wrong with one sentence and one question, neither of which invokes the metric system.

    “One of the Fed’s mandates is price stability. Would you say that prices that have increased twenty-fold since 1913 are ‘stable’, or would you say that they are ‘unstable’?”

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