Letter Re: The Great Debate--Puru Saxena Explains the Fed's Interest Rate Hikes

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I enjoy most of what Survival Blog puts out, but the Puru Saxena article is a bit misleading. Mr. Saxena seems to be a bit confused into thinking that 1) all inflation is the same and that 2) control is the same as eliminate. The Federal Reserve's monetary policy is, has been since its inception, and will most likely continue to be creating inflation. This is not at issue, as the Fed is happy to point out. What Mr. Saxena seems to say is that control over inflation should equal eliminating inflation. The Fed strives to keep inflation within a small range of values (from about 2.0 to 4.0% a year) and manipulates some choice interest rates as well as the monetary supply via the bond market. In this sense, the Fed is most certainly controlling inflation to be a known acceptable value, as opposed to "hyperinflation" as seen in Germany post-WWI. The "grim reality" that Mr. Saxena posits is not only true, it should not be a surprise. Mild inflationary economies are not only more pleasant to live in, they are more stable as they contribute to the ability of banks to loan money, businesses to take loans and individuals to profit. Any economy can self-destruct if enough of the right people do the wrong thing, but it isn't because of the existence of inflation.
In the interest of full disclosure, I am merely an Economics student and will certainly yield the floor to anyone with greater experience in the field, but I felt the need to offer an alternate point of view. - P.H.

All Content on This Web Site Copyright 2005-2013 All Rights Reserved - James Wesley, Rawles - SurvivalBlog.com

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This page contains a single entry by Jim Rawles published on December 3, 2005 5:10 PM.

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