Keller @ Large: Should We Be More Open To Inflation Now?

BOSTON (CBS) – According to the New York Times, there’s a body of thought among economists – including the president’s nominee for head of the Federal Reserve – that a good dose of bad-tasting medicine is just what our stagnant economy needs.

That would be inflation, which hasn’t been above three percent for the past two years.

Listen to Jon’s commentary:

Keller at Large Oct 28 2013

These economists argue, writes the Times, that “a little inflation is particularly valuable when the economy is weak. Rising prices help companies increase profits; rising wages help borrowers repay debts. Inflation also encourages people and businesses to borrow money and spend it more quickly.”

That sounds good, but hold on: other economists question the ability of policymakers to control what happens when the money supply is expanded, and warn of “the disruptive consequences of people rushing to spend money as soon as possible. Rising inflation also punishes people living on fixed incomes, and it discourages lending and long-term investments.”

In essence, these are competing guesses about how you’ll react to inflation.

If you’re old enough to remember the 1970s, chances are you’re skeptical. Inflation during that decade often reached double-digits, peaking in early 1980 at close to 15%, and it was decidedly not a good thing for the average American.

But should we be more open to inflation now?

It’s a question of trust.

Do you trust the corporations and banks advocating for more inflation to handle a boost responsibly?

Will wages rise and new jobs be created, or the ensuing wealth be hoarded as it has in the past?

If that’s where they’re headed in DC, it better work.

Ask Jimmy Carter what happens politically when it doesn’t.

You can listen to Keller At Large on WBZ News Radio every weekday at 7:55 a.m. You can also watch Jon on WBZ-TV News.

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