Today, Barrack Obama announced the core of his economic team. Timothy Geithner will lead Treasury, Larry Summers will head the National Economic Council, and Christina Romer will chair the Council of Economic Advisers. In his news conference, President-elect Obama stated that they would “do whatever it takes” to pull the US economy out of its current swoon. He also indicated a desire for transparency and clarity in his economic policy making as well as making sure “Main Street” benefits as well as “Wall Street”- nothing new in these statements.
However, these appointments are a key tell in what should be a key strategy for economic recovery- monetary expansion. While the Federal Reserve has already implemented major rate cuts and recently undertaken quantitative easing, the effects of these policies will not be felt for 6-9 months, as is the general case with monetary stimulus. The greater risk could be that, just as a brief monetary expansion was put on hold in 1932 (not a good decision, it turned out), renewed concerns about inflation could create pressure on the Fed to cut short an effective monetary response. But these appointments indicate that will not be Obama-led pressure.
All three- Geithner, Summers, and Romer- have indicated an understanding of monetary stimulus to provide short term benefits for economic growth. Geithner, for example, was one of the leading proponents of keeping rates lower back in 2006 and has historically been dovish on monetary expansion. Summers, while touting the benefits of fiscal stimulus last year, has also supported monetary expansion. The most interesting pick here could be Mrs. Romer, as she has has expressly written that nearly all the positive economic shifts during the Great Depression were attributable to monetary expansion rather than some Austrian school view of natural economic recovery.
While President Obama has indicated a desire for redistribution of wealth in the US economy, and based on the election results, will oversee it, there are different ways to effect this redistribution. Taxation and welfare is one way, but monetary expansion is another, because it ultimately creates higher levels of inflation. As long as capacity and technology can come to the rescue (and there is plent of both available) so that core inflation can be moderated, this monetary expansion can be expected to continue.
Just as money has time value, it should also have a half life. Without inflation, the wealthy can all too easily hoard their capital. With inflation, they must either spend, or invest- or their wealth is, in fact, redistributed. And redistribution to money earners- those who labor and invest- is not a bad idea for growing an economy. And make no mistake, Mr. Obama and his team are focused on growing this economy.
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We got it alright. ( As JD have pointed out to you.)
The collateral damage your socialist ideas ignore ——
Negative savings rate, massive trade deficit and debts (personal and collective) that can never be paid off.
The Keynes theories taught in school (that you’re still selling) have been demolished by Friedrich Hayek brick by brick —– way back in the 1930s.
Just as Aristotle have provided physical and observational arguments that the earth is spherical, the flat-earth society thrives.
This is where Mr Zs reference to the nature of man applies.
Redistribution is another word for stealing. The economic effects of legalized theft are always negative, no matter what the method.
Inflation may hurt big time investors to some extent, but the net effect of inflation is redistribution of wealth from the buyers of goods, meaning you, me, the poor, those on fixed incomes, those who work for a wage, to those who produce the money and get it first, the government, the Federal Reserve banks and the fractional reserve banking system, investment bankers and brokers.
Inflation only causes dislocation in the economy and we all pay the high price of their irresponsibility. Unfortunately for us all, It appears that our governennt, present and incoming, is ready and willing try to inflate the problems away, rather than recognize their role in causing them.