Aug 21 2008
Debating the Hidden Tax
Dr. Mark Perry and Brian Wesbury are both very good economists that I like. This past week the two have been going back and forth on the concerns of inflation.
On Tuesday Brian wrote this editorial in the Wall Street Journal. Here are a few highlights:
Today’s problems began seven years ago in 2001, when the Federal Reserve overreacted to the deflationary mistake it made in the late 1990s. The Fed vigorously pumped money into the economy in order to drive interest rates down rapidly.
As is so often the case, after the Fed has acted, but before the typical lag in monetary policy has fully played out, conventional wisdom argues that the Fed has become impotent.
. . .
One of the reasons that monetary policy is so loose today is that our economy is addicted once again to easy money and low interest rates. We hear over and over that the Fed cannot tighten because the housing market and the economy are vulnerable. This was the same argument made in the pre-Volcker 1970s, when the U.S. bounced from one economic crisis to the next.
Shortly after, Mark countered with this post on his blog and then he added another post to address Brian’s comments.
My Thoughts: Both arguments have validity, hence, in the short term, I can argue either way. In the long term, politicians will be politicians, and as long as there is no restraint (such as a gold standard) there WILL be inflation because it’s a hidden tax, and politicians will take advantage of it.
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