Two renowned US economists are arguing that inflation is the best way to combat the financial crisis. In their article on the webpages of the Peterson Institute for International Economics they argue that inflation (i) is preferable to deflation and (ii) in times of crisis has many advantages of its own. One of the advantages - according to them - is that inflation in the US induces a depreciation of the US dollar vis-à-vis the euro and thus effectively forces the ECB to engage in a more expansionary monetary policy (whereas in the case of a fiscal stimulus in the US the Europeans would free ride on the US expansion).
If this is a representative opinion among US economists then within the next few months we will see a huge fiscal expansion in the US (announced: fiscal stimulus of up to $700bn) accompanied by a massively expansionary monetary policy deliberately aimed at generating inflation.
My recommendation to the rest of the world: Tighten your seat belts!
PS: One of the two authors is Simon Johnson.
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K. Rogoff is also making a case for inflation
Danke für den Hinweis - auf den Artikel von Boone & Johnson ebenso wie den Warnhinweis "Tighten your seat belts!"
Reflationierung hat ja bereits der (jetzige Steinbrück-Kritiker) Paul Krugman empfohlen in seinem Papier "THINKING ABOUT THE LIQUIDITY TRAP".
Es war ja abzusehen, wenn man Bernankes 'Hubschrauber-Rede' gelesen hatte, dass binnen kurzem Simbabwe der schärfste Konkurrent für die neue US-amerikanische Schlüsselindustrie werden würde (http://beltwild.blogspot.com/2008/11/zimbabwe-schrfster-konkurrent-fr-us.html).
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