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Government Spending - Inflation

 
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PostPosted: Wed Jul 23, 2014 4:20 am    Post subject: Government Spending - Inflation Reply with quote

PeakTrader:

Menzie Chinn, I agree, expansionary fiscal policy is needed in a recession.

However, politicians/lawyers spend too much when the economy isn’t in recession.

From Commanding Heights:

“Keynes intended government to play a much larger role in the economy. His vision was one of reformed capitalism, managed capitalism — capitalism saved both from socialism and from itself.

Fiscal policy would enable wise managers to stabilize the economy without resorting to actual controls. The bulk of decision making would remain with the decentralized market rather than with the central planner.

…fiscal policy — spending, deficits, and tax. These tools could be used to manage aggregate demand and thus ensure full employment.

As a corollary, the government would cut back its spending during times of recovery and expansion. This last precept, however, was all too often forgotten or overlooked.”

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Menzie Chinn says: Those at lower income levels are likely facing a higher inflation rate.

Link: http://econbrowser.com/archives/2008/07/why_a_lot_of_pe

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PeakTrader:

However, don’t the top 20% buy high-end goods that are more profitable for businesses?

Are they really getting better bargains than the other 80%?

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