Economists Make Their Case For Inflation

The latest poll by The National Association of Business Economists shows that 41% believe that the Fed’s actions will cause inflation during the next two years. The top reasons cited for concern were “lagged effects of policies now in effect”, “monetization of the debt” and “ineffective exit strategy.” Put another way, the Fed will not be able to get out of its own way as the economy recovers.

The experts who see no way around inflation may be unwilling to admit that the recovery in GDP could be largely jobless. That would mean that the consumer spending that drives most economic growth will not be present and any improvement in the GDP will be muted.

There will probably not be a lot of consumers increasing their demand for goods and services. People who stay employed are likely to save wages or put them toward debt reduction. Inflation cannot thrive in that sort of environment.

Douglas A. McIntyre