A columnist at Bloomberg has begun cheering for what you have to pay for food, fuel and housing to go up.
Up?
It is Bloomberg columnist Karl Smith who, in light of inflation already surging to five-plus percent over the year, and as much as 1.2% for some products over the course of just a few weeks, wrote, "A higher rate of inflation, and correspondingly higher wage growth, could be a net positive for the economy."
He explained higher inflation makes "debt" more "expensive, but easier to manage."
And he noted if the Federal Reserve interest rate is higher, as it could be with inflation booming, that the feds would have "more room [to] cut interest rates in case of a downturn."
Critics suggested that suggests hoping circumstances for consumers were worse so that went the economy really tanks, the government could try to do something about it.
But the concept already was taking criticism from the likes of Newsbusters, a division of Media Research Center.
There, a commentary explained, "leftist pundits in the media are twisting themselves silly trying to spin the terrible economic situation in an attempt to save President Joe Biden. A new Bloomberg Opinion op-ed actually tried to argue that high inflation is a good thing for America."
Smith, the criticism noted, "actually had the audacity to publish a nonsensical article headlined, 'America Needs Higher, Longer-Lasting Inflation.' His sub-headline was just as ridiculous: 'The benefits of moderately rising prices and wages outweigh the costs.'"
The criticism pointed that the nonsensical nature of the suggestion, given that the Senate Joint Economic Committee recently warned if "high inflation persists, it will harm American families by decreasing their purchasing power," which is one of the consequences of inflation.
In fact, experts in and out of government alike have forecast a period of inflation, with some saying it could be high. Government analysts claim it was not, however, last a long time.
"In Smith’s view, economists and central bankers should cease wondering whether inflation will deflate back to the Federal Reserve’s two percent target and consider 'whether the Fed should strive to make 4% inflation permanent,'" the Newsbusters article said.
This while the actual inflation so far is running about 5.4% higher than a year ago, the highest surge in 13 years.
His "easier-to-manage" "debt dynamics" didn't impress Euro Pacific Capital Chief Economist Peter Schiff, who called it "nonsense."
Newsbusters explained, "Rising consumer demand for goods is increasing consumer prices, and it is also putting pressure on businesses to increase production while they are constrained by supply chain disruptions and labor shortages. When this occurs, American families are simultaneously faced with higher prices and shortages, lowering their quality of life."
While Smith conceded sudden price jumps are painful, and ultimately a spiral of both wages and prices is to be "dreaded."
But he claimed, "A permanent increase in inflation from 2% (its average over the last decade) to 4% would cause interest rates to rise by roughly 2% as well, as lenders sought to protect themselves from rising prices. Economists describe this as a rise in nominal rates, because the net return from lending — the real interest rate after accounting for inflation — remains the same."
He said one result is that with lower interest rates, people borrow more for their mortgages, so end up with the same payment no matter.
He said with slow wage growth, "those same families haven’t seen their mortgage payments decline as a fraction of their income at the same rates as previous generations did. They have less room to manage unforeseen expenses, making their financial future more uncertain."
And he explained, "The next recession, hopefully, will not be the result of a global pandemic. That means Congress is unlikely to provide the same level of support, and the Fed will have to do more to stimulate the economy. To do that, it needs higher nominal interest rates."
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