02 December 2009

Christina Romer, Tribal-Economist For President Obama, Still Blaming Bush

She also still thinks Cash for Clunkers was a good idea--willful suspension of disbelief and all that.

Apart from repeating the company line about how much things sucked when Obama took office and how he's done everything humanly possible to right the ship, Romer proposes even more government intervention in the private sector. This intervention will require even more government spending, natch.

Among other things, I'm reading Rose & Milton Friedman's "Free to Choose" (incidentally, an excellent Christmas gift idea). Given the incredible increase in the money supply over the last year both through government spending and the actions of Fed Chair Ben Bernanke, Friedman's cautions regarding the dangers of inflation seem timely. Page 275:
It takes time for these reactions to occur. On the average over the past century and more in the United States, the United Kingdom, and some other Western countries, roughly six to nine months have elapsed before increased monetary growth has worked its way through the economy and produced increased economic growth and employment [ed. note: matches up well with the recent "good" news that the US economy shed only ~167k jobs last month]. Another twelve to eighteen months have elapsed before the increased monetary growth has affected the price level appreciably and inflation has occurred or speeded up. The time delays have been this long for these countries because, wartime aside, they were long spared widely varying rates of monetary growth and inflation. On the eve of World War II wholesale prices in the United Kingdom averaged roughly the same as two hundred years earlier, and in the United States, as one hundred years earlier. The post-World War II inflation is a new phenomenon in these countries.
As sure as Obama and co. will continue to propose increased government spending, inflation will come.

When it does, it will act as a tax that robs the rich and poor alike.

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