08-30-2019, 10:05 AM
(This post was last modified: 08-30-2019, 10:06 AM by Warren Dew.)
(08-30-2019, 08:25 AM)David Horn Wrote:(08-29-2019, 09:25 PM)Warren Dew Wrote: If interest rates are below zero because the economy is shrinking, commodities like gold are likely to be decreasing in value too. Really only storing cash works in that situation.
I would hope that we're not going to copy Germany, and pretend that we can't inflate our way past this. I think we've proven that handing money to the rich is a non-starter, so next time, it will be massive public works … as it should have been under Obama. Frankly, under Trump, programs like that would be hand-outs -- both ineffectual and impoverishing.
Neither public works nor handing money to the "rich", which from the left generally means "anyone who works for their money", have anything to do with inflation. Inflation is controlled by monetary policy, not fiscal policy.
Jerome Powell is doing a good job of shifting the fed from a policy of erring on the conservative side on inflation - keeping inflation below 2% - to actually targeting a small amount of inflation - keeping inflation at or near 2%. As long as he manages that, I don't think we'll get into the situation Germany has.
Of course, Germany's fertility rate of 1.47 provides strong pressure for a shrinking economy, so that makes their job harder. The US is at a near replacement level of 1.89, so we don't have as big a problem to deal with.
