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| No alternative to inflation |
| 2009-02-11 |
| The nominal income or cash flow received by households determines how easily they can repay debt contracts fixed in nominal terms. In the same way, the nominal income or cash flow received by companies determines how easily they can repay debt contracts in fixed currency. At the most general level, nominal GDP is in some sense the "national cash flow" -- and determines how easily the economy as a whole can support an overall debt structure fixed in nominal terms. Nominal GDP growth becomes exceptionally important, especially at times when debts are at a high level. The attached charts show quarter-on-quarter and year-on-year growth in GDP in both nominal and real terms since 1947. |
| Posted by:ed |
| #7 It is written in stone that corporate insiders are entitled to massive payments & bonuses regardless of consequences. |
| Posted by: Anguper Hupomosing9418 2009-02-11 13:08 |
| #6 This is deja vu all over again. Carter redux! |
| Posted by: Yogi Berra 2009-02-11 12:47 |
| #5 I am an ant; f*** the grasshoppers. |
| Posted by: AlanC 2009-02-11 10:08 |
| #4 Who called inflation the unfairest tax of all? |
| Posted by: Nimble Spemble 2009-02-11 09:48 |
| #3 There is something deeply flawed in this way of thinking, having to do with moral hazard and a collectivist mindset. Collectivist in the sense of: the responsible people who didn't take on debt that was unsustainable in a downturn should share the pain of the irresponsible people via inflation, which is a tax on everybody. |
| Posted by: Cynicism Inc 2009-02-11 09:11 |
| #2 We are all Zimbabweans now. |
| Posted by: tipper 2009-02-11 09:02 |
| #1 but every wage cut and price reduction is also reducing the cash flows which households and firms need to pay their debts, deepening the crisis. False statement. What the author fails to acknowledge is that there is some and even a lot of gouging in prices. That 'every' price reduction doesn't reduce cash flows to reduce debt as much as profit margins. Where was it written in stone that companies and stockholders were entitled to double digit profit margins or to operate inefficiently without consequences? |
| Posted by: Procopius2k 2009-02-11 08:44 |
