The Feedback

We’ve all experienced price increases, and we don’t much like them—unless, that is, we’re the ones who are selling. But with the economy barely limping along, some economists have recommended a dose of inflation as a way to help cure unemployment. Do Dx readers think that’s a good idea?

No way, said reader Richard B Mann PhD:

As Drucker indicated, inflation does more harm than good! The “Iron Law of the marketplace” is that the economy depends on what a willing buyer will pay and a willing seller will accept—like water, it seeks its own level. When prices are propped up by stimuli, subsidies, loopholes, inflation, etc.—the market place is distorted. The current problem was created by the government demanding no-down, no-doc loans for people who could not make the payments, and the financial markets manipulation of mortgages.

Reader Joe Digman, who said the harm or benefit of inflation “depends on the context and the amount,” took exception to the idea that zero-down loans were to blame for today’s crisis:

You cannot have a market, Iron Laws or not, when willing sellers can defraud willing buyers, or when huge pockets of wealth distort demand and create price and speculation bubbles, or when aggregate demand (wages) has been so depressed that a huge portion of the population can’t participate in these markets. In an oligarchy, free markets are a fantasy.

Reader Brendan said inflation would make the United States less competitive as a job market:

Inflation is an unruly beast that can easily spiral out of control. The reality is, as things become more expensive, marginal businesses will only look to find ways of sourcing their products more cheaply, which may in turn drive more jobs overseas.

And reader john karayan, jd phd wrote in with numerous bibliographic suggestions and asked us what we were smoking when we said that Peter Drucker would have found today’s inflation rate to be historically low:

Inflation is not, in any way shape or form, “historically low right now.” Not in the world, not in Western Europe, not in Japan. Peter pointed out in Claremont Graduate School courses of his which I attended that the inflation rate in the U. S. between 1789-1913 included negative inflation rates. He said the same for Tokugawa Japan, and for Western Europe.