Article;
Comment;
Inflation-targeting aims at increasing inflation and prices…
i’m little surprised, probably late, at the Central-banks that they are trying
to correct a demand problem with supply-side measures, money-supply and
production… But, when the economy is in liquidity-trap, means when you are
increasing money-supply and it is not increasing inflation… good supply
conditions or likely, over-supply in the past are not letting demand exceed
supply, which is a necessary condition for increase in prices. They rise when
demand exceed supply or when supply undershoots the demand level… But,
increasing prices does not lone could solve the real economy problems
(unemployment)… Increasing prices is not a problem… The central-banks can
increase interest rates to increase the borrowing cost; prices will go up,
next-day… Banks can try… But, our real problem is low employment,
low-real-wages and low demand… And, it could not be solved by supply side
measure… In any multiplier supply and demand interacts with each-other on
various levels… Therefore, it does not matter who triggers who, it’s a chain
reaction… either demand follows supply or supply follows demand… Not, much a
policy problem… But, we need to choose between the multiplier and accelerator. When
monetary-policy works it is the former, and fiscal, the latter. But, we must
have money… QE is increasing inflation… Means less demand… But, our problem is
low demand… I think it is an update for Keynesians… Many say that QE has no
drawback…
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