Deflation, Not Deficit, Is the Real Threat

|William Greider – The Nation|:

The economic specter stalking Barack Obama is not the nonsense debate that captivates deficit hawks and witless political reporters. It is the threat of a full-blown monetary deflation that would truly put the US economy in ruin. In a general deflation, everything falls—prices, output, wages, profits. Unchecked, this can lead to another Big D—the Depression Obama claims he has avoided.

Depression was the fate that befell Herbert Hoover after 1929 and the outlines of this larger catastrophe are present again. It is easy to dismiss deflation warnings from curbstone critics, including from me. But it is more significant—and truly scary—when senior policy makers of the Federal Reserve begin to express the same fear, as the New York Times reported today. The Fed has done quite a lot in the last two years to prevent this disaster from unfolding, but some officials are now worried the Fed hasn’t done enough.

The central bank understands this danger far better than the over-confident technicians of the Obama administration because deflation led to the Federal Reserve’s historic disgrace after 1929. Fed officials then did not understand their wrong-headed policy moves were directly driving the economy into the Great Depression of the 1930s. Today’s central bankers do not wish to experience the same shame again.

The Times story reveals a rump group of decision makers within the Fed who are focused on the threat and urging their colleagues to consider more dramatic measures to reverse the deflationary pressures.

Full Story: Deflation, Not Deficit, Is the Real Threat | The Nation.

Post to Twitter

Share

Filed Under: Economy - LaborFeatured

RSSComments (0)

Trackback URL

Leave a Reply

You must be logged in to post a comment.

  • Thom’s Blog
    Thom plus logo
      The oligarchs openly talking about a coup d'état in America?
     

    Multi-millionaire lobbyist Grover Norquist is calling for the impeachment of President Obama. In an interview with the right-wing National Journal - Norquist warned that if President Obama wins re-election and decides to let the Bush tax cuts for the top 2% expire at the end of the year - then Republicans will "have enough votes in the Senate in 2014 to impeach [him]."
     
    What does that mean? It means that the super rich in America - and their political operatives like Norquist in Washington, DC - have now compared a tiny tax increase on the wealthy to high crimes and treason - the only Constitutional basis Congress can use to impeach a President. It sounds like the oligarchs are now openly talking about a coup d'état in America.
     
    -Thom
     
    (Do you think will try it? Tell us here.)
  • LEGALIZE Democracy

    " We the corporations" On January 21, 2010, with its ruling in Citizens United v. Federal Election Commission, the Supreme Court ruled that corporations are persons, entitled by the U.S. Constitution to buy elections and run our government. __________

    MOVE to AMEND

    a project of the CAMPAIGN TO LEGALIZE Democracy

    Help end Corporate personhood