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Yearning for more inflation

Posted by Richard on March 28, 2014

At The Economist, someone identified only as R.A. wants the world’s central bankers to work harder at increasing inflation. I think it’s Paul Krugman writing anonymously.

Alone among big rich economies, Japan is now actively trying to raise inflation, in hopes of finally kicking its low rate, low growth habit. Higher inflation is the only reasonable way forward:

This would let central banks cut effective borrowing costs despite the zero bound on interest rates, since inflation reduces the burden of repaying a given loan. Just as important, higher inflation would speed up interest-rate normalisation.

The rich world’s central banks are behaving with a dangerous complacency. Low and falling inflation will retard ongoing recoveries. …

If low inflation retards economic growth, then Venezuela’s economy must be growing like crazy:

Venezuelan Inflation

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