Saturday, November 16, 2013

George Selgin keeps saying something like this

Zero Hedge reporting:
"The countries with declining prices is troubled countries like Greece. They must make their price competitiveness, they have lost in recent years, again. This requires falling wages and rising productivity. As a result, unit labor costs go back, and the company may cut prices. This is not a dangerous deflation, but part of the necessary correction so that these countries are internationally competitive again, "Sargent said in an interview.

In addition, there are, according Sargent "historically no reason to fear deflation."

On the contrary: "We all benefit when technological progress lowers the prices, such as computers," said Sargent.

That central banks pursue an inflation rate of around two percent, according to Sargent is because they consider it their job to "make bad debt good debt". Of an inflation governments benefited with high debt.

Sargent: "Inflation is a major redistribution machine, which reduces the real debt burden for the benefit of creditors and devalued the assets of the creditors."
To prevent this, according to Sargent, the reintroduction of the gold standard would be possible, "I would not necessarily say that it would be the best solution, but it would not be foolish."
But would George like Gold?
Until the First World War, had the gold standard, to prevent that governments and their central banks print money limitless. During this time the prices would indeed have fluctuated, but had compensated over the years.

Economics is a spectator sport. If Selgin first thunk it, then George is gonna get some publicity.

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