Inflation? Bring It On. Workers Could Actually Benefit.
as is too often the case when workers finally start to see some of the benefits of growth, economists are warning that higher wages will lead to inflation, and they’re calling for the Federal Reserve Board to hit the brakes by raising interest rates.
What if we tried an experiment and waited until inflation actually began to rise substantially before raising interest rates too quickly? Even if prices did rise, my hypothesis is that the benefits, especially for those who haven’t gained from economic growth in recent years, would exceed the costs of higher inflation.
.. It’s not exactly clear why prices haven’t risen very much. It may be because greater international competition keeps prices down; because the decline of union contracts means that fewer companies give automatic cost-of-living adjustments; because consumers can compare prices so easily on the internet; because oil prices have fallen recently; or simply because, after years of low inflation, people expect price increases to be limited.
.. the costs of the Great Recession were enormous — at least $4 trillion in lost income, or about $30,000 per household
.. a high-pressure economy run over a longer period will actually increase that potential by pushing firms to improve productivity and draw more workers into the labor market.