Inflation comes roaring back

People who argue for “stimulus”, or more “stimulus”, often correctly point out that no one doubts that government can increase nominal GDP.   Zimbabwe and Weimar Germany are excellent examples of government rapidly increasing nominal GDP.  The question is, can government spending, particularly government spending on favored individuals and groups cozy with the government, increase useful employment, create real jobs that produce real value, create jobs where people work to produce what other people want and care about?

The cpi supposedly rose 0.4% in august – by about the same amount as employment declined. 0.4% a month, if continued, is 5% a year, and the real inflation is probably considerably higher than that.  Shadow statistics claims that the cpi calculation has undergone greater and greater adjustment since 1990, and if calculated by 1990 methods would now be showing an inflation rate 3.5 percent per year higher – which implies that present inflation, if continued would be over eight percent a year.

Five percent inflation per year is apt to have unpleasant and disturbing side effects.  Ten percent inflation is apt to have serious and gravely damaging effects, and we are heading towards ten percent.  The MSM reported the 0.4 monthly result as

underscoring the Federal Reserve’s view that inflation will be contained.

…

A lack of inflation will probably give Fed policy makers leeway to keep interest rates near zero in the foreseeable future to secure a recovery.

“What we’re seeing is a gradual disinflation that reflects the persistent slack in our economy,”

It is a bizarre thing to say.  If they say that for 0.4% per month, they will probably say the same for 4% per month, 30% per month, 10% per day, 100% per day, 100% per hour – which is pretty much what the German mainstream media was saying during the Weimar hyperinflation – that there was no inflation, that the problem was insufficient money in circulation and the government needed to issue lots more money to stimulate the economy, and that Jews and Anglo Saxons were causing the inflation.

When the inflation rate and the unemployment rate are similar, in that both of them are disturbingly high and rising fast, the government should be looking for solutions to both – in other words, supply side solutions – cutting taxes, spending, and regulation.

If, as seems likely, inflation becomes undeniable, expect the regular announcements that inflation is not a problem to be mixed with regular announcements that “price gougers” are a problem, doubtless due to Bush’s dreadful deregulation.  More regulation, by the wise and good regulators, who are on the side of the consumer, will doubtless be needed.