Friday, August 14, 2009

Why inflation hasn't found us yet

If you're wondering why the government's unparalleled expansion of the money supply has not led to inflation, look at our productivity numbers. In a New York Times article by Edmund Andrews (syndicated by the Star Tribune), he states that productivity is up at an annualized rate of 6 percent.

In increase in productivity will allow companies to keep prices stable. And when prices are stable, inflation is kept low.

Don't get too comfortable though. There are only two ways to pay off government debt: raise taxes or print money. Printing money, which we've been doing, will eventually lead to inflation.

No comments: