Sunday, October 27, 2013

Higher Inflation Will Hurt Generation Y

But, as we can guess, that's what Bernanke and Yellen want! Yes, the Federal Reserve wants higher inflation, see this article:

The Fed has worked for decades to suppress inflation, but economists, including Janet Yellen, President Obama’s nominee to lead the Fed starting next year, have long argued that a little inflation is particularly valuable when the economy is weak. Rising prices help companies increase profits; rising wages help borrowers repay debts. Inflation also encourages people and businesses to borrow money and spend it more quickly.

...

"Low inflation is not good for the economy because very low inflation increases the risks of deflation, which can cause an economy to stagnate," the Fed’s chairman, Ben S. Bernanke, a student of Japan’s deflation, said in July. "The evidence is that falling and low inflation can be very bad for an economy."

Not a problem for Echo Boomers? While many Americans won't understand (hint: many Americans suck at math and boast about it!), foreign readers and investors might want to see the below video of how destructive even 2% inflation is:

Note: I am not predicting hyperinflation; I do predict that if the Federal Reserve succeeds at raising inflation, they'll lose control of it much faster than they think. How high will it go? Unfortunately, that's impossible to predict.