Senator Mark Kirk (R-IL) doesn't seem like a Tea Partier on the surface, but he's started to experiment with right-wing populism. Today his office sent out an email suggesting inflation will
destroy us all climb in the near future and hurt Illinois businesses. He even shows a chart from the St. Louis Fed showing how the monetary base spiked during the 2009 recession. Only, the chart doesn't have anything to do with inflation except to show how (but not why) we didn't spiral into deflation during the crisis.
You have to remember three things about inflation: first, we haven't got any right now; second, inflation hurts lenders more than it hurts debtors in the long run; and third, deflation—the danger of which has not yet passed—is a lot worse.
Here's my note to the senator's office in response:
The Senator's office recently sent an email to constituents on the dangers of inflation. Only, the data show that core inflation remains below historical levels, and certainly below the Fed's target. If inflation were really a worry, we'd see the bond markets react, as they usually lead other indications of inflation. However, bond yields are at historically low levels.
What we need right now are jobs. Decreasing the money supply during a period of low inflation and high unemployment will not only hurt our already anemic job supply, but also possibly plunge us into *deflation,* which is far worse. Just ask Japan. Or look back at President Jackson's disastrous policy of paying off the national debt in full.
Senator, it's disingenuous of you to argue in favor of policies that hurt average people while claiming it's in their interest. The current policy of quantitative easing, far from hurting the economy, doesn't go far enough to help it. I'm in favor of weakinging the dollar even further, to help exports, boost jobs, and--here's the part your banker friends hate--reducing the real debt burden on families.
For more on how wrong Kirk is, see Krugman on austerity from a couple weeks ago.