Economics 101- 2

It is seldom edifying to listen to a politician when it comes to economics. I would argue that it is even less edifying to listen to a doctor, who almost by definition, has little or no knowledge of the subject. 

So when our Pants-up Doc began to hold forth about inflation my ears pricked up. Ah ha, I thought, here comes something stupid. 

I was not disappointed. 

Yet again his team of misfits led him towards a huge pile of shit which Doctor Daft stamped into by confidently stating that the government’s voucher scheme will cause problem inflation. 

What his merry band of Hobbits fail to understand is the idea of pumping money into the economy is to help reflate it. Yes, that’s right, reflate.

I can only imagine his microscopic knowledge of economics had him thinking.. Inflation BAD, as he remembers years back when high inflation was bad. To criticize the government now for stimulus measures aimed at reflation is the economic analysis of a poodle, and a dimwitted  poodle at that.    

As with the 2008 crisis and the US adding several zeros to the Federal Reserve’s balance sheet, effectively printing money, was aimed at heading off deflation. In other words what they needed to be doing was reflating. 

Yes, runaway inflation is bad when economies are hot, right now they are not...they need the stimulus of reflation because of the hit to growth caused by the pandemic. 

There was a famous quote at the time by a Fed official who said something like “the only way we can pump more money into the economy now is by flying over New York in a helicopter shovelling dollar bills out of the door.”

Did it lead to inflation? Yes but only enough for the economy to recover to something more normal. Has there been a problem with high inflation since, no.  

Any economy which is growing has an element of inflation. If you have a growing economy you will have a level of inflation. During difficult times when an economy is slowing or under pressure, there are the opposite forces of disinflation at work as the economy is strained, or in extreme cases shrinking, in which case you will get deflation.

Stimulating the Taiwan economy by the addition of funds via vouchers is aimed at boosting growth to the benefit of all. 

To scream THIS WILL CAUSE A INFLATION PROBLEM IN THE NEXT FEW MONTHS from the sidelines does not only display an almost total lack of any understanding of economics of the current situation, but is dangerous scaremongering by someone who should be a responsible official. 

Here is a graph of Taiwan inflation which I hope will reassure anyone who thinks this sensible economic stimulus by the government will create an inflation issue in the coming months. It won’t. 

This kind of scaremongering by an elected official is absurd and irresponsible.