Saturday, September 18, 2010
2010, a Year of No Inflation
This article is interesting because inflation rates according to the Labor Department states that inflation is at a negative 0.7%- over the last 6 months that is. This is vital because this is a sign of a very weak economy. Furthermore, the Fed has what is known to be called a duel mission; this states that they are responsible for trying to maximize employment and to keep inflation contained. According to the article, they are not doing a good job because there are millions of jobs not available to maximize employment.
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well in any bad economy there is going to be a lot of unemployment, so that is pretty normal. The Fed does want to maximize employment, but to do so the economy has to be better. The economy is the cause of a drop of inflation. People aren't spending money so prices are falling.
ReplyDeleteBut the Fed can alter reserve requirements and interest rates, so it could raise inflation if it wanted too. Increases in inflation usually result in increased employment because the real cost of labor decreases. The current deflation is likely a major reason why businesses aren't hiring.
ReplyDeleteThis is very dangerous. If Fed doesn't do a good job, economy will be at risk of deflation. Offer more jobs is very important to increase inflation rate.
ReplyDeleteInflation is a major problem for the Fed. However, an even bigger problem is deflation. Deflation in an economy can cause a problem where money is no longer able to stimulate the economy.
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