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View Diary: Paul Krugman: "Cheating Our Children" (51 comments)

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  •  It should understand that prices (1+ / 0-)
    Recommended by:
    Sparhawk

    are dynamic.

    The ice cream might be $3 this week and $3.50 next week.

    The hamburger might be $4.99 this week and $4.49 next week.

    The 300,000 pound house in Britain might have its asking price raised to 320,000 pounds in May to "test the market" as the estate agents like to say.

    If say government was to spend enough to create enough demand, the price of the hamburger might creep up to $5.49/pound and the sale price of the ice cream might jump to $4.

    The government might be happy with the increased tax from the  increased price $5.49/pound hamburger industry.

    However, there are about 50 million adults with a few trillion dollars of bank deposits that might be receiving 1% interest.

    The $45,000 in the bank of an older person might buy 10,000 pounds of $4.49 hamburger. But it might only buy about 8,000 pounds of $5.49/pound hamburger.

    A spurt of government spending demand (which might cut unemployment by 1% or 1.3 million people) will create lifelong reduced spending power and demand for say 50 million Americans with substantial monetary savings in banks.

    That's how stagflation happens.

    Please don't further impoverish 50 million people like me.

     

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