Tuesday, June 16, 2020

Economist Warns That Current Monetary Policy Will Only Set the Stage for Runaway Inflation

Walter Block
Walter E. Block, who is a Professor of Economics and holds the Harold E. Wirth Eminent Scholar Endowed Chair at Loyola University New Orleans, in a published correspondence is warning of the potential for runaway inflation.

After first stating that "economists predict to show they have a sense of humor," he went on to write:
[H]ere are my present thoughts on the matter. Will our recovery be a “U” shaped one, staying in the doldrums for a long time, or, will we have a quick “V” shaped recovery? It all depends upon what the government does. To wit, if we are to achieve the “V” the government must stop this barking mad system of paying people more unemployment insurance than they can earn from returning to their jobs. Second, the more deregulation we have, the faster the recovery. Third, lower taxes, radically. Fourth, stop this madness with MMT, flooding the market with new money, continually lowering interest rates; this will only set the stage for runaway inflation and the Austrian business cycle.
I am not taking this warning lightly.

At this time, I expect price inflation to climb to the 5% level and wouldn't be surprised if it gets into the low double-digits, between 10% and 15%, but Dr. Block is looking at a more long-term perspective and he is taking into consideration the current prevailing MMT thinking which appears on a practical level to exist at the Federal Reserve Board.

His warning can not be dismissed at all.


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