Which would you pick? Inflation or Unemployment.

[Big Blue Machine]

I would choose inflation because it is the smartest way to fight both of them. Inflation causes unemployment. If the inflation rate is high then businesses have to cut their losses and fire people. Lower inflation makes the businesses more confident and they hire more workers.

Fighting unemployment would cause a deficit. Spending money isn't the answer. Example is the Trudeau era, (I know there was a recession). More spending equals more inflation which causes unemployment.

[daniel]

I would choose inflation because...

<{POST_SNAPBACK}>

Academically, your choice is the correct one but not necessarily the reasons you state. I remember so clearly in Econonics 100. My professor stating in front of the class: If you had to make a choice between low unemployment or low inflation and interest, the choice is always low inflation and interest.

High inflation of course, devaluates the currency making investment less attractive as well as making debt payment more difficult, etc etc.

Many politicians will tell you that they will create an environment for investment which will in turn create jobs. But job creation is not their purpose. In an overheated economy, over-employment drives inflation and that's bad.

[err]

Suggested reading: "Shooting the Hippo" by Linda McQuaig.

Wealthy people's assets depreciate with inflation. Big business, Bay Street, etc... don't want the value of their assets eroded. Their assets are more important than the lives of working people, so if you have to raise interest rates high enough to choke half of the population to get control of inflation, then that is what is done...

High inflation will cause high employment, loss of house and home, etc... It is sure to cause high unemployment... High unemployment without high inflation must surely be a better bet.... There is a better chance of recovery....

[Riverwind]

Wealthy people's assets depreciate with inflation.  Big business, Bay Street, etc... don't want the value of their assets eroded.  Their assets are more important than the lives of working people, so if you have to raise interest rates high enough to choke half of the population to get control of inflation, then that is what is done...

This is a false dichotomy. The only people who like inflation are labour leaders because they don't have to settle for 0% wage increases year after year. Inflation allows labour leaders to sound like they are getting wage increases for their members when they actually are a wage cut after inflation.

Inflation puts a financial strain on everyone who does not have the ability to negotiate price increases. This includes everyone from the small business people exporting product around the world to a pensioner with annuities or non-indexed pension plans.

[The Terrible Sweal]

I don't understand the question. If I vote 'unemployment' am I saying I want to accept unemployment or fight unemployment?

[Big Blue Machine]

Fight umelpoyment

[The Terrible Sweal]

Okay then, I vote to fight unemployment.

Unemployment is permantently forgone productivity.

Inflation is only bad if it's unpredictable.

[Big Blue Machine]

But fighting unemployment will drive up inflation. If you spend more, you go more in debt and the inflation goes up.

[The Terrible Sweal]

But fighting unemployment will drive up inflation. If you spend more, you go more in debt and the inflation goes up.

Increasing gov. spending is not the only way of fighting unemployment. And deficit spending, though an inflationary influence, need not produce substantial actual inflation.

But more fundamentally, there isn't really anything that wrong with a little inflation. In fact, without some inflation, you are probaly experiencing no growth.

[err]

Inflation puts a financial strain on everyone who does not have the ability to negotiate price increases. This includes everyone from the small business people exporting product around the world to a pensioner with annuities or non-indexed pension plans.

<{POST_SNAPBACK}>

Yes... the old age pensioners... most often portrayed the "baby seals" hurt by inflation.... in ads sponsored by big business...

[Big Blue Machine]

Increasing gov. spending is not the only way of fighting unemployment. And deficit spending, though an inflationary influence, need not produce substantial actual inflation.

But more fundamentally, there isn't really anything that wrong with a little inflation. In fact, without some inflation, you are probaly experiencing no growth.

<{POST_SNAPBACK}>

But leftist thinking is that, the gov't has to get rid of unemployment themselves. They have to create all these programs and spend a fortune.

[The Terrible Sweal]

Increasing gov. spending is not the only way of fighting unemployment.  And deficit spending, though an inflationary influence, need not produce substantial actual inflation.

But more fundamentally, there isn't really anything that wrong with a little inflation.  In fact, without some inflation, you are probaly experiencing no growth.

<{POST_SNAPBACK}>

But leftist thinking is that, the gov't has to get rid of unemployment themselves. They have to create all these programs and spend a fortune.

<{POST_SNAPBACK}>

The idea of government spending as an economic stimulant has crept into right wing policy as well. Viz. GWBush. Of course what gets stimulated specifically differs quite a bit.

[ScottBrison]

I'd choose unemployment because inflation affects everyone whereas unemployment only affects those unemployed. Plus unemployment is a lot easier to fix.

[Big Blue Machine]

But the gov't doesn't have to take responibility for unemployment. It's a fact, that people will always be unemployed, you can't end unemployment. Inflation is more dangerous than unemployment. It makes businesses have to cut their losses and fire people, ie unemployment.

The only government stimulant is tax cuts. Tax cuts work. Cut taxes when the economy is down, and put them sort of back up when the economy's going good.

[Hugo]

But more fundamentally, there isn't really anything that wrong with a little inflation. In fact, without some inflation, you are probaly experiencing no growth.

Both these points are dead wrong. "Inflation" is the systematic devaluation of the currency, basically, it's counterfeiting committed by the government. This inflation causes an increase in the money supply, which leads the market to mis-invest resources. It seems that savings are up, which indicates a preference for capital goods over consumer goods. Therefore, more investments are made in capital goods. However, this is a false signal: consumer preferences haven't changed. The capital investments made with inflated currency are in products not in demand in the market, therefore, it is only a matter of time before they collapse. As soon as the influx of counterfeit money stops, the market adjusts itself and the malinvestments are liquidated in a recession. Continued and continually increasing inflation is the only way to stave off this recession, and this eventually leads to the collapse and abandonment of the currency as in the Weimar Republic. In our economy we suffer mild alternating recessions and booms because inflation is periodically increased, creating a boom, and then contracted again, which liquidates the malinvestments and creates a recession.

The second point is woefully ignorant of history. The period of Great Britain's greatest economic expansion in history was accompanied by deflation, or falling prices. This is the natural order of the free market, because at that time, the currency was gold and thus not subject to inflation. The division of labour and technological advances cause prices in a free market to fall in the long term, which is especially visible when compared to commodity money that doesn't change in value much, like gold. Rising prices in inflation are actually not rising at all, it's just that the value of money is falling relative to everything else. Sweal has actually posted data himself that contradicts his point.

Regardless, the original question is a false dichotomy. Unemployment and inflation aren't related, as the 70s taught us, it's perfectly possible to have both at the same time. This was (or should have been) the last gasp of the Keynesian school and the monetary cranks.

[Big Blue Machine]

Well, that killed the conversation....

Thanks, Hugo for the know-how.