Word: inflationâ
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...demands of a growing and inflationary economy. The arithmetic is simple: if real G.N.P. increases 3.5% and prices rise 8.5%, approximately the results expected this year, money supply must increase 12% to accommodate both. If it grows more slowly, then either production or inflation???or both?must slow down. A few economists fear that the bite will come out of production, and they oppose anything but a very gradual slowdown in money growth. "Anyone who calls for a sharper cut," says Arthur Okun, "is advocating recession, and he should come...
...Inflation???and a realization by investors that farm land is a vital resource in a hungry
Just as everyone had feared, last week's inflation figures were a stunner, and the most appalling thing about them was the high cost of eating. Not only does April's .9% rise in consumer prices mean that the economy is once again in double-digit inflation???11.4% on an annual basis ?but food prices are climbing more than twice as fast, 23.8%. The rise is turning the nation's supermarket shoppers into an army of walking wounded and making grossly naive the Administration's January prediction that food prices would go up by only 4% to 6% this...
Sooner or later, however, governments must act to curb inflation???and risk recession?by curtailing spending and restricting the growth of money supply. Many economists indeed blame all post-World War II recessions on overly zealous anti-inflationary policy. But that criticism obscures a vital point. In a society that operates by private decision-making rather than central command, governments must make difficult judgments on the exact mix of tax, spending and money-supply policies needed to nudge businessmen and consumers into the "right" decisions on how much to buy, build and borrow. Inevitably, the fallible humans who run treasury...
Unfortunately, no one has yet discovered a penicillin for the infection of world inflation???a swift miracle cure. But there are practical steps that could be taken to slow price rises. They are unpopular and slow-acting, but nonetheless essential...