mvscal Economics 110

[Mikey]

Inflation is a GOOD thing

Ask Congress.

So far through the first six months of this budget year, which began in October, the deficit totals $303 billion, an increase of 2.8 percent over the deficit in the first six months of the 2005 budget year.

An increase that is less than the 3.13% average rate of inflation for those six months

Now listen carefully, class.

The higher the inflation rate, the lower the deficit, at least in mvscal units.

So you see, if we only had 10% inflation the deficit would be even lower.
Who knows, if we went to 300% annual inflation like some of those South American countries used to sustain, we might retire the debt by the end of The Great Uniter's incredibly prosperous second term.

If you doubt me, just consider Germany in the 1920s.

It took this much cash to buy a single schweinshaxe.



BUT...

Because of this prescient and successful monetary policy they were well on their way to the glorious Nationalsozialistische Deutsche Arbeiterpartei empire of the 30s and 40s.

[Mikey]

3.1% inflation is not a high rate of inflation.

It really isn't a very complicated process. You're an idiot so I understand that you will need some special help.

When the nominal increase in spending is less than the rate of inflation, that means you are spending less money than you were last year adjusted for inflation.

If you aren't adjusting for inflation, you aren't engaged in an intellectually honest discussion of the budget.

Exactly.

And I'm so gratified to see that you're grasping the concept.

As you say, 3.1% is not a high rate of inflation. In fact, as I mentioned in my lesson, we'd be better off with a much higher rate. If we had a 10% rate of inflation, not only would we be spending less money than we were last year adjusted for inflation, we'd be spending much less money than we were adjusted for inflation.

You get an A+ for this unit.