Puffer Fish wrote:The media has recently been repeating that there is a trade-off between trying to lower inflation and preventing a recession.
Does this trade-off actually exist and is this a legitimate claim? Or is this yet another example of politically biased economics?
Maybe anyone here would like to try to explain why they think trying to reduce inflation might cause a recession?
How does printing more money prevent a recession?
Otherwise, is this just a lie that the media is propagating?
I am going to guess that some people think that higher government spending will help avoid a recession. But does this still apply when the government has been chronically overspending for many years? That sounds like just continuing to kick the can down the road in an unsustainable way. You can't go overspending forever. That is not economically healthy. If this is really the case, then it is time to face any recession now. The longer the delay, the worse it will be.
Furthermore, government printing money only moves purchasing power away from consumers to government. How can this really increase demand in the economy? Anyone care to take a try at explaining that?
I donlt think the media is propagating a lie per say. They juyst have poor understanding. It;s just economists is widely poorly understood. I done some reading and it;s really hard to get good books, there is lot of misunderstanding and poor stuff that gets a lot of circulation.
Political parties and pundits like simple explanations that suit their personal agendas, and teh devil is in teh detail and rarely as simple asthey make out so there a natural pumping of outright BS and FUD (fear uncertainty doubt, the slogan of IBM marketing in the old days) often drowning out any sort of sensible debate.
All economics is politically biased. Economists is the resource allocation system. Who gets what. It's always political, there always winners and losers to some extent. Money is fiction , an social construct,
A recession is dip in demand an contraction of the overall economy, there is less work, less demand for stuff, leading to less jobs and less ability of people generally being able to buy stuff. It can snowball.
Government spending can effectively create more demand, creates jobs, which enables people to buy more stuff leading to more jobs and yet more demand.
The Government builds a bridge (or some piece of infrastructure) which reduces travels times, lowers business costs, the guys building the bridge can afford stuff like new cars or appliance, pack their mortgages which enable the banks to lends more money. SO yes government spending can create more demand in the wider economy, and also generate more taxes for the government.
But any sort of growth can lead to inflation, people get better paid or more people have jobs they are willing to pay more for stuff, they compete in cases of scare objects (a lot scarcity can be artificial too)
There sort of standard convention that "pump priming" spending during recession or similar should be stuff that will ideally lead to more productivity down the line, infrastructure etc.
The standard capitalist economy we have is built on there being some inflation. Growth is assumed to absolutely necessary for a better economy. It's challengeable I personally don't agree but almost all political parties, economic pundits agree that grow is good. And if you have growth you will have some inflation. Increasing demand, will sort of tend towards increasing prices.