El economista

Many people around think that the heavy expenditure of the US government and the FED will bring upon them an era of high inflation and low growth since the taxes should rice in order to pay the big US deficit.

But the thing is that people’s fear is unnecessary under normal circumstances yes this kind of expending would make the inflation rate to go up since the economy would be on full employment, but the economy is not on full employment it have a big slack that this expending is filling, make in it to the lack of consumption and the big job loss that propels this slack.

In a normal scenario this kind of expenditure would make the interest rates to rise in a significant way in order to try to content inflation, but right now that kind of measures would only send the economy down in the recovery since a higher interest rate would only slow down the growth and would cool the bakers lending process; right now the right policy the FED should be taking is buying its own 10 year certificates so the 10 year interest rate fall and the economy gets out of this at a faster rate.

Even now with the rise in the oil and other commodities inflation is way to low even soaring to  a deflation level hence deflation is a more realistic an troublesome reality, a constant decrease in the prices will only risk the investment needed to growth again and will give incentives to saving and right now saving is not what the economy need since consumption need to get back to the track.

People should not worry about the inflation right now, some inflation wouldn’t be bad, some anchored level of inflation should be in the FED agenda and should become a principal monetary policy concern of the FED in the time to come.