Funny, humankind has a 10,000 year history of civilization with an arc of continued improvement. Sure there are downturns, but they are brief compared to the overall arc of progress. But I'm talking to the deaf because people don't want to hear that message. They are all glued to media that is reassuring them that their lives with be shortened by milliseverts of radiation. It will.
The average person has probably lost seconds, maybe a minute out of their 80+ year lifespan. So moan and despair! Yes, you have lost a noticeable amount of life. But that "loss" will be swamped this coming year by the increases in average lifespan due to advances in nutrition and medicine. But this good news doesn't get the headline coverage that a radiation leakage in Japan gets. People focus on the loss and fail to realize that overall they will be living longer at the end of this year than they did in 2010. But bad news sells and gets attention. Sadly this fascination with doomsday misdirects people's attention into dysfunctional attitudes and actions.
That preface got a bit off track...
What I want to focus on is this bit from a NY Times article by Christina Romer, the previous chair of Obama's Council of Economic Advisors:
... Franklin D. Roosevelt took the United States off the gold standard in April 1933, and rapid devaluation led to huge gold inflows and a large increase in the money supply. Roosevelt also made it clear that the monetary expansion would not be reversed. Expectations of deflation, which had been enormous, abated quickly. As a result, with nominal rates at zero, real interest rates (the nominal rate less expected inflation) plummeted.The fearmongers of "inflation" are preventing rational economic policies which would help kickstart the US economy into higher growth and more jobs. The funny thing is that 80 years ago, during a much more primitive era of economics knowledge, a leader stepped forward to do the right thing. Sadly, today with much more knowledge and greater wealth, the country is being "led" by a leader who is more timorous and afraid of his Republican opposition than was FDR. This is a tragedy for the American people because they are and will continue to suffer unnecessary unemployment and slower grower in their incomes because of the fear to take on the ideologues of the political right with this blighted ideas about economics. Sad.
The first types of demand to recover were ones that were sensitive to interest rates. Automobile production, for example, jumped 42 percent from March to April in 1933. Inflation did pick up somewhat in the mid-1930s, in part because of other New Deal measures like the National Industrial Recovery Act. But the inflation was modest, and after the crushing deflation of the early 1930s, widely celebrated.
THE triumph of hawkish views on inflation means that there is no appetite today for a Roosevelt-style, inflationary monetary policy. But that doesn’t mean the Fed couldn’t be more aggressive if the empiricists were willing to risk a split with the theorists.