Scott Sumner writes:
Lower inflation during recessions is a sign of procyclical monetary policy, i.e. policy failure.
Yes! I do not know why pop econ is so counter to this. If we are producing less due to investment mistakes or supply shocks or whatever, prices in general should go up as supply goes down. The fact is that sometimes inflation is good and sometimes deflation is good.
One proof that inflation is sometimes good is that farm and petroleum economies are doing good (North Dakota has very low unemployment). Employment is high in food and petroleum producing areas, and as for real wealth production is up and rising.
Let me address another thing to my fellow conservatives. You think that debt is bad and that people and corporations should pay down their debt but you fret about the rise in base money. Well since money is created be debt wont we need much more base money if everyone gets wiser and uses less debt?
Now a big problem is that monetary policy is controlled by voters and though relatively lower home prices are good and needed but to home owners, who are mostly voters lower home prices are a negative and so they want lower food and gasoline prices and higher home prices.