A good healthy dose of sustained inflation is just what we need, according to Harvard’s Ken Rogoff, Professor of Economics and Public Policy. That this proposed inflation would plunge as many as a billion more people around the globe into poverty, is nothing compared to the benefits of a more favorable Debt/GDP ratio, in his view. In fact, Prof. Rogoff suggests that the Federal Government could then use this extra deficit breathing room to continue stimulating the economy- a course it has been steering so effectively over the last three years. Surely that money will trickle its way back down to the Average Joe’s pocket eventually, he posits.
‘Certainly a little bit of inflation, say 4 percent, 5 percent, for a few years would be the least of our problems, and it might lower the burden of these(private debt and increasingly public) debts, as people’s wages go up.’, he opined in a Nightly Business Report interview this week. Although wages for the average American have remained flat for a decade or more, and have actually declined relative to inflation, Mr. Rogoff believes that, somehow, this will change.
Maybe at Harvard… but not in Sacramento.
Average household income in Sacramento is approximately $47,000 per year, according to 2009 Bureau of Labor Statistics data. Unemployment is at 12.5 percent- much higher than the 9.1 percent national rate. If the take-home pay of the average household is right around $3,000 dollars a month, then Prof. Rogoff is content that a $450-$600 dollar monthly reduction of purchasing power would be no big deal for you and me.
Jennifer Richards, a young Sacramento mother, would disagree. ‘Frustrating that many people think things have gotten better, when in actuality, our situation is no better now than it was two years ago. Wake up!’ Of course Ms. Richards has not had the benefit of Mr. Rogoff’s education and expertise, and therefore does not grasp the concept that higher prices for life’s necessities is a good thing. All she needs to do is ask her boss for more money.
The maunderings of an effete intellectual would normally be laughable. In this case- not so. Prof. Rogoff is one of our most televised economists. A week from now, someone will be citing his expertise as a public policy recommendation, without a doubt. As a result, more children in Santiago- or Sacramento- will go hungry in the coming years, just because Ken Rogoff thinks that this is the smart thing to do.