Tire Inflation and Economic Inflation.

["Harry Veeder" <veed0001@xxxxxxxxxxxxxxxx>]

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>From: "æÎ×å?? Henry C.K.Liu  ?â?l÷ä" <hliu@xxxxxxxxxxxxxx>
>To: POST-KEYNESIAN THOUGHT <pkt@xxxxxxxxxxxxxxxx>
>Subject: Re: investment and unemployment
>Date: Tue, Apr 11, 2000, 2:27 am
>

>
>
>GGard97342@xxxxxx wrote:
>
>> I make no apologies for regarding the first duty of a government to be to
>> prevent deflation.
>
>This seems to me to be a very sound statement.

No, it is unsound, because I think it is partly based on the
on the mistaken (Keynesian ?) belief that the economy cannot ever
naturally inflate without government intervention.
Deflation is either a natural process or the result of deflationary
operations.
Reflation is the result reflationary operations. I am not aware
of any special name for a natural process that increases inflation.
Reflation  is the opposite of deflation. Reflationary and deflationary
operations counter naturally occurring deflation and inflation
respectively.


>One only wishes that the Fed feels the same way.
>Unfortunately, the Fed has always considered it its sacred duty only to fight
>inflation.

The fed or monetary arm of the government
has a duty to fight a natural upward trend in inflation.
However, it should back off when the trend reverses.
The fiscal arm of the government should fight natural
downward trends in inflation, but it should back off when
that trend reverses.

If the fed over shoots the mark then the fiscal arm
should intervene by ordering the fed to back off.
Like wise the fed has a duty to order the fiscal arm to back
off if it over shoots the mark.

The "laws" for tire inflation work in the same way.
The right (fiscal) arm reflates the tire using the air pump
while the left (fed) arm deflates the tire by pressing
on the value.

Proper management of tire inflation requires an ability
to understand, recognize, measure and calculate the
differences between natural inflation/deflation
(due to energy/temperature fluctuations and/or leaks) and
that due to deliberate reflationary/deflationary
operations.


Harry Veeder