Defeat Recession or Inflation?

Discussion in 'Economics' started by polpolik, Jan 19, 2008.

Which one is more important?

  1. Raise rates to fight inflation and push economy into recession

    19 vote(s)
    95.0%
  2. Drop rates to head off recession and push inflation up further

    1 vote(s)
    5.0%
  1. So, I'm curious and I could DEFINITELY be wrong but why are the Feds so fearful of fighting off recession instead of letting it happen since it's part of a natural economic cycle? What's unnatural is devaluing the dollar and furthering inflation which I think has a much larger detrimental effect to the economy long term.
     
  2. Either way can be argued back and forth but I'm definitely taking the side of the strong dollar because I don't want my hard-earned money to become worthless.
     
  3. Now for a trader who makes money whether the market is up or down, this may be true.

    But for the regular joe blow, which would affect him more - losing his job if the market goes into recession for a year or slowly see his purchasing power slip away ~ at least he still has a job.. right?

    Just playing devil's advocate.
     

  4. if they can keep the inflation rate problem to a year or 2 --- maybe no big deal

    but take a 2.9% inflation rate - change it to 4% and run it out 20 years and watch what happens
     
  5. sprstpd

    sprstpd

    Real inflation (as opposed to government-reported inflation) has already been > 4% for the past several years.
     
  6. toc

    toc

    perisistent inflation can erode lots of value and power from the economy, better to take a couple of quarters of mild recession.
     
  7. agreed
     
  8. You can't avoid a recession by cutting rates and increasing inflation. The inflation number is accounted for in the GDP formulation. If inflation is greater than production we have a recession.
     
  9. Its NOT a part of natural cycle.

    You want people to be thrown out of jobs? Lose their homes? Go broke and become penniless? How wonderful of you...nice thoughts very nice..
     
  10. Yes, YES! The REAL inflation rate over the last 5 years is likely closer to 10%... and they surely wouldn't want us behaving like we understood that. (Why do you think the Talking Heads come on CNBS and tell us 10 TIMES EVERY FRICKIN' DAY, "Inflation is no problem.. only 2%". That's an even bigger lie than the one about Iraq's WMD's.)
     
    #10     Jan 20, 2008