Fed Needs to Tighten Money - WSJ.com
Let's see... we have lots of slack in America's economy, lots of unemployment...but, police in Philadelphia are striking for more money and the Federal government is planning on pay increases for Federal employees...so, is anything more going to be produced?
No, of course not, we'll have more dollars (wages) chasing the same goods!
But, wait a minute, will we have the same amount of goods?
Let's see...taxes up, benefit costs up (even before we know interest rates will be going up), so the cost to make that car was $20,000 and now it will be $25,000. But wait, another economy just cut their costs (read: no new taxes, no new benefit programs, high savings rate, etc.), so they just cut the cost of their equivalent car to $18,000.
Hmmm, let's add this up. More government spending spurring demand. More government taxes and regulations raising costs of production. Actually less production in the US (and fewer US jobs). Hmmmm....hard not to see inflation and no jobs (oops, that's a depression or stagnation at best).
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