Inflation Is Your Friend

While my title is obviously a joke, I am not so sure. Most central banks seem to think that inflation is our friend. Japan especially wants inflation. They may in fact have no choice as this might be the best way for a government to default, and default they will, as most governments have lied and promised beyond their ability to pay. If Japan gets 2 or 3% inflation this might be the best of their options, but once started down that road, they may not be able to stop. This is the risk. Japan cannot afford to let interest rates rise as even a modest increase in these rates will mean that all Japanese government revenue will be spent on interest. 

For Japan I offer the transcript of Dan Ackroyd on Saturday Night Live imitating President Carter. (I have made a few changes to avoid errors.)

We may find out first hand that Inflation is not our friend. 

President Jimmy Carter: Good evening. On Tuesday, we Americans will have the opportunity to exercise our role as citizens in a free democracy. Yet, only a third of the eligible voters will actually cast ballots. The other two-thirds are, in a sense, very lucky. Because they do not know what's going on. 

Last week, I delivered a message on inflation. Since then, the dollar has dropped in value, the stock market has sustained record losses, and the wholesale price index increased 0.9%. In other words, our economic system is screwed, blued and tatooed! We just have to face the fact that there is simply no way to fight inflation in a capital-intensive, highly-technological, conflict-riddled, anything-for-a-thrill world of today. That's why, tonight, I want you to try to look at inflation in an entirely new way: Inflation is our friend. 

For example, consider this: in the year 2000, if current trends continue, the average blue-collar annual wage in this country will be $568,000. Think what this inflated world of the future will mean - most Americans will be millionaires. Everyone will feel like a bigshot. Wouldn't you like to own a $4,000 suit, and smoke a $75 cigar, drive a $600,000 car? I know I would! But what about people on fixed incomes? They have always been the true victims of inflation. That's why I will present to Congress the "Inflation Maintenance Program", whereby the U.S. Treasury will make up any inflation-caused losses to direct tax rebates to the public in cash. Then you may say, "Won't that cost a lot of money? Won't that increase the deficit?" Sure it will! But so what? We'll just print more money! We have the papers, we have the mints. I can just call up the Bureau of Engraving and say, "Hi! This is Jimmy. Roll out some of them twenties! Print up a couple thousand sheets of those Century Notes!" Sure, all these dollars will cause even more inflation, but who cares? Everyone will be a millionaire! 

In my speech last week, I said that America would have to undergo an austerity program, but since this revolutionary new approach welcomes inflation, our economy will be free to grow, and we can spend, spend, spend! I believe the watchwords for the 80's should be "Let's Party!" And in that spirit, I'd like to say, "Live, from New York, it's Saturday Night!"