StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Why We Need a Goal of Zero Inflation - Essay Example

Comments (0) Cite this document
Summary
Milton Fiedman once said that with the introduction of fiat currency, there was no longer any method of standardizing and stabilizing the price system, and no standard of value exists. It is incumbent upon the central bankers to provide that stability (Keleher)…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER96.7% of users find it useful
Why We Need a Goal of Zero Inflation
Read TextPreview

Extract of sample "Why We Need a Goal of Zero Inflation"

Why We Need a Goal of Zero Inflation Milton Fiedman once said that with the introduction of fiat currency, there was no longer any method of standardizing and stabilizing the price system, and no standard of value exists. It is incumbent upon the central bankers to provide that stability (Keleher). A rapid rise in prices, and uncertain future earnings can be a recipe for economic disaster. Though Congress has failed to specifically define inflation goals, they are responsible for the number, and they have indicated their desire for a substantially low figure. Keleher reports that, "This objective has been endorsed not only by many of the world's most esteemed monetary economists but also by many Federal Reserve officials". A zero inflation rate will not impact the unemployment rate as critics contend. It will, however, stabilize the economy, and benefit the average worker.
Though there is some debate about the definition of zero inflation, almost all economists agree that high inflation rates have a negative impact on the economy. When the inflation rate reaches double digits, economies will experience slower rates of growth. The unpredictable future of inflation rates reduces investment, spending, and creates a climate ripe for poor planning. Future prices and uncertainty about future income affects everything from automobiles to the real estate market. There is no doubt that a goal of zero inflation is desirable in today's instantaneous, global economy.
As much as it is desirable for the corporate economy, it is even more so for the individual. Retirees on fixed incomes face an uncertain future with high inflation. For the average worker, an inflationary rise in wages will lag the increase in prices, which will place them permanently behind the inflation curve. The complexities of evaluating personal financial decisions in an inflationary market leaves the consumer open to exploitation. As Hellerstein tells us, "This shifts the distribution of power in the financial marketplace to the more sophisticated and knowledgeable actors to the detriment of the average person". A goal of zero inflation would benefit the worker and level the playing field.
Critics point out the tradeoff between employment and inflation, and advocate sustainable growth rate as the only valid yardstick. They point to the tradeoff and assert that we would experience higher unemployment by pursuing a zero inflation strategy. And, according to Makin, too much downward pressure can result in deflation and, " [...] [C]an create transitional unemployment problems if there is widespread reluctance to reduce wages". Yet, this adds validity to the zero inflation goal. Attempting to control inflation after it is beginning to rise will lead to over-correction, while a slow steady pressure will be able to maintain a balance with employment. In fact, W. Lee Hoskins, President of the Cleveland Federal Reserve Bank argues in a letter to Congress that, "The Federal Reserve cannot achieve maximum output and employment without achieving price stability" ("Fed Presidents")
High inflation disrupts the economy and is not welcomed by anyone. Those most affected by high inflation, retirees and wage earners, are in the least advantageous position to deal with it as they face a downward economic spiral into an uncertain future. The balancing act between employment and inflation all but disappears in the long run with a steady downward pressure and a stable low inflation figure. Though zero may not be definable in the real world, a figure that approaches it is highly desirable goal and a policy worth implementing.
Works Cited
"Fed Presidents Support Zero-Inflation Policy." The Region (1990). 8 Sep. 2006 .
Keleher, Robert E. Establishing Federal Reserve Inflation Goals. Washington, DC: United States Government, April 1997.
Hellerstein, Rebecca. "The Impact of Inflation." Regional Review (1997). 8 Sep. 2006 .
Makin, John H. "How Low Should Inflation Go" Economic Outlook (1996). 8 Sep. 2006 . Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Why We Need a Goal of Zero Inflation Essay Example | Topics and Well Written Essays - 500 words”, n.d.)
Why We Need a Goal of Zero Inflation Essay Example | Topics and Well Written Essays - 500 words. Retrieved from https://studentshare.org/miscellaneous/1502166-why-we-need-a-goal-of-zero-inflation
(Why We Need a Goal of Zero Inflation Essay Example | Topics and Well Written Essays - 500 Words)
Why We Need a Goal of Zero Inflation Essay Example | Topics and Well Written Essays - 500 Words. https://studentshare.org/miscellaneous/1502166-why-we-need-a-goal-of-zero-inflation.
“Why We Need a Goal of Zero Inflation Essay Example | Topics and Well Written Essays - 500 Words”, n.d. https://studentshare.org/miscellaneous/1502166-why-we-need-a-goal-of-zero-inflation.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Why We Need a Goal of Zero Inflation

Zero Tolerance

In Simon’s case, he had participated in contravening a company’s internet policy (Gerson, Parker, Volokh, Halloran, Cherkasky, 2006). Simon had utilized the company’s intranet to communicate with an unauthorized personality out of the network. The violation was gross since the company had sculptured clear conditions about the policy. This included clear indication of the relevant consequences. The management had notable controls in the same situation. To begin with, it laid a clear policy. This policy indicated that it banned use of the company’s internet and intranet in communication under unstated uses. The company also stated that unwarranted internet use and e-mailing could result into the termination of employment. In additi...
8 Pages(2000 words)Essay

Inflation

... Inflation Inflation is defined as the rise of the level prices of goods and services in a given economy over a certain period of time. In the event of an inflation or the rise of prices of goods and services in a given economy, the purchasing power of a given currency is diminished to the effect that it will now require more units of money for the same goods and services purchased or the number of goods and services purchased with the same amount of money is reduced. In effect, inflation is the loss or the diminishing of value of money in a given economy (Blanchard 45). In plain language, inflation is the instance where goods and services get expensive or the phenomena where people complain that the price of commodities is rising...
3 Pages(750 words)Essay

Inflation

...? Macro & Micro economics: Inflation Introduction Inflation is the of an economy when the general price level in the economy rises due to the falling value of money. This term involves a wide range of variables and does not have any fixed satisfactory definition. In common usage inflation refers to the state of the economy when the money supply is much higher than the physical quantity of goods available in the economy. According to Keynes, inflation refers to that phase of rise in the general price level after the output in the economy grows beyond the full employment level of output (Frisch, 1983). Inflation defined in this way refers to monetary inflation, which is the difference between the growth in money supply and the growth...
6 Pages(1500 words)Essay

Inflation

...? Inflation In an economy, there are times at which goods and services cost rises so that a unit currency will buy less than a previous time when it could buy more. With this general increase in the price of commodities, the currency in use losses it high purchasing power and weakens in relation to the prevailing conditions of the economy (Berlatsky, 2013, p5). The effects of inflation can affect an economy in positive and negative ways or both positively and negatively simultaneously because it affects the differently. In many circumstances, there are different explanations that could be given to the rise of inflation in an economy and which could explain the reasons why a currency can lose its purchasing power as compared to different...
6 Pages(1500 words)Essay

Do we still need library

... Do we still need libraries? Fervent debate on the justification, role and place of libraries persists, without overlooking any one of the categories- special, academic, public and school. Recent times have been characterized by unparalleled opportunity, change and crisis making it difficult for the institution to survive. Librarians are continually faced with the uphill task of redefining their position, rethinking the modes of service delivery, designing new models for librarianship and strategizing their futures. However, they have the opportunity of gaining a better understanding of their users and as such, more is expected from them compared to librarians in the past. Library users themselves have developed an appreciation...
4 Pages(1000 words)Essay

Inflation

... which then further leads to a boom if prices are not fixed and managed at a timely level. The main reason again is the need and deliverance of actual vs. aggregate demand within the economy. In terms of the monetary policy, inflation may be controlled by reducing the interest rates at which loans are advanced to the general public. In order to keep this in check, very low but positive inflation rates are suggested for an economy to thrive because a deflationary situation is very dangerous for economic health. Moreover, fixed exchange rates are also plausible for maintaining the rate of inflation within an economy as fixed exchange rates are used to stabilize or balance the value of a domestic currency with respect to a foreign currency...
6 Pages(1500 words)Essay

Inflation

... of her currency as a measure to curb further inflation. Inflation leads to high cost of operation since companies are forced to adjust their prices. Individuals are also said to increase their withdrawal transactions as more money is needed in cash to acquire goods and services16. This situation causes an increase in holding cost. Inflation also leads to unemployment, the firms are reducing their costs to maintain profit they lay off people and the economy is also stagnant as businessmen are not investing. There is loss of money value that is its purchasing power making a lot of money just buys few products and pay for fewer services. This causes hardships for the poor families and those whose income is fixed. The banking sector is more...
7 Pages(1750 words)Essay

Inflation

The markets had assumed that the debt by Euro zone was safe. This made the investors think that all members thereby making them willing to maintain debts even at low interest rates despite countries including Italy and Greece having high debt levels had backed them. After the credit crunching, the investors began being to be more skeptical about the European finances. The other unfortunate occurrence was that the European Union had no strategies in place to deal with the sudden panic. The diagram below shows some debt from Selected European countries between 2007 and 2010.
Pettinger on the economics journal of October 2011, tried to analyze the Euro economic crisis critically where he applied a single currency meant that sever...
5 Pages(1250 words)Literature review

Marketing Plan for Goal Zero Company

... Marketing Plan for Goal Zero Company 1. Introduction A Marketing plan has never been at the top of priority lists for most business owners and managers yet it is supposed to be first thing. Many business owners and managers are focused at making an effective business plan. Inasmuch as the business plan enables shape the direction of the company, the marketing plan provides the direction to be taken in reaching the destination outlined in the business plan. The marketing plan, in reaching the destination outlined in the business plan, gives the essential steps on the particular journey, which creates customer relationships. One of the essential things that need to be included in the marketing plan of any small business is establishment...
8 Pages(2000 words)Case Study

Inflation

...Article Summary 11th May Rise of India as an Economic Powerhouse India is expected to emerge on top of the other BRIC nations, they are; Brazil, Russia, and China. This emergence can be attributed to the election of a government that is pro-business in last year’s election. Since India attained her independence, the economic history can be divided into two phases. The 1947 to 1991 phase and the one after 1991(Picardo, 2015). The Indian economy was faced with internal issues that included; war, religious riots, shattered economy, poverty and high illiteracy levels. These issues were pivotal in shaping the country’s socialist economic policies. This led the country to rely less on imports and, therefore, encouraged self-reliance... Summary 11th ...
2 Pages(500 words)Assignment

Why Do We Age

Senescence also results in increased incidence and severity of a wide variety of age-related diseases and conditions such as cancer, heart disease, stroke, arthritis, and diabetes and can be considered manifestations of ageing (Goldsmith, 2006).

Researchers have come up with many theories over the years to explain the changes that lead to ageing. However, most of these theories have practical difficulties to be tested such as the lack of adequate models make testing these theories a difficult, lengthy, and expensive process. The ageing process may originate from changes occurring simultaneously in different tissues due to intrinsic cellular mechanisms or changes in one tissue. Some authors like Mattson et al (2002) argu...
10 Pages(2500 words)Assignment

Task Management: Need for the Deployment of IT Based Solutions

It may be rightly feared by the management of this Company that a large part of clients, presently engaging Aquarius Marketing, may seek recourse to other competitive marketing consultancy firms in order to achieve both cost and quality benefits. Thus, in order to preserve their market share and remain viably competitive in the business, it has become imperative for Aquarius Marketing to install marketing related IT software specially designed to meet their specific marketing requirements.

It is widely believed that the installation and execution of such sophisticated IT-based information systems would increase all round efficiencies in its services, make it competitively positioned, vis-a-vis its competitors, and more...
11 Pages(2750 words)Assignment

Corporate Governance the Need of the Hour

A corporation has to be fair in all its transactions. It is rather a compulsion than the choice to organizations especially, in the epoch of globalization where they need to pool resources from across the globe and win the confidence of the global people. These corporations are therefore governed by a set of codes of values and principals. Top management responsibilities, especially those of the CEO, involve getting things accomplished through and with others in order to meet the corporate objectives (Wheelen and Hunger, 2007. p.33). So, good governance is wholly and solely the responsibility of the top management. 

Corporate governance is about ethical conduct in business. Ethics is concerned with the code of valu...
6 Pages(1500 words)Report

The Need for the Maritime Labour Convention

The main objective of The International Maritime Organization was to control and regulate international standards for shipping. Though the first maritime treaty was held in 19th century later in 1912 with the disaster of Titanic the need for an international treaty became unavoidable. Thus the first international safety of life at sea (SOLAS) convention, the most important treaty ever addressing maritime safety was spawned (Introduction to IMO). IMO first met in 1959 undertaking tasks such as developing and maintaining a complete regulatory framework for shipping. Further, it has widened its range of concerns toward safety, environmental concerns, legal affairs, technical cooperation, maritime security and efficiency of shipping;...
7 Pages(1750 words)Literature review

Relationship between Money Supply and Inflation in Saudi Arabia

Over the recent past, the effects of money supply, debt and inflation have become contentious issues for debate. Furthermore, frequent cautions concerning the risk of very large budgetary deficits aver that this would send up the upcoming state debt and capital rate as indicated by the rates (interests). As a nation, Saudi Arabia has a bi and enduring budgetary deficit over the past two decades and the government has been forced to go into the market so as to have loan access and to make up for the deficits. Given the impact of this on inflation and other economic variables, it's imperative and of great alarm for strategy architects (strategists) to understand how microeconomics has an effect on money supply, financial plan defici...
10 Pages(2500 words)Speech or Presentation

The Main Goal of Cultural Industries

... we recognise that ‘the cultural industries [have] become an increasingly vital part of the strategies of global corporations and national governments’ (Hesmondhalgh 1997, p. 178). That is, in moving ‘from modernity to the current era of globalization, the crucial link is provided by the interventions brought about by technology and information networks’ (Singh 2007, p. 38). Therefore, this paper briefly explores how the culture industries produce something other than just money or art. The political economy of cultural production provides one example of what some people thought was an art-form deviating from the norm. What is more, because the ‘monopolistic hold on culture which forbids anything that cannot be grasped, necessarily...
6 Pages(1500 words)Essay

Lung Cancer Diagnosis: Where We Are Heading To

...Lung cancer diagnosis where we are heading to? Introduction Lung cancer, like any other cancer is caused by the abnormal growth of cells in the tissue of the lungs. “There are over 1 million deaths world wide due to lung cancer, making it truly an epidemic” (Driscoll 3).Unlike other cells, the cancer cells do not die programmatic death and divide and grow exponentially. Instead of developing into healthy, normal lung tissue, the cells grow uncontrollably and form lumps called tumors. If a tumor remains in one place and show a limited growth, it is commonly considered to be benign. “Cancer that originates from lung cells is called a primary lung cancer. Primary lung cancer can start in the airways that branch off the trachea to supply...
14 Pages(3500 words)Term Paper

Syscos Need for Business Intelligence Software

... to lose. Both of these questions required a lot of introspection, research and analysis. It was a long strenuous process to answer these questions manually. More over the authenticity of the imminent result could not be guaranteed. Instead, automated, quick and constant answers to such questions would have been extremely helpful to Sysco. They were central to the company’s business and would produce a rapid and humongous return on investment. Thus the implementation of a Business Intelligence System would have helped the company in achieving its desired goal more efficiently. There were a lot of competitive advantages associated with this kind of decision making which is why Business Objects recommended this approach. The real competitive...
6 Pages(1500 words)Case Study

To Understand Art as a Practice Do You Need Theory

...Conceptual Art Conceptual Art Introduction ICA The strategic focus of the ICA was to establish a platform through which artists of all kind could express their social concerns. Therefore, the exhibition “space” presented a conducive forum that saw a crop of new and forceful artists emerge and take centre stage in handling social problems. One of the landmark presentations in the ICA platform is the “nought to sixty” project that saw 60 new artists engage in an interactive exhibition format, through talk show and other forms of interactive artistic frameworks (LeWitt 1967). Other than the exhibition, the ICA provided a timely educative forum dubbed the fox reading room. This venture provided relevant resources, tools and the much needed...
7 Pages(1750 words)Term Paper

Goal of the Public Expenditure Cuts Has Not Been Achieved

In that light, the goals of these spending cuts were to help reduce signs and even eliminate government borrowing; this paper evaluates whether the spending cuts imposed by the UK government were successful in achieving the anticipated outcomes. Similarly, this paper will critically analyze the consequences of the spending cuts in the public sector by highlighting some of the critical areas of public service that have suffered adverse impacts following the tightening of public sector budgets across the board. this paper proposes that since the UK governments’ Annually-managed Expenditure (AME) has been on an upwards trend just like the Departmental Expenditure Limits (DEL), public spending remains as high as before the cuts...
7 Pages(1750 words)Term Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Why We Need a Goal of Zero Inflation for FREE!

Contact Us