NEW YORK (AP) – A private research group says its forecast of economic activity rose in May, the second straight gain after seven months of declines.
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Inflation Plus Collectivism
Recent experience in many countries enables us to draw the picture of a strange distortion and stasis in economic life and to diagnose an economic ailment that, more and more, is proving to be the worst of all, and that to a very large extent explains the persistence of Europe's distress. I have in mind that cross between collectivism and inflation, for which I have suggested the name of "repressed inflation" — first in my essay "Lehren des deutschen Wirtschaftsmarasmus"[1] and later, more systematically, in "Offene und zurückgestaute Inflation"[2] Typically, what happens is as follows. As a result of the war and of postwar mismanagement, serious inflation developed in the sense that the means of payment are increasing strongly, while the production of goods stagnates. Were the government to permit an "open" inflation, this disproportion between the volume of money and the volume of goods would lead to the consequence we all know, namely, a general rise in prices and incomes. To its credit, the government in question does not wish this to happen. However, it cannot make up its mind to dam back the flood of money, either because, as in countries governed under the paralyzing three–party system, it lacks the political strength to do so, or because it does not wish to give up an economic policy that is incompatible with sound money (full employment, cheap money, or a socialist economic policy).

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I was at a conference in St. Petersburg, Russia, a few weeks ago and interviewed Craig Barrett, the former chairman of Intel, about how America should get out of its current economic crisis. His first proposal was this: Any American kid who wants to get a driver's license has to finish high school. No diploma –– no license. Hey, why would we want to put a kid who can barely add, read or write behind the wheel of a car?

Now, what does that have to do with pulling us out of the Great Recession? A lot.


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