Sunday, January 22, 2006

The Left's Monetary Illusions

The decision by the Swedish central bank, Riksbanken, to reverse part of last June's interest rate cut have been criticized by many leftist pundits, including editorial writer Lena Askling at Aftonbladet and blogger and former leader of the Left Party (essentially commies) Youth Group, Ali Esbati .

They criticize the decision and claim it will prevent full employment. Indeed Esbati even accuses Riksbanken of trying to sabotage government policy and force through structural reforms which will lower wages.

But the problem is that there is only one way in which a more inflationary monetary policy will increase employment: by lowering real wages. Which is to say the very outcome which Esbati claims Riksbanken want to prevent by not having a according to him sufficently inflationary monetary policy!

Askling, Esbati and most other leftists don't seem to realize what fellow leftist Mike Whitney realizes: that inflation will have the effect of redistributing from the poor to the rich.


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