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Dealing with the economic illiterate.  

May 2, 2014 – 23:15 | by admin

One of the downsides of haven taken multiple graduate courses in economics, finance and accounting, is that I know more about the current state of the US economy than is probably good for me.

It also makes it painful to listen to people with absolutely no clue about economics or finance spout nonsense as gospel.

An all too common example is that we *need* inflation, because the increased spending will promote economic growth. This is wrong on multiple levels. First off, there are those economists that claim that inflation is a possible result of economic growth, not the other way around. In addition, those economists prefer academic models, since real world data so rarely supports their theories.

Then, as this article points out, if you have a basic understanding of the definitions of inflation, COGS, and economic growth, the idea of inflation being a driver of economic growth is nonsense.

Simply put, if you are spending more money for the same goods, because the money has less value, there is no economic growth because the exchange is still for the same value as before. If inflation has been increasing faster than economic growth, purchasing your basic goods will have a negative effect on the economy because you have less spending power left over for non-essential goods.

The worst part is, that all too often, after explaining this basic concept in simple terms, the idiots just stare at you and claim that you are wrong and justify that by repeating their false assertion!



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