Only in the Keynesian world of regression model aggregates do we get a polar-reversal. There, baskets of prices (i.e. price indices like the CPI) which are rising somewhat slower than trend allegedly cause that mysterious ether called “aggregate demand” to falter. Needless to say, the professors have never identified the transmission mechanism whereby the consumer’s logical behavior to buy more goods with falling prices at the micro-level— causes the sum of all consumers to defer spending in the face of weakening inflation at the aggregate level for the entire basket of goods and services.
Christine Lagarde Is Clueless: 70 Words Of Pure Keynesian Claptrap | Zero Hedge
Repeat after me, yo: Inflation is a tax, a regressive tax, a tax that diminishes everyone’s purchasing power. Inflation transfers wealth from savers, pensioners, to debtors like states or banks. Inflation over time returns massive misallocations of capital as it distorts the process of price discovery as in e.g. housing markets where asset inflation results in absurdly valued properties in cities like Victoria, Vancouver, Calgary, and Toronto. Another example: tuitions and the student loan crisis. The U.S. stock market is another such bubble. Yet “low-inflation,” according to our economic elites, is the enemy:
"The world’s official economic institutions are run by people who believe in monetary fairy tales. The 70 words of wisdom below from IMF head Christine Lagarde are par for the course. She asserts that a new jabberwocky expression called “low-flation” is the main obstacle to higher economic growth in Europe and the DM areas generally and that it can be cured by more central bank money printing."