On May 1, 2013, “Marketplace” aired a segment about inflation. The show extolled the many benefits of “a little more inflation.” This is a Marketplace MegaFail inflation edition. Titled “Should we bring inflation back from the dead?,” reporter David Gura listed these benefits from just a touch more inflation:
- Housing prices would rise and fewer homeowners would find their houses underwater.
- Those who have borrowed to, say, buy a car would get to pay back their loans with cheaper dollars.
- “Companies could raise prices, that could lead to higher salaries, ‘and assuming they can control their costs, that could be beneficial to their profit margins; that could be beneficial to them expanding their business, creating jobs; that could be beneficial to their shareholders.’ “
Frankly, these statements are incredibly stupid. Inflation means prices and incomes are rising at about the same rate. Any increase in salaries will just keep pace with inflation, leaving the consumer with unchanged purchasing power. The only way people who borrow can pay back with cheaper dollars is if the inflation is a complete surprise. If the inflation is expected, it will be part of the interest rate on the loan. Finally, higher housing prices? Give me a break. Even if housing prices rose, the real net wealth in your house wouldn’t change much because the higher price level would eat up the price increase.
This morning, Kai Ryssdal was a guest on KQED’s Forum program. He proudly declared that Marketplace did not employ any MBA’s or economics Ph.D.’s. After this embarrassment, perhaps Mr. Ryssdal should reconsider his hiring policy. Or at least talk to economists who know what they’re talking about. We’re not that hard to find.
(I suspect Marketplace will be removing this story from their website soon. As a public service, you can click here to get a pdf version of the transcript.)
 From the transcript, quoted from David Blanchflower, the Bruce V. Rauner Professor of Economics at Dartmouth College.
 From the transcript, quoted from Kevin Jacques, the Boynton D. Murch Chair in Finance at Baldwin Wallace University.
 Another priceless gem from Prof. Jacques, see footnote 2 above.