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RfCRf ATOM &
INTRAMURALS
_University_
Speaker sees inflation for future
Bad policies to
take their toll
on economy
B\ Dan 1 isler
1 merald Reporter
I or tlic past nmi' x cars the
I ederal Ri senc Hu.ml the
president anil ( amgnrss have
liccn |>1.1 \ 11)k a game ul linail
i i.il i hn ken dial is sending the
I Hill'd Stales oil the mail In
ward hyperinflation said ei on
omisl Tom Sargent
Sargent speaking Thursday
al a W 111 a n i el I e I tall lei lure li
lied Interpreting the Reagan
Details said I S monetary
and fisi al polii ies have been al
odds with ear li oilier sou e Rea
gan ln*( .ime president in loll 1
It the gnxeminent i onlimies
its i urient rale ol Ihiitow mg in
stead ot raising taxes or t titling
expenditures il will eventualh
run out ol willing lenders and
have to resort lo printing inon
e\ In linani e ilsell Sargent
said
Its tempting to llmik we
i au I do w hat banana republics
do. that we re so big somehow
we re never going lo have infla
lions Sargent said, pointing
out that big t outlines have ex
perienc ed high inllalion in (lie
past mi,lulling I lame during
its revolution and (hiiiiuiix at
lei \\ orld War I
I hose inllat lolls w eren t
brought about hx magii hut b\
arilhinetii . and the I ’niter!
Slates lares the same anllliue
Ill
Arithmetic sa\s it you're
going In run .1 permanent guv
eminent ih'lii it thru \on'n- go
mu to have to have on some
average basis monev 1 reation
lli.it s going to generilte enough
inflation to cover that iletii it
Sargent s.iul
()n the other hand it vou
w.int to have a zero inflation
jioln \ (or) no monetars
growth, what vou're going to
need is the lialam ed budget, ill
a present value sense, th.it Is.
didn its now are accompanied
In surpluses 111 the future.'' lie
said
Sargent said the pre lav real
interest rate on government
debt evi ceded the l' S ecu
noniii growlli rale toi the first
time a 111 ‘I Iveagan took olti( e
'll means even it you don't
run a new detit it your debt s
going to lie growing relative to
the size ol the ei minim . just
bet ails, ol the .11 ithnietii ot
1.(impounding." Sargent said
|ust financing the interest
payments will increase the
debt he said
Moreover the debt is actual
l\ highei III.111 reported lie
1 ause a SMI to S'tl billion So
i 1.1I Set uMl\ tins! fund surplus
is added to make the debt look
smaller Sargent said
l.vndon Inhnson was the lust
president to 1 I a I 111 to redui e the
del it it w hen all he real IV did
was Combine books Sargent
said "Johnson did that and
made it sin k
I lie Reagan administration
promised to stamp out inflation
In h.iving the federal Reserve
continue .1 tight mone\ poli< \
redm ing taxes. maintaining the
existing si/11 of the government
and h.d.iiu ing the budget with
in lour years Sargent s.dd
" These promises don't make
sense." Sargent said. The\
violate arithmetic II you re go
ing to i lit taxes and leave gin
eminent expenditures the
same, it implies you're going to
have a string of government
delii its
' ll you're going to do that on
a permanent basis: that is.
you're not promising to reduce
taxes now .ind increase them
latei you're sa\ ing you're go
mg to have a permanent rediu
lion m taxes " Sargent said
"That's not honest." Sargent
said. "And that's a promise
(leorge Hush endorsed when lie
said. NJo new taxes '
That implies il expenditures
aren't reduced, the government
will have to print more mone\
to Imam e them. Sargent add
e.l
"( In the otliei hand. the
i inim that you're going to light
inflation and encourage (Kea
gan's Reserve i hairman Paul)
Voh her and Ills sucoesxnix to
keep money tight is only a lea
sihle promise it the government
budget is going to be bn I
am cd." Sargent said
Sargent is a senior researt h
fellow at the I loin er Institute a
1 onservative think tank at Stan
lord I 'nil ersit\ in ( alitorma
and an adviser to the federal
Reserve Hank in Minneapolis
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