Asset price inflation vs the same on goods and services

I have never understood the mainstream obsession with avoiding any price
inflation on goods and services, especially if we contrast it with the happy
mainstream embracing of two-digit asset inflation in the stock market (USA
in the late nineties) or property market (Japan in the eighties). If there
is one thing that is recently proven to be truly harmful for entire
economies, it is these two types of inflation -- the unavoidable later busts are
very damaging for a long time to the economy as a whole.

Asset inflation can be nipped in the bud (and thus avoiding the later busts)
by levying a countercyclical adjustable flat tax on stocks or property held.
This is IMO the way to go, as opposed to adjusting the interest rate for the
same purpose -- a very blunt tool with a lot of bad side effects.

Any opinions on this?

Trond Andresen
Received on Wed Feb 5 14:24:29 2003