Fill in the blank:
ADAM DAVIDSON: Ladies and gentlemen, I have an amazing investment opportunity for you. Give me $100 – just a hundred – and in one year, I promise it will be worth 93 bucks. We call it the _______ special.
Okay, what’s your answer?
If you said “inflation,” congratulations, you’ve mastered one of the simplest concepts about the value of a currency. As the general price level goes up, the purchasing power of the currency goes down. In this case, the $100 you lent is worth only $93 when you get it back. That’s why in times of inflation, people are reluctant to lend money.
If you said “deflation,” congratulations, you’re the co-host of NPR’s Planet Money. And that bit of Econ 120 fail is from a “patented Planet Money explainer.” Yikes. There was an entire story yesterday written around this bit of confusion.
Let me ask you a question — is that enough to knock that program off of your trusted sources list? They ostensibly write about economic issues, yet neither the founder/writer nor any editor/producer was able to catch such a colossal blunder. If they are that confused about the easy stuff, how much do you trust them to explain credit default swaps or the toxic assets program? (And, as regular readers know, we love the Toxie Cam).
Must be that solar eruption.