not grow in excess of 2.5 percent without igniting inflation.(Stevenson).Again, past theory does not reflect today's realities of inflation rates of less than 1 percent with nearly a quarter of a million jobs added in each of the last twelve months. (Nason).Surely, the Federal Reserve monetary policy has been used wisely to positively impact these results. Surely, advancements in new technology has created new markets for labor and reduced costs and increased outputs. The improved productivity levels have served to suffocate inflation.The best explanation for today's condition, which began with the bull markets of the 1990's, closing in excess of 11,000 on May 3 of this year, is the Perpetual Motion Economy Theory. Each part of the economy works in conjunction with the other. Each part keeps the other moving indefinitely and positively. Mr. Richard T. Curtain, Director of the University of Michigan's Consumer Surveys coined the flow as a " virtuous cycle".(Uchitelle).In a Perpetual Motion Economy model, the rising stock market drives households wealth that encourages borrowing that pays for spending. This increase in spending creates more jobs that produce higher wages. This generates confidence that encourages people to invest in the stocks and causes the market to rise and so on and so forth.As Stephen Roach, Chief Economist at Morgan Stanley Dean Witter, aptly observed, "Many of us who have been doubters are starting to believe this can go forever. That is a complacency we may live to regret. But I cannot really substantiate doubt for a good analytic reason".(Uchilette) Buying into the Perpetual Motion Theory allows for a world in which low inflation and low unemployment can not only coexist, but also serve to feed a self-perpetuating process.Even the staunchest proponents of the Perpetual Motion Theory acknowledge that there is a trade off in the long term between inflation and unemployment. The question is not that thes...
