111–120 of 326 posts
Oh right, a Democrat is POTUS. "Right" on time.
I know this'll be immolated as being "political", but the article is also being sneakily political.
The subject may be legitimate. The timing... is not.
Earlier quoted context omitted.
A fixed income fund manager is a domain expert in this area, even though he was wrong about this prediction. Their full time job is largely to understand and anticipate Central Bank policy.
My time in finance has led me to believe that traders and investors are far more prone to groupthink than they’re willing to admit to. “Hedge fund manager predicted inflation after QE and was wrong” is very low on my list of things that surprise me.
They are still the number one domain experts insofar as Central Bank policy goes, as that's one of their primary preoccupations. Perhaps aside from economists that actually work at the Fed.
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> He has had the resources and status to access any scholar on the topic he would like. So did Bill Gross of PIMCO, one of the largest fixed-income (bond) management firms in the world (AUM: $1.9T): * https://en.wikipedia.org/wiki/PIMCO He bet that interest rates would rise in 2011 after QE(2). Keynesian macroeconomists like Krugman said they wouldn't. Krugam was right: * https://www.businessinsider.com/this-was-the-…
We’re basing the prediction of inflation on the notion that there’s more money “sloshing around out there”. I’m not convinced that more of it is sloshing. Wage growth has been largely absent for many people in the 12 years since the crisis, and as a result those people haven’t had more money to spend. The money clearly exists of course given that it’s been printed, but there’s a good chance it just isn’t finding it’s…
Remember 20% of Americans own ~80% of all the wealth in the US. So if your looking for sloshing money you should look at what they’re doing, not what “most” people are doing.
I think it’s fair to say that those a big chunk of those 20% probably have more money than they know what to do with, which probably means money is sloshing somewhere.
> Remember that some people thought that government borrowing ... facilitated by quantitative easing (Fed bond-buying) ... was going to lead to substantial inflation. But it didn’t. Every time someone says "but where's the inflation" I sigh. Look at literally any financial asset, SP500, stocks, real estate, even bond values (the inverse of interest rates). There is your inflation. Maybe we like asset inflation, maybe…
How can you have inflation while most of the services and commodities people are using are not increasing in price? Sure, you have equities rising, but that’s about it. Inflation because call options are flooding the market? Bonds are going down, real estate market is stagnant.
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Small tangent: I tend to borrow all the money that is offered to me at 0% effective rate, e.g., when buying a new mobile phone. I would even go as far as to borrow all money that is offered to me at sub-inflation rates. Is this rational?
When it comes to cars, what's often offered is 0% financing or some kind of cash back. It may actually be better to go with the cash back. Preet Banerjee made a 10 minute video laying out the math on why not going with 0% financing may be better: * https://www.youtube.com/watch?v=KGPu0jPryfU
Well, that just means the financing is not 0%.
Just a reminder - this is a rap-battle music video about economic policy. This is why the internet is amazing:
Fear the Boom and Bust: Keynes vs. Hayek - The Original Economics Rap Battle!(Youtube)[0]
I can't help feeling that the question is ill-posed. It's not "how much", but "why" that matters. Think about it: Would you borrow $10,000 to a friend who opens a dentist with a solid business plan? Probably yes. Would you borrow $1000 to a friend to cover an existing debt? Probably not, or, if you are very generous, you would gift them the money. If a government can demonstrate that it borrows money to invest in the…
Economists may not studied hyperinflations much, they've spent a lot of time looking at inflation, the one economic variable public policy designed by mainstream economists is very good at predicting and influencing. They know it's the result of the amounts people are willing to spend on stuff (including labour) rising faster than the amount of stuff available. They know that government spending more money into the economy can does increase the amount people are willing to spend on stuff (but seldom 1:1) and that it can also increase (or decrease) the amount of stuff available. They know this relationship depends on how the money is spent and also on the structure of the economy and this varies over the economic cycle as well as between countries. They know people look forward with inflation expectations when setting contract prices and wage demands.
There really isn't much reason to assume inflation, a rate of change, has a stable relationship with the absolute size of the debt. It seems like the article was inspired by Rogoff and Reinhart's similar argument that a particular debt/GDP ratio was an inflection point leading to a drop in economic growth. But that paper's arguments for there being a specific amount of debt that was the problem were empirical rather than theoretical, and more importantly, were wrong (infamously the paper's main result was shown to be the result of a coding error accidentally excluding countries from their calculation)
Earlier quoted context omitted.
We’re basing the prediction of inflation on the notion that there’s more money “sloshing around out there”. I’m not convinced that more of it is sloshing. Wage growth has been largely absent for many people in the 12 years since the crisis, and as a result those people haven’t had more money to spend. The money clearly exists of course given that it’s been printed, but there’s a good chance it just isn’t finding it’s…
Just because many people haven’t seen wage growth, doesn’t mean money isn’t sloshing around out there. Remember 20% of Americans own ~80% of all the wealth in the US. So if your looking for sloshing money you should look at what they’re doing, not what “most” people are doing. I think it’s fair to say that those a big chunk of those 20% probably have more money than they know what to do with, which probably means mon…
Earlier quoted context omitted.
The technical explanation why, when rates are zero, and you 'print money', inflation does not (or at least in all our current experiences has not) appear(ed): * https://en.wikipedia.org/wiki/Liquidity_trap It's what Keynesians (like Krugman) generally follow, and they've been right to date. Krugman for one has been writing about this since (at least) 1998 when Japan entered this situation: * https://www.brookings.edu…
The money printed to finance the government debt is not backed by a production of value. It just increases the money supply, while not increasing the amount of goods that one can buy with that money, hence by nature it is inflationary, ie it makes money less valuable. The market is complex and the effects may be postponed in time by years, but the fundamental mechanisms persist. The consequences are negative and soon…
This was published ten years ago (November 2010):
> We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment.
* https://economics21.org/html/open-letter-ben-bernanke-287.ht...
Still waiting for said debasement and inflation. Any time now. Real soon.