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Have we been thinking about inflation all wrong?

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Re: Have we been thinking about inflation all wrong?

#271

Post by hammock »

zozbot234 wrote: post #129
jbay808 wrote: post #57

When it starts to get really burdensome to keep your promises, the idea of breaking them gets really attractive. But that doesn't come for free. It costs credibility. The cost of central banks breaking their inflation-control commitment when inflation starts running hot, is that the market starts pricing in their unwillingness to raise interest rates. This fuels a whole bunch of other inflation feedback loops, and th…

Yup. The kernel of truth behind Austrian theories of macroeconomics/the business cycle is that interest-rate based policy setting is inherently an unstable system. If the central bank makes policy errors that fail to stabilize the underlying target (whether inflation, nominal income, exchange rates, whatever) the whole system starts spiraling away from that unstable equilibrium point, and the subsequently needed corr…

True to form, since the Fed was created, each new crisis has been bigger and sooner than the last.

Re: Have we been thinking about inflation all wrong?

#272

Post by ska »

friedturkey wrote: post #268
ska wrote: post #237

Earlier quoted context omitted.

> You mean with deflation people will suddenly no longer want for more money? Sign us up! No, they mean that people will want jobs and not find them. [addition: this is at least the orthodox view behind small inflation targets as policy, that on the whole it's the best trade off]

Japan is said to be deflationary (until covid at least) and lacks an unemployment problem.

Is japan deflationary in real terms? Even if so I suspect the economists would argue endlessly about "other factors".

Either way, I'm not saying I believe the analysis, but when economists talk about the problems of deflation they aren't afraid that people will have "enough" money.

Re: Have we been thinking about inflation all wrong?

#273

Post by imtringued »

Avshalom wrote: post #27
djrogers wrote: post #5

It's telling that the vast majority of the pushback on the 'inflation is bad' viewpoint comes from well-off academics, tech folks, and just generally people who are hurt the least by inflation.

I unload trucks and stock shelves at Target. You think my viewpoint about inflation is gonna get published in a way that anyone sees?

You benefit by keeping your job. In the current system deflation means you become useless to society. Yes capitalism is a ponzi scheme.

Re: Have we been thinking about inflation all wrong?

#274

Post by imtringued »

valcron1000 wrote: post #116
TremendousJudge wrote: post #64

Earlier quoted context omitted.

Brazil has had its inflation under control (for Latin American standards, anyway) since the 90s, after the Plan Real. Also, Latin American runaway inflation is something that has been happening since the 60s, every measure under the sun has been tried to fix it, with only limited success in some cases. Anyway, it's a bit more complicated than "spending money like crazy and being corrupt".

In Argentina the cause is plain and simply "spending money like crazy and being corrupt". Source: I've been living here for my whole life.

Read Silvio Gesell's book or watch the silvio gesell institute on youtube. His economic theory is based on his experience of inflation and deflation crises in argentina. His son founded villa gesell.

Re: Have we been thinking about inflation all wrong?

#275

Post by imtringued »

efdee wrote: post #15
jhawk28 wrote: post #7

Earlier quoted context omitted.

If anything it increases inequality. It hurts the poor the most. The wealthy are more immune because they will have their wealth in things that go up with inflation. When it is caused by the government spending more than it takes in, it is effectively a hidden tax. NONE of these things are new concepts. Even the belief that the inflation won't hurt is new. Many other societies have blindly thought they were immune un…

When you say the wealthy are immune because their wealth is in things that go up with inflation, what exactly are you thinking about? Not stocks for sure. Maybe those who have money invested in property for hire, but even then whether your income goes up with inflation strongly depends on where you are location. Interesting to know: in some countries (eg. Belgium) wages are automatically adapted to inflation, so "the…

Inflation is actually terrible for stocks because inflation has to be earned via revenue which only applies to quality stocks. It's not the same as a bull market where everything goes up.

Re: Have we been thinking about inflation all wrong?

#276

Post by Avshalom »

BitwiseFool wrote: post #224
Avshalom wrote: post #27

Earlier quoted context omitted.

I unload trucks and stock shelves at Target. You think my viewpoint about inflation is gonna get published in a way that anyone sees?

There's a viral video going around of a Target employee placing a new price tag on Jimmy Dean breakfast biscuits. Sure it's not getting treated as seriously as an article in the New York Times written by Paul Krugman, but it's arguably having a greater impact than one of his milquetoast columns on the subject. So please, do share what you're seeing.

I mean that's not really the point. The thing is that if a journalist writes an article about inflation they might ask me if inflation is affecting me but of course the majority of the article will be from "experts" because otherwise they get called out for giving equal weight to Random J. Asshole as they do to economists or whatever. So every article pro/con/neutral about complex economic phenomena is going to be majority academics or bank CEOs or fed-reserve spox. That's the nature of journalism.

Re: Have we been thinking about inflation all wrong?

#277

Post by [deleted] »

hammock wrote: post #271
zozbot234 wrote: post #129

Earlier quoted context omitted.

Yup. The kernel of truth behind Austrian theories of macroeconomics/the business cycle is that interest-rate based policy setting is inherently an unstable system. If the central bank makes policy errors that fail to stabilize the underlying target (whether inflation, nominal income, exchange rates, whatever) the whole system starts spiraling away from that unstable equilibrium point, and the subsequently needed corr…

True to form, since the Fed was created, each new crisis has been bigger and sooner than the last.

[deleted]

Re: Have we been thinking about inflation all wrong?

#278

Post by zozbot234 »

imtringued wrote: post #215
zozbot234 wrote: post #129

Earlier quoted context omitted.

Yup. The kernel of truth behind Austrian theories of macroeconomics/the business cycle is that interest-rate based policy setting is inherently an unstable system. If the central bank makes policy errors that fail to stabilize the underlying target (whether inflation, nominal income, exchange rates, whatever) the whole system starts spiraling away from that unstable equilibrium point, and the subsequently needed corr…

No, they completely miss the point. The fundamental problem with money is that you can delay your spending indefinitively thereby breaking the concept of supply and demand. Imagine an economy where you are self sufficient and sell but never buy anything ( cough germany). You keep accumulating more and more money and you could in theory spend it all, thereby cause a huge amount of inflation. That is the core of the de…

It doesn't break the concept of supply and demand, because demand for money also exists. Money is an asset. When you accumulate it, it increases in value and the central bank+banking sector creates just enough of it to offset your demand. When you later spend it, it becomes a hot potato (the economic actor who got your money doesn't really want to keep it, she'll exchange it for something else) until the central bank drains it away. Or else it will just slosh around until prices rise enough to create enough demand for it in nominal terms.

Re: Have we been thinking about inflation all wrong?

#279

Post by imtringued »

G3rn0ti wrote: post #246
spaetzleesser wrote: post #160

Earlier quoted context omitted.

In the Germany of the 1920s inflation increased inequality enormously. People who had some assets had to start selling them off until they had nothing. Only people with large reserves could survive this and actually prosper because they could buy up more assets. Inflation kills the middle class who was on the way up. Germany still has a trauma from the 1920s. And rightfully so. Also: the wealthy will steer policy tow…

> Inflation kills the middle class who was on the way up. It can be argued it was the hyperinflation of the early 1920s that radicalized a lot of people in Weimar Germany. It was the driving force helping the National Socialist German Workers‘ Party into power. Tragically, inflation policy was inflicted onto the Germans by the early Weimar governments supported by moderate political forces — not the communists or Naz…

You're wrong. Deflation caused both world war one and two. There is quite an interesting german book called Das Experiment von Wörgl where literally every single town in Austria and Germany was struggling with mass unemployment except this tiny 400 people town known as wörgl. There was no inflation or deflation, no money printing, no ddeficit spending. Just a small demurrage fee. Taxes were paid ahead of time. A brdige was built. Multiple streets were paved unemployment was low. There simply was no crisis. Then the central bank banned the experiment and the usual problems instantly came back.

Also, nobody is learning from this experiment. Nobody on this planet tries to create a money system that is actually sustainable and free of crisis, not even the marxists.

The reason why the ancient egyptians had such an advanced culture is that they understood money better than us.

Re: Have we been thinking about inflation all wrong?

#280

Post by zozbot234 »

hammock wrote: post #271
zozbot234 wrote: post #129

Earlier quoted context omitted.

Yup. The kernel of truth behind Austrian theories of macroeconomics/the business cycle is that interest-rate based policy setting is inherently an unstable system. If the central bank makes policy errors that fail to stabilize the underlying target (whether inflation, nominal income, exchange rates, whatever) the whole system starts spiraling away from that unstable equilibrium point, and the subsequently needed corr…

True to form, since the Fed was created, each new crisis has been bigger and sooner than the last.

Wrong, actually. The 1980s and 1990s saw a huge improvement in macro-level stability. The late-2000s crisis was an outlier.
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