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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?

#421

Post by jessaustin »

quadrangle wrote: post #354
didericis wrote: post #343

Earlier quoted context omitted.

Austrian theories appeal to me/seem correct beyond just a kernel, but I’d consider myself an amateur/haven’t read enough to be confident about my opinion. Specifically, the emphasis on relative value seems correct, the emphasis on the importance of keeping pricing signals pure/unaffected by artificial monetary supply changes to effectively allocate resources seems correct, the argument that market incentives exist fo…

Austrian economics is all anti-empirical say-so internally-consistent models that aren't tested against reality. Traditional economics is stuff that claims to be more empirical but fails to do so and focuses almost entirely on official stats and on its own versions of models that aren't tested against reality. The whole field of economics is overall messed up. It's insular, arrogant, and extremely resistant to outsid…

An esteemed economist really let the cat out of the bag recently:

“The world at the moment is in a really a rather extraordinary state because we have no general theory of inflation.”

https://www.pacemaker.global/post/goodhart-we-have-no-genera...

Re: Have we been thinking about inflation all wrong?

#422

Post by jessaustin »

coryrc wrote: post #419
jessaustin wrote: post #418

Earlier quoted context omitted.

Printing dollars out of thin air, makes the ones in your pocket less powerful. We've been doing this "thin air" thing for twenty years. Why has it only caused inflation over the last several months?

Graph housing and health care prices. Maybe low inflation was a lie all along.

OK, sure, let's assume inflation has been understated this whole time. (That might even be true!) Do you suggest that it's less understated now? If not, we still don't see the simple relation suggested upthread between inflation and a hypothetical "incorrect" Fed policy, since Fed policy has been pedal-to-the-metal for a long time.

Re: Have we been thinking about inflation all wrong?

#423

Post by fleetwoodsnack »

didericis wrote: post #396
quadrangle wrote: post #391

Earlier quoted context omitted.

I'm no expert, I just have the impression that the field of economics professionally is basically a lost cause, at least until generational turn-over if even that. Anything interesting has to engage with real facts like energy consumption, pollution, harvesting of raw materials, and somehow acknowledge the huge portion of human activities that are not measured in money. I don't know of anyone within economics who rea…

Yanis Varoufakis sounds interesting. Will check him out, thanks. Doesn’t align with my sensibilities at all/am generally allergic to anything described as Marxist, but the way you describe him and the misconceptions sounds worth looking into/I should challenge myself. I view Marx as more of a social analyst and a historian rather than an economist/a lot of what I understand of what he advocated for economically seems…

For your benefit: “It has become fashionable to think that Karl Marx was not mainly an economist but instead integrated various disciplines—economics, sociology, political science, history, and so on—into his philosophy. But Mark Blaug, a noted historian of economic thought, points out that Marx wrote “no more than a dozen pages on the concept of social class, the theory of the state, and the materialist conception of history” while he wrote “literally 10,000 pages on economics pure and simple.’”

https://www.econlib.org/library/Enc/bios/Marx.html

The fact of the matter is that Das Kapital is a foundational text in economics; it provided an analytical framework and an early prototype of rigour (before the introduction of mathematical formalism) that would influence just about every clade of economics that followed.

Not accusing you of intellectual sophistry, but the sentiment that Marx isn’t an economist is seen as rather glib at this point.

Re: Have we been thinking about inflation all wrong?

#424

Post by batshit_beaver »

BitwiseFool wrote: post #196
jbay808 wrote: post #157

Earlier quoted context omitted.

Hmm; all of those things are what I would associate with breaking the stability promise, that is, reneging on inflation control and holding interest rates low. That encourages borrowing and propels the price of assets. I'd expect your objection to be associated with growth at all costs , not with stability.

I'm not the person you responded to, but to me stability also implies artificially propping up parts of the economy that should otherwise be in-decline. It's not necessarily the same as growth at all costs, but I sense it is related.

Counter point: maybe prices (including on assets) should be allowed to go up, so that their prices better reflect their value relative to productivity?

The fed didn't really prop up any major industry this time around (unlike in 2008), just added fuel to the fire to keep the whole economy going.

Re: Have we been thinking about inflation all wrong?

#425

Post by RC_ITR »

kangaroozach wrote: post #357
quadrangle wrote: post #354

Earlier quoted context omitted.

Austrian economics is all anti-empirical say-so internally-consistent models that aren't tested against reality. Traditional economics is stuff that claims to be more empirical but fails to do so and focuses almost entirely on official stats and on its own versions of models that aren't tested against reality. The whole field of economics is overall messed up. It's insular, arrogant, and extremely resistant to outsid…

More money inflates the supply of money. This is why cryptocurrencies that burn crypto are considered deflationary. These Econ professors are responsible for inflating a giant bubble based on their politically motivated propaganda. Inflation is not about prices, it’s about simple math. Printing dollars out of thin air, makes the ones in your pocket less powerful. But if you are a the direct beneficiary of the newly p…

Why does nobody ever think about the supply of goods and services side of the inflation equation?!?!

If you print dollars faster than the real economy can create new things to buy that causes inflation, but only then and in recent history that’s only happened because of a pandemic.

I really don’t know why that isn’t talked about more.

Re: Have we been thinking about inflation all wrong?

#426

Post by reducesuffering »

samwisedum wrote: post #362
BitwiseFool wrote: post #218

Earlier quoted context omitted.

I wonder how much of an impact the Iowa Caucuses have on our government being so darn corn farmer friendly.

It's shocking that we subsidize farmers at all. If we want people to afford food, we could just give that money to the people.

It's really not shocking. Those people could then possibly buy entirely imported food if it was cheaper and wipe out domestic agricultural. Ensuring domestic food production is geopolitics 101, above domestic energy production. A nation doesn't want its bellies depending on a foreign adversary. You aren't a sovereign nation then.

Re: Have we been thinking about inflation all wrong?

#427

Post by RC_ITR »

ravel-bar-foo wrote: post #420
quadrangle wrote: post #371

Earlier quoted context omitted.

> there are far more dollars floating around thanks to crypto Uh no, cryptocurrencies can't generate USD. But if you meant "dollars" as a generic term for currency, then sure, kinda yeah, to the degree that cryptocurrencies are actually working as currencies (which they mostly are not). Anyway, the "deflationary" claim is internal to a cryptocurrency. Nobody is asserting that cryptocurrencies cause deflation of USD.

> Uh no, cryptocurrencies can't generate USD. If I buy crypto from a miner, the dollars don't disappear. The miner uses it to buy energy and semiconductors, which makes its way around the econony until some miniscule fraction of it comes back to me. (The loss of assets in the economy needed to create the transaction does not destroy dollars, but it does destroy finite resources such as fuel or sunlight for energy, th…

Lol, you’re trying to talk about the credit multiplier as it relates to crypto with a crypto fan.

Maybe a lost cause?

Re: Have we been thinking about inflation all wrong?

#428

Post by RC_ITR »

quadrangle wrote: post #359
kangaroozach wrote: post #357

Earlier quoted context omitted.

More money inflates the supply of money. This is why cryptocurrencies that burn crypto are considered deflationary. These Econ professors are responsible for inflating a giant bubble based on their politically motivated propaganda. Inflation is not about prices, it’s about simple math. Printing dollars out of thin air, makes the ones in your pocket less powerful. But if you are a the direct beneficiary of the newly p…

"Inflation is not about prices" is the silliest thing I've ever heard. You might as well say that gravity has nothing to do with up and down. The only thing anyone MEANS when they say "inflation" is that it's short for "price inflation". But to deal with your point directly: if the U.S. Treasury literally printed a quadrillion dollar bill but then gave it to someone with a contract saying that they agree never to spe…

> You might as well say that gravity has nothing to do with up and down.

Gravity doesn’t have anything to do with up and down. It deals with mass and center points.

It only appears as up and down to you on earth.

Probably a lesson in there somewhere.

Re: Have we been thinking about inflation all wrong?

#429

Post by batshit_beaver »

friedturkey wrote: post #195
uses wrote: post #173

Earlier quoted context omitted.

Inflation doesn't exist as a policy to stiff wage earners. Inflation exists as a reality of a growing economy (more goods and services needs more money to cover them). The alternative is deflation, which would be extremely bad. So what we aim for, is low inflation. Which we've had for ~40 years. Low, controlled inflation is the vastly preferable alternative to any amount of deflation, so it's the side of the scale we…

Yeah, deflation is awful. Imagine our continuously increased production and efficiency resulting in goods becoming cheaper and the value of the working person’s dollar going farther. Horrifying.

Deflation is horrific for any economy because it makes debt more expensive to service. Like it or not, modern economies are largely able to function thanks to prolific use of credit. If you think about it, it makes a ton of sense - if a rich person or company is sitting on a bunch of money, in an inflationary environment they are encouraged to invest this money in r&d, businesses (esp risky ones, like innovative startups), better employees or benefits for existing ones, etc. In a deflationary economy the best use of money is NO use of money. It's a death trap.

Re: Have we been thinking about inflation all wrong?

#430

Post by samvega_ »

pdonis wrote: post #29
kkoncevicius wrote: post #21

The best one-sentence description of inflation I've heard is: inflation is a hidden tax on savings. People who save money are hurt the most. It's as if the newly printed money is generated by taking a bit from anyone according to how much cash he/she has stored away.

Exactly. If more economists acknowledged this obvious truth, it would be much easier to have saner policies in this area. One thing to add is that, in addition to being a tax on savings, inflation also leads to misallocation of resources, because the newly printed money is not distributed equally. (If it were, it would actually have little economic effect, because all prices, including wages, would rise by exactly th…

That's not true in general, because import prices go up during inflation, and foreign investments go down, which might lead to foreign investors pulling out, and other effects. The US is in a unique position due to them keeping the USD stable internationally by being the world reserve currency, a status the US government abuse by printing an excess of dollars. US inflation is in practice a taxation of the international community who must mostly purchase oil in USD, and are otherwise financially tied to the US.
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