Have we been thinking about inflation all wrong? • Hacker News Board

Re: Have we been thinking about inflation all wrong?

#511

Post by _lazlo » Sat, Feb 12, 2022, 2:49 PM UTC

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…

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Re: Have we been thinking about inflation all wrong?

#512

Post by danaris » Sat, Feb 12, 2022, 2:58 PM UTC

HarryHirsch wrote: post #450

danaris wrote: post #445

Earlier quoted context omitted.

"Who can print money" and "who can introduce money into the economy" are not the same question. Obviously, only the federal government can change the rate of printing new dollars. But inflation of the monetary supply, in practice , is not merely about "how many dollars are in existence." It's about "how many dollars are circulating in the economy ." Thus, given how much money has been hoarded by the very wealthy over…

they have an unprecedented ability to cause inflation themselves simply by deciding to spend more of it They spend it in the stock market, that's where the inflation is. I remember a time when a P/E ratio of 12 was a signal that the company was highly valued, and a P/E ration of 15 was a signal of a bubble. Nowadays that number for Tesla is ~ 100! That's insane.

Well, yes, exactly; that, and stuff like the cryptocurrency and NFT bubbles are very clear demonstrations of the excessive wealth accrued by the top few %.

Re: Have we been thinking about inflation all wrong?

#513

Post by watersb » Sat, Feb 12, 2022, 4:54 PM UTC

Spooky23 wrote: post #459

watersb wrote: post #361

Earlier quoted context omitted.

> Every student debtor is 7.5% less in debt in real terms than they were last year. Because Federal Student Loan payments were deferred last year, interest free. Such loans can also be forgiven -- canceled and considered paid in full -- for borrowers which qualify for certain programs. One of the most widespread are programs for Public Service job holders, Teachers, and National Guard members. These borrowers are cre…

The point is, instead of giving investors risk free returns, inflation is effectively a tax on the people and entities hoarding wealth with no productive purpose, and it benefits debtors. We’ve had a carnival ride of cheap debt forever, which has powered and established many really dumb businesses. IMO, we’d benefit from a few years of 5-10% inflation.

-- Just an update, too late to edit my reply --

I responded to the assertion "Every student debtor is 7.5% less in debt in real terms than they were last year." because I found it intriguing. It's a cool writing prompt.

I found that I don't disagree with this assertion, if I'm getting it right. But it's interesting...

In our household of four people, both kids and spouse are attending college. So far, we are holding no student debt, but that could change dramatically next year if kid changes school.

And there has been a lot of talk about addressing huge burden of student debt, with politicians crowing about debt forgiveness that they can bring home to constituents.

But as with any matter of publicly-funded policy, the money only exists if you know how to ask for it. There are usually complicated procedures in place, and of those who would otherwise be qualified, many will lack the ability to follow through to actually discharging their debt via one of these programs.

So I decided to look it up: how do I get this free money?

It was worth looking into, but it's complicated.

The most straightforward free money from debt relief has been, indeed, a 14(?) month interest-free deferment of student loan payments during this COVID crisis.

Re: Have we been thinking about inflation all wrong?

#514

Post by smsm42 » Sun, Feb 13, 2022, 3:08 AM UTC

I would be more inclined to seriously consider the premise if the US weren't in the middle of the worst inflation bout in decades, and that wouldn't be critically inconvenient to certain politicians, facing an election quite soon, and I hadn't read many articles in the press affiliated with those politicians claiming that first the inflation doesn't exist and next that the inflation is actually very good. Given all that, I am having a hard time now taking any arguments towards it seriously.

Also, > For decades, governments have done all they can to keep inflation down

Did they really? I mean, like the inflation is something that pops out of nowhere by a quirk of cruel nature, having nothing to do with government actions - or it's an entirely predictable - and repeatedly predicted - result of such actions? If the latter, can we seriously clam they done all they can to avoid it, if they actually done all they can to cause it?

Re: Have we been thinking about inflation all wrong?

#515

Post by dnautics » Sun, Feb 13, 2022, 4:59 AM UTC

yed wrote: post #411

dnautics wrote: post #401

Earlier quoted context omitted.

> There will not be many working people if the economy is deflationary. The us had deflation between 1860 and 1910. I guess at the end of fifty years of that we had, like, no laborers, or something. Please read a history book before provably wrong macro dogma rots your brain and all you do is spout nonsense that could actually harm people.

That time period featured the longest depressionary period in US history with large spikes in unemployment [1] [1] https://en.m.wikipedia.org/wiki/Long_Depression#:~:text=In%2... .

And yet the economy grew and the country rose out of the ashes of an incredibly destructive civil war and became a world power, and brought a LOT of people out of poverty. So, maybe don't sweat the little stuff?

Re: Have we been thinking about inflation all wrong?

#516

Post by dnautics » Sun, Feb 13, 2022, 10:37 PM UTC

batshit_beaver wrote: post #424

BitwiseFool wrote: post #196

Earlier quoted context omitted.

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.

> 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.

So, what you are saying, is: they propped up the financial industry.

Re: Have we been thinking about inflation all wrong?

#517

Post by TheMagicHorsey » Mon, Feb 14, 2022, 2:52 PM UTC

imtringued wrote: post #317

TheMagicHorsey wrote: post #19

Inflation is bad in the sense it punishes people that made the right decisions and saved money for their retirement. Inflation eats away at the savings they made in their working life and makes them a pauper in old age. The argument that they should have been invested fully into the market is fine for educated people. But many uneducated people save cash because they do not have access to all the financial tools that…

Yes, we should abolish inflation by implementing negative interest rates on cash and adopting price level targeting. Long term interest rates will be 0% on certificates of deposit. This is consistent with saving for retirement.

You seem to misunderstand how interest works in a society that uses capital in production and in the purchase of income producing assets.

I also don't suggest price level targeting.

Re: Have we been thinking about inflation all wrong?

#518

Post by efdee » Tue, Feb 15, 2022, 4:53 PM UTC

GeekyBear wrote: post #494

efdee wrote: post #484

Earlier quoted context omitted.

Inflation is currently high everywhere, not just the US. Can't blame that on the current administration. It might influence it a little, but things like energy pricing (which has gone x4 in just a year or so) has a lot more to do with it.

> Inflation is currently high everywhere, not just the US. Can't blame that on the current administration. After blaming Trump for a global pandemic, we probably don't get to use that excuse to shield Biden from blame when bad things happen under his watch. For good or ill, "the buck stops here" is a longstanding American tradition.

I don't think I've seen anyone blame Trump for the global pandemic. What are you talking about?