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The anti-inflation pivot of 2022

adamtooze.substack.com

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Re: The anti-inflation pivot of 2022

#51

Post by PopAlongKid »

jmyeet wrote: post #8

Here's the lesson I want people to learn: we had 40+ years of stagnant real wages (overall; there are exceptions). What happened in the pandemic was: 1. People realized going into an officce to work was unncessary and even anachronistic for many jobs; 2. Employers like employees in the office as a form of control; 3. Employers made short-term decisions to lay off huge amounts of people (even after taking PPP loans fo…

The recent IRA law[0] does significantly increase corporate taxes at least on the big guys. Not sure if that counts as "controlling the money supply".

[0]https://itep.org/four-tax-policy-wins-in-the-inflation-reduc...

Re: The anti-inflation pivot of 2022

#52

Post by spywaregorilla »

ddorian43 wrote: post #41
spywaregorilla wrote: post #30

I think the US (and Canada) just needs to ride the tide and let all the other boats sink. Pretty much everyone else is screwed. I think people are underestimating the second order effects of the US still having stable energy and farming capabilities. We'll see more stuff get done here and less stuff done elsewhere. Unemployment will be great here no matter what we do really. It will suffer in other countries. Though…

Nah. Canada real estate has to take the hit.

Sure. And that will suck. But the country will still be better positioned than anyone. Especially once they finish the pipeline to ship LNG to Asia

Re: The anti-inflation pivot of 2022

#53

Post by roflyear »

fennecfoxen wrote: post #38
sfe22 wrote: post #9

Earlier quoted context omitted.

Why 8? Doesn’t there need to be a premium for borrowing money? If i can borrow money at zero percent inflation adjusted rate, that is a great deal and still inflationary. I would say 12 percent would be neutral on 10 percent inflation.

We've had many years of 0% rates and 2%ish inflation. A return to that status quo ante isn't exactly crushingly tight monetary policy. But perhaps inflation will fall before we hit 8%.

Inflation is 8% right now, not 10%. So 6% seems to be a good "target" - but many economists in the US are thinking that inflation will not stay at 8% (that is the hope...) so they are aiming for a rate that reflects a 5.5-6.5% inflation rate over 2023 - which is from anywhere from 3.75% (I think at this point this is too low) to 4.75% (higher than expected). This makes a lot of sense to me and I think we'll see around a 4.5%-4.75% target rate by the end of 2023.

Re: The anti-inflation pivot of 2022

#54

Post by roflyear »

refurb wrote: post #26
blagie wrote: post #15

Earlier quoted context omitted.

No, there doesn't need to be a premium on borrowing money. Why would there need to be a premium? If I can invest in businesses with 0% return and make a profit, that's generally good for short-term economic growth, and bad for long-term economic efficiency. I'm not arguing for more or less interest, but I don't think there is a "natural." Interest rates have gone negative several times in several contexts, and the un…

Of course there needs to be a premium to lend money. Why would I lend someone money to get the same amount back (in real terms)? You'd need at least some premium to account for risk of non-payment, changes in inflation, etc. There doesn't need to be a consistent premium to borrowing money. So if I borrow $1M for 30 years right now the interest rate doesn't have to be 10% because most people assume inflation will come…

To safely park cash. Think government securities.

Re: The anti-inflation pivot of 2022

#55

Post by koboll »

sfe22 wrote: post #9
mjburgess wrote: post #7

This article appears to take place in a universe where interest rates at central banks are at counter-inflationary levels. They've been inflationary for a decade, and continue to be so. With inflation at 10%, fears about "going too far with interest rates" make sense only *at least* north of 5%, and realistically, 8%.

Why 8? Doesn’t there need to be a premium for borrowing money? If i can borrow money at zero percent inflation adjusted rate, that is a great deal and still inflationary. I would say 12 percent would be neutral on 10 percent inflation.

You are conflating backward-looking inflation (money has gotten 10 percent less valuable over the past year) with forward-looking inflation (we should lend at 12 percent interest because we expect money to get 10 percent less valuable over the next year). The former doesn't guarantee the latter; the latter is unlikely and gets unlikelier the more interest rates ratchet upward. That's why they are incremented - at a certain point inflation will inevitably reverse, and that point is likely below 12%, so going to 12% would unnecessarily knife the economy.

Re: The anti-inflation pivot of 2022

#56

Post by hef19898 »

disgruntledphd2 wrote: post #45
hef19898 wrote: post #20

Earlier quoted context omitted.

Ok, so historian and author objects to current central bank policies. Not that much better...

To be fair, he's an economic historian. I am the OP and thought that this was a really interesting article on inflation, sorry that you don't agree.

There are worlds between a BA in economics being an economic historian and an expert in monetory policy. If Covid tought me something, it is listening to those doing it, or directly advicing those doing it, instead of all those people regardless of who they are, that obly stand at the sidelines.

Re: The anti-inflation pivot of 2022

#57

Post by refurb »

roflyear wrote: post #54
refurb wrote: post #26

Earlier quoted context omitted.

Of course there needs to be a premium to lend money. Why would I lend someone money to get the same amount back (in real terms)? You'd need at least some premium to account for risk of non-payment, changes in inflation, etc. There doesn't need to be a consistent premium to borrowing money. So if I borrow $1M for 30 years right now the interest rate doesn't have to be 10% because most people assume inflation will come…

To safely park cash. Think government securities.

Ok, fair point on that one. Eliminate the default risk and you're willing to take 0% or even a negative real interest rate.

Re: The anti-inflation pivot of 2022

#58

Post by howmayiannoyyou »

Monetary policy is far from the whole picture here. Global policy makers are dealing with about 25% of the global population being lifted from poverty over the last several decades and their increased consumption and wages are supply-side inflationary in ways not easily (or appropriately) reversed. The impact isn't just economic. Inflation is destabilizing (Venezuela, Argentina, Turkey).

The west invested heavily in manufacturing and resource extraction in the developing world for profit (mostly) and virtue (slightly) and inflation was always the likely outcome.

The only alternative to a global recession is step changes in productivity that relieves supply side pressure. Historically, those advancements can emerge quickly, but they are usually slow to propagate.

Re: The anti-inflation pivot of 2022

#59

Post by djbusby »

geerlingguy wrote: post #18
djbusby wrote: post #10

Earlier quoted context omitted.

The primary link blocks me after a short scroll. Couldn't get past "the fold". But with Archive I can read the full article.

There's a dumb anti-pattern link that's like "I don't want to subscribe yet", but yeah, annoying nonetheless. I thought Substack was supposed to be a nicer alternative to Medium?

Wow, I just went back a fourth time and the previous full-blocker modal/nagbox is gone and it's just at the bottom.

Guess I was in the B group for a while.

Re: The anti-inflation pivot of 2022

#60

Post by [deleted] »

colinmhayes wrote: post #28
refurb wrote: post #21

Earlier quoted context omitted.

Chart 1 lays it out. https://www.bls.gov/news.release/pdf/cpi.pdf Inflation isn't increasing much in August - relatively to July, but July was still high. That graph needs to go negative (a decrease in the inflation rate each month) for a long time before we get back to something "normal" like 2-3% inflation.

I think you're misreading the chart. My understanding is that 12 months of 0 means a year over year inflation rate of 0, not the same amount of inflation as the year before.

[deleted]
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