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The anti-inflation pivot of 2022

adamtooze.substack.com

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Re: The anti-inflation pivot of 2022

#271

Post by hakfoo »

prottog wrote: post #235
drekk wrote: post #203

Earlier quoted context omitted.

China has 4x the population of the US. Abandoning zero COVID as a policy would lead to millions of deaths. How can you call SinoVax a failure when all of the non-mRNA vaccines perform similarly? The US has more COVID deaths than China has had cases. That's shameful, especially when the US sat on enough mRNA vaccines to completely immunize our population 9x over. Countries like Argentina that were guinea pigs for the…

> a billion+ humans as inept drones under the iron grip of a tyrant Drones, no, but it's very instructive to look at what the elites of China do. Many who achieve success in China spend significant resources to have a foot out the door, because they know that success is fleeting, depending on remaining in favor of the CCP. Even Xi Jinping's daughter went to school in the US. If the CCP is actually so benign and China…

Optimization goals?

They could be targeting economic policy around the, say, 1.3 billion or so non-elites.

A few million at the top may see a net burden in "we have to be responsive to overall planning goals" and "we might have less raw economic opportunity", but maybe it's a choice the CCP is willing to make. At least on an aggregate, society-wide level, the quality-of-life metrics do seem to be pointing in the right direction.

I don't think "schooling in the US" is inherently a culpable thing. Premier American universities are globally very highly respected, and I could see value in "cross training" to make sure they're not missing any good ideas worth investigating.

Re: The anti-inflation pivot of 2022

#272

Post by imtringued »

WalterBright wrote: post #153
PKop wrote: post #139

Earlier quoted context omitted.

Neither does no planning and complete decentralization (no national industrial policy, no trade barriers, letting important supply chains move out of your control or even into the borders of your adversaries).

Actually, the chaos of the free market works very, very well at producing the most prosperous countries ever seen.

The problem with this statement is that we don't have free markets. We have monopoly ridden markets.

Re: The anti-inflation pivot of 2022

#273

Post by imtringued »

mytailorisrich wrote: post #149
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…

Europe has plenty of energy. They sit on huge gas reserves, for instance, but have decided to effectively ban using them by banning fracking while still being extremely dependent on gas. And not only that but most of gas imports came from a geostrategic adversary... This is all self-inflicted. You can't prevent people and countries from shooting themselves in the foot.

Netherlands stopped fracking because their population density is too high to just sweep the environmental damaged caused by fracking under the rug, the only thing that is self inflicted are the now unavoidable earthquakes in the Netherlands.

Re: The anti-inflation pivot of 2022

#274

Post by chubs »

WalterBright wrote: post #153
PKop wrote: post #139

Earlier quoted context omitted.

Neither does no planning and complete decentralization (no national industrial policy, no trade barriers, letting important supply chains move out of your control or even into the borders of your adversaries).

Actually, the chaos of the free market works very, very well at producing the most prosperous countries ever seen.

Lovely to hear this kind of thing on HN :) The free market looks like 'chaos' because it has millions of people making economic prioritisation decisions, as opposed to a control economy with few people. Millions of people making prioritising inputs vs a few, leads to a far more effectively prioritised economy, surely. And the proof is in the pudding!

Re: The anti-inflation pivot of 2022

#275

Post by rvense »

lupire wrote: post #255
rvense wrote: post #151

Earlier quoted context omitted.

30 year fixed-rate is very much the norm here in Denmark. There was a period of experimentation leading up to 2007, but I think fixed rate is very popular. I'm certainly happy that's what we went for when we bought our first house two years ago.

It's hard to call it a "norm" when it's so new that no one has yet seen one completed.

It's been like this for at least 50 years, maybe more - the underlying system of credit associations goes back to the lat 1700's.

The mortgage market was very tightly regulated to really only permit the 30-year fixed-rate mortgages until 2002.

Re: The anti-inflation pivot of 2022

#276

Post by imtringued »

nostromo wrote: post #189
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%.

Besides tanking all asset prices initially - that actually could pave the way for more inflation. US federal debt is 30 trillion dollars. If the federal government had to pay 10% interest on its debt, it’d require almost all of federal spending be paid on our debt. Of course that’d never happen. Instead they’d just borrow more to pay the interest, which means more dollars would be minted and we’d print several trilli…

How about you introduce a negative interest rate on cash and then mandate an actual debt ceiling like a reasonable person instead of continuing this pyramid scheme.

Re: The anti-inflation pivot of 2022

#277

Post by imtringued »

mdcds wrote: post #238
unholiness wrote: post #219

Earlier quoted context omitted.

Macroeconomics novice here. What's the argument that interest rates need to be close to inflation rates to counteract it? It seems like there should be an intrinsic time-value of money (e.g. 1 stuff today is worth 1.05 stuff next year) which is tradable (supply of future-stuff will equal demand for future-stuff at some rate like 1.05). And that single rate of stuff-interest would exist if the central bank does nothin…

I had the same question! The mechanism of higher rates reducing inflation isn't clear to me. Does it go down because people with cash choose to park it and earn interest instead of buying goods and services? Or does it go down because higher interest rates make the cost of doing business more expensive which leads to reduction in overall business activity? If it's by reducing business activity, then seems like the "b…

The economy is always deflationary because the way we create money also creates an obligation to return and destroy money so given enough time, the money supply trends towards zero no matter what you do. A higher interest rate makes it less appealing to take on a loan, which means repayment outweighs new loans which results in a net reduction in the money supply. Here is the dirty secret, you could have done the same thing by limiting reserves and increasing the reserve requirements without raising the interest rate. This is a long term effect that you can in theory do forever until your economy suffers from deflation and actually needs lower interest rates, possibly negative, to shrink the money supply.

Another reason is that a high enough interest rate makes people sell their risky assets and hold more money until the risk adjusted return on money and risky investments is the same. The latter is a short term effect that actually goes away eventually as paying a 70% interest rate makes the debt problem worse and necessitates even more debt just to pay the ridiculous interest rate.

Re: The anti-inflation pivot of 2022

#278

Post by WalterBright »

hakfoo wrote: post #269
WalterBright wrote: post #153

Earlier quoted context omitted.

Actually, the chaos of the free market works very, very well at producing the most prosperous countries ever seen.

Correlation may not imply causality here. Many of the most successful free market economies embody the concept of "was born on third base and thinks he hit a triple." The United States and Canada had relatively easy access to territorial expansion, which offered them huge amounts of fertile, temperate land and almost any natural resource needed. They also started with a high-immigrant and relatively educated populati…

Russia has even more natural resources. Doesn't seem to help.

> if you dropped (say) the American Founders in 1917 Moscow or 1948 Peking, would they do any better?

Absolutely. See Hong Kong, Japan & Germany after WW2, Chile does better when they go free market, does worse when they veer back left, etc. South American countries have vast resources, but little prosperity.

US immigration consisted of people in abject poverty, who arrived illiterate with nothing but a suitcase.

Re: The anti-inflation pivot of 2022

#279

Post by imtringued »

FormerBandmate wrote: post #75
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…

When interest rates are negative it's inherently inflationary. It won't destroy the universe but it encourages people and businesses to borrow to get additional resources (the deteriorating economic conditions right now make that a very bad idea, but in general this is true)

>When interest rates are negative it's inherently inflationary.

Is this supposed to be some kind of joke? When you have 3% deflation then a -3% negative rate just sets real returns back to 0% like one would expect in a functioning market.

Also, a negative interest rate on cash allows the abolishment of inflation as central banks no longer need to target a positive inflation rate and can instead do price level targeting which is the complete destruction of the concept of inflation itself.

Lower interest payments mean most of the payments go towards the principal which means the money supply shrinks given a sufficient debt brake on government spending.

Negative rates allow 100% reserve requirements to function and mitigate almost all the problems with the loanable funds model which means the central bank doesn't have to control the interest rate anymore.

If anything it is the opposite, if interest rates exceed returns in the real economy, the government has to borrow and spend to stimulate the economy until there is enough inflation to pay the interest rates expected of it.

Re: The anti-inflation pivot of 2022

#280

Post by WalterBright »

SantalBlush wrote: post #260
WalterBright wrote: post #210

Earlier quoted context omitted.

The US is a fine example, especially the first century.

It's never worth discussing political economy with die-hard free market types, because the they claim the US is a free market when it suits them, then deny it's a free market (calling it "crony capitalism", for example) if you point out legitimate flaws in the economic system. Not to mention, the notion that the US was a free market at any point in its history is unequivocally false, and anyone who thinks a system th…

The US was never a 100% free market. But it was pretty close, and the beauty of a free market is the closer it is, the better it works.

> anyone who thinks a system that observes slavery qualifies as a free market should be embarrassed.

I usually say "excluding the slave south". Nevertheless, let's compare the slave south with the free north. The free north economically buried the slave south, which was a major cause of the southern rebellion. They wanted to protect their economy from the depredations of free labor.

The south lost the war because the north buried them with arms and supplies and trains and everything needed in plentiful supply to destroy the southern barefoot armies.

A similar thing happened in both WW1 and WW2. The American free market decided the fate of Germany and Japan the day the US entered the war, because Germany and Japan simply were overwhelmed. The US supplied not only themselves, but supplied Britain, France, and Russia, and still buried Japan with overwhelming endless supplies of everything the military wanted.

The Japanese understood this (Hitler didn't), and tried to win WW2 with one stroke (Pearl Harbor). When that failed, they put everything on the line at Midway. The carriers were sunk, their best pilots were killed, the planes were lost, and Japan could not replace them, and everything went downhill for them from there. The US lost carriers and airplanes and just built lots more.

Hitler lost WW2 the day he declared war on the US, in probably the stupidest military move in history. You can't win against a free market country unless yours is free market, too.

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