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In Fed and Out, Many Now Think Inflation Helps

nytimes.com

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Re: In Fed and Out, Many Now Think Inflation Helps

#101

Post by jswinghammer »

jowiar wrote: post #79
BrandonMarc wrote: post #67

Earlier quoted context omitted.

Exactly. Continuous inflation is frankly the only plan the government has to deal with the national debt. Borrow now, and in the future when your currency is weaker and less valuable, the amount borrowed will seem smaller (and in pragmatic terms will be by that point). Of course it's destructive to the average person / taxpayer, but who cares about them? Nobody does who's in charge, that's for sure.

I think you may have this flipped. Inflation is, more than anything else, a tax on cash (and last time I checked, your average person didn't have a whole lot of cash on hand). Practically speaking, it helps debtors at the expense of creditors by shrinking the value of liabilities on the books. The debt hysteria we see isn't because the elite don't care enough about inflation - it's because the costs of it fall more h…

Most of the elites spend their money on buying more influence. They hold debt instead of cash if they hold anything at all outside of whatever they consider to be balanced portfolio.

Re: In Fed and Out, Many Now Think Inflation Helps

#102

Post by [deleted] »

TreyS wrote: post #96
ekianjo wrote: post #80

Earlier quoted context omitted.

Academics being funded by Keynesian politicians has surely nothing to do with it.

Anecdotal but I would imagine it's similar in reputable state schools in red states: Texas has very few Keynesians yet economics professors at the University of Texas are overwhelmingly Keynesian.

[deleted]

Re: In Fed and Out, Many Now Think Inflation Helps

#103

Post by jswinghammer »

TreyS wrote: post #92
enoch_r wrote: post #53

Absolutely no discussion of inflation is complete without recognition of the fact that inflation and inflation expectations are at historically low levels [1] right now. Economists aren't arguing that we should inflate our way out of debt--they are arguing that we should return to the historical norm. Of course, it's possible that these economists are secretly just pushing inflation as the "hidden tax" we're all up i…

"it does raise questions about why the school's arguments which seem so utterly convincing to so many people, don't manage to gain many converts among people who research the subject professionally." I think it would be easier to convince people with no physics knowledge that a bowling ball falls faster than a golf ball. Intuitively, it seems that bowling ball should fall faster. Austrian economics seems to follow a…

Most Austrians understand mainstream economic theory much better than mainstream economists understand Austrian theories. Evidence being Krugman's disastrous attempts to discredit Austrian Business Cycle Theory. It isn't a perfect theory but Krugman can't even explain it let alone criticize it.

Re: In Fed and Out, Many Now Think Inflation Helps

#104

Post by jswinghammer »

TreyS wrote: post #96
ekianjo wrote: post #80

Earlier quoted context omitted.

Academics being funded by Keynesian politicians has surely nothing to do with it.

Anecdotal but I would imagine it's similar in reputable state schools in red states: Texas has very few Keynesians yet economics professors at the University of Texas are overwhelmingly Keynesian.

Virtually everyone you encounter in the government subscribes to Keynesian economics to the degree that they understand anything at all about economics. When economics is explained in the media at all it is through the lens of Keynesian economics.

Re: In Fed and Out, Many Now Think Inflation Helps

#105

Post by jswinghammer »

cotsuka wrote: post #78
mistermann wrote: post #72

Earlier quoted context omitted.

I'm not sure how this casts doubt on the Austrians or supports the Keynesians, or vice versa.

I'm saying calling something Austrian or Keynesian is inherently political. We should come up with economic models, whether they're Austrian, Keynesian, alien, or dumb, test them against data to see if they hold up, and refine until we get close. Aka, what scientists do. Great article the other day from Krugman about this very topic. Economics might be a science, but economists are not being scientists about it. http…

The basic problem is that the models are not testable in the way you think they might be. Economics is inherently a deductive discipline and anything you can think of as coming from economics that is valuable in any way came from someone's head and not from testing models. Economists get into trouble by trying to pretend they are physicists.

Re: In Fed and Out, Many Now Think Inflation Helps

#106

Post by jswinghammer »

cotsuka wrote: post #60
enoch_r wrote: post #53

Absolutely no discussion of inflation is complete without recognition of the fact that inflation and inflation expectations are at historically low levels [1] right now. Economists aren't arguing that we should inflate our way out of debt--they are arguing that we should return to the historical norm. Of course, it's possible that these economists are secretly just pushing inflation as the "hidden tax" we're all up i…

Austrian school not holding much weight with academics is like wondering why creationism doesn't hold much weight with academics. Lots of things can be explained with creationism, but it doesn't mean it's right. Many Austrian economists rail against the use of quantitative models and such. But without them, how can you measure the efficacy of your policies? Faith that the policy works... But most academics like to be…

So far the predictive value of these models has been zero and Austrians tend to have a much clearer understanding of what is happening on a macro level. That's been my experience over the last decade or so. After awhile it helps to notice such things.

Re: In Fed and Out, Many Now Think Inflation Helps

#107

Post by 7Figures2Commas »

cotsuka wrote: post #60
enoch_r wrote: post #53

Absolutely no discussion of inflation is complete without recognition of the fact that inflation and inflation expectations are at historically low levels [1] right now. Economists aren't arguing that we should inflate our way out of debt--they are arguing that we should return to the historical norm. Of course, it's possible that these economists are secretly just pushing inflation as the "hidden tax" we're all up i…

Austrian school not holding much weight with academics is like wondering why creationism doesn't hold much weight with academics. Lots of things can be explained with creationism, but it doesn't mean it's right. Many Austrian economists rail against the use of quantitative models and such. But without them, how can you measure the efficacy of your policies? Faith that the policy works... But most academics like to be…

> ...the use of quantitative models and such. But without them, how can you measure the efficacy of your policies?

Here's a better question: if you measure the efficacy of your policies and find that they have not achieved the intended effect, on what would you base the extension and expansion of those policies? Faith? Insanity?

The reason I ask is that a few months ago, two senior economists at the SF and NY Feds published a letter, "How Stimulatory Are Large-Scale Asset Purchases?"[1]. Their conclusion:

"Asset purchase programs like QE2 appear to have, at best, moderate effects on economic growth and inflation."

Emphasis mine. For reference, QE2 involved $600 billion of Treasury purchases.

[1] http://www.frbsf.org/economic-research/publications/economic...

Re: In Fed and Out, Many Now Think Inflation Helps

#108

Post by jswinghammer »

GeneralMayhem wrote: post #82
BrandonMarc wrote: post #67

Earlier quoted context omitted.

Exactly. Continuous inflation is frankly the only plan the government has to deal with the national debt. Borrow now, and in the future when your currency is weaker and less valuable, the amount borrowed will seem smaller (and in pragmatic terms will be by that point). Of course it's destructive to the average person / taxpayer, but who cares about them? Nobody does who's in charge, that's for sure.

Except the average person sees the exact same benefit, ideally. It's the same platform William Jennings Bryan campaigned on way back in 1896 - expanding currency helps people who have debt. Inflation makes the past matter less. It erodes both the wealth of the super-rich and the debt of everyone else (the farmers who had to mortgage their farms in 1896; the normal family now who has a home mortgage as the norm). That…

The basic problem is that you're playing the devil's game when it comes to debt. You might think you are getting the upper hand but the house always wins. The banks always win in this scenario because they get bailed out when they lose and they collect your interest when you "win". It becomes difficult to see how this scenario helps the common man.

Re: In Fed and Out, Many Now Think Inflation Helps

#109

Post by jswinghammer »

7Figures2Commas wrote: post #100
enoch_r wrote: post #53

Absolutely no discussion of inflation is complete without recognition of the fact that inflation and inflation expectations are at historically low levels [1] right now. Economists aren't arguing that we should inflate our way out of debt--they are arguing that we should return to the historical norm. Of course, it's possible that these economists are secretly just pushing inflation as the "hidden tax" we're all up i…

Here's a question: how many "professional" economists sounded the alarm about the last bubble?

Zero unless they are rewriting history to claim they saw it 6 months to a year out when it was obvious to anyone who wasn't drunk on soaring home and equity prices.

Re: In Fed and Out, Many Now Think Inflation Helps

#110

Post by jswinghammer »

ra wrote: post #63
jswinghammer wrote: post #8

Given that the entire point of the Federal Reserve is to promote inflation it's probably good that they think it's a good idea-otherwise why do they think that they exist? The whole problem is that inflation is theft. You are basically having your property taken out from under you without realizing it. It's historically been very popular as a means of taxing the public without them realizing that's what you're doing.…

"Given that the entire point of the Federal Reserve is to promote inflation" No, that's not what they do. Too much inflation is bad, but you need a little bit. So they seek to maintain a "healthy" amount of inflation. Typically around the world this is something like 2-3%. http://en.wikipedia.org/wiki/Inflation_targeting

Real monetary expansion is much greater than 2-3% on average. The price inflation they calculate might be 2-3% but look at college or healthcare costs. That new money finds a home somewhere and I'll tell you now that that's where it ends up these days.
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