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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

#161

Post by bermanoid »

mistermann wrote: post #98
cotsuka wrote: post #78

Earlier quoted context omitted.

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…

You can make models all day, and I think it should be done in the pursuit of knowledge, but to imply these models can accurately predict behavior is a bit naive IMHO. Economics in a globally integrated economy are of similar complexity as weather, if not worse. Keynesians have been driving the bus for quite some time now, if they have it all figured out as many seem to imply, why do so many things (deficits and debt…

Austrians, for the most part, make no testable predictions. They essentially reject math as a tool, and insist that unless you implement their preferred systems 100%, then they won't work at all, and then explain all observed failures by claiming that it would have worked better if things had been pushed further.

Even if they're on to something, they don't give the unconvinced very much to work with. Most of their arguments push every economic dial in a single direction no matter the current state of the world, which says to me that there's no way that approach could lead to a reasonably balanced economy.

I think econ is messed up in all sorts of ways, but I don't think the Austrian school has the answers, they strike me as far too religious and unbalanced to be believable, and quite frankly I see way too many words and far too little math coming out of their camp to buy any of it. Every other science leans on math to great benefit, I refuse to believe that econ is somehow the one exception where it's not useful, especially since at its core it's about optimizing certain numbers.

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

#162

Post by gaius »

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?

Here in the UK, Gordon Brown claims he foresaw it all. Mysteriously tho', as the Chancellor of the Exchequer of the then-4th-largest economy in the world, he did nothing whatsoever about it.

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

#163

Post by gaius »

nazgulnarsil wrote: post #152
dpatru wrote: post #130

Earlier quoted context omitted.

Counterfeiting money is evil not because it hurts the counterfeiter, but because it takes away wealth from everybody else. Whatever the counterfeiter buys that is in limited supply, the rest of the people have to do without. To the extent that debt resembles counterfeiting, it is evil. Here's an example: suppose you want to buy a prime waterfront property which is offered for auction. You've worked hard, saved your m…

So the seller of the home deserves to sell for a lower a price because you want to ban certain types of private contracts between the seller, the bank, and joe?

The seller of the house can choose between X dollars, or more dollars that are worth less in purchasing power anyway. The price changes but the value is the same. You can't spend dollars for which there are no goods, nor can you sell goods for which there are no corresponding dollars, so price and value always converge.

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

#164

Post by dangrossman »

judk wrote: post #131
jayfuerstenberg wrote: post #122

Earlier quoted context omitted.

http://en.wikipedia.org/wiki/Peter_Schiff He saw it in 2007

That was immediately before the crash.

The book he wrote about the coming crash was published by Wiley in February 2007, which means he must've been formed the idea some years before to have written it early enough for that publication date. A quick Google search turned up CNBC interviews with him in 2005 and 2006 about the topic.

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

#165

Post by davidw »

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?

They're journalists more than economists, but the folks at The Economist were talking about a housing bubble in the US and elsewhere.

Also, this kind of article adds little to this site: it's basically round 4348388282998271193 of "mainstream economics vs Austrians and other heterodox schools of thought" on the internet. It's all been said.

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

#167

Post by eli_gottlieb »

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…

>Finally, most of these arguments are disputed by the so-called "Austrian school" of economics. It's important to recognize that this school is much, much, much more popular with laymen than with professional economists. This doesn't mean that the school's arguments are wrong, but 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.

It doesn't automatically mean the Austrian School arguments are wrong, but it does make it much more probable that they are wrong. When trained and educated economists think something is bullshit economics, we should consider it to probably be bullshit.

So why don't we? Because for so many of "us" on Hacker News, deflation is a class interest: "we" hold "our" assets mostly in cash and land. An Austrian-style neofeudal economy thus suits "our" portfolios.

Personally, this reminds me that I need to call Vanguard about my actual investments today. Fuck cash and land, I want my wealth in something productive, and a productive investment will have more to gain from inflation eroding away private debt and a steady pick-up in demand from a stronger labor market than from Austrian-style deflation.

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

#169

Post by eli_gottlieb »

clarky07 wrote: post #155
gruseom wrote: post #146

Earlier quoted context omitted.

Dean Baker called the housing bubble as early as 2002: http://www.cepr.net/index.php/reports/the-run-up-in-home-pri... By 2004 he even sponsored a $1000 contest for whoever could make a good case that there wasn't a bubble: http://www.nytimes.com/2004/01/18/business/personal-business...

That means he was at least partly if not mostly wrong. As far as markets go, you have to be right in both direction and timing. He was 4-5 years early, and frankly 2002 prices weren't that insane. Especially compared to 2006-2007 prices. He was really early, and if bet against housing at that point, he likely went bankrupt before the crash. That's really neither here nor there though. What's the famous saying, someth…

>He was 4-5 years early, and frankly 2002 prices weren't that insane.

Define "weren't that insane", please. Were they sane when compared with the incomes being leveraged to buy them? Compared with some shortage of supply that would naturally push prices up?

Because the story I've heard is that the mid-late 2000s housing bubble was just the peak of a vast secular inflation in real-estate values that had little to no tie to the actual feasibility of housing purchases for real families, and was fuelled largely by speculative lending.

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

#170

Post by nhaehnle »

ra wrote: post #59
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…

My (layman's) understanding of it is that central banks seek to keep inflation within a target range; in Australia this is between 2 and 3 percent [1]. The primary tool to manage inflation is interest rates, however interest rate movements also have other effects, positive and negative, so it's not as simple as turning on a tap. It's important not to let inflation get too high because that makes new investment unattr…

For your last point, I do wonder. How does high inflation make investment unattractive? It should do the opposite, since holding cash is very unattractive under high inflation.

As to the cost of living going up: in nominal terms, sure. But it depends on the type of inflation. Usually wages grow to keep up with inflation, so in the end, it's a wash.

I'm sure there are costs associated with extremely high inflation, e.g. restaurants having to print new menus all the time. However, I'm not aware of any serious work being done to quantify that effect. It seems that even at rates of inflation that we would consider very high - let's say 15% anually - those costs would still be irrelevant.

Volatile inflation would probably hurt more than merely high inflation as long as the latter is stable.

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