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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

#171

Post by eli_gottlieb »

7Figures2Commas wrote: post #107
cotsuka wrote: post #60

Earlier quoted context omitted.

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 pu…

And strangely enough, nobody outside of neoliberal bank-interest lobbyists has actually wanted quantitative easing. Keynesians want the labor market and consumer demand propped up, social democrats want infrastructure investment towards those ends, and radicals are looking for a debt jubilee.

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

#172

Post by nhaehnle »

clarky07 wrote: post #148
acslater00 wrote: post #116

I'm happy to see this article written, and it will hopefully start to change the attitude of evaluating central bank actions through the lens of 'high inflation bad, low inflation good'. This whole debate is an unfortunate example of what's called "Partial Equilibrium Reasoning" (as opposed to "General Equilibrium Reasoning"). All things being equal, higher inflation is bad. That's clear. But all things aren't equal,…

>This dynamic is why the Fed needs to break the attitude that its job is to keep inflation as low as possible. I'm not sure where you've been the last 5 years, but the current Fed has not in any way had a policy of trying to keep inflation low. Not in the slightest. Bernanke is extraordinarily paranoid about deflation and as such has had 0 interest rates since the crisis started. In addition to that, they are printin…

How can you argue that doctors care about avoiding high blood pressure? I don't know where you've been, but I've been watching those doctors here trying to help a bleeding patient, and not once have they done anything to prevent high blood pressure. They've even given him transfusions to increase his blood pressure. That's the exact opposite of trying to keep blood pressure low.

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

#173

Post by nhaehnle »

jswinghammer wrote: post #35
jellicle wrote: post #28

Earlier quoted context omitted.

And even a minimal knowledge of history would suggest that the Federal Reserve works very hard to minimize inflation, even at the expense of high unemployment. Poster's statement is along the lines of "Given that the entire point of firefighters is to promote fires". It's nonsense.

So much to learn, you still have. A most basic study of the Federal Reserve would lead you to the exact opposite conclusion. They try to keep interest rates as loan as possible until price inflation gets out of control. I spend a lot of time caring about this issue and all the hype about what the Federal Reserve cares about is just that-hype. They want to inflate the monetary supply all day every day and that's why t…

Low interest rates is exactly what you want in a normal, non-inflationary environment. It encourages lending for investment into projects that allows a rise in economic activity.

The only time you don't want low interest rates is when an excessive amount of loans fuels demand-pull inflation. (Though, interestingly, high interest rates can also fuel inflation via wealth effects. Overall, I tend to think interest rates are the wrong lever, and fiscal policy should be used at all times, but that's a whole other can of issues.)

So the behavior is describe is exactly what is reasonable.

Now, the whole QE thing is obviously pushing on a string. The zero lower bound means it's not going to help economic activity. QE is like going to a witch doctor because all the people who could really help - in this case, the people in control of fiscal policy - can't get their heads out of their proverbial asses.

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

#174

Post by nhaehnle »

jswinghammer wrote: post #99
snowwrestler wrote: post #75

Earlier quoted context omitted.

Inflation is only theft if you insist on storing value in cash--a financial instrument that is not designed to hold value. A major reason to manage for low, consistent inflation is to train people to put their money into real assets.

No it isn't. It is theft if you are making wages at X price with the understanding that X bought you Y goods in return. If inflation drives up the costs for Y goods so you get Y-Z goods in return then suddenly you got less than you intended for your labor. In a free market prices generally fall. In the current market they rise at random rates across sectors. Currently we have people spending a lot of time figuring ou…

> In a free market prices generally fall.

[citation needed]

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

#175

Post by nhaehnle »

dpatru wrote: post #130
nazgulnarsil wrote: post #37

Earlier quoted context omitted.

Thinking that loans are evil is where misean ideology really breaks down. If you give me a piece of paper that says you will pay me X dollars a month for Y months, that piece of paper has value depending on how likely you are to honor the obligation.

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…

I would rather not use terms like "evil" in a discussion of policy.

With that out of the way, counterfeiting does not necessarily take wealth away from anybody. In a depressed economy, it could just activate unused resources and stimulate production so that the overall amount of wealth increases by at least the amount represented by the counterfeit money.

That said, counterfeiting is still wrong for the same reason it is wrong for you to hack into your bank's computer systems to increase the amount of money in your account: Society has agreed upon a set of rules that underlie the distribution system of our economy, and both the hacking and the counterfeiting go against these rules.

Addendum: In a way, forbidding counterfeiting is a slippery-slope situation. A single act of counterfeiting does not necessarily take wealth away from anybody. But if counterfeiting were allowed, the whole system could not possibly work.

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

#176

Post by dwaltrip »

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…

Economics is not a science. You can't test hypotheses rigorously. Which makes these debates 100x harder.

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

#177

Post by Retric »

eli_gottlieb wrote: post #167
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 con…

Inflation does not hurt land values only cash and cash equivalents like debt and fixed income annuity's.

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

#178

Post by nullc »

Mikeb85 wrote: post #25

Inflation encourages spending, rewards investment, and discourages hoarding of cash. Inflation leads to all the positive outcomes that economists want. Not to mention, inflation is necessary in a society with a growing population, since there needs to be enough currency to spread amongst the population, otherwise it will be held in a finite amount of hands, and increase inequality.

> and increase inequality. Because quantitative easing is totally pro-equality?

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

#179

Post by nullc »

nerfhammer wrote: post #120
jayfuerstenberg wrote: post #66

Earlier quoted context omitted.

I would invite you to look at gold prices over the last 20 years. I only wish I could go back in time and tell my 20 year old self to buy lots of it back when it was in the $300/toz range. Right now it's sitting pretty at $1351/toz.

Just don't go too far and look at gold prices from 35 years ago. http://static.seekingalpha.com/uploads/2010/3/19/saupload_go...

I don't really know much about gold, but that chart is a little questionable: from 1934 to ~1975 private ownership or trade of gold was restricted by law in the US.

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

#180

Post by nl »

eli_gottlieb wrote: post #167
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 con…

Upvoted, but with a note that you are wrong about deflation being good for land owners. Generally speaking land is a good hedge against inflation.
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