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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

#191

Post by eli_gottlieb »

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.

If we take the far-right Austrian definition of "free market" (meaning: a market in which the only functions of government are property and contract enforcement) then we have zero empirical evidence for much anything about free markets.

They've never existed.

Further, we don't even have solid evidence that hypothetical markets of that kind would be Pareto-optimal. They serve literally no function except that of ideology.

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

#192

Post by eli_gottlieb »

BrandonMarc wrote: post #147
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.

Sure, if you have some money to start with. If you're at the lower rungs of the ladder, inflation hurts you even worse.

Right now, at least in the United States, if you belong to, IIRC, the bottom 75% of the population by net worth, then you are in fact a net debtor, and inflation helps you more than it hurts.

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

#193

Post by logicchains »

nhaehnle wrote: post #174
jswinghammer wrote: post #99

Earlier quoted context omitted.

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]

If you have X amount of money and Y goods/service, the ratio of money per unit of good/service is X/Y. Economic growth increases the amount of goods/services provided; tractors dig more holes than shovels, and so on. This means Y increases, and thus X/Y must decrease: the cost per unit of good/service decreases.

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

#194

Post by eli_gottlieb »

jswinghammer wrote: post #29
dwrtz wrote: post #19

Earlier quoted context omitted.

Higher inflation also means that it's cheaper for the U.S. government to borrow money. In fact, higher inflation is good for anyone who borrows money (people with mortgages, student loans, etc.) because they're effectively paying back less than they borrowed.

Except that the risk is asymmetric in that the bank gets bailed out if you can't pay and you don't. They loaned out the phony money and you paid it back with your labor.

Which is a problem of politics, not economics. There's a broad agreement that the bank bailouts should not have happened across most of the actual political spectrum. Only the vulgar neoliberals serving the interests of the capitalist class in government actually want to print money as bailout loans to banks, and yet Austrian "economists" and their Believers pretend that's the only alternative to a deflationary gold standard and total privatization of everything ever.

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

#195

Post by eli_gottlieb »

jayfuerstenberg wrote: post #33
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.

You have a lot of learning to do my friend. Inflation steals purchasing power away from people who contributed their labor to the market in exchange for the money they received. The cash hoarding that inflation is supposed to solve continues because people want to hold on to their money in risky times. Smart people are moving away from cash assets and into precious metals and real estate. These are tangible things, u…

>The US dollar in particular has lost more than 90% of its value since abandoning the gold standard in the early 70s.

The supply and demand for gold have essentially nothing to do with real economic value.

Now, admittedly, you've drawn near to an actual critique of our current monetary system, but that would require you to critique capitalism itself, too. Here, let me do that for you:

Capitalism optimizes for the production and accumulation of capital. Therefore, the monetary base does actually matter, because money is the most liquid form of capital. Thus, capitalism will optimize society for the production and accumulation of money, however money is defined. Define money as some commodity, like gold, and you'll get people sailing across the world to rig up mining infrastructure and haul back a rock of zero ultimate worth, simply because that's the optimization criterion of the economy they live in. Admittedly, all that hauling and sailing does actually require getting something done, so you do see real economic development under such a system, but the same thing can be enforced with fiat currency via exchange-rate controls and the rest of the Bretton-Woods package (which was, in fact, deliberately concocted to make trade count more than finance!).

Whereas, in contrast, if you set the definition of money as being debt, your capitalist economy will become a debt-maximizing machine. Which is what we see now, since the early '70s when the capital controls, exchange-rate controls, trade regime, and gold standard of Bretton-Woods were all abandoned.

There.

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

#196

Post by jswinghammer »

jayfuerstenberg wrote: post #122
jswinghammer wrote: post #109

Earlier quoted context omitted.

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.

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

He's an Austrian economist and yes he like all of them saw this coming in 2001 and maybe earlier.

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

#197

Post by jswinghammer »

eli_gottlieb wrote: post #191
jswinghammer wrote: post #99

Earlier quoted context omitted.

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. If we take the far-right Austrian definition of "free market" (meaning: a market in which the only functions of government are property and contract enforcement) then we have zero empirical evidence for much anything about free markets. They've never existed. Further, we don't even have solid evidence that hypothetical markets of that kind would be Pareto-optimal. They serve l…

19th century America is close enough and the results astounded the entire world.

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

#198

Post by jswinghammer »

eli_gottlieb wrote: post #194
jswinghammer wrote: post #29

Earlier quoted context omitted.

Except that the risk is asymmetric in that the bank gets bailed out if you can't pay and you don't. They loaned out the phony money and you paid it back with your labor.

Which is a problem of politics, not economics. There's a broad agreement that the bank bailouts should not have happened across most of the actual political spectrum. Only the vulgar neoliberals serving the interests of the capitalist class in government actually want to print money as bailout loans to banks, and yet Austrian "economists" and their Believers pretend that's the only alternative to a deflationary gold…

Evidence suggests that it they are correct but the part you are missing is that the whole point of the system is to bail out the large banks when their bets go bad. All in the name of the people. Whoever they ever are.

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

#199

Post by [deleted] »

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…

[deleted]

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

#200

Post by kriro »

I've always wondered about the relation of inflation and innovation. As long as a society is sufficiently innovative inflation is not a big deal because innovation tends to outpace it. This is especially interesting if you measure inflation in relation to some basket of goods that contain a good chunk of "hightech" items. But it's also relevant for more traditional items like bread due to improvements in agriculture tech etc. The interesting question is of course if a policy that tends to favour inflation also tends to favour innovation. It should because (artificially) low interest rates should c.p. lead to more long term R&D type projects being funded. (all imo, I'm not an economist)

I am aware that the Austrian School gets a pretty bad rep these days but as a curious citizen of the world I have read a couple of Austrian books (Human Action, Competition and Entrepreneurship) and even if you disagree on the content I find them very pleasant...aesthetically if that makes any sense.

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