I guess nobody remembers the Jimmy Carter era? "Stag-flation" (Inflation and no growth), 16% interest rates on mortgages, the "misery index" in the news every day?
Or Japan.
In Fed and Out, Many Now Think Inflation Helps
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Re: In Fed and Out, Many Now Think Inflation Helps
#12If the value of the dollar buys less stuff, that is only good for the economy if the economy benefits from this. While that may be a "well-duh" statement it is counter intuitive in cases where it also means that it means that "Stuff" becomes more expensive than "Labor". Often inflation means more people do things because it becomes cheaper to do things that are labor intense than it is to do things that are material…
Well, deflation sounds like it would be good for anyone with a positive net worth, but the empirics are awful.
Re: In Fed and Out, Many Now Think Inflation Helps
#13I guess nobody remembers the Jimmy Carter era? "Stag-flation" (Inflation and no growth), 16% interest rates on mortgages, the "misery index" in the news every day?
What you are describing is exactly why Keynesian economics fell out of favor in the first place. For a time it was thought that the business cycle was a solved problem and only a historical memory. Oops.
Re: In Fed and Out, Many Now Think Inflation Helps
#14Inflation is a tax. Its the result of somebody creating money from nothing (usually it's the government).
Also, it's a great way for an employer to lower your salary by actually increasing it, by doing it at a lower rate than inflation.
My country has a 25% inflation rate, that's going on for the last 4 years. Not pretty.
Re: In Fed and Out, Many Now Think Inflation Helps
#15Given 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.…
Your theory lacks predictive power.
There is huge debate about what inflation should be, and all you can say is "all the bad guys like inflation". The argument for inflation is very old, and goes back to Milton Friedman at least (who was no Keynesian).
Re: In Fed and Out, Many Now Think Inflation Helps
#16Inflation is a tax. Its the result of somebody creating money from nothing (usually it's the government). Also, it's a great way for an employer to lower your salary by actually increasing it, by doing it at a lower rate than inflation. My country has a 25% inflation rate, that's going on for the last 4 years. Not pretty.
It is a tax. It actually occurs the moment anyone takes out a loan in a fractional reserve system. The money is created from nothing at that moment. Government just tends to borrow huge sums of money through this mechanism.
Re: In Fed and Out, Many Now Think Inflation Helps
#17If the value of the dollar buys less stuff, that is only good for the economy if the economy benefits from this. While that may be a "well-duh" statement it is counter intuitive in cases where it also means that it means that "Stuff" becomes more expensive than "Labor". Often inflation means more people do things because it becomes cheaper to do things that are labor intense than it is to do things that are material…
Well, deflation sounds like it would be good for anyone with a positive net worth, but the empirics are awful.
a small amount of inflation (2-3%) is generally seen as good and the target of reserve banks around the world... you think they have this target because inflation is BAD?
inflation encourages investment (better invest to beat inflation)
deflation is bad unless you already have a lot of money. it discourages investment (why invest? i can just sit here and the value of my money goes up)
you can call inflation bad, but it is still better than the alternatives.
Re: In Fed and Out, Many Now Think Inflation Helps
#18"Rising prices help companies increase profits" I don't see how that could be true. If prices are rising, all of a company's expenses rise along with their revenues: raw materials, salaries, benefits, rents, etc. (Unless the company wants to screw their employees and give them raises that are less than the rate of inflation.) Inflation does benefit debtors, the biggest being the U.S. government: they can repay their…
Exactly. Inflation is a painless (for the government) way out of the debt problem the government itself has created. That's why they favor it, nobody has to make any hard choices, and the middle and lower income families get screwed, again, because everything now costs more.
Re: In Fed and Out, Many Now Think Inflation Helps
#19Given 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.…
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.
Re: In Fed and Out, Many Now Think Inflation Helps
#20Given 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
I can't tell if you're being sarcastic, but the Fed has three mandates [1], one of which is to stabilize prices:
"maximum employment, stable prices, and moderate long-term interest rates."