311–320 of 518 posts
Earlier quoted context omitted.
Making food more expensive is pretty much the opposite of politically viable.
About a third of all corn goes to ethanol production, so we could plant a lot less corn without impacting food production.
Earlier quoted context omitted.
Except, with higher interest rates the nominal price of housing falls relative to wages. A worker can reasonably hope to buy there way out of rents at some point in the future (assuming the price of the house is set as a multiple of it's rental equivalent cash flow discounted over time)
And the real value of debts fall, including student loan debt, housing debt and even consumer credit. I think we're going to hit a wall soon where we either need to forgive or inflate debts away. The alternative is likely to be a crushing depression and fiscal austerity that is much less than any of the downsides of inflation. If you're a largely debt free upper-mid to upper class tech person then the your personal v…
If you think inflation's impact on debt favours the poor, you have to look at the interest rates available for borrowing. Poor people get loans without collateral, so their interest rates price in inflation and then some. Wealthy people get collateralized loans at interest rates below inflation -- for an extreme example, look at how billionaires borrow against their stock holdings rather than sell stocks for cash.
Earlier quoted context omitted.
While everything you said is true: 1) 2) Treasury rates are still super low, even with high CPI inflation. It's not at all obvious interest rates will go up by much even with sustained 5-10% inflation, since society's ratio of capital to productivity is at an unprecedented level.
At this point, most of those who perform augury on the intentions of the Fed are predicting five to six 25bp interest rate increases before the end of 2023.
Keeping readjusting pricing and no knowing what a dollar is truly worth is a net loss for the people. It’s literally economics 101.
Earlier quoted context omitted.
> It's important that errors be promptly corrected, and expectations about future policy remain properly "anchored" to the right target. It would be interesting to know if inflation expectation has become unanchored in the mind of the general public, because, ultimately, inflation expectation causes inflation.
I don't think that inflation is as easy to cause without a fresh supply of money. And you know who prints fiat money.
Destroy your productive capacity => inflation.
Earlier quoted context omitted.
3 functions of money: 1) Store of value 2) Unit of account 3) Medium of exchange Go ahead and design a money that you intend to have last forever (because good design/engineering stands the test of time, right?) Tell me which tradeoffs you make.
For #1, I want increase in value over time, but don't care much about volatitlity or ease of exchange. For #2, I want low volatility (both in value and it's first derivative). For #3, I want low volatitlity in value and logistical ease of exchange. So, for #1, I want a different thing than for #2 & #3, for which I might want the same thing, since the needs are, though not identical, at least overlapping. Productive i…
Inflation is bad in the sense it punishes people that made the right decisions and saved money for their retirement. Inflation eats away at the savings they made in their working life and makes them a pauper in old age. The argument that they should have been invested fully into the market is fine for educated people. But many uneducated people save cash because they do not have access to all the financial tools that…
Earlier quoted context omitted.
The credibility I'm referring to is: when Jerome Powell says "we have the tools at our disposal to control inflation, and if it persists, we will not hesitate to use them", how much do you update your expectations of future inflation and interest rates? If statements like that start to sound like a bluff and no longer cause you to update your expectations away from high inflation and low interest rates, then the Fed…
They have a dual mandate on both employment and inflation, and have to balance.
Earlier quoted context omitted.
Yup. The kernel of truth behind Austrian theories of macroeconomics/the business cycle is that interest-rate based policy setting is inherently an unstable system. If the central bank makes policy errors that fail to stabilize the underlying target (whether inflation, nominal income, exchange rates, whatever) the whole system starts spiraling away from that unstable equilibrium point, and the subsequently needed corr…
No, they completely miss the point. The fundamental problem with money is that you can delay your spending indefinitively thereby breaking the concept of supply and demand. Imagine an economy where you are self sufficient and sell but never buy anything ( cough germany). You keep accumulating more and more money and you could in theory spend it all, thereby cause a huge amount of inflation. That is the core of the de…
> Selling and selling isn't a free market, it's not even a market.
You are not describing much of a problem. What you are asking is "What if there was an entity, that provided the rest of the world with lots of goods and services, and the only think they accepted for that is green pieces of paper".
That sounds pretty good to me. Someone never spending their green pieces of paper, is just doing the rest of the world a favor, by providing all those goods and services.
Inflation favors the debtor, while deflation favors the saver. Obviously the world's largest debtor (US govt) will consider inflation to be desirable and necessary. Otherwise it would lead to a sovereign debt crisis if there are positive real interest rates leading to a US govt default. Keep an eye on the Fed, especially before the midterm elections. The Biden administration will put an extreme amount of pressure to…
> Inflation favors the debtor, while deflation favors the saver No, deflation favors currency hoarders and lenders; the primary mechanism of saving is investment in productive assets, which deflation disfavors. > Obviously the world's largest debtor (US govt) will consider inflation to be desirable and necessary. Except it doesn't, except at a very low level; inflation in general (and energy inflation, in particular,…