81–90 of 326 posts
Earlier quoted context omitted.
I have to admit Japan is an interesting case and brings up good counter points. Really wages need to go up to spark inflation on the ground floor for common items.
Krugman has a 1998 paper on Japan that's probably still relevant today, especially since more places are hitting zero rates: * https://www.brookings.edu/bpea-articles/its-baaack-japans-sl... * https://www.princeton.edu/~pkrugman/japans_trap.pdf
Earlier quoted context omitted.
The same Peter Schiff calling for runaway inflation in 2008-2009? > He has that exactly right: the central dispute is between those who see depressions as the result of inadequate demand, implying that inflation will fall and that printing money does nothing unless it boosts employment, and those who see depressions as the result of maladapation of resources or something — anyway, something on the supply side — who p…
He predicted the financial crisis. And predicting is hard, especially, if you have a "creative" government. The underlying problem was postponed, not fixed, and it got bigger in the mean time. I do not agree with him on everything, but he has many apt observations and convincing explanations. And at least he looks at fundamental mechanisms, which I like to interpret as a hard reality. I believe we now live in a soft…
* https://en.wikipedia.org/wiki/Liquidity_trap
It's what Keynesians (like Krugman) generally follow, and they've been right to date. Krugman for one has been writing about this since (at least) 1998 when Japan entered this situation:
* https://www.brookings.edu/bpea-articles/its-baaack-japans-sl...
* Same paper: https://www.princeton.edu/~pkrugman/japans_trap.pdf
The paper is probably still relevant today, especially since more places are hitting zero. Krugman has made better predictions than some trillion dollar asset managers:
* https://www.businessinsider.com/this-was-the-bill-gross-blun...
* https://www.salon.com/2014/10/03/paul_krugman_schools_the_de...
* https://delong.typepad.com/delong_long_form/2014/10/pimco-ho...
I started reading Krugman's weblog around 2009, and AFAICT, everyone who bet/predicted against Keynesian economics in the intervening years has generally been wrong (or at least more-wrong, even if K hasn't been spot-on).
Ray Dailo has been thinking about this idea for most of his life. He has had the resources and status to access any scholar on the topic he would like. Smart and motivated to understand the answer, he has written a book about this topic that is coming out soon, but is also available in full on-line for free[1]. I'm half-way through and it is very good so far. [1] https://www.principles.com/the-changing-world-order/#i…
> He has had the resources and status to access any scholar on the topic he would like. So did Bill Gross of PIMCO, one of the largest fixed-income (bond) management firms in the world (AUM: $1.9T): * https://en.wikipedia.org/wiki/PIMCO He bet that interest rates would rise in 2011 after QE(2). Keynesian macroeconomists like Krugman said they wouldn't. Krugam was right: * https://www.businessinsider.com/this-was-the-…
Their full time job is largely to understand and anticipate Central Bank policy.
Earlier quoted context omitted.
Asset price increases and inflation are entirely different things. The former represents growth, the latter is a dilution (sort of "good" vs. "bad", but not really, economics is complicated, yada yada). Education costs are indeed part of inflation, as are car prices. And yes, those are rising, but they're being offset on balance by other things (phones, say) getting cheaper. Look, inflation indexes are complicated an…
Yes my underwear is going to offset the rising prices of homes, education, healthcare, etc. Also even your example is incorrect, the iphone price keeps rising at a healthy clip. They can now be $1300.
The iPhone (1) was introduced in 2007 and cost US$ 600 for the 8 GB model. What were its capabilities in 2007?
* https://en.wikipedia.org/wiki/IPhone_(1st_generation)
What, for $600, can you get now? And what are the capabilities of a $600 smartphone in 2021?
An iPhone 12 mini is $700 [1], an iPhone 11 [2] 64 GB is $600, and a 128 GB for $650.
The same number of dollars gets you much more in regards to technology in the past. That's not nothing.
The answer is you can borrow unlimited debt if you pin interest rates at 0% (though eventually you will lose control at the back end of the yield curve without heavy govt intervention). What happens to your currency in that process is debasement/hyperinflation.
> What happens to your currency in that process is debasement/hyperinflation. Not if the vast majority of population lives paycheck to paycheck and food and basic necessities production are not disrupted. In that/our case, you simply get the inflation of the assets the "elites" who have disposable income choose to spend that disposable income("investing" in real-estate, bitcoin).
> Remember that some people thought that government borrowing ... facilitated by quantitative easing (Fed bond-buying) ... was going to lead to substantial inflation. But it didn’t. Every time someone says "but where's the inflation" I sigh. Look at literally any financial asset, SP500, stocks, real estate, even bond values (the inverse of interest rates). There is your inflation. Maybe we like asset inflation, maybe…
"Official" inflation is based on the CPI, consumer price index, which is based on a basket of goods, not including CoL things like housing. edit: I stand corrected. It does include housing, but this "Owners' equivalent rent of residences" counts the cost of a Mortgage, which of course is majorly impacted by interest rates. It doesn't include the value of the housing market directly, though. Does anyone actually think…
What the CPI estimates is the price of shelter, by surveying renters how much rent they pay, and house owners how much rent they think their house would rent for.
It's a bit frustrating that there are so many misunderstandings around this topic, while the BLS has clear and extensive explanations on their website.
https://www.bls.gov/opub/hom/cpi/
https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...
This misconception needs to die. The government doesn't borrow money. The government doesn't need your money. The government prints money. They could stop accepting taxes tomorrow and still be able to keep spending. They print the money. Treasuries exist as an accounting fantasy for people to believe the government needs to borrow, they don't. Any treasuries outstanding today basically just represent dollars to be pr…
Another misconception that has to die is that governments can get away with printing money indefinitely. The concept itself is not new: Roman Empire also did the same, shortly before its fall. Soviet block countries did that before 1989. Venezuela and Zimbabwe also did it. See the common theme here?
With the Roman Empire, I'm guessing other problems caused it to fall; it didn't fall because of money printing, but it was printing money because it was falling.
The more abstract question of 'how much' is of course infinite when there exists a compliant central bank that will 'buy' the debt and issue currency in return. The real world value of that currency would be expected to approach zero, in the limit. TANSTAAFL
I can't help feeling that the question is ill-posed. It's not "how much", but "why" that matters. Think about it: Would you borrow $10,000 to a friend who opens a dentist with a solid business plan? Probably yes. Would you borrow $1000 to a friend to cover an existing debt? Probably not, or, if you are very generous, you would gift them the money. If a government can demonstrate that it borrows money to invest in the…
Title somewhat misleading as the actual question asked in the post was 'safely borrow.' The more abstract question of 'how much' is of course infinite when there exists a compliant central bank that will 'buy' the debt and issue currency in return. The real world value of that currency would be expected to approach zero, in the limit. TANSTAAFL