Saturday, April 18, 2009
Mankiw Calls for Inflation
I don't know what other evidence people need to realize that the dollar is doomed. Now in addition to Paul Krugman, we have "right wing" Greg Mankiw urging the Fed to promise us inflation. (HT2EPJ)
This requires a full-length Mises.org treatment, especially the "clever" idea of randomly destroying 10% of the currency. ("Huh? What kind of straw man argument is that, Murphy?!" Check it out, my friend.)
For now, let me just complain about our culture's utter inability to believe that government officials--and yes Bernanke is a government official--might be wrong or lying.
Consider this: Mankiw is saying that Bernanke ought to commit to inflation in order to fix the economy. Well what the HECK do you call this, Prof. Mankiw?!?!?!
Does Bernanke have to actually utter the words, "We will have massive CPI increases" in order for it to be true? Does he need to preface it with "Simon says"?
This requires a full-length Mises.org treatment, especially the "clever" idea of randomly destroying 10% of the currency. ("Huh? What kind of straw man argument is that, Murphy?!" Check it out, my friend.)
For now, let me just complain about our culture's utter inability to believe that government officials--and yes Bernanke is a government official--might be wrong or lying.
Consider this: Mankiw is saying that Bernanke ought to commit to inflation in order to fix the economy. Well what the HECK do you call this, Prof. Mankiw?!?!?!
Does Bernanke have to actually utter the words, "We will have massive CPI increases" in order for it to be true? Does he need to preface it with "Simon says"?
Comments:
Well, I will play Devil's Advocate and put on my inflationists hat.
Clearly, that curve isn't steep enough.:~)
Clearly, that curve isn't steep enough.:~)
# posted by 
: April 18, 2009 10:01 PM
: April 18, 2009 10:01 PM
Bob, as an early buyer of your latest book, I feel I deserve some free advice :)
1. Do you think it makes sense to buy gold now?
(In particular I have seen some gold mutual funds with expenses ranging between 2.5% and 3.0 %, which seems a bit high. I live in Italy so I do not have access to better funds. )
2. For curiosity... why gold? Does economic theory not teach that any real good would be ok as shelter from inflation? (I seem to recall to have read that stocks too provide shelter from inflation, but bonds do not).
3. Do you think it makes sense to buy gold for who lives in Europe?
Thank you :)
1. Do you think it makes sense to buy gold now?
(In particular I have seen some gold mutual funds with expenses ranging between 2.5% and 3.0 %, which seems a bit high. I live in Italy so I do not have access to better funds. )
2. For curiosity... why gold? Does economic theory not teach that any real good would be ok as shelter from inflation? (I seem to recall to have read that stocks too provide shelter from inflation, but bonds do not).
3. Do you think it makes sense to buy gold for who lives in Europe?
Thank you :)
Maurizio,
You're right, I am not saying that gold is necessarily a better investment than, say, silver or even platinum.
If we merely had to worry about inflation, then stocks would also work too. But at least in the US, the government is doing all kinds of things to destroy profitability.
I am not saying you should shift all of your wealth into a gold fund, rather I am saying you should (ideally) have a few months' worth of an austerity budget in gold and silver coins that you will be able to easily sell in your city. It's analogous to having a bunch of bottled water on hand in case the utility service gets interrupted for a couple months.
You're right, I am not saying that gold is necessarily a better investment than, say, silver or even platinum.
If we merely had to worry about inflation, then stocks would also work too. But at least in the US, the government is doing all kinds of things to destroy profitability.
I am not saying you should shift all of your wealth into a gold fund, rather I am saying you should (ideally) have a few months' worth of an austerity budget in gold and silver coins that you will be able to easily sell in your city. It's analogous to having a bunch of bottled water on hand in case the utility service gets interrupted for a couple months.
I think the reason that gold is suggested as the premium protection from inflation is that it can function as an alternative to fiat currency (it can be used as a medium of exchange). of course, investing in commodities of any kind will provide protection against inflation, but if confidence in paper currencies collapse, gold could be a reasonable alternative to facilitate economic transactions. another thing is that it is generally a highly liquid asset anywhere in the world.
it is my personally opinion that inflation will be a problem and that although stocks will provide more protection than, say, the u.s. dollar, they will still be in a real (while possibly not nominal) bear market.
it is my personally opinion that inflation will be a problem and that although stocks will provide more protection than, say, the u.s. dollar, they will still be in a real (while possibly not nominal) bear market.
Bob: You should have titled this post, "No thank you, Mankiw".
Maurizio: To add to what Bob said (and repeat his earlier advice), you shouldn't invest in gold through a mutual fund, because if gold actually does increase in value significantly, the government is likely to decide that it's getting in the way of its plans and will seize it from the mutual fund, paying you some small compensation.
Also, speaking for myself, I would recommend buying gold coins rather than gold bars because if gold actually is seized, there's a good chance there will be an exemption for "collectors", which is more likely to cover coins than bars.
Maurizio: To add to what Bob said (and repeat his earlier advice), you shouldn't invest in gold through a mutual fund, because if gold actually does increase in value significantly, the government is likely to decide that it's getting in the way of its plans and will seize it from the mutual fund, paying you some small compensation.
Also, speaking for myself, I would recommend buying gold coins rather than gold bars because if gold actually is seized, there's a good chance there will be an exemption for "collectors", which is more likely to cover coins than bars.
The funny part is how mainstream economists will get around actually calling this type of evidence on the money base "inflation." They will dance around it by (1) saying that price levels haven't responding yet (still worrying about the mystical fiat deflation) and (2) say really stupid things like "since inflation is defined as a rate of change in the price level over time, this doesn't change the long run inflationary trend." -- AS IF there is some crucial difference between a spike in price levels now or a "gradual" rate of change over the course of a longer period. It's still inflation if the everyone has to face a higher price level...You can't get around reality with nomenclature and careful definitions.
Why are ethical considerations completely ignored? Does Mankiw just not realize this is blatant theft, or is he too arrogant to care?
In my field, you need to at least give a nod to ethics... why not in macroeconomics?
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In my field, you need to at least give a nod to ethics... why not in macroeconomics?
# posted by : April 21, 2009 7:44 AM
: April 21, 2009 7:44 AM << Home
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