27 May 2011

Even Supercore Inflation Might Not Do the Trick

Economics, Krugman 62 Comments

[UPDATE below.]

Uh oh. Days after saying that even “core CPI” (regular CPI with food and energy prices taken out) might be overstating the actual danger of inflation, such that maybe the Fed should just be looking at wage growth as the barometer of inflationary pressures, Krugman now blogs:

First, Bloomberg reports on signs that wages may be accelerating. It’s worth bearing in mind that we’re talking about modest stuff — if the employment cost index accelerates to 2 percent, that’s still just productivity growth, and hardly a sign of runaway inflation. Still, this isn’t what I expected to see, and I will be watching developments.

I do give him credit for admitting that. I should be clear that the reason I focus on “Krugman Kontradictions” is that I understand he has principles of a sort. I don’t think Krugman would consciously lie about something. No, he is clever enough, and economics is such a soft science, that he can frame things to make him right, regardless of what happens. (However, I think Krugman is aware that he’s playing a game, too. So don’t take my concessions too far here.)

* * *

More generally, a lot of people have been asking me, “Bob, can you explain why you were so wrong on your CPI predictions of the last few years?”

Well, I’m still working through the best way to think about these issues, so that’s why I haven’t given a full-blown post. I.e. I don’t want to point out the inadequacies of my prior way of thinking, until I’m comfortable that I have “learned the lesson.” (And sorry guys, I don’t think the lesson is that the MMT people are right.)

What I can say for now is that the specific mistake I made, was in thinking that other people would see the end-game as I perceived it. In other words, I am still quite confident that there is no way Bernanke’s actions “fixed” the economy, or that TARP was a good idea etc. To translate that into a falsifiable prediction (which I’ve made before but will here repeat): If the Fed’s balance sheet goes back to where it was pre-crisis (we can make it % of GDP to make it fair), and unemployment (as currently defined) goes under 6%, and we don’t have CPI (as currently defined) inflation higher than 5% over any 12-month period, there’s not some major event that could totally falsify the measures (like a war and Obama drafts everybody and imposes wage and price controls), and (just to cover myself) that situation lasts for at least a year without any hiccups in the economy (i.e. there’s not a stock market crash two months after the above conditions are met), then sure I don’t just need to tweak things a bit, I would have to question Austrian business cycle theory itself. (I realize those are strong conditions, but I don’t want to say something too flippant on a blog post.)

So because I don’t see the Fed’s huge interventions ending in anything but a combination of a bad economy and high price inflation, I thought others would come to that realization and start shorting the dollar. I thought that once we got over the year/year drop in CPI due to the sharp drop in late 2008, that people would realize inflation was the threat.

Well, that obviously has taken a lot longer than I thought. So that was my specific mistake: I thought other investors would start agreeing with my views by now, whereas I still think most of them are being incredibly optimistic.

So now it remains to be seen whether the explanation is (a) I was right, and they are wrong, and it’s just taking longer to manifest itself than I had originally thought, or (b) Krugman et al. are right, and my worldview itself is totally wrong.

UPDATE added a few hours after the original post:

It occurs to me that if Ron Paul became president and took my free advice (since I can’t accept taxpayer money, at least on net), it’s possible the above “anti-ABC” scenario would occur! So let me clarify that I am saying I find it inconceivable (given my current worldview) that we are going to sluggishly grow out of this malaise, and Bernanke will let the Fed’s balance sheet unwind naturally until we’re back to normal. That’s the kind of scenario I was trying to codify above.

In contrast, if next week Bernanke pegs the dollar back to gold, and Obama gets Congress to agree to abolish the IRS, cut federal spending by $1 trillion immediately, and start selling off all federal assets, then yeah maybe we could get of our current pickle without a crash and without high price inflation. But really what would be happening is that the great pro-growth measures would offset the disaster I think Bernanke et al. have baked into the cake, in our current trajectory. (Also, in practice I still think there would be a major recession, possibly even depression, in the scenario I just described–but it would last about 6 months.)

So to add another condition to the above, I am barring any incredibly radical pro-growth measures. I’m not going to be a jerk and say, “Oh, Boehner shaved $3 billion from Fiscal Year 2013 spending, so I’m off the hook.” I’m talking crazy Austrian heaven stuff.

62 Responses to “Even Supercore Inflation Might Not Do the Trick”

  1. Daniel Kuehn says:

    The terms “soft science” and “hard science” should be permanently purged from people’s lexicons.

    It’s either science or its not, and economics is.

    • bobmurphy says:

      DK are you kidding me? You don’t think you and I have qualitatively different arguments every day, compared to physicists arguing about string theory?

      • Daniel Kuehn says:

        Two points –

        1. A lot of our conversations are over philosophy, logic, history of thought, politics, ethics, etc. – not over economic science. There’s an economic tinge to it all, but most of the economic science I do is not done on my blog.

        2. There are qualitative differences. Precision and complexity (in the emergence/chaos sense) is certainly one of them. I personally don’t think that ought to be called “soft” particularly because other science that are just as imprecise (like much of biology) are never considered “soft sciences”. “Soft science” isn’t really a meaningful descriptor, at least how its used.

        • bobmurphy says:

          Even on your own terms though, Daniel, the reason we end up arguing about (1) so much is that those conversations are relevant to economics in a way that is not nearly as true for physics. Also, to be clear, those things could come up in physics, especially if people are arguing about cosmology.

          And I’m not sure I like your pronouncements on what terms I can use, since on your blog you admit you don’t know what “free market economist” means. 🙂

          • Daniel Kuehn says:

            Well yes and no.

            That’s all engineering. It’s relevant in the sense that it’s related, but economics certainly doesn’t rely on it.

            I enjoy a good engineering discussion – don’t get me wrong.

          • Daniel Kuehn says:

            re: “And I’m not sure I like your pronouncements on what terms I can use, since on your blog you admit you don’t know what “free market economist” means. “

            I’m a newbie to the profession – I’m allowed to be confused 🙂

    • Daniel Hewitt says:

      In descending order of hardness, or since DK does not like that term, in descending order of appropriateness of the term “science”:

      physical science
      natural science
      social science (includes economics)

      • Daniel Kuehn says:

        What we call “social science” is a specific branch of natural science.

        Jane Goodall does the same damn thing we do, albeit less precisely, for less evolved apes and she’s called a “primatologist” or “biologist” and considered “harder”.

        We do it more precisely for a more evolved species of ape and we’re set off to the side of the scientific community and called “soft”. How much sense does that make?

        [yes, yes, – I know the terms “less evolved” and “more evolved” are inappropriately teleological but you get what I mean]

      • Daniel Kuehn says:

        Working myself up into a frenzy over this, I just checked out the American Society of Primatologists to look into a membership for myself… turns out they actually specify “non-human primates” in their description of themselves.

        False advertising I say!!

        • MamMoTh says:

          turns out they actually specify “non-human primates” in their description of themselves.

          So Austrian economists can apply.

          • Joseph Fetz says:

            I wouldn’t talk smack, you’ve been extinct for 4500 years, mammoth.

            • Daniel Kuehn says:

              Has it only been that long? I thought that happened back in the last ice age.

              • Joseph Fetz says:

                To be honest, there are many theories on the actual date, so I took the middle ground and picked the period.

            • Daniel Kuehn says:

              That’s the last time I rely on a computer animated Ray Romano for my natural history!

            • MamMoTh says:

              But I am back! Praise the Lord Keynes

              • Joseph Fetz says:

                Must have been an exorcism.

    • Silas Barta says:

      Yes, good point, there’s no use whatsoever in categeoring academic disciplines with respect to their rigor and maturity than to call them either “science” or “not science”. The fact that we can make much better predictions in quantum physics than in economics has no bearing on anything whatsoever. (???)

      Yes, Daniel_Kuehn, in some contexts, it only matters if something “is a science”, but in OTHER contexts, you need to be more precise. The case Bob is talking about is one of them.

      • Daniel Kuehn says:

        Geez Silas – you managed to botch and twist just about everything I said.

        “Soft” and “hard” ISN’T precise. That’s my whole complaint. And it’s certainly inconsistently applied.

        A “science” is anything that applies the scientific method. Now, the subject matter of different sciences allows for more precise predictions and less precise predictions.

        But those differences in precision say nothing about “rigor” or “maturity” and are entirely dependent on the complexity of the subject of study.

        The term “soft science” is never used to capture this degree of precision. It’s a colloquialism and it’s a fairly vacuous colloquialism. Biology is at least as (and probably more than – although I’m no biologist) imprecise in terms of its ability to predict and explain as economics is, but you never hear it described as “soft”. Metereology and seismology also have important deficits in their predictive powers. People who use the term “soft science” are rarely talking about these quite substantive differences between biology, economics, seismology, meteorology, etc. on the one hand and physics and chemistry on the other. Those differences are important to demarcate. But that is not what is typically done.

        • Dan says:

          “A “science” is anything that applies the scientific method.”

          That makes economics not qualify as a science at all. (Mainstream or Austrian) . Or is this where you’re going to insist that anything that involves excel sheets of historical raw data qualifies as “scientific method”?

          What about Mathematics, Geometry, Logic, etc…? Those are not science I presume according to your definition. What are they?

          • Daniel Kuehn says:

            No those are not science. Geometry is math, and logic can be thought of as philosophy. Hell, math in some ways is just analytic philosophy. Anyway – they’re their own disciplinary pursuits, but I don’t see what’s especially scientific about them.

            Although this is interesting – a lot more math is done inductively and is starting to take on the trappings of science. I’m not saying it is science – but some of it is starting to take on the superficial trappings of science.

            • MamMoTh says:

              Not really. Conjectures in maths are assertions believed to hold because no empirical counter-example has been found.

              And because of undecidabilty issues, this might be all you can say.

            • Dan says:

              “Hell, math in some ways is just analytic philosophy”


              But let’s go with your definitions. Surely, you must recognize that there is a difference between math and logic as a philosophy, and all the other branches of philosophy. Or are you now going to contend that there is no difference between a student of mathematics and a student of what is called philosophy in the academia.

              Since Science as you had defined it is still built on (and useless without) the foundations of mathematics and logic, i.e., laws which are considered a priori true. It is therefore nonsense to simply say that mathematics and logic is philosophy and that’s it. Science is also a branch of philosophy then and now you are left with nothing but a broad definition that is quite useless now.

          • Dan says:

            Hey, you stole my name.

          • Tel says:

            What about Mathematics, Geometry, Logic, etc…? Those are not science I presume according to your definition. What are they?

            I would argue that they are more akin to technology than to science. For example, when technologists were able to build vacuum chambers and vacuum pumps, it provided the tools for scientific discovery of subatomic particles. Similarly, math, geometry, computers, etc provide the tools for scientists, but they are not science.

        • Silas Barta says:

          Daniel_Kuehn, you said originally:

          “The terms “soft science” and “hard science” should be permanently purged from people’s lexicons.”

          That means you don’t think there’s any usefulness to any concept related to what people intuit by saying a science is hard vs. soft. Not that you object to the classification of some as hard or soft — but that the terms shoud be purged in toto.

          Now you’re saying there is a legitimate use for the distinctions, but people aren’t doing it right. That is miles away from “hey, you should only use a binary category and discard the concept of hardness in science altogether”.

          Try to say what you mean in the future — unless that would be too “hard”.

          Peace out.

          • Daniel Kuehn says:

            re: “Now you’re saying there is a legitimate use for the distinctions, but people aren’t doing it right.”

            There is no legitimate use for the hard/soft distinction. There are other distinctions to make.

            “Hard” and “soft” are distinctions of rigor grounded in a poor understanding of the methods of different sciences in some cases, and simply a misleading substitute for “natural science” and “social science” in other instances. It is poorly defined, poorly used, and completely removed from the legitimate distinctions and demarcations that can be made. I don’t know when I’ve ever varied my position on this.

      • Daniel Kuehn says:

        The characterization of the subject matter you are trying to explain is key.

        After all – quantum theory is grounded in your very inability to predict or even measure certain properties of atomic and sub-atomic particles. That’s not considered a liability or a sign of a lack of rigor on your part, though – it is understood as the nature of the subject of your science.

        So why are economists blamed for not predicting recessions well in advance?

        Are seismologists blamed for not predicting earthquakes well in advance? Are meteorologists blamed if they fail to predict a storm longer than a week in advance?

        No. It’s understood as the nature of the complex subject under study. Complexity changes predictability and precision.

        You are failing to understand the really significant distinctions between various sciences when you attribute this to rigor. As I noted with the primatologists – they are substantially less rigorous than economists. But nobody calls them “soft science”, because soft science is an inconsistently applied and poorly defined term. It ought to be dropped.

        There’s one reason and one reason only why social sciences are set apart: because people don’t like admitting that we’re just smart apes and we can be studied like any other ape.

        • bobmurphy says:

          DK wrote: “There’s one reason and one reason only why social sciences are set apart: because people don’t like admitting that we’re just smart apes”

          Right, and that’s why it’s entirely appropriate to set the social sciences apart. Humans are NOT “just smart apes.” Even if you endorse standard evolutionary theory, humans are not “just smart apes.”

          I mean, do you think humans are just combinations of molecules?

          • bobmurphy says:

            I want to follow up on that Daniel: Using your logic, why couldn’t a chemist or a physicist roll his eyes at Jane Goodall? I mean, apes are just combinations of molecules, right? So why should studying them be any different from what the guys at CERN do?

            • Daniel Kuehn says:

              I’m not sure what you mean.

              Different methods are suited for the study of the incredibly complex combinations of molecules that Jane Goodall looks at (and different precision in results can be expected). What is there to “look down on”? Why would you use methods to study elementary properties of particles to study more specific complex combinations of molecules like apes?

              I suppose I don’t understand the premise of the question. I would have thought it would be obvious why the two do their science differently, and I’m not understanding why one would look down on the other.

          • Daniel Kuehn says:

            re: “I mean, do you think humans are just combinations of molecules?”


            Although I’m guessing you are going to interpret the deeper meaning of my affirmative answer differently than I do.

            I should clarify – there’s nothing wrong with refering to a distinct “social science” as shorthand for “human social science”, just like there’s nothing wrong with distinguishing “primatology” from “biology” from “science”. But we get silly treatment of the social sciences because people don’t want to accept that social science is reakky just a branch of primatology.

            • bobmurphy says:

              DK, I have outsourced this discussion to Gene Callahan. He actually rescued me from my previous materialist worldview, so I hope he can do the same for your positivist position. Also, I think you and I are naturally inclined to argue, so maybe if Gene makes the points it will be easier for you to see what we perceive as the problem in your current stance.

              Just one thing: In the quotes above, I was focusing on the word “just.” Yes, humans are combinations of molecules, and (if you buy into modern evolutionary theory) they are smart apes, but they’re not just molecules or smart apes.

              If you see why we need a separate discipline to study apes versus quarks, then it shouldn’t be shocking that we need a separate discipline to study market economies versus gorillas in the wild.

              • Daniel Kuehn says:

                Well it depends on what you’re hanging on the word “just”.

                I would use other words to describe them besides those words, certainly. The point is, there is nothing about humans as collections of molecules that rules out all the other fantastic dimensions of human life. I think you say “just” because you imagine molecules rule out certain dimensions of humanity that I wouldn’t presuppose they rule out.

                re: “then it shouldn’t be shocking that we need a separate discipline to study market economies versus gorillas in the wild.”

                Oh no doubt!!!! I was trying to clarify this above. Humans deserve a disciplinary demarcation, to be sure. But it’s still the science of the social behavior of a species of primate.

              • Major_Freedom says:

                If you see why we need a separate discipline to study apes versus quarks, then it shouldn’t be shocking that we need a separate discipline to study market economies versus gorillas in the wild.

                Methodological dualism, bitchezz!

              • Silas Barta says:

                I have outsourced this discussion to Gene Callahan. He actually rescued me from my previous materialist worldview, so I hope he can do the same for your positivist position

                Whoa, you fundamentally changed your wordview without actually assimilating the critique that caused you to do so? Looks like someone jumped the gun.

              • bobmurphy says:

                Not sure what you mean, Silas. To clarify: I’m not saying, “Gene can convince you, DK, but I can’t, because I can’t remember what he said to me.”

                On the contrary, I’m saying I know Gene has it in him, and I think DK will listen to Gene more sympathetically than me since they are statist buddies. (I kid, I kid.)

              • Avram says:


                Ability to persuade someone of something is not necessarily correlated with their understanding of that something. I, personally, have about as much persuasive power as a fish has feathers, but I’d like to think I can understand the things I believe in.

        • Joseph Fetz says:

          “Are seismologists blamed for not predicting earthquakes well in advance?”

          Unfortunately, Daniel, they are.


          Yep, the world is definitely a crazy (insane) place.

          • MamMoTh says:

            Well, allegedly a microwave manufacturer was blamed for killing a cat when the owner put the cat in the microwave and turned it on… Or is it a urban myth?

            Can people be sued for filing insane lawsuits?

          • Joseph Fetz says:

            Also, with regard to the argument between Daniel and Robert, you guys are attempting to look at other objects without relating to the relative cognitive structure that separates species. We humans communicate with each other in the primary cognitive perception as humans. Therefor, we perceive, think, believe, and organize our thoughts and structures in the human thought realm.

            I cannot deny that other mammals are able to communicate with each other or to think, but they do not do so within the same construct or perception as a human.

            When it comes down to it, we cannot even describe the thoughts and perception of another human, or even completely express what goes on in our own mind. In truth, we can only use universally understood methods of communication and organization; this is known as human reason.

            As far as my understanding of science, it is merely the application of human reason to the world around us. This is not to say that any of us know the answers to all of the questions of life, or that we can truly come to conclusions upon fact, but that we all have a common thread of reason within us that explains the world around us. That we all have this thing that is ubiquitous to human thought. After all, we are all human.

            There is one particular wrench in the gears of human thought, and that is the idea of free will as well as choice. Just as the ape lives in the mind-world of the ape, we live in the mind-world of the human. Both have the ability to think and to act, only that we are more advanced and more attuned to the subtleties. As far as evidence has been able to prove, we are the most advanced of the species on the planet.

            As far as the debate of “soft” and “hard” science, both are all the product of human reason, the systems of reason that we have built up around us, and the perception that we have assigned to those systems of thought that we have created. No matter what, every science is grounded in our own ability to categorize, assign, perceive, and communicate the same from one to the other.

            There is no true litmus test to prove out reality other than the understanding of our own reason. The entire world around us is viewed from the lens of the human mind, and that is what we use to make sense of the world. Whether it be science, belief, and/or the beyond, it is all of a human construct due to our very perception and reason; this is something that no man will ever be able to escape.

        • Silas Barta says:

          After all – quantum theory is grounded in your very inability to predict or even measure certain properties of atomic and sub-atomic particles. That’s not considered a liability or a sign of a lack of rigor on your part, though – it is understood as the nature of the subject of your science.

          It’s not that they have an “inability to measure certain properties”; it’s that they trasnscended to a higher level of understanding about reality that rendered their previous categorizations and classifications invalid (such as the concept of “this specific electron”). Nor is it that they can’t predict: they know exactly what the aggregate results are going to be, but any further ability would be inconsistent with fundamental reality.

          So, what’s the corresponding mastery of the nature of reality that came along with the corresponding shortcomings of economics? Right — there are none.

          • Joseph Fetz says:

            In either case, we are all dealing in the reality of the human intellect, the human sphere of knowledge and reason (ourselves). We are not infallible, and our entire understanding is only relevant to the common thread that is our understanding of the world as we perceive it. What is science, what is religion, what is non-science? That answer depends upon the scope of reasoning in which the human mind absorbs and is able to communicate to others.

            When it comes to the human constructs of our reality, it is entirely our own. We created it through our own distinct reason, perception, and intellect, therefor we can only understand it in that context. I would posit that the social sciences present a “harder” science than that of the natural and physical science, if only because the supposed hard sciences deal with the world around us in terms of our own understanding of it, but the sciences of humanity and philosophy deals in the subject that we can most easily know best; ourselves.

            The understanding of the external world requires not only knowledge of ourselves, but also a faith in that we are correct about our proclamations in favor of it (of which can only be proven in the act of human understanding). However, the study of ourselves yields much fruit, just so long as you also incorporate the influence of conditioning and environment. While I do not subscribe to the tabular rasa doctrine, I do know that humans are a social being, and are often influenced by others, or are deductive in their own right.

            No matter what the subject of knowledge, it is all the creation of our own reason, and is thus a creation of the human lexicon. The only truths that we know are the ones that we conceived and subsequently reasoned as the truth.

  2. Daniel Kuehn says:

    Red flags should also go up when we blog about “some signs of modest inflation” and “some signs of modest wage growth” simultaneously.

    As Jared Bernstein points out recently – the real new thing that’s happening is that real wages are falling.

    If you thought high wages were the problem, then of course that’s a good thing.

    • Joseph Fetz says:

      Uh oh, looks like aggregate demand is going to need some pump-priming QE3 style.

  3. MamMoTh says:

    Why are you thinking so much about it Murphy? Inflation comes with excessive spending. There is no excessive spending at the moment, rather a lack of spending in the economy. And people want to cut government spending? Nonsense…

    • Joseph Fetz says:

      The economy is a thing of human construct and based upon voluntary exchange, there is no need to spend on behalf of others (in their name). When the economy (the people) don’t want to spend, then that is the decision that they make, but to have technicians in government make that decision for them, with real implications on the REAL lives and prosperity of the actors in the market, is to entirely ignore what the economy is all about.

      As it is now, the government (all levels) account for 46% of all spending in the economy. Obviously, the grand majority of the people who make up the economy do not agree with this level of spending, otherwise they would be doing it themselves. But, the prime difference between these dynamics is this: Those that earn their money through their own labor, investment, and interest are choosing NOT to spend, while those who have the reigns of government (and , the printing press) in their hands are making decisions to spend money that is not theirs, was taken from private individuals, and/or is being added to the tab. Give anybody control of money that is not personally theirs, and I don’t care what their principles or beliefs are, they will not make decisions as they would if it were their own income.

      As for your little spending comment, you are missing just about every component of what prices are all about; you’re are ignoring that not every entity spends in concert. As I said, government accounts for 46% of all spending. And, it does not have the same margin with regard to utility. It spends whatever it wants, because it has a printing press, coerced revenue, and can spend infinitely if it wanted to (or, until domestic/foreign economies loss faith in the currency). The point is that its marginal utility will diminish at a greater rate than an individual, or any number of individuals within the economy due to this very relationship. I should also mention that its current expenditures tend to be in the industries in which we are seeing the highest increases: defense, welfare, education and healthcare. I would mention pensions, but that is an entirely a different ball of wax (requires literally pages of data and research), but is inextricably related to the topic at hand. The demand for capital and commodities that serve the 4 sectors I mention above are seeing great increases, both on the investment and the consumption side, this is no coincidence.

      To continue along with the “who is spending” theme, I must direct our attention to the financial sector; they got a golden parachute out of the entire ordeal. They got bailed out, they got liquid-injected beyond their wildest dreams (apparently more than they wanted), and they’ve got a pretty good promise that that they don’t have to worry about their balance sheets now or in the future. So, now they’re trying to recapitalize, and what better way to do that than to move to stocks, securities, and commodities. They have more liquidity than they know what to do with, they aren’t going to loan it out to the economy (esp. when wages are falling and unemployment is high), so it is no wonder that equities had been climbing, that treasuries were being bought, and that commodities are being bought in huge amounts: highly liquid entities tend to bid up prices of goods and contracts to capital. Duh.

      Was Murphy wrong? Yes. He was wrong in that he saw the logical implications of the increase in the monetary base, ready bank reserves, and government stimulus, but that he did not take into account the shift in demand (from the economy to the government and financials). So, core inflation has remained at low levels even though prices at the higher orders. But, the prices of goods in the higher orders of production are rising, and they will have further pressure on CPI. This is going to create further problems with regard to input prices and the selling prices of goods meant for the consumer, but it will be met with inadequate consumer demand (standard ABCT theory, different circumstances). However, considering the fact that Murphy is a quite intelligent man and an economist, I can only imagine what mistakes the technicians behind the switches are making.

      We have one of three choices: we let the market correct (which is not a fun time, but necessary), we keep playing this game of cat and mouse of long-run malaise (with transitory bouts of stagflation/deflation), or we can enjoy the spenders of hyperinflation. Of course, there is default, but that is an external problem with our creditors, and is an entirely separate issue, as well as one that has implications that our beyond our reckoning due to our not being able to control the actions of foreign nations (esp. with regard to war).

      The point is that money is not a panacea, it is merely the medium of exchange.

      • Joseph Fetz says:

        Sorry for the disconbobulation in the middle of the 5th paragraph, my hand hit my toughpad during typing and I ended up starting a new sentence (forgot to proofread). Also, Bob. I am not saying that you’re wrong in essence, but none of us could have foreseen what is going on today (or, even imagined it). I still think that we are going to see long bouts of malaise (stagflation/inflation), or that we’ll kill the currency. This is assuming that the rest of the world doesn’t turn against us first (a real consideration). Deflation is not a concern of mine, because I know that they will never allow that to take place; maybe for a short period (certainly not with a printing press at their disposal).

        • Jackie Browne says:

          I really would like to sign up for your newsletter. 😉

          The main thing I question is whether, since the Fed ostensibly serves the banking sector, it really is different this time. I’m trying to understand the narrative where crashing the dollar is not acknowledged and avoided. Usually it’s a story of being in no one’s interest to put the brakes on.

          • Joseph Fetz says:

            Who’s newsletter? As far as I know most of us are bloggers, though some of us are professional economists (I’m not) or students. You have to be more specific, because comments tend to hop, skip, and jump around on blogs that have the reply function. (comments can only hop/jump to the right so many times),

            • Jackie Browne says:

              My first comment was very much tongue-in-cheek, whereby I was referencing a “sign up for your newsletter” meme, in which person A makes a long rant, and person B dismisses it with a sarcastic comment asking “where can I sign up for your newsletter”.

              Now, in this case, my reference flips the meaning back to approval. Do you indeed have a blog?

              • Joseph Fetz says:

                I haven’t had on in over a year, but it was mostly a news aggregator-type thing with short comments from myself (nothing special). I am considering starting one based on economics pretty soon, but I have 3 really time consuming hobbies, so I haven’t gotten around to it just yet.

  4. Bob Roddis says:

    Inflation alert.

    I was at one of my old law schools last week, and the fee for parking close to the building had jumped from $4 two years ago to $5.25.

    Plus, chicken soft tacos at Taco Bell are much more expensive and much smaller than in past years.

    My Florida Bar dues jumped from $150 to $175 per year.

    Enough said.

  5. RG says:

    Little Debbie cakes $0.75.

  6. Bob Roddis says:

    Think for a moment what complete cement-heads these Keynesians are to deny current inflation. They claim that there is not enough “aggregate demand” (or as we say in the Motor City “them people ain’t got no more money than a snake has hips”). Isn’t the entire purpose of money dilution and unpayable government debt to get them some money to spend? When they spend that money, whatever the prices they pay are necessarily higher than the $0 non-sale prices existing before the “stimulus”.

    • Blackadder says:

      Isn’t the entire purpose of money dilution and unpayable government debt to get them some money to spend? When they spend that money, whatever the prices they pay are necessarily higher than the $0 non-sale prices existing before the “stimulus”.

      An increase in demand might lead to an increase in prices, or it might lead to an increase in supply (mostly likely some combination of both). In any event, it’s not necessary that giving people more money means higher prices, and when you have a lot of spare capacity (as evidenced, say, by the fact that unemployment is above 8% while banks are sitting on trillions in excess reserves) you might well conclude that an increase in demand is more likely to lead to an increase in supply than an increase in prices.

      • Joseph Fetz says:

        I would agree with that claim if we were talking about an economy that would clear, but not one where much of the increases of price are found in the commodities markets (and, higher order stages of production), as well as those closely associated with government. Say’s law can be a pain sometimes.

  7. Dan says:

    Good post Dr. Murphy. I made a similar point in a recent post of yours. I would be curious to know what keynesians, MMTers, etc. would need to see to concede defeat. My guess is if we go into stagflation or the currency crashes they will not back off at all.

  8. Matthew Murphy says:

    “(a) I was right, and they are wrong, and it’s just taking longer to manifest itself than I had originally thought”

    I think the same could have been said about the housing bubble. Looking back, those that were predicting it in, say, 2002-2004 probably never expected it to last as long as it did. I tend to think we Austrians generally underestimate the viability of government bubbles.

    Give it 6, 12, 18, or even another 24 months at least.

  9. Joseph Fetz says:

    Darnit Bob, every blog-post that you put up turns into a political economic whirlwind. It seems that you’re a popular guy… Huhuhuh

    How many comments do Yglesias, Wenzel, DeLong, Caplan, Woods, Krugman, or that Baker guy (does he even have a blog?), ever get? Who would’ve thought that the “Constanza” look-a-like would become the king of political economic dialogue? Seriously???

    To be fair, those other guys are complete “comment” Nazi’s. “No post for you!!!!” they say (even Wenzel).

    I just want to thank you for keeping the comment page open and free, as it should be.

  10. John Papola says:

    If it makes you feel any better, Bob, there are still people who call themselves economists while claiming that high inflation and high unemployment cannot happen at the same time. This despite many, many instances that disprove this idea including but not limited to Venezuela, Argentina, the USA in the 1970s and the UK today. It’s pretty hard to take macro analysts seriously when they continue to believe in plainly, repeatably disprovable ideas.

    • Joseph Fetz says:

      Hey, John. Love the new video, you guys did a fantastic job on this one. It had much better production quality, the beats were better, I enjoyed the cameos (esp. Salerno as Mises), and it was a good transition from the first.

  11. Yancey Ward says:

    Hard sciences are those sciences in which the practitioners know a lot of facts about their science- soft sciences are those where the practitioners do not. Economics is one of the latter.