Potpourri, Peter Schiff Edition
==> The blogosphere is full of claims that he got “pwned” by Scott Sumner in this exchange on Kudlow. I don’t see how. Sumner said that if the official (price) inflation numbers were bogus, then that would mean the real economy was shrinking. Such a claim has always astounded me; I can’t believe libertarians find it so compelling. Schiff came back and said, “The reason it feels like a recession to most people is because it is.” I don’t endorse human bondage, but that sounded like pwnage to me.
==> Incidentally, Scott Sumner has no problem challenging the government’s official numbers, just so long as doing so meshes with his worldview. But if it’s an Austrian person challenging the numbers, he’s a flat earther.
==> Peter Schiff doing stand-up comedy. I was ready to pooh-pooh this, as it brushes up against my turf, but I have to admit this is pretty good. But he’s still staying in his comfort zone and talking about economic/financial stuff. I will truly applaud Peter when he can get laughs talking about his wife’s nagging or something. (BTW I met her on a cruise where Peter and I were speakers, and she is awesome. I’m just giving an obvious example of non-economic guru comedy.)
==> You know you’ve hit rock bottom when you’re arguing with Noah Smith over Schiff’s pronunciation of “Bernanke.”
Sumner had shadowstats stats in his mind, which is something Schiff constantly refers to. Sumner should have gone beyond the recession and mention the economy has been shrinking since the year 2000 and never stopped, a more ridiculous claim, if those numbers are right.
http://www.shadowstats.com/alternate_data/gross-domestic-product-charts
The current CPI is a measure of inflation. The one shadowstats uses is a different measure of inflation. Both accurately report what they are reporting…..
Any inflation figure is going to have bias one way or another.
The things you spend money on YoY may show net deflation. I know mine do(right now). The point worth making is that inflationary policy is taking away an even larger price decrease from me.
I refuse to look at cooked up figures. I would prefer doing my own research. I can easily look at individual prices of food, commodities, vehicles, medicare etc.
” and mention the economy has been shrinking since the year 2000 and never stopped, a more ridiculous claim, if those numbers are right.
”
Not necessarily a ridiculous claim. GDP doesn’t reflect the health of the economy. GDP is a pretty lousy indicator. What does GDP tell us? Does it offer any predictive power? no.
Look at private debt % to GDP, yuck
Stiglitz offers some good criticism against GDP
If the government spent $1T on pet rocks and hot pink spandex pants, the GDP would soar. That is a good enough reason to reject the GDP as a useful indicator of anything at all.
I tend to look at some of the components of the quality of life index.
But what do we see? We have policy that is based on CPI and GDP. Keeping CPI at 2%/yr and GDP ^ doesn’t necessarily Improve QoL.
Another reason why MMT’ers are easy fodder
http://www.lostoutputclock.com/
The way that ShadowStats “calculates” inflation is that it takes the CPI and adds around 8% to it. Literally, that’s how you get the ShadowStats number:
http://www.econbrowser.com/archives/2008/10/shadowstats_res.html
Unsurprisingly, this method tends to conclude that there is high inflation.
I read a serious blog post or article on this, but right now I can’t remember where,who or what.
Please tell me you are just joking, the alternative is too horrible to comtemplate.
Why didn’t you answer Peter’s claims about:
– US is using less energy today
– It is mostly part time jobs created
– The labor participation rate is shrinking, so employment is not really going up
And did I understand you correctly that if there really would be stagflation you would just brush that off as something that has nothing to do with the policies you favor?
No, I wasn’t joking Scott. Mrs. Schiff is super cool.
I don’t accept that it is rational to evaluate what you see in the world by merely choosing most comforting answer.
Mind you, it is a versatile approach, Global Warming can’t be a big problem because the alternative is too horrible to contemplate. Racism hardly happens because the alternative is too horrible to contemplate. We never go starting wars in the Middle East because if we did something like that it would just be too horrible to contemplate.
I am ever perplexed by several concepts. Please feel free ANYONE to help explain these conundrums to me.
I have been told that QE is meant to keep inflationary targets from falling below ‘normal’ rates. I become frustrated by several things in this. First isn’t creating a target rate of inflation damaging to everyone in the first place? Why not create a target rate of inflation at 1% rather than say 3%? Does this not ensure that the ‘poor’ simply become poorer?
Second if inflation as a target level was actually ‘wanted’ could this not most easily be attained by sending each household a check? Why should the Fed go through the process of buying bonds from the Federal Government?
Why are M1 and M2 so high? What are the long term dangers of this? Again just looking at the current state of the economy and maybe I am a bit of a doomsday person but this all looks fairly unsustainable.
Loved Pete Schiff’s Comedy…
“Why not create a target rate of inflation at 1% rather than say 3%?”
They think that the target rate is most beneficial for the economy. They fear deflation. 0% net inflation rate is too close to any amount of deflation for them.
“Second if inflation as a target level was actually ‘wanted’ could this not most easily be attained by sending each household a check?”
I’d offer you this definition of inflation for perspective
“an increase in the quantity of money (in the broader sense of the term, so as to include fiduciary media as well), that is not offset by a corresponding increase in the need for money (again in the broader sense of the term), so that a fall in the objective exchange-value of money must occur.” ~Mises
“Why are M1 and M2 so high? What are the long term dangers of this? Again just looking at the current state of the economy and maybe I am a bit of a doomsday person but this all looks fairly unsustainable.”
best answer I can give you
http://mises.org/daily/6159/
“They Fear Deflation” – But isn’t Deflation a natural response to either
1 ) a change in the supply Demand curve where there is excess surplus to Demand ( ‘everyone becomes more wealthy as the amount of purchasing power grows’ ) or
2 ) a correction to the price of a good due to speculation or overly strong inflationary pressure on a product or good?
The Mises link how would default be any less damaging than inflation? I can see the Government simply saying ‘Sorry we can’t pay’ but how does that not damage the middle class any less than hyperinflation? Because it does not damage creditors as much?
What about the Fed with QE? I mean they can’t easily shut off the spigot now that they have the money going can they? It appears that the rate of money injection is really rolling into the Equities market at a faster and faster pace now. Are they counting on another bubble to remove the cash they have injected? Are they going to sell their securities over time? I mean honestly I am wracking my brain trying to see the method they can use to exit the situation they have entered into and I cannot see it…
Again, I am not even talking ‘Hyper Inflation’ but a rate of just 6 – 7% per year for a decade would be damaging would it not? Isn’t the 3% target rate damaging enough to the middle class?
I am sorry. I am not ‘learned’ in this to where I would like to be I see these things as smoke and mirrors meant to protect people at the top. I believe they justify it by saying they have managed to keep the whole thing from crashing down but anything short of a couple of centuries of policy seems too short a time to congratulate yourself on an intelligent monetary policy. It feels more along the lines of crisis handling in a submarine with duct tape and the captain decides to go down another 50 feet so the external pressure become that much more intense. Do I think the system will unravel in the next 10 years? No not really. The next 20? Maybe, the next 40… probably.
The whole point of the exercise is that when new money enters the system, some get first dibs at it, and others don’t. In simple terms it is a mechanism for enriching some at the expense of others.
Seen from this perspective, a 0% inflation target would throttle the available wealth transfer, a 1% inflation target would offer something, but you know how it is with satisfying such people. The inflation target is thus the highest they think they can get away with. Hiring economists to convince the public that everything is in good hands isn’t cheap you know.
http://mises.org/etexts/Cant-jgh.PDF
So in other words the people that benefit the most from counterfeiting is the counterfeiter? Then the people who are in direct contact with the counter fitter? Working its way finally down to the person who is not counter fitting and they see increased competition for goods and their purchasing power goes down?
Just trying to make certain I am seeing this correctly.
Scott is right. The ShadowStats numbers imply all sorts of absurdities about the economy and are generated by just adding around 8% to whatever the CPI puts out. As a general rule, anyone who takes ShadowStats seriously should themselves not be taken seriously.
Excellent point, Blackadder! Shadowstats is a joke. See here:
http://azizonomics.com/2013/06/01/the-trouble-with-shadowstats
Hi there, I have a question regarding the debate and I’d love someone can answer it.
Sumner says: “In normal times QE would be very inflationary but given we have near zero interest rates…”
So, aren’t zero interest rates a consequence of printing money? What’s the meaning of this statement?
Thanks in advance!
Schiff has some very odd pronunciations. He also pronounces “Mises” different than everyone else does. I can’t imagine this is just out of ignorance…
I bet he doesn’t cut his grass every week either. The tyrannical ignoramus.
The best thing he says wrong is krugman. He knows what he’s doing.
Schiff won that debate, hands down. Kudlow is an ass. Sumner looked shocked, when reminded of the 1970s stagflation. He also conceded and said, “well, obviously that could be a problem.” And, the “billion prices project” is showing inflation around 2.5%. But, obviously everyone has their own index, and most people’s don’t under weigh health care. A lot of us are on the Big Mac index. That’s at 6%.
What would a shrinking economy look like?
Labor force participation rate at its lowest since the 1981-82 recession?
Disposable incomes down?
Record amounts of food stamp use?
Oil usage at 1997 levels?
Home ownership at an 18 year low?
I don’t know. It’s hard to say.
Let’s hope Scott doesn’t end up in the next “Peter Schiff was right” video.
“Kruggman”