Potpourri
==> The other day I had a deadline, so naturally I ended up watching the SNL auditions of both Phil Hartman and John Belushi. The former impressed me much more than the latter. Hartman had a very unique style.
==> If you took away my interest in karaoke, and forced me to teach at a university and publish only academic articles, in 30 years I’d like to think I’d be Nick Rowe.
==> 2013 is a record low year for US tornadoes. You might be tempted to laugh at the climate alarmists, but keep in mind that sharks slow down the funnel clouds.
==> So now, not only do the Keynesians say, “We’re not Weimar Germany!” but we’ve actually got Noah Smith saying:
To see that inflation doesn’t reduce your real wage, just think about Weimar Germany. Prices went up by a factor of one trillion. But people did not starve en masse as a result. Remember that guy with the wheelbarrow full of cash, going to buy bread? HOW DO YOU THINK HE GOT HIS HANDS ON A WHEELBARROW OF CASH IN THE FIRST PLACE? The answer: That was not his life’s savings. He did not sell the family farm. He had a wheelbarrow full of cash because as prices skyrocketed, wages skyrocketed too! [Bold in original.]
Now you might ask, “Noah, if workers are running to and fro with wheelbarrows, won’t that reduce the productivity of their labor? How could their real wages not take a hit?”
But don’t worry, Noah covers that type of thing at the end of his post, but conceding that yes, (price) inflation carries a “nuisance cost.”
And there’s this:
And remember that today’s government debt is tomorrow’s taxes. Inflation therefore reduces the size of your future taxes. Inflation is a future tax cut! Remember, inflation means the value of a U.S. dollar goes down. But the dollar value of the debt does not change. So inflation allows you to pay off your share of the government debt with “funny money”! Awesome, right?
So I think I can now summarize the Keynesian perspective on (price) inflation, at least from the main bloggers I read and discuss here at Free Advice:
(1a) A higher target for (price) inflation will let the Fed reduce real interest rates and boost economic growth.
(1b) It is a myth put out by Austrian trolls that a higher inflation target will reduce the return to savers. Only if inflation is unexpected can that happen. If it’s expected, they will raise their nominal interest rate demands accordingly.
(2a) There is downward wage inflexibility. That’s why a higher inflation target will alleviate unemployment.
(2b) It is a myth put out by Austrian trolls that a higher inflation target will reduce real wages. Workers will raise their nominal wage demands accordingly.
(3a) Right-wingers are idiots for thinking the national debt can make us poorer. We owe it to ourselves, morons.
(3b) One of the benefits of a higher inflation target is that it will reduce the national debt and make us richer.
“(1b) It is a myth put out by Austrian trolls that a higher inflation target will reduce the return to savers. Only if inflation is unexpected can that happen. If it’s expected, they will raise their nominal interest rate demands accordingly.”
Do Austrians and their trolls believe that expected inflation is not factored into interest rates ? That seems odd.
I’m going to take a wild guess that you haven’t read much on ABCT if this is a serious question.
Nope. It depends upon the inflation. In fact, much of the ABCT is based upon expectations of price inflation in certain markets.
I thought ABCT assumed the new money comes in at an ever increasing rate so that inflation is always unexpected ?
http://mises.org/tradcycl.asp
ABCT would expect it to occur initially in the markets money was dumped into. Example: Dump money into mortgage markets and equities and expect those prices to rise higher than they would have otherwise.
Yes. This is how Robert Wenzel explained it after his speech at the Federal Reserve:
New York Fed: Leave the Building!
[WWW]http://mises.org/daily/6028/New-York-Fed-Leave-the-Building
One economist asked me how I knew the housing market was going to crash. I responded that because of Austrian theory, I understood that money created by the Fed enters the economy at specific points and that it was obvious the housing market was one of the those points. I told him that I also knew that this would eventually result in price inflation (as the money spread through the economy) and that at that point the Fed would slow printing and the housing market would collapse, which is just what occurred.
Here’s a short explanation of ABCT (8 minutes):
Austrian Business Cycle Theory
[WWW]http://www.youtube.com/watch?v=5K4Os5eXPw4
I thought I understand ABCT well enough and had the impression that the new money that drives the boom created unexpected and unevenly distributed inflation (as described in these comments).
I am just surprised that in general Austrians think that when there are high inflation expectations this will not be reflected in higher interest rates.
Can’t the Fed hold interest rates low in the face of high inflation expectations by purchasing ever increasing amounts of debt?
Not all prices rise at the same time (as you noted), so not all costs of production rise at the same time.
If you raise interest rates before your competitors, you’re making your business more expensive to your customers, and they’ll choose someone else.
“… by purchasing ever increasing amounts of debt?”
With what?
Printing more money to keep interest rates low will eventually lead to such high inflation that economic calculation becomes impossible.
Then people will just stop using the currency.
Unfortunately ABCT is the wrong diagnosis.
It’s like looking at a flat tyre and saying “well the problem is obviously that there was just too much air in the tyre”.
Why odd? If I’m thinking about investing in government bonds, and my expectation is that allowing for inflation I need a 5% return, while at the same time the Fed will buy those same government bonds at 1.5% return… how exactly do my expectations get factored in?
Well, I guess you wouldn’t buy those bonds unless the price fell enough to provide a nominal 5% return rather than the 1.5% face value return.
Market expectations would have exactly that effect on bond prices (though apparently not in Austrian models)
You are correct. You would not be a buyer at these prices. Which explains why the Fed is the predominant purchaser of new Treasury issues today.
Making sense now?
Bill Gross Tweets: “Without Central Bank Check Writing, We Only Have Ourselves To Sell To” Sends Yields Soaring
[WWW]http://www.zerohedge.com/news/2013-08-16/bill-gross-tweets-without-central-bank-check-writing-we-only-have-ourselves-sell-sen
LOL. Awesome.
“It is a myth put out by Austrian trolls”
For the love of shiza Bob, please don’t play into their caricature, even if you’re doing it in jest. It nevertheless affects people’s perceptions.
Let’s keep it classy in the face of their immaturity.
so says the guy who believes the whole world is wrong, and only he has the right to make the law on his own little patch of turf, because of his gun and ‘homesteading’ or some such nonsense.
So … might makes right?
Either you have a natural right to the fruit of your own labor, or someone ELSE decides what are your rights.
Which one?
If you have a natural right, then you don’t need a government to legitimize your forceful defense of your own property.
how did you get that patch of turf?
“homesteading”?
How did you get that PC you’re using? Did you TRADE for it? (Let’s pretend it’s not your parent’s PC for the sake of argument).
“How did you get that PC you’re using?”
I bought it with money. This involved a deletion of numbers in my bank account and an addition of numbers to the seller’s bank account. All of it mediated through a financial/legal system in a secure environment established by law, police and military and involving many people who have all had access to basic goods and services throughout their lives as the result of being a member the same country as me.
how did you get that patch of turf?
I either mixed my labor with it (homesteading), or I traded something for it, in a free market.
Homesteading is what “right to the fruit of your labor” entails.
And making a distinction between plants and land is arbitrary. In both cases, you’re transforming something that occurs in nature.
And if nobody owned it before I claimed it, then no one is wronged.
(We’re not in a free market right now, I realize that.)
“How did you get that PC you’re using?”
I bought it with state/credit money from a store, that I accessed easily via a public road and transportation system. The transaction involved a deletion of numbers in my bank account and an addition of numbers to the seller’s bank account. All of which was mediated through a complex financial/legal/regulatory system within a secure environment established by law, police and military, and involving many people all of whom have had access to basic necessary goods and services, and guaranteed basic rights and protections, as a result of being members of the same country as me. Essentially it was a civilized transaction within a civilized society between civilized people. Not a backwards barter trade in some imaginary ancap dysfunctional nightmarish dystopia.
Translation: “I’m bleeding; Making me the victor.”
All of which was mediated through a complex financial/legal/regulatory system within a secure environment established by law, police and military …
On “Speeding”
http://ericpetersautos.com/2012/11/02/on-speeding/
Widespread, almost universal flouting of any given law is strongly persuasive that the law itself is preposterous. And malicious. Think Prohibition. Or, closer to home, the 55 MPH National Maximum Speed Limit for highways that was in force for 20 long years. Politicians decreed that what had been legal yesterday (70-75 MPH) and so – one must presume, reasonable and safe – was all of a sudden “illegal speeding.” Did the highways change overnight? Did the cars? Did people suddenly become incapable of driving 70 safely on Tuesday even though they had done so on Monday? Then, just as arbitrarily, the law was changed again. Just as suddenly, it was once again “safe” (we presume) to drive 70 on the very same road – in the very same car – with the very same person behind the wheel – who the day prior to the law’s going into effect would have been ticketed for “dangerous speeding” had he driven the same speed on the same road in the same car.
It was a farce – yet people learned nothing from it.
Throw Your Plate Away Day
http://ericpetersautos.com/2013/07/22/throw-your-plate-away-day/
License plates are another (one of many) assertion by the state of ownership over us, in this case, via ownership of our vehicles. Because control of a thing – who has the legal power to determine how a given thing shall or shall not be used – is the essence of ownership. If I am in a position to tell you how you may use your car, and have the power to compel you to obey my orders, then you’re not really the owner – are you?
“Not a backwards barter trade in some imaginary ancap dysfunctional nightmarish dystopia.”
Seriously? Another troll with the same tired statements. YAWN.
I don’t believe “the whole world is wrong.”
I do believe I have a right to make the law on my own huge patch of dirt, as long as that law does not infringe on other people’s persons or their property.
Guns and homesteading are nonsense? OK, then I guess you have no problems with me using the government’s guns to take your house.
you are a delusional narcissist
The last two are good catches. But in Noah’s defense, he does say that inflation hurts past savers. Did someone else argue that inflation doesn’t hurt savers?
When I read Noah’s arguments concerning inflation and wages, at first I disagreed, and then I thought about how I could agree with him and what came to mind was the long-run relationship between wages and inflation. In the past 100 years, for example, despite inflation our real wages have risen (because of increases in marginal productivity, not nominal income, of course). Now, you’re still right and Noah is still wrong, but I thought he was maybe thinking about it like this. Maybe he didn’t catch himself making the mistake, because he came up with the response while writing.
JF wrote:
The last two are good catches. But in Noah’s defense, he does say that inflation hurts past savers. Did someone else argue that inflation doesn’t hurt savers?
It sounds like you are saying there’s no contradiction on my first point. But there is:
==> The standard Keynesian blogger point (not sure about Keynesian academic) is that if you’re up against the ZLB, the only way to restore full employment with monetary policy is to raise expected future inflation and thereby lower real interest rates. I.e., right now the way Krugman et al. say monetary policy can work (“read my Japan paper from the late 1990s! It’s all there, I was Sumnerian before it was cool!”) is to keep nominal interest rates flat while inflation rises. (I’m not going to keep saying “price inflation” but that’s what I mean obviously.)
==> Noah said Austrian trolls are idiots for telling people that inflation will hurt savers going forward, because nominal interest rates will rise to maintain real interest rates.
Contradiction.
I’m assuming “future savers” refers to some long-run period, where eventually the nominal rate rises (with the price level). An analogy of the way I think about interest-targeting policy is the case for an accelerating money growth rate for the business cycles, to offset the periodic adjustment of prices.
Sure there’s a way you can adjust the dials to make it all work out, if you focus on one of Noah’s arguments at a time. (Same thing happens with my Krugman Kontradictions.) But I think Noah is simultaneously saying:
(a) A higher inflation target is good because (as Miles Kimball et al explain) with the ZLB floating around, you want more of a cushion. Having a higher inflation rate allows the central bank to cut real interest rates appropriately.
(b) A higher inflation target won’t result in lower real interest rates, going forward.
All savers are past savers.
Everyone who earns money is a holder of money.
Inflation depreciates money people currently own.
* Sorry, I meant inflation-targeting policy.
But, you’re right, the only “future savers” who won’t lose are those who save after the policy ends.
But inflation has AD effects aside from interest rates, right? I’m not saying that what you say about interest rates is wrong, but I think there are more Keynesian points than just that.
Of course this only hurts savers if it’s unexpected, as you’ve been over. But the other AD affects should hold even if inflation is completely expected.
Okay, but those who specifically think that inflation targeting lowers short-term real rates are contradicting themselves if they also believe that inflation does not hurt savers. Unless they think that since lower real rates are one of many transmission mechanisms, each one may or may not occur (it becomes an empirical question).
If you believe that
1. The market clearing interest rate reflects inflation expectations
2. If this rate drops below zero we have a ZLB-type problem and unemployment
Then surely increasing inflation expectations will cause the market-clearing rate to go above zero and the economy to recover.
Savers will get higher rates to compensate for inflation.
Where is the contradiction ?
Transformer you keep switching between nominal and real.
Let’s say right now the full-employment market-clearing REAL interest rate is -5%. Nominal rates are stuck at 0%, and right now expected (price) inflation is 2%, so shoot the actual real interest rate is only -2%. Savers earn -2% on their savings, if they want to put them in “risk-free” Treasuries.
OK Bernanke finally follows Noah/Krugman/Sumner’s advice, and convinces the market that inflation will actually run 5% for a few years. However, if he let nominal rates rise the same amount, there would be no boost to economic growth (at least according to the Keynesians, Sumner might disagree). The only way this Krugman solution works is to hold nominal rates low (let’s just keep them at 0% for simplicity) while expected inflation now goes up to 5%. Now the real rate of interest is -5%, restoring full employment.
But, savers now earn -5% on their risk-free Treasuries. So in order to save the economy, the rate of return to savers had to go down.
The contradiction is that Keynesians hold the nominal rate low (with inflation expectations rising) in order to “solve” the liquidity trap, but then in another train of thought, they claim inflation doesn’t hurt the real return to savers if it’s expected, because nominal rates will perfectly rise with inflation expectations. Both can’t be true simultaneously.
You seem to be assuming that interest rates need to be artificially lowered (below the market clearing real rate) for the economy to recover.
Lets looks at it from the perspective of borrowing for investment.
Start with a situation with no inflation where the real rate would have to be -5% to generate enough I to maintain full employment. (With no inflation the nominal rate would also be -5%)
No-one will lend at -5% so rates get stuck at zero and we have insufficient I and unemployment.
Introduce inflation expectations of 10%.
The nominal rate needed to generate full employment moves from -5% to +5% and we get a recovery. (the real rate is still -5%)
I guess one could argue that savers were getting real rates of 0% before and -5 now, but of course 0% was never the ,market clearing rate.
Transformer wrote:
I guess one could argue that savers were getting real rates of 0% before and -5 now, but of course 0% was never the ,market clearing rate.
Yes, you “guess” correctly. The way the Keynesians say inflation cures the unemployment problem, is that it reduces real interest rates when we’re at ZLB. OK fine, but then they can’t simultaneously say inflation won’t reduce real rates of interest.
Isn’t that different to the argument you gave before?
“The contradiction is that Keynesians hold the nominal rate low (with inflation expectations rising) in order to “solve” the liquidity trap,”
In my example noone holds any rates low – the market sets them. By committing to change the money supply the CB may be able to induce positive nominal rates and a recovery.
Savers just happened to be getting above the real rate before this adjustment to the money supply.
If this so called “market” was setting rates then why does the Fed need to purchase bonds?
Anyhow inflation expectations of 10% and real returns of -5% just drives people to real assets like gold or what have you where they earn a much better 0%.
By the way, the 0% os the market clearing rate, just like $0 is the market price of turd sandwiches.
… just drives people to real assets like gold or what have you where they earn a much better 0%.
Interest Rates in a Gold Coin Standard
[WWW]http://news.goldseek.com/LewRockwell/1324562820.php
On the other hand, some depositors may agree to be paid less interest. They may agree all the way to zero or very close to it.
Why would they hand over their gold coins to the banks at zero percent? Because, in a free market economy, the production of goods and services constantly increases.
…
People get richer even though the have no extra money.
So, in a free market economy, the money (gold coins) paid by borrowers to lenders may not be more than the money borrowed – zero percent – but the real income of the lenders rises. Interest is still being paid to lenders, but it is concealed. The interest rate is the same as the decline in gold-denominated prices.
Tel,
Suppose three was no fed and the inflationary expectations were caused by an expected influx of the money commodity ?
I think the effects I describe would still occur if for some reason this economy was stuck at the ZLB.
Suppose three was no fed and the inflationary expectations were caused by an expected influx of the money commodity ?
Without a central planner, when a commodity money’s supply is increased, its drop in value represents the real supply of the commodity, and so there’d be no boom and bust, and therefore no high unemployment of the kind that seems, to some, to justify government interventions.
(Not that some of these people wouldn’t attempt to justify a government program to “solve” the unemployment of a single person. I exaggerate, of course. [?])
The “worst” that would happen is that people would stop using that particular commodity as money, but then they’d have a cheaper commodity.
Cheaper stuff is good.
In the version of ABCT descried by Hayek in P&P he seems to think that the boom is driven not by the CB but by private banks increasing lending against a fixed quantity of reserves.
Savers can sell their risk free Treasuries and go into stocks or gold
… the boom is driven not by the CB but by private banks increasing lending against a fixed quantity of reserves.
That’s true as far as it goes …:
Monetary Lessons from America’s Past | Thomas E. Woods, Jr.
[WWW]http://www.youtube.com/watch?v=91OIBnrjzLU
… but a free market would have competition for sound money.
Only government privileges can permit private banks to get away with increasing lending beyond reserves (suspension of specie payments).
The fear of bank runs would cause the banks to hold higher reserves.
FDIC permits banks to make riskier loans, knowing they will be bailed out with printed money.
This video is also helpful on this issue:
Answering the Same Old Arguments Against Sound Money | Thomas E. Woods, Jr.
[WWW]http://www.youtube.com/watch?v=h-PxMzSyujw
Those are good points and I agree with you.
The problem with the ZLB is not that interest rates should be above zero, it’s that conventional monetary policy has a hard time pushing rates below zero.
Well, yes. Especially real interest rates. Why is that a problem?
If I could push the interest rate to, let’s say, -1% (nominal), this would be an absolute horrible thing. If we add to that, say, inflation of around 2%, the real interest rate is -3% or so. Which, by definition, means the economy’s capital base is shrinking. How does that help AT ALL?
That should say “especially nominal rates”. Real interest rates are negative any time inflation > nominal rates, of course.
More specifically, the problem with the ZLB is that the traditional transmission mechanism for monetary policy — bank lending — loses traction, because below a certain rate banks prefer to swap cash for interest-bearing assets.
And this is why the only real “solution” to the ZLB, if the goal is to benefit special interest groups with inflation, is if the central bank increases spending external to the credit expansion mechanism.
A long time ago I’ve seen those who believe the ZLB isn’t a real barrier say that the Fed should buy the S&P if need be.
Insanity seems to have lowered its admittance standards.
If savers expect inflation, that will “add to AD,” because if you know your savings are about to be wiped out, you would want to trade your savings for real resources. The expectation of inflation, of course, hastens the onset of said inflation. That’s not a good thing, btw.
But nominal interest rates don’t necessarily have to rise during an inflationary period. Can’t the central bank keep them contained with QE if it wants to?
Yes, but for as long as they do that, savers lose.
Yes, until the currency breaks
who said 3b, that reducing the debt via inflation makes the nation richer? There are other reasons to want to reduce debt to GDP other than that it makes the nation richer. Argument 3a is made in response to people who compare the national debt to household debt (money owed to a bank). 3b is made in response to concern over the debt to GDP ratio and the effect that has on the interest expense. Even though the interest is paid to the nation and does not make the nation poorer, you do not want interest expense to consume 50% of federal spending.
What’s surprising to me is that Noah actually insinuated that the German hyperinflation wasn’t all that bad. He acts as if wheelbarrows full of cash were no big deal since people were getting paid so much more than they were before. Did Noah also not see the picture where the woman is using marks to start a fire? How about the one where a man is sweeping the marks out of the street with a broom? Did he consider that nobody wanted that wheelbarrow full of cash in exchange for some eggs and bread? That man likely would have had better luck exchangins a couple of hens for what he wanted.
Noah’s post is incredibly utopian. He thinks if we just inflate to 4 or 5 percent that everything will start chugging along just fine again. This man has no clue as to the dire nature of our banking system, since it is essentially in the exact same financial state as it was before 2008. The difference between 2007 and today is that now when the market bubble begins to burst, the Fed will not be able to cut the funds rate by four percent, or even a quarter of a percent for that matter, and it will already have a >3.7 trillion dollar balance sheet. The Fed’s only response will be to increase QE even more. Eventually this will take it’s toll on the currency and there is no way out of the inflationary cycle unless they decide to let a lot of the big banks and big homebuilders go bust, along with a lot of other businesses as collateral damage. But I think 2008 taught us that they aren’t willing to let that sort of thing happen. The Keynesian/Socialist utopian dream is going to be revealed as a sham during our lifetimes folks. It isn’t going to be “no big deal” when the inflation starts to take hold in the United States. When the inflation starts to show up in the grocery stored and retail stores, expect guys like Noah to act like it’s a good thing. But when the inflationary deluge finally comes down on our head, and you can’t find anything on the shelves in the stores, just remember it was guys with Noah’s thinking, the Keynesian/Socialists who brought that situation to us.
In other news, Bob Murphy fully supports Central Economic Planning.
http://kenpruitt666.wordpress.com/2013/08/21/are-austrians-really-opposed-to-central-planning/
“we are prepared now to redefine the term Central Economic Planning.”
I have now “redefined” a cat to be a dog. Make it bark for me Ken.
“If you consider the tail as a leg how many legs does a dog have?”
“Five”
“Four. Cnsidering it a leg doesn’t make it so.”
That’s a story told by … well I won’t say. One of the FA hate fetishes anyway!
A Cat has three tails …
“I have now “redefined” a cat to be a dog. Make it bark for me Ken.”
Ok. Here you go. http://www.youtube.com/watch?v=6hUPWYUWnvA
My argument is invalid.
I’m still trying to figure out why anyone takes Smith seriously. It’s been obvious for a long time he has quite a number of serious flaws in his reasoning ability and knowledge of economics.
The way he describes inflation would make it seem like the Fed is sending checks to every wage earner. Is he really ignorant of the Cantillon Effect?
The last time I checked, very few if any wage earner receives a 2% annualized increase in salary every single day that would enable them to NOT suffer a reduced standard of living.
He’s so clueless about in your face basic facts. Like, the more obvious the fact is, the more he has trouble grasping it.
“the more obvious the fact is, the more he has trouble grasping it”
so funny when it’s you that says it.
I know right? I’m hilarious.
And with regards to Austrian concepts, we gave Bob Murphy as much time as he needed to discuss Austrian concepts, and the one thing he chose to focus on was the interest rate stuff, which I believe Warren responded to. Now, if you’re asking why we dont talk about cantillon effects, economic calculation and all that, the answer is that there is no empirical way of proving that correct or incorrect. To the extent that Austrians have a theory of psychology, then that’s absolutely fine (the rest of economics probably needs to do better on this), but until those ideas are framed in a way that allows for some empirical evidence-based discussion, any debate over those concepts would be like two religions arguing against each other.
Rohan Grey – Columbia Law School organizer of the Murphy/Mosler debate.
http://mikenormaneconomics.blogspot.com/2013/08/robert-murphy-smears-me-for-cheap-laugh.html?showComment=1376745406935#c6752640587690709622.
… but until those ideas are framed in a way that allows for some empirical evidence-based discussion, any debate over those concepts would be like two religions arguing against each other.
What empirical test was done that proved that THIS needs to be the case?
This is a “theory of psychology” as well.
How on earth do you reach these people?
If you can do these …:
Logic Puzzles Archive
[WWW]http://www.puzzles.com/Projects/LogicProblemsArchive.html
… then you already believe that some debates don’t require empirical evidence.
Spoiler for the puzzle “Ice Cream Stands”:
😀
Alice’s Ice Cream
-Boulder
-Thursday
-chocolate chip
Tom’s Ice Cream
-Rockland
-Friday
-peanut butter
Sally’s Ice Cream
-Granite
-Wednesday
-coffee bean
Gary’s Ice Cream
-Marsh
-Tuesday
-peppermint stick
“What empirical test was done that proved that THIS needs to be the case?”
And kerplunk goes Rohan Grey’s protest.
Good one.
Impersonating Rohan Grey: Hey, Austrians; WHY don’t you think an empirical test is required for a correct understanding of economics.
Austrians: That’s a really appropriate question. I’m glad someone wonders about this enough to ask us.
The reason is because economics is all about the individual’s pursuit of his own ends – people won’t buy and sell unless they believe it’s in their interest to do so.
So methodological individualism must be at the heart of the study of economics. Data can only tell you what people HAVE chosen, not ever what they WILL choose.
Even if all data collected after a particular policy has only ever shown a consistent change of some kind, this will not ever prove that policy A results in economic activity B – because all economic activity is subjective to the individual, with constraints placed upon them by scarcity and the subjective economic activities of other individuals.
what’s your point? A law student says something about cantillon effects and economic calculation?
What’s your point? An internet troll says something about something about a law student?
1. Everyone I know uses economic calculation in the daily lives all of the time. If a pizza delivery job promised to pay unskilled drivers $125,000 per year, people would calculate that such would be a real good job. If a similar job promised to pay $3,000 a year, not so much. Isn’t that an empirical test? Must we run a test of that over and over again to know that is true?
2. If an entrepreneur is thinking about going into business to make and sell a style of widgets that will only sell in great numbers if the populace gets an artificial subsidy, his future might be problematic if the subsidy is ended. Isn’t that an empirical test? Must we run a test of that over and over again to know that is true? Won’t the subsidy interfere with economic calculation because the businessman will not really know what the actual current “demand” for his product actually is in the absence of the subsidy? Must we run a test of that over and over again to know that is true?
3. If a counterfeiter prints up a bunch of perfectly appearing cash and goes out and buys stuff with it, isn’t he obtaining stuff to which he isn’t entitled ? Isn’t it true that those items are no longer available to purchase by non-counterfeiters? Must we run a test of that over and over again to know that is true?
4. The ANNOUNCED PURPOSE of Keynesian policy is to facilitate a purchasing power shift and subsidy to create new “demand” that would not exist but for the intended purchasing power shift which, BYW, is an artificial, temporary and non-sustainable subsidy. Doesn’t that interfere with economic calculation because we do not know the actual “demand” for finished products that would exist but for the artificial purchasing power shift and subsidy? Must we run a test of that over and over again to know that is true?
5. Isn’t the purpose of Keynesian policy in general to induce a form of Cantillon Effects in favor of artificially increased “demand” for finished products? Do Keynesians deny that this is their intent and that this happens? Do they have empirical proof?
6. Isn’t the Keynesian “theory” of “sticky prices” and “sticky wages” nothing more that psychological navel-gazing? If people are too stupid to know how to price their wages and goods, how can they be smart enough to vote for the proper Keynesian overseer bureaucrat? Have there been thousands of empirical tests that demonstrate that people can never be taught to understand that prices will probably tend to go down over time in the absence of funny money?
Do Keynesians deny that this is their intent and that this happens? Do they have empirical proof?
Nice.
Lets inflate everyone into the highest tax bracket. We’ll be rich!
Reaganomics!
You are here: Home » Political Economy » Germany is willing to accept a higher inflation target but does it matter?
So I know Bob was speaking as though he were a Keynesian ( or whatever Krugman et al. believe )but here are my silly and probably nonsensical responses to the various statements.
1a ) Will this not facilitate a faster transfer of wealth AWAY from producers and into the hands of banks/government sycophants i.e. those closest to the ‘lubers’ of the monetary world ( wince when Government does it or the Fed it is NOT inflation lol )? Just curious?
1b ) If banks are guaranteed a rate of inflation at a discounted rate what need do they have of savers to give them access to their monies, is it not better to have everyone a debtor lol…? The Fed Prints and hands it to them to target as they will?
2a ) So there was no wage retraction during the last fiscal crisis? Or was there little retraction because Government did not allow retraction since it had JUST RAISED MINIMUM WAGE in July 2009?
2b ) This works out great on paper, and yes it will happen in application as well but as Keynes noted wages are ‘sticky’ and this should mean in both directions. While it is not established that ‘up’ is the only way wages can move due to the past 100 years of Fed intervention and Fiat Currency injection into society this has become the norm… was there not a time where deflation and inflation were based on aggregate supply and demand? So the consistent inflation of wages was not historically always the case…
3a ) I guess I am stupid. I see the potential for lost availability of funds in order to service the debt, Which if they have it. If there is no need to service it or if it is not a fiscal liability please negate it, other words I am afraid I am an idiot that sees being answerable to a debtor on a national scale for anything other than short periods of time or at predictably low amounts as a portion of GDP in order to create a viable bond market and mechanism thereof so that you have flexibility in cash flow ( i.e. a line of credit ) as foolish, and even then why not create a ‘rainy day fund’ and forget about Government as a Debtor altogether?
3b ) Okay… First you say that debt does not matter and the reason is that we can increase the money supply in order to create wealth? Well yes if you are the counterfeiter then the amount of money you counterfeit directly empowers you. As the money moves through the system the people who get the money LAST benefit least from it due to increased competition for resources… I do not think you can inflate your way to prosperity no matter what you expect. Would not the same argument of ‘savers’ demanding a higher rate of return negate the argument of the debt not being at issue if you could SIMPLY inflate your way out if it? Does that not destroy the very confidence that creditors give in order to ‘establish’ rates of interest for a debtor?
I admit it I must be an economic illiterate and a troll… Oh well…
Wow several spelling mistakes and I thought I had read it through lol… So Troll I am…
1b should have been ( since when the Government does it ( print money ) or the fed it is not Counterfeiting but rather inflation.
3b should not have included the words “Which if they have it.” and simply jumped on to the “If there is no need to service it (The Debt)”
>>”HOW DO YOU THINK HE GOT HIS HANDS ON A WHEELBARROW OF CASH IN THE FIRST PLACE? The answer: That was not his life’s savings.”
>”Now you might ask, “Noah, if workers are running to and fro with wheelbarrows, won’t that reduce the
productivity of their labor?”
So let people pay with a debit card. Big deal.
Your rebuttal to him is that using a wheelbarrow to cart money costs time? Talk about nitpicking the edges and missing the point.