tag:blogger.com,1999:blog-5908830827135060852.post8573106502895407173..comments2024-03-29T02:54:56.523-04:00Comments on Bond Economics: The Great Inflation Scare Of 2021 (Or Not...)Brian Romanchukhttp://www.blogger.com/profile/02699198289421951151noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-5908830827135060852.post-61927999732295500842021-11-18T11:10:57.582-05:002021-11-18T11:10:57.582-05:00Thanks for your thoughtful response, Brian. It'...Thanks for your thoughtful response, Brian. It's helpful in its own right and as a point of departure for further investigation on my part.eghttps://www.blogger.com/profile/00785993737401518690noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-52699045843908889712021-11-18T07:35:30.426-05:002021-11-18T07:35:30.426-05:00Not a forecast - a description of how indexation i...Not a forecast - a description of how indexation interacted with inflation in earlier eras (1970s).<br /><br />Insuring everyone against inflation is effectively impossible. It will create winners and losers. It will still also be politically toxic.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-40532661748812921642021-11-17T18:18:55.890-05:002021-11-17T18:18:55.890-05:00《Paying people money to compensate for inflation c...《Paying people money to compensate for inflation creates a feedback loop that causes inflation to grow faster.》<br /><br />Is this a forecast?<br /><br />Why does inflation matter, if both price makers and takers are inflation-insured? Isn't inflation then plainly revealed as simply a psychological power play? Is indexation the best way to expose the power play and neutralize it, by ensuring real purchasing power stability no matter how high or how fast nominal prices may rise?rsmhttp://subbot.orgnoreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-75650321027486489202021-11-17T16:57:05.924-05:002021-11-17T16:57:05.924-05:00Sigh. My previous reply disappeared.
Although Mos...Sigh. My previous reply disappeared.<br /><br />Although Mosler is the highest profile supporter of that view, it was popular in the pre-Volcker period, and variants show up in post-Keynesian critiques of interest rate policy. If you want more information, that literature would be another source.<br /><br />Mosler’s argument is straightforward- higher interest rates increase interest spending. Although governments issue fixed coupon debt, duration is not that long. <br /><br />If you look at mainstream economists, they might start talking about “debt spirals.” What exactly is that, other than rising interest costs destabilizing the economy?<br /><br />As for the Volcker episode, my argument is that sufficiently rapid hikes will destabilize the private sector and cause a recession. The key is speed, not just a level change. Not sure what Mosler’s response to that is.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-46535379046070160332021-11-17T16:12:30.475-05:002021-11-17T16:12:30.475-05:00I am interested in Mosler's (apparent) content...I am interested in Mosler's (apparent) contention that the widely held premise that higher interest rates are disinflationary/deflationary is wrong -- specifically that it is backwards. Something about governments adding money via the interest rate channel being itself inflationary. <br /><br />Do you think he is correct? If so, are you able to explain why or why not?<br /><br />I haven't been able to prove him wrong about anything before, so I'm inclined to give him the benefit of the doubt. In this case, though, it seems to me that central banks have proven that they can cause recessions by raising rates (viz. Volker), and aren't recessions disinflationary/deflationary?eghttps://www.blogger.com/profile/00785993737401518690noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-29642426732856140642021-11-16T10:26:12.649-05:002021-11-16T10:26:12.649-05:00I’m not a forecaster. So I don’t predict things.
...I’m not a forecaster. So I don’t predict things. <br /><br />Paying people money to compensate for inflation creates a feedback loop that causes inflation to grow faster. (Mainstream economists think higher interest rates slow the economy, but even for them, the interest rate might need to rise faster than inflation.)Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-66408674486218896042021-11-16T06:09:59.449-05:002021-11-16T06:09:59.449-05:00So your inflation story is non-predictive? Was Fis...So your inflation story is non-predictive? Was Fischer Black right that inflation is just noise? Why can't the Fed insure us each against inflation by paying inflation as interest on a CBDC account to encourage individual savings as prices rise?rsmhttp://subbot.orgnoreply@blogger.com