tag:blogger.com,1999:blog-582368152716771238.post4090442166157288839..comments2024-03-28T14:41:03.793-05:00Comments on The Grumpy Economist: Sequester and vortex redux. John H. Cochranehttp://www.blogger.com/profile/04842601651429471525noreply@blogger.comBlogger16125tag:blogger.com,1999:blog-582368152716771238.post-55122408776074997352014-12-05T20:45:23.486-06:002014-12-05T20:45:23.486-06:00See Albert Einstein - General Relativity.
See Albert Einstein - General Relativity.<br /><br />FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-37554659478833705752014-12-05T18:28:35.582-06:002014-12-05T18:28:35.582-06:00Zack,
"I guess my real question is why profe...Zack,<br /><br />"I guess my real question is why professional economists were so worried about it."<br /><br />Pick your answer:<br />1. Because professional economists get paid to worry<br />2. Because professional economists take the view that deflation "unfairly" favors creditors at the expense of debtors<br />3. Because economists are under the delusion that deflation negatively affects a government's fiscal positionFRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-43214890212623264672014-12-04T04:12:50.693-06:002014-12-04T04:12:50.693-06:0080 years, OMG! So centuries old Newton fallacies m...80 years, OMG! So centuries old Newton fallacies must be oh so wrong!!! Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-63644870045194369962014-12-03T22:49:02.666-06:002014-12-03T22:49:02.666-06:00Krugman's claim is it any different than conve...Krugman's claim is it any different than conventional monetary expansion in a country with positive interest rates, right? The market clearing rate is negative, and negative deflation is - inflation? And you're worried about runaway 1970s inflation for what reason now?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-1377923892473074612014-12-02T21:59:10.525-06:002014-12-02T21:59:10.525-06:00Frank,
Thanks, I agree that the theory behind it ...Frank,<br /><br />Thanks, I agree that the theory behind it is very simplistic. I guess my real question is why professional economists were so worried about it. Japan always gets mentioned when it comes to deflation, but even this hardly fits the "spiral" story. They have had about two decades of either very low inflation or very low deflation. From what I can find, even when Japan has had deflation it has almost always been less than 1% and never averaged 2% for a given year- certainly nothing that would qualify as a deflationary spiral.<br /><br />http://www.inflation.eu/inflation-rates/japan/historic-inflation/cpi-inflation-japan.aspxZacknoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-90619539456805519832014-12-02T19:14:39.120-06:002014-12-02T19:14:39.120-06:00Targeting nominal GDP growth or a higher inflation...Targeting nominal GDP growth or a higher inflation rate seem to amount to the same thing. <br /><br />I do not understand the mechanism by which Krugman and others think that inflation will somehow stimulate the economy:<br /><br />First. Having lived through the 1970s it seems to me that one mechanism might be that fear of inflation stampeded the middle class into over-investing in housing temporarily stimulating the economy. That mechanism is both undesirable and a spent force.<br /><br />Second: Inflation provides some measure of universal debt relief but it operates indiscriminately. If debt relief is appropriate for some it should be targeted, perhaps through amendments to the bankruptcy laws. In the meantime low interest rates are a huge cash flow benefit to most borrowers.<br /><br />Third: Anyone who believes that inflation is needed to address wage "stickiness" must believe:<br />1) there is some materially large group which is materially overpaid to the point where a drop in real wages for that group would materially benefit the general economy; and<br />2) The overpaid group does not have the political or economic leverage to protect their real incomes in the face of inflation. <br />My question for Krugman, Delong etc is: "who are these overpaid, but powerless, people and how many of them are there that they can move the whole economy?"Absalonhttps://www.blogger.com/profile/09131268683451462949noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-74000468787096870272014-12-02T19:02:50.953-06:002014-12-02T19:02:50.953-06:00@Zack - No, I am not being sarcastic.@Zack - No, I am not being sarcastic.Absalonhttps://www.blogger.com/profile/09131268683451462949noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-47663343645965205272014-12-02T16:15:20.409-06:002014-12-02T16:15:20.409-06:00Economists suffer from a pathology called "He...Economists suffer from a pathology called "Hero Syndrome":<br /><br />http://en.wikipedia.org/wiki/Hero_syndromeFRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-50952658193151435092014-12-02T13:57:19.265-06:002014-12-02T13:57:19.265-06:00Hum, who claims that the other side "has been...Hum, who claims that the other side "has been wrong about everything" ?! I don't think professor Cochrane has that kind of attitude. Having said that, I do think the entire gospel of "deflationary spiral" and "vortex" a total absurd. There has never been a deflationary spiral anywhere in time or space. But what really amazes me is not that keynesians have gotten a lot of things wrong without admitting either. Is that they managed to convince a lot of people that inflation is not only good, but it should be higher, so that "we" (the economy as seen by policymakers, I assume) stay away from the zero lower bound, and therefore policy makers retain control over the economy. Notice that the objective of higher inflation is not to have a healthier economy, but "be able to control it better". How not democratic and not alined with a democratic country that is I leave to the other readers to assess...Jose Romeu Robazzinoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-81024488853921641802014-12-02T04:28:38.507-06:002014-12-02T04:28:38.507-06:00I am tired of the absurdity of the keynesian think...I am tired of the absurdity of the keynesian thinking! How can we still believe in the multiple fallacies of the General Theory about 80 years after its release! The Keynesian system is really "the economics of illusion" (to paraphrase a book by L. Albert Hahn in 1949).Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-35387797196668426522014-12-01T22:58:35.680-06:002014-12-01T22:58:35.680-06:00Zack,
See:
http://research.stlouisfed.org/fred2/...Zack,<br /><br />See:<br /><br />http://research.stlouisfed.org/fred2/series/CPIAUCNS<br /><br />There have been several fairly recent periods of deflation in the U. S. <br />1921-1923, 1930-1933, and even the slight period 2008-2009.<br /><br />The most persistent deflation was what occurred from 1930-1933. <br /><br />The simplistic story of a "spiral" - inflationary or deflationary - is a demand story about expectations. People expect prices to fall (forever?) and so delay purchases - deflationary "spiral". People expect prices to rise (forever?) and so move consumption forward - inflationary "spiral".<br /><br />The story misses what happens to the expectations of producers, it misses technological changes, it misses all of finance (debt / equity), and a lot more.FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-77286320771347765292014-12-01T22:38:02.194-06:002014-12-01T22:38:02.194-06:00" your writing communicates a hostility to an..." your writing communicates a hostility to anyone who might dare to disagree with what you have written."<br /><br />Not anyone. Only as a response to *someone* who actually does what you indicate, i.e. Krugman who attacks the person, condescends, attacks motive. Falstaffhttps://www.blogger.com/profile/06865552505521389155noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-26347653605416509202014-12-01T21:41:04.011-06:002014-12-01T21:41:04.011-06:00I think the relative success of the American econo...I think the relative success of the American economy post -2008 is due to a mildly expansive central-bank policy.<br /><br />Would that the Fed be more aggressive and show more resolve in targeting nominal GDP growth, or even in selecting and effectively targeting a moderately higher inflation target, perhaps a 2-3 band, ala Aussie's central bank.<br />3% inflation in not TEOTWAWKI--indeed that is about the average CPI 1982-2007, not a bad run.Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-89636228076103203832014-12-01T20:44:05.489-06:002014-12-01T20:44:05.489-06:00Absalon- are you being sarcastic? Otherwise I com...Absalon- are you being sarcastic? Otherwise I completely disagree with you on that point.<br /><br />A more serious question (for Cochrane or anyone else): I understand the concept of a deflationary spiral, but what are the best historical examples of this actually happening? Zacknoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-30058655855209823682014-12-01T19:00:26.604-06:002014-12-01T19:00:26.604-06:00I think you are wrong. Charitaby and respectfully,...I think you are wrong. Charitaby and respectfully, yours.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-43169468625321537592014-12-01T15:03:23.282-06:002014-12-01T15:03:23.282-06:00I am sort of neutral between you and Krugman since...I am sort of neutral between you and Krugman since I think you are both wrong. :-)<br /><br />It does seem to me that your writing has a "grumpier" edge to it than Krugman's does. You come across as being openly contemptuous of people who disagree with you and that tone permeates your writing. Your contempt is pre-emptive: your writing communicates a hostility to anyone who might dare to disagree with what you have written. Absalonhttps://www.blogger.com/profile/09131268683451462949noreply@blogger.com