Carney and Co. go on the record for inflation, I guess we'll see. For the record here.
What's good for central banks isn't always good for the individuals they are supposed to serve, a lesson likely to come into view even more clearly in the days ahead.
Higher inflation that's to come will mean still-tough times for savers and retirees, whose money has generated little return since the Fed took over the post-crisis economy.
11 comments:
Carney never understood MMT as evidenced by this and other Austrian tinged analyses and comments he's made in the past. How does the Fed create inflation anyhow? If the only thing the Fed can do is change the composition of the public's financial asset holdings, how in the world does that generate inflation? Maybe he means when they raise rates they'll be indirectly bringing on a fiscal expansion as the gov't will have to pay more interest and it will flow through to income? That's about all I can think of.
Mike I wouldn't put it past them to send Summers in there to conjure up a 1980 Volcker redux.... Reset everything for another 25 year run ... Just like the last one...
In any case there is more than normal levels of 'inflation chatter' like this out there currently around the 'taper' issue... Probably means we get a big bond rally at some point, but Summers is a wildcard....
Rsp
Is that "Michael Norman" in front of the stars and stripes above the same Mike Norman that runs this blog? Or is he a doppleganger / twin... or what?
The analysis was from Rosenberg.
He's following the view that the inflation rate is solely the choice of the central bank. It's a popular view in central banking circles now, as they can claim sole credit for the good things in the economy (disinflation), and they can distance themselves from the bad stuff (weak growth).
As a fixed income analyst, I looked at it, and I found that it is tautological. If the central bank determines the inflation rate, what is the transmission mechanism from central bank policy to realised inflation? Inflation expectations! What drives inflation expectations in practice? Realised inflation! Whoops.
Scott Sumner advocates QE because: "Countries that follow conservative “hard money” policies during deflation (the US in the early 1930s, Argentina 1998-02) end up seeing the government taken over by left-wingers".
The great thing about QE is the central bank can be "seen to be doing something to help the economy", when all it's really doing is shovelling money into the hands of the wealthy. Great ploy.
http://www.themoneyillusion.com/?page_id=3447
Of course, y. Anyone that understands economics and its basis in assumptions and employment of econometrics realized that economics is not an actual science because the reasoning can be shaped selectively to look like it is empirical. It's just a shell game masquerading as science to argue for policy.
I suspect that people like Sumner, Friedman, Mankiw, Becker, etc. are well aware of it. David Stockman admitted it.
Yep, that's me Ralph.
"David Stockman admitted it"
Where?
"It's kind of hard to sell 'trickle down,' so the supply-side formula was the only way to get a tax policy that was really 'trickle down.' Supply-side is 'trickle-down' theory."
"Yes, Stockman conceded, when one stripped away the new rhetoric emphasizing across-the-board cuts, the supply-side theory was really new clothes for the unpopular doctrine of the old Republican orthodoxy."
"…the Reagan coalition prevailed again in the House and Congress passed the tax-cut legislation with a final frenzy of trading and bargaining. Again, Stockman was not exhilarated by the victory. On the contrary, it seemed to leave a bad taste in his mouth, as though the democratic process had finally succeeded in shocking him by its intensity and its greed. Once again, Stockman participated in the trading -- special tax concessions for oil -- lease holders and real-estate tax shelters, and generous loopholes that virtually eliminated the corporate income tax. Stockman sat in the room and saw it happen."
"'Do you realize the greed that came to the forefront?' Stockman asked with wonder. 'The hogs were really feeding. The greed level, the level of opportunism, just got out of control.'"
The Education of David Stockman 1981
Ha Tom from your link:
"None of us really understands what's going on with all these numbers."
—David Stockman
That's the most accurate/true information in that article!
;) rsp,
Right, Matt. They just made up a narrative that fit the policy purpose.
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