Some people believe that this process can go on forever -- that the Fed can keep printing money to pay off the national debt, and banks will just stick that money in their vaults, keeping a lid on inflation. The school of thought that believes this goes by the name of modern monetary theory, or MMT. It’s typically associated with leftist politics -- in fact, Stephanie Kelton, a leading proponent of MMT, is an adviser to the presidential campaign of Bernie Sanders. So as Matt Yglesias notes over at Vox, this is another case of Trump-Sanders policy convergence.
I’m a bit more skeptical. Hyperinflation, like a stock-market crash or a bank run, is a phenomenon that depends crucially on people’s expectations of what other people will do. If everyone thinks that no one else will spend their dollars, inflation stays low. But if some people start to believe that other folks are about to go out and spend their stockpiles of cash, they will respond by doing the same, so they can buy things before prices start to rise. That will turn inflation into a self-fulfilling prophecy. And just as with bank runs and stock market crashes, we know that expectations can shift very quickly and catastrophically. Hyperinflation is like a bank run on a national currency.
So although the danger of hyperinflation looks very remote for now, a President Trump might change that. If he successfully pressured the Fed to start supporting infinite government borrowing, expectations might suddenly snap, and hyperinflation could result. It’s a risk I’d rather the U.S. didn’t take.Bloomberg View
Trump's Ideas About the Deficit Sound Inflationary
Noah Smith | Assistant Professor of Finance, Stony Brook University
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Narayan Kocherlakota | Lionel W. McKenzie professor of economics at the University of Rochester
10 comments:
And he is a finance professor to boot! This is his field.
They are modifying their units with this whole gold standard "inflation!" metaphorical idiocy... idk how they can claim to be scientists...
We have to dispatch with this whole "inflation!" gold standard concept or they will just always go "inflation!" whenever we say govt has absolute authority to issue whatever USDs it wants to appropriate for whatever public purpose the legislative process comes up with...
We cannot accept the whole concept of "inflation!" as legitimate anymore... OUT! OUT! OUT! as Trump would say...
PRICES can vary up and down in USD terms over time ... this is NOT "inflation!" or "deflation!" from these idiots...
In what way is Noah Smith notable?
Bloomberg has given him the soapbox so hence he is "notable"...
Matt: "PRICES can vary up and down in USD terms over time" - that is inflation & deflation according to the standard meanings. The concepts of inflation or deflation have nothing to do with gold standard.
Of course what Noah Smith is saying is quite confused - but par for the course in modern academic "economics".
Calg,
"inflation!" is for incompetent idiots...
actually the inflation meme is what we want. Oh yeah, inflation? So how many people we should keep unemployed to avoid inflation? Let the experts work on that one, is it 20-30 million people, is it more?
"In what way is Noah Smith notable?"
It is just a coincidence goy and it is has nothing to do with(((Noah Smith))) echoing really hard for the cabal's line for his fellow tribesmen at the (((Bloomberg))).
When are you guys going a take hint about these shills and look into the demographics of the (((1%)))?
Perhaps Tom believes it's important to include a shill's POV now and then.
Perhaps Tom believes it's important to include a shill's POV now and then.
I put it up because it mentions MMT and Stephanie Kelton as a bonus. It showed up in my Google alerts feed.
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