An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
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Monday, July 9, 2018
Zero Hedge — Fed's Underlying Inflation Gauge Warns Of Imminent Inflation Surge
As if inflation wasn't "mysterious" enough to the Fed already, recently the New York Fed joined the Atlanta Fed in releasing its own measure to track underlying inflation called, simply, the Underlying Inflation Gauge. What is notable is that this latest inflation tracker shows prices behaving quite differently from traditional indexes this year.
According to the UIG's August measure, broad inflation came in at a red hot 3.27%, the highest since September 2005. That compares with just 2.8% annual inflation according to the Labor Department’s CPI and an even more modest 2.0% as measured by the preferred PCE gauge of Fed policy makers....
As if inflation wasn't "mysterious" enough to the Fed already, ... Tom Hickey
Austrian Economists have a point when they say that new purchasing power creation, i.e. fiat and bank credit creation, benefits those who receive it first since they can buy at prices that are not yet affected by the new purchasing power at the expense of those who receive it last or not at all. (Not that their "solution" is any better ethically speaking than the problem and is arguably much worse, mind you.)
But suppose, ignoring bank credit creation for the moment, that ALL fiat creation beyond normal Federal deficit spending for the general welfare was via equal fiat distributions to all citizens? So that all citizens receive the new purchasing power simultaneously?
As for bank credit, it is unavoidable that some are better credit risks than others but with 100% private banks with 100% voluntary depositors, the credit that banks, etc. extend would be PRIVATE CREDIT for private gain, not the PUBLIC'S CREDIT for private gain. The result would be that banks, etc. would be much less able to create new deposits safely (new deposits are new liabilities for fiat) but instead conform largely to a "loanable funds" model.
As if inflation wasn't "mysterious" enough to the Fed already, ... Tom Hickey
ReplyDeleteAustrian Economists have a point when they say that new purchasing power creation, i.e. fiat and bank credit creation, benefits those who receive it first since they can buy at prices that are not yet affected by the new purchasing power at the expense of those who receive it last or not at all. (Not that their "solution" is any better ethically speaking than the problem and is arguably much worse, mind you.)
But suppose, ignoring bank credit creation for the moment, that ALL fiat creation beyond normal Federal deficit spending for the general welfare was via equal fiat distributions to all citizens? So that all citizens receive the new purchasing power simultaneously?
As for bank credit, it is unavoidable that some are better credit risks than others but with 100% private banks with 100% voluntary depositors, the credit that banks, etc. extend would be PRIVATE CREDIT for private gain, not the PUBLIC'S CREDIT for private gain. The result would be that banks, etc. would be much less able to create new deposits safely (new deposits are new liabilities for fiat) but instead conform largely to a "loanable funds" model.