tag:blogger.com,1999:blog-17232051.post8249361391233649314..comments2024-03-28T03:16:14.104-04:00Comments on Noahpinion: Hard money and the gerontocracyNoah Smithhttp://www.blogger.com/profile/09093917601641588575noreply@blogger.comBlogger41125tag:blogger.com,1999:blog-17232051.post-63629347179959380602012-10-11T08:41:09.412-04:002012-10-11T08:41:09.412-04:00Excluded middle! That disinflation could accompany...Excluded middle! That disinflation could accompany a falling labour share isn't a sufficient condition of inflation necessarily being good for workers. It's suggestion, but it could just be evidence that inflation or deflation as such don't explain changes in the labour share of national income and something else (like the institutions through which inflation and deflation are mediated) is necessary.<br /><br />I believe it may have been me that kicked off this particular row, by picking a war with Nick Rowe, and I should like to point out that I don't, in the least, support price stability as an abstract goal. <br /><br />I just suspect that trying to engineer inflation, without taking a view on wage bargaining, might have a pathological failure mode. If price inflation gets ahead of wage inflation, this is going to squash the consumer sector and therefore be self-defeating. I say "Wage-price spiral, bring it on!", but I suspect that the 30 years' war on inflation may have destroyed the institutions that made a wage-price spiral possible.Alexhttps://www.blogger.com/profile/17153530634675543954noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-3060330979783727462012-10-10T11:14:04.629-04:002012-10-10T11:14:04.629-04:00I would like to see some correlations of inflation...I would like to see some correlations of inflation and demographcis applying to countires in the 1920s-1930s, where there were strong swings in the inflation and deflation.<br /><br />Also, applying these correlations to contemporary examples over the last two decades, like Australia, Israel, Sweden, and Canada would be useful exercises.<br /><br />If these correlations between price instability and demographics hold up in the examples above, you would make a believer out of me..Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-46641623908674521982012-10-09T10:21:21.423-04:002012-10-09T10:21:21.423-04:00The real problem is grandma and grandpa run the Fe...The real problem is grandma and grandpa run the Fed - just like they run all of our major institutions....John Gloverhttps://www.blogger.com/profile/05394497010385877915noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-80511783684771038382012-10-06T14:16:03.392-04:002012-10-06T14:16:03.392-04:00No, don't be silly. It's much more reasona...No, don't be silly. It's much more reasonable to think that central banks adjust their inflation targets based on the percent of the population that's between 15-40 years old.Larsnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-87349038766142831562012-10-05T18:33:12.083-04:002012-10-05T18:33:12.083-04:00Noah mentioned there was some guy arguing in this ...Noah mentioned there was some guy arguing in this comment thread that inflation lowers workers' bargaining power, and hence labor's share of income (whereas I had just finished making the opposite case in another post). Lo and behold who do I find here but Dan Kervick.<br /><br />I'm sorry, but this is just utterly preposterous and counter to all the empirical evidence that we have. <br /><br />In particular, disinflation during the eighties and the nineties was accompanied by a significant rise in the profit share of national income in most OECD countries or, equivalently, by a reduction in the labor share. This suggests that changes in the rate of inflation are non-neutral with respect to the distribution of factor income. The consequences of disinflation upon inequality thus may largely be the indirect result of the effects of disinflation upon factor shares. The mechanism by which this comes about is fairly simple. Disinflation is correlated to rising unemployment rates, rising unemployment rates lead to lower labor bargaining power, and lower labor bargaining power is correlated with higher markups. Furthermore, lower inflation rates create lower price dispersion leading to less competition among producers to limit markups. This hypothesis was tested with a panel of 15 OECD countries over the period from 1960 to 2000 and a robust positive relationship between disinflation and the labor factor share of income was obtained:<br /><br />http://pareto.uab.es/wp/2000/46000.pdf<br /><br />Furthermore labor has a long history of favoring inflation over deflation going at least as far back as the Populist Party in the late 19th century. You're clearly on the wrong side of the debate on this question. <br /><br />The Rentiers would just love to hear you deluding yourself.Mark A. Sadowskihttps://www.blogger.com/profile/08259309059705236763noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-36418311331121784862012-10-05T17:21:42.739-04:002012-10-05T17:21:42.739-04:00I don't think that high inflation is bad for t...I don't think that high inflation is bad for the banks, wrote the opposite, as it reduces drastically the amount of non performing loans, and therefore profitability. Especially when coupled with low nominal rates, ideally resulting in negative real rates.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-67422528447368194672012-10-05T17:09:03.653-04:002012-10-05T17:09:03.653-04:00these exist in the UK in the form of ground rents ...these exist in the UK in the form of ground rents (effectively stream of income backed by residential property). Currently one can get around 4% real yield.<br />Also a couple of companies have issued inflation protected bonds with slightly positive yields (unlike the government ones that have negative yields at the moment)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-1769279834147852012-10-05T16:59:29.263-04:002012-10-05T16:59:29.263-04:00Noah -
You are insisting on some sort of a specif...Noah -<br /><br />You are insisting on some sort of a specific relationship between in/de/nil-flation and worker welfare.<br /><br />Why?<br /><br />Ceteris paribus is not a common real world condition.<br /><br />Low inflation has resulted in a lot of pain for workers in the past decade because wages have not kept up. Contrast the late 70's when I got a bunch of COLA's in my pay check. <br /><br />JzB Jazzbumpahttps://www.blogger.com/profile/07337490817307473659noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-84173644370909460492012-10-05T16:51:35.589-04:002012-10-05T16:51:35.589-04:00Also note how finance sector profits as a fraction...Also note how finance sector profits as a fraction of total corp profits has increased since the 80's, as inflation has declined.<br /><br />Plus, I don't see any reason to believe that the Fed takes it's dual mandate seriously. They have had no apparent concern for unemployment in decades.Jazzbumpahttps://www.blogger.com/profile/07337490817307473659noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-31950356454983441562012-10-05T15:27:24.460-04:002012-10-05T15:27:24.460-04:00I think there's something to this - developing...I think there's something to this - developing countries seem to follow a path of much higher growth than developed countries (catching up) but they also always seem to have fairly high inflation.<br /><br />Perhaps growth is a process that overshoots and creates inflation? To some degree?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-12308054428561546822012-10-04T18:31:41.910-04:002012-10-04T18:31:41.910-04:00Okay, I'm sure I commenting without giving thi...Okay, I'm sure I commenting without giving this enough consideration, but, as to that correlation: wouldn't we expect a younger population to more energetic and associated with faster general growth?<br /><br />And isn't faster growth associated with higher inflation?<br /><br />Do they deal with the possibility that you get anemic growth and thus low inflation or deflation when your population is disproportionately old?Adamhttps://www.blogger.com/profile/00848821084269314215noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-58154055718969135152012-10-04T17:45:56.603-04:002012-10-04T17:45:56.603-04:00Inflation achieving generational distribution is a...Inflation achieving generational distribution is a farse. The fed has not been able to generate inflation because there is no wage spiral, all they have managed to achieve was asset inflation (in both stocks, bonds and commodities) which is the worst of both worlds for the young. Not only can you not find a job, and if you do have one, have almost no bargaining power with employers, rent, food and living expenses keep going up.<br /><br />The rich boomers can easily divert their investments to hard assets and likely own property as well as stocks which have inflation passthrough. Meanwhile, I will be forced to pay more and more for necessities and my networth will shrink more and more and my retirement target and house downpayment savings will more and more unreachable. We've already identified that the flow into stocks will continue to be negative as more and more boomers retire, tell me why I should be the last sucker in this ponzi scheme.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-34576753787315555762012-10-04T17:09:26.202-04:002012-10-04T17:09:26.202-04:00Actually I think Dan Kervick has a point. Of cours...Actually I think Dan Kervick has a point. Of course Noah Smith has already conceded it.<br /><br />The left doesn't often frame things this way, but the aim of proper demand growth is to allow real wages to fall when they need to.Arthurhttps://www.blogger.com/profile/16882185097545470347noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-68826801797429978902012-10-04T16:33:22.682-04:002012-10-04T16:33:22.682-04:00OK, snark aside, yes, inflation-indexed bonds are ...OK, snark aside, yes, inflation-indexed bonds are obviously the way to go. But govt. bonds are the lowest-yielding bonds...why don't corporations issue inflation-indexed bonds? For that matter, why not issue inflation-protected asset-backed bonds?Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-36709497679846617662012-10-04T16:30:22.994-04:002012-10-04T16:30:22.994-04:00In our book The Indebted Society, which was writte...In our book <i>The Indebted Society</i>, which was written just before TIPS were introduced, James Medoff and I argued that debt was deflationary because it created a large lender class (which, we sort of hinted, corresponds largely to old people, although we never came out and said it -- but we did note that a lot of lenders live in Florida, a state one of whose senators had proposed a tighter mandate for the Fed). Actually, the idea was suggested to us by John Kenneth Galbraith -- and IIRC he used the word "rentier" when he suggested it.<br /><br />We advocated issuing TIPS (though of course the acronym didn't exist yet) as way to get lenders to stop worrying about inflation. I guess it didn't work.Andy Harlesshttps://www.blogger.com/profile/17582263872850949568noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-2573368900084711092012-10-04T16:08:21.680-04:002012-10-04T16:08:21.680-04:00OK, but if all other things being equal, inflation...OK, but if all other things being equal, inflation is bad for workers (as you contend), and deflation is bad for workers (as most believe), then flat prices are the only option left by power of elimination.Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-27240922961684847972012-10-04T15:32:46.563-04:002012-10-04T15:32:46.563-04:00"I'm so glad someone always gets my littl..."I'm so glad someone always gets my little references..."<br /><br />Some of your older readers may be concerned that you have just told them to "go fly a kite".Sethhttps://www.blogger.com/profile/16486234948199900568noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-48859157689068522842012-10-04T15:31:01.694-04:002012-10-04T15:31:01.694-04:00We don't have wage inflation because of the gl...We don't have wage inflation because of the global labor arbitrage. Sure that's something the upper class is exploiting for gains they somehow don't get around to sharing with the rest of their fellow-citizens. Labor used to be ensconced behind the high walls of "medieval castles" (national boundaries) and then the walls collapsed and the marauding Golden Horde of finance capital rushed in to make serfs of the workers. For the Golden boys, it's a sort of "class war of opportunity".<br /><br />But why did the castle walls collapse? I don't think this is well explained by a planned conspiracy of the upper class. It's partly to do with technological improvements in transportation and information technology and partly to do with "free trade" ideology which reduces an important insight about comparative advantage to an all-purpose cover-story for not-particularly-free trade practices. <br />Sethhttps://www.blogger.com/profile/16486234948199900568noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-14028759363396418252012-10-04T14:18:00.968-04:002012-10-04T14:18:00.968-04:00Ahh, I used the GDP deflator, and the dependency r...Ahh, I used the GDP deflator, and the dependency rate including only old people.Arthurhttps://www.blogger.com/profile/16882185097545470347noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-2602126364005175352012-10-04T12:18:40.826-04:002012-10-04T12:18:40.826-04:00I have no firm feeling about price stability, Noah...I have no firm feeling about price stability, Noah. If you economists can engineer a way to get prices to rise uniformly, with everyone's wages following suit including at the bottom of the pay scale, then I would be happy to see the inflation eating into debt burdens without any other pain inflicted - except on creditors. But it seems to me that when the economists start looking for aggregate inflation, in the real messy world, it is often a scam or tactic for engineering a reduction in real wages.<br /><br />Please note that Randall Wray's major 1998 MMT book <i>Understanding Modern Money</i> has the subtitle: "The Key to Full Employment and Price Stability".Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-67852100100772373152012-10-04T11:20:26.380-04:002012-10-04T11:20:26.380-04:00I may have played a clip from this movie to introd...I may have played a clip from this movie to introduce bank balance sheets in my Money and Banking course...Normanhttps://www.blogger.com/profile/12866136113454261245noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-23199738742635704682012-10-04T09:03:21.962-04:002012-10-04T09:03:21.962-04:00Wow, a labor guy for price stability!
And I thoug...Wow, a labor guy for price stability!<br /><br />And I thought I'd seen everything...Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-31252289746603677862012-10-04T09:02:22.457-04:002012-10-04T09:02:22.457-04:00I'm so glad someone always gets my little refe...I'm so glad someone always gets my little references... ;)<br /><br />TUPPENCE!Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-72425056536910671762012-10-04T08:52:23.299-04:002012-10-04T08:52:23.299-04:00Carlos, I think you and I may have a different ide...Carlos, I think you and I may have a different idea of poor people - I'm guessing loads have no assets at all, whether financial, real, inflation protected or whatever. They might have some debts. So inflation either has no effect on their asset position (it's still nil) or helps to inflate away their debts. They depend on wages/social security, not their negligible or non-existent savings. <br /><br />If it's true inflation, their wages/social security tends go up. They still might not be able to buy houses/TIPS, but they couldn't before.Lukenoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-60983421121813537312012-10-04T08:37:46.716-04:002012-10-04T08:37:46.716-04:00I think Steve (Randy) Waldmann at interfluidity be...I think Steve (Randy) Waldmann at interfluidity beat you to it.reasonhttps://www.blogger.com/profile/10958786975015285323noreply@blogger.com