Krugman on Inflation Theorists

[Hypatia]

http://krugman.blogs.nytimes.com/201...ion-theorists/

Inflation Theorists

Christy Romer has a piece framing the inflation debate in terms of “empiricists” versus “theorists”. I’d say she’s being too nice.

I mean, yes, there are theoretical models in which monetary expansion translates immediately into sudden inflation. But these same models also say, essentially, that what we’re experiencing now — a prolonged period of high unemployment in which wage growth has slowed, but wages haven’t plunged — couldn’t happen. So to believe the inflation scare stories you have to be not just a theorist but a theorist who believes his theories, not his own lying eyes.

And really, I don’t think the inflation hawks are relying on models. They’re going with their gut: eek! inflation! money printing! eeevil! This is not a rational discussion.

[c1ue]

Re: Krugman on Inflation Theorists

Christina Romer is a moron...and my views on Krugman should be well known to anyone on iTulip by now.

Let's look at what Ms. Romer wrote:

Unfortunately, this division is no longer useful. Monetary policy makers are all hawks now. Even those who most emphasize the Fed’s role in fighting unemployment oppose policies that would raise inflation noticeably above the Fed’s implicit target of about 2 percent.

Uh, ok. QE1, QE2, and now QE3 are ongoing.

Yet the Fed is composed of inflation hawks?

The Fed could engage in much more aggressive quantitative easing, both in size and in scope, to further lower long-term interest rates and value of the dollar. It could more effectively convey to markets its intentions for the funds rate, which would also lower long-term rates. And it could set a price-level target, which, unlike an inflation target, calls for Fed policy to take past years’ price changes into account. That would lead the Fed to counteract some of the extremely low inflation during the recession with a more expansionary policy and lower real rates for a while.
All of these alternatives would be helpful and would retain the Fed’s credibility as a defender of price stability. And any would be better than doing too little just because some Fed policy makers believe in an unproven, theoretical view of how inflation works.

Uh, we're at ZIRP. The Fed's balance sheet has expanded by the approximate size of the US GDP.

And she wants the Fed to do more?

Ludicrous.

[DSpencer]

Re: Krugman on Inflation Theorists

Uh, ok. QE1, QE2, and now QE3 are ongoing.

Yet the Fed is composed of inflation hawks?

I just stopped reading the article after that point.

I did read the excerpt in your post though and I can't help but laugh at the doublespeak:

"counteract some of the extremely low inflation" So now "counteract" means "continue to a greater extant"?

"retain the Fed’s credibility as a defender of price stability." And "stability" means "increases"?

Dear Mr. Bernanke,

Thanks for your pivotal role in the defense of gold price stability.

Yours truly,
DS

[metalman]

Re: Krugman on Inflation Theorists

Christina Romer is a moron...and my views on Krugman should be well known to anyone on iTulip by now.

Let's look at what Ms. Romer wrote:



Uh, ok. QE1, QE2, and now QE3 are ongoing.

Yet the Fed is composed of inflation hawks?



Uh, we're at ZIRP. The Fed's balance sheet has expanded by the approximate size of the US GDP.

And she wants the Fed to do more?

Ludicrous.

to even qualify to be in the debate you have to be wrong... krugman... prechter... etc.

CI: Give me an example of a broken debate.
EJ: For example the debate about inflation or deflation as potential outcomes of the US credit bubble. They have for years been debated as equally likely and viable outcomes, when in fact one is as likely as summer in the northern hemisphere in August and the other as likely as Paris Hilton inventing a stem cell cure for cancer. The debate should have been about what kind of inflation we’ll have, that we are now having. But for a country that’s ballooned its external Treasury debt from $1.4 trillion to $4.5 trillion in six years, and faces impossible refinancing costs should interest rates rise to reflect the actual rate of default and inflation risk facing the US bond market, a debate about inevitable inflation is put off until the inflation evidence becomes undeniable. By then it’s too late for most people to protect themselves – gold, silver, and commodities prices in general will have already anticipated the event. Same deal for the stock market and housing bubbles. The system provides belief formation cover for a period of time, long enough for a group of interested parties to, for example, make off with money from sales of worthless securitized mortgage securities before the roof caves in, if you’ll excuse the pun. It’s a perverse application of the system of propaganda that Edward Bernays explained in his book titled “Propaganda” in 1928, back before the term carried negative connotations.

http://www.itulip.com/forums/showthr...867#post189867

[Master Shake]

Re: Krugman on Inflation Theorists

This guy has as much cred on US economic policy as Krugman.

[Raz]

Re: Krugman on Inflation Theorists

Christina Romer is a moron...and my views on Krugman should be well known to anyone on iTulip by now.

I'm not sure you're being fair to the morons of America.

[metalman]

Re: Krugman on Inflation Theorists

I'm not sure you're being fair to the morons of America.

+1