Wow. Man I can't believe how much you are in Krugman's head. He hasn't stopped blogging about inflation.Actually, in Krugman's latest post on price inflation, I agree with his main point. He writes:
One response of inflation-fearers to the absence of the inflationary outburst they’ve been waiting for is to reject the numbers, and claim that the BLS is hiding a much higher rate of inflation than the official numbers say. You see that a fair bit in comments, and some credulous mainstream figures (i.e. Niall Ferguson) have also bought into this story. How do we know that it’s wrong?Well, I know economists at the BLS,also, (in fact I am having lunch with one on Tuesday) and I would agree with Krugman that they are straight shooters doing the best they can. I have problems with "core" inflation, but the BLS provides all the data so that I can work back to get data in any format you want.
One answer is that people I know work with the BLS, and they really are doing the best they can. But that won’t convince the skeptics, since I am presumably also part of the conspiracy. Bwahahahaha.
This is why when the major inflation hits I fully expect that Krugman will have to agree with me that the BLS is correctly measuring it.
One other curious point in Krugman's last inflation piece is that he posts a chart showing CPI and the Billion Prices Index. His point is that the CPI is moving in tandem with the BPI, which suggests there is no manipulation of the CPI number, since the BPI is taken from raw data and can't be monkeyed with. Point taken. But what I found interesting about the chart is that while Krugman continues to write that there is no price inflation. From the low point in the CPI and BPI indexes during the Great Recession to present, prices are up in the range of 8.3%. For a guy, like Krugman, who fears deflation, you would think this is a number he would want to explain.
Start quoting Hari Seldon and you can be sure that both Gingrich and Krugman will take note.
ReplyDelete8.3% inflation over slightly more than 3 years is roughly equivalent to 2.5% annual inflation during each of those years. 2.5% annual inflation is considered to be insignificant inflation.
ReplyDeleteAn increase over three years of 8.3% translates to about 2.7% (a little less) of inflation each year. Since the Federal Reserve's goal is low but positive inflation this is very close. Also clearly this uses the most severe starting point. Going back just a couple of months further reduces the geometric average to below 2% inflation each year.
ReplyDeleteAgain that is the "mandate-consistent" inflation rate as defined by the Federal Reserve. The Federal Reserve never promised an inflation rate, as measured by the CPI or the PCE of 0%. The Federal Reserve also is committed to this inflation rate for the headline CPI, or rather PCE, not core CPI. There is however academic research that shows that the less volatile core index is a better predictor of headline CPI over the medium term compared to the current headline index. You don't need to audit the Fed to find this out, it has been stated in scores of speeches and research papers.
The promise is low and stable inflation, not a stable CPI. You don't need to audit the Fed to find this out, it has been said hundreds and hundreds of times in speeches and academic papers over the last decades. You may think this is inappropriate and prefer a goal of 0%, literal price stability. As you also know from your friends at the BLS, the CPI overstates inflation, somewhat contrary what many people who commute hours by SUV seem to think. Or the steak vs. hamburger substitution conspiracy people (you know who you are).
If you want to use the average increases of 2.7% as evidence of hyperinflation, that is almost comical. It surely seems Paul Krugman's evidence got to you and you can no longer refute it. You basically stated that inflation so far has been very close to (if not exactly at, given starting points) the announced goal of Federal Reserve policy. After two rounds of QE which many people all of last year and this year predicted to surely increase inflation. Yourself included. Check your own archives. You conceded the point with this, regardless of the rhetoric you try to hide behind.
Things are always running through Krugmans head. they don't dare stop.
ReplyDelete"Where's the heart attack those quacks keep warning me about?" said the 500 pound man as he shoveled down his third big mac of the day.
ReplyDeleteTiSch, so where do we find all that deflation Paul Krugman is warning us against? We are in a liquidity trap after all.
ReplyDeleteNo, Krugman is getting into your head.
ReplyDelete@gienek
ReplyDeleteKrugman has actually acknowledge that the fact that there has not been sustained deflation: See Subsiding Deflation - 11/17/11.
His explanation is that people are less willing to cut nominal wages and prices than he expected and therefore have chosen not to sell (either their labor or their products) rather than to sell at a lower nominal price.
Whether or not you buy this argument, despite the lack of deflation, there really hasn't been any hyper inflation either. Inflation has essentially continued along the same path that it had been on for most of the past three decades (i.e. very low).
Krugman is very, very concerned about you. With all of his false predictions over the last few years and people starting to notice Austrian Econ thanks to the internet and people like Ron Paul, he is definitely lashing out at those who threaten to expose him among the masses.
ReplyDeleteIf you were someone who didn't know in 2007 whether a recession was going to take place or not, wouldn't you hate the people who talked about it coming for years in specific detail?
Krugman predicted:
ReplyDeleteDeflation right now
The stimulus would work
That QE2 would not increase commodity prices unless demand stimulated
That he wasn't sure in 2007 if a recession was coming
Krugman stated
That TARP was necessary
The Japanese earthquake was good for their economy
That whenever food prices and commodities go up that it is due to "volatility" and nothing to do with government increasing the money supply in circulation
If you want to use the average increases of 2.7% as evidence of hyperinflation
ReplyDelete2.7 percent insignificant? Only if you are an elitist bankster living off the benefits of the Cantillon Effect. Try being a pensioner living on a fixed income, jackass. That's 27 percent over a decade.
There was 4% deflation in 2008. The Fed took up QE and hit their target rate of around 2% annual inflation. If it were not for the stimulus measures by the Fed, there would be significant deflation.
ReplyDeleteIn 2002, Krugman predicted that Greenspan would have to initiate a housing bubble to keep the economy going:
http://www.nytimes.com/2002/08/02/opinion/dubya-s-double-dip.html?pagewanted=1
2006 Krugman predicts bursting of housing bubble:
http://www.youtube.com/watch?v=qo4ExWEAl_k
His current predictions hold true in 2011:
http://krugman.blogs.nytimes.com/2011/06/28/3-5-out-of-4/
The goal of investing for retirement is to account for steady inflation , jackass (such as 2% annually). And social security is adjusted for inflation.
ReplyDelete@Anonymous:
ReplyDeleteFirst off, 2.7% annual inflation is not hyperinflation by any reasonable comparison. In the late 1970s, we had 4 times that rate. In countries that actually have hyperinflation, prices can double or more over the course of a month, rather than over the course of three decades.
With respect to pensioners, many defined benefits pensions, including Social Security include a cost of living adjustment. If you have a defined assets pension (or just retirement savings), the cost of inflation should be roughly reflected by the appreciation of those assets (in nominal dollars). In either case a "fixed income" will not truly be "fixed" with respect to inflation.
I'm sure there are some people out there that are hurt by inflation, even low inflation such as we are facing, but there are also those who are helped by it (see, e.g. anyone with a fixed rate loan, such as many student loans and mortgages).
@Anonymous:
ReplyDeleteI would also posit that the real problem with inflation is when there is a dramatic and unexpected change in the inflation rate, rather than constant, high inflation. If everyone knows that there is going to be a consistent 100% inflation per year, they can work this into their contracts, i.e. you aren't going to deposit money with your bank unless you are getting about 100% interest, the bank won't lend money (to you or to a business or to the government) unless they are receiving 100%+ interests, wages will likely be indexed to 100% inflation and so would pensions. Assets, of course, should always rise roughly with inflation.
The only real problem comes when all of the sudden 2% inflation turns into 20% inflation or 200% inflation. Now, people have not worked this increase into their contracts and you wind up with somewhat arbitrary winners and losers.
Whether or not you agree that the 2.7% inflation we have been facing is significant or not, you must agree that we have not had dramatic swings in inflation over the past few years or past few decades. As a result, inflation has mostly affected your accounting rather than your wallet.
Couple things...
ReplyDelete1) I don't understand why commenters keep saying "X% inflation is not hyperinflation". Who is claiming X% inflation IS hyperinflation? If you're replying to a comment not available in this post or the subsequent comments, you should source it for the rest of us.
2) There is no way to really know what effect monetary inflation has had on price inflation. We can be fairly sure housing prices have not fallen as much as they would/should have had the Fed and government not taken actions to direct new dollars to the housing sector. The same goes for the stock market and commodities (albeit for different reasons). Point being, unless you think prices and the signals they send to the market are unimportant, price inflation isn't even the most damaging effect of monetary inflation.
Krugmanite1051 said...
ReplyDeleteThe goal of investing for retirement is to account for steady inflation , jackass (such as 2% annually). And social security is adjusted for inflation.
I didn't think it was necessary to point out that Social Security is not the only pay out pensioners receive, and for anyone comfortably middle class after thirty five plus years of working, it is certainly not the most substantial. However, I over estimated the intelligence of Keynesians in my assumption that it was not necessary to state the obvious. My mistake. I'll try to avoid doing that in the future.
wow this is an intellectually dishonest blog. Why would you single out the lowest point, after collapsing demand of the recession had temporarily suppressed prices, to use as your start period? It seems like you're grasping for whatever fits your biases. And even so, if you do take that low point, the yearly average inflation is still below the 3% range, and should be considered low by historical standards! How much evidence do you need to see before you can admit that you're intellectual framework doesn't provide an accurate model of reality?
ReplyDeleteFirst off, 2.7% annual inflation is not hyperinflation by any reasonable comparison. In the late 1970s, we had 4 times that rate. In countries that actually have hyperinflation, prices can double or more over the course of a month, rather than over the course of three decades.
ReplyDeleteIn the context of the worst performing years of the post WWII economy, a 2.7% rate should raise a few eyebrows. There is nothing but monetary policy to justify that rate. Where is that going to go if the economy gains traction? Are Keynesians even aware of the productivity trap? Through inflationary monetary policy you are shortening the rate of growth that can occur before the economy 'overheats', as your kind would put it. I doubt Keynesians will acknowledge that fact given there ideological insistence that their preferred policies are consequence free.
@Robert Lewis
ReplyDeleteI'm sure there are some people out there that are hurt by inflation, even low inflation such as we are facing, but there are also those who are helped by it (see, e.g. anyone with a fixed rate loan, such as many student loans and mortgages).
Thats the whole point isn't it, to transfer wealth from one class to another?
Of more interest is the 1920s where prices were also quite stable and few foresaw any problems. And I am still stumped by lack of discussion of John Williams and shadowstats, Perhaps this is what Mr. Wenzel means when he suggests that one has access to the data and can present it in any format.
To the anonymous at 2:19 who called me a jackass:
ReplyDeleteYou knew or should have known that the goal for inflation is about 2% annually. If not, why not? Also if you invested in gold over the last years as Dr. Paul suggested, wouldn't you have generated much higher return than +2.7% on average? Also, you knew about the housing bubble before everyone else, so could have shorted the ABX market in 2006, right?
And finally, growth rates of 2.7% annually compound to 30.528% not 27%, get the math in your insults straight.
To the comment moderators: Nice to see, that one comment calling another a jackass gets past the screen. Shows the classiness of the site.
In 2007 Krugman stated that he did not know that there would be a recession. The video has been posted here. Period. If he were really that confident of a bubble bursting, he would have said that just as the austrians did. He also would not have advocated and begged the Fed to cut interest rates to make the bubble much worse.
ReplyDelete"wow this is an intellectually dishonest blog."
Yeah, sort of like when Krugman commented on the debate from a couple months ago and mentioned that RP was asked about letting someone die who did not have healthcare, then intentionally DID NOT GIVE RON PAUL'S RESPONSE, but instead gave the response of a handful of people in the crowd while leaving the impression RP agreed with it.
TiSh,
ReplyDeleteEvery comment here is published, unlike on the NY Times when links to articles, videos, etc that disprove Krugman's claims or point out his lies are censored and not allowed to show.
@Anonymous:
ReplyDeleteI do have some concerns that priming inflation now might cause a problem once the economy takes off. That being said, I'd prefer to treat a problem that we are actually facing than fear a problem that we might possibly face.
@Lysander:
The goal isn't to transfer wealth, it is to improve demand. Too much debt has caused a lack of demand. Without demand, much of the economy has been left fallow, resulting in a very serious loss of wealth. If we had greater inflation, debt would go down, demand would go up, the economy would start moving and everyone would wind up better off.
@Robert Lewis
ReplyDeleteThe goal isn't to transfer wealth, it is to improve demand.
Lol, you are funny.