Wednesday, March 14, 2012

A Report from an Encounter with a Bunch of Keynesians

The EPJ reader and student who asked what question to ask a bunch of Keynesian economists, writes:
Report from my first encounter with the big wigs:

I took your advice! Even though I stumbled a bit, it was a useful learning experience nonetheless.

The event was a panel consisting of private and public sector workers, each giving their take on how to get a job, and what their job was like. There was the former IMF guy, an investment adviser at a large wealth management company, an investment banker, another government economist, and a "business planning analyst" at an upstart government agency. The other students at the event were more interested in asking uninteresting questions on how to write a resume and to how to find job postings. So when I asked my questions, I caused a bit of a stir.

I asked them both the questions you suggested. First the investment adviser answered. He said given his reading of the numbers, "hyperinflation is very unlikely".  He said he bet against the doomsayers by buying into the market last October. He thought that gold would probably max out at $2500, but that it is "wishful thinking".

Next up was the IMF guy. He said, "I see no inflation in the US in the next 12 months." He said in developing countries the risk was higher.

The only other person who answered my question was the business planning analyst, who warned me that according to a book he read, I shouldn't trust the experts and to do my own research. He then said gold is just as likely to hit $1000 as it is $5000.

After the panel discussion, I got to talk to both the investment adviser and the IMF guy again. First was the adviser. I told him that I had asked whether he expected any "significant price inflation", not necessarily hyperinflation. He again said it's very unlikely. He said all the indicators that he looks at aren't pointing to inflation. I asked him if he looked at central bank policies as an indicator of inflation, and he said he doesn't go that deep. (Thus he revealed that his October stock market buy-in was not the result of careful consideration of business cycle theory.)  I asked him, "what about commodity prices?" He brought up silver going from $29 to $35 within the last few months, but didn't seem to think it was that important. He said that the oil price worries him, though...  I noticed that a large line of students had formed behind me, so I thanked him for his time and made my way to the IMF economist.

I pressed him similarly. It wasn't as exciting an encounter as I thought it'd be. He seemed like an easy-going, down to earth guy. I asked him what makes him think that there won't be any significant price inflation. He said that the CPI is still at 2%, which is low and manageable. He clearly doesn't read EPJ regularly. He then said that what happens to inflation in 12 months is "anyone's guess", but in his opinion the US won't be any significant inflation. He admitted to ignorance on oil and gold prices. I thanked him for his honesty, grabbed my coat and left for the class that I was already late for.

All in all, a good experience. If I could do it all over again, I would ask both of these very gracious gentlemen if and how their views would change if significant price inflation occurred in 12 months and/or gold hit $5000 an ounce in two years.

Thanks again for your help!



  1. I think that meetings and Q&A’s like this are great for the Rothbard crowd. I know that in my own thinking about the economy I have a tendency to get too insular and not realize what everybody else is doing. A good investor should be keyed into the madness of crowds. Personally, I usually put so much focus on Fed policy and fluctuations in M2, that I’m shocked in everyday conversations that no one else is either paying any attention at all to M2 or that they even consider rising M2 to be an issue at all. Instead (I’ll speak for myself), so much of what I pay attention to is what people like hedge fund managers and similar bears are doing and what Austrians are saying that every once and a while I need to take a step back from the trees to see the forest. Reading the above makes me feel a lot more confident that we will see heavy inflation… Their big important indicator is CPI????

  2. I think gold and bonds have both been considered safe havens. As the economy picks up, it looks like they are both going down. Investors are turning to stocks expecting higher earnings. I own gold and understand the motivations for holding it, but the reality is most people don't. I still think long-term it'll be fine.

  3. Ahhh... civility,