Nobody has ever produced a coherent story about how Fed policy can drive interest rates below their natural level without inflationary effects.
Ludwig von Mises wrote in 1949 in Human Action:
A lowering of the gross market interest rate of interest... sometimes the price changes involved are laid against a general tendency toward a rise in purchasing power and do not convert this tendency into its manifest opposite but only into something which may by and large be called price stability...-RW
Human Action hardly qualifies as a coherent story.
ReplyDeleteBold of you to admit you didn't understand it....
DeleteAnon@8:07: Tell us what you believe does then.
DeleteIn addition to Mises' insight (Inflation Above Flat Money Supply), Harry Browne talked about other factors on his Investment Show radio program. One is timing. Also, inflation, he said, results from the supply of money increasing faster than the demand for money.
ReplyDeleteI don't know what Kruggy's thoughts are anymore as he keeps flip-flopping. Is QE inflationary or not, he can't repeat himself. Why are rates low in Japan, and high in Greece? He can't repeat himself.
ReplyDeleteI think what Krugman means is that no one has come up with a mathematical equation that comically ignores reality but is impressive-looking enough for an econometrician to appreciate.
ReplyDeleteHuman Action, to him, is just words; horrible, horrible words.
I think you hit the nail on the head Eric.
ReplyDeleteI think it is much simpler than that. Krugman is a liar, fraud and a coward, as are all Keynesians. As such, Krugman and the Keynesians will never acknowledge or engage Austrian analysis. A few fair statements of Austrian analysis in the MSM and their careers would be over.
ReplyDeleteThen there's that whole Knut Wicksell (1851-1926) thing...
ReplyDelete