BRIEFLY NOTED: For 2022-03-19 Sa:Truth be told, there is no economic theory. There is only history, and its events, and analogies we make based on judgments concerning complicated emergent processes we do not understand very well that come out of the millions of interactions that are the economy. Sometimes, it is true, we distill and crystallize the history into something we call theory where little squiggles that look like ɣ, δ, β, σ, and so on; we then mainline the crystallized product. After mainlining it we can think we know something. But after mainlining crystal meth we experience increased energy, elevated mood, extraordinary confidence, racing thoughts, muscle twitches, and rapid breathing, among other things. Move cautiously. Be data-dependent. Wait for it to become clearer which, if any, historical analogies are relevant to our situation. And always, always, always remember that in an economy that is near and that we have a good reason to fear will long remain in danger of hitting the zero lower bound on nominal interest rates, premature and excessively aggressive moves that raise interest rates cannot easily be corrected.
It seems we are currently dealing with two misapplied analogies: in inflation fighting it is always 1975, and in international relations it is always Munich 1938.
Naively, it looks like inflation comes before a baby boom. The early 20th century rise seems to have been driven by immigrants who arrived in the late 19th century and started families around and after The Great War. The mid-20th century rise seems to have been driven by their children, including many World War II veterans, who started families in the late 1940s and into the 1960s. The late 20th century rise seems to have been driven by that group's children, mainly baby boomers, who started families in the late 1980s and into the 1990s.
Inflation rises when they are young adults looking for careers, buying homes, entertaining, attracting sexual partners and establishing themselves in the world. Then inflation abates as they get down to the business of raising children. In other words, naively, it looks like a demographically driven cycle, and that our current bout with inflation presages a rise in family formation and child raising starting in about five to ten years, let's say 2027-2032.
Was there a similar cycle in the 1870s, after the Civil War? I wouldn't be surprised, though the I'd expect the economic indicators to look a bit different as so much has changed in the economy since then. (There was generational nostalgia for the Gay 90s which fits the pattern for people of that generation idealizing their salad days.)
"danger of hitting the zero lower bound on nominal interest rates, premature and excessively aggressive moves that raise interest rates cannot easily be corrected."
Why not? Why can't the Fed jut switch to buying something else, not ST Treasury securities: longer term bonds, foreign exchange? And whatever they do explained as getting back to 2% inflation?
It seems we are currently dealing with two misapplied analogies: in inflation fighting it is always 1975, and in international relations it is always Munich 1938.
Naively, it looks like inflation comes before a baby boom. The early 20th century rise seems to have been driven by immigrants who arrived in the late 19th century and started families around and after The Great War. The mid-20th century rise seems to have been driven by their children, including many World War II veterans, who started families in the late 1940s and into the 1960s. The late 20th century rise seems to have been driven by that group's children, mainly baby boomers, who started families in the late 1980s and into the 1990s.
Inflation rises when they are young adults looking for careers, buying homes, entertaining, attracting sexual partners and establishing themselves in the world. Then inflation abates as they get down to the business of raising children. In other words, naively, it looks like a demographically driven cycle, and that our current bout with inflation presages a rise in family formation and child raising starting in about five to ten years, let's say 2027-2032.
Was there a similar cycle in the 1870s, after the Civil War? I wouldn't be surprised, though the I'd expect the economic indicators to look a bit different as so much has changed in the economy since then. (There was generational nostalgia for the Gay 90s which fits the pattern for people of that generation idealizing their salad days.)
Again, I'm being deliberately naive here.
"danger of hitting the zero lower bound on nominal interest rates, premature and excessively aggressive moves that raise interest rates cannot easily be corrected."
Why not? Why can't the Fed jut switch to buying something else, not ST Treasury securities: longer term bonds, foreign exchange? And whatever they do explained as getting back to 2% inflation?