Last time you wrote about inflation I was at an extremely packed Disneyworld. This morning I’m in an extremely packed London where inflation is 11 percent. And just like the House of the Mouse, every hotel is booked (we tried to add an extra night), every tour is full, even the National Gallery was packed, and walking around last night in the suburbs, every restaurant was full. There’s a lot of money chasing goods everywhere.
1. No victory lap. The Bernanke-Yellin recession was just dereliction of duty. You do not get the the Medal of Honor for not deserting under fire.
2. Although the Fed acted very quickly to the Feb 2020 panic, it could have done better. The TIPS should never have been allowed to fall as much as it did. The Fed should have been flooding the market with so much liquidity in early 2020 that something like the PPP monstrosity would not have been thunk up and the eviction moratoria would have been unnecessary. [Congress should have installed the proper generous, automatic, Federally funded UI system that they failed to install in 2009, but that is not the Fed's fault.]
3. The early explanations about inflation being "temporary" [and people in the Biden Administration should have kept their mouths shut except to have confidence that the Fed would do its job] should have been more explicit that a) above target inflation when the economy is hit by supply shocks is salutary and b) that the salutary inflation WILL be temporary becasue we will make dammed sure that it IS temporary.
4. And then in at least September they should have started visibly making it temporary. That would have permitted a mini-reversal in February to allow for the additional shock of the disruption to Ukraine grain exports.
Well, yes. Hindsight is great. But I was whimpering at the time that people were talking about the natural rate of unemployment when they ought to be talking about the natural rate of inflation...
I wasn't listening then. :) Natural rates of inflation, unlike interest rates, at least sound like they might have a fighting chance of being estimated. By "natural" wound you mean the instantaneously optimal divergence from the optimal target rate of inflation?
I think the big conceptual problem with popular understanding of inflation is that the optimal rate is not zero, that 2% is just the lowest rate that central banks dare shoot for (although it probably is). "Let me reach zero, sed noli modo."
I regularly bitch to Scott Sumner that he will not derive NGDP targeting from an optimization model.
I think a fair number of people in low-bargaining-power jobs saw nominal wages frozen while costs rose with inflation and blamed the inflation and not the lack of bargaining power. A 2% annual pay cut is not much fun. Of course that doesn’t mean the same dynamics will happen again (or that on net they really were worse off with past inflation), but it’s an unsettling prospect.
I agree. Even a better understanding of inflation will not make the pain go away, but hopefully it will make sub-optimal responses to the pain go away.
Had a very different take on the high school canceling story - kid does stupid but extremely, extremely common teenager thing that is the predictable consequence of giving horny/stupid kids unsupervised use of internet devices with cameras, schoolmates go on a vicious, noxiously self-righteous and almost certainly hypocritical campaign of ostracism totally out of proportion to the offense, on top of that, dragging in a bunch of other kids who did nothing at all. To what end? I don’t believe it will discourage future drunken photo-sharers - that behavior is at least as old as the Polaroid camera.
I would be furious if my kids engaged in this kind of ostracism, especially the enforcement against others. They can make their own decisions about who to be friends with, of course. But policing others is not in their remit.
Fair. He’s got some issues, though he’s fairly open about the mental health causes. I think he’s an interesting writer who sometimes puts his finger on something I haven’t quite figured out myself. Other times, not so much, though I might at least be enjoyably irritated in disagreement. But I understand if he’s on your “no” list, I have plenty of those myself, including a sadly large number of 2010-blogosphere luminaries.
The tldr is just the problem of reconciling a desire for the end of mass incarceration with a seeming lack of belief in forgiveness (or just due process) as a general virtue. Most people in jail are there for violent and/or sexual offenses so forgiveness will have to play a role, and if so, we have to reconcile how we can think this dumb 17 year old (but I repeat myself) deserves unlimited consequences and no sympathy, but keeping someone in jail for decades for violent offenses they committed as an adult is unjust.
Anyhow, it’s not economics, and I don’t mean to digress too far. As I say, my take was different, that’s all.
Last time you wrote about inflation I was at an extremely packed Disneyworld. This morning I’m in an extremely packed London where inflation is 11 percent. And just like the House of the Mouse, every hotel is booked (we tried to add an extra night), every tour is full, even the National Gallery was packed, and walking around last night in the suburbs, every restaurant was full. There’s a lot of money chasing goods everywhere.
1. No victory lap. The Bernanke-Yellin recession was just dereliction of duty. You do not get the the Medal of Honor for not deserting under fire.
2. Although the Fed acted very quickly to the Feb 2020 panic, it could have done better. The TIPS should never have been allowed to fall as much as it did. The Fed should have been flooding the market with so much liquidity in early 2020 that something like the PPP monstrosity would not have been thunk up and the eviction moratoria would have been unnecessary. [Congress should have installed the proper generous, automatic, Federally funded UI system that they failed to install in 2009, but that is not the Fed's fault.]
3. The early explanations about inflation being "temporary" [and people in the Biden Administration should have kept their mouths shut except to have confidence that the Fed would do its job] should have been more explicit that a) above target inflation when the economy is hit by supply shocks is salutary and b) that the salutary inflation WILL be temporary becasue we will make dammed sure that it IS temporary.
4. And then in at least September they should have started visibly making it temporary. That would have permitted a mini-reversal in February to allow for the additional shock of the disruption to Ukraine grain exports.
5. Ain't 20/20 hindsight great! :)
Well, yes. Hindsight is great. But I was whimpering at the time that people were talking about the natural rate of unemployment when they ought to be talking about the natural rate of inflation...
I wasn't listening then. :) Natural rates of inflation, unlike interest rates, at least sound like they might have a fighting chance of being estimated. By "natural" wound you mean the instantaneously optimal divergence from the optimal target rate of inflation?
I think the big conceptual problem with popular understanding of inflation is that the optimal rate is not zero, that 2% is just the lowest rate that central banks dare shoot for (although it probably is). "Let me reach zero, sed noli modo."
I regularly bitch to Scott Sumner that he will not derive NGDP targeting from an optimization model.
I think a fair number of people in low-bargaining-power jobs saw nominal wages frozen while costs rose with inflation and blamed the inflation and not the lack of bargaining power. A 2% annual pay cut is not much fun. Of course that doesn’t mean the same dynamics will happen again (or that on net they really were worse off with past inflation), but it’s an unsettling prospect.
I agree. Even a better understanding of inflation will not make the pain go away, but hopefully it will make sub-optimal responses to the pain go away.
Yes...
Had a very different take on the high school canceling story - kid does stupid but extremely, extremely common teenager thing that is the predictable consequence of giving horny/stupid kids unsupervised use of internet devices with cameras, schoolmates go on a vicious, noxiously self-righteous and almost certainly hypocritical campaign of ostracism totally out of proportion to the offense, on top of that, dragging in a bunch of other kids who did nothing at all. To what end? I don’t believe it will discourage future drunken photo-sharers - that behavior is at least as old as the Polaroid camera.
I would be furious if my kids engaged in this kind of ostracism, especially the enforcement against others. They can make their own decisions about who to be friends with, of course. But policing others is not in their remit.
I think this FdB post is public and says it better than I probably can:
https://freddiedeboer.substack.com/p/ah-carceral-liberalism
I am sorry: I can't do anything other than classify FdB as "weird": <https://freddiedeboer.substack.com/p/statement>.
The apology he took down is on the WABAC Machine at: <https://web.archive.org/web/20210404033216/https://freddiedeboer.substack.com/p/statement>.
Fair. He’s got some issues, though he’s fairly open about the mental health causes. I think he’s an interesting writer who sometimes puts his finger on something I haven’t quite figured out myself. Other times, not so much, though I might at least be enjoyably irritated in disagreement. But I understand if he’s on your “no” list, I have plenty of those myself, including a sadly large number of 2010-blogosphere luminaries.
The tldr is just the problem of reconciling a desire for the end of mass incarceration with a seeming lack of belief in forgiveness (or just due process) as a general virtue. Most people in jail are there for violent and/or sexual offenses so forgiveness will have to play a role, and if so, we have to reconcile how we can think this dumb 17 year old (but I repeat myself) deserves unlimited consequences and no sympathy, but keeping someone in jail for decades for violent offenses they committed as an adult is unjust.
Anyhow, it’s not economics, and I don’t mean to digress too far. As I say, my take was different, that’s all.