& BRIEFLY NOTED: For 2022-03-02 Tu: I think Paul Krugman makes a leap of logic here, without filling in the intermediate steps. Suppose that you do have not general “overheating” but rather concentrated and specific “overheating” in particular sectors causing your inflation: Why should that lead you to moderate your contractionary monetary policy response. What argument would be that concentrated-and-specific is less likely to get baked into expectations of future wage inandprice increases. But why? The 1970s inflation was very concentrated-and-specific, and got very baked into future wage in price increases. The argument Paul does not seem to make—but that I think he believes—is that skewness-inflation is an essential part of desirable structural adjustment. Don’t get me wrong—Paul is very smart. But the range of arguments deployed here is much thinner than I think it should be: Paul Krugman: Overheaters, Skewers & the Nonlinear Economy <https://messaging-custom-newsletters.nytimes.com/template/oakv2>
Total non-economist here, but I have a question about signs of inflation expectations anchoring...if higher inflation expectations were becoming anchored, wouldn't we expect to see individuals and businesses pulling forward their purchases and investments in the face of future higher prices? And if that were so, shouldn't monetary velocity be higher than it is?
One question I have on baked in inflation is in regard to the broad use of bank debit cards to pay for even trivial items. This adds a hidden cost to everything. Oddly, each transaction costs the bank the same in terms of bits and bytes, but garners more for high cost items than low since it is a percentage of purchase. What is the total economic cost?
one of the "dives," I should have written
N. Gruen must be sitting in one of the bars on 52nd Street
Total non-economist here, but I have a question about signs of inflation expectations anchoring...if higher inflation expectations were becoming anchored, wouldn't we expect to see individuals and businesses pulling forward their purchases and investments in the face of future higher prices? And if that were so, shouldn't monetary velocity be higher than it is?
https://fred.stlouisfed.org/series/M2V
Unless they are largely using credit or other financing mechanisms?
We would indeed: the velocity of money should be rising rapidly in that scenario...
One question I have on baked in inflation is in regard to the broad use of bank debit cards to pay for even trivial items. This adds a hidden cost to everything. Oddly, each transaction costs the bank the same in terms of bits and bytes, but garners more for high cost items than low since it is a percentage of purchase. What is the total economic cost?
Can someone clarify for me what the cost-push shock they identified was?
That is not so clear. DSGE models don't so much identify shocks, as infer that there must have been one. It is a strange and mysterious art...