The Ron Paul types and inflation

[cbirch2]

Again, history is not on the Fed's side.

1) the Fed is new so there is very little history. This crisis was new for the Fed; so far they have done an incredible job. No one knows the outcome but it will for sure rewrite the rules of central banking.


2) the most important lesson so far is that base money does not necessarily cause inflation in any timely way and the system is too interdependent and so too vulnerable to a another similar collapse. Dodd Frank did not address this issue at all.

There's ample history of the Fed not exiting properly and bringing about price inflation.

What there isn't history of, is a Fed balance sheet of this size.

That should scare people, not encourage them.

"Ample history"

There is 1979 and thats it. If anything the central bank has been hawkish on inflation through its history. It didnt do enough during the great depression, even by Milton Friedmans standards.

 

[waltky]

Ever'thin' costin' more under Obama...

Under Obama, Price of Gas Has Jumped 83 Percent, Ground Beef 24 Percent, Bacon 22 Percent
January 20, 2012 – So far, during the presidency of Barack Obama, the price of a gallon of gasoline has jumped 83 percent, according to data from the Bureau of Labor Statistics.

During the same period, the price of ground beef has gone up 24 percent and price of bacon has gone up 22 percent. When Obama entered the White House in January 2009, the city average price for one gallon of regular unleaded gasoline was $1.79, according to the BLS. (The figures are in nominal dollars: not adjusted for inflation.) Five months later in June, unleaded gasoline was $2.26 per gallon, an increase of 26 percent. By December 2011, the price of regular unleaded gas per gallon was $3.28, an 83 percent increase from January 2009. The price of unleaded gasoline never reached the 10-year high of $4.09 back in July 2008 under George W. Bush’s administration, but it did get close.

By May 2011, gas prices hit a high under the Obama administration at $3.93, about four percentage points away from the July 2008 high. The U.S. city average retail price for one pound of 100 percent ground beef was $2.36 in January 2009. As of December 2011, that price had risen to $2.92—a 23.7 percent increase and a new peak. (Ground beef prices have risen every month since November 2009 – 26 months of price increases.) Whole wheat bread prices from January 2009 to December 2011 increased about five percent (5.02 percent) from $1.97 to $2.07. (The inflation rate in December 2011 was 3.0 percent.)

Among the first 36 months of Obama’s presidency, the last four (September, October, November, December) showed the average price of one pound of whole wheat bread hovering slightly above two dollars. Other refrigerated items like ice cream and bacon have increased by substantial amounts. Ice cream prices, for a half-gallon, were $4.44 in January 2009 and $5.25 in December 2011, an increase of 19.1 percent. One pound of sliced bacon in January 2009 was $3.73 and in December 2011 had climbed $4.55, an increase of 22 percent. The price hit a high in September 2011 at $4.82 per pound.

Whole milk prices averaged above three dollars 33 out of the 36 months since Obama took office. In January 2009, the price for one gallon of whole milk was $3.58; but by December 2011, milk prices had slightly declined less than one percent (0.28 percent) to $3.57 per gallon. The average retail price of Grade A eggs per dozen from January 2009 to December 2011 increased by less than two percent (1.30 percent) from $1.85 to $1.87.

MORE

 

[Zander]

We are still deleveraging from the asset bubble.

 

[DSGE]

The question that the "there is no inflation" people need to ask themselves is, can the Fed exit 2 trillion dollars worth of asset positions efficiently enough to avoid massive inflation when the economy rebounds to the point that lending and borrowing increase pace?

History tells us no.

Yes. They started paying interest on reserves specifically to begin using an interest rate corridor system for controlling the Fed Funds rate (just like most other central banks do). They will remove the money created from QE, but even if inflation picks up during that period they can control it by increasing IOR.

 

[DSGE]

Yea pretty much. The monetary base tripled at the same time inflation decreased.

Its amazing, because no one outside of a presidential debate could still stand behind the strict views of Ron Paul. Its a sad state of our society, facts do not matter.

Actually, as a liberal you apparently don't know that inflation is a function of both money and velocity (P=MV). No one denies this, especially in the short term, especially Friedman, but most agree that in the long term velocity reverts to the mean and so inflation is always and everywhere a function of an inflated liberal money supply.

Actually, austrians dont much care for Milton either.

"inflated liberal money supply"

As if its somehow monetary policy = politics. Idiocy.

Monetary policy is not always effective. If you can always combat deflation by printing money, whats the deal with japan

Monetary policy is always effective. It gets more difficult in a liquidity trap, but it's still highly effective if you guide expectations through setting binding level target for either the price level or NGDP (or an exchange rate). The deal with Japan is that they never actually tried to exit the liquidity trap. Whenever inflation started to go above zero they quickly tightened money.

 

[EdwardBaiamonte]

[
Monetary policy is always effective.

a perfectly idiotic thing to say given that most agree it caused the Depression, the Carter inflation, and this Great Recession!! Maybe you meant to say it was always effective in causing depressions recessions and inflations??

 

[EdwardBaiamonte]

Actually, austrians dont much care for Milton either.

actually they were good friends, colleagues, and shared a virtually identical philosophy. Disagreements were minor and within the family. In fact Hayek asked Friedman to write the intro to his book which he did!!!!!!!

 

[DSGE]

[
Monetary policy is always effective.

a perfectly idiotic thing to say given that most agree it caused the Depression, the Carter inflation, and this Great Recession!! Maybe you meant to say it was always effective in causing depressions recessions and inflations??

Perhaps you're unaware of the context of monetary policy - maybe Econ 101 was slack when it came to monetary theory: Monetary policy is always effective at controlling aggregate demand.

It was lack of aggregate demand that caused the Depression and the current downturn. As for the Carter inflation, nobody is suggesting that the central bank print as much money as they want, I want them to print only so much as to stabilize the path of aggregate demand.

 

[editec]

Ron Paul believes in the so-called Austrian School of Economics which strongly favors gold-backed currency and views fiat currency as anathema to sound economic policy.

Ron Paul's economic doctrine has effectively become the party-line for the G.O.P.

Three years ago the Fed started a series of policies that would greatly increase the monetary base. The essentially "printed" 2 dollars for every dollar we had. The Austrian School economists printed dire monetary inflation. It hasn't happened.

This is an excellent example of a monetary theory being put to test and failing to prove its hypothesis, but rather than simply admitting that and moving on, Ron Paul and, by extension, the Republican Party instead have dug in their heels and are insisting that they are right and have been all along despite the abundant evidence that proves the opposite.

Ron Paul would be an excellent addition to this message board.

Where's all this NEW money, Sam?

You wanna tell them or shall I?

 

[samjones]

Where's all this NEW money, Sam?

You wanna tell them or shall I?

They're currently busy propping up the DJIA, Sir.

 

[Norman]

First of all, not every austrian predicts inflation. Thats incorrect.

Anyway, I do. And the CPI certainly does show 3% inflation, which is not exactly low.

Meanwhile only the credit implosion has been swift, and china + other central banks are buying a lot of dollars, so balance of payments and trade deficits are out of whack. USA is in effect exporting the inflation. Demand for money is usually higher during recessions as well. All these things take away from the inflation.

What happens though, when banks start lending and china and other foreign countries start buying goods with their dollars? And what is the exit strategy for fed / US debt? That is the problem here.

 

[EdwardBaiamonte]

Monetary policy is always effective at controlling aggregate demand.

perfectly idiotic as usual from you. Demand is very very low now despite historicially low interest rates, QE123, talf, plus many other supercharged monetary policies. Krugman is calling for huge fiscal stimulus to increase aggregate demand.

It was lack of aggregate demand that caused the Depression

according to Friedman Bernanke and Krugman and Steiglitz it was 1/3 loss of money supply!!

and the current downturn.

actually it been in all the papers it was a housing crisis

As for the Carter inflation, nobody is suggesting that the central bank print as much money as they want, I want them to print only so much as to stabilize the path of aggregate demand.

who's talking about what you want??????

 

[Quantum Windbag]

You know, you would think after seeing those two graphs people would stop crying about the federal reserve causing inflation....

But no doubt they cant make any sense of those two graphs...

Or understand IS-LM

Why did you use the "Less food and energy" chart instead of the complete CPI?

 

[Quantum Windbag]

You know, you would think after seeing those two graphs people would stop crying about the federal reserve causing inflation....

But no doubt they cant make any sense of those two graphs...

Or understand IS-LM

The problem is that the Austrian School generally discounts the CPI (or PCE) as a valid measure of inflation and inists on restricting "inflation" to mean only changes in the money supply.

Wow.

Who cares about changes in the money supply if the price level remains the same?

I guess he does call for an end to the fed. He would like to go back to the turn of the century when people like JP Morgan had to step in and save the economy and the government.

Quite a few people, including Krugman.

Paul Krugman: We Could Use Some Inflation | RealClearPolitics

 

[CrusaderFrank]

You know, you would think after seeing those two graphs people would stop crying about the federal reserve causing inflation....

But no doubt they cant make any sense of those two graphs...

Or understand IS-LM

He uses statistics as a drunken man uses lamp posts - for support rather than for illumination -- Andrew Lang

 

[DSGE]

Monetary policy is always effective at controlling aggregate demand.

perfectly idiotic as usual from you. Demand is very very low now despite historicially low interest rates, QE123, talf, plus many other supercharged monetary policies. Krugman is calling for huge fiscal stimulus to increase aggregate demand.

Did you fail Econ 101? Or did they just forget to tell you that interest rates and the monetary base aren't indicators of the easiness or tightness of policy? Temporary injections of base money and zero interest rates aren't "supercharged monetary policies". Easy monetary policy would be if we saw large NGDP growth.

It was lack of aggregate demand that caused the Depression

according to Friedman Bernanke and Krugman and Steiglitz it was 1/3 loss of money supply!!

And how does money effect the real economy? Through changing aggregate demand!! I'm pretty sure you're lying about having ever taken Econ 101...

and the current downturn.

actually it been in all the papers it was a housing crisis

Oh well if it was in all the papers!

That's like saying the crash of 1929 caused the Great Depression. But we all know now that it was tight money, don't we?

As for the Carter inflation, nobody is suggesting that the central bank print as much money as they want, I want them to print only so much as to stabilize the path of aggregate demand.

who's talking about what you want??????

I am.

 

[Norman]

Its very simplistic to say that fall in aggregate demand caused the recession. I may as well say that the initial raise in demand for housing caused the recession and I do be just as correct. Just saying fall in demand caused it doesn't take into account why the demand fell, and was it actually a good thing.

And now these people want to re-inflate the housing bubble...

 

[DSGE]

Its very simplistic to say that fall in aggregate demand caused the recession.

There's nothing simple about how demand can affect real economic activity.

I may as well say that the initial raise in demand for housing caused the recession and I do be just as correct.

You wouldn't.

Just saying fall in demand caused it doesn't take into account why the demand fell, and was it actually a good thing.

Demand fell because the Fed passively tightened monetary policy. A large fall in demand isn't good because it causes recessions and it's completely avoidable.

And now these people want to re-inflate the housing bubble...

Nobody wants to re-inflate any bubble. You're talking garbage.

 

[editec]

Inflation is NOT the problem we need to worry about right now.

 

[Norman]

Its very simplistic to say that fall in aggregate demand caused the recession.

There's nothing simple about how demand can affect real economic activity.

Indeed, and thats why its stupid to just generalize simplistic statement like "fall in demand caused it".

I may as well say that the initial raise in demand for housing caused the recession and I do be just as correct.

You wouldn't.

How so? Obviously inflation of the bubble WAS what lead to the recession. Yeah you could keep the bubble up by lowering interest rates and misallocating more resources but the bubble problem would still be there. The bubble is the problem, not that it burst because "lack of demand".

Demand fell because the Fed passively tightened monetary policy. A large fall in demand isn't good because it causes recessions and it's completely avoidable.

Yeah and extremely overpriced housing had nothing to do with it. But NO! It wasnt actually housing bubble, it was just general fall in demand! If only could we make people waste their money by buying more overpriced house via increasing demand!

And now these people want to re-inflate the housing bubble...

Nobody wants to re-inflate any bubble. You're talking garbage.

Well increasing demand is the same as reinflating the bubble. The artificial demand is what causes these bubbles.