Inflation is transitional. Biden was right. The Fed is wrong.
jabberwocking.com
Team Transitory was right all along. When you look at a better measure of core inflation, it peaked higher than we thought and sooner than we thought. It's been declining pretty steadily for the past 15 months.
So I dissent from the view that the inflation hawks were right. Thanks to the pandemic and its artificial rent controls, rents were a way bigger deal in our current bout of inflation than they were in the past.
The bottom line is that practically everything about this inflationary episode was caused by an unprecedented pandemic that we reacted to quickly. And good for us! It's what we should have done even if we couldn't quite tune it perfectly and we ended up with perhaps a year of heightened inflation.
But it also means that it was all artificial. It wasn't due to underlying monetary policy or out-of-control spending or unions demanding higher wages. It has no analogs in the past and no lessons for the future—unless we encounter another huge pandemic. In that case it does provide a lesson: we mostly did everything right. We'll do a bit better in the future if we respond faster and more competently to the pandemic itself; adopt the same enormous fiscal response we did this time with possibly some tweaks; and maybe go easier on the eviction moratoriums, which aren't really necessary as long as we get the stimulus stuff right. That's probably about it, though I'm open to other suggestions.
It’s time to change our minds about the cause of our current bout of inflation - Kevin Drum
E.J. Dionne writes today about inflation. But I would like to dissent in part and concur in part. Here's what he says: I was among those who did underestimate the immediate threat of inflation in early 2021, so I salute those (notably former treasury secretary Lawrence H. Summers) who warned us...
jabberwocking.com
Team Transitory was right all along. When you look at a better measure of core inflation, it peaked higher than we thought and sooner than we thought. It's been declining pretty steadily for the past 15 months.
So I dissent from the view that the inflation hawks were right. Thanks to the pandemic and its artificial rent controls, rents were a way bigger deal in our current bout of inflation than they were in the past.
The bottom line is that practically everything about this inflationary episode was caused by an unprecedented pandemic that we reacted to quickly. And good for us! It's what we should have done even if we couldn't quite tune it perfectly and we ended up with perhaps a year of heightened inflation.
But it also means that it was all artificial. It wasn't due to underlying monetary policy or out-of-control spending or unions demanding higher wages. It has no analogs in the past and no lessons for the future—unless we encounter another huge pandemic. In that case it does provide a lesson: we mostly did everything right. We'll do a bit better in the future if we respond faster and more competently to the pandemic itself; adopt the same enormous fiscal response we did this time with possibly some tweaks; and maybe go easier on the eviction moratoriums, which aren't really necessary as long as we get the stimulus stuff right. That's probably about it, though I'm open to other suggestions.
