Hell yes to raising the long-term target. We need more room on the low side for cutting rates in recession. (Alternately, could we go with like a 5% NGDP growth target, or something? Aiming for 3% inflation and 2% real growth, or something to that effect.)
Suggestion for another person to talk to about the models and how far to trust them: Krugman. His "wonking out" posts about the present inflation over at the NYT have been excellent.
Unfortunately 23 would be an unreasonable goal. Maybe 0-4 by 24'? There's definitely merit to an accessible slogan easily reminding everybody of a future with more price stability.
I was interested in his thought that inflation was on its way down anyway without the CB doing anything. It suggests the bank rate moves are to speed up the decline. His position is the same as a British economic journalist published last week. At least that US inflation was on the way down of its own.
I hate it when people are right! Also love it when they are wrong. Secular Stagnation? Larry deserves his moment on the sun after a decade of being wrong. Hey- my watch stopped.
We are definitely going to slow down toward 0.3 to 0.4 MoM inflation. Very hard to continue at the present pace. Inflation is a rate of change. With less fiscal and monetary stimulus and consumers pulling back, how can that rate of change continue? Is gasoline going to go from $6 to $9 (same rate of change as going from $4to $6). So inflation (rate of change) will be lower but in absolute terms we will still be paying astronomical prices for some goods ($6 gas). . Longer-term, demographics (and degree of policy accommodation) should determine inflation. Japan indicates that bad demos= low inflation. However, lots of old people means more consumer spending, less savings and investment and fewer workers, which means higher inflation (particularly with less globalization and immigration)
I really don't understand the people freaking out about '70s style inflation. How can you have a wage-price spiral without rising wages? To the extent that the inflation is causing falling real wages, that's bad, and we should figure out what to do about it (and redistribution, so the pain isn't concentrated on the poorest, should be on the menu). But the inflation itself will be self-extinguishing, like a fire burning inside a sealed bottle.
"My favorite analogy to mainstream economics is Aristotle’s model of the Universe, in which Earth was at its center"....."That is the state of economics today. There is overwhelming evidence that the mainstream vision of the economy is wrong. But mainstream—or “Neoclassical”—economists steadfastly believe in their vision, and ridicule the heretics like me (Keen 2011) who point out its manifest flaws."....."According to mainstream economists like Ben Bernanke , White’s concerns (in 2007) were unfounded because, in mainstream economics, banks are just “intermediaries” between savers and borrowers. “Absent implausibly large differences in marginal spending propensities among the groups,” Bernanke opined, “pure redistributions should have no significant macroeconomic effects.” (Bernanke 2000)"......"White and I begged to differ because, in the real world, banks are not mere “intermediaries,” but money creators, as the Bank of England affirmed in 2014 (McLeay, Radia, and Thomas 2014). When this borrowed money is spent, it adds to aggregate expenditure and income. Negative credit—when debt is being written off or repaid—does the opposite. So, we both predicted that a swing from positive to negative credit would cause a crisis."
Time for govt. to muscle in on money creation, and issue debt-free money on behalf of the public sector. with public money interest rates set at zero.
Current inflation? Requires fuel and rent price controls ; food subsidies for low income groups. Controlling inflation with unemployment is immoral 'flat earth economics'.
Great interview. If you do get a chance to ask a follow-up question, I'd love to get his take on the prospects of secular stagnation coming back (after the current turbulence is over). WSJ is reporting that Summers expects it to come back, and I think so does Krugman.
Hell yes to raising the long-term target. We need more room on the low side for cutting rates in recession. (Alternately, could we go with like a 5% NGDP growth target, or something? Aiming for 3% inflation and 2% real growth, or something to that effect.)
Suggestion for another person to talk to about the models and how far to trust them: Krugman. His "wonking out" posts about the present inflation over at the NYT have been excellent.
Yep gotta call him up
Very assured individual.
2 per cent was said to come out of a hat. Was that NZ?
Yeah, 2% started with New Zealand's '0-2 by 92' campaign
I suppose Blanchard could start the campaign, 0-3 by 23.
Unfortunately 23 would be an unreasonable goal. Maybe 0-4 by 24'? There's definitely merit to an accessible slogan easily reminding everybody of a future with more price stability.
0-5 by 25 rhymes too.
I was interested in his thought that inflation was on its way down anyway without the CB doing anything. It suggests the bank rate moves are to speed up the decline. His position is the same as a British economic journalist published last week. At least that US inflation was on the way down of its own.
https://www.telegraph.co.uk/business/2022/06/21/us-recession-central-banks-still-fighting-last-war/
The link is as above.
I suppose he's slightly less Hawkish than I expected, which is a small win. Him and Larry Summers drive me nuts.
Why him? Blanchard, unlike Summers, uses math...
Fine. It was a good interview. Now - can you get Lawrence H on an give him a good grilling?
Yes!
https://noahpinion.substack.com/p/interview-larry-summers-economist
I hate it when people are right! Also love it when they are wrong. Secular Stagnation? Larry deserves his moment on the sun after a decade of being wrong. Hey- my watch stopped.
This is great! Is it possible to your interviews on a podcast feed?
I haven't done that, but I can do it!
I mean, only if it's easy. I'm obviously already here watching.
We are definitely going to slow down toward 0.3 to 0.4 MoM inflation. Very hard to continue at the present pace. Inflation is a rate of change. With less fiscal and monetary stimulus and consumers pulling back, how can that rate of change continue? Is gasoline going to go from $6 to $9 (same rate of change as going from $4to $6). So inflation (rate of change) will be lower but in absolute terms we will still be paying astronomical prices for some goods ($6 gas). . Longer-term, demographics (and degree of policy accommodation) should determine inflation. Japan indicates that bad demos= low inflation. However, lots of old people means more consumer spending, less savings and investment and fewer workers, which means higher inflation (particularly with less globalization and immigration)
I really don't understand the people freaking out about '70s style inflation. How can you have a wage-price spiral without rising wages? To the extent that the inflation is causing falling real wages, that's bad, and we should figure out what to do about it (and redistribution, so the pain isn't concentrated on the poorest, should be on the menu). But the inflation itself will be self-extinguishing, like a fire burning inside a sealed bottle.
More like this👍
The ninth of the key points - "several equations of neo-Keynesian's basic model are so unrealistic" - is revealing.
https://www.theepochtimes.com/the-deadly-altruism-of-economics_4546343.html
"My favorite analogy to mainstream economics is Aristotle’s model of the Universe, in which Earth was at its center"....."That is the state of economics today. There is overwhelming evidence that the mainstream vision of the economy is wrong. But mainstream—or “Neoclassical”—economists steadfastly believe in their vision, and ridicule the heretics like me (Keen 2011) who point out its manifest flaws."....."According to mainstream economists like Ben Bernanke , White’s concerns (in 2007) were unfounded because, in mainstream economics, banks are just “intermediaries” between savers and borrowers. “Absent implausibly large differences in marginal spending propensities among the groups,” Bernanke opined, “pure redistributions should have no significant macroeconomic effects.” (Bernanke 2000)"......"White and I begged to differ because, in the real world, banks are not mere “intermediaries,” but money creators, as the Bank of England affirmed in 2014 (McLeay, Radia, and Thomas 2014). When this borrowed money is spent, it adds to aggregate expenditure and income. Negative credit—when debt is being written off or repaid—does the opposite. So, we both predicted that a swing from positive to negative credit would cause a crisis."
Time for govt. to muscle in on money creation, and issue debt-free money on behalf of the public sector. with public money interest rates set at zero.
Current inflation? Requires fuel and rent price controls ; food subsidies for low income groups. Controlling inflation with unemployment is immoral 'flat earth economics'.
would like to hear this thoughts on housing market and will the interest rates ever go back to 2-3% ? Thanks
Great interview. If you do get a chance to ask a follow-up question, I'd love to get his take on the prospects of secular stagnation coming back (after the current turbulence is over). WSJ is reporting that Summers expects it to come back, and I think so does Krugman.