Jun 27, 2022·edited Jun 27, 2022Liked by Noah Smith
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.)
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)
"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.)
Very assured individual.
2 per cent was said to come out of a hat. Was that NZ?
I suppose he's slightly less Hawkish than I expected, which is a small win. Him and Larry Summers drive me nuts.
This is great! Is it possible to your interviews on a podcast feed?
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)
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.