Thursday, November 12, 2015

Everything that rises might converge...

...though you can't count on that either.

Colorado Springs Hot Air Balloon Competition, via Wikipedia.

BooMan has taken up the economic insanity of the Republican candidates, in very fine form, but one of the points he made caused some surprise in the readership over there:
It’s cute to see the Journal sound concerned about the fate of Dodd-Frank. After all, reviling the banks and bank bailouts while simultaneously demonizing the law that seeks to regulate them is exactly how this marriage is supposed to work. That’s precisely the kind of wink-and-a-nod politics that has defined the Bush-Goldwater-Wallace coalition from the beginning.
Still, it’s hard to take having to listen to Donald Trump bash free trade, Ted Cruz advocate the Gold Standard and Rand Paul blame the Fed for inflation that doesn’t exist.
"Whaddaya mean inflation doesn't exist, do you know how much a dozen eggs cost? And my rent's up 10%!" Which is actually a reasonable question, though that doesn't stop Boo from being right.

They're talking a little past each other, neither side quite getting what the other side is talking about, so I decided to write a longish comment, which is the only thing I've really written today, so here it is:
Everybody but Boo is forgetting what they learned about inflation in Econ 101 (I didn't take it, too stupid and stoned in those days, but read about it later in life, which may be why it's fresher in my mind), and has drunk the bankster Kool-Aid as to what it is and who it harms.
Inflation is not a rise in the price of fish so the only kind we can afford is garbage like tilapia. Inflation is a decrease in the value of currency, so that in the normal case everything gets a higher sticker price, including labor, and our pay goes up along with the price of fish, more or less, and what we can afford remains more or less the same, though it makes us mad because the numbers on the paycheck make us feel like we should be able to afford more. (Prosperity, with-or-without inflation, is when the value of our paycheck, as opposed to the sticker price, goes up.)
Rising prices are generally a pretty good leading indicator of inflation, I should have added, but they don't tell the whole story, and when you pick out some particular set of prices that are giving you a hard time, there's no necessary reason for ascribing that to inflation at all.
That is not what is going on now. What is going on now is not that currency is becoming less valuable but that certain consumer goods are becoming more valuable, notably a bunch of different kinds of foodstuffs because of drought and overfishing and Chinese people wanting to eat beef, etc., and housing because housing in the US lost all its value seven years ago and has been climbing back to normal. And it's pretty uncomfortable precisely because it's not inflation and our nominal wages aren't going up. (And inflation as measured by the authorities is not going up because it's being measured correctly.)
Banksters hate inflation because it decreases the value of outstanding loans, and working people with mortgages and student loans and big credit card balances should like inflation for the same reason. We should be demanding more of it (and we do, indirectly, when we beg the Fed to remember the other part of its mandate, of creating full employment), as long as old people on fixed incomes are protected by COLAs, which I realize seem to be threatened. We'd have real inflation now, of 2 or 3%, if the stimulus in 2008 and 2009 had been strong enough, and we'd be better off too. At least we'd be less in debt, and the economy would likely be growing in a healthier way.
People like Cruz and Paul with their gold standard lunacy don't seem to me to actually know anything about this. But their masters in the Club for Growth and that kind of place know all about it.
Now I think maybe I should have said something agreeing that housing prices in some markets may be "inflated", that is bubbling, but it's still not inflation. Not, I mean, the kind of thing that the Club for Growth is worried about, anyway. Those inflationista trolls at the Peterson Institute don't object to this sort of thing in the slightest; what upsets them is upward movement in the paystub.

Anyhow. Just so you know I've been thinking about you. 

No comments:

Post a Comment