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QE and printing money are supposed to INCREASE inflation and interest rates. According to econ 101, anyways. More supply of dollars means the value of the dol

QE and printing money are supposed to INCREASE inflation and interest rates. According to econ 101, anyways. More supply of dollars means the value of the dollar goes down. At the time these policies were enacted, deflationary spiral was a real risk. And the politics in 2010-2014 meant that increasing the money supply in any way besides handing it directly to rich people would be blocked by the Tea Party people. So we got QE instead of, say, big infrastructure projects or something. The fact that inflation has stayed persistently low despite all of that and the recent fed rate hikes says that something else is afoot. The really scary thing? The 'adults in the room', 'real experts', etc have no theoretical model that explains this. They're people with 40 years experience in saying this is impossible. Yet none of them are fired -- they're still churning out think pieces in DC and people still take them seriously.

bildung 8y ago
> The really scary thing? The 'adults in the room', 'real experts', etc have no theoretical model that explains this. They're people with 40 years experience in saying this is impossible. Paul Krugman has actually written about that for many years now. First for Japan in the 80s, then applying the model to the more recent events. His blog is a good source for short snippets explaining it. The keyword of interest here is "liquidity trap", see e.g. https://krugman.blogs.nytimes.com/2013/04/11/monetary-policy-in-a-liquidity-trap/ https://krugman.blogs.nytimes.com/2013/04/11/monetary-policy...
- yourbandsucks 8y ago
  I think he was talking more about the gold-hawking, "hyperinflation is coming" types -- the ones who were flat out, obviously wrong, in that their predictions from 2008-2012ish were 100% the opposite of what actually unfolded. Nobody cares that they were wrong because they're not trying to get it right. They're propagandists. You never heard a peep from them during Bush, then the sky was imminently going to fall as soon as Obama was elected. Now they're quiet again. If they were actually deficit hawks, they'd have loved Bill Clinton and Obama, and hated Bush and Trump. I was talking more about Brooking Institute types who are supposed to be trying to get it right.
  - IncRnd 8y ago
    > If they were actually deficit hawks, they'd have loved Bill Clinton and Obama, and hated Bush and Trump. You have a subtle bias there. Both Bush and Obama essentially doubled the _debt_.
    - cromwellian 8y ago
      Technically, the debt was caused by government revenues dropping through the floor and automatic stabilizers kicking in in 2008-2009 (e.g. Bush's final 2008 FY budget had a $1 trillion hole). Obama did not appreciably change the structural fiscal situation, he maintained the status quo (making Bush tax cuts permanent, mostly continuing global war on terror). The real damage was caused by a) Bush tax cuts b) Medicare Part D (unpaid for, $100b per year) c) 2 unfunded wars. Still, Obama ended office with a 40 year low average budget deficit per GDP. I don't really see this as bias, but as fact telling. The Tea Party was intensely 'interested' in budget deficits during Obama's reign, despite the fact that he mostly governed as a center-right, he made permanent Bush's tax cuts, had a stimulus package that was almost half business tax cuts, and accepted austerity (sequester). By contrast, Bush massively increased government spending and liabilities, which mean when the bottom dropped out of the economy in 2008, the debt was going to increase tremendously. Where was the Tea Party in 2000-2008? Somehow they were unable to see $1.1 trillion being flushed down the toilet in Afghanistan and Iraq, and didn't seem to care about the Pentagon not even being able to account for hundreds of billions of 'misplaced' dollars lost in their balance sheet. This makes the principled 'fiscal conservatism' of Republicans look feigned and disingenuous, and merely used as a scare tactic to rally around when they are in opposition in order to attack government. Magically, deficit concerns disappear once they get into power, like the $1+ trillion deficit they just created with their latest tax cut package.
    - yourbandsucks 8y ago
      It's not biased at all. Debt is a trailing indicator. Deficit is the rate at which you create/paydown debt. If you want to change the debt level, you change the deficit and then apply time. $X/year * Y years = (X*Y) difference in debt. It's literally the only way to do so. Is that honestly controversial or hard to understand? We're talking 8th grade algebra here.. you don't even need to generalize it into calculus.
rsync 8y ago
"The fact that inflation has stayed persistently low despite all of that and the recent fed rate hikes says that something else is afoot." I think a possible explanation is that deflationary pressure is still extremely high and that a deflationary spiral remains a risk.

bildung 8y ago

> The really scary thing? The 'adults in the room', 'real experts', etc have no theoretical model that explains this. They're people with 40 years experience in saying this is impossible. Paul Krugman has actually written about that for many years now. First for Japan in the 80s, then applying the model to the more recent events. His blog is a good source for short snippets explaining it. The keyword of interest here is "liquidity trap", see e.g. https://krugman.blogs.nytimes.com/2013/04/11/monetary-policy-in-a-liquidity-trap/ https://krugman.blogs.nytimes.com/2013/04/11/monetary-policy...

yourbandsucks 8y ago
I think he was talking more about the gold-hawking, "hyperinflation is coming" types -- the ones who were flat out, obviously wrong, in that their predictions from 2008-2012ish were 100% the opposite of what actually unfolded. Nobody cares that they were wrong because they're not trying to get it right. They're propagandists. You never heard a peep from them during Bush, then the sky was imminently going to fall as soon as Obama was elected. Now they're quiet again. If they were actually deficit hawks, they'd have loved Bill Clinton and Obama, and hated Bush and Trump. I was talking more about Brooking Institute types who are supposed to be trying to get it right.
- IncRnd 8y ago
  > If they were actually deficit hawks, they'd have loved Bill Clinton and Obama, and hated Bush and Trump. You have a subtle bias there. Both Bush and Obama essentially doubled the _debt_.
  - cromwellian 8y ago
    Technically, the debt was caused by government revenues dropping through the floor and automatic stabilizers kicking in in 2008-2009 (e.g. Bush's final 2008 FY budget had a $1 trillion hole). Obama did not appreciably change the structural fiscal situation, he maintained the status quo (making Bush tax cuts permanent, mostly continuing global war on terror). The real damage was caused by a) Bush tax cuts b) Medicare Part D (unpaid for, $100b per year) c) 2 unfunded wars. Still, Obama ended office with a 40 year low average budget deficit per GDP. I don't really see this as bias, but as fact telling. The Tea Party was intensely 'interested' in budget deficits during Obama's reign, despite the fact that he mostly governed as a center-right, he made permanent Bush's tax cuts, had a stimulus package that was almost half business tax cuts, and accepted austerity (sequester). By contrast, Bush massively increased government spending and liabilities, which mean when the bottom dropped out of the economy in 2008, the debt was going to increase tremendously. Where was the Tea Party in 2000-2008? Somehow they were unable to see $1.1 trillion being flushed down the toilet in Afghanistan and Iraq, and didn't seem to care about the Pentagon not even being able to account for hundreds of billions of 'misplaced' dollars lost in their balance sheet. This makes the principled 'fiscal conservatism' of Republicans look feigned and disingenuous, and merely used as a scare tactic to rally around when they are in opposition in order to attack government. Magically, deficit concerns disappear once they get into power, like the $1+ trillion deficit they just created with their latest tax cut package.
  - yourbandsucks 8y ago
    It's not biased at all. Debt is a trailing indicator. Deficit is the rate at which you create/paydown debt. If you want to change the debt level, you change the deficit and then apply time. $X/year * Y years = (X*Y) difference in debt. It's literally the only way to do so. Is that honestly controversial or hard to understand? We're talking 8th grade algebra here.. you don't even need to generalize it into calculus.

rsync 8y ago

"The fact that inflation has stayed persistently low despite all of that and the recent fed rate hikes says that something else is afoot." I think a possible explanation is that deflationary pressure is still extremely high and that a deflationary spiral remains a risk.