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Coming into Jackson Hole, economists are grappling with a major issue

6 points by yasp 7y ago

melling 7y ago
Larry Summers is giving an entire economics lecture on Twitter.
skybrian 7y ago
That's pretty vague. Does "assuring adequate demand" mean encouraging people to spend? (If so, it seems like there are two ways to do it: governments can give money to people who will spend it, or they can spend it themselves.) re: "Obviously fiscal policy needs to be a major focus, especially given what low or negative interest rates mean for the sustainability of deficits." - does this mean: governments, it's okay to spend more money? re: "But the level of demand is also influenced by structural policies: e.g. pay-as-you-go social security, higher retirement ages, improved social insurance, support for private infrastructure investment, redistribution from the high-saving rich to the liquidity-constrained poor." - is he saying there should be more or less of these things?
- StanislavPetrov 7y ago
  The crux of the problem is that central banks have been trying to encourage "aggregate demand" by lowering interest rates to incentivizing people and businesses to borrow (and spend) money. Now we're at the point where many of our institutions and most of our population is drowning in debt and our interest rates are already close to zero. It seems pretty obvious that massive wealth accumulation by the upper millionith of society precludes any solution. The only way to increase "aggregate demand" is if the people have money to spend. Real wages have been stagnant or falling for ~15 years and debt levels are at record highs. Cost of living increases (healthcare, food, education, housing, insurance) rise greatly each year, outpacing both stagnant wages and official inflation numbers. We're playing a game of monopoly where a couple of people already own every property and have them all stacked with houses and hotels. The rest of the players are trying to circle the board and collect their $200 from passing go and praying to god they don't land on a property that will bankrupt them completely before they make it around the board again. This economic system is not sustainable.
imtringued 7y ago
So far central banks have managed to achieve almost every goal they set for themselves. Lowering interest rates caused inflation in house prices. QE caused inflation in the stock market. The economists working there aren't stupid, they have every right to pat themselves on the back. Consumer price inflation wasn't really a goal. Their monetary expansion program never involved any consumers. Therefore expecting consumer inflation is very unreasonable.

6 points by yasp 7y ago

Larry Summers is giving an entire economics lecture on Twitter.

That's pretty vague. Does "assuring adequate demand" mean encouraging people to spend? (If so, it seems like there are two ways to do it: governments can give money to people who will spend it, or they can spend it themselves.) re: "Obviously fiscal policy needs to be a major focus, especially given what low or negative interest rates mean for the sustainability of deficits." - does this mean: governments, it's okay to spend more money? re: "But the level of demand is also influenced by structural policies: e.g. pay-as-you-go social security, higher retirement ages, improved social insurance, support for private infrastructure investment, redistribution from the high-saving rich to the liquidity-constrained poor." - is he saying there should be more or less of these things?

StanislavPetrov 7y ago
The crux of the problem is that central banks have been trying to encourage "aggregate demand" by lowering interest rates to incentivizing people and businesses to borrow (and spend) money. Now we're at the point where many of our institutions and most of our population is drowning in debt and our interest rates are already close to zero. It seems pretty obvious that massive wealth accumulation by the upper millionith of society precludes any solution. The only way to increase "aggregate demand" is if the people have money to spend. Real wages have been stagnant or falling for ~15 years and debt levels are at record highs. Cost of living increases (healthcare, food, education, housing, insurance) rise greatly each year, outpacing both stagnant wages and official inflation numbers. We're playing a game of monopoly where a couple of people already own every property and have them all stacked with houses and hotels. The rest of the players are trying to circle the board and collect their $200 from passing go and praying to god they don't land on a property that will bankrupt them completely before they make it around the board again. This economic system is not sustainable.

imtringued 7y ago

So far central banks have managed to achieve almost every goal they set for themselves. Lowering interest rates caused inflation in house prices. QE caused inflation in the stock market. The economists working there aren't stupid, they have every right to pat themselves on the back. Consumer price inflation wasn't really a goal. Their monetary expansion program never involved any consumers. Therefore expecting consumer inflation is very unreasonable.