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The argument that the central banks couldn't fight inflation by raising rates is sort of undermined by the fact that central banks have raised rates in very rec

The argument that the central banks couldn't fight inflation by raising rates is sort of undermined by the fact that central banks have raised rates in very recent history and there was no catastrophe, in 2011 the ECB raised rates 1/2% and all the Eurozone got was a stunted recovery. The US Fed had been steadily raising rates since 2016 and has since admitted that it was a mistake and reversed course. The tools to fight deflation/low-inflation are mostly left in the hands of government spending, which unfortunately governments refuse to do for political reasons, the central bank's tools are limited. What about Japan, or the Eurozone? What about them? The story you are telling is the some one from the 90's about Japan and it has been wrong so far, at what point is there enough evidence to prove that Japan was right to keep interest rates low? Furthermore Abenomics has been largely a success, which is doubling-down on those policies plus being willing to pile on even more debt, raising an expectation of future inflation to create investment (not quite exactly but more or less as Krugman encouraged them to in the 90's). The Eurozone's problem is clearly austerity in the face of the structural issues that the single currency creates, as long as the wealthy members are unwilling to spend and the rules prevent the poorer members from spending they are caught in a low-demand trap of their own creation. https://www.jstor.org/stable/24385696 https://www.jstor.org/stable/24385696 They have even lower interest rates and they're once again stagnating. You really believe if money was even cheaper, even more growth could be achieved? I believe that higher rates will hurt them (supported by the evidence from the 2011 ECB & 2015 Fed rate increases and the study of their consequences) and, as I stated in my original post they, like the Danish, should be spending money on things they need to stimulate their economy and invest in the future. If you can borrow money at negative interest rates and build assets of any future value then you should do it and make citizens' lives better now and in the future.

gridlockd 7y ago
> The argument that the central banks couldn't fight inflation by raising rates is sort of undermined by the fact that central banks have raised rates in very recent history and there was no catastrophe, in 2011 the ECB raised rates 1/2% and all the Eurozone got was a stunted recovery. They raised them very briefly for a couple of months. And half a percent? That's basically background noise. In the past, to fight inflation, rates went up as high as fifteen percent. > The US Fed had been steadily raising rates since 2016 and has since admitted that it was a mistake and reversed course. They've reversed course in 2018 because the markets were tanking in 2018. The Fed never admitted making any mistakes, as far as I know. > "Keynesianism totally works!" (paraphrased) Remember, Keynesianism says you boost the economy short term to get it up to speed, then throttle it when times are good. Keynesianism is about pulling future demand into the present. Except times never get good enough for politicians to put in the throttle. So you end up with a pile of debt that can't be serviced in any other way than inflation, and we haven't seen the end of that yet. Do you believe that situation is better for the owning class, who bought up all the assets in exchange for cheap debt, or the serving class, who have to rent those assets, whose wages are losing more and more purchasing power? > If you can borrow money at negative interest rates and build assets of any future value then you should do it and make citizens' lives better now and in the future. That's not what's happening. You borrow money so you can own more of the future, and charge citizens for it.
- JamisonM 7y ago
  Setting economic policy based on fighting 1970's inflation battles instead of accepting the evidence that the US economy is finally near or at full employment by sustaining a low interest rate environment contrary to evidence and experience. Full employment is good for workers and less-good for asset owners. Governments can borrow money to build infrastructure that make people's lives better, I don't know how you can dispute that this policy option exists or say that it "doesn't work that way" when you know, governments do that stuff all the time. When in doubt, and you have low interest rates, build a sewage treatment plant!
  - gridlockd 7y ago
    > Setting economic policy based on fighting 1970's inflation battles instead of accepting the evidence that the US economy is finally near or at full employment by sustaining a low interest rate environment contrary to evidence and experience. Full employment is good for workers and less-good for asset owners. You can always point to numbers that are supposedly good (such as questionable government-issued employment statistics) and I can always point to numbers that are bad (the PMI, the Russell 2000, the unprecedented levels of sovereign and individual debt). If the economy really was that great now for people on main street, why is Trump losing approval among the people that voted for him to fix this exact issue? > Governments can borrow money to build infrastructure that make people's lives better, I don't know how you can dispute that this policy option exists or say that it "doesn't work that way" when you know, governments do that stuff all the time. When in doubt, and you have low interest rates, build a sewage treatment plant! I'm not against emergency measures by any means, but the tendency with governments is to make the emergency measure of today the status quo of tomorrow. This idea that you can spend yourself wealthy at the national level is just as flawed as the idea of trickle-down-economics. Sure, in the short term, debt-financed government programs can stimulate the economy, but that debt has to be paid off. You have moved demand from the future into the present. It will be missing from the future, because money spent on debt service cannot be spent on anything else. That is unless you don't pay off the debt, or you erase it through inflation, in which case that is still money missing from someone's pocket, and it's not just foreign pockets - most US debt is internal. It's also not going to be the rich guys' pockets, because they saw it all coming and bought up all the hard assets already.

gridlockd 7y ago

> The argument that the central banks couldn't fight inflation by raising rates is sort of undermined by the fact that central banks have raised rates in very recent history and there was no catastrophe, in 2011 the ECB raised rates 1/2% and all the Eurozone got was a stunted recovery. They raised them very briefly for a couple of months. And half a percent? That's basically background noise. In the past, to fight inflation, rates went up as high as fifteen percent. > The US Fed had been steadily raising rates since 2016 and has since admitted that it was a mistake and reversed course. They've reversed course in 2018 because the markets were tanking in 2018. The Fed never admitted making any mistakes, as far as I know. > "Keynesianism totally works!" (paraphrased) Remember, Keynesianism says you boost the economy short term to get it up to speed, then throttle it when times are good. Keynesianism is about pulling future demand into the present. Except times never get good enough for politicians to put in the throttle. So you end up with a pile of debt that can't be serviced in any other way than inflation, and we haven't seen the end of that yet. Do you believe that situation is better for the owning class, who bought up all the assets in exchange for cheap debt, or the serving class, who have to rent those assets, whose wages are losing more and more purchasing power? > If you can borrow money at negative interest rates and build assets of any future value then you should do it and make citizens' lives better now and in the future. That's not what's happening. You borrow money so you can own more of the future, and charge citizens for it.

JamisonM 7y ago
Setting economic policy based on fighting 1970's inflation battles instead of accepting the evidence that the US economy is finally near or at full employment by sustaining a low interest rate environment contrary to evidence and experience. Full employment is good for workers and less-good for asset owners. Governments can borrow money to build infrastructure that make people's lives better, I don't know how you can dispute that this policy option exists or say that it "doesn't work that way" when you know, governments do that stuff all the time. When in doubt, and you have low interest rates, build a sewage treatment plant!
- gridlockd 7y ago
  > Setting economic policy based on fighting 1970's inflation battles instead of accepting the evidence that the US economy is finally near or at full employment by sustaining a low interest rate environment contrary to evidence and experience. Full employment is good for workers and less-good for asset owners. You can always point to numbers that are supposedly good (such as questionable government-issued employment statistics) and I can always point to numbers that are bad (the PMI, the Russell 2000, the unprecedented levels of sovereign and individual debt). If the economy really was that great now for people on main street, why is Trump losing approval among the people that voted for him to fix this exact issue? > Governments can borrow money to build infrastructure that make people's lives better, I don't know how you can dispute that this policy option exists or say that it "doesn't work that way" when you know, governments do that stuff all the time. When in doubt, and you have low interest rates, build a sewage treatment plant! I'm not against emergency measures by any means, but the tendency with governments is to make the emergency measure of today the status quo of tomorrow. This idea that you can spend yourself wealthy at the national level is just as flawed as the idea of trickle-down-economics. Sure, in the short term, debt-financed government programs can stimulate the economy, but that debt has to be paid off. You have moved demand from the future into the present. It will be missing from the future, because money spent on debt service cannot be spent on anything else. That is unless you don't pay off the debt, or you erase it through inflation, in which case that is still money missing from someone's pocket, and it's not just foreign pockets - most US debt is internal. It's also not going to be the rich guys' pockets, because they saw it all coming and bought up all the hard assets already.