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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 r

> 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.
  - JamisonM 7y ago
    IDK, the closest approximation of full employment we've seen since the second world war has been the product of low interest rates. Conversely fretting about debt in the way you describe, with a concern about the value of present investment in physical infrastructure for the future, has proven over and over again to be unfounded (tax cuts are otherwise clearly a case of leaving money on the table now that will not benefit the future). You'll see.

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.
- JamisonM 7y ago
  IDK, the closest approximation of full employment we've seen since the second world war has been the product of low interest rates. Conversely fretting about debt in the way you describe, with a concern about the value of present investment in physical infrastructure for the future, has proven over and over again to be unfounded (tax cuts are otherwise clearly a case of leaving money on the table now that will not benefit the future). You'll see.