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Interesting how quickly the people responsible for minding the levers of inflation call out that it will be temporary when at the same time saying what’s happen

by xfour 5y ago

Interesting how quickly the people responsible for minding the levers of inflation call out that it will be temporary when at the same time saying what’s happening is unprecedented...

mandelbrotwurst 5y ago
There's no conflict in that statement - something can be both unprecedented in its rate of change while simultaneously not expected to last for a particularly long time. Look to various natural phenomena for examples of this - a bad storm, a tornado, a tsunami, a wildfire, a volcanic eruption. Note: Not claiming anything here about where prices will head next.
- xfour 5y ago
  Good counterpoint, but your examples are referencing things that we have a strong scientific understanding of. Economists just don’t. If something is out of band of their models I sincerely doubt the claims made beyond that are even quality pseudoscience
  - incrudible 5y ago
    Would you be willing to say the same about climate science?
    - hungryforcodes 5y ago
      No.
  - imtringued 5y ago
    From a statistics perspective 2021 is an extremely noisy year. Even if you think that economists have the perfect answer given sufficient data they still would have to wait for the data to clear up. If the noise is gone it is entirely possible that we still have inflation but we just happen to hit exactly 2% inflation in 2022. If inflation were to undershoot the 2% target then you would have to do the unconventional monetary policy racket again. If inflation is too high, congratulations we can have normal interest rates again! Bonus episode: Money is created through debt. Money can be taken hostage, by taking it out of circulation aka saving it. However, that money is needed to pay the debt back. There is a due date for debt repayments and this is where the problems start: There is no due date for deposits to be spent and thus returned to the borrower... From a purely logical perspective default is inevitable given the above conditions and it requires the destruction of the deposits and thus the confiscation of the deposits. How does this happen in practice? Inflation, negative interest rates, wealth taxes or bank bankruptcy resulting in the loss of deposits. Maybe expiring CBDC offer a fifth option by forcing spending directly. You are of course allowed to spend your money on gold or stocks.
  - mandelbrotwurst 5y ago
    Sure, I was more just using those as colorful analogy to make the possibility easier to understand. I agree with you that it’s difficult to predict whether inflation will or won’t be transitory and I suspect that if you got Powell to speak honestly about the issue he’d tell you that his confidence in his projection is closer to 2/3 than 99/100. He does have a lot of quite powerful tools that make it easier for him to be correct, such as expanding the money supply by an unlimited amount and defining the inflation metric.
    - Psyonic 5y ago
      "quite powerful tools... such as... defining the inflation metric" you're not wrong, but I definitely had a good laugh at this. Pretty easy to win the game when you can change the rules whenever you please.

by xfour 5y ago

Interesting how quickly the people responsible for minding the levers of inflation call out that it will be temporary when at the same time saying what’s happening is unprecedented...

mandelbrotwurst 5y ago

There's no conflict in that statement - something can be both unprecedented in its rate of change while simultaneously not expected to last for a particularly long time. Look to various natural phenomena for examples of this - a bad storm, a tornado, a tsunami, a wildfire, a volcanic eruption. Note: Not claiming anything here about where prices will head next.

xfour 5y ago
Good counterpoint, but your examples are referencing things that we have a strong scientific understanding of. Economists just don’t. If something is out of band of their models I sincerely doubt the claims made beyond that are even quality pseudoscience
- incrudible 5y ago
  Would you be willing to say the same about climate science?
  - hungryforcodes 5y ago
    No.
- imtringued 5y ago
  From a statistics perspective 2021 is an extremely noisy year. Even if you think that economists have the perfect answer given sufficient data they still would have to wait for the data to clear up. If the noise is gone it is entirely possible that we still have inflation but we just happen to hit exactly 2% inflation in 2022. If inflation were to undershoot the 2% target then you would have to do the unconventional monetary policy racket again. If inflation is too high, congratulations we can have normal interest rates again! Bonus episode: Money is created through debt. Money can be taken hostage, by taking it out of circulation aka saving it. However, that money is needed to pay the debt back. There is a due date for debt repayments and this is where the problems start: There is no due date for deposits to be spent and thus returned to the borrower... From a purely logical perspective default is inevitable given the above conditions and it requires the destruction of the deposits and thus the confiscation of the deposits. How does this happen in practice? Inflation, negative interest rates, wealth taxes or bank bankruptcy resulting in the loss of deposits. Maybe expiring CBDC offer a fifth option by forcing spending directly. You are of course allowed to spend your money on gold or stocks.
- mandelbrotwurst 5y ago
  Sure, I was more just using those as colorful analogy to make the possibility easier to understand. I agree with you that it’s difficult to predict whether inflation will or won’t be transitory and I suspect that if you got Powell to speak honestly about the issue he’d tell you that his confidence in his projection is closer to 2/3 than 99/100. He does have a lot of quite powerful tools that make it easier for him to be correct, such as expanding the money supply by an unlimited amount and defining the inflation metric.
  - Psyonic 5y ago
    "quite powerful tools... such as... defining the inflation metric" you're not wrong, but I definitely had a good laugh at this. Pretty easy to win the game when you can change the rules whenever you please.