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How you get this: >if you explain why something is happening, that means it is somehow not happening. from this: >the BCE is asking too wait for the shock to

How you get this: >if you explain why something is happening, that means it is somehow not happening. from this: >the BCE is asking too wait for the shock to pass before taking measures that may weak the economy. is unclear. Generally, inflation is a rather noisy signal to respond to, and the tools at your disposal (as a central banker) are powerful, but have a significant time lag. So you really don't want to be reacting to every transient uptick. You should be watching for long- and medium-term trends, such as structural inflation because of fundamental constraints your economy is coming up against, things like demographics, long-term infrastructure deficits, etc. Can this COVID-related logistics crunch be long-lasting enough to warrant a response from a central bank? Maybe, but it's not at all clear.

seanmcdirmid 5y ago
> Can this COVID-related logistics crunch be long-lasting enough to warrant a response from a central bank? Maybe, but it's not at all clear. No, but if they are just using the supply crunch as cover to ignore the consequences of prolonged ultra low interest rates along with direct stimulus payments, there could be a huge problem down the line. We really should have raised rates when times were good.
- xapata 5y ago
  When were times all that good? The stock market was doing well, but I don't remember seeing great comments about wages until this year.
  - seanmcdirmid 5y ago
    Supposedly we were booking a few years ago but still need low interest rates to juice the economy. But you might be right, we might not have ever recovered from 2008 and have just been running off low interest rates since then. If that’s the case, we are most definitely screwed.
    - xapata 5y ago
      Real wages have been stagnant or declining for most professions since the 70s. Coincidentally, interest rates have been declining over the same period. Could it be that as capital becomes cheaper, companies are less willing to pay for labor? :thinking:
jerf 5y ago
The measure exists, whether or not there is a "shock to pass". "inflation is a rather noisy signal to respond to" The measure exists, whether or not it is "noisy". Besides, we're past "transient uptick" here anyhow. That was an argument for three months ago. "Can this COVID-related logistics crunch be long-lasting enough to warrant a response from a central bank?" Inflation exists and can be measured. Whether a central bank wants to respond to it is always a separate question. COVID has not suddenly made it a separate question. Don't let people get away with this. You must not let them conflate in your head a measure with its cause. You must keep them separate or you're going to get snowed. "Well, yes, the web page takes 28 seconds to load, but it's because we do several hundred database queries that are really slow, we do it in a slow language, we pull in dozens of unnecessary third party libraries and also our server is underprovisioned." How much faster does the web page load because you've explained why the web page takes a long time to load? Moreover, let me explicitly state I'm not trying to ascribe any particular cause to the inflation measure myself. I'm just advocating for, don't let them somehow "explain away" the measure with the very cause of the measure. It's a very cute trick, but don't let them do it. It isn't being done for your benefit.
- hervature 5y ago
  I think you're missing the point even though you laid out all the necessary facts. Before reporting a big inflation number and potentially causing panic or altering behavior, they believe (or hope) that the next months will have lower or even deflation so that they can average out to something more normal. Brought to an extreme, imagine waiting 50 years to be able to say "aha, see, inflation only averaged 3% from 2021-2071" even though there was a big spike in the first year.
- beambot 5y ago
  Let's use another example to explain why your thinking is incomplete: temperature versus global warming. Just because it's a bit chilly today, it does not mean that global warming isn't real. The time constants of the underlying effect matter, even if you have high variance in shorter time scales.
  - 5y ago

seanmcdirmid 5y ago

> Can this COVID-related logistics crunch be long-lasting enough to warrant a response from a central bank? Maybe, but it's not at all clear. No, but if they are just using the supply crunch as cover to ignore the consequences of prolonged ultra low interest rates along with direct stimulus payments, there could be a huge problem down the line. We really should have raised rates when times were good.

xapata 5y ago
When were times all that good? The stock market was doing well, but I don't remember seeing great comments about wages until this year.
- seanmcdirmid 5y ago
  Supposedly we were booking a few years ago but still need low interest rates to juice the economy. But you might be right, we might not have ever recovered from 2008 and have just been running off low interest rates since then. If that’s the case, we are most definitely screwed.
  - xapata 5y ago
    Real wages have been stagnant or declining for most professions since the 70s. Coincidentally, interest rates have been declining over the same period. Could it be that as capital becomes cheaper, companies are less willing to pay for labor? :thinking:

jerf 5y ago

The measure exists, whether or not there is a "shock to pass". "inflation is a rather noisy signal to respond to" The measure exists, whether or not it is "noisy". Besides, we're past "transient uptick" here anyhow. That was an argument for three months ago. "Can this COVID-related logistics crunch be long-lasting enough to warrant a response from a central bank?" Inflation exists and can be measured. Whether a central bank wants to respond to it is always a separate question. COVID has not suddenly made it a separate question. Don't let people get away with this. You must not let them conflate in your head a measure with its cause. You must keep them separate or you're going to get snowed. "Well, yes, the web page takes 28 seconds to load, but it's because we do several hundred database queries that are really slow, we do it in a slow language, we pull in dozens of unnecessary third party libraries and also our server is underprovisioned." How much faster does the web page load because you've explained why the web page takes a long time to load? Moreover, let me explicitly state I'm not trying to ascribe any particular cause to the inflation measure myself. I'm just advocating for, don't let them somehow "explain away" the measure with the very cause of the measure. It's a very cute trick, but don't let them do it. It isn't being done for your benefit.

hervature 5y ago
I think you're missing the point even though you laid out all the necessary facts. Before reporting a big inflation number and potentially causing panic or altering behavior, they believe (or hope) that the next months will have lower or even deflation so that they can average out to something more normal. Brought to an extreme, imagine waiting 50 years to be able to say "aha, see, inflation only averaged 3% from 2021-2071" even though there was a big spike in the first year.
beambot 5y ago
Let's use another example to explain why your thinking is incomplete: temperature versus global warming. Just because it's a bit chilly today, it does not mean that global warming isn't real. The time constants of the underlying effect matter, even if you have high variance in shorter time scales.
- 5y ago