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He seems to be admitting that inflation is high, and yet saying we should do nothing. This is precisely what was said by policymakers in the early 1970s who we

He seems to be admitting that inflation is high, and yet saying we should do nothing. This is precisely what was said by policymakers in the early 1970s who were saying pretty much the same thing back then: we can't act on inflation because it will hurt the labor market. This of course resulted in inflation becoming more and more firmly entrenched until their WAS a wage-price spiral that was very hard to break. It then look the new Federal Reserve chairman more than a decade of trying to get it under control, and ultimately, it was only done through sky-high interest rates that caused 2 bad recessions. Most of that pain could have been avoided had they just acted more decisively in the early 70s. And now here we are again decades later with the worst inflation in 40 years and some people saying we should just 'let it ride and see what happens'! Well we already know what happens if history is any indication.

mattbrewsbytes 5y ago
Do other countries economies experience these cycles in this repetitive fashion? It feels like the US correction/recession/crash cycle keeps going even though they (media, Fed?) call it different things or blame different things each time. If this was happening to say a build/deploy system for software and it kept having crashes/halts on some interval I would want to find root causes. I am no economist but it seems like a root cause analysis is in order of the whole system. I know you can’t just stop the economy and look at log files to figure it out, but there aren’t even conversations about it, like you said “let it ride and see what happens”.
- nine_k 5y ago
  The US can basically print money, because USD is the world reserve currency (most of the world, that is). This puts the US in unique position when it can inject massive amounts of liquidity into the economy, and nothing bad is apparently happening for years! The world happily buys dollars. Then the consequences still catch up and bite, but it's already a different administration. So the temptation is high.
  - ericmay 5y ago
    The US is also in the unfortunate position where it has to inject liquidity precisely because the globe demands dollars. Not doing so causes recession as banks and others are reluctant to release their dollars for use. Frankly I think from an economic standpoint we’d be better off not being the reserve currency. Note that there are other reserve currencies such as the Pound, Euro, and Yen. A reserve currency is simply what banks tend to hold in reserve. Most large international banks will hold multiple reserve currencies. The USD is just the one that’s in the most demand.
- wbsss4412 5y ago
  The answer is yes, every modern, developed, economy experiences the business cycle, the US is not unique in this regard.
- noduerme 5y ago
  Not an economist either, but your analogy to software made me think. If you had a piece of software that ran for 100 years and only crashed every few decades, presumably the people maintaining the code would have retired and handed it off to other people at least 5 or 6 times. The maintainers still in place with a memory of the last crash might have some idea how to avoid another one, but as the ranks get filled by people who don't remember, they're more prone to careless errors, or think they can execute tweaks or drive the system harder than it can be driven. Or they don't fully understand something and think it can be removed for the sake of expedience, without realizing why it was there. So rather than a problem in the code, it may be a problem in the nature of maintaining and updating it.
nine_zeros 5y ago
But raising interest rates is not the only way. The fed could just taper the balance sheet by selling off MBSes and long term Treasury bonds. This will only raise long term rates while simultaneously reducing liquidity. We don't need unemployment to reduce liquidity when the balance sheet has so much to sell.
rapjr9 5y ago
He's saying conditions now are not the same as in 70's. The causes of inflation are different, and they are not likely to go into a spiral. Some obvious facts are that raising interest rates is not going to magically produce more workers to alleviate a worker shortage or improve supply chains by getting ships unloaded faster and IC foundries to produce more nor will it encourage more people to eat at restaurants and stay in hotels and fly on airplanes. We'll see what happens when the Fed raises interest rates; the reaction may not be what is expected because things are not normal. The stock markets seem like a bunch of frightened cattle, afraid of any change at all.

mattbrewsbytes 5y ago

Do other countries economies experience these cycles in this repetitive fashion? It feels like the US correction/recession/crash cycle keeps going even though they (media, Fed?) call it different things or blame different things each time. If this was happening to say a build/deploy system for software and it kept having crashes/halts on some interval I would want to find root causes. I am no economist but it seems like a root cause analysis is in order of the whole system. I know you can’t just stop the economy and look at log files to figure it out, but there aren’t even conversations about it, like you said “let it ride and see what happens”.

nine_k 5y ago
The US can basically print money, because USD is the world reserve currency (most of the world, that is). This puts the US in unique position when it can inject massive amounts of liquidity into the economy, and nothing bad is apparently happening for years! The world happily buys dollars. Then the consequences still catch up and bite, but it's already a different administration. So the temptation is high.
- ericmay 5y ago
  The US is also in the unfortunate position where it has to inject liquidity precisely because the globe demands dollars. Not doing so causes recession as banks and others are reluctant to release their dollars for use. Frankly I think from an economic standpoint we’d be better off not being the reserve currency. Note that there are other reserve currencies such as the Pound, Euro, and Yen. A reserve currency is simply what banks tend to hold in reserve. Most large international banks will hold multiple reserve currencies. The USD is just the one that’s in the most demand.
wbsss4412 5y ago
The answer is yes, every modern, developed, economy experiences the business cycle, the US is not unique in this regard.
noduerme 5y ago
Not an economist either, but your analogy to software made me think. If you had a piece of software that ran for 100 years and only crashed every few decades, presumably the people maintaining the code would have retired and handed it off to other people at least 5 or 6 times. The maintainers still in place with a memory of the last crash might have some idea how to avoid another one, but as the ranks get filled by people who don't remember, they're more prone to careless errors, or think they can execute tweaks or drive the system harder than it can be driven. Or they don't fully understand something and think it can be removed for the sake of expedience, without realizing why it was there. So rather than a problem in the code, it may be a problem in the nature of maintaining and updating it.

nine_zeros 5y ago

But raising interest rates is not the only way. The fed could just taper the balance sheet by selling off MBSes and long term Treasury bonds. This will only raise long term rates while simultaneously reducing liquidity. We don't need unemployment to reduce liquidity when the balance sheet has so much to sell.

rapjr9 5y ago

He's saying conditions now are not the same as in 70's. The causes of inflation are different, and they are not likely to go into a spiral. Some obvious facts are that raising interest rates is not going to magically produce more workers to alleviate a worker shortage or improve supply chains by getting ships unloaded faster and IC foundries to produce more nor will it encourage more people to eat at restaurants and stay in hotels and fly on airplanes. We'll see what happens when the Fed raises interest rates; the reaction may not be what is expected because things are not normal. The stock markets seem like a bunch of frightened cattle, afraid of any change at all.