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Wow, this was the article I was looking for, it summarizes a number of thoughts about economics that I'd been having since the undergraduate days: - There's an

Wow, this was the article I was looking for, it summarizes a number of thoughts about economics that I'd been having since the undergraduate days: - There's an authority about the field that really isn't deserved. The models are not made properly, and there's a lot of hand-waiving. I studied economics with a class of engineers and everyone pointed this out. - The pop-sci version of economics is a bunch of easy quips. Friedman's "everywhere a monetary phenomenon", Keynes "In the long run". - The econ 101 version of economics is dominant in popular thought. You see it everywhere in newspapers. A more nuanced version of economics does exist, but the appeal to authority is strong in the field, because there's no real reasonable arguments, it's actually politics. - Inflation is more interesting in a disaggregated view, for reasons mentioned. You can't look at it as a single figure. - Relative price changes are what matter in society, because they represent changes in negotiation terms between different actors. Post-pandemic and Ukraine, we should expect to see more shortages as well as more strike action. Various groups like the RMT union will decide they need to flex their muscles. Chip shortages will cause negotiation positions to change across a wide variety of affected sectors like cars, meaning push will come to shove for certain lines of business.

frankfrankfrank 4y ago
The thing that has nagged at you as it has me, is the simple fact that not only was “economics” conjured and molded by and for the interests of the upper echelon of society, to control the language and thoughts about its terms; but that at the core of it, it’s nothing more than fraud, deception, con artistry. That’s all inflation is too, fraud that if you would commit it, e.g., you added filler to some product you delivered or forged signatures on delivery paperwork, you would be punished for. You are given currency coupons in exchange for your work, and then more of those coupons are just forged than correspond to actual work having been done, thereby defrauding you out of the value of your work, also commonly called theft of service.
- lordnacho 4y ago
  > The thing that has nagged at you as it has me, is the simple fact that not only was “economics” conjured and molded by and for the interests of the upper echelon of society, to control the language and thoughts about its terms; but that at the core of it, it’s nothing more than fraud, deception, con artistry. Yeah this true, but I wonder if it's as straightforwardly sinister as that. I'm sure there are a lot of economists, esp in the mid 20th century, who would have liked to turn economics into physics. Some of those ideas are of no real merit after further inspection, but are kept alive by political interests. You do come across a lot of thought pieces by think tanks, which seem to be more political than science. > You are given currency coupons in exchange for your work, and then more of those coupons are just forged than correspond to actual work having been done, thereby defrauding you out of the value of your work, also commonly called theft of service. The problem with that is there are legitimate reasons for printing more coupons, they're just mixed in with less legit reasons. If people want to exchange more, they need more coupons. Otherwise everyone would have to wait for their income to arrive before sending it on, and while they wait some of the opportunities will vanish. A little bit of creation isn't so bad.
  - flybrand 4y ago
    > straightforwardly sinister If the impact is sinister, then debating the motive just extends the duration of the pain experienced. Motives matter at the time of trial - when the action and pain are over. Until then, debating motive is just a distraction from stopping the unjust activity.
  - ekianjo 4y ago
    > f people want to exchange more, they need more coupons. thats a fallacy. nothing prevents you from exchanging more even if you had a fixed number of coupons. you would just have to consider that the value of each coupon becomes more, not less, over time, so you need to use subdivisions of coupons more. Inflation, even at low levels, is ultimately value destruction over time.
    - klipt 4y ago
      > the value of each coupon becomes more, not less, over time Deflation has historically been a bad thing every time it's happened.
      - ibeckermayer 4y ago
        Nonsense. Sure, deflationary shocks can be calamitous, like the Great Depression or the GFC. But steady deflation over time is logically the natural and good outcome of improvement over time—as technology advances and we get better at producing things, they should get cheaper, on average. Instead, our savings are buying us LESS over time, so that government can buy votes, fund wars, bail out defense contractors, pharma companies, financial institutions, and other cronies, etc. Inflation via the printing press, which is now just considered by many a normal phenomenon, is actually legalized wealth transfer from the savings of ordinary citizens into the coffers of giant government bureaucracies and the large corporations that feed off them.
        mrow84 4y ago
        Goods getting cheaper broadly means that supply is going up relative to demand - we call this deflation. If the supply of money goes up relative to demand then we call that inflation. It seems like you are conflating the two categories.
- pjc50 4y ago
  > then more of those coupons are just forged than correspond to actual work having been done Is this Karl Marx's critique of inflation?
  - deleted 4y ago
    [deleted]
- throw0101a 4y ago
  > You are given currency coupons in exchange for your work, and then more of those coupons are just forged than correspond to actual work having been done, thereby defrauding you out of the value of your work, also commonly called theft of service. All currency is made up. Even gold, or bitcoin, or giant rocks: * https://en.wikipedia.org/wiki/Rai_stones https://en.wikipedia.org/wiki/Rai_stones The only thing that has "inherent" value to humans is air/oxygen, shelter, water, and food. Everything else is psychological projection for convenience. See The Power of Gold: The History of an Obsession by Bernstein: * https://www.goodreads.com/book/show/249245.The_Power_of_Gold https://www.goodreads.com/book/show/249245.The_Power_of_Gold * https://en.wikipedia.org/wiki/Peter_L._Bernstein https://en.wikipedia.org/wiki/Peter_L._Bernstein And Money: The True Story of a Made-Up Thing by Goldstein: * https://www.goodreads.com/en/book/show/50358103-money https://www.goodreads.com/en/book/show/50358103-money * https://en.wikipedia.org/wiki/Jacob_Goldstein https://en.wikipedia.org/wiki/Jacob_Goldstein
  - Turing_Machine 4y ago
    > All currency is made up. Even gold, or bitcoin, or giant rocks Yes, but gold, bitcoin, and giant rocks can't be inflated at will, which is what the OP was complaining about. Simulated pieces of green paper can. Even with the formerly-used real pieces of green paper, there's a physical limit to how fast printing presses can run. With simulated pieces of green paper, you can just type some numbers into a computer and suddenly there are twice as many of them as there were before. Or a hundred times as many. Or a trillion times as many...
    - orwin 4y ago
      Okay, but creating money at will is not a bug, its a feature. I know there is this myth of the "no crisis ever during the gold standard era", but this is false. We had a crisis every ten years or so, sometime way bigger than the 2008 crisis despite the economies being less interconnected. And those crisis sometimes were entirely disconnected from production issues, unlike 2008 that is clearly linked with the conventional oil/gas peak. Because having liquidity that allow easy trading of ressources actually help recover faster and avoid made up crisis like the 1893 one in the US.
- simonh 4y ago
  So you seem to be adding your voice in support for the article which, er, directly contradicts your views about money printing and current inflation. Right now we know for a fact that current inflation is a genuine global shortage of actual stuff. Crude oil, cooking oil, wheat, Chinese products. Plus American government overspending, to be fair, but that's just a US phenomenon. Of course that's inconvenient if you really desperately want to complain that you specifically are being cheated. After all if you have less, it must be because somebody else has more, right? If we're all screwed, who do you blame? Putin and Xi are far away and broadly hated already, so there's no satisfaction to be had blaming anything on them.
  - bko 4y ago
    > Plus American government overspending, to be fair, but that's just a US phenomenon. That's not true. US spent the most, but Europe spent €3.2 trillion. US spent $12 trillion but they had to "shore up" a lot of global banks because that's just what they do. About half went into asset purchases and liquidity measures. I take a simple approach. What would you expect to happen if you just created trillions out of thin air and distributed it? Arguing nothing would happen is the economic equivalent of a perpetual motion machine. It just doesn't pass the smell test to me because you can just create global wealth from changing some numbers in a computer with no repercussions. It's alchemy. Can I "prove" that there are negative consequences that in the long run outweigh the benefits? No. But I can say that I cannot find a single case of high inflation that did not coincide with government printing money. Printing a lot of money doesn't always cause inflation, but any time there is inflation there has been a lot of money printing. Sure what happens may not be predictable, but its obvious that you're messing with a complex system and effects aren't instantaneous or uniform. That's why you see things like product X is going up 50% while product Y is going up 5%. And the people that point this out think they're debunking something. With complex systems its best to keep things simple. You can get lost in the data from all the noise and overconfidence will bite you in the ass. Which is why it's not a smart idea to increase the money supply by 30+% in a year and dump it into the market. https://www.weforum.org/agenda/2020/04/european-union-finance-fiscal-money-support-covid-coronavirus/ https://www.weforum.org/agenda/2020/04/european-union-financ... https://www.covidmoneytracker.org/ https://www.covidmoneytracker.org/
- 1ncorrect 4y ago
  My current thesis, from a position of absolute agnostic ignorance, is economics is what filled the void in society vacated by religion after the enlightenment. They’re functionally indistinguishable, with mythology replaced by mathematics, and God replaced with GDP. Similarly, they’re both arbitrary rules; conjured, imposed, and protected from scrutiny by the ruling class. That’s not to say it’s not useful, but I find it baffling that an imaginary concept is unquestionably granted veto over tangible and visceral phenomena.
  - lukifer 4y ago
    I've used to think the Reagan-era political coalition (persisting to this day) made no sense: the values and worldviews of evangelicals and economic libertarians have terribly little in common. Then it clicked, the common belief that united them: https://en.wikipedia.org/wiki/Just-world_hypothesis https://en.wikipedia.org/wiki/Just-world_hypothesis
  - achenatx 4y ago
    the difference between economics (or science) and religion is that economics is used to predict the future. When economics fails to predict the future, the models are changed until they can predict the future. religion tells you what goals you should have and how you should live a life, passing judgement and establishing morality. They are orthogonal to each other.
    - lukifer 4y ago
      "Economists have successfully predicted nine of the last five recessions."
- perfecthjrjth 4y ago
  Also, note that mainstream monasteries are at Harvard, Yale, Princeton, Stanford, etc. That's where these secular priests 'corrupt'/preach the next generation of elites.
onlyrealcuzzo 4y ago
The article talked a lot about winners and losers. It's interesting that there's no mention of debtors and creditors. The biggest winners in hyperinflation are people in massive debt. It's inflated away to nothing. The biggest losers are creditors for the opposite reasons. When inflation is just abnormally high (~8%), your debt doesn't get deflated to nothing, but you're getting a ~6% discount.
- brabel 4y ago
  My car loan just increased the interest rate I have to pay due to "increased costs". I had no idea they could do that (yeah, didn't read the fine print). I'm pretty sure consumer goods' creditors are doing just fine with rising inflation!
- lordnacho 4y ago
  With hyperinflation yes, because then there are only real incomes, prices (and debts) become meaningless. A plumber can fix the toilet for a carpenter who makes a doorframe for the plumber, they don't need a number if they can agree those services are worth the same. Thus real incomes are still real. With merely high inflation you still have insecurity. Many salaries are not inflation indexed (I struggle to think of anyone I know), so the only way to maintain your budget is to get a new job. For many lines of work, especially at the lower end of the scales, that's utterly unappetizing, and people would rather pressure their union to push up salaries.
- gpderetta 4y ago
  Only if you never need to refinance a debt.
- yxhuvud 4y ago
  The most common reason for hyperinflation is that the productive capabilities of society has gone down the crapper. That mean everyone is a loser. Some more than others, but even the debtors are losers in that situation.
  - onlyrealcuzzo 4y ago
barry-cotter 4y ago
> The econ 101 version of economics is dominant in popular thought. You see it everywhere in newspapers. If only. Rent control wouldn’t exist. Policies that couldn’t pass any sane cost benefit trade off would be abolished. There would be a smooth, graduated marginal tax schedule. There would be congestion taxes on traffic. The world would be incredibly different if Econ 101 was widely understood.
- achenatx 4y ago
  not necessarily. One of the things Ive come to understand is that economic efficiency is not always the top priority. In many cases people want reduced variance. In return they are ok with less efficiency. Economics can predict the outcome, but cannot make a value judgement between two options. I used to think some people were irrational (especially when they disagreed with my logical viewpoint). It turns out that everyone is irrational, they simply have different opinions of the relative priority of values. For example it might be worth it to them to trade off long term economic efficiency for short term reduction in variance. Nationalized health care, social security, and rent control are all examples of policies that reflect this value system. "Freedom" is not a universal value. In fact many people are willing to trade freedom for security (or reduction in variance). They are not wrong or bad people, they just have a different opinion of priorities.
FabHK 4y ago
I thought the article made a lot of noise about very little. Sure, inflation reports the change in price of an average basket, and some prices in the basket might have gone up a lot, and some down a lot. But that is a different issue, and not inflation. The basket is carefully constructed to mirror what the average consumer consumes. Thus, the inflation of the basket measures how much more the average consumer has to spend on his consumption. That is certainly a useful number. To your further points: - [...] The models are not made properly, and there's a lot of hand-waiving. I'd disagree, you must have come across the wrong models. Theoretical economics has many beautiful models precisely laid out. For example, the Arrow-Debreu equilibrium model [1] utilises "the Kakutani fixed-point theorem on the fixed points of a continuous function from a compact, convex set into itself." I doubt that any engineer can find fault with the specification of that model. Similarly, the Heckscher–Ohlin model of international trade is well specified and yields five informative theorems [2]. To which extent those models reflect, or can be applied to, the real world is an entirely different question of course. Then there is empirical economics, a whole different ball park. But if you look at national accounts [3], for example, all those measurements are defined in excruciating detail, and there are books just dedicated to define the terms correctly. - The pop-sci version of economics is a bunch of easy quips Agreed. Some of them are more informative than others. - The econ 101 version of economics is dominant in popular thought. Yes, and that is quite bad, and is often exploited particularly by the political right, the business-friendly laissez-faire libertarians. James Kwak calls this Economism, and he has a great book about it [4]. - Inflation [...] can't look at it as a single figure. Again, to the extent that it reflects the price increase for the consumption basket of an average consumer: yes, it is an interesting and important number, and in particular, it is one number. Obviously, with more numbers a more nuanced discussion is possible. - Relative price changes are what matter in society. Sure, they matter. But inflation in itself really matters also, per se. By the way, Keynes pointed out that inflation need not be a bad thing. One thinks it is obviously bad because the average consumer has to pay more for his basket, thus can afford less of it. However, if there was, for example, a fiscal stimulus in the wake of a recession, and that leads to everyone having more money at their disposal, and aggregate demand rising, then there will be a new equilibrium with more demand, more supply, and higher prices (=inflation), but the average consumer having more of their basket than before. Good, not bad. [1] https://en.wikipedia.org/wiki/Arrow–Debreu_model https://en.wikipedia.org/wiki/Arrow–Debreu_model [2] https://en.wikipedia.org/wiki/Heckscher–Ohlin_model#Conclusions https://en.wikipedia.org/wiki/Heckscher–Ohlin_model#Conclusi... [3] https://en.wikipedia.org/wiki/National_accounts https://en.wikipedia.org/wiki/National_accounts [4] https://economism.net/ https://economism.net/
specialist 4y ago
> The models are not made properly... Yes and: This OC refers to the empirical data. Friedman (et al) rejected empiricism. I was gobsmacked when I finally figured out what that meant. Like, wtf are they even arguing about if they reject reality?! (Ya, I am a slow learner.) So agree or not with Nitzan's thesis, at least critics can have constructive debates about it.
- tjader 4y ago
  I think it's better to think of it not as a complete rejection of reality, but recognizing the limitations of empirical methods. Mainstream economics today is arguably too focused on indicators, just collecting a bunch of data and finding correlations, then jumping to causation from that.
lamontcg 4y ago
Inflation also ignores asset bubbles entirely by focusing on them as a separate class as not as too few houses or too few financial instruments being chased after by way too much money in the hands of the upper 90%/99%. And this article barely mentions wages, unionization and wage-price spirals.
marcosdumay 4y ago
Get some popcorn and enjoy the discussion. The real point is that "inflation" is a badly defined term, and everybody uses a different meaning. So one person using the number measured by averaging the prices of a few real items says it's not purely monetary, while another using the value that converts monetary unities into real goods on the macroeconomic equations yells "what do you mean it's not purely monetary? It's defined that way, any real data was removed" (as a hint, you can't even measure that one). If you get tired of this, there is a related discussion about the Keynesian investment multiplier. It's just as fun.

frankfrankfrank 4y ago

The thing that has nagged at you as it has me, is the simple fact that not only was “economics” conjured and molded by and for the interests of the upper echelon of society, to control the language and thoughts about its terms; but that at the core of it, it’s nothing more than fraud, deception, con artistry. That’s all inflation is too, fraud that if you would commit it, e.g., you added filler to some product you delivered or forged signatures on delivery paperwork, you would be punished for. You are given currency coupons in exchange for your work, and then more of those coupons are just forged than correspond to actual work having been done, thereby defrauding you out of the value of your work, also commonly called theft of service.

lordnacho 4y ago
> The thing that has nagged at you as it has me, is the simple fact that not only was “economics” conjured and molded by and for the interests of the upper echelon of society, to control the language and thoughts about its terms; but that at the core of it, it’s nothing more than fraud, deception, con artistry. Yeah this true, but I wonder if it's as straightforwardly sinister as that. I'm sure there are a lot of economists, esp in the mid 20th century, who would have liked to turn economics into physics. Some of those ideas are of no real merit after further inspection, but are kept alive by political interests. You do come across a lot of thought pieces by think tanks, which seem to be more political than science. > You are given currency coupons in exchange for your work, and then more of those coupons are just forged than correspond to actual work having been done, thereby defrauding you out of the value of your work, also commonly called theft of service. The problem with that is there are legitimate reasons for printing more coupons, they're just mixed in with less legit reasons. If people want to exchange more, they need more coupons. Otherwise everyone would have to wait for their income to arrive before sending it on, and while they wait some of the opportunities will vanish. A little bit of creation isn't so bad.
- flybrand 4y ago
  > straightforwardly sinister If the impact is sinister, then debating the motive just extends the duration of the pain experienced. Motives matter at the time of trial - when the action and pain are over. Until then, debating motive is just a distraction from stopping the unjust activity.
- ekianjo 4y ago
  > f people want to exchange more, they need more coupons. thats a fallacy. nothing prevents you from exchanging more even if you had a fixed number of coupons. you would just have to consider that the value of each coupon becomes more, not less, over time, so you need to use subdivisions of coupons more. Inflation, even at low levels, is ultimately value destruction over time.
  - klipt 4y ago
    > the value of each coupon becomes more, not less, over time Deflation has historically been a bad thing every time it's happened.
    - ibeckermayer 4y ago
      Nonsense. Sure, deflationary shocks can be calamitous, like the Great Depression or the GFC. But steady deflation over time is logically the natural and good outcome of improvement over time—as technology advances and we get better at producing things, they should get cheaper, on average. Instead, our savings are buying us LESS over time, so that government can buy votes, fund wars, bail out defense contractors, pharma companies, financial institutions, and other cronies, etc. Inflation via the printing press, which is now just considered by many a normal phenomenon, is actually legalized wealth transfer from the savings of ordinary citizens into the coffers of giant government bureaucracies and the large corporations that feed off them.
      - mrow84 4y ago
        Goods getting cheaper broadly means that supply is going up relative to demand - we call this deflation. If the supply of money goes up relative to demand then we call that inflation. It seems like you are conflating the two categories.
pjc50 4y ago
> then more of those coupons are just forged than correspond to actual work having been done Is this Karl Marx's critique of inflation?
- deleted 4y ago
  [deleted]
throw0101a 4y ago
> You are given currency coupons in exchange for your work, and then more of those coupons are just forged than correspond to actual work having been done, thereby defrauding you out of the value of your work, also commonly called theft of service. All currency is made up. Even gold, or bitcoin, or giant rocks: * https://en.wikipedia.org/wiki/Rai_stones https://en.wikipedia.org/wiki/Rai_stones The only thing that has "inherent" value to humans is air/oxygen, shelter, water, and food. Everything else is psychological projection for convenience. See The Power of Gold: The History of an Obsession by Bernstein: * https://www.goodreads.com/book/show/249245.The_Power_of_Gold https://www.goodreads.com/book/show/249245.The_Power_of_Gold * https://en.wikipedia.org/wiki/Peter_L._Bernstein https://en.wikipedia.org/wiki/Peter_L._Bernstein And Money: The True Story of a Made-Up Thing by Goldstein: * https://www.goodreads.com/en/book/show/50358103-money https://www.goodreads.com/en/book/show/50358103-money * https://en.wikipedia.org/wiki/Jacob_Goldstein https://en.wikipedia.org/wiki/Jacob_Goldstein
- Turing_Machine 4y ago
  > All currency is made up. Even gold, or bitcoin, or giant rocks Yes, but gold, bitcoin, and giant rocks can't be inflated at will, which is what the OP was complaining about. Simulated pieces of green paper can. Even with the formerly-used real pieces of green paper, there's a physical limit to how fast printing presses can run. With simulated pieces of green paper, you can just type some numbers into a computer and suddenly there are twice as many of them as there were before. Or a hundred times as many. Or a trillion times as many...
  - orwin 4y ago
    Okay, but creating money at will is not a bug, its a feature. I know there is this myth of the "no crisis ever during the gold standard era", but this is false. We had a crisis every ten years or so, sometime way bigger than the 2008 crisis despite the economies being less interconnected. And those crisis sometimes were entirely disconnected from production issues, unlike 2008 that is clearly linked with the conventional oil/gas peak. Because having liquidity that allow easy trading of ressources actually help recover faster and avoid made up crisis like the 1893 one in the US.
simonh 4y ago
So you seem to be adding your voice in support for the article which, er, directly contradicts your views about money printing and current inflation. Right now we know for a fact that current inflation is a genuine global shortage of actual stuff. Crude oil, cooking oil, wheat, Chinese products. Plus American government overspending, to be fair, but that's just a US phenomenon. Of course that's inconvenient if you really desperately want to complain that you specifically are being cheated. After all if you have less, it must be because somebody else has more, right? If we're all screwed, who do you blame? Putin and Xi are far away and broadly hated already, so there's no satisfaction to be had blaming anything on them.
- bko 4y ago
  > Plus American government overspending, to be fair, but that's just a US phenomenon. That's not true. US spent the most, but Europe spent €3.2 trillion. US spent $12 trillion but they had to "shore up" a lot of global banks because that's just what they do. About half went into asset purchases and liquidity measures. I take a simple approach. What would you expect to happen if you just created trillions out of thin air and distributed it? Arguing nothing would happen is the economic equivalent of a perpetual motion machine. It just doesn't pass the smell test to me because you can just create global wealth from changing some numbers in a computer with no repercussions. It's alchemy. Can I "prove" that there are negative consequences that in the long run outweigh the benefits? No. But I can say that I cannot find a single case of high inflation that did not coincide with government printing money. Printing a lot of money doesn't always cause inflation, but any time there is inflation there has been a lot of money printing. Sure what happens may not be predictable, but its obvious that you're messing with a complex system and effects aren't instantaneous or uniform. That's why you see things like product X is going up 50% while product Y is going up 5%. And the people that point this out think they're debunking something. With complex systems its best to keep things simple. You can get lost in the data from all the noise and overconfidence will bite you in the ass. Which is why it's not a smart idea to increase the money supply by 30+% in a year and dump it into the market. https://www.weforum.org/agenda/2020/04/european-union-finance-fiscal-money-support-covid-coronavirus/ https://www.weforum.org/agenda/2020/04/european-union-financ... https://www.covidmoneytracker.org/ https://www.covidmoneytracker.org/
1ncorrect 4y ago
My current thesis, from a position of absolute agnostic ignorance, is economics is what filled the void in society vacated by religion after the enlightenment. They’re functionally indistinguishable, with mythology replaced by mathematics, and God replaced with GDP. Similarly, they’re both arbitrary rules; conjured, imposed, and protected from scrutiny by the ruling class. That’s not to say it’s not useful, but I find it baffling that an imaginary concept is unquestionably granted veto over tangible and visceral phenomena.
- lukifer 4y ago
  I've used to think the Reagan-era political coalition (persisting to this day) made no sense: the values and worldviews of evangelicals and economic libertarians have terribly little in common. Then it clicked, the common belief that united them: https://en.wikipedia.org/wiki/Just-world_hypothesis https://en.wikipedia.org/wiki/Just-world_hypothesis
- achenatx 4y ago
  the difference between economics (or science) and religion is that economics is used to predict the future. When economics fails to predict the future, the models are changed until they can predict the future. religion tells you what goals you should have and how you should live a life, passing judgement and establishing morality. They are orthogonal to each other.
  - lukifer 4y ago
    "Economists have successfully predicted nine of the last five recessions."
perfecthjrjth 4y ago
Also, note that mainstream monasteries are at Harvard, Yale, Princeton, Stanford, etc. That's where these secular priests 'corrupt'/preach the next generation of elites.

onlyrealcuzzo 4y ago

The article talked a lot about winners and losers. It's interesting that there's no mention of debtors and creditors. The biggest winners in hyperinflation are people in massive debt. It's inflated away to nothing. The biggest losers are creditors for the opposite reasons. When inflation is just abnormally high (~8%), your debt doesn't get deflated to nothing, but you're getting a ~6% discount.

brabel 4y ago
My car loan just increased the interest rate I have to pay due to "increased costs". I had no idea they could do that (yeah, didn't read the fine print). I'm pretty sure consumer goods' creditors are doing just fine with rising inflation!
lordnacho 4y ago
With hyperinflation yes, because then there are only real incomes, prices (and debts) become meaningless. A plumber can fix the toilet for a carpenter who makes a doorframe for the plumber, they don't need a number if they can agree those services are worth the same. Thus real incomes are still real. With merely high inflation you still have insecurity. Many salaries are not inflation indexed (I struggle to think of anyone I know), so the only way to maintain your budget is to get a new job. For many lines of work, especially at the lower end of the scales, that's utterly unappetizing, and people would rather pressure their union to push up salaries.
gpderetta 4y ago
Only if you never need to refinance a debt.
yxhuvud 4y ago
The most common reason for hyperinflation is that the productive capabilities of society has gone down the crapper. That mean everyone is a loser. Some more than others, but even the debtors are losers in that situation.
- onlyrealcuzzo 4y ago

barry-cotter 4y ago

> The econ 101 version of economics is dominant in popular thought. You see it everywhere in newspapers. If only. Rent control wouldn’t exist. Policies that couldn’t pass any sane cost benefit trade off would be abolished. There would be a smooth, graduated marginal tax schedule. There would be congestion taxes on traffic. The world would be incredibly different if Econ 101 was widely understood.

achenatx 4y ago
not necessarily. One of the things Ive come to understand is that economic efficiency is not always the top priority. In many cases people want reduced variance. In return they are ok with less efficiency. Economics can predict the outcome, but cannot make a value judgement between two options. I used to think some people were irrational (especially when they disagreed with my logical viewpoint). It turns out that everyone is irrational, they simply have different opinions of the relative priority of values. For example it might be worth it to them to trade off long term economic efficiency for short term reduction in variance. Nationalized health care, social security, and rent control are all examples of policies that reflect this value system. "Freedom" is not a universal value. In fact many people are willing to trade freedom for security (or reduction in variance). They are not wrong or bad people, they just have a different opinion of priorities.

FabHK 4y ago

I thought the article made a lot of noise about very little. Sure, inflation reports the change in price of an average basket, and some prices in the basket might have gone up a lot, and some down a lot. But that is a different issue, and not inflation. The basket is carefully constructed to mirror what the average consumer consumes. Thus, the inflation of the basket measures how much more the average consumer has to spend on his consumption. That is certainly a useful number. To your further points: - [...] The models are not made properly, and there's a lot of hand-waiving. I'd disagree, you must have come across the wrong models. Theoretical economics has many beautiful models precisely laid out. For example, the Arrow-Debreu equilibrium model [1] utilises "the Kakutani fixed-point theorem on the fixed points of a continuous function from a compact, convex set into itself." I doubt that any engineer can find fault with the specification of that model. Similarly, the Heckscher–Ohlin model of international trade is well specified and yields five informative theorems [2]. To which extent those models reflect, or can be applied to, the real world is an entirely different question of course. Then there is empirical economics, a whole different ball park. But if you look at national accounts [3], for example, all those measurements are defined in excruciating detail, and there are books just dedicated to define the terms correctly. - The pop-sci version of economics is a bunch of easy quips Agreed. Some of them are more informative than others. - The econ 101 version of economics is dominant in popular thought. Yes, and that is quite bad, and is often exploited particularly by the political right, the business-friendly laissez-faire libertarians. James Kwak calls this Economism, and he has a great book about it [4]. - Inflation [...] can't look at it as a single figure. Again, to the extent that it reflects the price increase for the consumption basket of an average consumer: yes, it is an interesting and important number, and in particular, it is one number. Obviously, with more numbers a more nuanced discussion is possible. - Relative price changes are what matter in society. Sure, they matter. But inflation in itself really matters also, per se. By the way, Keynes pointed out that inflation need not be a bad thing. One thinks it is obviously bad because the average consumer has to pay more for his basket, thus can afford less of it. However, if there was, for example, a fiscal stimulus in the wake of a recession, and that leads to everyone having more money at their disposal, and aggregate demand rising, then there will be a new equilibrium with more demand, more supply, and higher prices (=inflation), but the average consumer having more of their basket than before. Good, not bad. [1] https://en.wikipedia.org/wiki/Arrow–Debreu_model https://en.wikipedia.org/wiki/Arrow–Debreu_model [2] https://en.wikipedia.org/wiki/Heckscher–Ohlin_model#Conclusions https://en.wikipedia.org/wiki/Heckscher–Ohlin_model#Conclusi... [3] https://en.wikipedia.org/wiki/National_accounts https://en.wikipedia.org/wiki/National_accounts [4] https://economism.net/ https://economism.net/

specialist 4y ago

> The models are not made properly... Yes and: This OC refers to the empirical data. Friedman (et al) rejected empiricism. I was gobsmacked when I finally figured out what that meant. Like, wtf are they even arguing about if they reject reality?! (Ya, I am a slow learner.) So agree or not with Nitzan's thesis, at least critics can have constructive debates about it.

tjader 4y ago
I think it's better to think of it not as a complete rejection of reality, but recognizing the limitations of empirical methods. Mainstream economics today is arguably too focused on indicators, just collecting a bunch of data and finding correlations, then jumping to causation from that.

lamontcg 4y ago

Inflation also ignores asset bubbles entirely by focusing on them as a separate class as not as too few houses or too few financial instruments being chased after by way too much money in the hands of the upper 90%/99%. And this article barely mentions wages, unionization and wage-price spirals.

marcosdumay 4y ago

Get some popcorn and enjoy the discussion. The real point is that "inflation" is a badly defined term, and everybody uses a different meaning. So one person using the number measured by averaging the prices of a few real items says it's not purely monetary, while another using the value that converts monetary unities into real goods on the macroeconomic equations yells "what do you mean it's not purely monetary? It's defined that way, any real data was removed" (as a hint, you can't even measure that one). If you get tired of this, there is a related discussion about the Keynesian investment multiplier. It's just as fun.