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I still argue for that central banks got inflation wrong. Central banks set inflation target to to percent to try and control wage inflation. But wage inflation

by acd 4y ago

I still argue for that central banks got inflation wrong. Central banks set inflation target to to percent to try and control wage inflation. But wage inflation are globalized. So I argue that central banks tried to control local wage increase on a globalized market which is impossible. Central banks cannot control price increases on global market. Also central banks did not take into account increased housing prices in inflation data. Central cannot control energy price increase/decrease. central banks cannot control global wage levels. Thus central banks cannot control inflation in a global market. However interest rates set by central banks greatly effect housing prizes since people calculate what mortage they can afford monthly given bank interest rate. This inflation rate vs manipulation of interest rate by central banks has inflated house prices.

throw0101a 4y ago
> Thus central banks cannot control inflation in a global market. Japan enters the chat https://fred.stlouisfed.org/series/FPCPITOTLZGJPN https://fred.stlouisfed.org/series/FPCPITOTLZGJPN
- cjmb 4y ago
  This is actually a picture of national failure, tantamount to celebrating a blowout losing scoreboard. It is not a model for others to copy. Productivity and inflation are very related to each other. Per your chart, "Japan enters the chat" in the mid 1980s. If you're curious what has happened to Japan since the mid 1980s you can read https://en.wikipedia.org/wiki/Lost_Decades https://en.wikipedia.org/wiki/Lost_Decades (this wikipage was pluralized from "Decade" to "Decades" in the last couple of years, due to the continued struggles of the Japanese economy). To the extent that you hold central banks responsible for the national-economic state of things, Japan's central bank ought to be considered a massive failure. If you lean towards the Krugman side of things, you can find his explanation of that failure here: https://web.archive.org/web/20161203180303/https://krugman.blogs.nytimes.com/2015/10/20/rethinking-japan/ https://web.archive.org/web/20161203180303/https://krugman.b... If you prefer the Scott Sumner side, you can find his explanation of that failure here: https://www.themoneyillusion.com/why-japans-qe-didnt-work/ https://www.themoneyillusion.com/why-japans-qe-didnt-work/ https://www.themoneyillusion.com/the-other-money-illusion/ https://www.themoneyillusion.com/the-other-money-illusion/ https://www.themoneyillusion.com/rooseveltian-resolve/ https://www.themoneyillusion.com/rooseveltian-resolve/ Personally, I tend to sympathize with central banks and take a more muted view of their powers at the national-economic level. In my model, Japan's central bank was/is powerless given the magnitude of non-financial headwinds the country face(d) after the opening of China and beneath 2 decades of aggressive anti-Japanese trade policy from their largest trading partner (USA). This is a (slightly) heterodox take, and you can read my articulation of this view here: https://www.conradbastable.com/essays/unequal-growth-the-zero-sum-games-you-dont-see#1999 https://www.conradbastable.com/essays/unequal-growth-the-zer... But whatever your take, Japan's economic struggles should not be mistaken for signals of success.
  - imtringued 4y ago
    Central banks are just actors dressed up in fancy credentials. They are ultimately meaningless institutions. Yes they control the interest rate and they can do QE but the commercial banks and federal government wield at least ten times more power in economics alone.
  - throw0101a 4y ago
    > This is actually a picture of national failure, tantamount to celebrating a blowout losing scoreboard. It is not a model for others to copy. It's "losing" because Japan wants inflation. They've had the opposite problem the rest of the planet has. Inflation (generally) means there's some kind of economic activity. I'm well aware of Krugman's thoughts on Japan. See his 1998 paper: * https://www.brookings.edu/bpea-articles/its-baaack-japans-slump-and-the-return-of-the-liquidity-trap/ https://www.brookings.edu/bpea-articles/its-baaack-japans-sl... My post is a counter-point that somehow a global economy (always) means that central banks can't do anything. Just compare the US and the EU in the 2010s, and you'll see different trajectories.
lumost 4y ago
This also effects larger Private Equity decisions. Moving a factory costs money, low interest rates in the US make it easier to borrow the money to do so. Lower interest rates also mean that assets appear cheaper relative to wages, meaning the asset price will be bid upwards to make up the difference. I don't think we have a good understanding of all the effects changing interest rates have.
arc-in-space 4y ago
> Thus central banks cannot control inflation in a global market. This is simply false. What a central bank can affect, in the long run, is the average level of prices(including wages) denominated in the currency they control, even globally. Inflation in the price level of other currencies, on the other hand, is mostly irrelevant to a particular central bank. It is true that central banks cannot control a relative change in prices of energy or any other single good, but that isn't even their goal.

by acd 4y ago

throw0101a 4y ago

> Thus central banks cannot control inflation in a global market. Japan enters the chat https://fred.stlouisfed.org/series/FPCPITOTLZGJPN https://fred.stlouisfed.org/series/FPCPITOTLZGJPN

cjmb 4y ago
This is actually a picture of national failure, tantamount to celebrating a blowout losing scoreboard. It is not a model for others to copy. Productivity and inflation are very related to each other. Per your chart, "Japan enters the chat" in the mid 1980s. If you're curious what has happened to Japan since the mid 1980s you can read https://en.wikipedia.org/wiki/Lost_Decades https://en.wikipedia.org/wiki/Lost_Decades (this wikipage was pluralized from "Decade" to "Decades" in the last couple of years, due to the continued struggles of the Japanese economy). To the extent that you hold central banks responsible for the national-economic state of things, Japan's central bank ought to be considered a massive failure. If you lean towards the Krugman side of things, you can find his explanation of that failure here: https://web.archive.org/web/20161203180303/https://krugman.blogs.nytimes.com/2015/10/20/rethinking-japan/ https://web.archive.org/web/20161203180303/https://krugman.b... If you prefer the Scott Sumner side, you can find his explanation of that failure here: https://www.themoneyillusion.com/why-japans-qe-didnt-work/ https://www.themoneyillusion.com/why-japans-qe-didnt-work/ https://www.themoneyillusion.com/the-other-money-illusion/ https://www.themoneyillusion.com/the-other-money-illusion/ https://www.themoneyillusion.com/rooseveltian-resolve/ https://www.themoneyillusion.com/rooseveltian-resolve/ Personally, I tend to sympathize with central banks and take a more muted view of their powers at the national-economic level. In my model, Japan's central bank was/is powerless given the magnitude of non-financial headwinds the country face(d) after the opening of China and beneath 2 decades of aggressive anti-Japanese trade policy from their largest trading partner (USA). This is a (slightly) heterodox take, and you can read my articulation of this view here: https://www.conradbastable.com/essays/unequal-growth-the-zero-sum-games-you-dont-see#1999 https://www.conradbastable.com/essays/unequal-growth-the-zer... But whatever your take, Japan's economic struggles should not be mistaken for signals of success.
- imtringued 4y ago
  Central banks are just actors dressed up in fancy credentials. They are ultimately meaningless institutions. Yes they control the interest rate and they can do QE but the commercial banks and federal government wield at least ten times more power in economics alone.
- throw0101a 4y ago
  > This is actually a picture of national failure, tantamount to celebrating a blowout losing scoreboard. It is not a model for others to copy. It's "losing" because Japan wants inflation. They've had the opposite problem the rest of the planet has. Inflation (generally) means there's some kind of economic activity. I'm well aware of Krugman's thoughts on Japan. See his 1998 paper: * https://www.brookings.edu/bpea-articles/its-baaack-japans-slump-and-the-return-of-the-liquidity-trap/ https://www.brookings.edu/bpea-articles/its-baaack-japans-sl... My post is a counter-point that somehow a global economy (always) means that central banks can't do anything. Just compare the US and the EU in the 2010s, and you'll see different trajectories.

lumost 4y ago

This also effects larger Private Equity decisions. Moving a factory costs money, low interest rates in the US make it easier to borrow the money to do so. Lower interest rates also mean that assets appear cheaper relative to wages, meaning the asset price will be bid upwards to make up the difference. I don't think we have a good understanding of all the effects changing interest rates have.

arc-in-space 4y ago

> Thus central banks cannot control inflation in a global market. This is simply false. What a central bank can affect, in the long run, is the average level of prices(including wages) denominated in the currency they control, even globally. Inflation in the price level of other currencies, on the other hand, is mostly irrelevant to a particular central bank. It is true that central banks cannot control a relative change in prices of energy or any other single good, but that isn't even their goal.