3 ms·
The follow-up article on inflation of shelter costs in response to mortgage interest rates is also fascinating and worth a read, imo [0]. The tl;dr is that in t
by magneticnorth 4y ago
The follow-up article on inflation of shelter costs in response to mortgage interest rates is also fascinating and worth a read, imo [0]. The tl;dr is that in the medium and longer term, higher interest rates will decrease inflation, but there's a right-half-plane zero effect that will cause higher inflation rates in the short term in response to interest rate hikes (with a lot of simplifying assumptions).
[0] https://jbconsulting.substack.com/p/on-shelter-futures-part-1 https://jbconsulting.substack.com/p/on-shelter-futures-part-...
- neilwilson 4y agoIt's a little more complex than that because of the potential feedback loop via the main price channel. In other words if you can have a wage/price spiral you can have a profit/price spiral and an interest/price spiral for the same reasons. [0]:https://new-wayland.com/blog/interest-price-spiral/ https://new-wayland.com/blog/interest-price-spiral/ Once you abandon the concepts of general equilibrium and a fixed amount of money for what happens in reality, then the functional control mechanisms get a whole lot more interesting.