4 ms·

Is there a better way to kill inflation than raising interest rates?

4 points by stubish 4y ago

WantonQuantum 4y ago
"The way we use interest rates to control inflation is socially destructive, unfair and inefficient" Everyone seems to be forgetting that the Reserve Bank has been telling the government for years and years that the housing market is out of control and the government needs to implement policies (e.g. tax changes) to reign it in. The RBA can only control one thing: the cash rate. So, government after government have shied away from any kind of reform and relied the RBA to do the unpopular thing. They even chastise the RBA in the media. So now we have a true inflation problem and the thing that the RBA has been warning successive governments about is unfolding. But who is everyone blaming? The RBA. Idiotic.
elmerfud 4y ago
Yes there is another way, increase supply. Oh wait that's what had been going and it's not sustainable either. Blame the policy makers not the banks. It's very how the banks often get the blame but rarely do you see any criminal prosecutions come out of that blame. It makes the people even more angry with the banks and "big money". They never realize that the reason no banker goes to jail for these things is because they're follow the regulations set up by the policy makers. So the people charged with doing the investigation are the same as who set the policy. The only interest they have is to lay blame and do nothing else.
jnordwick 4y ago
too many misconceptions around rates where we have had definitive theoretical and empiracle data otherwise: - the govt doesnt set bank to bank overnight rates, it only has targets. and in the past it has been only partially successful at keeping those targets. the fed can wish all it wants but sometimes the market says no. the can keep pushoing to force an issue, but it would likely be catastrophic. - short term overnight rates are not long term rates. overnight rates are highly affected by trading and regulatory holding reasons. the longer term has many other far larger things in control. the quick long term definition is inflation plus rate of return. short term rates are more effected by forex prices, reserve penalties, etc. they invert all the time and it is never clear which is the tail and which is the dog in any predictive fashion. - interest rates are a global market. ppl dont care who's debt they have, just the return and risk profile. (and if they do, the arbitragers will quickly fix that). so to complain about interest rates you need to complain about your fed or currency it is currently in the process of fucking up. pretty much all ineterest rate are set globally absent massive inerventions. - as friedman put it "inflation is and always is a monetary phenomenon." it is too many dollars chasing too many goods. so you can have production grow or reduce the amount of dollars (or both). #2 is really difficult and getting more difficult as what can be used to conduct trade is getting wider and wider. so targeting money supply doesnt seem to give a good answer as what ppl use for money can change. #1 is basically politics and governments are shit at doing it without fucking it all up (see the history of the human race for more details). too much corruption, lack of market forces, and the govt generally doesnt believe in creative destructions and instead will hold on to any idea or agency in perpetuity (or one that comes along that gives it more control). not a gold bug, but we've had multiple attempts at fiat currrencies and soft money.the economic community drifts into la la lands and then things reset back to classical economics (which is just a study in people and reward structures). we last had bretton woods and most of the world on a gold price target (maintained in a very similar way as todays IR targets) in the 1970s - thats about 50 years. I saw an old guesstimate at every 200 years, and i so hope that is wrong. (someday we'll find something to measure money against besides gold, but not yet it just happens to be useful because it is mostly useless and not easily made). rip jude wanniski - i wish i could have asked you about bitcoin
dennis_jeeves1 4y ago
Haven't read the article but the main cause of inflation is printing money beyond the (gold?) reserves.

4 points by stubish 4y ago

"The way we use interest rates to control inflation is socially destructive, unfair and inefficient" Everyone seems to be forgetting that the Reserve Bank has been telling the government for years and years that the housing market is out of control and the government needs to implement policies (e.g. tax changes) to reign it in. The RBA can only control one thing: the cash rate. So, government after government have shied away from any kind of reform and relied the RBA to do the unpopular thing. They even chastise the RBA in the media. So now we have a true inflation problem and the thing that the RBA has been warning successive governments about is unfolding. But who is everyone blaming? The RBA. Idiotic.

elmerfud 4y ago

Yes there is another way, increase supply. Oh wait that's what had been going and it's not sustainable either. Blame the policy makers not the banks. It's very how the banks often get the blame but rarely do you see any criminal prosecutions come out of that blame. It makes the people even more angry with the banks and "big money". They never realize that the reason no banker goes to jail for these things is because they're follow the regulations set up by the policy makers. So the people charged with doing the investigation are the same as who set the policy. The only interest they have is to lay blame and do nothing else.

jnordwick 4y ago

too many misconceptions around rates where we have had definitive theoretical and empiracle data otherwise: - the govt doesnt set bank to bank overnight rates, it only has targets. and in the past it has been only partially successful at keeping those targets. the fed can wish all it wants but sometimes the market says no. the can keep pushoing to force an issue, but it would likely be catastrophic. - short term overnight rates are not long term rates. overnight rates are highly affected by trading and regulatory holding reasons. the longer term has many other far larger things in control. the quick long term definition is inflation plus rate of return. short term rates are more effected by forex prices, reserve penalties, etc. they invert all the time and it is never clear which is the tail and which is the dog in any predictive fashion. - interest rates are a global market. ppl dont care who's debt they have, just the return and risk profile. (and if they do, the arbitragers will quickly fix that). so to complain about interest rates you need to complain about your fed or currency it is currently in the process of fucking up. pretty much all ineterest rate are set globally absent massive inerventions. - as friedman put it "inflation is and always is a monetary phenomenon." it is too many dollars chasing too many goods. so you can have production grow or reduce the amount of dollars (or both). #2 is really difficult and getting more difficult as what can be used to conduct trade is getting wider and wider. so targeting money supply doesnt seem to give a good answer as what ppl use for money can change. #1 is basically politics and governments are shit at doing it without fucking it all up (see the history of the human race for more details). too much corruption, lack of market forces, and the govt generally doesnt believe in creative destructions and instead will hold on to any idea or agency in perpetuity (or one that comes along that gives it more control). not a gold bug, but we've had multiple attempts at fiat currrencies and soft money.the economic community drifts into la la lands and then things reset back to classical economics (which is just a study in people and reward structures). we last had bretton woods and most of the world on a gold price target (maintained in a very similar way as todays IR targets) in the 1970s - thats about 50 years. I saw an old guesstimate at every 200 years, and i so hope that is wrong. (someday we'll find something to measure money against besides gold, but not yet it just happens to be useful because it is mostly useless and not easily made). rip jude wanniski - i wish i could have asked you about bitcoin

dennis_jeeves1 4y ago

Haven't read the article but the main cause of inflation is printing money beyond the (gold?) reserves.