4 ms·

A warning to others: This is far more contested, and more nuanced, than this post makes it out to be. I believe this narrative as stated would not fly without l

by jrk 3y ago

A warning to others: This is far more contested, and more nuanced, than this post makes it out to be. I believe this narrative as stated would not fly without lots of debate and pushback in any mainstream economics department today. Among many other things, the recent history (of inflation, recession, and economic growth over the past 4 years) is completely wrong: stimulus was used during the COVID recession (early 2020), and the recession was very brief as a result. In the US we have had steady and strong growth continuously outside a short drop around March 2020. Inflation set in around a year later (due to many factors, not monetary or fiscal policy alone -- but again, this is complex and highly contested). Interest rates started being raised seriously two years later (spring 2022). Economic growth has continued throughout this process aside from the early-mid 2020 lockdown shock. There was never a time when "interest rates [were] hiked even though the economy was trashed by lockdowns."

nvm0n2 3y ago
University economics departments are probably still bastions of Keynesianism, but they aren't the ones whose opinions really matter :) COVID certainly saw stimulus be used, but I didn't say that's when Keynesianism was discredited. It's really happened during the post-pandemic recovery period. The US claims to be experiencing strong growth right now, but there are reasons to be a bit skeptical of that. Opinion polls that have historically always tracked reported economic performance have now diverged significantly, with people telling pollsters that they feel the economy is poor whilst the government announces that it's actually doing great. This leads left wing economists like Noah Smith to claim that there's suddenly a sort of ignorance crisis in which people have suddenly stopped being able to assess their own economic security. I think it's more likely that US data has gone bad, ably assisted by a very pro-Biden civil service. For example one metric they use to measure economic strength is job openings, but read any thread about the job market on HN and you'll see lots of highly skilled people struggling to find work along with many reports of what appear to be fake job openings, held open just to collect CVs. In Europe what we see is very weak or non-existent growth when controlled for inflation despite truly vast levels of immigration, i.e. real economy is probably shrinking in the UK: https://tradingeconomics.com/united-kingdom/gdp-constant-prices https://tradingeconomics.com/united-kingdom/gdp-constant-pri... Did shrink in Germany: https://archive.is/F2IX2 https://archive.is/F2IX2 And inflation has reached very high levels. For an Austrian "inflation is always and everywhere a monetary phenomenon". The post-COVID inflation is for them entirely a function of stimulus, which you'd expect to have a delayed impact in that case because when the stimulus money landed in people's bank accounts everywhere people might spend it was closed. The economy reopens, travel becomes possible again and that money starts flowing out of the bank. Inflation appears immediately, exactly as expected. Again it's a clearer picture in Europe. The UK started rapidly raising interest rates at the start of 2022, just as COVID was ending. Two years of lockdowns had left the economy in a terribly weakened state, nobody in the UK would claim the boom times were back, yet the BoE left Keynesianism behind and ramped up interest rates to levels last seen just before the last crisis in 2008. Back then they reacted by dropping rates to zero. This time they reacted by raising them to historical norms. A pretty clear repudiation of Keynes.

by jrk 3y ago

nvm0n2 3y ago

University economics departments are probably still bastions of Keynesianism, but they aren't the ones whose opinions really matter :) COVID certainly saw stimulus be used, but I didn't say that's when Keynesianism was discredited. It's really happened during the post-pandemic recovery period. The US claims to be experiencing strong growth right now, but there are reasons to be a bit skeptical of that. Opinion polls that have historically always tracked reported economic performance have now diverged significantly, with people telling pollsters that they feel the economy is poor whilst the government announces that it's actually doing great. This leads left wing economists like Noah Smith to claim that there's suddenly a sort of ignorance crisis in which people have suddenly stopped being able to assess their own economic security. I think it's more likely that US data has gone bad, ably assisted by a very pro-Biden civil service. For example one metric they use to measure economic strength is job openings, but read any thread about the job market on HN and you'll see lots of highly skilled people struggling to find work along with many reports of what appear to be fake job openings, held open just to collect CVs. In Europe what we see is very weak or non-existent growth when controlled for inflation despite truly vast levels of immigration, i.e. real economy is probably shrinking in the UK: https://tradingeconomics.com/united-kingdom/gdp-constant-prices https://tradingeconomics.com/united-kingdom/gdp-constant-pri... Did shrink in Germany: https://archive.is/F2IX2 https://archive.is/F2IX2 And inflation has reached very high levels. For an Austrian "inflation is always and everywhere a monetary phenomenon". The post-COVID inflation is for them entirely a function of stimulus, which you'd expect to have a delayed impact in that case because when the stimulus money landed in people's bank accounts everywhere people might spend it was closed. The economy reopens, travel becomes possible again and that money starts flowing out of the bank. Inflation appears immediately, exactly as expected. Again it's a clearer picture in Europe. The UK started rapidly raising interest rates at the start of 2022, just as COVID was ending. Two years of lockdowns had left the economy in a terribly weakened state, nobody in the UK would claim the boom times were back, yet the BoE left Keynesianism behind and ramped up interest rates to levels last seen just before the last crisis in 2008. Back then they reacted by dropping rates to zero. This time they reacted by raising them to historical norms. A pretty clear repudiation of Keynes.