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Fed chair bernanke famously said "the us government has a technology called a printing press" to explain why deflation was in no way to be feared, bc unlike inf

Fed chair bernanke famously said "the us government has a technology called a printing press" to explain why deflation was in no way to be feared, bc unlike inflation it can be fought easily and without serious drawbacks. Deflation is good, it means cheaper prices. A deflationary spiral due to insufficient money supply despite robust economic fundamentals can be really bad in theory sure, but it can't happen unless the monetary authorities are totally negligent and incompetent, as happened in the great depression. All you have to do is print more money and problem solved. We don't expect it to happen again because we learned from it. See https://en.m.wikipedia.org/wiki/Bernanke_doctrine https://en.m.wikipedia.org/wiki/Bernanke_doctrine

throw0101d 2y ago
> […] but it can't happen unless the monetary authorities are totally negligent and incompetent, as happened in the great depression. Or if you do not have monetary policy flexibility, like when you're on the Gold Standard, as happened in the Great Depression (until FDR went off of it). See Bernanke and James (1990): > However, Temin (1989) argues that, once these destabiliz- ing policy measures had been taken, little could be done to avert deflation and depression, given the commitment of central banks to maintenance of the gold standard. Once the deflationary process had begun, central banks engaged in competitive deflation and a scramble for gold, hoping by raising cover ratios to protect their currencies against speculative attack. Attempts by any individ- ual central bank to reflate were met by immediate gold outflows, which forced the central bank to raise its discount rate and deflate once again. According to Temin, even the United States, with its large gold reserves, faced this con- straint. Thus Temin disagrees with the suggestion of Friedman and Schwartz (1963) that the Federal Reserve's failure to protect the U.S. money supply was due to misunderstanding of the problem or a lack of leadership; instead, he claims, given the commitment to the gold standard (and, presumably, the ab- sence of effective central bank cooperation), the Fed had little choice but to let the banks fail and the money supply fall. * https://www.nber.org/system/files/chapters/c11482/c11482.pdf https://www.nber.org/system/files/chapters/c11482/c11482.pdf For a fuller treatment, see Eichengreen: > This book offers a reassessment of the international monetary problems that led to the global economic crisis of the 1930s. It explores the connections between the gold standard--the framework regulating international monetary affairs until 1931--and the Great Depression that broke out in 1929. Eichengreen shows how economic policies, in conjunction with the imbalances created by World War I, gave rise to the global crisis of the 1930s. He demonstrates that the gold standard fundamentally constrained the economic policies that were pursued and that it was largely responsible for creating the unstable economic environment on which those policies acted. The book also provides a valuable perspective on the economic policies of the post-World War II period and their consequences. * https://www.goodreads.com/en/book/show/775143 https://www.goodreads.com/en/book/show/775143 Following the rules of the gold standard is what caused the initial "negligent and incompetent" action. Of course later (1937) on they raised rates too soon (and the government dialled back deficit spending), which caused an economic slowdown. It was not until the giant stimulus packaged often referred to as "World War Two" that the economy picked up again.
Aloha 2y ago
As someone who has lots of debt, I would prefer slow, but subtle inflation. I look forward to minimum wage jobs being 25 dollars an hour, and still poverty wages - because then the debts I have will be roughly half what they are now in constant dollars.
- davisr 2y ago
  Hey, you're <insert billionaire here>! Just a reminder for those not in-the-know: https://www.propublica.org/article/billionaires-tax-avoidance-techniques-irs-files https://www.propublica.org/article/billionaires-tax-avoidanc...
  - Aloha 2y ago
    I didn't see the word 'inflation' in there once. I do think we should tax borrowing on securities though.
    - davisr 2y ago
      The ultra-wealthy can borrow phenomenal amounts of money at low interest rates, which has two effects. First, as you said, is that during times of great inflation they come out ahead (also because they manipulate the broader economy to inflate). Second, is that borrowing doesn't count as earned income and therefore is not subject to income taxes. I think we should outlaw billionaires. The idea that a sole individual could hold so much economic, societal, and political power is totally fucking insane.
      - abeppu 2y ago
        I've heard that the ultra-rich borrow a lot against potentially illiquid assets to avoid realizing gains and taxes, but I'm confused how it works long term. Do you just keep taking out new debt to pay back your old debt, and continue doing that until you die? It seems like eventually you would need to sell something to pay back your older creditors.
        2y ago
veqq 2y ago
> unless the monetary authorities are totally negligent and incompetent See Japan for the last 3 decades!
- omegaworks 2y ago
  The standard of living in Japan for the vast majority of people is orders of magnitude better than it is here. It might not look good according to metrics that optimize ploughing society's wealth into the hands of a few billionaires, but it says something that an Uber delivery person can live walking distance to the popular restaurants that he delivers from.
  - throw0101d 2y ago
    > The standard of living in Japan for the vast majority of people is orders of magnitude better than it is here. But is that because of their economic policy or because of social norms? > It might not look good according to metrics that optimize ploughing society's wealth into the hands of a few billionaires […] Sweden also has a pretty good standard of living, less inequality than the US, decent economic growth (better than JP, lower than US), and has more billionaires on a per capita basis than the US: * https://en.wikipedia.org/wiki/List_of_countries_by_number_of_billionaires https://en.wikipedia.org/wiki/List_of_countries_by_number_of...
    - staunton 2y ago
      > But is that because of their economic policy or because of social norms? You think the distribution of living standards across a population could be a matter of social norms? How?
      - throw0101d 2y ago
        > You think the distribution of living standards across a population could be a matter of social norms? How? Taxation and social programs: * https://en.wikipedia.org/wiki/Redistribution_of_income_and_wealth https://en.wikipedia.org/wiki/Redistribution_of_income_and_w... People choose to vote for / elect people who are willing to implement various policies to achieve it. What is acceptable to the population is (partly?) determined by the norms of that population and society, and the acceptance of various ideas will determine what politicians will campaign for.
abeppu 2y ago
In the context of the original chart which covers a long period of US history ... is Bernanke's statement still true for most of it? Clearly, I am not a monetary policy buff, but certainly I've heard people talk about the US getting off of the gold standard in 1971. When the currency is by policy backed by something, you can't just print money (unless you dig a new mine, I suppose), right? When I google around for what our policy was in the 1920s, I see that it was a bit complicated in that many countries suspended the gold standard during WWI and in some cases there were pegged exchange rates, and the US intervened in gold imports.
ThrustVectoring 2y ago
Every nominal asset that can be sold to take advantage of lower prices on goods and services is someone else's nominal liability that they have to cover with weakened earning power. Deflation is straight up bad compared to mild and predictable inflation, it's easy to fight off sure but it's definitely something to avoid.

throw0101d 2y ago

> […] but it can't happen unless the monetary authorities are totally negligent and incompetent, as happened in the great depression. Or if you do not have monetary policy flexibility, like when you're on the Gold Standard, as happened in the Great Depression (until FDR went off of it). See Bernanke and James (1990): > However, Temin (1989) argues that, once these destabiliz- ing policy measures had been taken, little could be done to avert deflation and depression, given the commitment of central banks to maintenance of the gold standard. Once the deflationary process had begun, central banks engaged in competitive deflation and a scramble for gold, hoping by raising cover ratios to protect their currencies against speculative attack. Attempts by any individ- ual central bank to reflate were met by immediate gold outflows, which forced the central bank to raise its discount rate and deflate once again. According to Temin, even the United States, with its large gold reserves, faced this con- straint. Thus Temin disagrees with the suggestion of Friedman and Schwartz (1963) that the Federal Reserve's failure to protect the U.S. money supply was due to misunderstanding of the problem or a lack of leadership; instead, he claims, given the commitment to the gold standard (and, presumably, the ab- sence of effective central bank cooperation), the Fed had little choice but to let the banks fail and the money supply fall. * https://www.nber.org/system/files/chapters/c11482/c11482.pdf https://www.nber.org/system/files/chapters/c11482/c11482.pdf For a fuller treatment, see Eichengreen: > This book offers a reassessment of the international monetary problems that led to the global economic crisis of the 1930s. It explores the connections between the gold standard--the framework regulating international monetary affairs until 1931--and the Great Depression that broke out in 1929. Eichengreen shows how economic policies, in conjunction with the imbalances created by World War I, gave rise to the global crisis of the 1930s. He demonstrates that the gold standard fundamentally constrained the economic policies that were pursued and that it was largely responsible for creating the unstable economic environment on which those policies acted. The book also provides a valuable perspective on the economic policies of the post-World War II period and their consequences. * https://www.goodreads.com/en/book/show/775143 https://www.goodreads.com/en/book/show/775143 Following the rules of the gold standard is what caused the initial "negligent and incompetent" action. Of course later (1937) on they raised rates too soon (and the government dialled back deficit spending), which caused an economic slowdown. It was not until the giant stimulus packaged often referred to as "World War Two" that the economy picked up again.

Aloha 2y ago

As someone who has lots of debt, I would prefer slow, but subtle inflation. I look forward to minimum wage jobs being 25 dollars an hour, and still poverty wages - because then the debts I have will be roughly half what they are now in constant dollars.

davisr 2y ago
Hey, you're <insert billionaire here>! Just a reminder for those not in-the-know: https://www.propublica.org/article/billionaires-tax-avoidance-techniques-irs-files https://www.propublica.org/article/billionaires-tax-avoidanc...
- Aloha 2y ago
  I didn't see the word 'inflation' in there once. I do think we should tax borrowing on securities though.
  - davisr 2y ago
    The ultra-wealthy can borrow phenomenal amounts of money at low interest rates, which has two effects. First, as you said, is that during times of great inflation they come out ahead (also because they manipulate the broader economy to inflate). Second, is that borrowing doesn't count as earned income and therefore is not subject to income taxes. I think we should outlaw billionaires. The idea that a sole individual could hold so much economic, societal, and political power is totally fucking insane.
    - abeppu 2y ago
      I've heard that the ultra-rich borrow a lot against potentially illiquid assets to avoid realizing gains and taxes, but I'm confused how it works long term. Do you just keep taking out new debt to pay back your old debt, and continue doing that until you die? It seems like eventually you would need to sell something to pay back your older creditors.
      - 2y ago

veqq 2y ago

> unless the monetary authorities are totally negligent and incompetent See Japan for the last 3 decades!

omegaworks 2y ago
The standard of living in Japan for the vast majority of people is orders of magnitude better than it is here. It might not look good according to metrics that optimize ploughing society's wealth into the hands of a few billionaires, but it says something that an Uber delivery person can live walking distance to the popular restaurants that he delivers from.
- throw0101d 2y ago
  > The standard of living in Japan for the vast majority of people is orders of magnitude better than it is here. But is that because of their economic policy or because of social norms? > It might not look good according to metrics that optimize ploughing society's wealth into the hands of a few billionaires […] Sweden also has a pretty good standard of living, less inequality than the US, decent economic growth (better than JP, lower than US), and has more billionaires on a per capita basis than the US: * https://en.wikipedia.org/wiki/List_of_countries_by_number_of_billionaires https://en.wikipedia.org/wiki/List_of_countries_by_number_of...
  - staunton 2y ago
    > But is that because of their economic policy or because of social norms? You think the distribution of living standards across a population could be a matter of social norms? How?
    - throw0101d 2y ago
      > You think the distribution of living standards across a population could be a matter of social norms? How? Taxation and social programs: * https://en.wikipedia.org/wiki/Redistribution_of_income_and_wealth https://en.wikipedia.org/wiki/Redistribution_of_income_and_w... People choose to vote for / elect people who are willing to implement various policies to achieve it. What is acceptable to the population is (partly?) determined by the norms of that population and society, and the acceptance of various ideas will determine what politicians will campaign for.

abeppu 2y ago

In the context of the original chart which covers a long period of US history ... is Bernanke's statement still true for most of it? Clearly, I am not a monetary policy buff, but certainly I've heard people talk about the US getting off of the gold standard in 1971. When the currency is by policy backed by something, you can't just print money (unless you dig a new mine, I suppose), right? When I google around for what our policy was in the 1920s, I see that it was a bit complicated in that many countries suspended the gold standard during WWI and in some cases there were pegged exchange rates, and the US intervened in gold imports.

ThrustVectoring 2y ago

Every nominal asset that can be sold to take advantage of lower prices on goods and services is someone else's nominal liability that they have to cover with weakened earning power. Deflation is straight up bad compared to mild and predictable inflation, it's easy to fight off sure but it's definitely something to avoid.