5 ms·

First, take a gander at M0, to get a sense of how much money has been printed: http://research.stlouisfed.org/fred2/series/BASE http://research.stlouisfed.org/

by temphn 13y ago

First, take a gander at M0, to get a sense of how much money has been printed: http://research.stlouisfed.org/fred2/series/BASE http://research.stlouisfed.org/fred2/series/BASE That shows you what actually happened to the money supply. In other words, the central factual claim made by Krugman is false: The practical misconception here — and it’s a big one — is the notion that we live in an era of wildly irresponsible money printing, with runaway inflation just around the corner. It’s true that the Federal Reserve and other central banks have greatly expanded their balance sheets — but they’ve done that explicitly as a temporary measure in response to economic crisis. I know, government officials are not to be trusted and all that, but the truth is that Ben Bernanke’s promises that his actions wouldn’t be inflationary have been vindicated year after year, while goldbugs’ dire warnings of inflation keep not coming true. As that graph shows, we are indeed in an era of out of control money printing[0]. Moreover, food[1] and energy[2] prices are through the roof, and housing is being artificially propped up by QE4 -- in which dollar holders are diluted to the tune of $85B per month[3] so that the government can take mortgage-backed securities off the hands of their favorite banks. The CPI intentionally excludes[4] the consequent energy and food price increases (ostensibly due to their "volatility") thereby systematically understating the consequences of printing 85 billion dollars per month, every month, to infinity. [0] http://research.stlouisfed.org/fred2/series/BASE http://research.stlouisfed.org/fred2/series/BASE [1] http://research.stlouisfed.org/fred2/graph/?g=8l2 http://research.stlouisfed.org/fred2/graph/?g=8l2 [2] http://goo.gl/R4r0f http://goo.gl/R4r0f [3] http://www.forbes.com/sites/afontevecchia/2012/12/12/qe4-is-here-bernanke-delivers-85b-a-month-until-unemployment-falls-below-6-5 http://www.forbes.com/sites/afontevecchia/2012/12/12/qe4-is-... [4] http://www.bls.gov/cpi/cpifaq.htm#Question_13 http://www.bls.gov/cpi/cpifaq.htm#Question_13

mav3r1ck 13y ago
Um, your link to gas prices show them going down. I don't consider that as "energy prices going through the roof", quite the opposite actually. By the way, a barrel of oil right now is in the same exact price range it was 5 years ago (go to Marketwatch and click 5-year price). Furthermore, one would be hard pressed to claim a rise in food-prices resulted solely from inflation-- given the record droughts in America [1] and record fires in Russia [2] that devastated entire crops last year. Please, for the sake of good argument, try to be factually correct when trying to claim others aren't. [1] http://theweek.com/article/index/230673/americas-worst-drought-in-decades-by-the-numbers http://theweek.com/article/index/230673/americas-worst-droug... AND http://en.wikipedia.org/wiki/2012_drought http://en.wikipedia.org/wiki/2012_drought [2] http://en.wikipedia.org/wiki/2010_Russian_wildfires http://en.wikipedia.org/wiki/2010_Russian_wildfires
- cdtwigg 13y ago
  Also food price increases look to me like they're basically within historical norms? The posted graph makes it look like there's a big spike because it starts with the 2008-2009 time period when inflation was actually negative. http://research.stlouisfed.org/fred2/graph/?g=hxh http://research.stlouisfed.org/fred2/graph/?g=hxh
- temphn 13y ago
  Sure, let's talk facts. 1) Fixed the link to include the four year gas chart. Up from $2.03 to $3.57 in four years. Doesn't bode well for your case. Short link due to ampersands: http://goo.gl/R4r0f http://goo.gl/R4r0f 2) You seem to grant that inflation contributed to the rise in food prices. A one off drought can't explain the persistence of the rise since 2008, or the fact that food inflation caused the riots which led to the Arab Spring in 2011. http://www.telegraph.co.uk/finance/economics/8492078/How-the-Fed-triggered-the-Arab-Spring-uprisings-in-two-easy-graphs.html http://www.telegraph.co.uk/finance/economics/8492078/How-the... The first graph illustrates the correlation between the prices of food and the Fed’s purchase of US Treasuries (i.e. its quantitative easing programmes). (A widely- discussed graph illustrating correlation between QE and broader commodities indices can be seen here.) We see how the food price index broadly stabilised through late 2009 and early 2010, then rose again from mid-2010 as quantitative easing was re-started (QE2) following Ben Bernanke’s Jackson Hole speech of August 27 – with prices rising of about 40% over an eight month period. Similar correlations can be observed between Fed purchases and wider commodities indices, but let’s focus on food for now. ... But the reality is that a rise in commodity prices is precisely what theory predicts would be a consequence of QE2, and the data give the same picture – we aren’t investigating a contentious mystery in the data; we are seeing precisely what we ought to have expected. Indeed. The amazing thing is how vehemently people insist that tripling the monetary base in a few years won't cause inflation. This is a simple matter of ratios. Bernanke, Obama, Bush, Greenspan, and Krugman have pursued a policy that enriches banks and shields them from risk by diluting dollar holders. If you understand the concept of dilution in a cap table, you should understand this much: the printed dollars are deposited in the accounts of large banks, enriching the very richest and making everyone else worse off. Krugman himself is a knowing accomplice, one who always pulls his punches with respect to the banks: http://krugman.blogs.nytimes.com/2010/04/12/failure-is-a-failed-strategy/ http://krugman.blogs.nytimes.com/2010/04/12/failure-is-a-fai... One thing that keeps coming up in comments, both here and on my column, is the widespread belief that all we need to do on the banking front is (a) break up the big banks, so that none of them are too big to fail (b) promise not to bail out any banks in the future. That way, the claim goes, bankers will know that they will face dire consequences if they misbehave, and market discipline will do the rest. Dream on. ... But just letting banks fail isn’t going to happen — nor should it. In practice, talking about doing so is just an excuse to avoid real reform. At the end of the day Krugman is for the bailouts, for the banks, and against bank bankruptcy. No wonder he's against Bitcoin.
mikeyouse 13y ago
Except inflation takes more than just increased money supply.. You need to pair the money supply with velocity to get an indication of inflationary pressure. As seen here: http://research.stlouisfed.org/fredgraph.png?g=hxg http://research.stlouisfed.org/fredgraph.png?g=hxg There is no conspiracy.. MIT's billion prices index matches CPI almost verbatim. (http://bpp.mit.edu/usa/ http://bpp.mit.edu/usa/)
bitcartel 13y ago
Don't forget the Bank of Japan has also joined the party. Having held interest rates at 0.5% or less, for 18 years now (since 1995) they are also going to conjure up $76 Billion/month of funny money to buy government bonds, on a mission to double the monetary base by $1.4 Trillion within 2 years. Nobody really knows what the consequences are going to be, but I think one thing is certain: ordinary people are going to find it hard to accept so-called 'austerity measures' and reduced living standards when they pick up a newspaper and read about central bankers creating money out of thin air. [1] http://au.news.yahoo.com/thewest/business/a/-/world/16670172/bank-of-japans-kuroda-signals-ready-to-keep-stimulus-more-than-two-years/ http://au.news.yahoo.com/thewest/business/a/-/world/16670172...
parasubvert 13y ago
The graphs you've shown indicate nothing about "out of control". Krugman"s central claim is actually quite true. There are very good reasons most economists DO NOT include commodities like oil and food in inflation indicators: they're highly volatile, as you point out. And they tend not to be correlated to other inflationary indicators. Just look at the Gold crash the past two days, and oil crash today. Please explain what economic model you use to indicate your preferred economic policy? Krugman uses standard IS-LM, which has been vindicated time and time again during this crises.

by temphn 13y ago

mav3r1ck 13y ago

Um, your link to gas prices show them going down. I don't consider that as "energy prices going through the roof", quite the opposite actually. By the way, a barrel of oil right now is in the same exact price range it was 5 years ago (go to Marketwatch and click 5-year price). Furthermore, one would be hard pressed to claim a rise in food-prices resulted solely from inflation-- given the record droughts in America [1] and record fires in Russia [2] that devastated entire crops last year. Please, for the sake of good argument, try to be factually correct when trying to claim others aren't. [1] http://theweek.com/article/index/230673/americas-worst-drought-in-decades-by-the-numbers http://theweek.com/article/index/230673/americas-worst-droug... AND http://en.wikipedia.org/wiki/2012_drought http://en.wikipedia.org/wiki/2012_drought [2] http://en.wikipedia.org/wiki/2010_Russian_wildfires http://en.wikipedia.org/wiki/2010_Russian_wildfires

cdtwigg 13y ago
Also food price increases look to me like they're basically within historical norms? The posted graph makes it look like there's a big spike because it starts with the 2008-2009 time period when inflation was actually negative. http://research.stlouisfed.org/fred2/graph/?g=hxh http://research.stlouisfed.org/fred2/graph/?g=hxh
temphn 13y ago
Sure, let's talk facts. 1) Fixed the link to include the four year gas chart. Up from $2.03 to $3.57 in four years. Doesn't bode well for your case. Short link due to ampersands: http://goo.gl/R4r0f http://goo.gl/R4r0f 2) You seem to grant that inflation contributed to the rise in food prices. A one off drought can't explain the persistence of the rise since 2008, or the fact that food inflation caused the riots which led to the Arab Spring in 2011. http://www.telegraph.co.uk/finance/economics/8492078/How-the-Fed-triggered-the-Arab-Spring-uprisings-in-two-easy-graphs.html http://www.telegraph.co.uk/finance/economics/8492078/How-the... The first graph illustrates the correlation between the prices of food and the Fed’s purchase of US Treasuries (i.e. its quantitative easing programmes). (A widely- discussed graph illustrating correlation between QE and broader commodities indices can be seen here.) We see how the food price index broadly stabilised through late 2009 and early 2010, then rose again from mid-2010 as quantitative easing was re-started (QE2) following Ben Bernanke’s Jackson Hole speech of August 27 – with prices rising of about 40% over an eight month period. Similar correlations can be observed between Fed purchases and wider commodities indices, but let’s focus on food for now. ... But the reality is that a rise in commodity prices is precisely what theory predicts would be a consequence of QE2, and the data give the same picture – we aren’t investigating a contentious mystery in the data; we are seeing precisely what we ought to have expected. Indeed. The amazing thing is how vehemently people insist that tripling the monetary base in a few years won't cause inflation. This is a simple matter of ratios. Bernanke, Obama, Bush, Greenspan, and Krugman have pursued a policy that enriches banks and shields them from risk by diluting dollar holders. If you understand the concept of dilution in a cap table, you should understand this much: the printed dollars are deposited in the accounts of large banks, enriching the very richest and making everyone else worse off. Krugman himself is a knowing accomplice, one who always pulls his punches with respect to the banks: http://krugman.blogs.nytimes.com/2010/04/12/failure-is-a-failed-strategy/ http://krugman.blogs.nytimes.com/2010/04/12/failure-is-a-fai... One thing that keeps coming up in comments, both here and on my column, is the widespread belief that all we need to do on the banking front is (a) break up the big banks, so that none of them are too big to fail (b) promise not to bail out any banks in the future. That way, the claim goes, bankers will know that they will face dire consequences if they misbehave, and market discipline will do the rest. Dream on. ... But just letting banks fail isn’t going to happen — nor should it. In practice, talking about doing so is just an excuse to avoid real reform. At the end of the day Krugman is for the bailouts, for the banks, and against bank bankruptcy. No wonder he's against Bitcoin.

mikeyouse 13y ago

Except inflation takes more than just increased money supply.. You need to pair the money supply with velocity to get an indication of inflationary pressure. As seen here: http://research.stlouisfed.org/fredgraph.png?g=hxg http://research.stlouisfed.org/fredgraph.png?g=hxg There is no conspiracy.. MIT's billion prices index matches CPI almost verbatim. (http://bpp.mit.edu/usa/ http://bpp.mit.edu/usa/)

bitcartel 13y ago

Don't forget the Bank of Japan has also joined the party. Having held interest rates at 0.5% or less, for 18 years now (since 1995) they are also going to conjure up $76 Billion/month of funny money to buy government bonds, on a mission to double the monetary base by $1.4 Trillion within 2 years. Nobody really knows what the consequences are going to be, but I think one thing is certain: ordinary people are going to find it hard to accept so-called 'austerity measures' and reduced living standards when they pick up a newspaper and read about central bankers creating money out of thin air. [1] http://au.news.yahoo.com/thewest/business/a/-/world/16670172/bank-of-japans-kuroda-signals-ready-to-keep-stimulus-more-than-two-years/ http://au.news.yahoo.com/thewest/business/a/-/world/16670172...

parasubvert 13y ago

The graphs you've shown indicate nothing about "out of control". Krugman"s central claim is actually quite true. There are very good reasons most economists DO NOT include commodities like oil and food in inflation indicators: they're highly volatile, as you point out. And they tend not to be correlated to other inflationary indicators. Just look at the Gold crash the past two days, and oil crash today. Please explain what economic model you use to indicate your preferred economic policy? Krugman uses standard IS-LM, which has been vindicated time and time again during this crises.