3 ms·

>You're of course referring to the current bogus CPI, which was put into effect in the 1990s to hide the real rate of inflation. Let's just assume this is true

by w4 12y ago

>You're of course referring to the current bogus CPI, which was put into effect in the 1990s to hide the real rate of inflation. Let's just assume this is true. CPI, as currently measured, has been in place since ~1996. One can thus safely assume CPI would reflect the alleged inflationary effects of QE on price levels, regardless of how accurately it measures the actual rate of inflation, since it represents a measurement of some consistent snapshot of the total rate of inflation throughout the entirety of QE. But CPI shows no change in the rate of inflation due to QE, and even more curiously, tells us inflation is currently lower now than pre-QE. Regardless of your opinion of its measurement of "real" inflation, the fact remains: there has been no uptick in price levels due to QE (startup valuations aside, hah!), despite the intuition that it ought to have resulted in substantial inflation. Hence, cause for concern. EDIT: And I say all of this as someone who was horrified of inflation back when the Fed first started QE. So far, I appear to have been worried about the wrong thing.

djyaz1200 12y ago
The whole QE program MUST be inflationary. It don't make any rational sense that a government could just purchase trillions of dollars worth of it's own debt with synthetic money and not have some inflationary impact (your initial fear). So what then? How is that massive force just being absorbed with no consequence? I don't know, I don't think anyone knows. I could speculate. It's likely that in a global economy China's artificially devalued currency allows us to print money without real inflationary consequences for us? Could be the dollar has become the de facto world currency and with this much wider circulation the system can absorb much more inflationary pressure than previously thought. Could be that this system is controlled more by behavioral economics than economics. Maybe people just believe a dollar is worth about X and that's very sticky until it isn't. This last idea is the scariest. Our government is just like a big bank. The value of the dollar is subjective and I believe serious inflation won't come in an incremental fashion, it will come in a black swan tidal wave. I could be wrong and I seriously hope I am!! I just don't think it's prudent to say, well we all thought (rationally and rightly) QE was going to cause inflation because it's so obviously an aggressively inflationary policy... then since it didn't we just turn the page and say oh well... glad that didn't blow up the dollar. We need to understand why that didn't have an effect.

by w4 12y ago

djyaz1200 12y ago

The whole QE program MUST be inflationary. It don't make any rational sense that a government could just purchase trillions of dollars worth of it's own debt with synthetic money and not have some inflationary impact (your initial fear). So what then? How is that massive force just being absorbed with no consequence? I don't know, I don't think anyone knows. I could speculate. It's likely that in a global economy China's artificially devalued currency allows us to print money without real inflationary consequences for us? Could be the dollar has become the de facto world currency and with this much wider circulation the system can absorb much more inflationary pressure than previously thought. Could be that this system is controlled more by behavioral economics than economics. Maybe people just believe a dollar is worth about X and that's very sticky until it isn't. This last idea is the scariest. Our government is just like a big bank. The value of the dollar is subjective and I believe serious inflation won't come in an incremental fashion, it will come in a black swan tidal wave. I could be wrong and I seriously hope I am!! I just don't think it's prudent to say, well we all thought (rationally and rightly) QE was going to cause inflation because it's so obviously an aggressively inflationary policy... then since it didn't we just turn the page and say oh well... glad that didn't blow up the dollar. We need to understand why that didn't have an effect.