Hi. I hope this sort of thing is acceptable for an Open thread.
I got interested in the economy back in the 1970s, what with the inflation and all. Never seemed right to me that it was called “wage-push inflation”.
Since that time I’ve learned that Fed Chair Burns accepted that “inflation was a real (cost-push), and therefore non-monetary, phenomenon.” And that Fed Chair Volcker rejected that view, thinking instead that “rising inflation is caused by demand-pull or excess aggregate demand or nominal spending.”
I’ve also learned that
“The shift in policy, beginning with Paul Volcker, was an explicit attempt to stabilize inflation expectations and this was done deliberately at first through monetary targeting and ultimately through the stabilization of nominal income growth. Gone were notions of cost-push versus demand-pull inflation. The Fed simply assumed accountability as the creator of inflation.”
(The two quotes seem to disagree about Volcker’s view of “demand-pull” but they really don’t. It was still the “too much money” thing.)
And I hold it true, as Peter Cooper says, that “Money creation can enable cost-push inflation, but the real source of the problem will be the cost pressures themselves.”
Here’s my problem, one of em: When I find what people think about cost-push inflation, it almost always turns out that they think there’s no such thing, and that monetary “accommodation” is what causes inflation.
But inflation is a solution to the problem of cost pressures. It is certainly not the right solution to that problem. But inflation is not the problem. The problem is the cost pressure.
It’s a mistake to focus on cost-push inflation. It is necessary to focus on the cost push pressures that are “the real source of the problem”, and on how those pressures didn’t go away when Volcker “stabilized nominal income growth”.
Demand-pull is easy: there is too much money and too much spending for the existing price level, so prices go up. And prices stop going up when there is no longer “too much money”.
But cost-push is more complex: If costs are driving business to raise prices, and the Fed fails to accommodate, then prices don’t go up but the cost pressure doesn’t go away. If the cost pressure leads to declining profits, it will cause the economy to slow.
In other words, when there are cost pressures, if you don’t get inflation then you get a slowing economy.
Here’s what I think: Since the time of Volcker our economy has been slowing because the cost pressures are only partially accommodated by the Fed.
I think this explains what’s been wrong with our economy for all these years.
The big reveal: The problem cost is the cost of finance.
coberly
November 15, 2020 12:14 pm
Arthurian
acceptable, but apparently not popular. i think it may be too complicated to hope to resolve here.
coberly
November 15, 2020 12:18 pm
on the other hand, i ran across this the other day and think it might be worth thinking about, if not talking about:
George Orwell wrote a review of Mein Kampf. among other things he said
“…The fact is that there is something deeply appealing about him. [Hitler] … knows that human beings don’t only want comfort, safety, short working-hours, hygiene, birth-control and, in general, common sense; they also, at least intermittently, want struggle and self-sacrifice, not to mention drums, flags and loyalty-parades. However they may be as economic theories, Fascism and Nazism are psychologically far sounder than any hedonistic conception of life.”
coberly
November 15, 2020 12:20 pm
might be worth noting that the reviewer of the review seems to have thought that Orwell was praising Hitler. It seems stupidity can be found on both sides of the aisle.
Coberly
Thanks. What I wrote is way too complicated, I now see, even for me. Maybe I will *prepare* something and *proofread* it for a couple weeks, and try again.
That Orwell quote is interesting. It’s a warning of some kind, that’s for sure, and relevant to current events. But I can’t imagine what Orwell would have wanted me to get from it.
coberly
November 15, 2020 9:40 pm
i guess i don’t know what Orwell would have wanted either. What I take from it is that the Dems are confused because the people vote against their own interests. Orwell suggests their “interests” might not be the same as what the Dems think.
I don’t think it’s so much “a holy cause versus “material gains” as it is that people seem to be able to find some reason to fight with each other, and if someone can give them leadership and guns they will love the chance to hate thy neighbor. t doesn’t hurt that the original complaint was a lack of (equal) material gains and that war will cost them more than they will gain.
Ron (RC) Weakley (a.k.a., Darryl for a while at EV)
November 16, 2020 7:19 am
People in Honduras, northern Nicaragua, Guatemala and southern Belize do not have one Iota of a chance in years such as this when anthropogenic climate change acts with the autumnal ENSO in the La Nina state. Well, just wait until the next strong El Nino when the hurricanes get rolled back making room for late fall into early spring Nor’easter Blizzards in the Big Apple. Each strong cycle of ENSO sets new record weather events and 100 year events begin to occur two or three times each decade. Just imagine that we have not even begun to see the worst of what ACC has in store for planet Earth.
coberly
November 16, 2020 12:05 pm
now if we could just teach those hurricanes to run through Washington, we might get somewhere. last time there was a heat wave in DC the Congress all became believers in global warming.. for a week.
i think the answer they came up with was to buy stock in air-conditioning companies.
Hi. I hope this sort of thing is acceptable for an Open thread.
I got interested in the economy back in the 1970s, what with the inflation and all. Never seemed right to me that it was called “wage-push inflation”.
Since that time I’ve learned that Fed Chair Burns accepted that “inflation was a real (cost-push), and therefore non-monetary, phenomenon.” And that Fed Chair Volcker rejected that view, thinking instead that “rising inflation is caused by demand-pull or excess aggregate demand or nominal spending.”
I’ve also learned that
“The shift in policy, beginning with Paul Volcker, was an explicit attempt to stabilize inflation expectations and this was done deliberately at first through monetary targeting and ultimately through the stabilization of nominal income growth. Gone were notions of cost-push versus demand-pull inflation. The Fed simply assumed accountability as the creator of inflation.”
(The two quotes seem to disagree about Volcker’s view of “demand-pull” but they really don’t. It was still the “too much money” thing.)
And I hold it true, as Peter Cooper says, that “Money creation can enable cost-push inflation, but the real source of the problem will be the cost pressures themselves.”
Here’s my problem, one of em: When I find what people think about cost-push inflation, it almost always turns out that they think there’s no such thing, and that monetary “accommodation” is what causes inflation.
But inflation is a solution to the problem of cost pressures. It is certainly not the right solution to that problem. But inflation is not the problem. The problem is the cost pressure.
It’s a mistake to focus on cost-push inflation. It is necessary to focus on the cost push pressures that are “the real source of the problem”, and on how those pressures didn’t go away when Volcker “stabilized nominal income growth”.
Demand-pull is easy: there is too much money and too much spending for the existing price level, so prices go up. And prices stop going up when there is no longer “too much money”.
But cost-push is more complex: If costs are driving business to raise prices, and the Fed fails to accommodate, then prices don’t go up but the cost pressure doesn’t go away. If the cost pressure leads to declining profits, it will cause the economy to slow.
In other words, when there are cost pressures, if you don’t get inflation then you get a slowing economy.
Here’s what I think: Since the time of Volcker our economy has been slowing because the cost pressures are only partially accommodated by the Fed.
I think this explains what’s been wrong with our economy for all these years.
The big reveal: The problem cost is the cost of finance.
Arthurian
acceptable, but apparently not popular. i think it may be too complicated to hope to resolve here.
on the other hand, i ran across this the other day and think it might be worth thinking about, if not talking about:
George Orwell wrote a review of Mein Kampf. among other things he said
“…The fact is that there is something deeply appealing about him. [Hitler] … knows that human beings don’t only want comfort, safety, short working-hours, hygiene, birth-control and, in general, common sense; they also, at least intermittently, want struggle and self-sacrifice, not to mention drums, flags and loyalty-parades. However they may be as economic theories, Fascism and Nazism are psychologically far sounder than any hedonistic conception of life.”
might be worth noting that the reviewer of the review seems to have thought that Orwell was praising Hitler. It seems stupidity can be found on both sides of the aisle.
Coberly
Thanks. What I wrote is way too complicated, I now see, even for me. Maybe I will *prepare* something and *proofread* it for a couple weeks, and try again.
That Orwell quote is interesting. It’s a warning of some kind, that’s for sure, and relevant to current events. But I can’t imagine what Orwell would have wanted me to get from it.
i guess i don’t know what Orwell would have wanted either. What I take from it is that the Dems are confused because the people vote against their own interests. Orwell suggests their “interests” might not be the same as what the Dems think.
I don’t think it’s so much “a holy cause versus “material gains” as it is that people seem to be able to find some reason to fight with each other, and if someone can give them leadership and guns they will love the chance to hate thy neighbor. t doesn’t hurt that the original complaint was a lack of (equal) material gains and that war will cost them more than they will gain.
People in Honduras, northern Nicaragua, Guatemala and southern Belize do not have one Iota of a chance in years such as this when anthropogenic climate change acts with the autumnal ENSO in the La Nina state. Well, just wait until the next strong El Nino when the hurricanes get rolled back making room for late fall into early spring Nor’easter Blizzards in the Big Apple. Each strong cycle of ENSO sets new record weather events and 100 year events begin to occur two or three times each decade. Just imagine that we have not even begun to see the worst of what ACC has in store for planet Earth.
now if we could just teach those hurricanes to run through Washington, we might get somewhere. last time there was a heat wave in DC the Congress all became believers in global warming.. for a week.
i think the answer they came up with was to buy stock in air-conditioning companies.