CPI 4.1% 4% 3% oh hell 99% of everything is out to get me
as often happens, I felt moved to reply to the e-mail that Noah Smith blasts out.
On my PhD supervisor Larry Summers to whom I owe a debt I can never repay: who the fuck cares about inflation ? Answer: everyone but for opposite reasons. Economists think that, in the long run, inflation does not effect real quantities except for menu costs and shoe leather costs. Economists estimate those costs to be almost exactly zero. Then economists say that people hate inflation and we must follow those people because we are their leaders.
Normal people hate inflation because they think it means price increases with no effect on wages so lower real wages. This view (which makes no sense according to economic theory for which theory I have zero respect) is supported by short term change on change correlations – increasing price inflation is correlated with reduced real wages as in 2021-2 and 1979-1980.
Both groups absolutely totally disagree on everything except neither likes inflation. Occasionally economists like Larry Summers,Brad DeLong, Olivier Blanchard, and Paul Krugman slip and admit that, as far as they can tell the inflation target should be 4% (AKA latest annual headline CPI inflation- 0.1%).
But when push come to shove to the Federa Funds rate, they go along with almost everyone else and leave me alone advocating a 4% target.
So I had just finished complaining about all of the former 4%ers who had defected to 3% when the BLS joined the pile on reporting that over the last 12 months the CPI has increased 3% (I mean they could at least have had some pity and reported 2.9% or 3.1% but noooooo they too are 3%ers now).
I am not the center of the universe. I am not that important. The world is not conspiring to make me look like a fool. I must repeat these sentences until I believe at least one of them.
I would really like to understand this short essay, but after 2 careful readings I am lost. Possibly Mr. Waldmann could explain what this means more clearly. I would be grateful.
Waldmann
fair enough. my completely uneducated view of inflation is that i don’t like paying a lot more for groceries than the official “inflation rate.” i do not believe wage push leads inflation, or even follows it. there is no such thing as a free market in labor. employers have all the leverage.
on the other hand, it is easier for me to deal with a doubling of the price of milk than it is for me to deal with unemployment, so i am not pleased when the FED’s only tool for fighting inflation is to create unemployment. I have never seen runaway inflation like Argentina or (pre-war) germany, so I may not know what the FED is worried about.
nuff said…except that after watching the economy for a long time I don’t feel any reason to think the public economists know what they are talking about. perhaps they are protecting me, but they aren’t convincing.
Coberly,
How can I get my screaming ATTABOY to your comment to display in a larger font?
Ron
inflation in screaming?