Comments on: Fighting Inflation as Class Warfare

By: John

John — Sun, 05 Dec 2004 10:13:10 +0000

Are the Feds monetary tools more effective in stimulating or restraining the economy?

By: shooting star

shooting star — Wed, 01 Dec 2004 23:35:45 +0000

Minor grammatical question— Do you really mean shibboleth? A shibboleth is a group identifier (In ancient Israel, Samaritans pronounced the word differently than Jews). If low inflation is a shibboleth, then what group does it identify and what is the contrasting group?

By: Kimmitt

Kimmitt — Wed, 01 Dec 2004 09:27:32 +0000

There’s a pretty good Tom Tomorrow cartoon in which superhero Greenspan, responding to the increased inflationary threat from “uppity workers” demanding higher wages, saves the day by throwing the prime rate lever on his unemployment machine. Yeah, well, one man’s “business cycle smoothing” is another man’s “unemployment machine.” It is worthy of note that Greenspan does turn on the spigot of easy money when the economy turns sour, which is something of an argument for the technocratic interpretation.

By: Dubious

Dubious — Tue, 30 Nov 2004 17:55:33 +0000

Tracy makes an important point. Allowing inflation to rise to 15% (to be safely below our 20% threshold) from 1.5% would give us a one-time economic boost, but then the Fed would have to run the same monetary policy, with an inflation target of 15% instead of 1.5%. Likely as not, you would get a one-time economic benefit from that. As several posters have pointed out, this can be particularly powerful as a way to partially repudiate government (esp. external) debt. But the zero-correlation between growth and inflation runs both ways. As for distribution of income/wealth, does anyone have evidence that the Gini coefficient is lower in high inflation countries?

By: George

George — Tue, 30 Nov 2004 17:47:59 +0000

Jason McC: I’m no economist, but I thought the opposite was true. For instance, the sole purpose of the ECB is to maintain price stability. (According to the Journal, anyway.)

By: Matthew2

Matthew2 — Tue, 30 Nov 2004 11:52:32 +0000

J Stiglitz makes the argument that most of the IMF’s decisions forced on many non-Western countries, were gripped by a relentless focus on stopping inflation, to the detriment of everything else, with disastrous consequences. There is no conspiracy theory there: it’s simply that because of its nature, the IMF listen mostly to the creditors, the treasuries and the financial lobbies which have their ear, and like Blyth explains they have an interest (you could say “focus”) on low inflation. Conspiracy or not the result is the same. Shame about all those ruined economies…

By: Tracy

Tracy — Tue, 30 Nov 2004 08:40:59 +0000

Retired people make up a large proportion of people living at least partially off investments. Retired people are quite effective lobbiers, which may have something to do with them as a group having much more time on their hands than, e.g. two income families with small kids. And the group of retired people of course includes a fair number of people with contacts amongst the current set of leaders. And, of non-retired people, a fair proportion have hopes of inheriting something from their elderly parents, or at least of not having to support them if all their income gets inflated away. Even if we removed money from it entirely, the lobbying field would not be fair. Plus I haven’t seen any evidence that holding inflation to e.g. 7% would be noticeably cheaper than holding it to 1% or 2%.

By: Chris

Chris — Tue, 30 Nov 2004 08:18:00 +0000

Well, look how the working class enjoy inflation – it terrified them so much they pissed on Australia’s Gough Whitlam when the conservatives subversively sacked his government. And talking myth and inflation as a weapon of false consciousness, look how Mugabe is destroying the living of the poor in Zimbabwe, while creating myths about land, race and colonialism. Economist John Robertson (Harare) joked about livng through thirty years of historic inflation in just a few months, and what a great laboratory it is.

By: bob mcmanus

bob mcmanus — Tue, 30 Nov 2004 04:42:23 +0000

“the rise of neo-Hayekian/Friedman/Chicago-school economics was overwhelmingly political, rather than a result of their arguments being fundamentally better ways to get good macroeconomic policy.” “It’s my experience that the world doesn’t actually work that way.” Who needs conspiracies when you can use ideologies as explanatory factors? And ideologies are rarely deliberately mendacious, that is the point in creating them, as a tool for false conciousness. That is precisely how I see the social/political world working, on all possible sides, with rationalization and delusion.

By: Lee Scoresby

Lee Scoresby — Tue, 30 Nov 2004 04:34:38 +0000

Keith, There’s no conspiracy argument here, as far as I can tell. Nobody’s talking “elders of zion” or “smoking man.” The claim is that some groups have an elective affinity for believing arguments that may not be true. And the left has no monopoly on conspiracy theories. The right has a history of doing plenty well in that department.

By: Keith M Ellis

Keith M Ellis — Tue, 30 Nov 2004 04:07:25 +0000

This post and thread well demonstrates a cutural divide that has long puzzled me. The thing I think I distrust most about leftism—and which is most important to many leftists—is a conspiracy-esque political analysis of, well, everything. It’s not so much that these forces are often at work, they probably are, but that the explanatory power of the conspiracy theory is almost always preferred, mendacity assumed; and the beauty or seduction of it is that all things can be thus analysed within the same context—a single comprehensive explanation for everything. It’s my experience that the world doesn’t actually work that way. Far more likely to my mind is the possibility that the macroeconomic arguments against inflation are generally sound, but that those with vested interests are perfectly willing to sieze upon this reasoning to further them.

By: Lee Scoresby

Lee Scoresby — Tue, 30 Nov 2004 03:22:05 +0000

Henry, Glad to see you’re reading Blyth’s book :-). Blyth’s argument about inflation is just one of many claims that add up the important one: the rise of neo-Hayekian/Friedman/Chicago-school economics was overwhelmingly political, rather than a result of their arguments being fundamentally better ways to get good macroeconomic policy. Moreover, the problem with the Democrats in the mid-1980s was that they cared more about their policies being correct (e.g., the rejection of managed trade) than being politically efficacious. Whether or not Blyth is right on this specific point is less interesting than the overall claim about the rise of dis-embedded liberalism in the 1970s and 1980s.

By: Antti Nannimus

Antti Nannimus — Tue, 30 Nov 2004 02:05:26 +0000

Inflation is also a way for debtor governments to repay deficit financing with less valuable money. Lyndon Johnson’s irresponsible borrowing to finance the Vietnam War was repaid with double digit inflation during Carter’s term. George W. Bush’s irresponsible deficit financing of the Iraq War will be similarly repaid. The baby boomers Social Security benefits will also be paid with similarly worthless dollars. Governments don’t have to repudiate debt. They simply makes the debt worthless through inflation. To some degree its a class issue, but in reality, we’re all invested in it. This is a very old game, and the public never catches on.

By: Jason McCullough

Jason McCullough — Tue, 30 Nov 2004 01:31:23 +0000

“…..Fed’s dual (and contradictory) missions: to maintain price stability and to promote full employment.” I can’t remember the exact comment from Doug Henwood, but apparently the US is the only first world country apart from Germany (where it’s true for obvious reasons) with price stability in the central bank’s charter.

By: Tom T.

Tom T. — Tue, 30 Nov 2004 00:37:03 +0000

It’s interesting to see that CT’s famously cantankerous comment system managed to pick up comments from Keith Gaughans in two very slightly different (but equally profane) parallel universes. :-)