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Larry Summers and the Crisis of Economic Orthodoxy
Again, I accept Krugman's reading of the overall economy. From the Krugman report that you reference: "it’s probably worth noting that private surveys confirm official reports of rapidly declining inflation as well"
I have no problem believing that. What I do have a big problem with is what is being measured by these surveys.
To repeat: these official surveys pretty much eliminate everything that's "volatile" and then suggest that the results have some actual relationship to the cost of damned near everything that we actually use on a regular basis.
I'm not saying that the official inflation numbers are being "cooked". I'm just saying that what they have chosen to measure is not in any way a reflection of everyday reality for the average U'S. citizen.
I worry about the future, too. Everybody does. But I’ll take this inflation over the hard landing Summers seems to want or mistakenly thinks we need any day of the week.
+1
Healthy modern economies experience some inflation. Deflation (falling prices) is usually a sign of a contracting and unhealthy economy. Prices fell during the great depression. Problem was … many people couldn’t buy hamburger even if it fell to half the previous price because they had no job. Farmers took to pouring unsold milk on the ground and destroying harvested crops while people in cities lacked for food. We invest for the purpose of meeting or staying ahead of inflation.
Want exactly 0 inflation? Try balancing an irregular shaped chunk of ice on the rim of your cocktail glass. How you doing?
Asking people to see the economic forest instead of just the one inflation tree is not preaching revolution. Larry Summers is fixated on the inflation tree and is comfortable with millions of people losing their jobs to chop it down. If retirees have children, it’s worth asking them if they’d rather pay more for bread or because of unemployment have no money to pay for bread at all? That is especially so as the current policies seem to be working on inflation without the blood sacrifice of high unemployment Summers seems to desire. Hardly revolutionary.
My kids hate it when I present them with false dilemmas like jobs or inflation. They figure some sort of pointed lecture is bound to follow.
A few old geezers chatting about the personal effects of inflation doesn't quite rise to the threshold of forests and trees in my book. We remember when inflation and unemployment were an inseparable package deal. We saw it in our parent's lives. We saw it in our lives. And we remember when guys like Larry invented the new orthodoxy of the wage-price spiral. "We have no badges. In fact, we don’t need badges."
Current policies have resulted in a remarkable drop in the money supply. Following the money supply was my grandfather's orthodoxy. We shall see how it plays out.
In the meantime, don't let me catch you on our lawn.
There has also been increased discussion about how those corporate profits are contributing to inflation.
In a recent note, economists at ING looked at Germany, where inflation is increasingly a demand-side issue. While cautioning that so-called “greedflation” cannot be proven and there are variations by sector, they wrote that there are signs companies have been hiking prices ahead of the rise in their input costs, and that “from the second half of 2021 onward, a significant share of the increase in prices can be explained by higher corporate profits.” They call this a profit-price spiral..... Not the 1970s
....Richard Portes, professor of economics at London Business School, told CNBC there is “no serious risk” of a wage-price spiral in the U.K., U.S., or major European countries, however. He also cited reduced union power in the private sector as a notable change from the 1970s.
“If you look at core inflation in the U.S., rentals, housing, have been driving that. That’s got nothing to do with wages — with rentals, it’s more sensitive to interest rate rises,” he added.
There is evidence — including from the IMF — that wage-price spirals aren’t common. The IMF research found very few examples in advanced economies since the 1960s of “sustained acceleration” in wages and prices, with both instead stabilizing, keeping real wage growth “broadly unchanged.” As with so much in economics, the idea that wage-price spirals even exist has also been challenged.
For Kamil Kovar, an economist at Moody’s Analytics, the scenario was always seen as a risk, not necessarily likely. But he, too, said that as time progresses it has become clear that it is not happening.
Wages are likely to increase fairly rapidly for Europe, but there’s “so much scope for wages to catch up with prices, to get to a spiral situation we would need something totally different to happen,” he said. The ECB expects nominal wage growth, not adjusted for inflation, of around 5% this year.
Real wages in Europe are so much lower than before the pandemic they could increase another 10% without going into a “danger zone,” Kovar said; while in the U.S. they are roughly equal but exiting the risky zone.
When comparing the current situation to the 1970s, Kovar said there were some similarities such as an energy shock; back then it was in oil, whereas this time it is bigger and broader, impacting electricity and gas too. There has also been a more rapid drop in energy prices as this shock has subsided.
And again, he noted the ongoing growth in corporate profits and the absence of powerful unions as yet more factors for why this time it’s different.
“It’s an example of how we are slaves to our historical parallels,” he said. “We potentially overreact even if the underlying situation is different.”
The CPI link is current. The first half of the page is all of the INPUTS for FOOD.
My smart arse comment for this is that: One has the food portion of inflation, the INPUT side, and you have noted the OUTPUT side of inflation. The OUTPUT side being a normal bodily function as a result of the INPUT side, being EATING the food. The END result being inflation from both the INPUT and OUTPUT portions of FOOD inflation.
End of my smart arse overview for a portion of the inflation index.
Electric cars are increasingly popular in the only U.S. State which is located in Polynesia. Before the pandemic, gas was $3.25. For a period of time, it was over $5, and is by now down a bit to about $4.69---- which is still totally nuts.
We shop at Costco, which saves some money------ perunit. But it's always an adventure to find room in the fridge and the cupboards just to PUT stuff away. It does not hurt much to give to our church's food drive for the starving students at the university. They can't get federal money for their food bank because they serve a particular population.
Despite dreadful inflation, we count ourselves very lucky. Wife works way too many hours, but she wants it that way. And that's why we're sitting pretty. We do not yet need the dividends and capital gains which our portfolio produces.
The 2 biggest items for most people are housing and transportation. They increase 40+% and vehicles are up 30+% since 01/2020. Do you know many who got a 30% salary increase?
First, Biden was not president on 1/20, not for another year. Second, your repeating qualified subjective statements regarding what’s most important to people economically over and over again doesn’t make them true. Third, the whole fascism bit and attempted coup by the previous administration bothers some folks.
The CPI link is current. The first half of the page is all of the INPUTS for FOOD.
My smart arse comment for this is that: One has the food portion of inflation, the INPUT side, and you have noted the OUTPUT side of inflation. The OUTPUT side being a normal bodily function as a result of the INPUT side, being EATING the food. The END result being inflation from both the INPUT and OUTPUT portions of FOOD inflation.
End of my smart arse overview for a portion of the inflation index.
Is it true that just under 100 million Americans of working age are not in the work force? How can that be with this great economy and 4% unemployment?
I'll answer for the class. Govt BLS stats are pure bullshit. Proceed at your own risk.
Is it true that just under 100 million Americans of working age are not in the work force? How can that be with this great economy and 4% unemployment?
I'll answer for the class. Govt BLS stats are pure bullshit. Proceed at your own risk.
I don't mind looking at other peoples' numbers. Who do you get your numbers from?
Is it true that just under 100 million Americans of working age are not in the work force? How can that be with this great economy and 4% unemployment?
Hi @Mark Thanks for the info links. I was looking at Chamber of Commerce data last night. As to C.O.C. : Positions taken. Politically, the US Chamber of Commerce is considered to be on the political right, but is known to take positions that many Republicans, particularly populists, do not support. The US Chamber is often associated with the establishment wing of the Republican Party. I can't imagine they fiddle with data too much and are in line with B.L.S. data.
With the U.S. population at about 335 million, @Baseball_Fan presents a 100 million unemployed number that is well, hard to believe. I'm sure we'll receive a valid data point link from him regarding this 100 million number. I know of about 45,000 at Michigan State University who are of employment age and not working, as most of them are busy otherwise.
@Mark- Thanks much for those two links. To my surprise, the Chamber of Commerce link seems accurate and non-judgemental, citing good reasons such as lack of available child care for a significant amount of the non-employment.
As usual, Baseball_Fan is more interested in throwing hand grenades rather than trying to actually understand the underlying complexities of things. This isn't all bad, I must admit: he does motivate me to dig into underlying facts, so I don't remain altogether ignorant, even if he does.
"Unless Congress can find a way to agree on an extension of the expanded child tax credit — and cost is a big concern for many of its critics — the policy now reverts back to its previous iteration.
This also means much of the progress achieved with the monthly benefit, including dramatic reductions in child poverty and food insufficiency, could be just as short-lived as the policy itself."
Well we can't have that now can we. I mean what if we need those funds to bail out more banks and financial institutions, or cut corporate taxes, or help millionaires and beyond not pay their fair share of taxes. Those kids, our kids in the land of America should just go out and get a damn job if they want to eat or not live in poverty.
LB "your repeating qualified subjective statements regarding what’s most important to people economically over and over again doesn’t make them true."
FD said "The 2 biggest items for most people are housing and transportation." Most people spend the most on housing and transportation.
And generally, most people continue to have a very tough time keeping the lifestyle they had in the last several years. More Gov spending on top of the trillions we already spend isn't the solution.
Comments
https://messaging-custom-newsletters.nytimes.com/template/oakv2?campaign_id=116&emc=edit_pk_20230704&instance_id=96666&nl=paul-krugman&productCode=PK&regi_id=22268089&segment_id=138347&te=1&uri=nyt://newsletter/be160886-149a-5e45-88d5-c878e2fd8477&user_id=83d45440ead1d14c2a89a1e7221337d1
https://www.pbs.org/newshour/science/science-jan-june05-summersremarks_2-22
https://www.harvard.edu/president/news-speeches-summers/2005/letter-from-president-summers-on-women-and-science/
I have no problem believing that. What I do have a big problem with is what is being measured by these surveys.
To repeat: these official surveys pretty much eliminate everything that's "volatile" and then suggest that the results have some actual relationship to the cost of damned near everything that we actually use on a regular basis.
I'm not saying that the official inflation numbers are being "cooked". I'm just saying that what they have chosen to measure is not in any way a reflection of everyday reality for the average U'S. citizen.
Healthy modern economies experience some inflation. Deflation (falling prices) is usually a sign of a contracting and unhealthy economy. Prices fell during the great depression. Problem was … many people couldn’t buy hamburger even if it fell to half the previous price because they had no job. Farmers took to pouring unsold milk on the ground and destroying harvested crops while people in cities lacked for food. We invest for the purpose of meeting or staying ahead of inflation.
Want exactly 0 inflation? Try balancing an irregular shaped chunk of ice on the rim of your cocktail glass. How you doing?
A few old geezers chatting about the personal effects of inflation doesn't quite rise to the threshold of forests and trees in my book. We remember when inflation and unemployment were an inseparable package deal. We saw it in our parent's lives. We saw it in our lives. And we remember when guys like Larry invented the new orthodoxy of the wage-price spiral. "We have no badges. In fact, we don’t need badges."
Current policies have resulted in a remarkable drop in the money supply. Following the money supply was my grandfather's orthodoxy. We shall see how it plays out.
In the meantime, don't let me catch you on our lawn.
Well, at least that's a good sign. Hopefully things can be stabilized without significant job loss.
Signed:
Old Geezer
"Inflation ex food, energy, shelter, used cars"
Doesn't leave much, does it?
@WABAC , You noted:
Doesn't include what I paid for toilet paper at Walmart the other day.
CPI-U (all urban)
The CPI link is current. The first half of the page is all of the INPUTS for FOOD.
My smart arse comment for this is that: One has the food portion of inflation, the INPUT side, and you have noted the OUTPUT side of inflation. The OUTPUT side being a normal bodily function as a result of the INPUT side, being EATING the food.
The END result being inflation from both the INPUT and OUTPUT portions of FOOD inflation.
End of my smart arse overview for a portion of the inflation index.
Remain curious,
Catch
We shop at Costco, which saves some money------ per unit. But it's always an adventure to find room in the fridge and the cupboards just to PUT stuff away. It does not hurt much to give to our church's food drive for the starving students at the university. They can't get federal money for their food bank because they serve a particular population.
Despite dreadful inflation, we count ourselves very lucky. Wife works way too many hours, but she wants it that way. And that's why we're sitting pretty. We do not yet need the dividends and capital gains which our portfolio produces.
Are most better off now than four years ago? the answer is clear, it's not. https://apnews.com/article/biden-poll-economy-survey-jobs-inflation-b3c77cb208f96f9b039cf48cbc4fb67b
You don't need a weatherman to know which way the wind blows.
Pushing the boundaries of analysis for sure.
I'll answer for the class. Govt BLS stats are pure bullshit. Proceed at your own risk.
Good discussion about that can be found here.
Another - Who's Not Working
As to C.O.C. : Positions taken. Politically, the US Chamber of Commerce is considered to be on the political right, but is known to take positions that many Republicans, particularly populists, do not support. The US Chamber is often associated with the establishment wing of the Republican Party. I can't imagine they fiddle with data too much and are in line with B.L.S. data.
With the U.S. population at about 335 million, @Baseball_Fan presents a 100 million unemployed number that is well, hard to believe. I'm sure we'll receive a valid data point link from him regarding this 100 million number.
I know of about 45,000 at Michigan State University who are of employment age and not working, as most of them are busy otherwise.
Remain curious,
Catch
As usual, Baseball_Fan is more interested in throwing hand grenades rather than trying to actually understand the underlying complexities of things. This isn't all bad, I must admit: he does motivate me to dig into underlying facts, so I don't remain altogether ignorant, even if he does.
"Unless Congress can find a way to agree on an extension of the expanded child tax credit — and cost is a big concern for many of its critics — the policy now reverts back to its previous iteration.
This also means much of the progress achieved with the monthly benefit, including dramatic reductions in child poverty and food insufficiency, could be just as short-lived as the policy itself."
Well we can't have that now can we. I mean what if we need those funds to bail out more banks and financial institutions, or cut corporate taxes, or help millionaires and beyond not pay their fair share of taxes. Those kids, our kids in the land of America should just go out and get a damn job if they want to eat or not live in poverty.
FD said "The 2 biggest items for most people are housing and transportation."
Most people spend the most on housing and transportation.
And generally, most people continue to have a very tough time keeping the lifestyle they had in the last several years. More Gov spending on top of the trillions we already spend isn't the solution.