tag:blogger.com,1999:blog-6616959642391988608.post6886878004592450212..comments2024-03-18T13:22:06.536-07:00Comments on Calafia Beach Pundit: Inflation update—still tame, but still a concernScott Grannishttp://www.blogger.com/profile/14028519647946868684noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-6616959642391988608.post-45683377192049551682010-08-31T15:09:09.524-07:002010-08-31T15:09:09.524-07:00Gee, and I thought we should worry about inflation...Gee, and I thought we should worry about inflation when we have inflation. By your standards, we worry about inflation whether or not we have any--a lot like the BoJ worries. <br />Maybe it's just me, but when the economy is slow and inflation is below one percent and sinking, and when interest rates are negligible--I would say we need a huge shot in the arm. <br /><br />We seem to agree thatBenjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-5472186168852366122010-08-31T10:17:11.539-07:002010-08-31T10:17:11.539-07:00J&J: I doubt there would be a sudden decline i...J&J: I doubt there would be a sudden decline in the demand for money. I think instead we would see a gradual decline in the demand for money, and a Fed response to that proves to be too little, too late, much as we saw happen in the 1970s. So the real threat is that credit demand would rise slowly (which is another way of saying that money demand would decline slowly) and the Fed would not Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-79509435490791066902010-08-31T10:13:06.078-07:002010-08-31T10:13:06.078-07:00Re: "what conditions have to apply before we ...Re: "what conditions have to apply before we can stop being concerned about inflation?"<br /><br />I would argue that we would need to see a) a significant decline in gold and commodity prices, b) a significant rise in real yields, c) a significant flattening of the yield curve, d) a significant rise in the value of the dollar, and e) a significant rise in money demand.Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-62114084953612327932010-08-31T07:37:18.352-07:002010-08-31T07:37:18.352-07:00Isn't the PCE deflator at the upper end of the...Isn't the PCE deflator at the upper end of the Fed's acceptable range? In reviewing the last BEA report, if not for the decline in the price of imported oil, would not the deflator have been higher than 2.0?Rickhttps://www.blogger.com/profile/07767085539237536998noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-19194633555351552072010-08-31T03:32:58.554-07:002010-08-31T03:32:58.554-07:00Fed policy at the aggregate level is about right. ...Fed policy at the aggregate level is about right. Perhaps a little tight. The fed is paying an above market interest rate on excess reserves. As a result demand for certain kinds of money has soared. <br /><br />We need to remember that macroeconomics is all about abstract constructs that can be impossible to measure accurately and that are difficult to estimate in a consistent way. Money, price Charleshttps://www.blogger.com/profile/00607057013050715435noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-16181203897625777252010-08-30T20:11:22.905-07:002010-08-30T20:11:22.905-07:00BTW, read today in the WSJ that China makes 45 per...BTW, read today in the WSJ that China makes 45 percent of the world's glass. The USA about 10 percent.<br />In terms of commodity demand, China dwarfs the USA in many, probably most markets. <br />In a sense their real economy is larger than ours--real goods, and construction. <br />Our economy counts a lot of guys sitting in their chairs in law offices, accounting firms, etc. The whole Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-92133097975081555072010-08-30T19:36:42.927-07:002010-08-30T19:36:42.927-07:00Scott,
I am sorry to interject as often as I hav...Scott, <br /><br />I am sorry to interject as often as I have lately. If the cash printed by the Fed just landed back on reserve with the Fed, why would you think it would result in inflationary pressures? Yes, cash washes throught the system, but its effect is only temporary as it has simply landed idle on reserve. Perhaps I am severely underestimating the possibility of a sudden and Jason and Jenhttps://www.blogger.com/profile/14143998074900505152noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-46304141852996560392010-08-30T15:59:26.111-07:002010-08-30T15:59:26.111-07:00Excellent commentary.
As for me, I say bring on th...Excellent commentary.<br />As for me, I say bring on the inflation. <br />Japan has had no inflation for 20 years, just about. Price stability may be death on the "animal spirits." <br />People and lenders feel better if they know that inflation will bail them out ultimately, even if the lend or borrow and things go sideways.<br /><br />And right now, we badly, badly need reflation in Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.com