First of all, I enjoy your writings-they always make me think. I am a HS History teacher on the East Coast. Doing an on-line professional development today focusing on Economics. Had a guest speaker who was an economist for a local financial institution. His topic was "Post-Covid Economics." His main point of discussion was supply and demand of labor and how that would impact the economy. He did touch upon inflation, but he lost me when he blamed the Ukraine war, high demand causing prices to spike, and simultaneously said that oil prices have been taken out of the measurement because they're too volatile. I asked whether the money supply had anything to do with it. He said yes, but followed it up with a paraphrase-"all the nations of the West are dealing with inflation right now, the central banks just didn't correctly predict what would happen as we were coming out of Covid." So, this is a reasonably major player in the economics and financial sector, who didn't see what I saw-18 MONTHS AGO. These are the people setting policy and making decisions. God help us.
Thanks. By the way, the National WW2 Museum just took a bunch of history teachers on a European vacation that ended at the Eagle's Nest. You should check it out and go! I am happy to chat with your class via zoom anytime.
I was fortunate enough to be selected for the museum's "Home Front" cohort of teachers in 2018. We got to be in New Orleans for a week, and had almost a complete run of the museum. I was lucky enough to meet and talk with Rob Citino (what a SMART dude that guy is) and they treated us like royalty. Then, the following year, (pre-Covid) we got to go to Hawaii and see all the WWII sites there. Again, we were treated wonderfully. I still want to go back to New Orleans and visit the museum again, preferably with my wife and/or my history nerd almost-grown up children. I will take you up on the zoom offer with my AP class next spring! Thanks.
Crazy how some talking heads on the financial networks are saying that inflation has probably peaked. They never bring up the money supply, only commodity prices at this point.
They also ignore the effect of inflation and interest rates on the housing market. Have you seen that non-bank lenders which are 68% of the mortgage market (!!) are in trouble again, just like back in 2008. However they were only 48% of the market back then. Two of these lenders have filed recently filed for bankruptcy, and Loan Tree which is the #4 lender is laying off thousands.
All press secretaries lie, even the ones you like. Some do it better, some do it worse.
Inflation is a monetary phenomenon. If spending like drunken sailors and resulting deficits were the issues then inflation should have started taking off under Bush 2.
And, yes, you are correct that commodity prices don't drive the rate.
"Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output... A steady rate of monetary growth at a moderate level can provide a framework under which a country can have little inflation and much growth. It will not produce perfect stability; it will not produce heaven on earth; but it can make an important contribution to a stable economic society." - Milton Friedman
Inflation is the result of bad Fed decisions. And they still do not appear to know what to do.
Fleisher lied consistently about Iraq, the worst military/foreign policy mistake of the 21st century. I say that as a supporter of the war at the time. Choose a right or left publication:
It's literally their job to bullshit the press and the people.
Going back to the inflation stuff, which is more important, I'm really surprised that you, a justifiably proud U of Chicago alum, believe that fiscal policy is the big driver of inflation. The Fed has bungled their job. Inflation has a large psychological component and ends up being partly self-fulfilling. The Fed has totally spooked the markets and the people, it will take a lot to get back to low inflation.
I think he relayed information, not lied. University of Chicago professor Milton Friedman did a fair amount of research.....he found that government spending is the driver of inflation.....Examining the data, you'd have to conclude that he is correct.
Friedman's views from 1950s and later were inflation is a monetary phenomena - too much money chasing too few goods. The Fed has the primary tools to manage the money supply and inflation. Even while acknowledging the government spending does have an impact. The 2020 helicopter drop was inflationary. Of course, Build Back Better would have been too (Manchin/Sinema 2024!). The Fed didn't do much to address the former program.
you are misreading Friedman. The Fed has one lever. When the government overspends, there is little they can do. I blogged about it a bit ago and posted a video. Friedman is clear. It's the government overspending.
Perhaps the issue is defining "Washington". The Fed is part of the government despite its "independent" designation. Fiscal policy has two levers - spending and taxes. Monetary policy has many more levers to manage the supply of money. For an extreme, see the Fed actions of 2008.
Friedman's views on fiscal vs. monetary policy and inflation were pretty clear. Monetary policy is more powerful.
"He convincingly showed that if fiscal policy was either expansionary or contractionary, it was not at all clear what the outcome would be without also knowing what had happened to monetary policy. However, if monetary policy was either expansionary or contractionary, that was enough to explain broadly how the securities and asset markets, the economy and later inflation would behave." from section 2 of: https://sites.krieger.jhu.edu/iae/files/2022/03/Milton-Friedmans-Views-on-the-Interaction-of-Monetary-and-Fiscal-Policy.pdf
"Policymakers in the 1970s saw that inflation was costly, but failed to grasp that to get inflation under control, they needed to use monetary policy, and only needed to use monetary policy. The fact that today’s policymakers do understand this reflects the profound impact of Milton Friedman on monetary economics."
All economic indices are backward looking. So what?
Batting averages are backward looking.
What is never, ever wrong is the bloody TREND.
In this instance the trend is disastrous:
1. CPI rising
2. PPI rising
3. Wages declining
4. GDP growth contracting into negative territory for half a year
5. Interest rates rising - get ready for a 100 bp upward jump by the Fed
6. Job offers being rescinded, layoffs
We have seen this movie before. It was called "Jimmy Carter."
This is going to get very dicey. Very very very dicey.
You know I am right.
JLM
www.themusingsofthebigredcar.com
The trend is (or isn't) your friend!
The truth will set you free. Good one Jeff.
Afternoon Mr. Carter,
First of all, I enjoy your writings-they always make me think. I am a HS History teacher on the East Coast. Doing an on-line professional development today focusing on Economics. Had a guest speaker who was an economist for a local financial institution. His topic was "Post-Covid Economics." His main point of discussion was supply and demand of labor and how that would impact the economy. He did touch upon inflation, but he lost me when he blamed the Ukraine war, high demand causing prices to spike, and simultaneously said that oil prices have been taken out of the measurement because they're too volatile. I asked whether the money supply had anything to do with it. He said yes, but followed it up with a paraphrase-"all the nations of the West are dealing with inflation right now, the central banks just didn't correctly predict what would happen as we were coming out of Covid." So, this is a reasonably major player in the economics and financial sector, who didn't see what I saw-18 MONTHS AGO. These are the people setting policy and making decisions. God help us.
Thanks. By the way, the National WW2 Museum just took a bunch of history teachers on a European vacation that ended at the Eagle's Nest. You should check it out and go! I am happy to chat with your class via zoom anytime.
Cathy Wood begs to differ :-) Deflation already here. You cannot make it up.
I was fortunate enough to be selected for the museum's "Home Front" cohort of teachers in 2018. We got to be in New Orleans for a week, and had almost a complete run of the museum. I was lucky enough to meet and talk with Rob Citino (what a SMART dude that guy is) and they treated us like royalty. Then, the following year, (pre-Covid) we got to go to Hawaii and see all the WWII sites there. Again, we were treated wonderfully. I still want to go back to New Orleans and visit the museum again, preferably with my wife and/or my history nerd almost-grown up children. I will take you up on the zoom offer with my AP class next spring! Thanks.
I think you left out some letters in the final/closing statement...SSHH....
Crazy how some talking heads on the financial networks are saying that inflation has probably peaked. They never bring up the money supply, only commodity prices at this point.
They also ignore the effect of inflation and interest rates on the housing market. Have you seen that non-bank lenders which are 68% of the mortgage market (!!) are in trouble again, just like back in 2008. However they were only 48% of the market back then. Two of these lenders have filed recently filed for bankruptcy, and Loan Tree which is the #4 lender is laying off thousands.
https://www.nasdaq.com/articles/u.s.-producer-price-index-jumps-more-than-expected-in-june Hey now, PPI unexpectedly jumps more than they thought.....hahahahahaha idiots.
It is crazy. They want it to be so for Joe.
All press secretaries lie, even the ones you like. Some do it better, some do it worse.
Inflation is a monetary phenomenon. If spending like drunken sailors and resulting deficits were the issues then inflation should have started taking off under Bush 2.
And, yes, you are correct that commodity prices don't drive the rate.
"Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output... A steady rate of monetary growth at a moderate level can provide a framework under which a country can have little inflation and much growth. It will not produce perfect stability; it will not produce heaven on earth; but it can make an important contribution to a stable economic society." - Milton Friedman
Inflation is the result of bad Fed decisions. And they still do not appear to know what to do.
https://www.themoneyillusion.com/ends-not-means/
https://thehill.com/opinion/finance/3540685-is-a-recession-looming/
Show me a time where Ari Fleisher, or Sarah Huckabee told a real lie. This press secretary and the one before her engages in pure fabrication.
Fleisher lied consistently about Iraq, the worst military/foreign policy mistake of the 21st century. I say that as a supporter of the war at the time. Choose a right or left publication:
https://www.theamericanconservative.com/ari-fleisher-lied-and-people-died/
https://www.vox.com/policy-and-politics/2019/3/20/18274228/ari-fleischer-iraq-lies-george-w-bush-wmds
Of course Sanders did too: "As a very active President with lots of things happening, it is not possible for my surrogates to stand at podium with perfect accuracy!" - Donald J. Trump. https://www.detroitnews.com/story/news/politics/2018/05/04/donald-trump-sarah-huckabee-sanders-credibility-questioned/34543999/
It's literally their job to bullshit the press and the people.
Going back to the inflation stuff, which is more important, I'm really surprised that you, a justifiably proud U of Chicago alum, believe that fiscal policy is the big driver of inflation. The Fed has bungled their job. Inflation has a large psychological component and ends up being partly self-fulfilling. The Fed has totally spooked the markets and the people, it will take a lot to get back to low inflation.
Better hope DeSantis is the nominee in '24.
I think he relayed information, not lied. University of Chicago professor Milton Friedman did a fair amount of research.....he found that government spending is the driver of inflation.....Examining the data, you'd have to conclude that he is correct.
Friedman's views from 1950s and later were inflation is a monetary phenomena - too much money chasing too few goods. The Fed has the primary tools to manage the money supply and inflation. Even while acknowledging the government spending does have an impact. The 2020 helicopter drop was inflationary. Of course, Build Back Better would have been too (Manchin/Sinema 2024!). The Fed didn't do much to address the former program.
https://www.mercatus.org/publications/monetary-policy/what-would-milton-friedman-say-about-market-monetarism
https://www.dallasfed.org/~/media/documents/research/pubs/ftc/bernanke.pdf
you are misreading Friedman. The Fed has one lever. When the government overspends, there is little they can do. I blogged about it a bit ago and posted a video. Friedman is clear. It's the government overspending.
Perhaps the issue is defining "Washington". The Fed is part of the government despite its "independent" designation. Fiscal policy has two levers - spending and taxes. Monetary policy has many more levers to manage the supply of money. For an extreme, see the Fed actions of 2008.
Friedman's views on fiscal vs. monetary policy and inflation were pretty clear. Monetary policy is more powerful.
"He convincingly showed that if fiscal policy was either expansionary or contractionary, it was not at all clear what the outcome would be without also knowing what had happened to monetary policy. However, if monetary policy was either expansionary or contractionary, that was enough to explain broadly how the securities and asset markets, the economy and later inflation would behave." from section 2 of: https://sites.krieger.jhu.edu/iae/files/2022/03/Milton-Friedmans-Views-on-the-Interaction-of-Monetary-and-Fiscal-Policy.pdf
"Policymakers in the 1970s saw that inflation was costly, but failed to grasp that to get inflation under control, they needed to use monetary policy, and only needed to use monetary policy. The fact that today’s policymakers do understand this reflects the profound impact of Milton Friedman on monetary economics."
https://files.stlouisfed.org/files/htdocs/publications/es/07/ES0701.pdf
https://americanlookout.com/biden-adviser-thinks-high-inflation-means-we-just-need-to-spend-more-video/