100% of excessive inflation is due to bad monetary policy.
Always. This shouldn’t even be debatable.
I don’t know of any respectable theory (monetarist, Keynesian, Austrian, etc.) where this is not true.
And yet according to this recent Vox article, economists have no idea what is causing the current bout of excessive inflation:Among economists and experts, there’s no strict consensus about what exactly is to blame.
There are certain factors widely agreed upon that we’ve been hearing about for months: supply chain woes, rising oil prices, shifting consumer demands. These concerns have hardly subsided.
But there are other arenas where there’s more disagreement, such as the role government stimulus has played in increasing prices, and the possibility that corporate greed is an important factor… .
Whichever economist or expert or policymaker you ask to explain the current inflation story to you is going to tell you something slightly different.
I asked a bunch of economists over the past couple of weeks what was causing inflation and how to fix it. Most kind of laughed for a second before launching into their cases, acknowledging the full answer is, to a certain extent, ¯_(ツ)_/¯.
The Fed’s job is to insure an appropriate level of demand. On occasion, it may be appropriate for inflation to exceed 2% for a period of time due to supply issues.
But that’s no excuse for excessive growth in nominal spending. When inflation is higher than it should be for demand side reasons, it is always 100% due to bad monetary policy.
And now Vox tells us that economists are now talking about “corporate greed”?
And just who are these so-called “economists”?
According to Vox they are “progressives”:Many progressive economists and politicians are beginning to argue that it’s corporate consolidation that’s making inflation worse.
Wait, I thought it was right-wingers who were the creationists, global warming deniers, the anti-vaxxers?
I thought the left believed we should “trust the science”?
Since when did progressive economists become the left wing version of QAnon?
Ezra Klein has a must read interview of Larry Summers. One of Ezra’s questions is interesting.
No, “interesting” isn’t quite right, it’s the single most revealing question I’ve ever seen from a reporter in my entire life.
EZRA KLEIN: So I know you’re a hard-nosed economist who looks at the numbers here. But I want to locate, I think, the emotional and to some degree even political frustration of this conversation, because a lot of the dynamics you’re talking about that then get framed as excess demand, there are things that feel just, that many of us have wanted for a long time.
More hiring, wage increases, particularly at the bottom end, stimulus checks for people who have had a lot of bad years and didn’t have a lot of cushion behind them, child tax credit for families that could really use that.
And so there are a lot of policies that came together — I mean, there was a reason the Biden administration wanted to run the economy hot. There was a long period when it didn’t just feel, the economic data showed, that expansions were not reaching people on the margins.
And it felt, finally, like we were reaching people on the margins. We were putting a lot of firepower to do that. But even in this terrible time, this horrifying pandemic, we were giving people who needed it quite a bit of help.
And then for that to then turn into this horrifying inflation problem, which is now eating back those wage increases, potentially going to require much sharper action from the Fed— I recognize the world doesn’t have to please me, but it is maddening.
And I think one of the hard questions, before we even get into Ukraine and China— I think one of the hard questions is, does it have to be this way? Did it have to be this way?
Is there some way for this to end without the people we were finally helping suffering?
If anyone wants to know how we got in this mess, it’s right there in Klein’s question.