Monthly Archives: September 2013

Inflation? What inflation?

Posted by Deepish Thinker on September 18, 2013
Economics / No Comments

Paul Krugman, as he’s rather fond of doing, has been pointing out that predictions that loose monetary policy would spark inflation have so far proved embarrassingly inaccurate.

“Republicans predicted poor economic performance under Obama. And to be fair, the economy has not done particularly well. The crucial point, however, is the nature of the poor performance. Republicans confidently predicted Weimar 2.0 — soaring interest rates and inflation. They lambasted not just Obama but Bernanke — in fact, their attacks on Fed policy had more passion than their attacks on the stimulus, which after all didn’t last long.”

An interesting question to consider is why predictions of high inflation, which many conservative pundits made, have been so wrong.

Perhaps the simplest answer is that they assumed loose monetary policy would work.

To date the results have been unimpressive.  Inflation has remained quiescent in large part because cheap money hasn’t resulted in dramatic increases in lending and consumption.

This leads to the somewhat ironic situation that the advocates of tighter monetary policy overestimated the threat of inflation in large part because they believed the advocates of looser monetary policy, who overestimated the growth impacts.


Posted by Deepish Thinker on September 08, 2013
Uncategorized, US Politics / No Comments

Congress spent the past week having a serious, thoughtful, substantive and bipartisan debate about Syria.

On the down side this does highlight an uncomfortable truth. The partisan dysfunction we normally expect from Washington isn’t due to the failings of our elected representatives, however much we might enjoy blaming them. When circumstances require it, Congress is clearly capable of operating in the way we say we’d prefer.

The fact that serious, thoughtful, substantive and bipartisan debate is largely absent from every other issue simply reflects the deep political divisions in the country as a whole. Red and blue voters demand that their representatives hold to strict party lines. So they do.