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Author Topic: WSJ: Fed Officials Mull Inflation as a Fix  (Read 1949 times)
jgarzik
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October 08, 2010, 02:10:15 AM
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URL: http://online.wsj.com/article/SB10001424052748704689804575536391713801732.html?mod=WSJ_hp_mostpop_read

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The Federal Reserve spent the past three decades getting inflation low and keeping it there. But as the U.S. economy struggles and flirts with the prospect of deflation, some central bank officials are publicly broaching a controversial idea: lifting inflation above the Fed's informal target.

The rationale is that getting inflation up even temporarily would push "real" interest rates—nominal rates minus inflation—down, encouraging consumers and businesses to save less and to spend or invest more.

Both inside and outside the Fed, though, such an approach is controversial. It could undermine the anti-inflation credibility the Fed won three decades ago by raising interest rates to double-digits to beat back late-1970s price surges. "It's a big mistake," said Allan Meltzer of Carnegie Mellon University, a central bank historian. "Higher inflation is not going to solve our problem. Any gain from that experience would be temporary," adding that the economy would suffer later.
[...]

Jeff Garzik, bitcoin core dev team and BitPay engineer; opinions are my own, not my employer.
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kiba
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October 08, 2010, 03:29:53 AM
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Yum. Let inflate even when time are prosperous.

ribuck
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October 08, 2010, 09:30:01 AM
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... a controversial idea: lifting inflation above the Fed's informal target ...

In the United Kingdom they simply skipped the "controversy" bit.

The Bank of England keeps claiming that it is committed to monetary policy that will deliver 2% inflation (as if that isn't too much already!) while having delivered higher than that for 16 consecutive months now.
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October 08, 2010, 11:41:27 AM
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save less and to spend or invest more
Huh? Investing is saving.
hugolp
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October 08, 2010, 06:24:11 PM
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The "funny" part is that the Fed argued that if Ron Paul's Audit the Fed bill passed it would politicize the Fed and it would led to inflation...

The bill did not pass and now they are creating inflation on their own.

Professional liers.
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October 08, 2010, 07:25:20 PM
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save less and to spend or invest more
Huh? Investing is saving.


Not in the current climate.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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October 08, 2010, 07:26:58 PM
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The Federal Reserve spent the past three decades getting inflation low and keeping it there.

That's funny, because I seem to recall a great deal of inflation from about 1995 to 2007.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
kiba
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October 08, 2010, 07:28:19 PM
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The Federal Reserve spent the past three decades getting inflation low and keeping it there.

That's funny, because I seem to recall a great deal of inflation from about 1995 to 2007.

There are low inflation, so you did see a great deal of inflation. It's not mutually exclusive.

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October 08, 2010, 07:34:44 PM
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The Federal Reserve spent the past three decades getting inflation low and keeping it there.

That's funny, because I seem to recall a great deal of inflation from about 1995 to 2007.

There are low inflation, so you did see a great deal of inflation. It's not mutually exclusive.

I meant more than the standard "low" 2-3% annually.  All of the recent bubbles had a fedreserve induced inflation componet to them.  The tech bubble, the real estate bubble and the stock bubble were all linked to inflation in some capacity.  Now we are in a state of deflation as a result of those bubbles popping, and there are still people who claim that inflation has been under control this entire time?

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
kiba
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October 08, 2010, 07:35:51 PM
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The Federal Reserve spent the past three decades getting inflation low and keeping it there.

That's funny, because I seem to recall a great deal of inflation from about 1995 to 2007.

There are low inflation, so you did see a great deal of inflation. It's not mutually exclusive.

I meant more than the standard "low" 2-3% annually.  All of the recent bubbles had a fedreserve induced inflation componet to them.  The tech bubble, the real estate bubble and the stock bubble were all linked to inflation in some capacity.  Now we are in a state of deflation as a result of those bubbles popping, and there are still people who claim that inflation has been under control this entire time?

That's a lot of bubbles in one decade.

db
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October 09, 2010, 12:46:41 AM
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Huh? Investing is saving.


Not in the current climate.

In theory I guess it is possible to save without investing. (Store and don't use some physical good that is not expected to increase in price.) But how do you invest without saving?
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October 09, 2010, 01:24:27 AM
 #12

Huh? Investing is saving.


Not in the current climate.

In theory I guess it is possible to save without investing. (Store and don't use some physical good that is not expected to increase in price.) But how do you invest without saving?


If you borrowed and bought stocks I don't think that would be saving, but surely it would be investing.
 

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db
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October 09, 2010, 01:46:02 AM
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If you borrowed and bought stocks I don't think that would be saving, but surely it would be investing.

The lender is doing the saving. Intermediaries don't change that there is just as much saving at the beginning of the chain as there is investing at the end.
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October 09, 2010, 07:02:51 AM
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If you borrowed and bought stocks I don't think that would be saving, but surely it would be investing.

The lender is doing the saving. Intermediaries don't change that there is just as much saving at the beginning of the chain as there is investing at the end.


That's a good point.

One person could invest without saving by borrowing, but somewhere, someone had to do the saving.

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hugolp
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October 09, 2010, 07:43:56 AM
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If you borrowed and bought stocks I don't think that would be saving, but surely it would be investing.

The lender is doing the saving. Intermediaries don't change that there is just as much saving at the beginning of the chain as there is investing at the end.


That's a good point.

One person could invest without saving by borrowing, but somewhere, someone had to do the saving.

This would be true without the central bank. In the present system this is not true, since credit is created through inflation.
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October 09, 2010, 09:03:17 AM
 #16

If you borrowed and bought stocks I don't think that would be saving, but surely it would be investing.

The lender is doing the saving. Intermediaries don't change that there is just as much saving at the beginning of the chain as there is investing at the end.


That's a good point.

One person could invest without saving by borrowing, but somewhere, someone had to do the saving.

This would be true without the central bank. In the present system this is not true, since credit is created through inflation.

In a very broad sense it is still true. The dollar would be worth exactly zero if people weren't doing work and trying to save the value in dollars. In this case it isn't the borrower or the lender doing the saving, it is some dupe (most of us here) working a job and holding dollars for a while.

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