The Midnight Ride
Member
- Joined
- Aug 16, 2011
- Messages
- 136
Long story short: I got into a debate over this article and while I received concessions on several issues such as CPI v. SGS Alternate, how the standard of living should be measured, whether or not deflation is present, etc. I am looking for someone with a more thorough understanding of Austrian economics to point out other areas where his conclusions are suspect and whether or not I am misunderstanding the Austrian view point.
http://globaleconomicanalysis.blogspot.com/2011/08/yes-virginia-us-back-in-deflation.html
1) I cannot accept his conclusion that we were in a deflationary period in the early months of 2009. SGS shows that even during that time we bottomed at +2%.
2) "Without credit expansion there is little hiring." Am I mistaken in believing that firms can (and should) be able to save and invest and then as a result have enough capital to begin hiring? Why does there have to be further credit expansion to spur hiring?
3) "nflationists constantly fret about prices, ignoring far more important credit conditions." I do not understand this sentence. I understand people have differing definitions of inflation (prices v. money) but where is he going with this? What is the Austrian view?
4) He lists several different symptoms of deflation. How is falling home prices a symptom of deflation? Home prices were built up well above their historical trends due to the government propping up prices through various means and were due (and still are) for a massive correction. Why is this a symptom of deflation?
5) "However, equally clearly the US dollar bottomed in May. That makes five for five." This one baffles me. We just hit a three month low this past week. This is not as far as I am concerned a "rising dollar." Am I off base on this one?
6) Falling Commodity Prices were another symptom he lists, the PPI just rose at .02% and is over 7% YoY. I don't see how he chalks that one up as a Win. The CRB has seen a correction, but I don't see how it is deflationary. YoY it is still up.
7) He lists falling consumer prices as #7, he cites CPI as the basis of his conclusion. I view SGS as a more reliable indicator.
8) I can't disagree with him that there has been a massive spike in the monetary base and excess reserves, although it has not worked it's way through the system yet so it is not inflationary until banks begin lending. I had someone argue that banks will not lend this money out because they have no capital. Is there any merit to this? I would think that they would be more than willing to lend out once there are firms ready to expand in order to make profits.
9) "Most Austrians have refused to consider (or simply fail to understand) debt-deflation analysis and how it would impede the Fed's ability to spawn the inflation Bernanke wants, let alone the massive inflation Murphy, Schiff, and North all saw coming." Is it not too early to say that this Austrian trio were wrong? I find that it is immaterial if a prediction is off a year or two, rather the consequences are more important. Even if we do not see the inflation scenario that they predicted, where does our economy go? Our dollar is falling, import prices are rising as a result, and our economy is still largely consumption based. That cannot be sustained. Either way, are we not due for a restructuring?
Any information on this would be greatly appreciated. I feel I have a basic understanding of the Austrian view, but when information becomes more specific, things get hazy for me. I'm still learning.
http://globaleconomicanalysis.blogspot.com/2011/08/yes-virginia-us-back-in-deflation.html
1) I cannot accept his conclusion that we were in a deflationary period in the early months of 2009. SGS shows that even during that time we bottomed at +2%.
2) "Without credit expansion there is little hiring." Am I mistaken in believing that firms can (and should) be able to save and invest and then as a result have enough capital to begin hiring? Why does there have to be further credit expansion to spur hiring?
3) "nflationists constantly fret about prices, ignoring far more important credit conditions." I do not understand this sentence. I understand people have differing definitions of inflation (prices v. money) but where is he going with this? What is the Austrian view?
4) He lists several different symptoms of deflation. How is falling home prices a symptom of deflation? Home prices were built up well above their historical trends due to the government propping up prices through various means and were due (and still are) for a massive correction. Why is this a symptom of deflation?
5) "However, equally clearly the US dollar bottomed in May. That makes five for five." This one baffles me. We just hit a three month low this past week. This is not as far as I am concerned a "rising dollar." Am I off base on this one?
6) Falling Commodity Prices were another symptom he lists, the PPI just rose at .02% and is over 7% YoY. I don't see how he chalks that one up as a Win. The CRB has seen a correction, but I don't see how it is deflationary. YoY it is still up.
7) He lists falling consumer prices as #7, he cites CPI as the basis of his conclusion. I view SGS as a more reliable indicator.
8) I can't disagree with him that there has been a massive spike in the monetary base and excess reserves, although it has not worked it's way through the system yet so it is not inflationary until banks begin lending. I had someone argue that banks will not lend this money out because they have no capital. Is there any merit to this? I would think that they would be more than willing to lend out once there are firms ready to expand in order to make profits.
9) "Most Austrians have refused to consider (or simply fail to understand) debt-deflation analysis and how it would impede the Fed's ability to spawn the inflation Bernanke wants, let alone the massive inflation Murphy, Schiff, and North all saw coming." Is it not too early to say that this Austrian trio were wrong? I find that it is immaterial if a prediction is off a year or two, rather the consequences are more important. Even if we do not see the inflation scenario that they predicted, where does our economy go? Our dollar is falling, import prices are rising as a result, and our economy is still largely consumption based. That cannot be sustained. Either way, are we not due for a restructuring?
Any information on this would be greatly appreciated. I feel I have a basic understanding of the Austrian view, but when information becomes more specific, things get hazy for me. I'm still learning.
