What would it take to admit you're wrong about inflation?

[Paul Or Nothing II]

I agree. I didn't really phrase my original question very well. Let me try again. Another part of the austrian prediction (that I didn't mention) is that once you go down the path of stimulus, removing it is going to cause a recession. Since we've had massive stimulus, removing it should cause a massive recession (even a depression). So austrians think we are boxed in, we either keep stimulating until the dollar collapses or we stop stimulating and get a massive recession. So austrians would be wrong if we stopped stimulating and the economy didn't lapse into recession OR we stimulated for some lengthy period of time (how long? not sure.) and the dollar never collapsed.

In other words in (austrian) theory we are boxed in, if we can get out of the box without damage the theory would "take a hit".

Again, you aren't appreciating the fact that future is uncertain & an economy is something very difficult to predict because it behaves based how humans act & it's impossible to predict human behavior & put it into some mathematical formula to get answers about future - isn't that the whole reason why Austrians oppose central-planning? Because no person or group of persons can perfectly predict how people as a whole will behave & how the economy will behave. We can only learn from the past & draw inferences from theoretical & practical lessons we have learned & we have seen it so many times that an increasing supply of something causes its value to fall, we have seen it with "money" & we have definitely seen with a bunch of other goods & services. Occasionally, there could be circumstances that lead to a different outcome than expected but an odd exceptional situation can't falsify the numerous others that led to the expected outcome.

 

[Cleaner44]

I will admit that inflation was not high as I first feared after the Fed started printing like mad in 2009-2010. I think that was probably because so much of the money supply was destroyed when the digital money evaporated and so new money created was digital money that simply replaced what was destroyed. That did not result in a net increase in the money supply and so did not result in a massive amount of inflation of prices.

 

[erowe1]

Keynesians only admit they are wrong after they are dead.

But ending up dead would make them right.

 

[idiom]

Here's what you are missing... It takes just more than an increase in the money supply to cause inflation. That's only if the speed of money remains stable. It isn't. The velocity is really, really slow right now which is how they can create that much money without causing hyperinflation. You will see the problems when the speed inevitably picks back up. Sure, the Fed will try to counter, but it will have limited success. Chances are they will make it worse.

*inevitably*...

The economy is grinding to a halt. It might just stop if enough business owners continue to go Galt.

 

[RonPaulGeorge&Ringo]

An increase in the money *is* inflation. That's the definition of it. If you're asking why the rise in prices lags behind the rise of the money supply, keep in mind

1)*productivity* -- with robots doing everything, prices should be falling based on lower costs
2)*demand collapse* -- with no one working, demand is collapsing, which should also be driving prices down.

both these are mitigating factors against prices rising. But without the monetary supply inflation, prices would actually be lower, which *would* be good for:
1) people with money
2) minimum-wage workers who could buy more

However, what we have is monetary inflation; which is good for & helps debtors and of course the banks and govt contractors who get the new fake money first, hot off the press.


Hope this helps.

 

[RonPaulGeorge&Ringo]

PS. There is still a good amount of price-hike inflation of course, mostly in food, which is not measured as "inflation" by the feds. Because, who eats right? Certainly not corporations. And corporations are the only people who matter these days.

 

[erowe1]

An increase in the money *is* inflation.

I tend to think that's the most meaningful definition. But it's not THE definition, nor even the most common one.

http://www.economist.com/economics-a-to-z/i#node-21529397

 

[Zippyjuan]

An increase in the money *is* inflation. That's the definition of it. If you're asking why the rise in prices lags behind the rise of the money supply, keep in mind

1)*productivity* -- with robots doing everything, prices should be falling based on lower costs
2)*demand collapse* -- with no one working, demand is collapsing, which should also be driving prices down.

both these are mitigating factors against prices rising. But without the monetary supply inflation, prices would actually be lower, which *would* be good for:
1) people with money
2) minimum-wage workers who could buy more

However, what we have is monetary inflation; which is good for & helps debtors and of course the banks and govt contractors who get the new fake money first, hot off the press.


Hope this helps.

When everything is made by robots, goods may be cheaper but people will have lost their jobs to those robots and have no money to buy good with. Which leads to your #2.

 

[enoch150]

When everything is made by robots, goods may be cheaper but people will have lost their jobs to those robots and have no money to buy good with. Which leads to your #2.

Wants are unlimited. If robots take over a particular industry, at worst there will simply be a temporary shift to a different type of employment.

Unless the government puts too many restrictions on productivity and the use of capital. But it would never do that.

 

[Madison320]

An increase in the money *is* inflation. That's the definition of it. If you're asking why the rise in prices lags behind the rise of the money supply, keep in mind

1)*productivity* -- with robots doing everything, prices should be falling based on lower costs
2)*demand collapse* -- with no one working, demand is collapsing, which should also be driving prices down.

both these are mitigating factors against prices rising. But without the monetary supply inflation, prices would actually be lower, which *would* be good for:
1) people with money
2) minimum-wage workers who could buy more

However, what we have is monetary inflation; which is good for & helps debtors and of course the banks and govt contractors who get the new fake money first, hot off the press.


Hope this helps.

I know, that's why I didn't write "inflation" I wrote "price inflation". I agree that inflation can cause prices to remain the same when they should be dropping, but I think we already had happen in 2009. I think that the biggest reasons we haven't seen more price inflation are the fact that the dollar is the reserve currency and banks are holding a lot of the newly created monetary base. But neither of these factors are permanent.

 

[matt0611]

For McDonalds to bring back the dollar menu.

 

[buenijo]

In general Keynesians think QE in the US is not going to cause prices to rise very much. Austrians think we are headed for high price inflation if we keep doing QE. What would it take to admit you were wrong?

I would assume that if we did have a huge rise in prices, Keynesians would admit they were wrong. But what about the austrians?

Monetary inflation can affect general prices by not merely increasing prices, but by preventing a decline in prices. This effect combined with the decreasing velocity of "money" in recent years accounts for the relatively tame price inflation that is widely perceived. On that last note, I emphasize also that the general price level is rising at a rate higher than indicated by official government statistics. Personally, I have experienced a compounded annual increase in my nominal cost of living of 5-7% over the last 10 years. I argue also that general nominal price inflation has been within this range nationwide over the last 10 years. So, in my view, general price inflation is substantial.

Now, I think what Madison320 considers "high price inflation" will not be seen as long as the international reserve currency status of the U.S. dollar remains unchallenged. In effect, as long as the dollar retains this status, the U.S. government can finance its extravagance by steadily pilfering the savings of virtually all individuals on the planet (directly or indirectly) as it continues its policy of "financial oppression" (an increasingly popular euphemism for the theft made possible by the expansion of currency/credit). There is reluctance on the international stage to challenge the existing financial paradigm for many reasons. Most obvious is the fear of U.S. military reprisal. However, in general, there is a widespread reluctance to disrupt trade. There is a move away from the U.S. dollar, but there are forces and incentives in place that slow the process. In any case, we will see a continual expansion of the U.S. dollar currency, and a general rise in the prices measured in dollars will not be avoided. However, there is no way to know how volatile will be the prices nor what will finally be the rate of general price inflation. Trying to forecast such things is akin to making weather forecasts years in advance.

I remain confident that there will be significant price inflation in the U.S. by any metric. I believe it will exceed any prior experience. However, Austrian economic theory does not necessitate this... rather, it describes it only as unavoidable under certain circumstances. I consider it virtually assured for many reasons. The most persuasive argument in my mind is quite simply that those with an incentive to expand the currency also have the means (and the opportunity) to make it happen. I made the argument during late 2005 that the U.S. dollar is on this path due to the incentives in place. I took the position that the last nail in the coffin would be seen by the U.S. government financing its operations with money printing (i.e. monetizing its debts). Well, this has been going on for several years now. If we never see price inflation at a rate greater than ever before in the history of the U.S. dollar, then I'll admit I'm wrong. However, again, my position here has little to do with Austrian economics.

 

[anaconda]

When everything is made by robots, goods may be cheaper but people will have lost their jobs to those robots and have no money to buy good with. Which leads to your #2.

Robot technology will be a significant employer. And tangential economies related to robot technology. Times change. We aren't building canals and railroads in 2013.

 

[eric_cartman]

if we have a debt deflation, then we could experience a deflationary event.

it depends on whether public credit growth is larger than private credit contraction.

most austrians are predicting inflation. some are predicting deflation. at the end of the day, we're using a fiat currency, the US government is in a lot of debt... the world can decide to dump their dollars at any point... and the central bank is going to print money. if we have a debt deflation, they're going to print even more money. so at the end of the day, i don't see the currency holding its value. but there could be a lot of volatility. the US dollar could rise in value before it falls. a country like Japan may have issues before the US. we don't know exactly what will happen.

i think inflation has been relatively low in the last few years. house prices are still way down... most commodity prices are below their highs. most stock markets (with the exception of US markets) are below their highs. if we had a serious inflation problem at the moment, oil prices would be at new highs. but the economic crisis is not over... in fact, it's barely even really started. so we'll have to see how it all plays out.

 

[Henry Rogue]

I don't know, why do you ask?

My point is that I get tired of hearing with each passing month, "Where's the inflation? You guys are wrong!" Meanwhile all the underlying factors that cause price inflation continue to get worse.

If an anonymous person on the web is eventually proven to be wrong, I don't think that discredits an economic school of thought. If a known Austrian Economist makes a bold prediction and is eventually proven to be wrong, that would look bad. I choose to follow the Austrians and I study it some, but I am no economist, If I make a bold prediction, it doesn't mean squat.

 

[enoch150]

On that last note, I emphasize also that the general price level is rising at a rate higher than indicated by official government statistics. Personally, I have experienced a compounded annual increase in my nominal cost of living of 5-7% over the last 10 years. I argue also that general nominal price inflation has been within this range nationwide over the last 10 years. So, in my view, general price inflation is substantial.

MIT's Billion Prices Project is often close to the official statistics for the US. It's occasionally a little higher, but only by 1.5%, not 5%. It's not like the difference between their numbers and the official numbers for Argentina.

 

[osan]

[M]aking certain assumptions about HOW the QE money will circulate can give rise to (possibly divergent) predictions on price levels of particular goods.

This is precisely so. The amount of money "out there" doesn't necessarily predict anything. It is what it's doing that tells the tale.

Very good.

 

[osan]

First, your not familiar with the Austrian side. The Austrian side explains inflation as an EXPANSION OF MONEY SUPPLY. This is the root cause of the rise of the general rise of the price of goods. We have massive inflation by its real definition.

Keynsians have told you that inflation means the general rise of the price of goods. That is incorrect. They use inflation to describe the visible effect of inflationary policies. So we are not wrong because we are using the correct term for inflation which is the expansion of money supply.

It is also irrelevant. Nobody really cares how much currency is out there, per se. What counts is the purchasing power per unit. Speaking in economy-wide terms, people don't care if there is one dollar in circulation or 100 octillion. What counts in the end is how many hours did one have to work to be able to buy a loaf of bread. Academic definitions are certainly important, but go only so far in practical terms. It is where the rubber meets the road that people generally focus their gaze, and rightly so. For all practical purposes the inflation of prices is what counts and not some academy-theoretic definitions of what constitutes "inflation". Nobody is going to care the least about that when their house is being repossessed or they cannot feed themselves.

I will not downplay the role of theory more than justifiable, but we are living in a time where practicalities are going to take center stage regardless of what anyone of a higher caliber of consideration might think. When people start going hungry, and I mean the scary kind of hungry, theory will taking a hiatus from human affairs.

 

[Zeeder]

Robot technology will be a significant employer. And tangential economies related to robot technology. Times change. We aren't building canals and railroads in 2013.

Exactly, Zippy was probably amoung the rioters who didn't like the sewing machine.

http://voices.yahoo.com/history-sewing-machine-690367.html

Unfortunatly, people like Zippy are in charge. Governments protect the powerful monopolies, who's ideas are outdated and no longer needed. Real competition would have destroyed them long ago. Ban the sewing machine! Bring back jobs!

 

[Athan]

For McDonalds to bring back the dollar menu.

ZING.