The Paul Krugman Thread


#1261

I think stagflation through being fecked is different.

And QE has not led to inflation. Just look at Japan for example.

The point is where you have two ‘examples’ where the opposite effects are observed, you have to suppose that the action you picked as a cause is the wrong one. It’s not that QE has no effects, it just doesn’t seem to be directly linked to inflation.

As Mr. Anderson observes, you might be able to see it have an effect on a particular asset class, but to be honest, bonds are a poor one to pick as evidence of inflation since high bond prices = low inflation… :wink:


#1262

Eh… dont high bond prices = low interest rates?

Would you accept that deflation has been countered by QE?
I mean the point of QE is to reinflate the economy or at least mimick inflation to counter deflation.
The trick is withdrawing it without deflation kicking in again which, judging by Japan, will take 20 years or require 20 times what we’re doing now.

And, as an aside, this is why gold is a no-brainer.


#1263

Yes and low interest rates = low inflation - hence the winkie.

No, I don’t think deflation has been countered by QE. The point of QE is to fill the hole that appeared when magical money disappeared and thereby to prevent an asset value crash/prevent firesales.

I think the precipitous destruction of money has been countered by QE, but that’s different to deflation.

If your idea of a no-brainer is 20 years of zero returns + storage costs… well, good luck to you.


#1264

Inflation does not rob savings if wage increases keep pace. Moderate inflation (2%/year) is generally good, being the result of economic growth. In fact, too much saving is bad and should not be encouraged. Money should flow to consumption and investment into productive areas. Deflation is undesirable as it is generally associated with depressions and should be the last thing wished for. Now that austerity has proven to be a dismal failure in the UK (earning them a credit downgrade in the process) expect some creative monetary policies (as hinted at by Merv today). Price inflation in UK is caused by rising input prices and UK oil production is down, plus Str has fallen making imports more expensive. Nothing to do with QE, in fact not enough stimulus is the problem.


#1265

In case yoiu haven’t noticed, there is a big fundamental difference between wages and savings.


#1266

This is a point that has been made consistently by Krugman. A point he had to make for the last 5 years.

Posen’s paper is well worth a read

bankofengland.co.uk/publicat … ech434.pdf

QE has not led to inflation in Japan but possibly mild inflation in UK. It is hard to get traction at the ZLB without monetary and fiscal policy acting together.

As regards inflation as thief, you can always try bitcoins and gold. :wink:


#1267

Absolutely - and even with them working together, it is not clear what, other than halting a collapse, can be achieved. Exceptional debt and spending doesn’t seem to lead to a revival, at least not by GDP measures.

Pick your poison :slight_smile:


#1268

But QE hasn’t lead to inflation. Just look at Japan for example.


#1269

I dont agree with this at all.
Look at the high rates of savings in China; where the state doesnt provide services (in this case healthcare or pensions) then higher savings are a necessity.
‘Savings’ then are just deferred spending. Seen in this light they mimic deflation and this is how the whole Krugman shiteology and QE gains traction.
The economy is not an seperate system, it is the aggregated actions of millions of people.
These millions of people who have been saving then are expressing an opinion on the social situation in which they find themselves.
‘I am earning enough for my present needs but must provide for future needs’.
Nobody is saving ‘recklessly’, thats a preposterous notion.

Besides all that, when you save your money is not taken out of circulation, its deposited in a bank or other financial instrument.
The banks are supposed to manage, loan and invest this money and return it to you on demand.
This was the failure, not ‘saving too much’.

But its okay to want deflation in the housing market, right?
I mean, thats why we’re all here, isnt it?

This is complete fucking horseshit.
There has been hardly any austerity in the UK; spending, deficit and debt are all continuing to rise at a fair clip.
After almost £400Bn of QE we had the economy shrink again in Q4 2012.
You havent a bulls notion.

No Daniel youre reading this wrong.
You cant say that if a person falls off a 100 foot building (deflation) and someone quickly raises the ground up 99ft (QE) that there hasnt been any rise in ground levels. You can say that a fall has been averted, but you cannot say the ground hasnt risen just because he hasnt fallen the whole 100ft.
Its not just what youre looking at, its how youre looking at it.

Either way, the building (economy) is no longer in the same position relative to the ground; the economy has literally crashed into the earth.


#1270

Quite.

QE isn’t inflationary. It’s a waste of time and only works to serve commissions to the large broker dealers and investment banks.

Presumably you are another kept awake at night by the bond vigilantes yes? Short Gilts, short Treasuries, short JGB’s … and wrong on all.


#1271

He hasnt a bulls notion on England.

QE isnt inflationary, its anti-deflationary.

Way to obfuscate.

If you have a bucket with 10 litres and a hole in the bottom your water is ‘deflating’.
Pouring water in the top at the same rate as its falling out the bottom isnt ‘inflationary’, in the sense that the bucket will overflow, but it does fuck all to fix the hole in the bucket.

Now imagine that suddenly the hole is fixed… is the continued pouring of water inflationary? Of course it is.
QE may not be causing a huge amount of inflation in the present circumstances but it is an inflationary mechanism; I mean, thats the whole point of it!


#1272

There isn’t inflation in the UK? There certainly is. Ok it’s not hyperinflation, but incomes are stagnant and the cost of living has gnawed away at people for 5/6 years now, with no end in sight.

The best cure for the stagflation is cutting the money supply. Instead, they keep growing the money supply, and wonder why the problems aren’t solved. In number 10, they need 1979 Thatcher, but they’ve got 1970 Ted Heath instead.


#1273

Who said that captain strawman?


#1274

No austerity in UK? Give me a break. Where did you hear this? IF you believe that you are either misinformed or a kook. This thread is 5 years old, where’s the hyperinflation? Perhaps you’ve spent the last 5 years in your bunker living on beans. Take the tin-foil-hat off and come back to reality.


#1275

As long as your interest rate is higher than inflation you’re ok.


#1276

Looks like Fingers is back.


#1277

All the analogies in the world won’t make QE inflationary.

Certainly, the point of QE is to inflate, I agree with you.

But it doesn’t work in its current guise - because it can’t.


#1278

So who is paying such said interest?


#1279

KBC are paying 3.5%.


#1280

KBC are only paying 3.5% on a gimmick savings account where you can lodge a maximum of E1000 per month. Their real rate (“standard demand deposit account”) is only 2.5%.