January 22, 2006

PSSSST, THE '70s ARE OVER:

More than inflation on Bernanke's full plate (T.M. Sell, 1/22/06, The Seattle Times)

The Fed usually is obsessed with inflation, as central bankers tend to be. That's probably the fundamental thing to understand about the Federal Reserve system — it's run by bankers, and bankers most fear inflation.

Inflation eats away at savings by making money worth less (if not worthless), and penalizes lenders (which includes bankers). As happened with home mortgages in the 1960s and 1970s, if you lent at 3 percent and inflation is 5 percent, you're losing money.


Of course, when you're lending at over 6% and there is no inflation you're guilty of usury.

Posted by Orrin Judd at January 22, 2006 10:04 AM
Comments

or trying to gently deflate a housing bubble.

Posted by: toe at January 22, 2006 3:54 PM

OMG, your obsession with this "no inflation" thing is increasingly hilarious. Just check the CBO's web page or numerous other sources. Inflation is around 5% now (it depends on whether you're talking core inflation).

Posted by: Tom at January 23, 2006 7:04 AM

Tom:

Yes, if you speak of real inflation the government estimates it at under 2% and is known to overstate it by at least a full percent. There is no inflation and as population decline and globalized economics gain traction there can't be.

Posted by: oj at January 23, 2006 8:42 AM

Just went through an appallingly lengthy attempt to find annual inflation data. What is it, classified all of a sudden? Anyway, the White House says it's around 2.2% and my calculations based on the Bureau of Lbr Stat monthly data put it at 3.2% for the last year. Even if you use the low figure and take as gospel your contention that it's overstated by a pctge point, that's still an inflation rate of 1.2% That is pleasingly low inflation, but it IS inflation.

Posted by: Tom at January 23, 2006 1:15 PM

The feds say it was 1.7% for 2005--given their mismeasure it's negligible. Meanwhile, mortgage rates over 6% become the highest real rates we've had since the Depression.

Posted by: oj at January 23, 2006 1:23 PM

Which feds? The Fed?

Posted by: Tom at January 23, 2006 4:18 PM

Just got back from the NY Fed Bank site - annualized CPI inlfation rate is either +2.8% or -1.6% for the most recent month (December), depending on whether you're talking "core" inflation or not. If you use 2.8% and take off 1% it's still +1.8%. The other one implies a DEflation rate of 2.6%, which is absurd.
Take your pick, I guess.

Posted by: Tom at January 23, 2006 5:07 PM

Denying that we've been in a global deflationary climate for decades doesn't make it go away.

Posted by: oj at January 23, 2006 5:34 PM

Ladies and gentlmen, Orrin Judd.

Denying that we've been in an inflationary period for decades doesn't make it go away.

Posted by: Tom at January 23, 2006 7:06 PM

The 70s were inflationary--the economy tanked. The 80s/90s/00s have been deflationary, like the end of the 19th century with similar good results.

http://www.brothersjudd.com/index.cfm/fuseaction/reviews.detail/book_id/1369/

Posted by: oj at January 23, 2006 7:13 PM

We've had inflation, except for a quarter here and a month there, for the last several decades.

Posted by: Tom at January 24, 2006 5:47 PM

Tom:

No, we haven't.

Posted by: oj at January 24, 2006 5:50 PM

Name a year since 1976, to make it an even 30 years, when the inflation rate was zero or negative.

Posted by: Tom at January 24, 2006 8:20 PM

Name a year since 1976, to make it an even 30 years, when the inflation rate was zero or negative.

Posted by: Tom at January 24, 2006 8:20 PM

There's been deflation (or stagnation of real prices) for the past twenty-five years.

Posted by: oj at January 24, 2006 11:36 PM

If by stagnation you mean "slow increase," then we've finally reached agreement.

Posted by: Tom at January 25, 2006 7:45 AM

No, I mean prices have been either flat or falling since Volcker and Reagan broke inflation in the early 80s and then Reagan led globalized trade and the compyter revolution took off. Nothing costs as much as it used to.

Posted by: oj at January 25, 2006 7:59 AM

That's just not true.

Posted by: Tom at January 25, 2006 10:14 AM
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