Oh, For Sensible Obama Era Economics

Think we can ask Barry to come back?

Those who have been paying attention will have noted that inflation is a little higher than many are comfortable with at present. Cracking up to 6% or so is indeed that tad above the Federal Reserve’s target of 2%.

We can make a few little sideline observations - sidling ones even. The 6% plus or minus change is in the CPI which always does run a little hotter than the Fed’s declared target measure of core PCE at 2%. The Fed’s said that inflation was below target therefore they’re going to allow it to run hot to catch up. That one seems extraordinarily stupid to me but then what do I know? And, of course, we are all gravely assured that this is transitory. Be over soon, right. Right soon. There’s even some obvious truth to that - we were having deflation a year back so this year we are going to run hot on a year to year measure. Then there’s the chip shortage and used car prices and shipping with containers in the wrong places and…..it’s not just money losing value, the more normal type of inflation.

Then we’ve got people changing the definitions of why inflation occurs. We can start with the known Marxist - I note that Marxism because that’s the obvious signifier of his being wrong about anything economic - Richard Wolff:

<blockquote class="twitter-tweet"><p lang="en" dir="ltr">Inflation occurs when employers raise prices. Profit drives their decisions. But they dare not publicly admit that reason. Instead they blame gov&#39;t or rising wages or &quot;shortages&quot; etc.: anything/anyone but themselves. Dont be fooled.<a href="

Richard D. Wolff @profwolff

Inflation occurs when employers raise prices. Profit drives their decisions. But they dare not publicly admit that reason. Instead they blame gov't or rising wages or "shortages" etc.: anything/anyone but themselves. Dont be fooled.

bbc.inKraft Heinz says people must get used to higher food pricesThe boss of the food giant says rising prices are partly due to pandemic disruption.

14, 2021</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>

(I have no idea whether that tweet comes out properly, sorry)

Yeah, inflation is nothing to do with all that stuff Keynesians talk about, excesses of demand over supply, possibly a bit too much stimulus as parts of Congress try to spend another $3 trillion on nice things. Nope, it’s greedy capitalists I tell ya!

It’s not just addled Marxists saying such things - well to the extent that Lizzie Hatchet isn’t an addled Marxist:

<blockquote class="twitter-tweet"><p lang="en" dir="ltr">Prices at the pump have gone up. Why? Because giant oil companies like <a href="

Elizabeth Warren @SenWarren

Prices at the pump have gone up. Why? Because giant oil companies like @Chevron and @exxonmobil enjoy doubling their profits. This isn't about inflation. This is about price gouging for these guys & we need to call them out.

20, 2021</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>

It’s even possible to see a talking point being created before our very eyes. Inflation also isn’t anything to do with what the monetarists say it is, an excess of money supply. Nope, it’s those bastard capitalists being greedy!

Makes me wish for those heady days of Jan 2016, when Trump - who has so perverted the niceties of economic and political discourse of course - was no more than a gleam in the electorate’s eye, when it was that nice Mr. Obama running things. Back when the American government took seriously the task of educating the benighted foreigner out of silly ideas.

Voice of America - which I quite like to be honest, a friend is about to start work there - is a propaganda arm of that American government. Often sensible enough and all that but very much a liberal organisation in that modern American sense. What was so fun about 2016 was that back then modern liberals working for the American government were making fun of economic ideas like those being pushed by Wolff and Lizzie. In fact, making fun of exactly this specific idea being pushed by Wolff and Lizzie:

Luis Salas, the new 39-year-old vice president for the economy, has scant administrative experience, but champions the same theories of price and currency controls that have defined Venezuela's leftist economic policy for 17 years.

Like Maduro, Salas says the country is suffering from the world's worst recession and triple-digit inflation because business interests are colluding with the U.S. to sabotage the economy.

He even goes further than Maduro in arguing that many of the country's problems are the result of being too capitalist.

A professor at the Bolivarian University, an institution created by the late president Hugo Chavez, Salas was relatively unknown before this week. Now, the country is poring over his large body of pamphlets and letters.

"Inflation doesn't exist in real life," he wrote last year.

He added that prices go up not because of scarcity, but because of "capitalist economies that are driven by the desire for personal gain through the exploitation of others; by selfishness."

Since that explanation the annual inflation rate in Venezuela has been 254 % for 2016, 438% in 2017, 65,374.08% in 2018 (and I do love the 0.08 there), 19,906 in 2019 and so on.

For those with their Spanish the full glory of Sr. Salas’ economic understanding can be seen here.

We might then suggest that either this isn’t a very good explanation of inflation or that they’ve got some damn fine capitalists in Venezuela. Just look at that profit maximisation!

Or, we might take a little stock here. Views on inflation so purblind stupid that VoA was laughing at them only 5 years ago are now being seriously advanced by a Professor Emeritus and a sitting Senator. Why’s this?

Because any standard explanation of the current inflation would lead to a derailment of current Democratic plans to spend another $3 trillion or whatever it is this afternoon. Monetarist explanations would mutter something about - yes, it’s transitory, OK, we get it, but a series of transitory for many months starts to look something more than transitory - the money creation of QE leaking into the real economy so perhaps we should curb QE, raise interest rates and all that. More Keynesian explanations would be that more spending is stimulatory and when we’ve got 6% inflation that might not be quite the right time to do stimulus. Yea, even if everything is paid for because there is that balanced budget multiplier to think about (as Greg Mankiw has gleefully noted).

So why do we have these two tarting themselves out - intellectually of course, Lizzie’s worth $12 million so she’s no need for prostitution of any other kind - with this absurd explanation that inflation is the result of capitalist greed and no more?

Because the actual explanations of inflation threaten that current plan to spend $3 trillion on nice things. And the $3 trillion to spend on nice things is more important than truth, honesty or intellectual rigour.

And to think, the general view is that it’s Trump who has taken politics down into the gutter.

Me, I’m just wondering whether we can ask Barry to come back. Or, if that’s not possible for some strange constitutional reason can we at least get that VoA editor a little more prominence?