Difference between revisions of "Inflation"
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| − | *[https://johnhcochrane.blogspot.com/2021/12/inflation-speculation.html#more John Cochrane on 2020-2021 inflation]: | + | *[https://johnhcochrane.blogspot.com/2021/12/inflation-speculation.html#more John Cochrane on 2020-2021 inflation]: {{Quotation| A monetarist might object that this event was (finally) proof of MV=PY. Helicopter yes, but helicopter money, not helicopter bonds. M2 rose $5.5 trillion, the rest is irrelevant. But we can ask all the questions of Section 14.1 about helicopter drops: Suppose the M2 expansion had been entirely produced by purchasing existing Treasury securities, with no deficits. Would this really have had the same effect? Are people starting to spend their M2 because they don't like the composition of their portfolios, which have too much M2, paying 0.01% (Chase), and not enough one-year treasurys paying 0.1%? Or are they simply spending extra ``wealth?'' Suppose the Federal Reserve had refused to go along, and the Treasury had sent people Treasury bills directly. Would that not have stoked the same inflation? The fiscal expansion, the wealth effect, is the natural interpretation of this episode. |
| − | {{Quotation| A monetarist might object that this event was (finally) proof of MV=PY. Helicopter yes, but helicopter money, not helicopter bonds. M2 rose $5.5 trillion, the rest is irrelevant. But we can ask all the questions of Section 14.1 about helicopter drops: Suppose the M2 expansion had been entirely produced by purchasing existing Treasury securities, with no deficits. Would this really have had the same effect? Are people starting to spend their M2 because they don't like the composition of their portfolios, which have too much M2, paying 0.01% (Chase), and not enough one-year treasurys paying 0.1%? Or are they simply spending extra ``wealth?'' Suppose the Federal Reserve had refused to go along, and the Treasury had sent people Treasury bills directly. Would that not have stoked the same inflation? The fiscal expansion, the wealth effect, is the natural interpretation of this episode. | ||
Why did this stimulus cause inflation, and that of 2008, or the deficits from 2008 to 2020, did not do so? Federal debt held by the public doubled from 2008 to 2012, as inflation went nowhere. (Figure 5.6.) From the fiscal theory point of view, the key feature is that people do not believe this debt will be paid back. (In principle discount rates or real interest rates could be different, but in this case they are nearly the same.) So why, this time, did people see the increase in debt and not infer higher future surpluses, while previously they did? Several speculations suggest themselves. | Why did this stimulus cause inflation, and that of 2008, or the deficits from 2008 to 2020, did not do so? Federal debt held by the public doubled from 2008 to 2012, as inflation went nowhere. (Figure 5.6.) From the fiscal theory point of view, the key feature is that people do not believe this debt will be paid back. (In principle discount rates or real interest rates could be different, but in this case they are nearly the same.) So why, this time, did people see the increase in debt and not infer higher future surpluses, while previously they did? Several speculations suggest themselves. | ||
Revision as of 15:52, 20 December 2021
- John Cochrane on 2020-2021 inflation:
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