[ad_1]
It starts with a occasional rock where lawmakers paddle across the ocean. Then many other stones appear. Finally, they see themselves heading straight for the mountain of inflation. It is only with great effort that he turns the ship around and sails to safety.
This is how the world begins with the hearing of a man whose life as an economist began in the 1970s. Only a few wanted to believe Milton Friedman’s warnings. But he was right. The trend came to a head with a rise in prices that the late John Hicks called “flexprice” markets, such as food. Other price hikes could be explained by restrictions, such as the oil ban of 1973-74. In what Hicks called the “fixprice” markets we saw a growing need and shortage. However, as rising prices skyrocketed and wages began to plummet, workers began to feel increasingly violent. Eventually, the increase in the price of pay was more pronounced.
What was behind all this? The answer is: relying too much on what is possible, until it is too late. Are we making the same mistakes now? In my opinion, yes. While the price hikes we see may be temporary, they can be a permanent threat. Also, even if one has more hope than this, it seems impossible to justify existing financial reforms, especially in the US. The modern policy may be understandable in frustration. But we are no longer at risk of depression.
Mu May 2020, I saw warnings from an investor, Tim Congdon, about rising prices. In early 2021, prominent Keynesians, in particular Lawrence Summers and Olivier Blanchard, joined them, especially in light of the great economic support that Joe Biden provided. I reiterated my concerns about inflation in March and May as well.
Now, complaints feeling reassured. Mu a a recent passage, Summers provides a detailed answer to form “team transitory”. Federal Reserve Governor Jay Powell at Jackson Hole in August. This is not surprising. In the US, inflation reached 6.2 percent in the year until October 2021. Worse, the average rise (excluding food and energy prices) reached 4.6 percent. Fortunately, the area looks good in the eurozone and the UK, with prices valued at 1.9 and 2.9 percent, respectively. The view of the European Central Bank that the risk of inflation is much lower in the eurozone than the US seems to be right.
Today, as Summers reports, prices are rising in many parts of the U.S. economy, including housing. In addition, inflation expectations stemming from the difference between regular Treasuries and index-related increases have risen by almost a percentage last year. As Harvard’s Jason Furman emphasizes, signs of stress are appearing in the job market. Of course, the last ones were healed. (See charts.)
However, one can still recognize special things. Some of them are prices are rising of gas. A detailed analysis is International Energy Agency he mentions a number of issues in need and delivery – among them that “the level of groundwater storage in Europe at the end of September was 15 percent below their five-year level”. So even the power of demand has acted, it was not the only thing.
A similar point the nature of the importance of post-crisis, especially rushing to buy fixed goods. This may be so because many people are afraid to go out and enjoy a meal or other service. The increase in the need for sustainability reflects the need for industrial inputs and so on transportation across the globe. In fact, Neil Shearing, an economist at Capital Economics, says that the real issue “is how the sales process has improved due to the dramatic changes in the economy”.
Over time, however, special factors become less reliable and concerns that inflation will become more stable. I am the economic system is growing, even in the US, the burden of financial stability falls on central banks and especially the Fed. There is no major financial crisis, however, beyond the Biden program “Build Back Better”. According to Furman, “there may be little effect on inflation in the medium and long term” as well as greater efficiency.
All major central banks are still locked in a system set up in March 2020, at the height of Covid’s fears. In the US, this seems unfair. Other than that, with inflation rising sharply, real short-term interest rates are at hand removal 5 percent, even at a premium price. It is difficult to see why this should be the case now. Today’s problems are availability, not desire. The Fed will not do anything about this.
It may be that the Fed is abandoning a definite move to normalization due to its change direct on average inflation. Still, it did not make sense to me that the world’s largest bank should be held accountable for its past failures by deliberately making mistakes in the future, a point that has been reiterated in more detail by Willem Buiter. This only adds new uncertainties.
Another obstacle may be the belief that running a “hot” economy will bring greater social benefits and lower incomes. That is a good argument to meet the demand. But it is a heated argument for not responding to the rapid rise in inflation. The danger is that the outcome may continue to be worse than expected. Then the Fed will be forced to exercise. The cost can go far beyond changing the current trend.
I strongly believe that the rise in prices will end. But hope is not enough. Existing preferences here seems to be inappropriate. The Fed needs a new superintendent to be ready to stand up and consider where the US and financial countries are. Rapid economic changes can now prevent the cold afterwards.
[ad_2]
Source link
