MCViewPoint

Opinion from a Libertarian ViewPoint

EconomicPolicyJournal.com: Now, The New York Times is Warning About Coming Price Inflation

Posted by M. C. on March 24, 2021

Now, as a sidebar, comes the woke cultural-Marxist moment in the Sahm essay which is apparently required in any opinion piece these days at the Times:

The Fed is still learning. In the late 2010s, I helped with some of that introspection. We asked ourselves whether we were producing our best work or if we were succumbing to groupthink. We grappled with why we missed the 2008 financial crisis, why we ignored the warning signs and how to do better next time.

Still trying to figure out inflation 111 years later.

https://www.economicpolicyjournal.com/2021/03/now-new-york-times-is-warning-about.html

 The word is obviously out to play down the accelerating price inflation that is developing. 

Yesterday The New York Times columnist Paul Krugman played down the coming inflation (See: It’s Time to Panic: The Paul Krugman “Don’t Panic” Indicator Just Kicked In).

Now Claudia Sahm, a Times contributing opinion writer who once worked as an economist at the Federal Reserve, is out with a column that claims price inflation is good for lower-income people! 

She starts out with the puff-piece-style claim that Federal Reserve Chairman Jerome Powell and the Federal Reserve Bank staff are simply great:

[W]ith Jerome Powell as the leader of our nation’s central bank. The swift and steady action from the Fed, a commitment to getting people safely back to work and Mr. Powell’s calm-inducing pronouncements have earned him plenty of bipartisan credit. (There’s now even a wide cross-section of progressives who have become fans of his.) That said, Mr. Powell is not the only hero. The long, hard path to get a more worker-friendly Fed was generations in the making.

Then there is this absurd claim to justify coming inflation:

Inflation hawks seldom remind us that wealthy investors are hurt by inflation and lower-income borrowers are helped: For example, paying off a fixed-rate loan is easier when wages and prices rise by, say, 5 percent a year rather than 2 percent. People have more money to pay the debt, and when creditors get their money back, it’s worth less. When framed this way, zealously guarding against any significant uptick in inflation feels less like responsible stewardship and more like a classist double whammy — increased cost of debt and fewer jobs.

First of all, you can’t believe in simple supply and demand economics if you think that price inflation is required to create jobs. Markets clear, even jobs markets.

As for the benefit of fixed-income debt during a period of strong inflation, it is true that there is a benefit for the holders of such debt. But Sahm is very misleading in her phrasing of who benefits. 

“Lower-income” borrowers with fixed debt do benefit but the lowest income debt holders have adjustable-rate debt, not fixed debt. As inflation climbs and interest rates go up, they are squeezed, especially if they are on fixed incomes. And every major corporation in America today has issued massive amounts of fixed-rate corporate debt that will benefit to a much greater extent than a low-income individual.

Now, as a sidebar, comes the woke cultural-Marxist moment in the Sahm essay which is apparently required in any opinion piece these days at the Times:

The Fed is still learning. In the late 2010s, I helped with some of that introspection. We asked ourselves whether we were producing our best work or if we were succumbing to groupthink. We grappled with why we missed the 2008 financial crisis, why we ignored the warning signs and how to do better next time.

Among the fruits of this labor was an analysis conducted in 2015 exploring whether the staff consensus was underestimating how many more jobs the economy could create without sparking too much inflation. We also tried to tackle groupthink by trying to increase diversity among the staff, under Ms. Yellen and later Mr. Powell. And I am heartened by the changes so far. But even today what’s known as the “staff view” looms large, and only a handful of the hundreds of economists at the Federal Reserve Board are Black economists.

And then the Sahm conclusion which falls in line with Krugman to ignore the coming price inflation and warnings about it:

If you think the hawks on television and Twitter are loud now, just wait until they see a temporary uptick in prices. They’ll be deafening. Some are inside the Fed itself and will be voting on its policies. That said, there are also many wonks at the Fed who have spent a decade shoring up technical defenses against outdated inflation fears.

But their words in long-winded memos are not enough. Good intentions are not enough. It’s what the Fed does this year and the next — in the face of inevitable criticism from incredibly powerful voices stuck in the past — that will ultimately matter most.

There you have it another New York Times voice attempting to play down the coming price inflation.

LOL, “outdated inflation fears” as the inflation tsunami is about to hit.

 –RW

Be seeing you

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

 
%d bloggers like this: