A lot of crazy stuff is being said this week about monetary policy, perhaps none of it crazier than this WSJ op-ed:You only thought that inflation was around 12% during the Carter years -- actually, it was 50% inflation, accompanied by 40% deflation. No wonder people were escaping by balloon over the border to Canada.
But deflation and inflation predictions could both be right in a sense, if you aren’t too fussy about strict definitions. In the late 1970s, the last time Americans suffered from manic interventionism from Washington, we had “stagflation,” a combination of minimal economic growth and double-digit inflation. It wasn’t pretty.By the same token, a round square is possible if you allow the definition of “square” to include circles. However in the 1970s the price level was increasing rapidly (i.e., inflation) whereas “deflation” means a decrease in the price level. If you don’t use words properly, you wind up talking nonsense. Being fussy about strict definitions is a good idea.
Friday, August 27, 2010
Goes to Matt Yglesias. Gonna quote his whole item: