Monday, September 19, 2011

Catch of the Day

Well, it was yesterday, and to tell the truth he's not the first one to point it out...but I'm happy to see basic factual information prominently displayed in the NYT, and anyway I'm about to agree with Newt Gingrich on something (sorry, you'll have to wait), and so I'm even more eager than usual to reward a little Newt-bashing.

Oh, I need to actually say what it is, don't I: the catch goes to David Leonhardt, for laughing at GOP claims that Ben Bernanke has been, in Newt's words, "the most inflationary" Fed Chair ever. As Leonhardt demonstrates, that's true if you define ever as "except for all the others since Nixon."

As someone who remembers the 1970s (OK, I wasn't all that old, so  I remember the baseball parts of it a lot better than the economics parts, but still...), I'm not entirely unsympathetic to Paul Volker's reminder that inflation has a very real tendency to snowball. But that said, deflation can snowball, too, and as Matt Yglesias never hesitates to point out, actual inflation has been running below the Fed's (relatively non-controversial) target, so questions about raising that target are, for the time being at least, not really relevant. And, you know, it's possible that Bernanke has successfully prevented runaway deflation, in which case perhaps he is the "most inflationary" compared to that baseline -- in which case, he deserves credit, not blame (or do the GOP presidential candidates now support deflation? Could be!).

At any rate, nice graphic, and great catch!


  1. I think you have a mistake in your link. Is the Leonhardt "catch" you are applauding the editorial graphic at ? I think that fits better then the existing link, which just points to a calendar of debates for the Republican Presidential nomination.

  2. Well, it's probably the largest monetary expansion in Fed history. While that expansion isn’t nearly enough in some people’s eyes, it’s worth mentioning that a lot of economists are really worried by what we’ve already done.

    As to the Fed critics -- they tend to carelessly equate monetary expansion with inflation. But in their defense, the definition of inflation is essentially arbitrary -- in the 70’s, it was decided that we would stop counting real estate towards inflation. So Greenspan technically presided over relatively low inflation even while the housing bubble had reached catastrophic proportions.

  3. Don,

    Thanks, and link fixed (and repositioned to where it makes more sense).

    Sorry everyone -- that's two of those today (already). Must be some sort of Monday thing. Thanks to all for the corrections.

  4. What was the cost of actually fighting inflation in the 80's? About 11% unemployment for a few months? So basically, if worse comes to worse and we get some hyperinflation, we'd be right about where we are now, but with some room for monetary policy to maneuver?

    That sounds naive, but I don't see how we could get inflation without some wage growth and decrease in unemployment first. I suppose a supply shock or maybe foreign demand for raw materials could do it. But a supply shock's going to screw us no matter what. And I don't see foreign demand pushing inflation that high.


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