Monday, September 17, 2012

That stagflation they predicted in 2009 doesn't seem to be happening

Here's me bloviating in February 2009:

Conservatives choose inflation as a test of whether the stimulus will be a failure
I've seen conservatives railing against the stimulus package as something that will bring inflation without economic growth, or a return to stagflation. Sounds like we've got a good, Republican-chosen, measurable parameter of whether the stimulus fails.
If inflation in the next year or two spikes dangerously far above last year's 3.85%without being caused by something external like an oil shock, then the Republicans turned out to be right. I don't think the absence of inflation by itself proves the stimulus worked, but it will show the downside risk was very low.
Of course, I expect conservatives will attempt to have people forget everything they said about stagflation when the time comes around, but this is one way to make it slightly harder.
For related fun, here are the Republican prophecies of doom at the time of the Clinton 1993 stimulus plan.

Now with the latest action by the Fed, we hear more of the same inflation nonsense from the same people, such as this genius given a February 2009 Op-Ed space in the NY Times:

Thirty Years Later, a Return to Stagflation  
CONGRESS has made a terrible mistake. Amid a rhetorical debate centered on words like “crisis,” “emergency” and “catastrophe,” it acted too fast. While arguments were made about the stimulus bill’s specific components — taxpayer money for condoms, new green cars and golf carts for federal bureaucrats, another round of rebate checks — its more dangerous consequences were overlooked. And now the package threatens a return to the kind of stagflation last seen in the 1970s.
 Be sure to check out the entire entertaining read from the future Vice-Presidential nominee of the GOP.


Anonymous said...

'This Time is Different' details why credit crises take a long time to resolve. The lack of inflation is probably a good indicator that all the stimulus is benign in the short term, but probably also ineffective.

The stimulus ( interest rates, QE, deficit spending ) is helping the wealthy and employed who have income in the first place and wealth to invest. It is not, evidently, increasing employment.

An aging society, automation, and global competition put the lower skilled and lower educated at particular risk. Stimulus is not changing any of these factors, so it may not be creating inflation but it may not be working, either.

Jeffrey Davis said...

I have no idea what is meant by "not ... increasing employment."

Employment has increased throughout the Obama presidency. Compare Obama's job numbers with GWB's.


1st term: 2,716,000
2nd term: -4,506,000


1st term: 3,350,000

So, over 4,000,000 more jobs than the Bush years. And that's with a Republican congress who have played obstructionist from the first second of his term in office.

Paul said...

Those are interesting and important job figures. Could you post a link to a source for them?
Paul Middents

Paul said...

Those are interesting and important job figures. Could you post a link to a source for them?
Paul Middents

Jeffrey Davis said...

Let me Google that for you:

Anonymous said...

Presidents don't have a lot to do with the economy - except to lead us to policy which might help avoid a credit crisis:

Adam Smith

Lotharsson said...

"It is not, evidently, increasing employment."

This claim keeps being made.

And yet the official analysis, IIRC, is that a few million jobs exist now that would not have existed without the stimulus.

Interestingly the claim is usually framed in such a way as to direct people away from that sort of analysis.

Gaz said...

For the doubters.

Check the top box (Total Nonfarm Employment), scroll down, click on "Retrieve data". You may have to change the date.

J Bowers said...

Interesting read, given Romney's latest.

Misconceptions and Realities About Who Pays Taxes

Hank Roberts said...

I do want to know where the gov't is getting the money to now start buying all those bundles of mortgage securities from the banks -- and, while that action pushes a lot of money (or "money"?) into the banks' hands (or "tentacles?"), thereby lowering their long term interest rate costs, the question from the NYT and others is why it hasn't pushed 30 year mortgage rates down at all.

They couldn't sell or spend their bundles of mortgage securities -- nobody trusted that stuff not to have hidden toxic waste.

Now, they've been able to sell that to the Fed, and been given money in return; the way the banks work as I understand it, they can lend out 5x as much as they actually have or something along those lines.

My question is -- isn't this inflation, in a compressed form that hasn't yet been able to balloon?

All those retirement savings that were based on projecting a 7 percent annual return -- are dead dust blown in the wind.

THat's not inflation?

What do we call it then?

a_ray_in_dilbert_space said...

Of course it's inflationary. It's printing money. That is why the dollar has gone from $1.2:1 euro to 1.3:1 euro and gold is currently trading near $1800/oz.

The thing is that pretty much every other nation is in the same boat. Inflation is how respectable nations repudiate their debts. Too bad for those of us who have been responsible and saved for retirement.

The problem, now, is all the promissory notes issued that are not valued in $,but rather in promises of support for life (e.g. social security, medicare, VA benefits...). Expect to see the gummint running, not walking away from those in the near future--no doubt with a fanfare that they are saving/improving the program.

This actually solves all of gummint's problems--the debt is wiped out, wages are lowered in real terms, people will not be able to retire at 55...or 65 and will continue to work and pay taxes into their 70s, reducing the burden on Social Security. Welcome to the Workers' Paradise.

It won't drop long-term interest rates though--not unless there are a lot of gullible investors who forget to factor inflation into their calculations.

EliRabett said...

Eli is a VERY old bunny, he remembers when a dollar an hour was a princely wage. Eli's burrow is a lot better today and he has inflation to thank for it:).

US inflation is well under European inflation btw

Hank Roberts said...

Speaking of stagflation (or not), is there any way we can chip in and pay PolicyLass's web hosting bill? I'd miss having her page around for reference and the fallback link doesn't work. And no 'contact' link seems available: