OLD1953 wrote:The market has gone insane, IMHO. The reaction to a stronger dollar, stocks fell. Reaction to low inflation, stocks fall. Good news for the USA is bad news for the stock market. WHERE do these people think they'll trade their stocks if the US goes bankrupt? Going from the evidence of the last ten years, if we had 100% unemployment, the dollar went to zero and we had total failures in every imaginable way, the market would recover to DOW 100,000 within six months.
David "Danny" Blanchflower,
former Monetary Policy Committee,
Interviewed by Tom Keene on bbtv, 12:04 pm, 5/13/2011
We saw some inflation numbers today. Those numbers have jumped
up a little bit, but we should say they're not in the 7% levels,
they're not in terrible levels right now.
But they've been driven by a jump in the oil price. Energy is
the main contributor, and the question down the road is, is there
going to be another hike in oil? Assuming that there isn't, then
these effects will drop out. The Fed is quite right to say that
these are transitory, and down the road the worry still is: deflation.
[Are you kidding me?]
I know. We look around the world and those transitory effects
-- you look at the UK and the transitory effects there -- if you just
take them out, strip the transitory effects out, you basically
have inflation around .7, with the real risk to go lower.
And if we see weeks like last week, when the oil price drops quickly,
there is still a danger. It's not central projection/prediction?, but
it's a danger.
[How can economists be so divided on this issue?]
They're right to worry that it could matter, but at this moment
it doesn't appear to. The reason why it might matter is if it
gets entrenched into expectations of inflation. Bernanke said
this week that it hasn't to this point. If it does, the Fed
would have to act. If wage rises, started to go up, they would
have to act. But to this moment, wages are the dog that
hasn't barked. There is no evidence here of wage growth.
Inflation expectations appear to be broadly anchored to the
target, so you shouldn't act.
The problem to this point is we have a long history going back into
the '70s, and the difficulty is to argue the position that I've
argued. The worry is that people look back, they have one data point,
they have one data point from the past, and they think that it's going
to repeat again. Paul De Grauwe, whom you've talked about many times,
calls it "the economics of the Maginot line." That's for the last
great crisis, not for this one.
John wrote:I transcribed the following interview because it relates predictions of inflation to the "Economics of the Maginot Line," which is a generational concept:
OLD1953 wrote:Amen to that. Especially in times when they act contrary to common sense almost exclusively.
Now, as far as the IMF bailing out anyone goes, this may slow that down, as it looks like they may have to pick a new chief executive.
http://hosted.ap.org/dynamic/stories/I/ ... TE=DEFAULT
Don't that snap yer garters!
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