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Well, I've been poor and I'm rich now, and I gotta say for me inflation meant my debts were getting smaller when I was poor, and now it means my bonds are earning 0% real return after tax. I want to know what the magic inflation proof instrument is (don't say TIPS, after tax they just tread water)

How long have we been teaching, even our intro students, that the long-run Phillips Curve is vertical? Even in the 80s, when I used to teach economics to journalists, I emphasized this.

Clearly it is time to require all journalists who write about economics to take (and pass!!) at least an intro course in it.

There's nothing wrong with proposing a coherent, contrarian viewpoint. But TorStar's readers deserve better than sloppy, anti-intellectual, rants.

Linda McQuaig has written more than one book on similar themes. Do you evaluate her the same way?

I haven't read the books, but from what I've seen, I'd guess that I would. If I did read them. But I won't.

However, her books are probably one of the easiest ways to understand where the Canadian left's critique of mainstream economics is coming from.

The guy is an econotard. He misrepresents the goals of the BofC because the BofC recognizes that low inflation is not an end in itself, but a means to promote the end goal of human welfare.

Readers would be better off reading Milton Friedman's Nobel Prize Paper to understand that it's about anticipated versus unanticipated inflation.


Yeah, but the Debullsion-Repfliffy augmentation of the Friedman-Lizt IS-LM paradigm clearly shows that at low levels of inflation, counter-vorticipal reductions in M's 1-3 produce deleterious transmogrifications of the unemployment rate.

Raising interests rates slows down the economy. A slower economy = more unemployment. Lower inflation benefits savers. Higher interest rates benefit savers. Modest levels of inflation don't have such a bad effect on low-income earners. Most are on fixed incomes that can be indexed.

I mean, you can dress it up with all sorts of rationalizations, but that's about it.

I'm a big fan of deleterious transmogrification, and I think that Liszt's symphonic poems are very relevant to this matter.

I guess I'm a few too many months late to teh party, but I've only just discovered this blog, so I guess I'll vent for my own amusement.

First off, both the Toronto Star author and the quoted economist, Seccareccia, seem to be stuck in a time warp from the pre-70's. I can't claim any knowledge of Canada's inflation and unemployment rates during this time, but I know that in the uS, and in the world in general, that both inflation and unemployment both went up dramatically when the US Fed tried what the author suggests, namely inflate the currency to screw the rich and help government out with social programs.

We had stagflation (rising inflation and unemployment), a word that didn't exist before this policy took effect. And Milton Friedman publicly, via his Newsweek column and no doubt elsewhere, predicted this never before seen phenomenon called stagflation before it happened. Also as near as I can figure, he was the only one out there predicting it and was scoffed at by the illustrious economics profession for his obvious ignorance/disdain (your pick) of the Philips Curve.

Inflation's employment and GDP raising effect is all about greater inflation than expected. The disinflationary effect of rising unemployment and falling GDP is due to "everyone" realizing via prices that there was no real increase in demand for their products. In other words, the "beneficial" effects of inflation are a short term phenomenon, and must always be followed by increased unemployment after the decrease. Either that or the government can keep trying to raise inflation more than expected, and carried to its logical conclusion you will eventually get hyperinflation but without any decreased unemployment effect.

Re: rich vs poor getting hurt by inflation.

First of all, see the above. Anyone who loses their job due to the disinflation gets hurt. Sounds like "the little guy" to me.

Second, inflation does not hurt savers at the expense of borrowers. It hurts those who lend, which is another matter entirely, usually consisting of the elderly who can't afford the variance of stocks, and of the poor who can't, or for whatever reason won't, put their limited money in stocks, probably because they would smply have to sell their stocks within a week to pay for food and rent.

Third, once disinflation sets in anyone who borrowed money at the interest rate top and locked in that high nominal interest rate gets royally screwed, while those who lend at that top rate and lock in that rate for an extended period of time get a nice juicy return when nominal interests rates fall again.

Finally, I don't honestly know what the market for baseball cards is, especially in Canada, but the author of the article seems to think that inflation would hurt the owners of such "assets". Based on what happened to collectibles such as stamps and coins in the uS during the 70's, and in the wake of disinflation aftwerwards, such collectibles would, if anything, be more likely to increase in price than decrease. This occurred as people tried to move into "real" assets and away from sucker vehicles like bank accounts and cash.

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