Wayne Swan is in the AFR this morning ($) claiming credit for the low inflation rate.
The inflation numbers on Wednesday were another reminder that our economic fundamentals are in very good shape, by either international or historical standards.
Both headline and underlying inflation printed at their lowest levels in 13 years, with the underlying rate of 2 per cent over the year at the bottom of the Reserve Bank of Australia’s target band.
It’s widely accepted that the federal budget’s call on the economy has an impact on inflation. For example, there’s widespread acceptance now that lax fiscal policy towards the end of the previous government was in part responsible for high inflation, leading to 10 rate rises on the trot.
One factor helping contain inflation at present – and hence recent interest rate cuts – is the government’s strict budget discipline.
Stop sniggering – last time I checked the accumulated deficits under Swan’s treasurership were over $150 billion, by contrast Peter Costello had accumulated surpluses of almost $100 billion.
Something else very important has happened to inflation – the underlying weights got changed and some definitions too. While many readers might give up at this point it is an important story to tell – largely because Malcolm Turnbull was trying to tell the story at the time. Unfortunately I haven’t been able to track down the original source but here is the gist from a Peter Martin piece in 2008.
Mr Turnbull had argued that the costs of housing and financial services should be excluded from the Bank’s calculations of inflation because higher interest rates would only push them up.
Without mentioning the Coalition Spokesman by name the [RBA] Governor [Glenn Stevens] said that some Australians had argued that monetary policy in fact “makes the problem worse by actually raising prices”.
So let’s have a look at what Stevens’ said about financial services (emphasis added).
Suppose, though, that we did take out some of the ‘special factors’ that people nominate. Let’s, for the sake of argument, remove from the CPI rents and petrol, as well as the calculation of deposits and loan facilities. If we do that, the rate of inflation of the remaining items over the year to December 2007 is 2.1 per cent. No problem, right? Well, not exactly.
He then goes on to talk about being consistent and banana prices and stuff. That speech was given on March 11 2008 and the most recent annual CPI inflation rate figure was 3.3 percent the December 2007 quarter. Now I don’t know the relative contributions of rents, petrol and deposit and loans facilities to the CPI figures in 2008 but I do know the weights they contributed. Rent was 5.2 percent, Fuel was 3.79 percent and Deposit and Loan Facilities 4.47 percent.
So keep an eye on that Deposit and Loan Facilities number.
Every few years the ABS update the weights in the CPI calculation. The last change occurred at the September 2011 quarter (16th series). The previous change had occurred at the September 2005 quarter (15th series). So what I did was graph the inflation rate from June 2000 through to June 2012. That period of time encapsulates the entire series 14, series 15 and now the beginning of series 16. The series 15 data are shown in red.
At the beginning of the series we have the GST spike then a period of calm, then a huge amount of volatility and now falling inflation. I’m sure there are a lot of things going on in there but there is also this:
Volatility in the index during the global financial crisis (GFC) prompted concerns from users about the behaviour of the index. Recent experience has shown that movements in the index are highly sensitive to the detailed level of data available from financial institutions. The behaviour of related indexes during periods of heightened financial market volatility prompted a broader international debate surrounding the measurement of FISIM [financial intermediation services indirectly measured].
…The concerns voiced in the review primarily related to the indirect fees component
of the Deposit and loan facilities index. Some of the concerns raised by users were:
- the weight assigned to Deposit and loan facilities and the consequent impact of the index on the All groups CPI;
- the volatility of the Deposit and loan facilities index, and whether this volatility is representative of indirectly measured financial service prices;
- the correlation between changes in the official cash rate target and the Deposit and loan facilities index, and whether this correlation is representative of indirectly measured financial service prices;
- the Deposit and loan facilities index sampling methodology;
- the treatment of products with fixed interest rates;
- the lack of international comparability;
- a perceived lack of transparency due to difficulties experienced in replicating the Deposit and loan facilities index, and difficulties explaining movements in the index;
- the best way to calculate the reference rate;
- the quality/robustness of the underlying data;
- the complexity of the calculation method; and
- the impact of changes in wholesale funding costs on the Deposit and loan facilities index calculation.
So a very dodgy number was adding a lot of volatility to the inflation data – in particular “the correlation between changes in the official cash rate target and the Deposit and loan facilities index” was a concern. So every time the RBA raised rates it had the effect of raising measured CPI. More or less what Malcolm Turnbull had said at the time and everyone else pooh-poohed.
So what has happened to the weights? Financial and Insurance Services have declined from 9.31 percent to 5.08 percent overall. Deposit and loan facilities has declined from 4.47 percent to 0.76 percent and only direct costs are included with indirect costs excluded.
I don’t know if it is possible to retrofit the CPI for September 2005 through September 2011 using the series 16 weights but that could tell an very interesting story about the political surrounding recent economic history.
Update: Noodle emails to remind me that Turnbull was also arguing that the increase in interest rate spreads during the GFC were also adding to measured inflation via the Deposit and loan facilities figure.
Wayne Swan on inflation:
http://www.youtube.com/watch?v=PtEyAe1QqCg
C.L.
27 Jul 12 at 11:01 am
Not to worry, the inflation rate will soon be back up, courtesy of that monumental ‘economic reform’, the carbon dioxide tax…
Rabz
27 Jul 12 at 11:13 am
Oh good. I’ve been waiting for a post on the inflation rate, so I could mention that we are at the anniversary of a certain stagflation warning via Catallaxy, The Drum and Andrew Bolt, too.
That’s what I call snigger-worthy.
steve from brisbane
27 Jul 12 at 11:15 am
Why is it that swan always looks like he has just soiled himself.
Carpe Jugulum
27 Jul 12 at 11:16 am
Steve – snigger as much as you like; unemployment is up, confidence is down, and the government on their way out. You know the Reagan joke – when do you know its a recovery? When
Jimmy Carterwayne Swan loses his job.Sinclair Davidson
27 Jul 12 at 11:19 am
It’s not stagflation, it’s just the economy is tanking and the dollar is high.
Totally fucking different.
wreckage
27 Jul 12 at 11:49 am
It’s cute when Steve discusses economics. A bit like a dog discussing penmanship.
Infidel Tiger
27 Jul 12 at 12:06 pm
It’s a bloody awful mess at the moment, that’s what. Curbs on investment and management, falling employment, company closures, a housing stall, a three speed economy (yours, mine and the other guy’s), a resources boom yet to bust, a high dollar and pressures on the cost of living from a range of factors including various of Labor’s great ideas and the air tax. We’re welfared up, warfared down, (the army is full of girls and the navy a water taxi), the kids are diseducated and nana’s hip is out and staying out, so we’re bottomed out in hope, and restless, restless, restless for a change. No-one can agree on the numbers and the composition of them is often curly and spun. I listen in the supermarket queues and the comments are ugly.
Elizabeth (Lizzie) B.
27 Jul 12 at 12:12 pm
What an excellent comment, Lizzie especially this:
Gab
27 Jul 12 at 12:14 pm
Stepford:
As Tiny Dancer would say.. “There’s a pile of ironing waiting and your husband is coming home from work early expecting your chores to have been done”. Chop chop.
JC
27 Jul 12 at 12:15 pm
Sinclair, confidence is down (on my reckoning) based on two major factors:
* concern and uncertainty as to what is happening in Europe (a matter genuinely not within any Australians control) and
* over-inflated concern about the effects of the carbon “tax” on the Australian economy, and the voter’s hip pocket, with such concern being given a flogging every day by the Coalition and right wing commentators – and this blog, of course – for essentially political purposes.
As with prominent climate change skeptics who claim “oh look, government, public belief in AGW is tanking” without acknowledging their own role in promoting bad arguments against the science, I would find any bemoaning of low public confidence from this blog a tad disingenuous, to say the least.
steve from brisbane
27 Jul 12 at 12:20 pm
LOL SFB is towing the Wayne Swan line like the good little Labor lapdog he is:
“Hey everyone, just be happy, it’s all good, trust me, I’m the World’s Greatest Treasurer”.
Gab
27 Jul 12 at 12:24 pm
I don’t know what you’re talking about Sinc.
Weren’t you aware that Liebore saved us from the GFC?
And it only cost $300 odd billion.
We’re the envy of other nashuns.
They’d probably each pay us $300 billion to have Swannie for themselves.
JamesK
27 Jul 12 at 12:25 pm
Steve is saying that Swan just needs some Clear Air.
C.L.
27 Jul 12 at 12:27 pm
Steve – winners are grinners … As for the substance of your comment; doesn’t it worry you that a single blog run by amateurs and volunteers can bring down a government with the entire resources of the ABC and federal bureaucracy. I don’t believe it either.
Sinclair Davidson
27 Jul 12 at 12:27 pm
That’s why they call you the mighty Doomlord!
Gab
27 Jul 12 at 12:29 pm
Steve, there are your views, and then there is reality. Never the twain seem to meet, IMHO.
Confidence is down because of our own economy and government, additionally to world factors which people know will impact on us badly while we have a bad government. You think people are stupid, can’t make their own judgements and are guided by spin (typical Labor view, actually). The facts say otherwise.
Get thee to a supermarket, Stepford.
Elizabeth (Lizzie) B.
27 Jul 12 at 12:30 pm
I don’t blame this blog entirely – I hold Tony Abbott, Andrew Bolt, New Limited and a bunch of right wing radio stations to a higher degree.
It is, of course, not just me saying this:
steve from brisbane
27 Jul 12 at 12:32 pm
Speaking truth to power, Stepford.
FFS anyone taking Shane Wand seriously about anything ought to be committed to an institution for the mentally insane as they are a danger both to themselves and the general public. Wand is perhaps worse than the lying Slapper in every way.
JC
27 Jul 12 at 12:34 pm
Do you honestly think any of them gives a shit?
Rabz
27 Jul 12 at 12:36 pm
Lift your game people. We demand 100% credit.
Infidel Tiger
27 Jul 12 at 12:37 pm
Lizzie, I lived in Queensland under the long reign of Bjelke Peterson, when obvious corruption and “deserve to go”-ness of the government was obvious for at least the last two terms.
I also have no problem with a similar argument for the last couple of terms for NSW Labor.
It is undoubtedly possible that a majority of people can make political judgements that are – shall we say – unwise, and not well founded.
We are currently such a state, where the views of a minority of economists, like Sinclair, are getting a run they don’t deserve.
steve from brisbane
27 Jul 12 at 12:38 pm
Well, in Mandy Rice-Davis’s immortal words, ‘he would say that, wouldn’t he?’
Elizabeth (Lizzie) B.
27 Jul 12 at 12:38 pm
– SFB the world famous economist, 2012.
Get back to you polishing, SFB.
LOL
Gab
27 Jul 12 at 12:43 pm
Stepford, you ignoramus twat. Stevens is not going to talk the economy down in a ‘vironment where it’s experienced the best terms of trade in 150 years.
Expand your thinking horizons a little, you moron. We’ve gone through the most significant commodity boom in history and people are grumpy and upset about the direction of the economy.
Why?
Jobs aren’t exactly in over-supply mode despite the backdrop, mainly brought on by choking over-regulation of the labor markets.
Cost of living pressures are going up and up despite a massively appreciated Australian dollar compared to only a few years ago.
And lastly we’re $200 billion in debt with shit to show for it and that little prick keeps raising all sorts of taxes like da tax on da carbin and fucking over the miners for their success.
If that little piece of shit wants to know why the economy is fucked and people are feeling unsteady all he needs to do is look in the mirror to see why. However I doubt the little turd would get a reflection.
JC
27 Jul 12 at 12:43 pm
Nor me Steve, except i have no time for anything Labor has done since the 2007 and before, and I certainly didn’t vote for them then, knowing the falsity of Rudd Lite, having once been a committed True Believer and having seen some of the results with open eyes in the New Millenium (and even before that I was awakening).
OK Coach. Give us the game plan.
Elizabeth (Lizzie) B.
27 Jul 12 at 12:46 pm
You’d know wouldn’t you?
LOl
PMI in May showed a contraction potential that was actually deeper than Spain or Italy. In fact it was even lower than the EU average. This is staggering and very concerning.
June PMI rose only a little but it was again at contraction.
This a key forward looking indicator which trends almost 1:1 with future GDP.
In other words the economy appears to be sagging and in the doldrums. People’s pessimism is caused by that because at this stage the majority of people are working in the private sector and the see an obvious slowing.
This isn’t caused by economic factors, but pure policy mismanagement.
Lastly, you’re a dickhead.
JC
27 Jul 12 at 12:50 pm
The thought of Swan as PM does my head in. He does not understand the words he utters.
Mother G
27 Jul 12 at 12:54 pm
Here, this is what people are worried about and what Stevens should have also addressed.
I can’t expect Shane Wand to address it because the little prick wouldn’t understand it for a start and even if he did, would lie about it.
JC
27 Jul 12 at 12:56 pm
Your kidding. It would be freaking great. In fact it would be a riot. I don’t think politics in the country would ever have been as funny.
JC
27 Jul 12 at 12:58 pm
I forgot to mention in my list of reasons for low confidence: the high Australian dollar and its effect on various industries.
Again, as far as I know, this is a matter not within much sphere of influence by this government, but the public at large is not good at noting this.
steve from brisbane
27 Jul 12 at 1:02 pm
LOL, thanks for that.
It is not Sinclair “getting a run”, it is the vacuous and empty platitudes of Keynesian running its course as the damages those government interventions hit the economy.
Token
27 Jul 12 at 1:06 pm
“The thought of Swan as PM does my head in. He does not understand the words he utters.”
If Mr Swan becomes PM, my guess is K. Rudd wpuld resign within a few weeks.
candy
27 Jul 12 at 1:14 pm
I just saw the office electricity bill and back of envelope calculation shows the carbon tax impost increased the bill by 15% for this quarter.
Louis Hissink
27 Jul 12 at 1:15 pm
Actually, you didn’t “forget” to mention it, you lying asshat. I raised it and that reminded you to try and curve ball it. But it doesn’t work.
Several I-banks place what is known as “fair-value” for the Australian dollar at around 83ish cents. It never went higher than 90 cents even at the top of the commodity up cycle.
That’s what the estimated value of the Australian dollar would be if it wasn’t buffeted by policy mismanagement where we’ve seen $40 billion deficits annually (with the exception of one year in this government’s first term of office).
We didn’t need to have such heavy duty counter cyclical pressure on the exchange rate brought on by the little prick’s shit awful woeful policies.
1.The highest real rates in the western world in order to fund the appalling government deficit,
2.combined with a resources boom,
3.a labor market unable to adjust due to choking regulation,
4.monthly PMI dropping like a stone
and you fucking wonder why the voters are uncertain?
Stepford, are you fully retarded?
Yes they are. Stepford, you went to a rural TAFE. Don’t talk as though you know about this and the rest of us don’t. It simply doesn’t hold water.
JC
27 Jul 12 at 1:21 pm
JC: I am not familiar many of the economic terms you use, but it hardly matters, since your continual over the top commentary on anything done by Labor means I do not consider you a reliable commentator on matters economic when they have a political aspect to them.
steve from brisbane
27 Jul 12 at 1:30 pm
Look up deficit.
Infidel Tiger
27 Jul 12 at 1:31 pm
If you’re not familiar with even these most basic terms then why the fuck are you discussing anything to do with economics, you bolivating useless pansy?
Get the fuck off this thread and stop wasting people’s time you spammer.
JC
27 Jul 12 at 1:32 pm
JC, you will, of course, find that I am no different to the majority of people who comment here.
I can, however, form views by reading a range of economic commentary and developing a sense of who appears reliable and to be making reasonable arguments.
steve from brisbane
27 Jul 12 at 1:37 pm
Steve, do you agree with Swan that Greens economic costings must be kept secret from voters?
C.L.
27 Jul 12 at 1:38 pm
ahahahahahaha.
Yet you admit having no idea about the meaning of economic terms. LOL. You’re Swan’s little handmaiden.
Gab
27 Jul 12 at 1:42 pm
Phil Coorey?
C.L.
27 Jul 12 at 1:43 pm
Having just read about it now, I still officially have “no opinion” about it, CL.
steve from brisbane
27 Jul 12 at 1:45 pm
No I don’t and yes you msot certainly are different. People that comment here are for the most part are well educated. More than that they also seem to display a great deal of savvy nous and cynicism. You’ve never displayed any of these attributes nor are you well edcuated and consequently vastly different to “the majority of people who comment here”.
Well how can you when you admitted in the previous comments that you’re unfamiliar with even the most basic terms like “deficit”?
JC
27 Jul 12 at 1:45 pm
Oh yea, he reads bald galoot, fabulous Phil Coorey. The only man standing (bald) even at Fairfax who thinks the Alliance will win an historic landslide at the next election.
JC
27 Jul 12 at 1:47 pm
CL: I have been saying at my blog for some time that Colebatch appears to me to the pick of current economics writers in Australia. Kohler, who to my surprise even Sinclair said recently is generally sound, seems pretty good too.
steve from brisbane
27 Jul 12 at 1:49 pm
Fair dinkum, that’ll be hard to top for stupidest comment this year.
Infidel Tiger
27 Jul 12 at 1:52 pm
JC, you’re on one of your misrepresentational sprees again, like Jarrah was complaining about yesterday, so I can’t be bothered responding.
Gab, I think you were saying you were going to educate yourself about economics by reading Kate’s book? I don’t need to know much about economics to guess that a man so obsessed with interpretation of Says Law in the history of economics is, well, not a source I would consider reliable.
steve from brisbane
27 Jul 12 at 1:54 pm
Well that settles it then. I mean, if stepford has mentioned it on his blog. It’s official.
Moron.
JC
27 Jul 12 at 1:55 pm
Steve, you and Jessica Irvine should enroll in an economics course. It would help both of you.
Infidel Tiger
27 Jul 12 at 1:57 pm
Oh yes, I’ve been noticing that the Bobsey twins have been tag teaming of late. (jazzabelle and stepford)
Stepford, Jazzabelle bobsey thinks the US healthcare system is worse than Albania’s.
JC
27 Jul 12 at 1:58 pm
You wouldn’t know what Say’s Law was if it jumped up and bit you on the nose.
And it’s Say’s Law, not ‘Says Law’.
Gab
27 Jul 12 at 1:59 pm
So bloody true!
Nanuestalker
27 Jul 12 at 2:05 pm
Yes Gab, stepford might not know what it is, but he knows it is evil. That wise Mr Keynes said so…Come to think of it, that pretty much describes anyone who has finished their education in economics with a 1st year macro course.
Skuter
27 Jul 12 at 2:05 pm
And for God’s sake Colebatch??? Personally, I think most Australian economics commentators are rubbish (those in the mainstream media anyway). I love Oliver Marc Hartwich and Stutch used to be pretty good, although I haven’t heard much from him since he went behind the fairfax paywall…
Skuter
27 Jul 12 at 2:08 pm
Lol.
JC
27 Jul 12 at 2:09 pm
And it’s Kates, SFB, not Kate’s.
Gab
27 Jul 12 at 2:10 pm
Grammar. It’s the difference between knowing your shit and knowing you’re shit…eh stepford?
Skuter
27 Jul 12 at 2:13 pm
Australian confidence rides on the back of residential real estate.
Outside mining boom influences in Perth, it’s been rooted for 4 years in regional coastal NSW.
Alfonso
27 Jul 12 at 2:14 pm
Gab has become a Say’s Law zombie, by the sounds.
By the way, economics is a pretty dull field generally speaking. I only come here because of how obviously wrong everyone is on it.
steve from brisbane
27 Jul 12 at 2:15 pm
Obviously. You fool.
You have self awareness on the same level as Shane Wand…
Skuter
27 Jul 12 at 2:18 pm
Economists are hot. That’s all I’m sayin’.
Gab
27 Jul 12 at 2:20 pm
You are a wise woman, Gabrielle!
Rabz
27 Jul 12 at 2:33 pm
FWIW, next week the ABS will release its latest “Analytical Living Cost Indexes for Selected Australian Household Types.”
“This publication presents analytical living cost indexes for selected Australian household types. These price indexes are designed specifically to measure the impact of changes in prices on the out-of-pocket living costs experienced by four household types: Employee households; Age pensioner households; Other government transfer recipient households; Self-funded retiree households.”
Capitalist Piggy
27 Jul 12 at 2:39 pm
So Gab’s the aging groupie spotted outside of economics conferences holding up the placard “Say’s Law says I’m available”.* Now I know.
* Only for dinner, I’m sure, Gab.
steve from brisbane
27 Jul 12 at 2:40 pm
Not the Keynesian variety though, Rabz. They’re just acolytes of Big Government.
Gab
27 Jul 12 at 2:41 pm
You’ve got the gist of Say’s Law, SFB, by accident I;m sure.
Gab
27 Jul 12 at 2:47 pm
The inflation Swan is most familiar with the inflation of his career way beyond his level of incompetence.
The Peter principle is that people get promoted to their level of incompetence.
The Wayne principle is that some people get promoted way beyond their level of incompetence.
John Comnenus
27 Jul 12 at 3:25 pm
If only the bar babes in the Rag and Famish thought the same!
.
27 Jul 12 at 3:26 pm
Dot, tell them you’re an architect, or a chef.
Capitalist Piggy
27 Jul 12 at 3:48 pm
Or masochism. But mostly masochism.
wreckage
27 Jul 12 at 5:06 pm
The Child Bride needs a new kitchen and bathroom. We also need a new car.
Neither is happening until TA chucks the Lying Slapper out of the front gate of the Lodge, because she is only going to fuck everything up even more.
It’s called consumer confidence, SfB.
Winston Smith
27 Jul 12 at 5:23 pm
Winston, the point is, there are actually not a lot of economists around saying that “everything is f**ked up”.
Your attitude, is, of course, making it a self-fulfilling prophecy that small businesses are suffering when you delay getting them to do this work that you can afford on the grounds that you don’t like the hair colour of the Prime Minister.
steve from brisbane
27 Jul 12 at 5:45 pm
There are however numerous economists saying that:
1. the forward indicators are simply awful
2. the policy mix is wrong.
Ignoramus, Shane Wand referred to himself as a follower of Keynes. You may then want to ask the little prick why he was running budget deficits of 4% of GDP in a period when our terms of trade were at 150 year peaks. The reason you should ask the dishonest little prick is that Keynes would have been telling him to run surpluses during this period.
Now for an asshat who says he has little understanding of economics, why are you posting so many comments on this thread?
Seriously, go away as you have no business being here.
JC
27 Jul 12 at 5:51 pm
Swan might fit the mold as Keynes as a failure but why he would have the same self aggrandising tendencies is beyond me:
http://www.zerohedge.com/news/guest-post-why-listen-keynes-first-place
.
27 Jul 12 at 6:31 pm
Now that Glenn Stevens has spoken on the Australian economy it is obvious we are totally fucked. On the grounds that “it isn’t true until it has been officially denied”.
Where on Earth did they get those inflation figures from? Subcontracted to the Chinese Government statistician?
Electricity, water and government charges would have put up most people’s cost of living by 5% or more in the last year.
Eyrie
27 Jul 12 at 6:44 pm
The workforce is being more casualised and people’s hours are being reduced and just stuffed around. I don’t think you see this in the statistics but it is a big headache for people.Perhaps the workforce was always going to go this way, i don’t pretend to understand economics, but it’s not much chop is it.
candy
27 Jul 12 at 7:01 pm
Shit for Brains, have you been sniffing bleach again?
That would be the most bizarre reply I’ve seen in a long time.
I’m not talking about economists confidence, the term I supplied was consumer confidence.
Now there certainly would be a subset of ‘economists’ and ‘consumers’ who are called economist consumers, but I thought I made it quite clear I was talking about ‘consumer confidence’
And what’s this about hair colour, for Gods sake?
Winston Smith
27 Jul 12 at 7:09 pm
Are you running for Miss Teen USA Steve?
http://www.youtube.com/watch?v=lj3iNxZ8Dww
.
27 Jul 12 at 7:12 pm
If you were any more economically illiterate you wouldn’t be able to spell “economically”.
wreckage
27 Jul 12 at 7:25 pm
World class bullshit here from the guy who reckons economics is boring, everyone is wrong and Say’s law must be rubbish. Fuck me. Now the attitude of one man causes the business cycle. Genius. Stevo, please don’t ever go anywhere. Your beclowning of yourself brightens my day.
Skuter
27 Jul 12 at 10:56 pm
Say’s law is irrelevant.
sdfc
28 Jul 12 at 12:35 am
Why is it irrelevant, sdfc? Genuine question.
Jarrah
28 Jul 12 at 1:23 am
Idiot.
.
28 Jul 12 at 12:51 pm
Good one SfB. Of course, that’s exactly what happened when the unions spent a mozza on misleading advertising about Work Choices in 2007, and the luvvie media just went along with it. We now have pre Hawke-Keating rules again so the unions can screw everyone over and live on to control the ALP for much longer instead of continuing on the de-fanged and marginalised downward spiral they were in before.
That (and an accident prone executive government) is why business is going into a do-nothing, low profile, risk averse mode. They’ll stay that way until the next big wave of anyone-but-greens-and labor voting washes over the decks and cleans house.
blogstrop
28 Jul 12 at 1:05 pm
Jarrah
Genuine enquiry is a rarity on this site as you know.
Say’s Law is a tauology in terms of the long run being a commodities-money-commodities framework.
However as we are dealing with a money-commodities-money economy where the current problems are borne of monetary disturbances Say’s Law is indeed irrelevant in analysing the current crisis.
Dot
Anyone who thinks negative real interest rates and deflation can go hand in hand should probably abstain from participating in economic discussions.
sdfc
28 Jul 12 at 11:47 pm
So you’re adding to that by being here?
Yes it is a tautology however not recognizing the importance of the supply side is to stick your head in the sand. It’s actually attempting to refute micro-economic reform.
JC
28 Jul 12 at 11:51 pm
JC
The current problems are monetary. Micro reform is important however reforming economies via deflationary policies is the road to disaster.
sdfc
28 Jul 12 at 11:56 pm
Spot on, sfdc.
Gab
28 Jul 12 at 11:57 pm
You’ve changed the subject, sdfc.
The topic you responded to was Says Law and bullshit that people aren’t debating at a high cognitive level you desire despite the fact that your here often.
You now want to talk about monetary problems.
This is silly. It’s obvious that say southern Europe required quite drastic micro-reforms (supply side) as well as monetary easing. The US does too as a result of the current administration’s supply side shock.
You obviously disagree. It doesn’t surprise.
JC
29 Jul 12 at 12:06 am
JC
Do you ever read before you respond? Say’s Law is irrelevant because the most pressing current problems are monetary in nature.
Deflation will increase the debt burden on the PIIGS.
The US is also suffering the after effects of a debt binge. How will raising taxes or cutting government transfer payments improve the situation? Seeing as it will cut household income.
sdfc
29 Jul 12 at 12:12 am
You changed the subject, sdfc, you dolt.
Is that why the ECB demanded and continues to demand material micro-economic reforms (supply side reforms) in the PIIG countries before they committed to and continue to commit to monetary intervention and tacit support for bailouts?
Stop talking garbage.
Yes. What’s the point of repeating this?
The US needs two things. It needs drastic supply side reforms (Says law-like reforms) by enacting a bi-partisan healthcare plan, major tax reform, debt reduction and the repeal of Dodd Frank (replaced with market friendly reforms which does away with TBTF) major social security reform and finally it needs to scrap Sarbanes Oxley. On the macro-side, the Fed needs to QE and inform the market that it will keep the inflation rate (preferably the deflator) at no less than 2% from here on.
Get those things going and you will see 4% growth.
JC
29 Jul 12 at 12:34 am