March for Occupy Boston

Take a gander at my photos from the 10/15/11 march in Boston in support of Occupy Boston. Samples below.

Another Inflation Hawk Argues for a Higher Inflation Target

Economist Kenneth Rogoff, no liberal, is arguing for a higher inflation target:

If the Federal Reserve raises its target inflation rate by several percentage points - up from around 2 percent, where it’s been for the past decade, to somewhere in the neighborhood of 4 to 6 percent - and injects new money into the economy until it gets there, then debtors will get some relief and the wheels of the economy will once again start to turn.

One of the biggest propaganda victories of the 20th century was convincing the middle class that inflation is the worst possible thing that can happen to them. High inflation sucks, to be sure, but people tend to forget that inflation also reduces the real value of one's debts.

We also hear a lot about the "elderly who live on a fixed income." Except that most elderly people depend on Social Security for the bulk of their income, and SS is inflation-protected via COLAs.

However, there is one class of people for whom inflation is in every and all cases an unmitigated disaster: bondholders, a.k.a. the owning class. These are the folks who make money from money. As Rogoff, an inflation hawk, notes, tolerating higher inflation will result in a transfer of income from financiers to workers, (or as he puts it in less class-war terms: from creditors to debtors). That's exactly right. All economic policy is a question of the distribution of income.

Hyperinflation, Chuck? Really?

Via Bleeding Heartland, Iowa Senator Chuck Grassley tells the Des Moines Register that he feels that Fed Chairman Ben Bernanke has been too soft on inflation:

“I’m waiting to see what he says about the fight against inflation,” Grassley said about Bernanke. “And I think we’re in for hyper inflation in a couple years like we had in ‘79 and ‘80, if something isn’t done about it and I’d like to see something.”

This is just bizarre beyond belief. Worrying about "hyperinflation"  when the number of unemployed Americans has doubled in the last two years, is, in a word, goofy.

It's like worrying about the water damage while you're trying to put out a house fire.

It's like thinking about a new layer of shingles while the foundation of your house is crumbling into the ground.

It's like — No, wait. These ho-hum "house similes" just don't quite capture the utter wackiness of Grassley's statement.

How about this: Worrying about hyperinflation now, after two years of the worst economic downturn since the Great Depression, is like worrying that a flock of crazed Canada geese is going to swoop down into Iowa from Minnesota to commandeer all the corn harvesters within a 20-mile radius of Ottumwa, after which this honking gang of super-intelligent goose-fiends organize a mechanized corn harvester batallion to lay waste and destruction to the central Iowa counties of Jasper, Poweshiek, and Story. Could it conceivably happen? Well sure, anything is possible, I suppose. But the chances are so small that worrying about it for even one second would be a waste of time.

I think Grassley tipped his hand when he used the term "hyper inflation." It's so over-the-top that it can't be based on any real, non-ideological analysis of the situation. It sounds to me like a poll-tested scare word, just like his twirl around the dance floor last summer with "death panels."

My well-thumbed copy of The Penguin Dictionary of Economics (Seventh Edition) defines Hyperinflation as follows:

"Very rapid growth in the rate of inflation in which money loses its value to the point where alternative mediums of exchange (e.g. barter or foreign currency) are commonly used." (Italics added.)

Somebody back in my home state needs to hold Grassley accountable for using language like "hyperinflation." Any Iowans out there who want write a letter to the editor? All you'd have to do is quote the definition of hyperinflation I gave above and then ask if Grassley is afraid we will have to start stocking up on gasoline, cooking oil, flour, and Canadian loonies.

What has happened to the cardigan'ed senior Senator from the Great State of Iowa? First death panels, now hyperinflation. The guy used to be kind of a statesman.

Image: 5 Billion Reichsmark Note, Germany, 1928, uploaded to flickr by Adam Crowe and used here via a Creative Commons license.