Ineffective levers for inflation; Philip Lowe v Jerome Powell; modern monetary theory misconceptions; cricket analogy for Libs; US divide; Daniel Andrews’ Victoria.
opens with these lyrics, “There’s something happening here/ But what it is ain’t exactly clear”. In all the talk about inflation and the inability to tame it over the past 18 months, there’s much that “ain’t exactly clear”.
To manage inflation we need central bankers and government to apply effort on both levers in one clear direction; if we don’t improve labour supply the dreaded wage-price spiral could undermine real wages by itself.Can a song written in 1966 help us manage inflation in 2022? Maybe. Let’s stop and consider what’s really going down.The nature of the present “inflation beast” is unlike any that has come before.
Inflation in the US is already over the 8 per cent at which it is expected to peak in Australia. Both central banks failed to forecast the rise in inflation, although they could not be expected to have foreseen Russia’s attack on Ukraine. I’ve never advocated modern monetary theory as some kind of easy solution, just written about it as an interesting part of the economic conversation. But it’s completely wrong to say MMT proposes that “money could be created, almost at will, to fund government spending, without stimulating inflation”. In fact the truth is the exact opposite: MMT says that inflation is thetrue limit on government spending, since money can be, and is, created by governments all the time.
The irony of John F. Kennedy’s family background and his most famous speech has been lost in the propaganda Americans wallow in.
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