||"dawnbreak in the west"|
Wednesday, July 01, 2015
When this time is different - between you and me
A long while ago I was working out what the hell happened to this country whilst we in Houston were suffering through Hurricane Ike. Sometime in, I think, 2009 I bought Rogoff and Reinhart's classic This Time Is Different. For grins today I checked up on how this work's holding up. It turns out that, in 2010, some Keynesians at the so-called "EconoMonitor" had complained. In 2013, more Keynesians complained; this time with more force.
(I found all this at the EconoMonitor's blog, April 2013. Sort-of. The EconoMonitor blogpost is basically a linkfest with added abuse, snark, and slander; on account that its author felt that his crew'd adequately made their point years before. Anyway here I'll just be addressing the 2010 link.)
The 2010 conclusion:
When is the deficit too large? When it’s over 3%, 7%, 10%? Again, there is no magic number and anyone who comes up with a universal number simply misunderstands the modern monetary regime and macroeconomics. In opposition to magic, [Abba] Lerner proposed “functional finance”—the notion that the federal government’s budgetary outcome is of no consequence by itself, but rather, what is important is the economic effects of government spending and taxing. When total spending in the economy, including government spending, is more than what the economy is able to produce when employed at full capacity, the government should either lower its spending or raise taxes. A failure to do so will lead to inflation. So inflation is the true limit to government spending not lack of financing. Government debt is merely the result of government deficit and hence the same applies to debt as well.
Now: if, like Moldbug, you accept that government-issued "fiat" currency is equity - stock in Bank Of Diocletian - then inflation equals a slump in the stock's value. Hyper-inflation equals a crash. Unfeeling aliens and robots don't care about one country's stock any more than they care about stock in Chestnuts And Lugnuts, Amalgamated; people like that can just move their monies to better investments. But there do exist people who care about a country's stock. Those people are known as "citizens".
In 1923 Germany the guys who got screwed furthest up the ass were ethnic Germans who supported the Weimar government, and/or simple German patriots who didn't even care much about politics up to then (mostly veterans and retirees). Non-Germans weren't as badly affected, clearly. (You probably already know where I'm going with this...)
Rightly or wrongly, the local Jews got to being considered as non-German. There were certainly some cosmopolitans in Germany at the time who had cousins over in Poland or Austria, and were able to snap up some swell deals whilst the inflation was going on. So I'm told, anyway, by various guys who post at sites featuring the word "storm" in their letterhead. The German nationals back then got told the same thing, by the same kind of guys in the same kind of publications.
To sum up, I don't see why we're being so blasé about inflation. Inflation is failure. Hyperinflation is, as the kids call it, epic-failure. Back to Rogoff and Reinhart, it wasn't in their scope to explain what form such failure would take. Even if they "should" have speculated on this: I get to look forward to having my cash holdings evaporate, to general chaos, and then to having my neighbours blame me both for their own loss of property and for that general chaos. All this strikes me as being "bad".
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