Some people argue that too much liquidity can lead to greater boom-bust cycles.
Economics reminds me of Software Engineering a bit, where smart people on two sides can argue opposite cases and both sound reasonable!
Economics reminds me of Software Engineering a bit, where smart people on two sides can argue opposite cases and both sound reasonable!
Pet peeve: This is pretty valid for Macro Economics. Because it's an extremely difficult field.
Micro Economics is a solid hard science that has taught us many invaluable things!
Yes, maintaining and understanding large software systems is a process that's very hard to understand and control, despite basic Computer Science being very well understood.
> We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment.
* https://economics21.org/html/open-letter-ben-bernanke-287.ht...
A bunch of other folks (generally Keynesians, like Paul Krugman), said the above was non-sense.
The results of the 'experiment' came in: the Keynesians were right. See also "expansionary austerity".
In fact Krugman recently wrote an entire book on "zombie ideas": certain things that come up over and over again, often over several decades, but will not die; Arguing with Zombies:
* https://wwnorton.com/books/9781324005018
* https://www.theguardian.com/books/2020/may/03/arguing-with-z...
* https://www.theatlantic.com/magazine/archive/2020/01/review-...
There are correct answers. It's just that certain political classes find them 'inconvenient' (i.e., contradictory) to their ideologies.
There are of course complicated matters where things are open for debate. But some things have been settled.
In economics you’re right until suddenly you’re not. Same thing with people like Peter Schaffer who was constantly wrong until he wasn’t.
But all of this doesn’t make economics a science with undeniable rules as to how the system works.
Few thing HAVE to happen. That being said, much of human behavior is linear optimization, which is predictable if you know the rules (and they don't change).
Which is exactly what Keynesians were saying. The Monetarists said otherwise. Guess who was right?
> and in fact we’ve seen the prices of some things (real estate?) go up astronomically the past 13 years.
Those "things" which have risen in price does not count as inflation. It has never counted as inflation. There is a different word that should be used for that phenomenon:
* https://en.wikipedia.org/wiki/Economic_bubble
I do not understand why this is difficult to understand: inflation/CPI is the cost of goods and services that are used on a daily/weekly/monthly basis. Asset prices are not one of those things.
Please stop using "inflation" when it comes to asset prices, as it does not apply. It's like pointing to a Boeing 787 and saying "boat".
> In economics you’re right until suddenly you’re not.
In economics, at least "good" economics, there are models. These models describe reality: some models are better than others. We should follow the ones that make (more) accurate predictions.
Keynesian models (for example) had problems with stagflation in the early 1970s, but by 1978 most text books had explanation as to why the earlier models broke down, and why the phenomenon occurred in the first place:
* https://en.wikipedia.org/wiki/Stagflation#Neo-Keynesianism
Some folks' models said inflation would occur from money printing post-2008; others' models said it was not. One group was right, and the other was wrong.
Similarly: a bunch of folks are worried about inflation after the US Congress passed the $1.9T rescue plan, others are not. This is an(other) experiment in which some folks will be right, and others wrong.
Whose model best/better describes (economic) reality?
AFAICT, the Keynesians have been right more than any other school of though. I'm sure they may/will be wrong at some point, but hopefully something will be learned and models improved.
I’m sorry you’re homeless, but it technically doesn’t count as inflation!
Blaming inflation (or how inflation is calculated) for a societal problem is a distraction.
You can have a "correct" answer that's unknowable. Assuming you know everything, you can calculate everything. However, there is an amount of randomness in the system (and everything can't be known), so the 'right' answer is hard to know, will not always be correct, and is impacted by personal risk tolerances.