Economics and similar, for the sleep-deprived
A subtle change has been made to the comments links, so they no longer pop up. Does this in any way help with the problem about comments not appearing on permalinked posts, readers?
Update: seemingly not
Update: Oh yeah!
Thursday, September 02, 2010
Yes this is what I'm talking about
I think I am right here and Krugman & Rogoff are wrong! It's not "an inflation cure" or "two or three years of inflation". What is needed is a step-change shift in the price level. These are two distinct concepts - we want a change in P with constant dP/dT, not a change in dP/dT. This has the effect of a one-off windfall redistribution from nominal creditors to nominal debtors, a one-off increase in the ratio of collateral to credit. If anticipated, it would encourage an investment boom, as owners of nominal assets attempted to exchange them for real assets.
The reason why I'm insisting on this is not just anal retention, by the way - it's that several of the world's most important central banks have it written into their constitutions that they need to control inflation or target price stability. I think a good lawyer could make a case that a decision to target stability, but stability at a higher level would be consistent with the letter if not the spirit of these laws. Also, if you're going to change the constitution of the ECB, the aims of the Fed or the contract between HMT and the Bank of England to accomodate a more expansionary policy, making the change in terms of a step shift in the price level rather than a change in the inflation target means you only have to do it once.
this item posted by the management 9/02/2010 07:41:00 AM