Look: I am eager to learn stuff I don't know--which requires actively courting and posting smart disagreement.

But as you will understand, I don't like to post things that mischaracterize and are aimed to mislead.

-- Brad Delong

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Everything that appears on this blog is the copyrighted property of somebody. Often, but not always, that somebody is me. For things that are not mine, I either have obtained permission, or claim fair use. Feel free to quote me, but attribute, please. My photos and poetry are dear to my heart, and may not be used without permission. Ditto, my other intellectual property, such as charts and graphs. I'm probably willing to share. Let's talk. Violators will be damned for all eternity to the circle of hell populated by Rosanne Barr, Mrs Miller [look her up], and trombonists who are unable play in tune. You cannot possibly imagine the agony. If you have a question, email me: jazzbumpa@gmail.com. I'll answer when I feel like it. Cheers!

Tuesday, November 5, 2013

Inflationary Derp

Once again, Krugman takes on the inflationistas, aka your typical derpy Republicans.  Their tired story goes this way:

Vice Chair Yellen will continue the destructive and inflationary policy of pouring billions of newly printed money every month into our economy, and artificially holding interest rates to near zero. This policy has been in place far too long.

Of course, it's nonsense.

PK shows this from FRED, here as graph 1.

Graph 1 - Monetary Base and Inflation since 2009

Sure, enough, a big, big change in Money and a pretty flat non-response in Inflation.

But this is only short term, since the Great Recession [GR].  Lets take a longer view in Graph 2, using the same FRED database.  Here the two data sets are on opposite axes, to let Inflation more visibly inflate.

Graph 2 - Monetary Base and Inflation since 1970

Aside from the Great Inflation Dragon, ca.1980, it's been a rather steady and featureless climb for Inflation up until the GR wiggle.  The Monetary Base had a slightly faster than linear rise, until the three recent big steps up.  

PK's point, then, is well taken.  Let's look at it a different way.  Here in Graph 3 is Inflation as a function of the Monetary Base.

Graph 3 - Inflation vs the Monetary Base, 1970 on

Pretty dramatic.  In the past, it would have seemed that increasing the Monetary Base correlated with rising Inflation. Suddenly, though, when the GR arrived, that stopped and stayed stopped.   More likely, though, both variables just trended up over time, each for its own reasons.

Here is the same graph, with the GR truncated.

Graph 4 - Inflation vs the Monetary Base, 1970 through 2007

But if you look at annual changes, a somewhat different picture emerges, as seen in Graph 5.

Graph 5 - Inflation vs the Monetary Base, Annual % Change

 It's hard to see an overarching pattern here, but at a detail level, it seems that the movements are contrary.

That appears to be an illusion, though.  The scattergram in Graph 6 below, with Inflation on the vertical axis, suggests that there is no relationship at all.  Note that this data set is truncated at 2007, so there is no effect from the GR.

Graph 6 - Annual Change in Inflation vs Annual Change in Monetary Base, Through 2007

There are big changes in the Monetary Base with almost no change in Inflation; and big changes in Inflation when the change in Monetary Base is small.   In post WW II America, there is no broad correlation between Monetary Base growth and Inflation..

Including 2008-13 in Graph 7 emphasizes just how different those years really are.

Graph 6 - Annual Change in Inflation vs Annual Change in Monetary Base, Through 2013

Just to demonstrate that the money measure doesn't matter much, Graph 7 shows the annual Inflation rate vs the change in MZM.

 Graph 7 - Annual Change in Inflation vs Annual Change MZM, Through 2013

Now the Christmas tree shape is leaning hard to the left, suggesting, if anything, that the relationship between Money supply growth and Inflation might be negative.

What this leaves us with is very few things inflating these days, other than the money supply and Republican derp.



Grrrrrr said...

But as you will understand, I don't like to post things that mischaracterize and are aimed to mislead.

Then why do you post Krugman?

The guy is a propagandist for the status quo.

Jazzbumpa said...


How so?

Which status quo are you referring to?

And as you can see, I just started with PK, then went my own way.

Anything here from either of us that mischaracterizes or misleads?


Grrrrrr said...

Which status quo are you referring to?

I'm referring to the ONE party system in America. Ostensibly it has two branches (all nonsense of course) that serve the same master.

Anything here from either of us that mischaracterizes or misleads?

Yes. Almost all of it. You think there is a difference between republicans and democrats. Seriously, if you ignore the rhetoric it's not hard to see that both parties are the same.

As for Krugman, good grief, I don't have time to debunk all his bs. Just go back and look at his writings from years ago. Here's a sample from before his recent discovery of mmt and accounting identities (as if Government money creation and double entry bookkeeping are new concepts):


Could one have been more wrong?

And now we're supposed to believe Krugman knows what level of inflation is "good". We've had inflation for decades and how has it benefitted the majority?????

You seem like a good egg, but I've got news for you - inflation isn't the issue, at least for the majority - it's a strawman argument that distracts people from discussing fundamental flaws with the system. But you'll never hear what the true issues are from the likes of Krugman.

Jazzbumpa said...

Grrrr -

I am a good egg, and that's no yolk.

I get your PoV. Both parties are deeply influenced by corporate money. But if you think there's no difference between them, then you haven't been paying attention to vaginal probes, other aspects of the war on women, immigration reform, Obamacare, or minority rights, to name the first few things I thought of.

Plus - look at all the Rethug efforts at gerrymandering and voter suppression. The latter, at least, is something you never get from Dems. Nor do you get making the opposite party's president fail as the number 1 policy goal of the party.

Certainly, there is a lot wrong with the Dems, but to equate then to the Rethugs is simply false.

Re: PK - You can always go back a decade and play gotcha with some cherry picked error. Have you always gotten everything right? one of the reasons I respect PK is that when he's wrong, he admits it, in print.

I don't always agree with him. He's basically a conservative who only looks liberal because those who claim to be conservative are either corrupted, bat-shit crazy, or simply stupid. [Which highlights another difference - you don't see that kind of stupid among the Dems.]

As for inflation, go back and read more Krugman. Or read here. I have 25 post with that tag.


Right now, the true issue is misbegotten austerity, and you hear that from Krugman almost constantly.

The fundamental flaw is that, even with low inflation, median wages are not keeping up. I'm pretty sure PK might have mentioned that.

I certainly have.