The Death of High Inflation/July 23, 2013, 6:41 pm

The Death of High Inflation 高インフレの死

Back home, although I got a bit worried when the gate agent in Edinburgh announced a delay. At least I think that’s what she announced. The truth is that I couldn’t understand most of what she said. Ah, Scotland.

Anyway, blogging may be limited by various real-life responsibilities. But I thought I’d post a quick calculation that might be of some interest.

As a number of people have been reminding us lately, talk of high inflation, nay hyperinflation, has been widespread ever since the Fed began trying to fight the Great Recession. And the failure of the predicted high inflation to appear has done nothing to shake their conviction that they have the truth, and that those of us who have been right are nonetheless wrong.

So, one thing I wonder about is the extent to which this attitude is reinforced not just by the usual crank tendencies, right-wing leanings, and so on, but also by the fact that economists love — looooove — to talk about runaway inflation, precisely because it’s something that’s so easy to explain: you run the printing presses to cover your deficits, and off you go.

Yet this is getting awfully stale.Not only has the promised high inflation failed to appear here in America, but high inflation has largely vanished everywhere.

I did a quick calculation using the IMF’s World Economic Outlook Database, which runs back to 1980. Year by year, how many countries had triple digit inflation in any given year? It looks like this:
1980年に遡るIMFのWorld Economic Outlook Databaseのデータを使って簡単な計算をしてみた。年ごとに3桁インフレの国の数はどれだけあるのか? それはこうなる:


Basically, there was a wave of hyperinflations caused by the chaos following the breakup of the Soviet Empire, much like the wave after World War I; since then, Zimbabwe and nobody else.

Even double-digit inflation has become quite rare:


There’s a brief spike around 2008; if you look at it, it turns out to be mainly small commodity-exporting countries pushed into big devaluations by the crisis, leading to one-time jumps in consumer prices. But then it was back to the downward trend.

There are, I think, a couple of morals here. One is that economics textbooks probably talk too much about high inflation; it’s a nice pedagogical set-piece, but not something that’s a real issue in today’s world. Another is that high inflation doesn’t happen just because a country’s rulers are spendthrifts or don’t know about the Emperor Diocletian or something; it is always associated with severe political and social disruption. To stand Milton Friedman on his head, high inflation is never and nowhere a merely monetary phenomenon.

【Bloomberg Businessweek】Paul Krugman Won the Crisis—and Lost the Argument

Paul Krugman Won the Crisis—and Lost the Argument ポール・クルーグマンはこの危機に勝った――そして論争に負けた
By Peter Coy September 12, 2013

A lot of people were tired of thinking about the financial crisis by 2012. Not Paul Krugman, the liberal Princeton University economist with a Nobel Prize and a New York Times op-ed column. That April he published a full-on cri de coeur called End This Depression Now! In May his attention-getting taunts of conservatives led the New York Post to call him “the nation’s most dangerous economist.” Then in June he got into a Twitter war over austerity with the president of Estonia that was so entertaining it was made into a short opera.
多くの人は2012年にもなるとこの金融危機について考えるのにうんざりしていた。ノーベル賞受賞者でニューヨーク・タイムズのオプエド・コラムニストであるプリンストン大学のリベラル派ポール・クルーグマンは違う。去年4月、彼はcri de coeur(心からの叫び)で一杯の『さっさと不況を終わらせろ!』という本を出版した。5月には、彼の保守派に対する罵倒が注目を集め、ニューヨーク・ポストは彼を「この国で最も危険な経済学者」と呼んだ。それから6月になると、彼はエストニア大統領との緊縮財政をめぐるツイッター戦争に突入したが、それはあまりにも面白すぎてショート・オペラの域に達していた。

The Lehman crisis was a moment made for Krugman. It prompted policymakers to swallow their pride and take a second look at John Maynard Keynes, the late British theorist whose influence in academia had been fading for decades. The bearded, gnome-like Krugman, as the most famous expositor of traditional Keynesianism, rose to the occasion. As of 2013, End This Depression Now! has been translated into 25 languages. “Paul is a rock star overseas,” says Drake McFeely, president of W.W. Norton, his U.S. publisher.

There are, as the Economist’s Matthew Bishop once observed, two Krugmen: the scholar and the polemicist. The scholar sifts data for patterns. The polemicist picks fights to make points. “It kind of helps to use various people as foils,” Krugman said in an interview this year for this magazine. “If someone has said something that’s demonstrably at odds with experience or just demonstrably stupid, I use it.” He once told a National Public Radio interviewer, “There are so many fools that if you try to suffer them at any great length, there’s no time left.” Columnist George Will said of Krugman: “If certainty were oil, he’d be Saudi Arabia.”
かつてエコノミスト誌のマシュー・ビショップが述べたように、2種類のクルーグマン(Krugmen)がいる。一方は学者で、もう一方は論客だ。学者としての彼はデータをパターンごとにふるい分けていく。論客としての彼は評価を上げるために論争を吹っかける。「色んな人々をダシに使うのは結構便利だ」と彼は今年当誌のインタビューで語っている。かつてNnational Public Radioのインタビューでは「もし誰かが明らかに事実と異なることを語ったとか、もしくは単に明らかに馬鹿なことを言っていたら、僕はそれを使う」と語り、「あまりにも馬鹿が多すぎるから、そんなことを少しでも気に病んでいたら、時間が全然なくなるよ。」コラムニストのジョージ・ウィルはクルーグマンをこう評した:確実性が石油だとするなら、彼はサウジアラビアだ。

Despite his popularity and determination, Krugman hasn’t exactly won the argument. He’s had no luck getting the Federal Reserve to raise its inflation target to 4 percent, from 2 percent. He also hasn’t managed to persuade Congress to increase spending to stimulate growth; with the sequester, lawmakers have done just the opposite. Columbia University economist Jeffrey Sachs, who calls himself a fellow progressive, says Krugman shows too little concern for wasteful government spending. “This approach is disastrous both politically and economically,” he wrote in a Huffington Post column.

Still, Krugman is happy where he stands. By taking positions outside the political mainstream, he bucks up the fighting spirit of fellow liberals. The late Joseph Overton, a libertarian, invented the notion of the Overton window to describe the range of ideas that are politically acceptable at any given time. The window has moved to the right in recent years. But it might have moved even further without Krugman.

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Summers the Shiftless/September 3, 2013, 12:03 pm

Summers the Shiftless シフトなきサマーズ

A few months ago Christy Romer gave an excellent talk on the prospects for monetary policy in a liquidity trap, titled It Takes A Regime Shift (pdf). As many of us have noted, the central bank has very little direct traction when safe short-term rates are at the zero lower bound; maybe it can achieve something by buying lots of unconventional assets (“quantitative easing”), but its main hope of achieving anything is through “expectations management” — convincing both financial markets and players in the real economy that it will hold off much longer on tightening once the economy improves than they currently expect, which will lead to higher expected inflation and demand, and hence higher spending now.
数ヶ月前、クリスティ・ローマーはIt Takes A Regime Shift (レジーム・シフトの必要性)(pdf)というタイトルの流動性の罠にある中での金融政策の展望に関して素晴らしい話を行った。我々の多くが指摘してきたように、安全資産の短期利子率がゼロ下限にある時には、中央銀行はほとんど直接的な牽引力を持たない。ことによると、非伝統的資産を大量に購入すること(「量的緩和」)によって何らかのことはできるかもしれないが、それを達成するための主な望みは「期待を操作すること」――現実の経済で金融市場とそのプレイヤーの両方に、景気が回復しても、現在考えられているより金融引き締めを大幅に延期すると信じさせ、そのことにより予想インフレ率と需要を高め、現在の支出を増加させること――にかかっている。

However, engineering such a change in expectations — what I long ago dubbed a credible promise to be irresponsible — is hard. How do you convince people that the central bank won’t just revert to type, always eager to snatch away the punchbowl, at the first signs of economic improvement?

Romer’s answer is that it takes a “regime shift” — a set of actions that reflect a clear break with the past. FDR achieved such a regime shift in the 1930s by going off the gold standard, and in general by bringing in a, well, New Deal. Shinzo Abe may (the returns aren’t in yet) be achieving something similar simply by talking and acting in such a seemingly un-Japanese way; I suspect that Abenomics is working better than one might have expected precisely because Abe seemed to be such an ordinary Japanese machine politician, until he started moving on economic policy.

This, I think, is the way to read today’s report by Binyamin Applebaum on how the rising odds of a Summers appointment to the Fed is already having a chilling effect on the economy. A Yellen appointment would clearly have represented something new at the Fed — not just because she is, as Garrison Keillor used to say, a person of gender, but also because she has been a strong and consistent monetary dove, and took that position before it was fashionable.

Summers, on the other hand, while he often expresses unconventional views when not in office, has a strong tendency to revert to conventionality when in office. And leaving Summers the person on one side, just think of the historical connections: can you imagine a stronger signal that the same old regime is staying in place than choosing a Robert Rubin protege at this late date?

So the apparent decision to appoint Summers is a strong anti-regime-shift signal on Obama’s part.

Now, we can hope that if Summers actually does get the job, he’ll realize the problem — and realize that he needs to pull his own version of what Abe has pulled off in Japan, saying and doing things that shock people into realizing that he isn’t going to be the conventional-wisdom guy they expected. And this is, in fact, my advice to Summers if he is the guy: don’t spend your first few months being mild-mannered and winning friends. What this economy needs is a monetary shock — and if you don’t do it right away, you probably won’t get a second chance.