On inflation, we can learn from the mistakes of the
past — or repeat them
Larry Summers notes:
The largest errors a year ago came from a deep faith in inertia. After 40 years of almost totally stable inflation, most observers failed to recognize that pursuing fiscal and monetary policy on a transcendent scale to increase demand, at a time when covid-19 was likely to curtail the supply of labor and goods, risked generating a huge overflow of demand. Similarly, after an extended post-financial-crisis period of sluggish growth, they failed to appreciate just how quickly the economy could shift from being demand-constrained to supply-constrained.
Don’t Blame Greed for Inflation
https://www.nytimes.com/2022/02/08/opinion/dont-blame-greed-for-inflation.html
Robert Shiller notes:
But feeding fears of a wage-price spiral can be dangerous, especially if Americans view it as something that might continue indefinitely. Once lawmakers, business leaders and consumers come to believe the spiral has really taken hold, that belief can amplify long-term inflation expectations. It can make people angry and rigid in their demands and depress the stock market and consumer confidence.
Modern Monetary Theory, the buzziest economic idea
in decades, got a pandemic tryout of sorts. Now inflation is testing its
limits.
https://www.nytimes.com/2022/02/06/business/economy/modern-monetary-theory-stephanie-kelton.html
Larry Summers notes:
The largest errors a year ago came from a deep faith in inertia. After 40 years of almost totally stable inflation, most observers failed to recognize that pursuing fiscal and monetary policy on a transcendent scale to increase demand, at a time when covid-19 was likely to curtail the supply of labor and goods, risked generating a huge overflow of demand. Similarly, after an extended post-financial-crisis period of sluggish growth, they failed to appreciate just how quickly the economy could shift from being demand-constrained to supply-constrained.
https://www.nytimes.com/2022/02/08/opinion/dont-blame-greed-for-inflation.html
Robert Shiller notes:
But feeding fears of a wage-price spiral can be dangerous, especially if Americans view it as something that might continue indefinitely. Once lawmakers, business leaders and consumers come to believe the spiral has really taken hold, that belief can amplify long-term inflation expectations. It can make people angry and rigid in their demands and depress the stock market and consumer confidence.
https://www.nytimes.com/2022/02/06/business/economy/modern-monetary-theory-stephanie-kelton.html