• Eye on Inflation

    This post originally appeared on The Finance Buff.

    Yes, another inflation post. If the economists keep blogging it, I’ll keep linking to their stuff. We’ll see in a few years who got it right. I’ll have the records!

    I predict more debate, followed by some “I told you so” gloating, and then we’ll all forget about it until the next blast of fiscal and monetary stimulus in ??? years.

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    • I think these are just noise. People make all kinds of predictions on all kinds of things. Will the stock market go up? Or will it go down? Will we have high inflation? Or will we have low inflation? Will the dollar go up? Or will it go down? You can put all kinds of theory behind each prediction. In the end, do we trust these predictions enough and make them actionable? I think not. Does it matter which prediction came out to be right after the fact? I don’t think so either. I don’t waste my time on these predictions.

    • @Mike – Predictions are entertainment only if they’re not put to use. In this case, “we” use predictions about inflation to inform government policy, policy that has large impacts on our lives. It will be important to learn the extent to which consequences of government fiscal and monetary decisions are predictable and which economic model or perspective produces a better prediction. In years to come economists will try to persuade policy makers to do XYZ based on the experience of the current crisis. They will either say, “Krugman was right. We should do that again,” or “Krugman was wrong. Don’t do that again.” (Actually, it won’t be that simple. And they won’t only talk about Krugman. But that’s the idea. That’s why I care.)