Interesting Links for 29-10-2013

[andrewducker]

• Many Now Think Inflation Helps
  (tags: economics inflation )
• The Best Of The Internet's Reaction To The St. Jude Storm
  (tags: funny weather internet )
• This is what happens when you interrupt a programmer
  (tags: programming development thinking comics )
• Cockblocking Rapists Is A Moral Obligation; or, How To Stop Rape Right Now |
  (tags: advice rape )

Comments

[philmophlegm]

"Many now think inflation helps." Conversely, many think it doesn't. However, there probably is something of a consensus that Japanese-style deflation is certainly something to be avoided.

Inflation is very, very bad for people whose wealth and income depends upon non-index related assets - for example, retired people. On the other hand, inflation is a great way of reducing the national debt. Public debt is bad for younger people - they're the ones who have to pay it off.

There is a good moral argument here that since much of the public debts of developed countries have come about because of government expenditure on the now-retired generation, then inflation would be a good way to get them to pass some money back to the working generations and their children, grandchildren, great-grandchildren etc.

Personal view: I wouldn't be too scared of a low level of stable price inflation. But the key there is "low level". I could live with the Bank of England easing the inflation target to say 3% from its current 2%.

In my lifetime, inflation in the UK reached 25% and stayed above or around 20% for several years. At that level of inflation, the degree of uncertainty is a big problem for businesses and consumers and definitely has a negative impact on economic performance - a microeconomic impact from macroeconomic factors. The degree of monetary squeeze required to stabilise an economy from 20-25% inflation is always hard.

[andrewducker]

Oh yes. 3% fine, 25% bad. I suspect there are arguments for 5%, I doubt there are good ones for anything higher than that!

[philmophlegm]

There will definitely be people who would be happy not worrying about higher inflation than 5% because they are focused on other targets - lower unemployment, higher growth for example - and they would see higher inflation as an acceptable trade-off.

It's essentially a moral trade-off because different segments of the population are affected by unemployment, low growth and inflation.

[andrewducker]

True, yes.

I'm thinking of the long-term here, largely. And that the long-term effects of high inflation would be bad for people at all levels. A few months of 25% inflation would be annoying, but shouldn't throw the country into disarray. If it stayed that way for long periods then investment would, I'd have thought, start to have problems.

I don't actually know enough about when it starts to go wrong though!

[chess]

We've known that (single-digit) inflation is good for a long time now - ever since various places used stamp scrip to pull themselves out of the 1930s depression. Inflation means that money has to move - which is what drives the economy.

If you have no inflation, you massively reduce the incentive to invest - because you can just bury your wealth in a hole in the ground and you aren't going to lose any of it (even if you might gain more if you invested correctly, just storing it has practically zero risk in the absence of inflation, which is very attractive to humans).

[del_c]

The constituency that wants inflation to be ultra-low is the same constituency that wanted monetarism, the gold standard, and austerity: people who own tons of stuff. They're a very small number of people, and often things that are bad for almost everybody are good for them.

When I hear phrase "the economy" in a sentence, I usually substitute "people who own tons of stuff", and it's amazing how often the sentence makes sense when it didn't before. Inflation is bad for the economy!