A Quote by Athanasios Orphanides
Near-zero policy rates that may be considerably expansionary in an economy with high inflation could be contractionary when inflation is too close to zero, or worse, deflation has set in.
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Monetary policy has less room to maneuver when interest rates are close to zero, while expansionary fiscal policy is likely both more effective and less costly in terms of increased debt burden when interest rates are pinned at low levels.
The reality is that zero defects in products plus zero pollution plus zero risk on the job is equivalent to maximum growth of government plus zero economic growth plus runaway inflation.
We know that inflation distorts economic behavior. In the 1970s, a combination of high tax rates and inflation prompted investors to flee production in favor of protection.
The most important thing to remember is that inflation is not an act of God, that inflation is not a catastrophe of the elements or a disease that comes like the plague. Inflation is a policy.
What people today call inflation is not inflation, i.e., the increase in the quantity of money and money substitutes, but the general rise in commodity prices and wage rates which is the inevitable consequence of inflation.
The entire political class and ruling Wall Street class are zero-percent-interest zombies who talk about 'deflation' in the value of their second, third, and fourth homes. This is paper-deflation, zombie-deflation, and has nothing to do with the real economy.
The only way to ensure that inflation expectations remain safely anchored near the FOMC's target is to keep inflation close to that target on a consistent basis.
The only number that would ever be enough is 0. Zero pounds, zero life, size zero, double-zero, zero point. Zero in tennis is love. I finally get it.
Although low inflation is generally good, inflation that is too low can pose risks to the economy - especially when the economy is struggling.
However, in spite of the general perception that monetary policy should be conducted so as to avert deflation, a central bank cannot lower interest rates below the zero lower bound.
[Australian Reserve Bank] Governor MacFarlane said recently when Paul Volcker broke the back of American inflation it's regarded as the policy triumph of the Western world. When I broke the back of Australian inflation they say, "Oh, you're the fellow that put the interest rates up." Am I not the same fellow that gave them the 15 years of good growth and high wealth that came from it?
The single biggest issue that I'm very sensitive to is inflation. I'm very concerned that this extended period where the interest rates were quite low and stimulated a lot of activity could breed inflation and create a problem for us.
If you put tariffs in place, it creates inflation. If you put inflation in place, you have to raise interest rates. You raise interest rates, and stock markets shouldn't be so high.
With QE3, we are essentially being bought out with our own money...and unemployment is being used to facilitate this process in a very clever manner. Monetary inflation is currently being offset by labor deflation. The way you avoid collapse is by printing money and stealing assets. The way you avoid inflation is with labor deflation.
Significant changes in the growth rate of money supply, even small ones, impact the financial markets first. Then, they impact changes in the real economy, usually in six to nine months, but in a range of three to 18 months. Usually in about two years in the US, they correlate with changes in the rate of inflation or deflation."
"The leads are long and variable, though the more inflation a society has experienced, history shows, the shorter the time lead will be between a change in money supply growth and the subsequent change in inflation.
Because food and energy prices are volatile, it is often helpful to look at inflation excluding those two categories - known as core inflation - which is typically a better indicator of future overall inflation than recent readings of headline inflation.
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