A Quote by Janet Yellen
Although most Americans apparently loathe inflation, Yale economists have argued that a little inflation may be necessary to grease the wheels of the labor market and enable efficiency-enhancing changes in relative pay to occur without requiring nominal wage cuts by workers.
Related Quotes
Thirty years ago, many economists argued that inflation was a kind of minor inconvenience and that the cost of reducing inflation was too high a price to pay. No one would make those arguments today.
We pay some price when necessary to bring down inflation but that price is temporary and is not large relative to the permanent gain from reduced inflation.
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.
There is no such thing as agflation. Rising commodity prices, or increases in any prices, do not cause inflation. Inflation is what causes prices to rise. Of course, in market economies, prices for individual goods and services rise and fall based on changes in supply and demand, but it is only through inflation that prices rise in aggregate.
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.
Models used to describe and predict inflation commonly distinguish between changes in food and energy prices - which enter into total inflation - and movements in the prices of other goods and services - that is, core inflation.
To be sure, faster growth in nominal labor compensation does not necessarily portend higher 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.
Getting back to inflation, it is important to note that the producer price Index does not reflect wage pressures - and that is where the inflation threat really lies.
Most Americans are on a downward escalator. Median wage in the United States, adjusted for inflation, keeps on dropping.
Since it is to the advantage of the wage-payer to pay as little as possible, even well-paid labor will have no more than what is regarded in a particular society as the reasonable level of subsistence. The lower ranks of labor will commonly have less, and if public relief were afforded even up to the wage-level of the lowest ranks of labor, that relief would compete in the labor market; check or dry up the supply of wage-labor. It would tend to render the performance of work by the wage-earner redundant.
I would be uncomfortable raising the federal funds rate if readings on wage growth, core consumer prices, and other indicators of underlying inflation pressures were to weaken, if market-based measures of inflation compensation were to fall appreciably further, or if survey-based measures were to begin to decline noticeably.
When we say "people worry" about inflation, it's mainly bondholders that worry. The labor force benefitted from the inflation of the '50s, '60s and '70s.
American economists can't understand the German fear of inflation and the effects of inflation when dealing with the world economic crisis. They wonder why Germany pursues such a different course - 'Why can't they agree with us?' I would have thought it was fairly obvious.
Inflation is not an abstract idea thrown around by finance gurus. Inflation is a very real threat to the pocketbooks of hardworking Americans throughout our great country.
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.
Related Authors
Andrew Yang Quotes
American
Public Servant
Ben Bernanke Quotes
American
Public Servant
David Frum Quotes
American
Public Servant
Elizabeth Warren Quotes
American
Public Servant
Henry Paulson Quotes
American
Public Servant
James Comey Quotes
American
Public Servant
Janet Reno Quotes
American
Public Servant
Karren Brady Quotes
British
Public Servant
Michael Hayden Quotes
American
Public Servant
Mohammed Saeed al-Sahaf Quotes
Iraqi
Public Servant
Paula White Quotes
American
Public Servant
Samantha Power Quotes
Irish
Public Servant
Scott Gottlieb Quotes
American
Public Servant
Steve Bannon Quotes
American
Public Servant
Vivek Murthy Quotes
American
Public Servant
Wendy Kopp Quotes
American
Public Servant