10 Comments

I can't help tying this discussion with Michael Pettis book "Trade wars are class wars". The issue is real of global demand. For real shift in power to labour and for real wage growth, you need structural changes in big surplus economies of China, Germany, Korea and Japan. A higher share of national income to GDP will result in higher wage growth across the globe. And if not managed appropriately, can result in wage price spiral.

But that seems unlikely and hence the world can easily revert back to a deflationary environment with even a mild recession (and without further disruption in energy supplies)

Expand full comment
Jan 5, 2023·edited Jan 5, 2023

"has there ever been an inflationary process more docile than this one?"

"has there ever been an abortion ban swallowed as peacefully as the present?"

"has there ever been a flirting with a near cuban missile crisis war scenario as calmly as in the present?"

This ain't the baby boomers, that's for sure!

Expand full comment

"What we need is an adequate model of inflation and policy-making under conditions prevailing in 2023 of extreme asymmetry of bargaining power, deadlocked democratic politics and consequent lack of social contestation, even when wages are taking a painful hit."

Maybe it is time to explore and articulate more clearly the type of potential massive bureaucratic involution, or new logic of domination that has taken place in the United States over the past 60 years in which no real opposition to the status quo is allowed to exist--alluded to immediately above in your description of the asymmetry of bargaining power and lack of social contestation now predominant organizationally in our country.

This extremely successful strategy of basically sponsoring one's own opposition ( i.e. one example being labor unions encased and controlled within a more powerful corporate/ bureaucratic state) may have now reached a dead-end since such a strategy now only seems capable of generating greater economic, political and cultural instability.

How about thinking about the necessity of creating social space for real opposition in order to save our society!

Expand full comment

A great read. Thanks.

Expand full comment

Watching the whole debate in the finance world about what the path of interest rates will be or discussing whether inflation targets should be 2 or 4 percent strike me as akin to people shifting deck chairs on the deck of a sinking ship.

None of these things ever did really make a difference. The "market crash" we witnessed last year was simply the removal of some of the froth through zero interest rates being unwound. There has been literally zero transmission between those changes and the real economy thus far.

The whole thing is a sham. The real problem we have is that much of the worlds productive capacity is being driven by a system which focuses productive capacity on ridiculous things which are not doing anything to address any of the worlds challenges (weaponry, financialized investment services, technological developments to sell and market products, rockets to take us to Mars, murderous self driving cars).

Fortunately large parts of the world have realized this and moved away from it. However this does not include the Anglo-speaking world who also love building weapons. So that will end well.

Expand full comment

Loved this piece. The first half gives real insight into how esoteric, factionalised and pointlessly self-referencing academic debate is amongst economists. This contrasts however with the lucid description of Blanchards tweet as being “otherworldly” and the analysis of Blanchards view as being outdated for this age is brilliantly clear, convincing and so well written.

Expand full comment

I have 3 degrees and I can’t understand half of what it is written in the article. Among inflationary pressures is the compensation paid to management in publicly held corporations regardless whether there is value destruction or manufactured profits through stock buy backs etc. Salaried employees wages have barely moved in 20 years, and whether the target rate is 2% or 3% or 4%, they will continue to suffer wealth destruction or even the ability to acquire any assets as their income is spent on necessities. While egghead academics joust through twitter, the masses suffer….

Expand full comment

"Only, if you start from a straw-man version of monetarism in which inflation is always and everywhere (nothing more than) a purely monetary phenomenon." I assume "straw man" here means something like simplistic and so, of course, ignore; "(nothing more than)" , which was not in the original formulation, thrown in for emphasis. We can therefore set this nonsense aside.

But in the next paragraph: "An inflation theory ultimately needs some mechanism of monetary expansion, otherwise the real value of the money stock is sharply reduced etc etc. One reading is that Blanchard knows this and doesn’t feel the need to spell it out," which is "common sense". So the Straw Man lives after all.

Expand full comment