Friday, February 24, 2012

Ryan Avent Is Sick of Arnold Kling: Invisible Wage-Push Inflation Vigilantes Watch by DeLong

commenter dwb writes:
there are other, better arguments against this.
1) never reason from a price change: wage push is demand side inflation. Just because we have "inflation" does mean we have demand-side inflation. In fact, right now its all supply side (gasoline etc) because demand is cranking up. We really should not compare commodities prices to rock-bottom lows on 2009-2010 when demand sank. Gasoline prices are up but we've become a net exporter of refined products (combination of energy efficieny, vehicle-miles, and infrastructure issues).

2) inflation indices do a very poor job when there is a substantial change in relative prices. Home ownership got cheaper (-35%) rentals are much more expensive (+7%) because people are locked from the housing market. inflation or substitution??
supply-side inflation is something the Fed should ingore because the SRAS is fairly inelastic but eventually will shift as capital projects are completed.

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