Congressman Bill Foster

OVER AT THE WASHINGTON CENTER FOR EQUITABLE GROWTH: IN WHICH I TRY AND FAIL TO UNDERSTAND THE CURRENT STATE OF RIGHT-WING MONETARY ECONOMICS: WEDNESDAY FOCUS: MARCH 19, 2014 by DeLong

Lawrence White: On the right and on the left.

Congressman Bill Foster: Those on the left did not share this mania about runaway inflation. Dr. Bivens, do you have a diagnosis of this failure to understand the problem? 

Josh Bivens: Yes. I think inflation remained so low in spite of those predictions because people totally underestimated how long it would take the economy to recover. We still have deeply depressed aggregate demand in the economy. That is what is keeping prices low. I just do not buy that a quarter of a percent [per year] interest rate on reserves is what is keeping all those reserves from flying out into the economy. What is keeping prices low is the enormous gap between potential supply and aggregate demand in the economy, even today.