Thoma and Inequality

What’s the Best Way to Overcome Rising Economic Inequality? by Mark Thoma

Robert Waldmann anchored inflation expectations

What's the name Noah Smith gave to the economics of CNBC? Chris Dillow calls it mediamacro.

Anchored Perceived Inflation or How Fox News Helped Obama by Robert Waldmann (July 20, 2014)

inflationistas

Hard money is not a mistake by Steve Randy Waldman

NAIRU

OVER AT EQUITABLE GROWTH: A NOTE ON THE CORE PCE INFLATION PHILLIPS CURVE: THE HONEST BROKER FOR THE WEEK OF AUGUST 30, 2014 by DeLong

meme events, inflation and expectations

[rough draft. need meme links and clean up.]

Does the phrase "price level" encapsulate both inflation and deflation.?

Meme events inspire me to make link lists. There's Piketty's K21. The Floor system and the billion dollar coin. German trade surpluses.

And now the Philips Curve with anchored inflation expectations. And the 70s stagflation, new classical revolution which failed in the 80s. A commenter noted how people with debt and little savings are constrained in their spending. They may see higher inflation with food and gas prices going up, but what does this translate into as expectations. Fox News may convince your Republicunt uncle that inflation is raging but what does this mean for his savings and investment decisions?

The history of economic thought is not a food fight: Philips Curve edition by Daniel Kuehn

http://factsandotherstubbornthings.blogspot.com/2014/08/the-history-of-economic-thought-is-not_4.html

Inflation Expectations: How Credibility Pays Off by Cecchetti and Schoenholtz

Stagflation and the Fall of Macroeconomics by Krugman

Methodological seduction by Simon Wren-Lewis

Financial Market Oversight, Economic Recoveries, and Full Employment: Some Crucial Linkages by Jared Bernstein

The Tradeoff between Inflation and Unemployment: What We Don’t Know Can Hurt Us by Jared Bernstein

On (Rational) Expectations by Chris Dillow

Defending rational expectations by Simon Wren-Lewis

More On Consumers’ Inflation Forecasts by Robert Waldmann

Philips curves with anchored expectations by Robert Waldmann

What happened to the Philips Curve by Robert Waldmann

Aggregate Demand, Aggregate Supply, and What We Know (Wonkish) by Krugman

Anchored Perceived Inflation or How Fox News Helped Obama by Robert Waldmann

James Tobin and Aggregate Supply (Implicitly Wonkish) by Krugman

The Neo-paleo-Keynesian Counter-counter-counterrevolution (Wonkish) by Krugman

Downward Nominal Wage Rigidities Bend the Phillips Curve by Daly and Hobijn

Yale’s Tobin Guides Obama From Grave as Friedman Is Eclipsed

Unanchored by Menzie Chinn

Phillips curves with anchored expectations by Robert Waldmann

Further thoughts on Phillips curves by Simon Wren-Lewis

DEPARTMENT OF "WTF?!" CHRIS HOUSE ON TRADITIONAL MACROECONOMIC MODELS AND THE GREAT RECESSION by DeLong

Nominal wage rigidity. What do inflation expections do? What's the mechanism. Does it effect demand via investment and savings. Those with debt can't really adjust much and don't effect demand much unless they go bankrupt. Aggregate effects? The elderly Fox News crowd can adjust behavior. Give less to Sarah Palin and Ted Cruz?

inflation (or a lack thereof) and the rightwing fever swamp

IS U.S. AT IMMEDIATE RISK OF BECOMING "ARGENTINA"?: MONDAY SMACKDOWN/THE HONEST BROKER FOR THE WEEK OF JULY 12, 2014 by DeLong

unemployment and inflation

The Tradeoff between Inflation and Unemployment: What We Don’t Know Can Hurt Us by Jared Bernstein

Inflation, Unemployment, Ignorance (Slightly Wonkish) by Krugman

anchored perceived inflation

More on Consumers' Inflation Forecasts by Robert Waldmann

My http://angrybearblog.com/2014/07/anchored-perceived-inflation-or-how-fox-news-helped-obama.html has received more attention than I would have guessed. This should be a semi-serious post on the topic.
...
In any case there is clear evidence that a sudden drop in the price of petroleum does not cause respondents to forecast extremely low inflation in the future. In constrast sudden increases in the price of petroleum correspond to unusually high forecast inflation.
...
Only later and less dramatically is there the genuinely puzzling anomaly. Median forecast inflation was consistently higher than lagged inflation for the past two and a half years. This is suprising.
...
It is not. Using all the Michigan survey data, this coefficient is almost exactly zero and, in fact, slightly positive. There is no evidence that survey respondents place more weight on food and energy prices than on other prices.

...
The indicator for 2009 and later is strongly significant and corresponds to forecast inflation being higher than expected by about 0.85%.

This is not a huge anomaly, but it is quite important. Some prominent economists feared that the extremely slack demand at a time of already low inflation would cause deflation. The fact that inflation has continued with high unemplyment suggests that at extremely low inflation rates, expected inflation ceases to affect wage bargains. The idea is that actual reductions in dollar wages are avoided. With normal pressures for variation in relative wages, this means that some nominal wages increase. This is a very old story. The continued increase in hourly wages at a an annual rate varying from about 1% to about 2.5% can be explained this way.

However, it is also possible that high unemployment has caused workers to accept a fairly rapid decline in subjectively expected real wages on the order of one to two percent a year. The systematic over estimate of future inflation would mean that this corresponds to puzzlingly stable achieved real wages.

Now that I am being semi-serious, I have to admit that I can’t determine the cause of the anomalously high forecasts since 2009. In 2009 itself it is not easy to guess the effects of the then recent extreme fluctuations in the price of petroleum. More generally many things have changed. My first guess is that the combination of a Democrat in the White House and fully developed Fox News leads to high inflation illusion. However, I could fit the anomaly very well using an indicator of unconventional monetary policy — say the ratio of total Fed liabilities to GDP. It is certainly true that prominent commentators predicted that the huge expansion of high powered money would cause high inflation. There is no way to know if they would have made the same prediction with a Republican in the White House.

When discussing the effects of unconventionally monetary policy through expected inflation (the Krugman-Woodford story) I have been very skeptical for two reasons. First huge interventions were associated with tiny changes in bond prices (often of the wrong sign). Second the expectations which matter are not those of bond traders but of house builders. Bond traders pay obsessive attention to the FOMC of the Fed.

I now think these two criticisms might cancel out. Bond traders also look at official measures of inflation. This doesn’t mean they think the indices are good or correspond to the cost of living. They do this just because the Fed looks at those indices. However, this may mean that stories about how loose monetary policy is causing high inflation might have more effect on economic agents other than bond traders. This means that the loose money might have caused higher investment through lower subjective expected real interest rates even if it didn’t bring inflation up to target.

anchored perceived inflation

I asked in comments for DeLong to add Waldmann's post on "anchored perceived inflation" and he did.

Menzie Chinn has a related post.

And here's DeLong's post on Chris House and Krugman from a week ago.

Phillips curves with anchored expectations by Robert Waldmann (from July 1st)

Keynesians

Aggregate Demand, Aggregate Supply, and What We Know (Wonkish) by Krugman

Still, we try. New Keynesians do stuff like one-period-ahead price setting or Calvo pricing, in which prices are revised randomly. Practicing Keynesians have tended to rely on “accelerationist” Phillips curves in which unemployment determined the rate of change rather than the level of inflation. 

So what has happened since 2008 is that both of these approaches have been found wanting: inflation has dropped, but stayed positive despite high unemployment. What the data actually look like is an old-fashioned non-expectations Phillips curve. And there are a couple of popular stories about why: downward wage rigidity even in the long run, anchored expectations. 

The point, however, is that the price-setting side of the models has never been an integral part of Keynesian doctrine, and the surprising resilience of inflation hasn’t undermined the core insights. 

And it remains true that Keynesians have been hugely right on the effects of monetary and fiscal policy, while equilibrium macro types have been wrong about everything.

And Robert Waldmann's Fox News inflation-distortion bubble which isn't exactly anchored expectations. It boosts expected inflation rates.

anchored perceived inflation

Anchored Perceived Inflation or How Fox News Helped Obama by Robert Waldmann

I am assuming that, like inflation expectations, inflation perceptions have delinked from reality recently. I really really should find data on perceived inflation (which is out there somewhere). I also have to come up with a story for why this happened just in time to save us from deflation. 

I give the credit to Fox news. A large fraction of people in the US rely on Fox News (often indirectly as repeated by friends and relatives). They are out of touch with reality — there expectations and perceptions are what Roger Ailes wants them to be. He thinks inflation is bad even though in a depressed economy in the liquidity trap it is good. Therefore Fox News convinces people that inflation has been and will be high. The representative consumer is only partly living in the Fox bubble so perceived and expected inflation are moderate. Then finally actual inflation is low but positive.

the Great Clusterfuck and deflation

DEPARTMENT OF "WTF?!" CHRIS HOUSE ON TRADITIONAL MACROECONOMIC MODELS AND THE GREAT RECESSION by DeLong

Unemployment, aggregate demand, and search/matching by Nick Rowe

I don't quite understand it, but Krugman says Keynesians expected more deflation/disinflation from the aggregate demand shocks in the U.S. and Japan. (What about Europe?) What if QE explains it?

Neoclassical and New Keynesian models seem to be poorly with distributional issues. Maybe it was something to do with that.

The Leftovers, scapegoats, and inflation

The World’s Central Banker by DeLong

AV Club reviews the The Leftovers: “Pilot”

The Fed needs to target 4 percent inflation or else we'll get the scapegoating of foreigners. If 2 percent of the population disappeared, there'd be an economic boom as labor supply would meet demand and the Fed would have to raise rates.

Dean Baker had the best post on inflation and wage adjustment.

stagflation

Not a monetary phenomenon by Steve Randy Waldman

What Happened to the Phillips Curve ? by Robert Waldmann

Inflation

There’s still no reason to be afraid of the inflation monster by Matt O'Brien

Predictions and Prejudice by Krugman

Piketty on inflation

From Yglesias's interview:

Inflation has proved to be very useful to reduce the large stocks of public debts that we had in the 20th century. Now the progressive wealth tax, in a way, is the same thing as inflation, but this is sort of a civilized form of inflation. 

It’s like inflation, but you can make sure that people with limited wealth would not be hurt, and people with billions would pay more. With inflation you have chaos, in that you don't actually know who's going to pay for it. 

Very often, not only do you destroy the public debt, but you also destroy the savings accounts of lower and middle class people. I think this is why Europe today, for instance, has a very hard time with inflation. 

That's why I think tax on private wealth or property tax on private wealth is a better way to go than inflation. Now, if we don't have the tax, inflation is better than austerity. If you only have budget surpluses to reduce a public debt of 100 percent GDP with zero inflation, which is what we have in the Euro zone right now, it can take decades and decades.

Inflation

Does inflation make you poorer? by Noah Smith

A Reply to "Does Inflation Make You Poorer?" by Carola Binder

The Economy is Not Like a Household by Krugman

Krugman, DeLong and Baker on inflation and the 1970s

Are Investors Less Confused About Real and Nominal Interest Rates Than They Were 40 Years Ago? by Dean Baker

Thoma commenter anne writes: 

There were 2 characteristics of investment structure and understanding in the 1970s that have changed markedly since. 

As for bond portfolios, the concept of duration and how a constant duration bond portfolio can be used to control principle loss during a period of significantly rising interest rates was not developed till late in the 1970s. Bond portfolio managers know how to protect portfolios against increasing inflation or interest rates now. 

As for stock portfolios, there has been a significant change for well established companies in which stock buybacks are demanded by investment managers and accepted by corporate management as a way in which to increase stock prices when economic conditions such as increasing inflation or interest rates make for bear markets.

inflationphobia

How the interest rate increase of 2015 caused the Great Recession by Scott Sumner

via Andy Harless

"but full employment is two years away."

Evan Soltas and the Inflation Hawks by Dean Baker

Wages of Fear (Somewhat Wonkish) by Krugman

I’m a Slacker Not a Quitter and You Should be Too by Jared Bernstein

We'll see how Soltas's prediciton holds up. I'd go with Bernstein, Baker, Krugman, etc.