In general, those who claim inflation is too high have a preference for a tighter monetary policy, and vice versa. But fast NGDP growth is a much better indicator of whether the economy is overheating.
Later in his post, Sumner writes,
We don’t need easy money or tight money; we need stable money. That’s why I didn’t believe the low inflation of 2019 was a problem and it’s also why I don’t think the high inflation of 2021 is a problem. Inflation is not a reliable policy indicator.
I gather that Scott believes we have stable money now. Even though NGDP in the first quarter grew at an 11 percent annual rate. I assume that this qualifies as “fast” by Scott’s standards, but it is just one quarter.
In the past, Scott has said that his preferred indicator is future growth in NGDP. But nobody knows what that is. We have to rely on forecasts. For example, the Congressional Budget Office has a forecast for NGDP growth over the next several years, and it looks pretty benign. But even in the short term, NGDP is notoriously difficult to forecast.
I would be the last (or maybe next-to-last) person to defend using measured inflation as a reliable indicator. But it’s not like there is a reliable indicator sitting out there like the proverbial $20 bill on the sidewalk, waiting to be picked up.
“Scott has said that his preferred indicator is future growth in NGDP. But nobody knows what that is. We have to rely on forecasts.” Actually, Scott’s preferred indicator is *expected* future growth in NGDP: the growth expected *by the market*. Currently we have some implicit indicators of the market’s expectation for future growth, but they are hard to interpret. It would be better to subsidize a prediction market—a clear, explicit indicator.
Yes, perhaps a Prediction Market but we already have a prediction market called the stock market.
BTW, in addition to global record market highs, there are more IPOs done in the US this year than in any other year…already.
Bond yields are muted.
Personally, I think the reaction to covid-19 has been a disaster, from the lying skunks about the Wuhan labs to the lockdowns.
But once you have locked down such a large portion of the economy by government edict, what are you going to do?
Yesterday’s libertarians became today’s statist martinets.
I now prefer tracking current and recent past inflation thru the more-reliable-than-other measures of
the Big Mac index.
Most useful for PPP comparisons of over- or under- valued alternate currencies, I’m finding it seems more realistically accurate for “normal folk” inflation.
Including energy but mostly excluding housing.
There will be no US hyperinflation without food shortages, which will be shown by rising food prices and rising Big Mac prices. Including the $15/hr min wage effects, which are likely to have similar effects on all foods normal folk eat.
We already have share price and house price high inflation (houses in nice areas; stocks with good cash flow).
With high unemployment benefits to those willing to accept benefits rather than work, we even have a little bit of semi-UBI (universal basic income), as long as the unemployment checks keep coming.
I see no food shortage – I predict no high inflation for normal goods, like a Big Mac.
I believe that this dude drafted Jonathan Turley for his FITS v2.0 team. Maybe the best sleeper pick of all time?
+1 – yep
https://www.economist.com/big-mac-index
http://bigmacindex.org/2001-big-mac-index.html <<
for before 2000, when The Economist on-line data.starts.
I'd like a yearly chart of just Big Mac prices, but didn't quite see it.
I did some “economic research” on this the other day. It was $5.69 in Whitehorse Yukon. Helluvadeal. I also “researched” the difference between a mcdouble and a double cheeseburger. Basically it’s an extra 10 cents for an extra slice of American Cheese. Retail with a coupon I’d be looking at 15 cents per slice. Huge deal. I forgot to get a receipt the first time, so I needed to do a second round of research. I have a replication study planned this afternoon. KailerBSnackin’