Mastodawn

Continuing this discussion. Again, Olivier is tapping into an important point often missed in monetary/macroeconomics: in the end, it all comes down to individual motives and decisions 1/ https://twitter.com/ojblanchard1/status/1609000406184591360

Olivier Blanchard on Twitter

“1. Answering John Cochrane: no contradiction: Higher aggregate demand leads everybody to want to increase their price relative to others. This is a distributional conflict in which everybody wants more, leading to increasing and increasing prices, i.e. inflation.”

Twitter

Paul Krugman Jan 1, 2023

A business that raises its prices doesn't do so because the Fed has increased the money supply. The chain of events that leads to that price rise may have started with the Fed, but the firm is responding to its own market conditions 2/

Paul Krugman Jan 1, 2023

There was a similar debate over the balance of payments back in the 1980s. The trade balance must equal the difference between savings and investment, and some argued that this made exchange rates and competitiveness irrelevant 3/

Paul Krugman Jan 1, 2023

But exporters and importers don't care about accounting identities. They care about costs and opportunities; something that affects these, like the real exchange rate, must shift to make the identities hold 4/

Bill Jan 1, 2023

@pkrugman is it? Or in some cases is it just price gouging because they think they can?

Concerned Citizen Jan 1, 2023

@pkrugman this assertion seems circular.

@pkrugman OK, but if corporations are making record profits they have optimized price. If wages and materials have not increased in price, otherwise profits would not have increased, then might it possibly be corporations are price gouging and actually creating inflation. The costs of which, higher interest rates, get passed on to workers and consumers.

No One Special Jan 1, 2023

Greed; the depth of corporate greed in our society is astounding.

Capitalism kills; literally.

Asymptosis Jan 1, 2023

@pkrugman Having run a few businesses myself, seems like this to me:

Firms are facing steeper demand curves. They can raise prices with less/little hit to Q sold. Lemme tell ya, it's like printing money, pure profit. Ka-ching.

Their "greed" hasn't changed; that's a straw-man/red-herring. They're just in a position to capitalize on it.

Why the steep demand curve?

Eliot Lear Jan 1, 2023

@pkrugman accidental sign error? lowered money supply, right? Or am I confused?

PrinceOfDenmark Jan 1, 2023

@pkrugman Thank you for your perspective, engagement, and overall positivity, and Happy New Year!

Ken Farinsky Jan 1, 2023

@pkrugman
A technical note about Mastodon, there is a way to "thread" together multiple posts. It's probably different on every platform. Android FediLab has a '+' next to the post being written.

Ken Farinsky Jan 1, 2023

@pkrugman
For instance, this post is threaded with the above response. We're all learning the new service together, hope this helps!

Willy Guthrie Jan 1, 2023

@pkrugman why isn’t anyone pointing out that companies are making up for the pandemic by gouging?

Tips for Overcomers Jan 1, 2023

@pkrugman
[asking again]

Isn’t the root cause of inflation that the economy as a while is zero sum? Not the value aspect (that can grow without limit), but the monetary aspect (absent printing more money).

Taken as a whole, global industry needs every $ spent to come back as revenue, to support the next cycle of expenses. But people save, or spend more at one firm than another. So some firms need to borrow. That means they need even more in the next cycle, to pay interest.

AmicusOpus Jan 2, 2023

How do you create demand-pull if you cross-post _everything_?