Monday , November 25 2024
Home / Mike Norman Economics / John T. Harvey — Inflation…Huh…What Is It Good For?

John T. Harvey — Inflation…Huh…What Is It Good For?

Summary:
Unfortunately, there are a great many misconceptions out there about inflation. Since I can't possibly address them all in a short blog post, I figured I'd take on just one: the idea that it is a net loss for everyone. The reason people believe this is partly because of the manner in which most economists teach the concept and also because we naturally transfer how a phenomenon affects us individually to the macro level. If inflation reduces my standard of living, then it must be doing the same to everyone. But what this ignores is the simple and fundamental fact that if I’m paying more, someone else is getting more. Every expenditure for one person is income for another. Hence, inflation can’t possibly be a net loss for everyone, but is instead a redistribution of income.…. Inflation

Topics:
Mike Norman considers the following as important: ,

This could be interesting, too:

Matias Vernengo writes Elon Musk (& Vivek Ramaswamy) on hardship, because he knows so much about it

Bill Haskell writes Getting the Story Right on What Happened

Matias Vernengo writes The second coming of Trumponomics

Lars Pålsson Syll writes Central bank independence — a convenient illusion

Unfortunately, there are a great many misconceptions out there about inflation. Since I can't possibly address them all in a short blog post, I figured I'd take on just one: the idea that it is a net loss for everyone. The reason people believe this is partly because of the manner in which most economists teach the concept and also because we naturally transfer how a phenomenon affects us individually to the macro level. If inflation reduces my standard of living, then it must be doing the same to everyone. But what this ignores is the simple and fundamental fact that if I’m paying more, someone else is getting more. Every expenditure for one person is income for another. Hence, inflation can’t possibly be a net loss for everyone, but is instead a redistribution of income.….
Inflation is always and everywhere a redistribution of income. If you truly want to understand an episode of inflation, you have to ask, "Who's winning from this?"
Sometimes your answer will lead you to the conclusion that it's bad and sometimes not. From a broader perspective, what this means for government policy is that it should be tailored to the specific situation. We should not treat all inflation as the same....
Forbes — Pragmatic Economics
Inflation…Huh…What Is It Good For?
John T. Harvey | Professor of Economics, Texas Christian University

Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

Leave a Reply

Your email address will not be published. Required fields are marked *