Yellen Says Inflation Isn’t A Top Risk. She’s Probably Right

Yellen Says Inflation Isn’t A Top Risk. She’s Probably Right

Janet Yellen is no stranger to answering questions about inflation. And, as she'll patiently remind you (where "you" means Larry Summers), she's "spent many years studying inflation and worrying about inflation." So, if it's inflation you want to talk about, Yellen is happy to have that discussion. That said, I'd wager she's already a bit weary of explaining to the general public why the US isn't going to morph into Venezuela overnight just because she's in the process of (literally) sending
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8 thoughts on “Yellen Says Inflation Isn’t A Top Risk. She’s Probably Right

  1. H: A question. In regards to education, wouldn’t a better way to reduce tuition be to completely remove any federal government subsidies? I’m 51, went to a high quality state university in the late 1980s. Tuition was somewhat expensive, but reasonable. IIRC, tuition started exploding only after the federal government began making it much easier to get loans and grants. Colleges and Universities aren’t stupid. With an increased ease of funding for students, of course tuition went up. It’s the classic truism, when you subsidize something, you get more of it. Tuition subsidies led to more tuition. That, and the now luxury nature of many Colleges and Universities created craziness on the cost side.

    I’m not against government paying for two-year degrees at community colleges. The USA community college system is a real gem that great work with millions of people. What worries more is that the government will completely screw it up as they do many things in which they have a monopoly with no accountability. Perhaps if it was a simple as a voucher for use at a community college. Even then, the same problem of tuition increases may exist.

    Even with my strong right-leaning perspective, I agree that the free-market has failed on the health care front.

  2. I agree with anyone, including Yellen that inflation is a non-issue, within the greater context of pandemic recovery. The greater long-term threat is the restructuring of society and what that implies for millions of workers who will be either displaced or discarded by various forms of efficient technologies.

    A small blip of interest rate jawboning isn’t going to matter to millions of older workers that will be weaned off the the stimulus teats, only to find that employers no longer want or need them. Retraining an older worker or an unwanted person is essentially a nice thought, but the reality of a 64 year old person with a cool new diploma from an online college connecting to a nice new job, is a pipe dream. Community colleges certainly will seek to sell that dream, because they thrive on that kinda hope and hopelessness.

    In the pandemic disruption, stimulus has been doled out far different that the GFC, in terms of helping out the average person, versus just giving everything to banks — but how this plays out long term is unknown. Summers apparently thinks wages are about to skyrocket and act like inflationary jet fuel, but I think he has that totally backwards, I think you see wage stagnation continue, with less labor participation and greater labor efficiency by fewer people. AS the pandemic fades, probably next year, disinflation will be a greater concern as all the efficient giants carve out new ways to decrease prices. I assume that post pandemic, we’ll see more of a supply glut than our recent era of shortages. Once capacity rockets higher and output increases, that new supply isn’t likely to sell off if it’s over-priced.

    Furthermore, it seems like the stimulus funds are being burned up pretty fast by those that are unemployed, so as people are weaned off financial heroin, chances are good that unemployed people will be forced to return to crap jobs, or drop out of the workforce — and they won’t be consuming as much on tighter budgets. In 3 months, hopefully, the virus variant won’t be crazy bad (it’s possible) and in 6 months if the vaccines seem to be gaining ground, people will be re-thinking what normal means, but I seriously doubt inflation will be a primary fear!

    A recent trip to FRED shows an interesting relationship between:

    Households and Nonprofit Organizations; Personal Consumption Expenditures, Consumer Durable Goods, Flow, Millions of Dollars, Seasonally Adjusted (BOGZ1FA155011001Q)

    and

    Personal saving as a percentage of disposable personal income, Percent, Seasonally Adjusted Annual Rate (A072RC1Q156SBEA)

    https://fred.stlouisfed.org/graph/?g=BXLl

  3. TBH, Bernanke and Yellen did what they could as Fed Chairs. It wasn’t their fault the fiscal side of things didn’t work.

    Put it another way – if Ben and Janet had either hiked rates or launch QT, we may have experienced less wealth inequality… but also a lot more pain for the bottom 20% of society. As they say, wealth is relative but hunger is absolute…

  4. Just as all other developed countries have at least a basic public healthcare system, these countries generally also have a system of selecting students for university attendance–not everybody gets to go to uni. So in France or Germany, you get a subsidized college education–if you’re a good enough student to make the cut. If not, then you go somewhere else. It helps to have a high school system that actually prepares students for life, and has a strong occupational track. Although college is expensive in the US, it is readily available to just about anybody that wants to go. Probably a majority of jobs don’t actually require a college education–but they do often require someone to be literate, with good work habits. Because there are so many college graduates, employers can demand that their applicants possess a college degree–just as a filter, because they can, and because it crudely does select for people who have ambition and can complete something. And yet you hear that manufacturers in the US are having a hard time finding qualified labor. Community colleges should be filling this gap, but the gap apparently remains. In the US, both healthcare and education are effectively industries, and we depend on them for employment, rather than using them to support the productivity and welfare of the citizens who are engaged in other productive work. This is not to diminish the great influence and research output of our universities–but the system could be so much better.

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