The third kind, also recognized in Smith, is meso-inflation. Meso-inflation is when incentives become out of alignment between productive and unproductive labor in Smith, but more generally when incentives no longer send the correct signals to allocation of activity in an economy. A simple and obvious example of meso-inflation is a government over or under taxing. . . .
Could you elaborate a bit on this type of inflation, for those of us economically challenged?
And here's a bit from the BBC that suggests the geographic scope of the problem.
The soaring cost of food is threatening millions of people in poor countries, the United Nations Food and Agriculture Organisation (FAO) has warned. Food prices have risen an unprecedented 40% in the last year and many nations may be unable to cope, the agency says. It is calling for help for farmers in poor countries to buy seeds and fertiliser, and for a review of the impact of bio-fuels on food production.
Food prices have risen an unprecedented 40% in the last year and many nations may be unable to cope, the agency says.
It is calling for help for farmers in poor countries to buy seeds and fertiliser, and for a review of the impact of bio-fuels on food production.
Another report indicated the rise in food prices in the previous year was 6%. Holy shit.
Care to comment? Grabbing what you can, as John Ruskin said, isn't any less wicked when you grab it with the power of your brains than with the power of your fists.
Thanks- have not dropped by the Agonist for a while-- will visit more often. Good piece--yours and his. Grabbing what you can, as John Ruskin said, isn't any less wicked when you grab it with the power of your brains than with the power of your fists.
I think that macro and meso inflations together combine as "fiscal" (government driven) inflation, whereas "micro" inflation may be characterised as a "monetary" (private banking sector driven) inflation.
I suspect that in a deficit-based economy at least hyperinflation may everywhere and always be a fiscal phenomenon.
Monetary inflation on the other hand, always leads to asset price bubbles, but I would be interested in recent examples of where these have led to hyper inflation - it seems to me that people borrowing against inflated assets is the sign of a deficiency of money, not a surfeit of it (Anglo Disease again). Modern conservatives engage in one of man's oldest exercises in moral philosophy: the search for a superior moral justification for selfishness.Galbraith
Also, in the U.S., the tax system is imbalanced against wages and earnings, in favor of unearned income, such as capital gains. Newberrry wrote in the comment that meso-inflation can be used to hold down inflation, and I think this U.S. tax imbalance is an example - it holds down the wage side of classic cost-push inflation.
What also struck me is that Newberry wrote:
The root of meso-inflation is an imbalance of incentives. At a certain point this imbalance becomes so pervasive that it makes monetary policy useless.
What is particularly worrisome to me is that as we have slashed interest rates 225 basis points, consumer loans -- mortgages and revolving credit -- have actually moved higher.
Its the maintenance of slack labor markets that is the key to suppressing nominal wage increases ... no matter what the impetus to push for recouping lost wages, in the context of the extraordinarily slack labor markets that the US has been experiencing ... U6 unemployment above 8% at what was supposed to be the "peak" of the business cycle! ... there's little for workers as a group to do but to take it on the chin. Utsukushikereba sore de ii
