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Drew J Jones:
Joe Blow doesn't really think about inflation when he's borrowing for a house.

Of course he does. He thinks house prices are going to go up. They always go up, don't they? If he didn't, then he wouldn't buy.

Drew J Jones:

People have inflation expectations, but Joe's only thinking, "Man, meat and cereal are costing me a lot more these days."  He thinks that will continue to be the case, watching the news.

But IMHO he asks for his wages to go up to restore the status quo ante. Not to pre-empt inflation.

I doubt whether inflationary expectations play much, if any, sort of role in Joe's thinking - unless he's an economist....


"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri May 9th, 2008 at 12:44:49 PM EST
[ Parent ]
Of course he does. He thinks house prices are going to go up. They always go up, don't they? If he didn't, then he wouldn't buy.

Okay, yes, that's true.  I was thinking more along the lines of how it impacted his real interest rate at a given price.  But you're right.  He'll be thinking about the price of the asset, too.  Really, though, I don't think that's going to impact him much unless prices are moving strongly in one direction or another (like they are now).

But IMHO he asks for his wages to go up to restore the status quo ante. Not to pre-empt inflation.

I completely agree that's his initial move.  He's falling behind, so he asks for a higher wage.  But I suspect that, if the inflation is sustained, he'll think of the future to some degree.  I don't think it's an either/or kind of thing.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri May 9th, 2008 at 01:00:51 PM EST
[ Parent ]
Drew J Jones:
I don't think it's an either/or kind of thing.

Indeed.

I don't think many things are "either/or". Unfortunately we are up against people who think they are......

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri May 9th, 2008 at 01:05:23 PM EST
[ Parent ]
I know.  It's a real pain in the ass to maintain integrity in economics while diving into day-to-day political battles, because it's almost never clear-cut.  The gas-tax fight was one exception, and I was pleased by the reaction from economists across the political spectrum.  But that's very rare.

It's funny.  The pundits will occasionally bring up Harry Truman's statement that "All my economic advisors say, 'One the one hand _, and on the other hand _.'  Someone give me a one-handed economist."  And I always think, "Yeah, and we have a word for one-handed economists: Frauds."

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri May 9th, 2008 at 01:10:12 PM EST
[ Parent ]
So Truman was 30 years ahead of his time, he would have liked Milton Friedman and the Chicago Boys.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Carrie (migeru at eurotrib dot com) on Fri May 9th, 2008 at 02:12:28 PM EST
[ Parent ]
Well, he was kidding.  No, he would not have liked Friedman and the Chicago crowd.  Truman was the Democrat who put universal health care into the party's platform and integrated the military.

He's a weird one in the history books.  One of the most hated presidents in history during his time, yet he's now looked upon as a true maverick and one of the all-time greats.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri May 9th, 2008 at 02:16:49 PM EST
[ Parent ]
Have you read Naomi Klein's book?

I would REALLY love to see a discussion of it here among people who actually have some economics background.  The insights are pretty fascinating, but the book def. has an agenda (hey, that I agree with) so I'm really interested to know what others think of it.  

"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.

by poemless on Fri May 9th, 2008 at 02:28:22 PM EST
[ Parent ]
I think they just rolled out a big advertising campaign for The Shock Doctrine in London today - there were large posters in many tube stations.
Maybe I'll get a copy and read it, on your recommendation ;-)

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Carrie (migeru at eurotrib dot com) on Fri May 9th, 2008 at 06:54:09 PM EST
[ Parent ]
I keep meaning to read it, but I haven't gotten around to it yet.  I may actually grab it tonight if I can drag my lazy behind down to Barnes & Noble.  My father read it and loved it.  I suspect I get the general idea, having heard Klein talk about it on Maher's show, and she's right.  Having an agenda doesn't change her being right.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Fri May 9th, 2008 at 07:17:08 PM EST
[ Parent ]
I'm about halfway through, and I keep on learning new things, and I cannot really point yet to really partial accounts of stuff I know.

I'm planning to go back to the reviews in the FT and the Economist I saw a while back and do a compare.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat May 10th, 2008 at 06:49:11 AM EST
[ Parent ]
I think the eXile did a review too. ;)

"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.
by poemless on Mon May 12th, 2008 at 02:19:18 PM EST
[ Parent ]

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