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If you have, broadly, 20% unemployment it will be a long time before you get wage push inflation

Isn't that the 'pushing on a piece of string' theory? I.e. it can work, but only after protracted efforts and many 'fails' first.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sat Sep 27th, 2014 at 01:15:21 AM EST
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No, pushing on a string is about monetary policy impotence.  The central bank can't induce more borrowing when households and businesses are financially strapped by lowering interest rates (because households and businesses want to do the opposite) -- and, even if households and businesses wanted to borrow, they couldn't, because commercial banks' risk premiums are too high for them to make loans.

ARG's referencing effects from capacity utilization and propensities to consume tied to fiscal injection.

If you inject a bunch of money into the checking accounts of households, they'll spend it.  If unemployment's 20%, factories and stores are probably operating well below full capacity.  The jump in demand will initially result in raising production until unused capacity is mopped up.

You'll see some inflation in some regions where there's not much unused capacity (say, North Dakota).  In others, you'll see a big boom in growth (say, Nevada).

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

by Drew J Jones (pedobear@pennstatefootball.com) on Sat Sep 27th, 2014 at 08:53:42 AM EST
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