Hacker News new | ask | show | jobs
by dragonwriter 1976 days ago
Like producer price inflation, asset inflation isn't what people are talking about when they talk about “inflation” without modifiers, which refers to consumer price inflation. When people predicted inflation from QE, they were predicting consumer price inflation. And depending on how you look at it, they were either right and that was entirely the point of the policy (if you look at the difference between actual results and what was predicted without the policy) or wrong because they failed to consider the deflation that would happen without the policy (if judged by a net standard rather than delta from without-the-policy expectations.)

Pointing to asset price inflation to say “there is the predicted inflation from QE” is the fallacy of equivocation; shifting definitions to suit the argument.
1 comments
username90 1976 days ago
Giving people more money doesn't make them buy more basic goods, just more assets, so price of normal goods doesn't go up but price of assets do.
link
dragonwriter 1976 days ago
> Giving people more money doesn't make them buy more basic goods, just more assets

Under normal circumstances, in the limit as starting income approaches infinity, this is correct (marginal propensity to consume approaches 0 and marginal propensity to save approaches 1.)

In the limit as starting income approaches 0, OTOH, the opposite is true (marginal propensity to consume approaches 1 and marginal propensity to save approaches 0.)

While there may be some future society with the distribution of income such that the former limit is a decent approximation of average behavior, but for real current societies the latter limit is a fairly good approximation, with observed society-wide marginal propensity to consume in modern developed countries, IIRC, around 0.9 (90% of added income goes to spending, 10% to savings/investment.)

> so price of normal goods doesn't go up but price of assets do

Were that true, supply gluts in a commodity used for money (like, say, the result of Spain bringing in vast hoards of New World precious metals) would have no impact on nominal consumer prices while driving up nominal asset prices.

This is, empirically, not true.

link