Yo, Ben! Where’s Your Fucking Helicopter? I Needs Me Some Inflation

Those who believe that hyperinflation is in the immediate future may be right, really!, I mean the chances are like 1 in a billion, but at least it’s a non-zero probability.  The banks don’t want inflation because it means they get paid back in devalued dollars.  I and (I believe) W.C. Varones want inflation so that we can pay back the banks in devalued dollars.  And some, like Michael Kinsey, have no basis or interest whatsoever and are just, well, apparently mentally retarded.

Now, as much as I would like to see inflation, and a lot of it (right kind of inflation only, please!), I just don’t see it happening.  From downsizing boomers, to 20% un/underemployment, to weak labor laws, to massive amounts of debt at the household level, to the need to work off resource misallocations, there just isn’t anything out there that could drive it.  But I’m a charitable sort, and am willing to forgive the occasional moron that stops by to say that any time the government is running a deficit, it’s printing money, and therefore inflation is imminent – uh huh.

But, really, some people should know better:

The watchdog group, in existence since the early 1970s, serves as a vehicle to criticize Federal Reserve policy making. Its members are frequently luminaries of the economics profession. Some past members, like current Philadelphia Fed president Charles Plosser, have even gotten called to the big league, getting the chance to set policy for themselves.

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They’re concerned the Fed, having more than doubled its balance sheet, is risking a big breakout in inflation if it doesn’t get to the business of raising interest rate relatively soon.

Channeling my inner 16-year-old girl, Whatevs!  The Dallas Fed just released the Trimmed mean PCE inflation calculations (basically a measure of core inflation), and I charted the monthly annual inflation rate over the past 24 months.  For fun, I added in the key dates relating to the failure of my small business:

Not gonna lie to ya, the trend doesn’t seem to be pointing in the direct of hyperinflation, or even inflation, or even price stability.  Looks like deflation – or more accurately core price deflation – will be showing up soon.  But Ben Bernake has a plan to deal with that, right?  I mean, the guy gave a speech 8 years ago about how to ensure that “it” (deflation) doesn’t show up in the U.S.:

Even if households decided not to increase consumption but instead re-balanced their portfolios by using their extra cash to acquire real and financial assets, the resulting increase in asset values would lower the cost of capital and improve the balance sheet positions of potential borrowers. A money-financed tax cut is essentially equivalent to Milton Friedman’s famous “helicopter drop” of money.¹⁸

Yo, Ben, we’re ready for that helicopter drop!  What you’ve been doing to hold back the deflationary tsunami is all well and good, but it really doesn’t get us an answer for the single most important question – courtesy of Paul Krugman:

What is it about the United States now that looks different to you from Japan in say, 2000? Big budget deficits and high debt? Check. Huge expansion in the monetary base? Check. And yet Japan’s GDP deflator has fallen 9 percent since 2000.

Anyone, anyone, Bueller, Bueller?

Fasten those seatbelts, it’s gonna be a bumpy (deflationary) ride.

OMFG!!! We R All Going 2 Die!

Michael Kinsey vomits some nonsense all over the pixelated Atlantic pondering hyperinflation.  The old saw about how it is better to keep your mouth shut and have people think you are a moron than to open it and remove all doubt seems particularly applicable to this jackass.  The “basis” for Kinsey’s piece comes, ironically, at the end:

Compared with raising taxes or cutting spending, just letting inflation do the dirty work sounds easy. It will be a terrible temptation, and Obama’s historic reputation (not to mention the welfare of the nation) will depend on whether he succumbs. Or so I fear. So who are you going to believe? Me? Or virtually every leading economist across the political spectrum? Even I know the sensible answer to that.

In other words, according to Michael Kinsey, the temptation to inflate away the national debt will be overwhelming!  Overwhelming, I tell ya, even though “virtually every leading economist across the political spectrum” disagrees.  I don’t think much of economists across the political spectrum, but unless we do inflation the right way, it ain’t going to happen, not now, not for years.  What we are going to see is deflation, lots of it, for years:

Everyone, everywhere, is engaged in a furious attempt to hold back the deflationary reality that inevitably follows unsound and unsustainable credit creation.  It won’t work this time, just as it has never worked before.

Nobody wants to talk about the root causes of this mess – the intentional and even fraudulent creation of credit that led to the inflation of multiple asset bubbles – because doing so forces recognition that much of the so-called “growth” of the last two decades – about half of it, in fact – never really happened, being borrowed into existence in a grand chimera-laced show.

The problem with such bogus “growth” is that it exists only in the fantasy-laced mind of those who report it, as the debt that was taken on to enable its reporting remains and must be serviced.  This, over the space of many years, turns into a millstone around the neck of the government that allows it to occur.

Kinsey seems to believe that inflation is some magical pony, and the government can simply say “abracadabra, give me some inflation!” and it will happen.  Nope, doesn’t work that way.  In order to stoke inflation under a classical monetary model, you need people willing to borrow and banks willing to lend – that’s how money gets created after all.  But businesses have no customers, individuals have declining incomes, and households are buried under a mountain of debt.  Other than a few hedgies speculating in the commodities and equity markets and banks playing the yield curve, there just isn’t much credit-based activity in the economy.  If you think that’s a recipe for widespread inflation, I’ve got a bridge I’d like to sell you.

Even more importantly, in order to “inflate away” debt, the “inflation” needs to be turned into that thing that people and businesses use to pay off their debt and use to pay taxes that the government can use to pay off its debt (hint: wages and profits).  Unless the government sells 15 trillion in bonds to fed, and then writes everyone a check to pay off their debt (a good idea BTW), we won’t be seeing inflation for a long time.  It’s not going to happen just because Michael Kinsey is a moron.

Irony Alert!

This would be a lot funnier if he didn’t die, but it’s still funny.

The president of ConocoPhillips Alaska was killed in an avalanche and another person in his snowmobiling party is missing, according to Alaska State Troopers.

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Between mid-February and mid-March warm temperatures cause[d] layers of snow to become unstable.

Heh.  What do all those folks arguing that the snow storms in Washington DC prove that climate change is a hoax do now?

Skeptics of global warming are using the record-setting snows to mock those who warn of dangerous human-driven climate change — this looks more like global cooling, they taunt.