First, I’d like to start with a quick look at current residential investment in Figure 1. All of these measures are indexed to 1990. The blue line is residential investment/GDP. The other two lines are very broad estimates of the value of residential units under construction (red line) and the value of residential units completed (green line).
Speaking of inflation, check out that CPI drop....
It took me over 15 years and a lot of internet blog posts by Sumner, Dean Baker, and Kevin to get a better understanding of what happened over the past few decades. I don't get into fights with anybody when they refer to the "housing bubble"--I just drink my beer and remind myself that there was some speculative excesses that prompted some bad policy actions on the part of the Fed. The loud noise about some of that bad behavior drowned out the obvious fact that housing production never went crazy. The Bernanke Fed destroyed the village in order to save it, and the real housing shortage continues to get worse.
We should be grateful that Powell remembers both the 1970's and the 2010's--he places more value on liquidity than moral purity. As for the people who harp about Fed credibility because FAIT was abandoned or 2021 was a bad call, there's not much that will change those minds except for the next crisis which will give us a new set of bad memories.
I'm picturing Kevin at some Phoenix barbecue shouting at the guy at the grill "We need to upzone, damnit!"
I'm glad you see what I see. It's sort of a bummer how few people are left who would be willing to even entertain a conversation about our perspective here.
I don't know why the NGDP targeting crowd has become so hawkish. It seems pretty obvious that in 2008 we had a permanent negative shock with a return to trend growth and in 2021 we had a permanent positive shock with a return to trend growth. That's better! It's a huge win that the Fed seems to have pulled this off. But it seems like everyone is committed to making discretionary decisions about what to worry about or what to benchmark to, or what to exclude from the inflation index, in order to end up with a hawkish bias.
Now it's high wage growth we're supposed to worry about even though inflation is clearly leveling out around 2%, NGDP growth around 5%, and the reverberations of sticky wages when inflation was nearly 10% a year ago will obviously create a forward positive impulse in real wages.
I like the tough-guy talk about "getting up your grill."
But if you want to drop by, I will do up some hamburgers. That's the kind of noun I understand. Who would anyone put a grill on their face? Is that for protective gear?
Seriously, another great column.
Central bankers do not like prosperity.
I still like the "Minsky moment" expression, and maybe you will accept it in regard to the dot.com follies. Or Andy Warhol print prices.
We will see on the CPI or PCE-core for H2. My guess is inflation is done.
A certain generation (me included) lived through the 1970s, and that became a formative experience. We think everything leads to inflation. Or even accelerating inflation. That generation runs the macroeconomics profession now.
My father's generation lived through the Great Depression. For them, economic growth and security was primary.
A stray and inchoate thought: If OPEC tightens up, and a war in Eastern Europe cuts crop output, and housing construction is deeply constrained in the US, we will have a certain level of reported inflation.
To get inflation down to a target---how hard will the overall economy have to be suffocated? Will it be worth it? Crush wages?
And if crushing wages is always the solution to inflation...why would the 160 million employees in he US vote for such a system?
Speaking of inflation, check out that CPI drop....
It took me over 15 years and a lot of internet blog posts by Sumner, Dean Baker, and Kevin to get a better understanding of what happened over the past few decades. I don't get into fights with anybody when they refer to the "housing bubble"--I just drink my beer and remind myself that there was some speculative excesses that prompted some bad policy actions on the part of the Fed. The loud noise about some of that bad behavior drowned out the obvious fact that housing production never went crazy. The Bernanke Fed destroyed the village in order to save it, and the real housing shortage continues to get worse.
We should be grateful that Powell remembers both the 1970's and the 2010's--he places more value on liquidity than moral purity. As for the people who harp about Fed credibility because FAIT was abandoned or 2021 was a bad call, there's not much that will change those minds except for the next crisis which will give us a new set of bad memories.
I'm picturing Kevin at some Phoenix barbecue shouting at the guy at the grill "We need to upzone, damnit!"
I'm glad you see what I see. It's sort of a bummer how few people are left who would be willing to even entertain a conversation about our perspective here.
I don't know why the NGDP targeting crowd has become so hawkish. It seems pretty obvious that in 2008 we had a permanent negative shock with a return to trend growth and in 2021 we had a permanent positive shock with a return to trend growth. That's better! It's a huge win that the Fed seems to have pulled this off. But it seems like everyone is committed to making discretionary decisions about what to worry about or what to benchmark to, or what to exclude from the inflation index, in order to end up with a hawkish bias.
Now it's high wage growth we're supposed to worry about even though inflation is clearly leveling out around 2%, NGDP growth around 5%, and the reverberations of sticky wages when inflation was nearly 10% a year ago will obviously create a forward positive impulse in real wages.
Thanks for being here!
I like the tough-guy talk about "getting up your grill."
But if you want to drop by, I will do up some hamburgers. That's the kind of noun I understand. Who would anyone put a grill on their face? Is that for protective gear?
Seriously, another great column.
Central bankers do not like prosperity.
I still like the "Minsky moment" expression, and maybe you will accept it in regard to the dot.com follies. Or Andy Warhol print prices.
We will see on the CPI or PCE-core for H2. My guess is inflation is done.
A certain generation (me included) lived through the 1970s, and that became a formative experience. We think everything leads to inflation. Or even accelerating inflation. That generation runs the macroeconomics profession now.
My father's generation lived through the Great Depression. For them, economic growth and security was primary.
A stray and inchoate thought: If OPEC tightens up, and a war in Eastern Europe cuts crop output, and housing construction is deeply constrained in the US, we will have a certain level of reported inflation.
To get inflation down to a target---how hard will the overall economy have to be suffocated? Will it be worth it? Crush wages?
And if crushing wages is always the solution to inflation...why would the 160 million employees in he US vote for such a system?
Yeah. I've been surprised by the amount of hawkish "mood affiliation" as the transitory nature of this inflation has increasingly become clear.