Posts Tagged purchasing power
Frankly, these statements are incredibly stupid. Inflation means prices and incomes are rising at about the same rate. Any increase in salaries will just keep pace with inflation, leaving the consumer with unchanged purchasing power. The only way people who borrow can pay back with cheaper dollars is if the inflation is a complete surprise. If the inflation is expected, it will be part of the interest rate on the loan. Finally, higher housing prices? Give me a break. Even if housing prices rose, the real net wealth in your house wouldn’t change much because the higher price level would eat up the price increase.
Introduction Economists take it for granted that everyone knows the definition of the real interest rate: r = i – p where i is the nominal interest rate and p is the inflation rate. The real interest rate measures the net transfer of purchasing power from borrowers to lenders. Lenders will be repaid i dollars […]
Blanchard’s argument is that by raising the inflation target, nominal interest rates would be higher. This, he proposes, would give central banks more room to reduce interest rates to stimulate the economy. Unfortunately, Prof. Blanchard has made an error that should make him blush.
central banks, inflation rate, inflation target, international monetary fund, macroeconomic policy, nominal interest rate, olivier blanchard, policy prescriptions, purchasing power, real interest rate
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- Don’t Blame Households for First Quarter GDP May 4, 2015The U.S. economy is still sick. It will not be cured until (if and when) the current regulatory onslaught emanating from Washington, D.C. is not just slowed, but rolled back. The U.S. needs business climate change.TonyLima
- Tariffs for the Long Haul April 4, 2015To get around the 25 percent tariff, Ford installs rear windows, rear seats, and seat belts prior to shipping the vehicles to the United States. These vehicles are no longer classified as commercial trucks but as passenger vehicles, which are subject to the much lower 2.5 percent tariff. Upon arrival in Baltimore, Maryland, the rear […]TonyLima
- Bay Area Air Quality District Proposes Violation of Constitution March 24, 2015A quick scan of BAAQMD's massive report shows a lot of concern for concentrations of various pollutants in different locations, but zero consideration of sources. Frankly, that's stupid. BAAQMD cannot determine the effectiveness of their regulations until they know the percentage of current pollution emitted by exempt structures. Until then they are simply whistling in […]TonyLima
- Tax Policy and Economic Growth March 5, 2015The point I’d like to add is that the U.S. has already done this once. In the 1970s, led by Cornell Professor Alfred E. Kahn, several important industries were deregulated: airlines, trucking, transportation generally, energy, communications (remember the old AT&T monopoly?), and finance (including banking). Each of these industries lowered prices, increased quantity offered and […]TonyLima
- Don’t Blame Households for First Quarter GDP May 4, 2015
- The Inconvenient Truth about Ghetto Communities’ Social Breakdown | National Review Online http://t.co/Fj5yBxw9VB, 15 hours ago
- RT @CapitolAlert: Sergio Romo showing off the World Series hardware at the state capitol http://t.co/KKjC9hVu7k, May 5
- RT @debrajsaunders: Caveat ursus. #Latin (May the bear beware) https://t.co/KvR3eeOleM, May 5
- RT @debrajsaunders: Did Tesla nearly go bankrupt without investors knowing? Sure looks like it. @DavidBakerSF http://t.co/hmGgofkbzL via @sfchronicle, May 4
- Don’t Blame Households for First Quarter GDP https://t.co/vQngFzjT0b, May 4
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