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
- Puerto Rico Got Away With It May 5, 2016These bonds are CUSIP 74514LE86. The bonds are Puerto Rico Commonwealth Series A maturing July 1, 2035. Take a deep breath. Those are 20 year bonds. The Commonwealth unloaded $3.5 billion of these with a hefty 8 percent coupon according to EMMA. But, as we all know, a bond is nothing more than a promise […]TonyLima
- Twenty Dollar Note Features Harriet Tubman April 20, 2016Ms. Tubman was first proposed for U.S. currency in 1996 by J.S.G. Boggs. Featured in the PBS NOVA documentary “Secrets of Making Money,” Mr. Boggs showed several different designs that incorporated Ms. Tubman’s face on a note.TonyLima
- Revisiting Operation Choke Point April 16, 2016Operation Choke Point was illegal and, most likely, unconstitutional. But many of the targeted businesses were small and unable to file a lawsuit. While I usually oppose class-action cases, this program is crying out for a few good attorneys.TonyLima
- Is Obamacare Coverage Worse Than Not Having Insurance? February 22, 2016A market solution to the health insurance problem is pretty straightforward. Each household estimates the upper limit on what they can afford to lose. They then buy a pure insurance policy with that amount as the deductible. ITonyLima
- Puerto Rico Got Away With It May 5, 2016
- “@kerpen: Cory Booker (D-Wall Street) hilariously pretending fiduciary rule that hammers small financial advisers is for the little guy.”, May 25
- Obama Raided $500M for Zika to Finance UN’s Green Climate Fund https://t.co/FbqoQfNaKe, May 24
- BREXIT https://t.co/v54BExaAmy, May 24
- RT @dkrasne: @BarbarianCap @DividendMaster I'm feeling motivated to get a racehorse and name it Adjusted EBITDA. excluding losses it will be undefeated, May 22
- VZ news https://t.co/J7BkLCPEA1, May 21
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