LinusK:
I’ve also argued that more spending - more demand - does not cause inflation , so long as new production is able to keep up with demand. We’ve had long periods of growth without inflation - in the 90’s, 2000’s, and over the last 6 years - without inflation.
Inflation was positive over the nineties.
Inflation was positive over the naughties.
Inflation has been positive over the last six years.
It’s not zero. It’s not less than zero. It’s low , or muted , or anchored , but we are not living in a period “without inflation”. Nor were they living with no inflation in the New Deal, even with double-digit unemployment. Inflation went up at the same time spending went up. Which leads me directly to my next point: The argument here is that more spending “does not cause inflation”. This is not new. Similar arguments have been offered before. This is from a previous thread.
Yes.
But inflation can also result when there is still slack in production. Inflation was positive from 1934 to 1937 during the early New Deal, even when the unemployment rate was still over 10%. Unemployment was coming down after the inauguration of FDR and the abandonment of the previous gold peg, but it was still double-digit. There was high unemployment and rising prices.
The difference between the two time periods, 1929-1933 and 1934-1937, was that NGDP was plummeting during the Great Contraction, while NGDP was rising during the early New Deal. Prices can rise even when there is still productive slack in the economy, as long as total spending is on its way up. When there is no more productive slack and demand keeps increasing, then that’s when inflation really spikes. When there is slack in the economy, any increase in demand will be felt predominantly with more real production. Predominantly, but not exclusively. Some of the extra demand will be felt in price increases.
The problem is that these sorts of arguments have been offered before.
To quote my previous post one last time:
The problem is that you’ve made these sorts of arguments before.
I responded to several of them in previous threads. I tried to walk you through a different way to think through some of these issues in previous threads . I pointed out what I perceived to be holes in your argument. You didn’t respond to the issues I raised, as I noticed in the last post of the first thread I just cited. You left with those issues almost entirely unacknowledged. Then later you started new threads and made the same mistaken assertions all over again.
I took a dim view of this behavior.
I’m willing to walk through these issues again… But if I make a criticism against your argument that goes unacknowledged, if I see an error that’s not admitted, only to see the same argument or error resurface three months later in another thread, my current dim view is not likely to change.
On double-checking, I see that that post was written three months ago today.