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Austrian and related firms of economics function more as a religion than economic science. Specifically, it is a religion to"comfort the comfortable, and afflict the afflicted".

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Nov 13, 2021Liked by Noah Smith

Praxeology sounds like the exact opposite of how economics should work. Humans are complex, so reasoning from principles won’t work and experiments are the only way that we can get a decent idea of how humans work in reality. If the first line of your proof is “assume humans are rational”, throw out the rest.

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Nov 13, 2021Liked by Noah Smith

People are still citing Shadowstats after that excellent evisceration in 2013? I had forgotten about it. I figured the proponents would have all slunk off in shame.

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One obvious problem with the Shadowstats numbers is that they imply that prices have increased sixfold in the past twenty years, and that clearly just isn't true. The apartment I rented for $800 in 2001 might rent for $2,000 now, but it definitely doesn't rent for $4,800. And that's without taking into account the low rate of inflation in manufactured goods.

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This is a fair takedown of the inflation fringe. But reducing positions into two extreme camps is killing useful analysis.

Bitcoin is a terrible substitute for the current international monetary system. Yes, agree 100%. And also -- what's your short position?

The loudest inflation hawks are crazed astrologers. Yes, agree 100%. And also -- how long until the 10-Year Breakeven plateaus?

We should be able to raise an eyebrow at T10YIE's trajectory without being lumped in with Dorsey-ian econometrics. We should be able to say about Bitcoin "eh, the price is the price and I clearly don't fully understand all the ways people move money" without being dismissed as HODLers.

I saw the best minds of my generation destroyed by Twitter, dragging the goldbugs until dawn looking for an angry fix...

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I would just add that there's no need to put quotes around "money printing". QE is certainly money creation, and the technical point that the money is created digitally not on paper is not relevant to the "debate" over whether QE causes inflation. Rather there is a very simple explanation for when money creation idrives inflation and when it doesn't. When money creation funds increases in spending, it's inflationary. Inflation is driven by increased spending, not by increased money supply. That's empirically perfectly well established and it's also a very simple, obvious first principle, unless you're a charlatan or a fool. (Sorry for the garbled first post).

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Generally speaking I think you're spot-on about the inflation "truthers" and it's important to point out how wrong they've been - about inflation, policy, austerity, etc.

That said, QE has almost certainly led to "asset" inflation (possibly even hyperinflation) - stocks, bonds, art, NFTs, crypto, etc. This does seem quite relevant both from an economic perspective and also its sociological effects. Let's not pretend QEforever hasn't at least helped create a billionaire class and a world full of insufferable tech VCs. And inasmuch as this very well could be planting the seeds to the next crisis, and clearly has significant political effects - this seems worth some analysis as well no?

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But there's some grain of truth to these claims right? Sure, Bitcoin fetishists are full of shit, but there's something going on here. I think many of us experience inflation higher than the given numbers. Not because those numbers are wrong, but because it's an aggregate average.

In my city, for instance, rent has risen much more than 6%, which is the bulk of my spending. Meanwhile, though technology prices have fallen adjusted for quality, I don't really care about the increase in quality; 2015 computers would have been fine for Substack and Reddit. On the other hand, the spike in gas prices has barely touched me, since I don't drive much.

So I wonder if part of this just comes from the issue of aggregation. The median family income may be 60k, but some people are homeless and some people are Elon Musk.

In short, I think these truthers arise because some people are simply seeing way more than a 6% increase in their cost of living.

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I do not care much about Inflation, this can be adjusted. I look at the production of goods and services in the economy. If the capacity to produce goods and services diminishes then we have a big problem and Inflation is a serious symptom.

I worry about people trading crypto rather than working to produce goods. Frankly I see almost no good ending for crypto. Yes, bring the heat from the heavily invested suicide pact crypto mafia, it will not matter, the ending is inevitable. Yes I was savaged when I predicted years ago that Napster was not sustainable, everyone was telling me I am an idiot, how could anyone put that genie back in the bottle, I am a luddite curmudgeon of the worst kind, get out of the way grandpa. Well I will make a new prediction, crypto, as it currently exists is unsustainable. Government will need to kill it to maintain order and authority.

I am largely in favor of financial innovation ( blockchain underpinnings ), and increasing services in that sector is going to continue and grow, but on this specific invention crypto ( uncontrolled distributed currency ) the answer is no, it will fail, but you can make a lot of money until the lights go out, so just get your timing right.

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Just because the CPI says 6%, doesn't mean that's the actual rate of inflation (especially in an era of accelerating technological progress). Imagine we became 10% more technologically efficient, we would expect prices to decrease by 10% which would make everyone's life 10% cheaper.

So when we say we have 6% inflation, the rate of "deflation" is hidden. So if we were supposed to have deflation of 10% (due to technological progress), and instead we had inflation of 10%, it means that true inflation was 16%.

This is pernicious for multiple reasons — mainly because it pumps asset prices of rich people, and raises the cost of goods for poor people (instead of allowing the price of goods to drop).

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Strawman much? This inflation truther thinks we’ve had a permanent (and regressive) increase in the price level despite the best attempts of our policy-making, “transitory truthers” to convince us otherwise.

The truth is simple: we pushed asset prices too high and sent too much money to people who didn’t need it (I know many “COVID windfall” stories among the wealthy). And instead of unwinding some of this we’d rather have everyone pay for it via a regressive inflation tax.

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Hucksters predicting hyperinflation seems especially pernicious because inflation this high really is a problem by itself and people rightly or wrongly place less weight on inflation as a social problem when people lie to argue that it is a problem.

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“[bitcoin] adding additional layers with lower transaction fees have so far proven fruitless”

Gave up on the article after reading this line.

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Feb 24, 2022·edited Feb 24, 2022

"Nobel-winning Card & Krueger minimum wage study which constructed a natural experiment from a policy change to test the hypothesis that raising the minimum wage would cause unemployment, and found that it did not." Their award have more to do with natural experiment methodology than the result. As for the result, it is wrong because it uses bad proxy of focusing the young and only the food service. A better experiment would be the Seattle imposed 15 dollar wage policy. Data was taken from the city statistics monitor to see the economy as a whole and it show significant unemployment. Hours was cut and the minimum wage worker work more jobs

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Does the CPI include the cost of buying bitcoin? That stuff has gone up in price more than prime rib.

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One doesn't have to be an Austrian, or a libertarian, to be anxious about the monetary argument. Absent an increase in supply a spike in demand caused by excess specie, logically implies price inflation. While in 2008 that didn't happen, history gives us too many examples of very bad outcomes. The Weimar Republic, the entire west during the 1970s; yes these episodes can be explained away, still it seems to me the burden of proof doesn't fall on monetarists to prove why the current growth of money won't result in an inflationary shock -- didn't Friedman already do that in any case -- rather's it's upon the anti-monetarist to prove that it won't.

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