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Inbox Reader Question: Thoughts on Yield Curve Control?

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Inbox Reader Question: In two years time (to strip out pandemic effects) would you support deliberately running the economy at 3% inflation to try and figure out the NAIRU?

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Inbox Reader Question: I was wondering if you have done any work or have any knowledge about the federal definition of the poverty level. It’s a key metric used by many laws to determine eligibility for so many social programs. Does the poverty level have any role in Fed decision making? Does the definition of poverty in the US need to be updated? Do you have any opinions about the defined federal poverty level?

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Inbox Reader Question: I often see you write about the unfairness in economics where “old white men” make all the decisions and denigrate people unlike themselves. But, surely this is only an issue in North America and Western Europe? The world is a lot bigger than those two regions. Are there no economists in large non-white countries like China, Japan, India, Indonesia, Nigeria, Egypt, Brazil, etc.? Surely there are.

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Inbox Reader Question: What do you think of MMT? 1b. Haven’t their policies/prescriptions already been tried during the 1917 to 1991 experiment with state-controlled economies in the USSR and its satellites (Govt created all money, Govt decided how money gets allocated, etc)?

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Inbox Reader Question: Where are the supply bottle necks and what is preventing producers from investing in production gains?

One thing I’m trying to wrap my head around is both PPI and CPI are up. (If PPI comes down then does that mean wider margins and some savings can be passed onto consumer?)

Policy is typically demand side with exception of regulations. Ending policy (especially fiscal) might lead to a demand softening, which also proves producers that the right move was to not increase capacity.

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Inbox Reader Question: What are your thoughts on the component breakdown behind what is driving inflation?

There’s both weighting contribution as well as which goods/services have been going up the most. In the past it used to be education and healthcare costs that increase more than the average. While internet goods have been less. Leading to an “inflation in things we need but not in things we want”. (Ie this is up to 2017, need a 2022 update). While housing is arguably a high weight and probably drives a large part of index. With both low inventory and low rates, home prices have been steadily increasing.

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Inbox Reader Question: As I understand, when the Fed wants to stimulate the economy, it buys bonds (OMO) to put money in banks, increasing loanable funds (LF) and so reducing interest rates. It sells bonds to raise rates.

On the fiscal policy end, I have suggested an NIT program, basically similar to UBI but run as a tax credit with a monthly distribution; and, on the monetary policy end, I have suggested that in a recession, the Fed could advise the Treasury to issue new currency (not debt) into the NIT balance sheet for immediate distribution in the next month's checks. This would go into LF because it goes into bank accounts—personal when consumers receive the money, and then corporate when purchases are made—just the same as buying bonds. To counter unwanted rate increases, the Fed could sell bonds; balance is reached long-term by reducing bond buying in non-recession times, since some money was issued as direct payments.

Is this a sane approach to monetary policy? Would this be a useful tool for the Fed to have, or is it a Very Bad Idea™? There are probably implications for the Fed issuing currency and then selling bonds, rather than just buying bonds, but if they could buy bonds now then why can't they sell bonds now and buy them back later? Plus if they need to raise LF anyway, then any bond sales would be smaller than the amount distributed to consumers, right?

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Inbox Reader Question: What’s your best guess for why unemployment remains over 5%? What can the govt do to get that number lower without triggering inflation issues?

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Inbox Reader Question: 2. I saw you read the Noah Smith + Larry Summers interview, and you were quite critical of it. What in your opinion were the biggest flaws in Summers’ thinking, especially in regards to inflation?

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Inbox Reader Question: I’m still really on the fence about how seriously to take inflation right now. I hear a lot of different opinions from people I respect on it. At what point do you think we should actually start to make policy changes to slow down inflation? Is there a particular threshold where you’d agree it’s time to slow things down a bit to prevent inflation from getting out of control? How far away are we from that threshold?

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I found it interesting that the Canadian conservatives would create a version of the Sahm Rule that would trigger at the provincial level, which would be like our states. It seems more fiscally efficient, especially if the economic fallout is hyper-localized.

All of this makes me wonder how such a discussion would go over in the U.S. if states had the same stabilizer but could “opt out.” That is what we essentially saw this year with cuts to extended unemployment benefits in some states. To prevent political or partisan interventions, would a more effective approach to automatic stabilizers preclude provincial opt-outs?

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Before covid there was a consensus around the world about secular stagnation and the lack of aggregate demand against supply in the world economy broadly for several reasosn(inequality,deleveraging,savings among boomers), interest rates have been at the zero lower bound basically since 2008 to account for this. After the great depression there was a broadly similar period of stagnation, characterised by deflation and an inadequate fiscal response. The thing that got the US and other countries out of this period was WW2 and the enormous govt spending that it caused. After WW2 the US grew and prospered arguably until stagflation hit in the 1970s. My question is do you think the fiscal response from covid will do to secular stagnation what WW2 did to the Great depression? (Btw, im here after I heard u talk about the Sahm rule on the david mcwilliams podcast)

Daniel O'Neill 16yrs old, Ireland

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What is typically left unsaid when inflation is discussed?

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How much deficit sending can a government realistically maintain? I am from Canada where we are in the midst of an election. The Liberal government is proposing running a budget deficit of 363 billion, or 17 per cent of gross domestic product, in the fiscal year that ended March 31. It's estimated that by the time it's all said and done, the Liberal government will have accumulated more debt than the 22 prime ministers that preceded him combined. Although I know the general rhetoric is that large deficits are bad and expensive to service (per the conservative party at least), I'm wondering how much of that is actually true.

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Question: Does QE have a significant impact on the soaring US house prices? And when do you expect the Fed to raise interest rates?

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