11 Comments
Sep 28, 2022Liked by Claudia Sahm

Excellent presentation. I wish the Federal Reserve would open their eyes/ears.

Expand full comment
Sep 27, 2022Liked by Claudia Sahm

Thank you for a very insightful summary of rather complex data. The reality of countries, under certain conditions, partially exporting their inflation was particularly thought provoking!

Expand full comment

I also appreciate your discussion of "the poor do not cause inflation." It would be good to develop that into a separate post.

Expand full comment

Are you able to provide URLs to the papers which describe how sources of inflation can be distinguished between supply-driven, demand-driven and ambiguous? It would seem that if we can make those distinctions, then we have the beginnings of new policy tools.

Expand full comment
Sep 27, 2022Liked by Claudia Sahm

Great presentation

Expand full comment

Thank you. When you say that a finger should be wagged at the rich, given that there is no such policy tool, are you implying that the Fed is thus going to have to hike much more than what is priced in/expected yet?

The rich are consuming and they have the largest excess savings, so their demand is interest insensitive.

Just wondering whether that's your thought and you stopped short of saying it, making your recession prediction even more inexorable.

Expand full comment

Claudia and fellow community members,

I don't know if this comment section is the right place for this, but I wanted to share an idea for fighting inflation from the supply side of the equation, and get your thoughts as to whether this approach sounds like it has potential, or if I'm missing something.

The idea is to create "Federal Businesses" that serve as guaranteed competitors in the market, whose sole purpose is to create supply to influence price stability. They would be funded by the federal government via money creation (from the US Treasury, since the US dollar is fiat) which would ensure that operations of the Federal Business would continue in the face of fluctuating market conditions.

Since the Federal Business operates from government funding and does not require profits to stay afloat, they have no incentive to raise their prices. With such a business competing in the market that doesn't raise their prices, can't go out of business, and can't be bought out, any other businesses competing with it will not want to raise their prices, because if they do they risk losing business to their Federal Business competitor. With one competitor refusing to raise prices and the rest not wanting to due to competition, you have created price stability and halted inflation in the market.

The interesting thing with this approach is that, while I would consider federally-funded businesses to be a left-leaning solution, its strangely palatable from a right-wing perspective too. This strategy is implemented without increasing taxes, without increasing government debt (no bond sales necessary), and doesn't require any sweeping market mandates from the government... prices are held in place using market competition.

Let me know what you all think!

Expand full comment