We were energy independent before the Biden administration took over. And the price of energy was relatively low. The war on current energy producers is why energy prices are so high. Stop promoting your WOKE-failing-Keynesian -economic mush!!
What will it take for the Biden Administration to admit that their sanctions against Russia are hurting the western economies more than they are hurting Russia? Peace in Ukraine would be most welcomed of course, but unless the sanctions are lifted Russia has no way to sell its resources.
One thing all foreigners think Americans could do to reduce energy demand is turn down aircon (raise temperature) a couple of degrees, especially in offices. When I was working in Miami I used to put on a sweater in the height of summer because the temperature in the office was so cold. Outside it was sweltering. And it was the same in all offices , not just ours. This is crazy. That was 20 years ago so maybe things have changed, but if not ….. (Conversely of course make sure people do need to wear a sweater when it’s cold outside!)
All of your suggestions are valid, but why not go to the heart of our economic problems and solve more than just inflation? We can do this by implementing a single policy that has instantaneous, universal and ongoing macro-economic effects. That policy is a 50% discount at retail sale, the entirety of which is rebated back to the retail merchant granting it to their customers by the FED or some other monetary authority. Not only will this immediately reverse all of the present inflation, but it will (amazingly) implement beneficial price and asset deflation into profit making economic systems. It will also immediately double everyone's purchasing power and potentially double the demand for every enterprises goods and services so its integrative of the self intersts of the traditionally opposed economic constituency of consumer and enterprise.
I'm surprised that Modern MONETARY Theorists have not recognized such a policy and latched onto it because it ends inflation forever and hence shuts the mouth of every conservative/libertarian who says fiscal spending is inflationary. If you end any possibility of inflation that means you can fund every rational socio-economic and climate/ecological mega project...exactly like MMTers and others would like to see. What do you think Stephanie?
Do we have any reason to think that reducing demand for gasoline (to pick one thing) would reduce the price? Eventually, sure, but has there really been a shortage? I don't drive, I wouldn't know directly. My impression is generally, where in the past businesses were able to squeeze labor to obtain high profits in the recovery, this time that wasn't working so they went for high prices instead. There's no competition with an alternative business model to worry about. Whatever reduction in demand we could create with WFH, transit, etc., they could probably easily make up by lowering the price a bit. Would going from $5 to $4 solve the political problem?
"First and foremost, we need a negotiated end to the war in Ukraine."
Most people don't appreciate where this war is probably headed. If the U.S. and other NATO countries keep supplying Ukraine with advanced weaponry, the Ukrainians are going to slaughter--SLAUGHTER--the Russians. And it will happen in the next 60 days. The so-called experts are predicting a war that will last years--this is almost certainly nonsense. The Russians are massing in the southeastern region of Ukraine--historians will soon be referring to them as the "Sitting Ducks of Donbas." By mid-August all Russian armored vehicles will be destroyed by GPS guided missiles (along with any Russian naval vessel sailing the Black Seas that isn't a submarine), and so they won't even be able to cart away the Russian corpses that will pile up by the thousands per day.
Why is this important? Because Putin has threatened nuclear war. Believe him. Inflation will be the least of our problems.
Really nice appearance on Hasan's show last night. I guess this will sound like nitpicking, but Stephanie at one point mentioned increased "tax revenue" as part of the explanation for a lower deficit. But based on her own research and writings, Stephanie has shown that there is no such thing as FEDERAL (as opposed to state and local) tax "revenue." (Her 1998 paper is a seminal work on this issue.) It's impossible to spend these federal tax dollars because the money disappears as soon as the Treasury deposits those TAX RECEIPTS in its account at the Fed to offset deficit spending. It's always new money created out of thin air that is spent by the federal gov't.
Why is this distinction important? If Americans think they have to be taxed FIRST before the federal gov't can spend the money, then, well, they'll be less likely to want the gov't to spend money even when that spending is crucial to creating a prosperous economy.
Anyway, congrats on a forceful and cogent defense of MMT.
Working from home sure had an effect on gas prices when the pandemic hit. Why not use what we learned then? It wouldn't be a lockdown and it would reduce costs for those who must work (essential workers).
I'm glad to hear that Professor Friedman had second thoughts when he saw the effects of his policy. He had effectively separated shareholders from citizens, which broke the 'We're all in this together' consensus from WWII and the moon landing project. The bean counters did the rest.
Kelton is an adherent of the 'rising oil prices cause inflation' crowd!!!
Not much of a surprise. Rising oil prices are a symptom of inflation, not the cause of it. A rising oil price, all things remaining the same, has a deflationary effect, not an inflationary effect. Let us say one earns $1000 per month and energy use comprises $200 of that amount. A rise in the price of energy such that one must spend $300 to obtain the same amount requires one to spend $100 less on other goods - aka a recessionary effect.
But the prices of many goods are rising such that ceteris paribus does not apply.
What is causing the general price rise? Well, government reaction to Covid throttled production and trade everywhere. Then government used central banks to print massive amounts of money to throttle it even more.
If one seeks an end to inflation, then one should let those who produce do so. Government, so inclined to limit and destroy production, should not even be involved other than to clear the government imposed roadblocks to production, to oil production, food production, trade, etc.
But wait, there’s more: two driving habits that can substantially reduce gas consumption: 1) wait to accelerate until you’re on a downhill grade. Gaining speed down hill uses substantially less gas, amplified by 10’s of millions of autos. This could mean a delay of just a few seconds in many cases. I call this inertia driving. I’ll even accelerate on a lesser inclined road to coast up an elevated section. Inertia driving gains me 30% more mpg on longer drives with many hills. 2) Don’t do complete stops when it is obvious that safety would not be compromised. If you have to accelerate rapidly because you didn’t stop, you’ve just wasted 10 times (my guess) the fuel you would have saved by not stopping. Don’t do rapid accelerations. Probably don’t want to “not stop” at intersections with red/yellow/green lights. But, a “stop sign” has the intelligence of a rock. It has no idea if it’s safe to not do a complete stop.
I'm surprised you are not talking about windfall profit taxes. Is that not a legitimate way to encourage a reduction in prices? Is this chart inaccurate?
There are a few things in life, if any, that could be worse than wishful thinking. "We" shouldn't be constrained in analysis by what the Biden administration believes to be viable, or the Democrats as a political party. It is this administration that requires the leveling.
1. First, we had the wishful thinking of Covid repression and lockdowns to be appropriate responses, while it was already clear that the current vaccines couldn't stop the spread. Moreover, we can still see such grupthink on a much larger scale in China. It is misplaced policy related to Covid that should be pinpointed, rather than abstractly blaming it on the pandemic. It is the people in charge that have to be accountable for particular choices.
2. For a while now, there was wishful thinking that is a good idea to reduce nuclear energy production. Now we have coal plants powering up in the EU, related to another wishful thinking well before the war that it would be viable to reduce the natural gas production.
3. The gas prices in the US were also going up for a while before the war, due to the green agenda. It is this agenda that requires serious reconsideration about its pace and means. None of the issues at hand are short-term, but they have to be considered. It goes both ways that action on climate and possible oil supply increases are not short-term measures.
4. Where are the critical parts for the solar panels, such as polysilicon, coming from? Maybe from the coal production and slave labor in the Chinese Uyghur region? None of that is green or ethical.
5. The same could be asked for electric battery production. How are renewables ever going to be enough to cleanly replace fossil fuels, without resorting to more nuclear power?
6. While we should oppose Putin, oil sanctions have been a net benefit for Russia. They are exporting it elsewhere, at higher prices. Those sanctions need reconsideration or abolishment.
Like elsewhere in life, goals and policies must be realistic and well-paced. Otherwise, there is nothing faster that brings to ruins than failed wishful thinking!
We were energy independent before the Biden administration took over. And the price of energy was relatively low. The war on current energy producers is why energy prices are so high. Stop promoting your WOKE-failing-Keynesian -economic mush!!
If Milton Friedman were here he would expose you for who you are: “A misguided leftist so called economist”
What will it take for the Biden Administration to admit that their sanctions against Russia are hurting the western economies more than they are hurting Russia? Peace in Ukraine would be most welcomed of course, but unless the sanctions are lifted Russia has no way to sell its resources.
One thing all foreigners think Americans could do to reduce energy demand is turn down aircon (raise temperature) a couple of degrees, especially in offices. When I was working in Miami I used to put on a sweater in the height of summer because the temperature in the office was so cold. Outside it was sweltering. And it was the same in all offices , not just ours. This is crazy. That was 20 years ago so maybe things have changed, but if not ….. (Conversely of course make sure people do need to wear a sweater when it’s cold outside!)
All of your suggestions are valid, but why not go to the heart of our economic problems and solve more than just inflation? We can do this by implementing a single policy that has instantaneous, universal and ongoing macro-economic effects. That policy is a 50% discount at retail sale, the entirety of which is rebated back to the retail merchant granting it to their customers by the FED or some other monetary authority. Not only will this immediately reverse all of the present inflation, but it will (amazingly) implement beneficial price and asset deflation into profit making economic systems. It will also immediately double everyone's purchasing power and potentially double the demand for every enterprises goods and services so its integrative of the self intersts of the traditionally opposed economic constituency of consumer and enterprise.
I'm surprised that Modern MONETARY Theorists have not recognized such a policy and latched onto it because it ends inflation forever and hence shuts the mouth of every conservative/libertarian who says fiscal spending is inflationary. If you end any possibility of inflation that means you can fund every rational socio-economic and climate/ecological mega project...exactly like MMTers and others would like to see. What do you think Stephanie?
Do we have any reason to think that reducing demand for gasoline (to pick one thing) would reduce the price? Eventually, sure, but has there really been a shortage? I don't drive, I wouldn't know directly. My impression is generally, where in the past businesses were able to squeeze labor to obtain high profits in the recovery, this time that wasn't working so they went for high prices instead. There's no competition with an alternative business model to worry about. Whatever reduction in demand we could create with WFH, transit, etc., they could probably easily make up by lowering the price a bit. Would going from $5 to $4 solve the political problem?
"First and foremost, we need a negotiated end to the war in Ukraine."
Most people don't appreciate where this war is probably headed. If the U.S. and other NATO countries keep supplying Ukraine with advanced weaponry, the Ukrainians are going to slaughter--SLAUGHTER--the Russians. And it will happen in the next 60 days. The so-called experts are predicting a war that will last years--this is almost certainly nonsense. The Russians are massing in the southeastern region of Ukraine--historians will soon be referring to them as the "Sitting Ducks of Donbas." By mid-August all Russian armored vehicles will be destroyed by GPS guided missiles (along with any Russian naval vessel sailing the Black Seas that isn't a submarine), and so they won't even be able to cart away the Russian corpses that will pile up by the thousands per day.
Why is this important? Because Putin has threatened nuclear war. Believe him. Inflation will be the least of our problems.
We should have been off carbon a long time ago. Plus Russia invaded Ukraine, Plus, the oil companies are posting higher than normal profits
Great analysis, as always from Ms. Kelton
The commentariat here (for the most part) is precisely why administration after administration can continue to get away with what they do or don't do.
The most aggressively narrative-managed population in the entire planet.
The success of which is distressingly evident.
Stop Blinken!
Stop nuclear brinkmanship!
Stop disproductive finance!
Stop profit incentive deathcare!
Stop building coalitions and walls!
Stop the 1% extracting rent from the 80%!
Stop entrenched monopoly monetary allocation!
Stop being so numbingly credulous!
If we don't, the new giant sucking sound is the drain.
Really nice appearance on Hasan's show last night. I guess this will sound like nitpicking, but Stephanie at one point mentioned increased "tax revenue" as part of the explanation for a lower deficit. But based on her own research and writings, Stephanie has shown that there is no such thing as FEDERAL (as opposed to state and local) tax "revenue." (Her 1998 paper is a seminal work on this issue.) It's impossible to spend these federal tax dollars because the money disappears as soon as the Treasury deposits those TAX RECEIPTS in its account at the Fed to offset deficit spending. It's always new money created out of thin air that is spent by the federal gov't.
Why is this distinction important? If Americans think they have to be taxed FIRST before the federal gov't can spend the money, then, well, they'll be less likely to want the gov't to spend money even when that spending is crucial to creating a prosperous economy.
Anyway, congrats on a forceful and cogent defense of MMT.
Working from home sure had an effect on gas prices when the pandemic hit. Why not use what we learned then? It wouldn't be a lockdown and it would reduce costs for those who must work (essential workers).
I'm glad to hear that Professor Friedman had second thoughts when he saw the effects of his policy. He had effectively separated shareholders from citizens, which broke the 'We're all in this together' consensus from WWII and the moon landing project. The bean counters did the rest.
Kelton is an adherent of the 'rising oil prices cause inflation' crowd!!!
Not much of a surprise. Rising oil prices are a symptom of inflation, not the cause of it. A rising oil price, all things remaining the same, has a deflationary effect, not an inflationary effect. Let us say one earns $1000 per month and energy use comprises $200 of that amount. A rise in the price of energy such that one must spend $300 to obtain the same amount requires one to spend $100 less on other goods - aka a recessionary effect.
But the prices of many goods are rising such that ceteris paribus does not apply.
What is causing the general price rise? Well, government reaction to Covid throttled production and trade everywhere. Then government used central banks to print massive amounts of money to throttle it even more.
If one seeks an end to inflation, then one should let those who produce do so. Government, so inclined to limit and destroy production, should not even be involved other than to clear the government imposed roadblocks to production, to oil production, food production, trade, etc.
But wait, there’s more: two driving habits that can substantially reduce gas consumption: 1) wait to accelerate until you’re on a downhill grade. Gaining speed down hill uses substantially less gas, amplified by 10’s of millions of autos. This could mean a delay of just a few seconds in many cases. I call this inertia driving. I’ll even accelerate on a lesser inclined road to coast up an elevated section. Inertia driving gains me 30% more mpg on longer drives with many hills. 2) Don’t do complete stops when it is obvious that safety would not be compromised. If you have to accelerate rapidly because you didn’t stop, you’ve just wasted 10 times (my guess) the fuel you would have saved by not stopping. Don’t do rapid accelerations. Probably don’t want to “not stop” at intersections with red/yellow/green lights. But, a “stop sign” has the intelligence of a rock. It has no idea if it’s safe to not do a complete stop.
I'm surprised you are not talking about windfall profit taxes. Is that not a legitimate way to encourage a reduction in prices? Is this chart inaccurate?
https://www.macrotrends.net/2501/crude-oil-vs-gasoline-prices-chart
There are a few things in life, if any, that could be worse than wishful thinking. "We" shouldn't be constrained in analysis by what the Biden administration believes to be viable, or the Democrats as a political party. It is this administration that requires the leveling.
1. First, we had the wishful thinking of Covid repression and lockdowns to be appropriate responses, while it was already clear that the current vaccines couldn't stop the spread. Moreover, we can still see such grupthink on a much larger scale in China. It is misplaced policy related to Covid that should be pinpointed, rather than abstractly blaming it on the pandemic. It is the people in charge that have to be accountable for particular choices.
2. For a while now, there was wishful thinking that is a good idea to reduce nuclear energy production. Now we have coal plants powering up in the EU, related to another wishful thinking well before the war that it would be viable to reduce the natural gas production.
3. The gas prices in the US were also going up for a while before the war, due to the green agenda. It is this agenda that requires serious reconsideration about its pace and means. None of the issues at hand are short-term, but they have to be considered. It goes both ways that action on climate and possible oil supply increases are not short-term measures.
4. Where are the critical parts for the solar panels, such as polysilicon, coming from? Maybe from the coal production and slave labor in the Chinese Uyghur region? None of that is green or ethical.
5. The same could be asked for electric battery production. How are renewables ever going to be enough to cleanly replace fossil fuels, without resorting to more nuclear power?
6. While we should oppose Putin, oil sanctions have been a net benefit for Russia. They are exporting it elsewhere, at higher prices. Those sanctions need reconsideration or abolishment.
Like elsewhere in life, goals and policies must be realistic and well-paced. Otherwise, there is nothing faster that brings to ruins than failed wishful thinking!