No, think of it intuitively. The whole concept of sticky prices is that for whatever reason, it's easier to change output than prices, so firms cannot or will not adjust prices, and prefer adjusting output instead, so markets can't clear. This works on both the demand and supply side. Ex: less demand for your good; instead of shifting down price and output, your marginal cost of shifting down output is much less, so all you do is shift down output and keep price constant---so markets are sub-optimal and not in equilibrium. I can see it for downwards sticky wages because things like unionization imply a huge cost to shifting wages down, so you'd rather fire more employees instead. For firms charging prices on their items...I can't really see it. There's a whole school of New Keynesian "menu cost" models that try to tidy this up with all kinds of contrived penalties to changing prices...but I haven't seen an argument for sticky prices that is as nearly as convincing as unionization is for downward sticky wages. Empirically speaking, the literature on sticky prices/wages is pretty out there too, if memory serves. Jury's still out on whether this actually happens, and in what markets. Basically, sticky wages/prices are a way for New Keynesians to cozy up to the classical model and the Lucas critique, and they were more constructed as a theoretical exercise for why markets might not clear perfectly, and therefore why there would be need for government intervention. I mean, I'm on board with that sentiment, but the way it's defended in the neoclassical model is lacking in my opinion. (As yet another aside, sticky prices were only researched because the classic New Keynesian sticky wages model had a few things that didn't fit with the data, most notably inconsistencies on changes in wage, average labour productivity and price level)
Got it. Your previous post said that it was fallacy to think that prices change more easily than output (typo?). I got confused.
hmm...I think I might have phrased it wrong, was trying to get across the point that prices should be easier to change than output, and it was a fallacy to think otherwise.
If gold is a finite mineral resource and I'm a ".01%er", I would want a return to the gold standard, too. Or maybe the silver standard. So I could buy it all and control your world.
From my experiences interacting with Ron Paul supporters, this topic is one of considerable embarrassment for them, and is a blemish that is more commonly minimized than accentuated (only the most ardent Paul supporters champion this issue...). As someone who really doesnt have a 'candidate' or party affiliation, it's difficult to reconcile the sensibility with which he approaches other issues (most notably foreign policy) with his economic policies which are obviously less tenable....
You can't really be this dumb. So the world 200 years ago is the same as the world today, and we can go about organizing ourselves in the same way? There were a lot of things that made sense 200 years ago that don't any longer. Seriously man ... really?
I agree with this, as far as his supporters go. But while staying quiet on the gold standard, they do aggressively support the "End the Fed" movement, which has many of the same problems. Someone should start this same thread asking them to justify End the Fed and why/how that would work - I suspect you'd end up with the same results, with the only defense being some youtube videos but no one actually being able to articulate their own thoughts on how it would all play out.
200 years ago? check your history, way more recent than that Why do you say the Gold Standard made sense 200 years ago but not today? please explain what has changed that makes this the case.
Isn't gold vs. fiat a false choice? The arguments against the gold standard presented here are compelling, but so is the notion that we don't want to give an unelected body the power to devalue our wealth with a few keystrokes. Setting gold aside, is pegging currency to anything tangible worthwhile?
And you would be correct. It has been established long ago, in my opinion, that arguing economics with a Ron Paul supporter, or Ron Paul groupie, is an exercise in futility. They ignore, and apparently put others on ignore for disagreeing, any argument that goes against their hero's "philosophy." Show them that they are wrong? They move the goalposts, forward and back as suits them. Try to pin them down? They get in a snit and accuse you of "fill in the blank." Sure, this doesn't hold with every supporter of Dr. Paul. Rhad and Wes come to mind. While I disagree with them on the Paul Issue, I respect their opinions. I have little respect for those like Hightop and tallanvor, who simply make Dr. Paul look bad. The irony is that they haven't a clue that that is what they do.
Gold lasts longer than tulips. Gold lasts longer than governments and therefore gold lasts longer than a government's word (fiat money). This is why precious metals were used for currency and not flowers. I don;t support Paul. I think hes nuts. Swing and a miss.
Inflation isn't always a monetary phenomenon (contrary to Milton Friedman), nor is it some insidious hidden tax that destroys people's savings (contrary to Ron Paul). Sometimes it's just built into an economy, and there's very little we can do about it. The only thing the Fed can create with a keystroke are reserves. They can't just pump money into the economy at will. Banks are ultimately the gatekeepers in controlling how much of their reserves make it into the economy. Take a look at the years 2000 and 2010: Year 2000 - Large fiscal surplus ($230 billion), removing far more money from the private sector than spending into it. - The Fed encourages savings like crazy, destroying excess bank reserves and setting the prime interest rate as high as 9.5% - The inflation rate was 3.4% Year 2010 - Large fiscal deficit ($1.26 trillion), removing far less money from the private sector than spending into it - The Fed is discouraging savings and encouraging lending, tripling the level of bank reserves and setting the prime interest rate at 3.25% - The inflation rate was 1.6% If you don't like that the banking system has so much control over the money supply, that's another issue...but the Fed doesn't have the power to "devalue our wealth with a keystroke."
A currency board/peg poses much of the same problems. Really, removing discretion in monetary policy is a bad idea. I pointed to the currency board as an example of a compromise on this issue, one that went very wrong. You can also see how fixed pegs go disastrously wrong in the Asian Financial Crisis, and Black Wednesday in England.
Just got into a huge argument with someone I know, here are some of his quotes... lol. Basically he chastises me for disagreeing with him. Lol. Some blatantly wrong information here. Also he just blatantly ignores European austerity measures that have recently failed. Inflation=theft? And then I got mad at him and dropped this: Lol.
If one has savings in dollars, and inflation weakens the value of the dollar, then inflation hurts people's savings.
I totally understand what you're saying. We really can't have money devalue. It must remain constant. We all know the best way for a country to improve its economy is for people to save money. Once we horde all the gold and not give them away, the US will certainly show the rest of the world our incredible gold hording power. I see nothing but the most glorious future for America if this happens. Glorious!
On the flip side, since most Americans are debtors, inflation helps them get out of their debts faster.
