{"id":498,"date":"2023-12-26T16:00:00","date_gmt":"2023-12-26T23:00:00","guid":{"rendered":"https:\/\/marginalnonhermit.com\/?p=498"},"modified":"2024-08-15T19:38:49","modified_gmt":"2024-08-16T01:38:49","slug":"inflationary-expectations","status":"publish","type":"post","link":"https:\/\/marginalnonhermit.com\/?p=498","title":{"rendered":"Inflationary Expectations"},"content":{"rendered":"\n<iframe loading=\"lazy\" id=\"odysee-iframe\" width=\"560\" height=\"110\" src=\"https:\/\/odysee.com\/$\/embed\/@MarginalNonHermit:3\/inflationary-expectations:8?r=8gvoByECHNgc2BfQ5o91oxf89bpi1Ui4\" allowfullscreen><\/iframe>\n\n\n\n<p class=\"\">In <a href=\"https:\/\/mises.org\/wire\/inflationary-expectations-do-not-cause-inflation\">this article<\/a> by Frank Shostak, I think he&#8217;s made a bit of a mistake. It may be that I&#8217;m missing some subtle point, but I really do think I&#8217;m on to something here.<\/p>\n\n\n\n<!--more-->\n\n\n\n<p class=\"\">Frank argues that inflation can only affect some goods because any additional spending on, say, oil, must be counterbalanced by reduced spending in other sectors.<\/p>\n\n\n\n<p class=\"\">I argue two points:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li class=\"\">Individuals can decide to reduce their cash balances, which can bid up the prices of real factors.<\/li>\n\n\n\n<li class=\"\">Those expecting high inflation (group B) can buy all kinds of assets from those not expecting high inflation (group A).<\/li>\n<\/ol>\n\n\n\n<p class=\"\">Based on these two points, it does indeed seem possible for there to be a general rise in prices due to differences in expectations. Basically, the velocity of money becomes inhomogeneous between groups A and B, resulting in dollars (net) going to group A and real goods and non-dollar assets going to group B.<\/p>\n\n\n\n<p class=\"\">As long as group A holds a wide variety of goods, the price increases will appear roughly uniform over all sectors, due to the bidding up by group B.<\/p>\n\n\n\n<p class=\"\">I also refer to <a href=\"https:\/\/mises.org\/library\/human-action-0\/html\/pp\/782\">this section<\/a> of <em>Human Action<\/em>, in which Mises describes the crack-up boom. Mises notes that velocity can increase as people try to escape into real goods.<\/p>\n\n\n\n<p class=\"\">Also referenced are the current <a href=\"https:\/\/www.federalreserve.gov\/releases\/h6\/20231226\/\">money supply<\/a> and <a href=\"https:\/\/www.bea.gov\/sites\/default\/files\/2023-12\/gdp3q23_3rd.pdf\">GDP numbers<\/a>, mostly to show that these two numbers are of about the same order of magnitude.<\/p>\n\n\n\n<p class=\"\">Update: Now also available <a href=\"https:\/\/www.youtube.com\/watch?v=bBbXbEyRT-Y\">on YouTube<\/a>.<\/p>\n\n\n\n<p class=\"\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Can expectations of inflation cause more inflation? I consider an article by Frank Shostak, and I think I might have found a slight error.<\/p>\n","protected":false},"author":1,"featured_media":499,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,6,2],"tags":[37,185],"class_list":["post-498","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economics","category-essay","category-video-link","tag-economics","tag-inflation"],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/marginalnonhermit.com\/wp-content\/uploads\/2023\/12\/dollars.jpg?fit=800%2C529&ssl=1","jetpack_sharing_enabled":true,"jetpack_likes_enabled":true,"_links":{"self":[{"href":"https:\/\/marginalnonhermit.com\/index.php?rest_route=\/wp\/v2\/posts\/498","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/marginalnonhermit.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/marginalnonhermit.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/marginalnonhermit.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/marginalnonhermit.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=498"}],"version-history":[{"count":2,"href":"https:\/\/marginalnonhermit.com\/index.php?rest_route=\/wp\/v2\/posts\/498\/revisions"}],"predecessor-version":[{"id":579,"href":"https:\/\/marginalnonhermit.com\/index.php?rest_route=\/wp\/v2\/posts\/498\/revisions\/579"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/marginalnonhermit.com\/index.php?rest_route=\/wp\/v2\/media\/499"}],"wp:attachment":[{"href":"https:\/\/marginalnonhermit.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=498"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/marginalnonhermit.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=498"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/marginalnonhermit.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=498"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}