Janet Yellen says it's dangerous to let inflation get lower

I think that she's just saying that if they raise rates too quickly, the economy slows down, which means inflation stays low because people won't be spending money when the economy is bad. It seems like common sense. What is the problem?

If costs don't rise then pay doesn't rise.

But debt as a ratio to income does rise with low inflation.

A nice medium inflation rate leads to pay increaeses and debt as a percent of income goes down.

X-Runner wrote:

If costs don't rise then pay doesn't rise. .

And interest rates don't rise. Jamin's savings will be essentially worthless.

jamin wrote:

"Economist" Janet Yellen is worried that we aren't seeing fast enough increases in the cost of housing, healthcare, food, etc.

Okay, credit where it's due: I did not have a particularly strong opinion about this guy jamin, but what I did have was vaguely negative.

Yet here he's willing to admit to his ignorance and put himself up for ridicule. I think that bespeaks a modest person with a sense of humor.

Props to you.

kibitzer wrote:

jamin wrote:

"Economist" Janet Yellen is worried that we aren't seeing fast enough increases in the cost of housing, healthcare, food, etc.

Okay, credit where it's due: I did not have a particularly strong opinion about this guy jamin, but what I did have was vaguely negative.

Yet here he's willing to admit to his ignorance and put himself up for ridicule. I think that bespeaks a modest person with a sense of humor.

Props to you.

Thanks? Lol

Low inflation leads to deflation. Simple minded people think, "oh, this means all my goods cost less, whoopee!"

But what it really means is nobody buys any goods because they can buy them for less tomorrow, so why buy today? Then the economy collapses, everyone loses their jobs, wages collapse for those who still have jobs, and lots of bad stuff.

Side note, the CPI is a precursor to wage inflation. You want higher wages to make girls like you, you need higher CPI.

When you don't have actual growth, you must have a minimum amount of inflation

The entire stack of cards depends on this. Read up on stagflation

Jamin, I think you're pretty cool, but your understanding of inflation, at least as represented by what you've stated here, appears incomplete; whether that's on purpose or not, I don't know. You can start by looking up what "core inflation" is and what the personal consumption expenditures index is. If you do know what they are, then you should know that's what Janet Yellen is referring to and that would not lead you to label her as an " 'economist' "

aofas wrote:

Jamin, I think you're pretty cool, but your understanding of inflation, at least as represented by what you've stated here, appears incomplete;

This is not limited to understanding inflation with this particular poster.

Janet Yellen says it's dangerous to let inflation get lower

She didn't have that opinion whilst propping up Obama economy while selling out USA's future.

More like if you have too much deflation you don't get real growth. We had deflation from 1792 to 1913 and the economy grew much faster than today. Inflation is supposed to be more stable for unemployment and better for people in debt. But we do still have massive deflation in things like computers which aren't properly reflected in the CPI.

the great depression wrote:

Low inflation leads to deflation. Simple minded people think, "oh, this means all my goods cost less, whoopee!"

But what it really means is nobody buys any goods because they can buy them for less tomorrow, so why buy today? Then the economy collapses, everyone loses their jobs, wages collapse for those who still have jobs, and lots of bad stuff.

Side note, the CPI is a precursor to wage inflation. You want higher wages to make girls like you, you need higher CPI.

Low inflation mostly leads to higher inflation.

no wage Inflation then spins into in tha cpi.

Please, do explain

Hardloper wrote:

We had deflation from 1792 to 1913 and the economy grew much faster than today.

Gee, what happened around 1913?

jamin wrote:

Hardloper wrote:

We had deflation from 1792 to 1913 and the economy grew much faster than today.

Gee, what happened around 1913?

The introduction of the Federal Reserve System.

That's a good point hardloper, but that deflation is driven by technological change and increases in efficiency. Deflation that is brought on by a slump in demand is pernicious and has perverse and potentially long lasting negative effects on the vibrancy of an economy. Japan is a very good example of this, and so are Latvia and Estonia when the euro crisis was in full swing and the proposed solution for re-balancing and restoration of competitiveness in the peripheral area of Europe was to let those countries suffer through deflation. The result has been mass unemployment and an almost interminably slow process of a return to anything resembling normalcy in these economies.

And pretty much no one is saying to jack up inflation to 6 or 8 percent; 4 percent was a common reading during the Reagan years and the right didn't seem to bicker over it as much as they do now when it's barely 1.5%; and this isn't even including core inflation.

aofas wrote:

And pretty much no one is saying to jack up inflation to 6 or 8 percent; 4 percent was a common reading during the Reagan years and the right didn't seem to bicker over it as much as they do now when it's barely 1.5%; and this isn't even including core inflation.

We've changed how we calculate inflation. If we calculated it the same way we did during the Reagan years it would be 20%+. Everyone knows intuitively that inflation is not 1.5%. Look at the prices of lap dances, for instance.

Peter Schiff talked about this on his podcast today

https://www.youtube.com/watch?v=KVP3gTwE6NA