John Cochrane argues that fiscal theory can explain both the period of low inflation and the return of rapidly rising prices after the pandemic. But it offers limited guidance to policymakers beyond what is already well-known
Save time by listening to our audio articles as you multitaskA wonkish theory, laid out in glorious detail in a new book by John Cochrane of Stanford University’s Hoover Institution, would offer a potential explanation. “The Fiscal Theory of the Price Level” builds a theory of inflation as ambitious as that proposed by John Maynard Keynes’s “The General Theory” or Milton Friedman’s and Anna Schwartz’s “A Monetary History”.
Mr Cochrane is careful to note that the adjustment of the price level is not instantaneous. People can be poor judges of a government’s credibility when it comes to paying off debts. Just like stocks, prices are able to deviate from fundamentals. Yet in the long run, they adjust. A government that hands out money without eventually running surpluses will not avoid inflation for ever.
Mr Cochrane also brings fiscal theory to bear on America’s inflation in the 1970s-80s. In the mid-1970s price rises exceeded 12%. The Federal Reserve lifted interest rates; inflation dropped to 5% by 1977. Yet Mr Cochrane points out that inflation shot up again to more than 14% by 1980, in part because America failed to get its fiscal house in order.
Deutschland Neuesten Nachrichten, Deutschland Schlagzeilen
Similar News:Sie können auch ähnliche Nachrichten wie diese lesen, die wir aus anderen Nachrichtenquellen gesammelt haben.
John Major says 'every effort' must be made over NI Protocol disputeFormer Prime Minister Sir John Major has said 'every effort' must be made to ensure the NI Protocol dispute is solved
Weiterlesen »
John Mayer Hitting the Road With Solo Tour in 2023, Including Stop in BostonIn what’s being billed a “groundbreaking solo acoustic arena tour,” and for the first time in his career, John Mayer is hitting the road with 19 concert shows across North America in 2023. His second stop will be at Boston’s TD Garden on March 13. The news was announced on Thursday morning with a news release from Live Nation, as…
Weiterlesen »
Daughter of Sopranos star John Ventimiglia dies months after giving birthOdele Ventimiglia's heartbroken family took to social media to share the news of the 25-year-old's passing earlier this month.
Weiterlesen »
St John's Wood: Firefighters tackle blaze at St Mark's churchAuthorities say all local residents are safe and accounted for and the fire is under control.
Weiterlesen »
Sopranos star John Ventimiglia's daughter, 25, dies months after giving birthJohn Ventimiglia’s family have announced the devastating news that the star’s 25 year old daughter Odele has died just months after giving birth to her own daughter, Shiloh
Weiterlesen »
St John's Wood: Historic church destroyed in large fireLocal residents describe seeing flames and 'smoke everywhere' before the roof caved in.
Weiterlesen »