tag:blogger.com,1999:blog-2499715909956774229.post7998608960043031518..comments2024-03-22T22:37:02.639-07:00Comments on Stephen Williamson: New Monetarist Economics: FOMC Statement, December 14, and the Recent Increases in Bond YieldsStephen Williamsonhttp://www.blogger.com/profile/01434465858419028592noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-2499715909956774229.post-57023840853952346672010-12-17T05:00:47.791-08:002010-12-17T05:00:47.791-08:00The US government will inflate the debt away and d...<i>The US government will inflate the debt away and default on it implicitly before they default explicitly.</i><br /><br />Who says? It seems to me that Bernanke would not be complicit in this, so they would have to completely discard any concept of Fed independence. The only people who would support this are people who think the Fed is too inflationary (and want to adopt a gold standard, say), nobody would support ending Fed independence purely to create higher inflation.<br /><br />On the other hand, I can see a populist case being made for default, particularly when so much US debt is held by foreigners.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-61854760863853453202010-12-15T14:19:45.608-08:002010-12-15T14:19:45.608-08:00JP,
Yes, this is correct. If we think about how i...JP,<br /><br />Yes, this is correct. If we think about how inflation can get started in this environment, the likely place to start looking is commodity prices. On your fed funds market question: I answered this after your comment on the other post.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-10033170221320910892010-12-15T13:26:17.422-08:002010-12-15T13:26:17.422-08:00"Now, what has happened since November 3? The..."Now, what has happened since November 3? The break-even inflation rate has stayed roughly constant."<br /><br />Andolfatto's chart (http://andolfatto.blogspot.com/2010/12/nominal-interest-rates-and-inflation.html) shows that some measures of break-even inflation are actually creeping up. My calculations show the 10 year spread above what is was on Nov 3.<br /><br />Referencing your post on the "broadest possible measures of inflation", it probably also makes sense to also look at stock and commodity indexes since Nov 3 for inflation expectations. These are almost all up.<br /><br />I left a question on an older post about the Fed Funds market? Any thoughts?JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.com