Free Republic
Browse · Search
General/Chat
Topics · Post Article

Skip to comments.

ART LAFFER: I Was Wrong About Inflation And The Fed
Business Insider ^ | 01/03/2014 | Rob Wile

Posted on 01/03/2014 10:22:34 AM PST by SeekAndFind

Arthur Laffer is a legend in Washington, having been the leading voice on President Ronald Reagan's hawkish Economic Policy Advisory Board. 

His "Laffer Curve," which argued that there are diminishing returns after a certain point of taxation, was taken as gospel.

If his views are not quite as frequent a presence in public debate, it's largely because Laffer's pet issues, regulation and taxes, took a back seat during the George W. Bush and Barack Obama administrations.  

But Laffer himself still occasionally makes appearances on the public scene.

And in June of 2009, he penned an op-ed warning excessive quantitative easing would inevitably lead to higher inflation and interest rates.

...we haven't ever seen anything like this in the U.S. To date what's happened is potentially far more inflationary than were the monetary policies of the 1970s, when the prime interest rate peaked at 21.5% and inflation peaked in the low double digits ...Gold prices went from $35 per ounce to $850 per ounce, and the dollar collapsed on the foreign exchanges. It wasn't a pretty picture.

Obviously, nothing like that happened.

In an interview with Business Insider from his office in Tennessee, Laffer admitted that he was wrong. The old maxim that dictates increasing the availability of cash through lower interest rates will lead to higher prices, he said, may need to be reexamined. 

"Usually when you find the model this far off, you've probably got something wrong with the model, not that the world has changed," he said. "Inflation does not appear to be monetary base driven," he said. 

He's not totally comfortable with what the Fed is doing, however. "Ask me whether inflation represents longer term problem, I think there's a potential there for excess reserves to create problems."

But it now seems impossible to predict.

(Excerpt) Read more at businessinsider.com ...


TOPICS: Business/Economy; Society
KEYWORDS: artlaffer; fed; inflation; laffercurve; tennessee
Navigation: use the links below to view more comments.
first previous 1-20 ... 61-8081-100101-120 ... 141-147 next last
To: Toddsterpatriot
They think it will help the economy.

Gee, how nice of them. Where can I sign up for that? Run trillions of dollars through my bank account and I'll help the economy too.

Sounds good. We need to cut taxes, cut spending, a lot, and seal the border.

And change the way currency is created.

81 posted on 01/04/2014 5:45:57 AM PST by Partisan Gunslinger
[ Post Reply | Private Reply | To 77 | View Replies]

To: Partisan Gunslinger
Gee, how nice of them. Where can I sign up for that? Run trillions of dollars through my bank account and I'll help the economy too.

You can sign up right here. All you need is trillions in Treasury bonds or guaranteed MBS that the Fed can exchange for cash.

And change the way currency is created.

And improve economics education.

82 posted on 01/04/2014 7:57:30 AM PST by Toddsterpatriot (Science is hard. Harder if you're stupid.)
[ Post Reply | Private Reply | To 81 | View Replies]

To: Toddsterpatriot
You can sign up right here. All you need is trillions in Treasury bonds or guaranteed MBS that the Fed can exchange for cash.

Sweet gig they got going.

83 posted on 01/04/2014 1:08:41 PM PST by Partisan Gunslinger
[ Post Reply | Private Reply | To 82 | View Replies]

To: Partisan Gunslinger

I know. Trading those bonds yielding 3% and up for that cash yielding 0.25%!


84 posted on 01/04/2014 1:25:55 PM PST by Toddsterpatriot (Science is hard. Harder if you're stupid.)
[ Post Reply | Private Reply | To 83 | View Replies]

To: Toddsterpatriot
I know. Trading those bonds yielding 3% and up for that cash yielding 0.25%!

I'm sure most of what they buy beats inflation.

85 posted on 01/04/2014 1:35:03 PM PST by Partisan Gunslinger
[ Post Reply | Private Reply | To 84 | View Replies]

To: Partisan Gunslinger

The Fed gives the banks cash, in exchange for their bonds. The cash yields 0.25%.


86 posted on 01/04/2014 1:42:42 PM PST by Toddsterpatriot (Science is hard. Harder if you're stupid.)
[ Post Reply | Private Reply | To 85 | View Replies]

To: Toddsterpatriot
The Fed gives the banks cash, in exchange for their bonds. The cash yields 0.25%.

I'm sure they stay well ahead of inflation.

87 posted on 01/04/2014 3:22:14 PM PST by Partisan Gunslinger
[ Post Reply | Private Reply | To 86 | View Replies]

To: Partisan Gunslinger
0.25% is ahead of inflation?

Their 3% bonds were paying much more than 0.25%.

88 posted on 01/04/2014 3:28:49 PM PST by Toddsterpatriot (Science is hard. Harder if you're stupid.)
[ Post Reply | Private Reply | To 87 | View Replies]

To: Toddsterpatriot
0.25% is ahead of inflation? Their 3% bonds were paying much more than 0.25%.

You're being inconsistent again. You've said the Fed sends their profits to the Treasury and now you say they can't keep up with inflation.

89 posted on 01/04/2014 3:43:30 PM PST by Partisan Gunslinger
[ Post Reply | Private Reply | To 88 | View Replies]

To: Partisan Gunslinger

You’re confused, again. You said the banks had a sweet gig. Because they get to sell their 3% bonds to the Fed, for cash earning 0.25%.


90 posted on 01/04/2014 4:07:12 PM PST by Toddsterpatriot (Science is hard. Harder if you're stupid.)
[ Post Reply | Private Reply | To 89 | View Replies]

To: Toddsterpatriot
You’re confused, again. You said the banks had a sweet gig. Because they get to sell their 3% bonds to the Fed, for cash earning 0.25%.

Thery have a sweet gig because they buy currency at manufacturing cost which is about $.08 per bill and then loan that out and buy debt instruments which beat inflation, plus they have a 3% target for inflation which means they make more money every year.

How about we try something else rather than this slavocracy.

91 posted on 01/04/2014 4:13:19 PM PST by Partisan Gunslinger
[ Post Reply | Private Reply | To 90 | View Replies]

To: Partisan Gunslinger
Thery have a sweet gig

Yes, the government has a sweet gig. Let's make it smaller.

How about we try something else rather than this slavocracy.

Modern finance is not slavery. Bitcoins or gold won't clear up your confusion.

92 posted on 01/04/2014 4:16:26 PM PST by Toddsterpatriot (Science is hard. Harder if you're stupid.)
[ Post Reply | Private Reply | To 91 | View Replies]

To: Toddsterpatriot
Modern finance is not slavery.

It's a system only a bootlicker like you could love.

Bitcoins or gold won't clear up your confusion.

Bitcoin is also slavery. The miner receives a royalty for every transaction forever.

93 posted on 01/04/2014 4:30:26 PM PST by Partisan Gunslinger
[ Post Reply | Private Reply | To 92 | View Replies]

To: Partisan Gunslinger
Modern finance is not slavery.

It's a system only a bootlicker like you could love.

Try living without it. That's something only an idiot like you could love.

94 posted on 01/04/2014 4:43:20 PM PST by Toddsterpatriot (Science is hard. Harder if you're stupid.)
[ Post Reply | Private Reply | To 93 | View Replies]

To: AdmSmith; AnonymousConservative; Berosus; bigheadfred; Bockscar; cardinal4; ColdOne; ...
...in June of 2009, he penned an op-ed warning excessive quantitative easing would inevitably lead to higher inflation and interest rates.

...we haven't ever seen anything like this in the U.S. To date what's happened is potentially far more inflationary than were the monetary policies of the 1970s, when the prime interest rate peaked at 21.5% and inflation peaked in the low double digits ...Gold prices went from $35 per ounce to $850 per ounce, and the dollar collapsed on the foreign exchanges. It wasn't a pretty picture.

Obviously, nothing like that happened.

In an interview with Business Insider from his office in Tennessee, Laffer admitted that he was wrong. The old maxim that dictates increasing the availability of cash through lower interest rates will lead to higher prices, he said, may need to be reexamined.
"Usually when you find the model this far off, you've probably got something wrong with the model, not that the world has changed," he said. "Inflation does not appear to be monetary base driven," he said.
Thanks SeekAndFind.
95 posted on 01/04/2014 5:23:00 PM PST by SunkenCiv (http://www.freerepublic.com/~mestamachine/)
[ Post Reply | Private Reply | View Replies]

To: Toddsterpatriot
Try living without it. That's something only an idiot like you could love.

The prisoners at the gulag couldn't live without the gulag either, they'd freeze.

96 posted on 01/04/2014 5:34:07 PM PST by Partisan Gunslinger
[ Post Reply | Private Reply | To 94 | View Replies]

To: Partisan Gunslinger

Modern finance is not slavery.


97 posted on 01/04/2014 5:51:30 PM PST by Toddsterpatriot (Science is hard. Harder if you're stupid.)
[ Post Reply | Private Reply | To 96 | View Replies]

To: SeekAndFind

Actually, he was right. We just don’t compute inflation the way we did when he first penned the Curve.


98 posted on 01/04/2014 5:59:06 PM PST by Dead Corpse (I will not comply.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Toddsterpatriot
Modern finance is not slavery.

The Federal Reserve system most certainly is. It's Esau's inheritance.

99 posted on 01/04/2014 7:45:04 PM PST by Partisan Gunslinger
[ Post Reply | Private Reply | To 97 | View Replies]

To: SeekAndFind

Bump for later read.


100 posted on 01/04/2014 9:42:47 PM PST by CPT Clay (Follow me on Twitter @Clay N TX)
[ Post Reply | Private Reply | To 1 | View Replies]


Navigation: use the links below to view more comments.
first previous 1-20 ... 61-8081-100101-120 ... 141-147 next last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
General/Chat
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson