Because of their flawed model for understanding monetary policy,
they ignored asset inflation, and patted themselves on the back for the lack of goods price inflation.
Central banks did not view inflation broadly enough, focusing on goods price inflation, and
ignoring the asset inflation that was distorting the economy.
Not exact matches
He believes we're seeing signs that
inflation is creeping up —
asset inflation, that is, which the Fed deliberately
ignores.
Specifically the
asset price
inflation that you've seen has largely been
ignored by Keynesians in the last two bubbles.
Mark Whitmore: Well, batting clean - up here is a little tough, because as Bill mentioned, I think that people have really nicely covered a lot of the main, sort of theoretical tenants of Austrian Economics, I guess I would add that specifically the role of central banking is something that I think is really distinct from an Austrian perspective vs Keynesianism, specifically the
asset price
inflation that you've seen has largely been
ignored specifically in the last two bubbles, and now we're into a third bubble I would argue as well.
3) How do you adjust the price or value of an item to compensate
inflation; eg: Say I have a house I paid 1 million dollars 3 years ago (
ignore depreciation and other factors that can affect the
asset's value), if
inflation was: Y1 = 10 %, Y2 = 11 % and Y3 = 12 %, what would the value of the house be?
(Please
ignore the
asset price
inflation that aids the non-existent wealth effect.)