re: #389 sagehen

um… you’re forgetting that we were in a deflationary spiral, home values and other asset values were crashing. Monetary expansion was needed to keep everyone from going underwater on their mortgages… it’s bad enough it’s happened to people who bought at bubble prices, but at least they sort of deserve it and it’s a reasonable market correction; it would be crushingly awful if it also happened to tens of millions of people who bought their homes pre-bubble and have kept up their payments.

I’m not saying that this expansion was without justification. I’m saying IT HAPPENED. I’m also saying that if and when money velocity and bank lending pick back up, if they reach the same unreasonable multiple between M0 and M1 or M2 that was in place in 2007 say, we’ll then be facing a huge inflation. The seeds for that inflation have been sown. Now the question is, will they be watered?

Every great inflation in history is accompanied by diversionary tactics. Look at the speculators. Look at the bad weather. Look at this or that falling price. Greedy businessmen. Greedy unions. etc. etc.

So I’m suggesting, look at the prices that move first in an inflation: commodities. Here, the evidence is disturbing. Any one commodity can move because of the weather in Kansas or Florida. But that doesn’t (much) affect the price of cotton, or oil.

Also, I’m not endorsing Kotlikoff’s tax reform. Marginal rates of 22 percent, on top incomes, are not high enough. The right number is more like 35 percent, give or take.

But K. is a serious scholar with a lot of technical expertise in his field. He can’t be all wrong or he wouldn’t enjoy the reputation he does. In liberal circles, I might add, as well as in conservative circles, and in apolitical circles.