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The creation of deflationary coalitions around the world supported the shift from wages to capital gains.
In the United States, financial deregulation and its attendant deflationary political coalition were embedded in the politics of housing. Housing policy has been integrated with welfare provision since the New Deal, when the Federal Government intervened in credit markets to create a thirty-year fixed mortgage and allow for widespread homeownership. But as Greta Krippner has shown, the stability of this system depended on strict financial regulations that limited the interest rates that banks could charge on deposits. The “savings and loans” bank industry was specifically dedicated to issuing government-backstopped, thirty-year fixed loans. The inflation of the 1970s threatened this system of housing provision, as savers searching for higher returns pulled their money out of savings and loans, and invested it in new, unregulated products like Certificates of Deposit (CDs). Re-regulating these new instruments would carry a high political cost, but neglecting them would risk destroying the housing market.
In response, American policy makers reacted by deregulating lending while maintaining government protection for housing relative to other consumer borrowing. Thus, housing became a special kind of asset that could both be widely held and appreciate relative to other forms of personal wealth. This avoided explicit “hard choices” about distribution and the rationing of credit by offsetting the losses to wages which followed the Volcker shock. In practice, targeting inflation means that the Federal Reserve and other central banks restrict credit at the point where labor markets begin to tighten. Until recently, central bankers assumed that inflation was at least in part triggered by an increase in employment beyond the Non-Accelerating Inflation Rate of Unemployment (NAIRU). This means that as an economy moves to full employment and workers can bargain for higher wages, central banks will restrict credit to engineer a pullback in the labor market.
As a result of these policies, a generation of homeowners found themselves with an appreciating capital asset, insured by the government, that could be used as a subs ute for falling wages. New Deal housing policy was repurposed from the provision of long-term, stable shelter to a support for asset price inflation. This deal has been very good for a politically powerful cohort of homeowners who purchased their first house in the 1970s and 1980s. Coalitions of older homeowners have defended low taxes on housing relative to other assets and economic activities, such as California’s infamous Proposition 13—itself a reaction to the 1970s inflation. These same voters have made it impossible to build new housing units in high demand areas, jacking up prices on real estate. Housing wealth has become increasingly held by the old, white, and wealthy, while cohorts born after the 1970s have found housing a drag on their net worth. (Lisa Adkins and Martijn Konings argue that the political economy of the United States is now a machine for stealing the opportunity of the young to preserve the livelihoods of the elderly.) The deflationary coalition has been held together by a cohort of powerful voters whose financial position depends on the continual appreciation of capital assets at the expense of wages.
The creation of deflationary coalitions around the world supported the shift from wages to capital gains.
For some observers, a shocking result of the 2008 financial crisis was the “strange non-death of neoliberalism.” Why have neoliberal ideas persisted despite their apparent failures? The question seems less perplexing when we conceive of neoliberalism as a set of economic practices performed by ins utions designed to protect the interests of the deflationary coalition.
Examining the current political landscape through the politics of inflation is illuminating: members of right wing populist movements, for example, are unified by a desire to preserve capital gains on asset ownership, whether they are CEOs of major banks or suburban homeowners needing to compensate for falling wages. The slogans of the Tea Party and the populist right in the United States against new spending clearly demonstrate this fear of inflation.
"there can be no demonstration that unemployment can be reduced without reestablishing inflation. "
US has had "full" employment and under 2% inflation for several years.
You seem to have lost the context of the Hyman Minsky quote.
The article argues against Hyman Minsky's gloss in favor of "the deflationary coalition." You're underscoring the main point, not refuting it.
you're also leaving out the millions who left the workforce last year and never returned.
lol simple, sloppy boutons
So close, yet so far.
Cryptic.
Expand please?
So few posters here have an actual point, I suspect you do.
You've been caught short as well lately, daddy-O. You ain't immune.
I was reminded of this old thread because I looked at my private messages for the first time in 10 years and this was sent to me in it. We suffered the most significant two-year stretch of inflation this nation has seen in 40 years... and came up just short of hyperinflation in either of those years by a mere 1,217,500 nominal basis points. My main point I guess is that I wouldn't look to the OP (or the person who wrote the article posted) for economic prognostications.
In fairness, economic prognostications are hard. Like James Galbreath Sr. said, they are so accurate they tend to recuperate astrology as a science.
But again, i mainly agree with what you're saying.
I'm also amused that the originally quoted "think piece" quoted hyperinflation at 15% annualized. Shiiiiiiiiit, bring me the real hyperinflation. Until you are buying bread with wheelbarrows full of cash, it's all still fun and games.
We're not Weimar Germany, but some people act like we are, or, are about to be. Helps to propel fascist national salvation.
Looking at you, Cosmic Cowboy.
Your stupid is showing again.
I have never predicted hyper-inflation.
I did correctly predict this latest round of inflation and will go on record now that the Fed may not ever get inflation down to 2% again.
Uh, uh, sure scott.
And remember...inflation is ulative. It's like compounding interest. Celebrating "inflation is down to only only 4%" ignores that inflation is up what...19% in the last three years?
the most recent "hyperinflation is coming" stuff was coming from crypto cultists, particularly after the SVB thing
And the usual hyperbolic ads from the gold bugs. I'm not against gold and currently have about a pound in the safe but the ads to "switch your retirement funds to gold are hilarious.
...because tumult has a commerce angle all to itself. "There isn't an ill wind that doesn't blow success to somebody."
They might achieve it temporarily if they break the financial system in their effort to tame inflation. I think it's entirely possible that they create another deflationary crisis. Over the longer term, global demographics and rising energy costs (specifically oil) will make rising inflation the norm.
No way fed can cause deflation while US politicians continue to deficit spend forever into the future. There may be scattered areas of the economy devalueing (office buildings) but the overall trend will be inflation.
It's really not that complicated or unlikely if interest rates raise above your average investment return, and goods supply finally normalizes to pre-pandemic levels. Especially outside of the summer window, when oil has more incidence.
Yooooooo, let's settle down with issuing challenges like this. The NSA is probably reading this and we don't want them passing any bright ideas over to the political class.
lol yeah... see Argentina right now, and that still not considered hyperinflation (yet)
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