Academic

PAPER MONEY: ?As they prepare for holiday reading in Tuscany, City bankers are buying up rare copie?

By Glenn Reynolds

PAPER MONEY: “As they prepare for holiday reading in Tuscany, City bankers are buying up rare copies of an obscure book on the mechanics of Weimar inflation published in 1974. . . . As a signed-up member of the deflation camp, I think the Bank and the Fed are right to keep their nerve and delay the withdrawal of stimulus — though that case is easier to make in the US where core inflation has dropped to the lowest since the mid 1960s. But fact that O Parsson?s book is suddenly in demand in elite banking circles is itself a sign of the sort of behavioral change that can become self-fulfilling.”

(Sort of) related: Deflation Defies Expectations?and Solutions. “The old bogeyman of deflation has re-emerged as a worry for the U.S. economy. Here’s something else to fret about: After studying more than a decade of deflation in Japan, economists have slowly realized they have no idea how it works.”

UPDATE: A hedge-fund reader emails:

Inflation helps the government hide its spending, while easing the burden on politically influential debtors and those who’ve lent against property. Deflation helps savers, salary earners and those on fixed incomes.

This is all VERY well understood.

What “Ivy League” governing elites don’t know, is how to finesse the politics of debasing the currency without inciting the pitchforks-and-torches crowd, whose latest manifestation has been the Tea Party movement.

Well, good.

Full post as published by Instapundit.com on July 26, 2010 (boomark / email).