2012年6月29日星期五

Price stability is immoral

The one thing that first recognized the implementation of the policy of "price stability", regardless of the implementation is in the level or rate, the policy of the government to provide social insurance, like unemployment or disability benefits. All of these programs is prepared for some of those countries in the world may be less fortunate. Government action to offset this unfortunate to get funding resources, other personal charges. Such as unemployment insurance, business owners and workers employed by the payment of unemployment insurance, to provide funding for workers who lose their jobs. Price stability has a similar dynamic characteristics. Consider the adverse supply shocks. Absence to take action to reduce the supply of goods and services will be higher prices. Prevent prices only way to reduce aggregate demand. Demand reduction may be implemented by raising interest rates or other monetary policy operations, or through the tax impact. Any one of these two cases, some people will pay the cost, it would indicate that the decrease in demand. Others will enjoy the benefits of prices no longer rising. Who these people are? We can find them? Of course. Increase non-price benefit to those people holding dollar-denominated assets. The most obvious include creditors - to save money in the banks, bondholders, etc. - also have a steady job, but the pursuit of a small salary increase bargaining power. These people will see their purchasing power decline in inflation. If the government limit on the total demand in order to stabilize prices, it can help these groups to transfer the cost to others. If price stability through monetary policy, the debtor to pay: increase in interest rates and reduced demand, increased debt burden. Tax increases to stabilize prices, then obviously, who will pay the new tax who pay. In both cases, the marginal workers paid by stretching may face the risk of unemployment or to reduce the possibility of finding a job. [1] So, inhibiting the price of a supply shock under the influence of the interests of the debtor, the taxpayer and marginal workers transfer to the creditors and the stability of the workers is quite obvious. The workers of the policy of price constraints on the creditors and stability is equivalent to the insured in the form of this part will be exempt from the purchasing power of their nominal assets will be subjected to unforeseen risk of decay. By the taxpayer, the debtor and marginal workers with a written assurance to finance this part of the talent is this policy stakeholders. [2] So far, we have to consider a policy of asymmetric price constraints. However, assume that the target price level or inflation rate is symmetrical? Then, these constraints because of the potential price losers, when the country to take action to prevent price deflation, will become the winner of the potential price support? Absolutely! In the case of symmetric price, through monetary policy, benefits enjoyed by the debtor from low interest rates and increase the available income of the total demand of positive supply shocks. If you are using fiscal policies, and happy the impact of the distribution of benefits is to get tax cuts and government transfer payments to consume. Either monetary or fiscal policies, an anti-deflation response to supply shocks mean an increase in aggregate demand, which helps to protect the employment of marginal workers in the work. Creditors and have a stable and stagnant people who work will have lost purchasing power increase by deflation, they may have been assigned to other parties. So the price of a symmetric target "fair"? Absolutely not. Of course, it relates to the risks and benefits of the exchange, rather than just the allocation of risks and to benefit other people. However, for this exchange to create value, loss of interest must match. Risk-averse individuals seeking insurance for a rainy day. At greater risk of the poor economy, all groups in the supply shocks. Enjoy the policy of insurance benefits under the price constraint, creditors, and stable employment. Asymmetric policy, the insurance premium paid by other people. Symmetrical policy, creditors, and stable employment in bad times and buy insurance, which is equivalent to give up the interests of good. This is still a good deal. Their overall risk reduction. Set up for the debtor, the taxpayer and marginal workers in the opposite case. Additional costs only when these groups need to rest, when due to adverse supply shocks lead to the economic downturn, they are hit, the name of price stability. Of course, when things are good, they can some of their cake icing. Higher highs, lower lows. Symmetric price positioning of the debtor, the taxpayer and marginal workers in a wide range of economic as high β speculators, while reducing the risk of exposure of creditors and stable workers. It represents a huge subsidies, transfer payments paid to creditors and stable workers to bear the risk of the debtor, the taxpayer and marginal workers. Symmetric price target on the debtor, the taxpayer and marginal workers in terms of asymmetric price constraints - the responsibility to protect the purchasing power of other people's burden at the same time protection than no protection. But the symmetry of the price target is an unfair treatment. Debtor, the taxpayer and marginal workers when their burden is the heaviest forced to bear the costs when they most value when received return. Of course, in the real world, we often see things in a simple price restraint policies and the symmetry between the price target. Under normal circumstances, the price stability through the implementation of monetary policy. We work hard to creditors and to stabilize the employment of people with insurance, indiscriminately reward debtors and marginal employment, when they basically do not need help. Price stability policy is to have the most secure members of society to provide social insurance, bill payment, loss of purchasing power and the most unsafe increased risk at the expense of. In addition, disproportionate to the benefits of price stability, accumulated to the largest creditor, holding the body of the high wages, safe working population. The value of maintaining the purchasing power of one hundred million U.S. dollars hiding far more than the bank account to maintain the value of fifty dollars. Price stability is an incredibly regressive social insurance, if not convenient to conceal this allocation so that abhorrent to most people. Price stability arising from the transfer of intangible monetary veil covered. Because they make the the influencers income, hurt the crowd of the most marginalized in our society, this terrible policy is the political half should not be adopted. It is true that there are such groups in our society, we should work together to ensure that its purchasing power: the fixed-income retirees, the ability of depositors of a moderate deposit. This is good, spending on social security is the protection of the index, and enjoy some of the purchasing power of retired personnel. However, indicators of a visible, obviously expensive, form of social insurance. Because it is visible, we take for granted that the provision and distribution costs. I do not think that the purchasing power of the insurance is immoral. Instead, we need the purchasing power of the insurance and the government should invent specific methods to provide it. Immoral to hide hiding technical bureaucratic phrase "price stability" behind the government's largest social insurance program. This is a conspiracy to force the most unstable members of our society to ensure that the purchasing power of the safest groups, without any restrictions, even without any accounting transfer scale. -------------------------------------------------- ------------------------------ Appendix: The above argument, I only consider the impact of supply shocks, rather than the total demand shock. Price stability, imagine that, contrary to fact, it is perfectly symmetrical, if we think that demand shocks do not seem terrible, but doing so is foolish. Tool we used to stabilize the price level through the role of aggregate demand. Stabilize prices to the extent possible, which can stabilize aggregate demand. I have no objection to the general macroeconomic stability. The stability of the aggregate demand is a great idea, although I may differ from the market's most famous monetarist policy instruments advocated preferences. However, due to the control of aggregate demand is our tool, it is more stable than price stability variables. Causing aggregate demand to deviate from the planned growth path, in order to keep prices low is what is immoral. Price level should not have any weight in macroeconomic policy, these policies should only be for the gross domestic product path. I understand that the New Keynesian model to predict the "divine coincidence", like an invisible hand, when the price stability and stable real output. In the present conditions, we rely on the "divine coincidence", even in theory, is impossible to maintain in practice. The model predicts a divine coincidence to assume that given the "representative household", blind construction of the distribution of problems discussed here. I consider the "divine coincidence", the content of any forward-looking, another synonymous with the "wrong". 3 I discuss the changes in interest rates impact on creditors, and ignore the long-term impact. Maturing debt held by creditors, increase interest rates to curb price, they may be lending support purchasing power and by increasing the investment earned benefits. But it can also damage them, clearing and spend their long-term debt prior to maturity to provoke a capital loss. For long-term savings, the effect of re-investment to compensate for loss of capital. Creditor groups of price restraint policy is more fortunate, but some long-term creditors due to rising interest rates suffer. -------------------------------------------------- ------------------------------ Notes: [1] unemployment by reducing workers' bargaining power, thus limiting the price of the main factors of production costs rise, and reduce the possibility of the consumption of the scarce supply of goods, reason is that if people will be significantly reduced consumption. In theory, unemployment may also lead to higher prices, reduced supply due to idle staff products and services. However, if the unemployment caused by the demand constraints (rather than the destruction of a production plant), reduced consumption will dominate, as dismissed, subject to strict budget constraints consumption basket in the consumer can not provide more than the production of exchange value. The unemployed do not eat is the everyday low price of other human based. Please note that these workers are "zero marginal product, only in a narrow and disguised consciousness. Is clearly sensitive to the pattern of hiring and firing workers reflected the marginal product of aggregate demand policy in the short term, almost certainly in the long term can be proved. Almost no nominal income and price stability, "zero marginal product groups, when the period of income sufficient price flexibility may provide a high marginal productivity. The marginal productivity of each individual in today is the equation of a policy and internal quality, economic activity is an independent path. [2] Of course, these different groups are not mutually exclusive. The same time the debtor, and have a stable job, both creditors and taxpayers. Everyone to enjoy certain benefits from the implementation of policies and price stability, and to bear some burden. However, net, such a policy are the winners and losers. If the price constraints through the implementation of monetary policy, large creditors and security liabilities workers to enjoy the greatest net benefit, while the edge of the business debtor to assume the greatest risk. Combination of the stable employment of the debtor will encounter the risks and benefits, depending on their wages and debts.

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