Fewer Nail Salons, More Global Heating Mitigation? Federal Reserve Bank Will Target Higher Inflation… At Last!

This is a historic day, the day when the central bank recognized there are bigger issues than inflation. There always have been. Rome didn’t go down from inflation, but from the unemployment and un-empowerment which preceded inflation by centuries. Roman inflation in the Third Century was a big problem, but it originated from much bigger and deeper problems, and first the lack of democracy and the mass unemployment and mass un-empowerment of the Roman plebs.

Emperor Diocletian was able to fix inflation where it really hurt state and society with a command economy, and that worked well: Roman provinces were doing great economically… until they got invaded. Archeology has revealed this to be the case all over, from Italia, to Gallia, to Africa, and even to Syria, which got invaded two centuries later than the former three.

So Rip out and throw away all the economic textbooks of the last fifty years: they were wrong.

The revamp towards higher inflation and a more active economy (as requested by US President Trump!) is designed to address the “reality of a quite difficult macroeconomic context of low interest rates, low inflation, relatively low productivity, slow growth and those kinds of things,” said Fed Chairman Jerome Powell during a conference broadcast online. “We’ve really got to work to find every scrap of leverage in helping stabilize the economy.”

I have asked heavens to target much higher inflation, for decades. In the so-called “glorious thirties”, which ended in the mid 1970s, the economy, the technology, the quality housing were all growing fast… propelled by inflation well above 2%.

How much above 2% is not clear because the ways of measuring inflation vary, and have changed from introducing “hedonistic” factors. However, the following graph is telling enough:

Enough inflation, enough real GDP growth (here the ten year treasury is used as a proxy of inflation, and it’s much better than the all too tweaked and humanized, even hedonized CPI)

Also inflation has been very strong in some areas (say health care, medical drugs; quality education), or then tweaked, twisted and tortured (measuring real estate cost from rents instead of face value, etc.)

One of my main reason to favor higher inflation is that, well done, it accelerates the speed of money and the speed of technology, while weeding out obsolete habits.

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Catastrophic Climate Change, CCC, is upon us, so forest fire mitigation has to become primordial:

Larry Minikes informed me that: “In July, [California Governor] Newsom announced the delivery of $285M worth of dozen Huey Hawk (Blackhawk) helicopters to replace our aged Vietnam-era Bell helicopters. I believe they were ordered in February. The new Hawks can each carry a fire crew plus 1000 gallons of water and are certified for night flying, which the Bell are not. However, as I am reading, pilots are not yet fully certified so they could not be used at this time”.

I did not know about the new helicopters, and Newssom’s initiative. Especially flying at night is good. They better rush, because the maximal fire season is not yet here. Systematic racism against domineering brush would be most welcome, by burning it during the cold, wet months. Some of this brush was/is ridiculous: one has to tunnel through it. It does not have to be done everywhere. That could employ a number of qualified professionals, same technique as counterfires. 

Doing preventive burning in patches would be enough, more effective for large fire prevention, and best to preserve plant and animal diversity. This was done in places like Yosemite already starting long ago, after huge fires, and it was done with reasonable success. Goats should be unleashed: there are enough mountain lions to keep the numbers down should they escape. Bovines are not ideal, but way better than nothing.

The 747-400 supertanker can drop 74 tons of water (20,000 gallons)… What is clear, as we both agree, is that much more, and more innovatively, needs to be done, right away. This should become part of a more general economic reorientation as part of an adaptation to the massive climate catastrophe around the corner. Burning the forests is how much of the change will happen, and will accelerate it, so we need to learn to slow it down as much as possible… And learn to acquire the mentality to divert enough economic activity to do this. 

Less nail salons, more prescribed burning. The responsibility in California is higher: redwoods disappeared from Europe, but they are the highest carbon storage form of life per surface. They also release huge quantities of oxygen, which may come handy if more seas die, with all their plankton… They are one of the answers to global heating: also they are fire and heat resistant.

So we have to change the world economy. And accelerate it. So, inflation, welcome!

In practice it means more loans to engage in more progress. Focusing in quality ecologically correct housing, should be a must, and priority.

Patrice Ayme

Tags: Central Bank, Economy, Federal Reserve Bank, Inflation, Real GDP Growth