I tend to think so. It seems to me that it's effects are double edged-some positive and negative effects among them. However, it seems that Woj of Bubbles and Busts-he regularly reads and comments here for which I'm certainly grateful-seems to take a considerably dimmer view of it.
"Lower inflation is better for the median American if food and energy prices fall
while wages steadily increase. I'm not saying this could be engineered but that
would be positive."
His point is as I read it that in the last 30 years we've seen wage stagnation while prices have continued to rise. I lament the wage and income stagnation as he does.
The difference is about how we fix the problem. I don't think the solution is lower inflation-it's pretty low already and has been over the period with lower wages. The problem hasn't been prices that rise too much but wages that don't raise at all and even take a step back.
The cause of this stagnation are conscious monetary and fiscal policies meant to freeze wage growth. The Volcker disinflation was the big move. Then Reagan's crushing of the unions exacerbated it. For this reason even during the 90s, wage growth was very quiescent.
This enabled Greenspan to tamp down on growth much less than he otherwise would have. Overall, the problem is not inflation-actually inflation was about the same during the "Great Moderation" and the rate between the end of WWII and the late 60s. So the problem isn't inflation. If we were to force lower inflation this would further tamp down on spending but it would also further tamp down on wages.
You would have to hope that prices would be pushed down even harder and tighter than wages. I don't see this as optimal. What we need it to raise wages rather than restrain prices. The President's proposed raise in the minimum wage, indexed to inflation, is an important step in this direction.
"During his State of the Union address last night, President Obama called for raising the minimum wage to $9 an hour, up from its current $7.25, and indexing it to inflation so that it rises as the economy grows. If the increase were to happen, it would give the minimum wage its highest purchasing power since 1981, lifting millions of families above the poverty line."
P.S. Woj I hope you take my commentary here in the spirit that it's given. I have a high regard for your knowledge of econ and understand you're an honest guy who like me is just trying to understand the econ world-I hope if I disagree or question something you say you don't think I'm picking on you. I see that we seem to disagree a little about inflation so I'd like to explore these differences further-in the interests of further knowledge for myself certainly, and hopefully others as well. Intelligent and honest people can have an honest disagreement.
I say this just so we're clear
You clearly are beyond me on many matters of econ. That piece you did on the "currency floor" monetary regime is fascinating. I note that it's totally at variance with Sumner and friends who believe that IOR is a dilution of monetary stimulus.
P.S.S. Woj I see that you actually clarified your position on inflation a lot more in another comment you left today.
"Sorry for being unclear. I don't think low inflation is necessary or even
helpful for raising nominal wages. My point was that depending on what is
driving changes in the price level, low inflation or deflation could be
consistent with rising real wages for most workers.
Changes to the price
level (inflation) certainly was not the dominant cause of diverging wages and
prices. That is precisely why it seems crazy to think engineered changes in the
price level (inflation) will reverse that trend
So it may be that there's much less disagreement here than I was thinking. I think it's possible that higher inflation might be beneficial right now in terms of lowering debtors' burdens. However, inflation is certainly no panacea and it depends on other factors whether it's a good or bad thin in any particular economic context.
Overall, though, this post wasn't mostly about Woj but the debate over inflation: what I care about are ideas not persons though some people seem to have trouble differentiating this. For me it seems that so many bad policy ideas are due to inflationphobes that while I don't agree that inflation is a panacea, it seems to me that an inordinate hatred and fear of inflation is a major cause of so many problems.
I wasn't sure if Woj was suggesting that nominal wages could be raised by low inflation-if he was I'd really disagree with that. There are many Austrians on steroids like Major Freedom who claim that low inflation or even deflation necessarily benefits the poor and that idea is horribly wrongheaded and harmful.
Overall, I guess my point is this. It's not that inflation is an unmitigated good-far from it. However, it's not the unmitigated bad that the Austrians and many Supply Siders and other conservative econ guys think.