Mike the Mad Biologist

The Overton Window: The Inflation Estimate Edition

Posted by Mike on May 22, 2010
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Unfortunately, Mark Twain’s aphorism, “lies, damn lies, and statistics”, has been used so many times that it’s become trite. But, as I say repeatedly around these parts, you have to understand your data. A key economic statistic is core inflation, which is estimated by the Federal Reserve’s Open Market Committee (FOMC). Basically, if the Fed believes that inflation is about to rise*, it clamps down on the money supply and slows down the economy (you didn’t really want to be employed, did you?). So that estimate of inflation is really important. By way of Paul Krugman, we discover a very interesting tidbit about how the Fed estimates the future rate of inflation:

The econ team at Goldman Sachs (not online) makes the interesting point that FOMC inflation forecasts are pulled up by a small group that keeps forecasting much higher inflation than anyone else; this in turn helps limit the Fed’s willingness to support the economy.

In other words, a bunch of anti-inflation radicals are pushing inflation estimates in the direction they want, and thereby shifting the terms of the debate. What the FOMC should do (but won’t) is release each of the estimates and their assumptions, just as the Social Security Trustees do.

*I would argue with record numbers of people in hock up to their eyeballs, not to mention the massive amount of underwater mortgages, modest inflation (2.5 – 4%) would be a good thing. Inflation rates, in an economy, that hasn’t hit maximum employment, are a political battle between creditors and debtors–and, right now, debtors are getting creamed. This is nothing new: after all, that’s what Bryan’s Cross of Gold speech was all about…

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Comments

  1. #1 llewelly
    May 22, 2010

    Unfortunately, Mark Twain’s aphorism, “lies, damn lies, and statistics”, has been used so many times that it’s become trite.

    Note only that – it’s perhaps mis-attributed. Twain claimed he got it form PM Disraeli. But no recorded speech or writing of Disraeli contains the remark.

  2. #2 Tyler DiPietro
    May 22, 2010

    It’s only in exceptional instances that high inflation does not correlate with low unemployment (Philips curve, and all that). I would say that we could use some modest inflation at this point.

  3. #3 BaldApe
    May 22, 2010

    10 years of 5% inflation would solve the mortgage crisis. The nominal value of the mortgages would not go up, but they would be secured by homes with higher prices, and paid off with cheaper dollars.

    The problem is that the expectation of inflation has negative effects.

  4. #4 Jeanine London
    May 24, 2010

    Now, let us consider the inverse, shall we? The homogeny of ideas incorporates into the social personality a consensus, a standard, an acceptable, and therefore comfortable reality. However, this is not reality at all. At least not in tangible, scientific terms. This realm of consensus we practice can best be described as myth.

    The Overton Window is a brilliant assessment of the propaganda-esque manipulation of ideas designed to not only create the desired consensus, but the effective distraction of comfort, ease, and contentment. Like scouts huddled around a campfire telling ghost stories safe in its warm light, we survey the dark forest of ideas around us as mysterious, frightening and even dangerous. And we huddle closer still.

    But, within the Overton Window there lies only a shadow, a reflection in dim light of that stark, bright and blinding dimension we shade our minds from, soothing our collective psyche in the cool breezes of denial. We are lead to believe the mainstream concept of what is true, reasonable, generally agreed upon, must be true by its sheer acceptance, and the only truth. The fringe is not only an element to be feared, but scoffed, disreputable, untrustworthy, a lie.

    This is only one intended outcome, to disparage the characters of those who would in fact speak the truth and effect real change.

    But the more important outcome degrades the truth into an impossibility in the minds of thinkers. If an idea, or person is effectively relegated to the fringe, to conspiracy, outright lunacy and myth, no one who lives within Overton’s Window will ever believe the idea or the person. The employ and aid of the media, mainstream and independent, are effective and to be lauded in their exquisitely executed communiqués, effectively locking the window shut, tight.

    Now, if you are the Bogey Man, this is very advantageous for you. After all, who in their right man is going to look under their bed and make sure the Bogey Man is not there? That would be silly, crazy, even paranoid. You may go about your Bogey Man business unmolested, unseen and most importantly, unimagined.

    It is not what lies within Overton’s Window which ought to concern us. We have more than the fact that our leaders concede only to possible successes guaranteed by the consensus of the public, instead of what is beneficial and right and good for all. We have more to occupy our fears than our own naïve compliance. There is an actual forest beyond our cozy ring of fire, and there are monsters in the woods. No matter how crazy or paranoid it seems to believe it.

    Hey, I’m just doing my part to maintain the fringe and keep the rest of you safe. You can thank me later.

    Or you can wake up now. If you think Glenn Beck’s Overton Window is anything close to the political reality on Planet Earth, think again. If you think the real news of the day gets anywhere close to the media, think again. If you think at all, the best you can hope for is to wonder where those thoughts came from, and hope they are your own.

    We are making synthetic DNA and putting it into cells now, without wondering how that life might evolve. We make seed genetically modified to kill insects who feed on the plant, without wondering what it does to the humans who feed on the same plant. We are equipping humans with Radio Frequency Identification Chips (RFID) without asking what that chip might be equipped to effect in our cells. After all, every cell in the body operates on an electrical frequency. What type of access to my cells am I allowing by accepting the chip?

    Yes, these are the types of new realities which make up the fringe of our society. The fringe we are taught to dismiss as lunacy. The fringe we disregard to our own peril. After all, we might look funny trying to climb out of Overton’s Window.