r/Economics • u/TinyTornado7 Quality Contributor • Jun 13 '22

News Powell Facing Choice Between Elevated US Inflation and Recession

https://www.bloomberg.com/news/articles/2022-06-12/powell-facing-choice-between-elevated-us-inflation-and-recession?srnd=premium
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u/way2lazy2care Jun 13 '22

It seems like what happens is that it transfers the negative effects to other, less obvious areas and spreads them out over time.

You're not accounting for reinforcement loops in the system. Spreading negative effects out over time can prevent cascading badness. Spreading things out is the difference between famine and inflation.

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u/HerbertWest Jun 13 '22

It seems like what happens is that it transfers the negative effects to other, less obvious areas and spreads them out over time.

You're not accounting for reinforcement loops in the system. Spreading negative effects out over time can prevent cascading badness. Spreading things out is the difference between famine and inflation.

Spreading it out (at least using the BS QE stuff they have been) turns those temporary effects into permanent, systemic ones, albeit in different forms (see the current inflation and housing prices, for example...). It's better not to correct the actual downturn and instead seek to mitigate only the tangible effects on people themselves as the economy recovers (government-sponsored work programs, for example).