Sunday, March 6, 2011

FLG Still A Motherfucking Genius

Look, FLG has been talking about this time horizons thing for a long while now. As sort of corollary to that, you'll no doubt remember, is the theory versus empirical divide. Well, the other day, Christina Romer had a column in the NYTimes:
The real division is not about the acceptable level of inflation, but about its causes, and the dispute is limiting the Fed’s aid to the economic recovery. The debate is between what I would describe as empiricists and theorists.

[...]

The fight over quantitative easing is about the costs. The empiricists say the policy won’t cause inflation because the economy remains so weak. The theorists argue that a small gain in growth could come at the price of a rapid rise in inflation. Although the Survey of Professional Forecasters, conducted by the Federal Reserve Bank of Philadelphia, shows virtually no change in long-run inflation expectations since the start of the program, the theorists hold fast to their concerns.

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