This man argues that high interest rates actually CAUSE inflation. Is he right, Jow Forums?

macroeconomics textbooks

This

Mike Maloney, Jim Rickards, Peter Schiff, Mises, Hayek.

>Asking a board full of high school dropouts and is in 90% red finance questions

>money is created by banks when people borrow.
I thought the Fed Reserve creates the money. So they give or lend money to banks, that then the banks lend it to people? So what receives interest rates, the banks lending, and/or the peoples' money that they borrow?

>Interest rates go up, less people borrow, less inflation, economy cools off.
Why is it that inflation goes down when people borrow less. Less money in the economy, prices for items go down?

>Interest rates go down, more inflation, economy heats up.
Ok. So interest rates that banks can borrow from the fed goes down, and the banks then lend that extra money with less interest rates so people borrow and spend more, creating bubbles?

So when the fed increases interest rates, what happens to our personal loans, is that where variable interest rates are kicked in? OR the interest rates are only passed onto the banks? Don't get that part. Thanks user.

t. brainlet

will do. thanks user

i hear anons complaining that macroeconomic textbooks are outdated and don't reflect today's reality in the US

No, not really.

High interest rates generally strengthen your currency as it encourages people to exchange foreign currency for yours.

A stronger currency relative to others means that imports are cheaper as are supply costs. In a properly functioning market this could lead to lower prices and therefore deflation.

People are also more likely to save than spend putting further downward pressure on inflation.

People also tend to pay off debt when interest rates rise. Destruction of debt is also generally counter-inflationary.

So basically he's talking shit.

Attached: wp.png (420x420, 335K)

International Economics - Krugman & Obstfeld

Don't listen to the idiots that don't understand the difference between descriptive and normative economics, Krugman is top tier in descriptive economics, he's just a keynesian so his solutions are stupid, but that doesn't take away the he's great describing the variables.

Generally economists are retarded in the way they explain things. They jump through hoops and just say things like "A happens. Then B. Then C" without explaining why B follows A.
In a non retarded explanation, what he means is that:
When you take a loan, the loan has an interest rate. So if you take a 10k loan with 10% interest, you'll have to pay back 11k. When interest rates go way up, less people are willing to take a loan because they fear having to pay back so much. This is common sense. Finally, banks loan to people from money they don't really have on reserve thus creating money from thin air. Or the fed loans you money that they just printed for the loan, thereby increasing the money supply just to give you a loan. More money being created means inflation. So naturally, when interest rates go down, people are willing to take more loans, which means more air money is being created, therefore causing inflation.

His textbook as a 3/5 star review on amazon. Would you say it's still a good place to start?

Holy shit this makes a ton of sense. Copied and Pasted. What does this mean for present day? Now that most Americans live in debt, this means that if interest rates go down more idiots will consume more debt, or need to to pay for living expenses, inflation hits, making the banks richer. But if interest rates go up, less money to go around, and people will still be clawing at paying back their daily expenses + loans. So the American population is fucked overall?

Krugman is trash. He's a crook who served on the board of directors of Enron and he's an idiot who called for a housing bubble after the dot-com bubble crashed. We all know how Enron and the housing bubble ended.

>So the American population is fucked overall?
Yup

red pilled. Gulp.

Where to go from here?

Good to know.

>higher interest = lower interest
Kek

I’ve seen the argument before on the basis that the government is effectively putting more money into the economy through bond holders. It seems a bit weak though, I think you’d have to reach extremes to see effects like that. For instance, if the interest rate rose to a very large degree you’d simultaneously have the cost of money quite high, slowing production, while also giving easy money to bond holders. This synergy could cause inflation, because you’re shrinking the supply of goods while also increasing the money supply (if there is a deficit)

Don’t forget that Krugman smugly declares that the internet would “never have more influence on the economy than the fax machine” back in the mid-2000s. He’s a well connected pundit who gets paid to shill for liberal economic theories and politics by his corporate masters. Nothing more.

Well, the harsh truth is that most Americans (and people in capitalistic economies in general) will always be fucked. There is only so much money in circulation for you to get enough of. As you know, simply printing more money is not gonna make it better for 99.9% of people. Your mission in life is to make is so that as much of the money in circulation is distributed to you than to others. How you do it, is up to you. There are different strategies with different consequences. You can wage slave and move up the corporate ladder so that by the time you are 50-60 you will have enough to retire. This will cost you your mental health and precious time, but is low risk. Or you can invent something new which will make a lot of people give you their money. This is riskier but if has the benefit of not sacrificing your time as much as wage slaving. Or you can game the system and fuck people over. This is the riskiest option but the most profitable. Being on Jow Forums, I assume most of us are somewhere in the third option, gambling on shitcoins and taking money away from other gamblers.

Does anybody here actually believe that deflation is a bad thing?
>inv4 muh ‘2% deflation means nobody will spend money’

How would that even work? Are you going to take money from random people and "burn" it?

Krugman in 2018, jesus fucking christ Jow Forums. He's the most worthless person to ever receive a Nobel and ALL of his international macroeconomic predictions of the last 5 years have been proven wrong, he has even admitted that. He is years behind current top economic researchers like Bergman and Benmelech because he's still driveling over the same shit he was 10 years ago. Stop telling people to read that garbage.
Educate yourself.
www.nber.org/cycles/cyclesmain.html

>posts some 3rd world dictator
>calls him a "man"
gtfo faggot

Attached: 1530738108283.png (779x534, 794K)

Well put user.

it depends on how you define inflation

the true definition of inflation is the derivative of the money supply, however inflation has been bastardized to be defined as the average change in a basket of consumer goods, but that is just a measure of purchasing power, not inflation

If interest rates rise, then the cost of money in the present goes up, if so then purchasing power declines. That's why house prices and interest rates have a negative correlation.

High interest rates cause conservative and efficient allocation of capital. If it wasn't for the fed manipulating the interest rates, and the practice of fractional reserve banking, interest rates would be closer to 10%

Cringe