Here is Woj-quoting Ashwin:
"On the topic of inflation, I have recently been engaging in a debate with Mike Sax
(see here and here) about the potential benefits of targeting a higher inflation rate. This policy
has garnered support from both sides of the political and economic aisle (New
Keynesians and Monetarists), yet I think its potential benefits are being
extremely oversold. My two basic arguments against such a policy are the
"1) Higher inflation does not necessarily entail higher nominal wages (which many
people clearly assume)."
"Aside from the top quintile of households, real income has been declining
for nearly 15 years. The only way higher inflation helps reduce real debt
burdens is if nominal wages increase faster than nominal interest rates on debt.
If instead higher inflation stems primarily from higher costs-of living (nominal
food and energy prices), than most Americans may find themselves in the
precarious position of requiring even more debt to maintain current living
It certainly doesn't necessarily mean that. I'm not sure who assumes this-certainly not NKers like Krugman or the MMTers. Again, as I said I see inflation as a double edged sword. It certainly can have negative effects.
"2) Higher inflation alters saving, investment and consumption decisions which can
lead to a misallocation of capital. On this second point is where Ashwin’s post
really hits home:
During most significant hyperinflations throughout history, the catastrophic phase
where money loses all value has been triggered by the central bank’s enforcement
of highly negative real interest rates which encourages the rich and the
well-connected to borrow at negative real rates and invest in real assets. The
most famous example was the Weimar hyperinflation in Germany in the 1920s during which the central bank allowed banks and industrialists to borrow from it at as low an interest rate of 5% when inflation was well above 100%. The same
phenomenon repeated itself during the hyperinflation in Zimbabwe during the last
decade (For details on both, see my post ‘Hyperinflation,
Deficits and Real Interest Rates’).
I'm not sure if this is really a worry right now-and I don't think savings is what is needed right now either-Keynes' Paradox of Thrift.
I'm not sure, but Woj's final position may be in line with mine:
"To be clear, similar to Ashwin,
I am in favor of “helicopter money” and believe higher wages for the bottom 80
percent are key to ending the balance sheet recession as well as ensuring more
sustainable growth and unemployment going forward. Targeting higher inflation
and larger negative real interest rates is the wrong approach to achieve these
goals and may actually work in the opposite direction. Yes, all macroeconomic
policy is dangerous. But even more dangerous is misunderstood and misrepresented
I mean I'm not sure what he and Ashwin necessarily mean by "helicopter money" but I think Woj looks at it as fiscal stimulus. I certainly support higher wages for the bottom 80 percent. I'm not sure that monetary policy does any harm though there is wide disagreement about how much good it does. I'm not at all sure that a raise in the inflation target of the Fed to 3% wouldn't be beneficial. I don't see it as harmful. The Fed has basically raised it to 2.5% for now anyway.
I think the reason I often find it hard to figure out exactly what Woj's views are is that I find the idea of coming from an Austrian and Post Keynesian perspective simultaneously as counterintuitive. I agree that one shouldn't think you can only learn from one school of thought, and I'm all for using what works for you and being eclectic.
It just seems to me that Austrianism and Post Keynesianism-aka MMT-would seem to be diametrically opposed at least on the policy level. Austrianism says that government intervention is always bad-fiscal or monetary. PK says that we should have a big deficit during a recession to get us out.
How do these two poistions have any ground they can meet on? If an Austrian agrees with a fiscal stimulus action is he still an Austrian?
On the level of theory, there might seem to be more common ground. Woj's site is of course concerned about boom-bust-hence the title. Austrians and PKers both have a theory of boom-bust where an overheated boom leads to a bust. Even so, the critique is quite different. While Austrians worry about "malinvestment"-mostly due to improper govt intervention-but all intervention is improper in their eyes-PK is more about the financial sector being overheated and overinvested.
At end of the day what does Austrianism have to offer Post Keynsianism-or any Keynsian who believes we need fiscal stimulus?