{"id":13923,"date":"2015-10-29T06:31:54","date_gmt":"2015-10-29T11:31:54","guid":{"rendered":"http:\/\/olduvai.ca\/?p=13923"},"modified":"2015-10-29T06:31:54","modified_gmt":"2015-10-29T11:31:54","slug":"lost-in-extrapolation","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=13923","title":{"rendered":"Lost in Extrapolation"},"content":{"rendered":"

Lost in Extrapolation<\/a><\/h3>\n

Phillips Curve Fail<\/strong><\/p>\n

In the late 1970s the impossible happened.\u00a0 Inflation and unemployment simultaneously went vertical.\u00a0 The leading economists of the day were flummoxed.<\/p>\n

\"summers\"Larry Summers favors us with his \u201ceternal stagnation\u201d shrug. The man is a sheer inexhaustible fount of truly atrocious ideas. As we have previously pointed out, when he\u2019s around,\u00a0the economy can only be deemed safe under certain circumstances<\/a>.
\nPhoto credit: Reuters<\/p>\n

The Phillips curve said there\u2019s an inverse relationship between inflation and unemployment.\u00a0 When unemployment goes down, inflation goes up.\u00a0 Conversely, when unemployment goes up, inflation goes down.<\/p>\n

\"Phillips_curve\"<\/a>These are the data economist William Phillips originally studied \u2013 wage rates vs. unemployment in the UK in the years 1913 to 1948. Phillips\u2019 study will forever stand as a monument as to why economic theory cannot possibly be derived from empirical data. In the wake of the 1970s experience, at least seven Nobel prizes in economics were awarded for work that debunked the Phillips curve-based assumptions of the Keynesians in some shape or form. Recently its long dead cousin NAIRU has risen from the grave again, like a zombie \u2013 click to enlarge.<\/p>\n

How could it be that both were going up at once?\u00a0 Weren\u2019t they mutually exclusive?\u00a0 Indeed, it took years of heavy handed government intervention to pull off such a feat.<\/p>\n

When unemployment began creeping up in the 1970\u2019s the U.S. Treasury, with backing from the Federal Reserve, did what Keynes had told them to do.\u00a0 They spent money to stimulate the economy and spur jobs creation.<\/p>\n

According to the Phillips curve, with rising unemployment the planners could have their cake and eat it too.\u00a0 They could run large deficits without inflation.<\/p>\n

Unfortunately, something unexpected happened.\u00a0 Instead of jobs they got inflation.\u00a0 Then, when they tried it again, they still didn\u2019t get jobs.\u00a0 Astonishingly, they got more inflation.<\/p>\n

\"Phillips<\/a><\/p>\n

…click on the above link to read the rest of the article…<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Lost in Extrapolation Phillips Curve Fail In the late 1970s the impossible happened.\u00a0 Inflation and unemployment simultaneously went vertical.\u00a0 The leading economists of the day were flummoxed. Larry Summers favors us with his \u201ceternal stagnation\u201d shrug. The man is a sheer inexhaustible fount of truly atrocious ideas. As we have previously pointed out, when he\u2019s […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[5728,5328,190,10323,303,426,467,3284,10324,2096,2084,824,2202,1808,10325],"class_list":["post-13923","post","type-post","status-publish","format-standard","hentry","category-economics","tag-acting-man","tag-assumptions","tag-data","tag-extrapolation","tag-fed","tag-inflation","tag-keynesian-economics","tag-larry-summers","tag-phillips-curve","tag-stagnation","tag-statistics","tag-unemployment","tag-us-treasury","tag-wages","tag-william-phillips"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/13923","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=13923"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/13923\/revisions"}],"predecessor-version":[{"id":13924,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/13923\/revisions\/13924"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=13923"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=13923"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=13923"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}