Re: Interest Rates and inflation

["Alan G. Isaac" <aisaac@xxxxxxxxxxxx>]

On Sat, 23 Dec 2000, John O'Donnell wrote:
> I still say the same thing
> I've been saying all along. There is no meaningful
> relationship between inflation expected inflation,
> unexpected inflation, changes in the rate of inflation
> whether expected or not and the level of employment or
> production. Whatever correlation exists is coincidental, not
> evidence of a causal relationship.

> ... any representation of
> changing the size of the dollar, standard hour or any other
> proxy of value can not directly in itself affect physical
> production either beneficially or in any other way.

John, You are still trying to comment on a literature
you have not understood and, by your own admission,
have refrained from reading.  I am tiring of reminding
you that the Phillips curve has almost nothing to do
with your interpretation of it, so I am withdrawing
from this discussion.  As a final reminder, however,
the traditional story can be briefly compressed
to the following:  when unemployment is low workers
are more likely to win wage increases, which will tend
to be larger when inflation expectations are higher.
This of course is completely unrelated to your
misguided critique, which is a product of nothing but
your misunderstanding of a literature you refuse to read.

> .... regardless of the historical evidence of actual
> outcomes.

You would best leave the historical evidence alone as
well, until you have time to read about it and handle
the (freely available) data.  The historical evidence
indicates that monetary policy can have important influences
on real activity in the short run.  Your posts leave me
wondering again why people who have absolutely no reason
to suspect they have the slightest expertise in economics
(or, e.g., psychology) are so willing to believe they have
great insight into the subject---a mistake that rarely
occurs in, say, physics or history.

Happy New Year,
Alan Isaac