Inflation

Robin Harding

For the last three years, there has been no breakfast for journalists on the opening day of Jackson Hole, while we write up a dramatic, market-moving speech by Ben Bernanke. It’s a more sedate start this year with a thoroughly wonkish paper by Stanford’s Robert Hall.

There is not much new in it on policy. It starts with a fairly straightforward rundown on why the economy got into such a mess when interest rates hit zero after the financial crisis, and it ends by agreeing with last year’s paper by Michael Woodford on what to do with monetary policy (QE doesn’t work, you need commitments about future policy, not just guidance).

The meat of Mr Hall’s paper is about why inflation did not fall much after the crisis despite high levels of unemployment. This has been a surprise during the last few years: unemployment has not driven down wages in a way that led to deflation. Read more

Not a milestone to rejoice in. Japan’s debt has tipped into the “quadrillion” zone for the first time. That is, as of the end of June, central government debt, looked like this: Y1,008,628,100,000,000, or $10.4tn.

It surely could not be a clearer message to Japanese Prime Minister Shinzo Abe that shilly-shallying over fiscal consolidation is no longer an option? Second-quarter economic output figures due on Monday are key to Abe’s decision about whether to raise consumption tax from 5 per cent to 10 per cent by 2015. Back in June in a speech in London, he pinned any decision to raise the tax – one he must make by October – on the strength of the economy in the second quarter. Read more