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Oct 15, 2022Liked by Joseph Politano

Another terriific review of our economy and some of its complicated levers. A wonderful read

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These both seem like perfectly reasonable culprits for why inflation is bad, but I think they are more second order effects. Primarily, inflation is bad because prices are less sticky than wages. Certainly this is more true when inflation is volatile and hard to predict. In your first example of an economy of 10% inflation per annum, you can imagine a scenario where over time it is predictable enough such that wages will rise in lock step, but that isn’t guaranteed. In this hypothetical economy though, if wages adjusted perfectly, then I don’t think you would have the other problems of uncertainty and trust you identified.

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CBDCs are also dependent on this trust, right?

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