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November 18, 2013


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+1, I'm primed to look for contingency and the very first thing I noticed was "purchases risk".

I wonder if this doesn't tie into the whole discussion currently going on about the Larry Summers talk and the various comments and counter-comments around it? Krugman notes persistently low inflation over the last 25 years or so, but also notes multiple bubbles. What are "bubbles" if not inflation concentrated in specific sectors? Housing starts to get unreasonably pricey, which drives excess production and rising prices for both the inputs and specialized labor surrounding construction, which screws up the price signal in various labor markets (too many construction jobs, mortgage originators), etc. The Fed is primed to take away the punchbowl when inflation spills over into the entire economy, but it has been willing to let it happen in specific sectors on the theory that you can't really tell what's a bubble and what isn't.

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