I’ve been suggesting that inflation paranoia has a lot to do with the interests, or at any rate the perceived interests, of the 0.1 percent; the same goes for other policy arenas. But how does that influence work? Well, there are multiple channels. In some cases we have crude buying of influence through the promise of campaign contributions or the threat of backing someone else — hence the pilgrimage of GOP would-be presidents to Las Vegas to abase themselves before Sheldon Adelson. Some of it involves financing think tanks and media organizations. But an important channel, I believe, is personal: oligarchs quite literally wine and dine people who go along with their views and interests — and when billionaires are doing the wining and dining, well …
In a few minutes I’ll be teaching about inflation, deflation, and all that, and my slides finish with the signatories of the famous letter warning that quantitative easing would debase the dollar. The first name on that list is the hedge fund manager Cliff Asness. So, does anyone remember this story? (Do click on the link.)
As the linked article indicates, Asness has close ties to the finance group at the University of Chicago, whose reigning leader is the recently Nobelized Eugene Fama; indeed, Asness was Fama’s student. Now, some readers may recall that Fama said something strange about modern economic history in defense of the finance industry, asserting that the rise of finance had ushered in “a period of extraordinary growth” after the early 1980s. As anyone even slightly familiar with the data knows, this is all wrong — growth in advanced countries has been generally slower since the rise of modern finance than during the postwar generation when banks were tightly regulated, and developing countries — mainly China — have maintained capital controls, so that Wall Street has had nothing to do with their performance.
So what might make someone who gets his economic history from talking to his social set believe that great stuff has happened since 1980? Hmm:
You see my point: the sheer wealth of the 0.1 percent has a kind of gravitational attraction, pulling people into their orbit and their worldview.