Pace Sumner is the Fed 'Reasoning From a Price Change?'

     Wondering if I'm correctly 'Sumner whispering' here. 

     "U.S. consumer prices in January posted their biggest drop since 2008 as gasoline prices continued to tumble, which could give a cautious Federal Reserve ammunition to keep interest rates low a bit longer. "

     "The Labor Department said its Consumer Price Index fell 0.7 percent last month, the largest decline since December 2008, after slipping 0.3 percent in December. It was the third straight month of decline in the index."

     "In the 12 months through January, the CPI increased fell 0.1 percent, the first decline since October 2009 and a sharp deceleration from November's 0.8 percent rise."

     http://www.cnbc.com/id/102454987

     According to Sumner the key would be whether or not the drop in oil is supply or demand based: it does seem that at least a big part of it is that it's supply based thanks in part to the shale boom in the US and the decision by Saudi Arabia not to have OPEC cut production. 

     Does anyone know if Ralph Musgrave is related to the Richard Abel Musgrave-who was there at the debate between Keynes and Lerner-it wasn't so much a debate as some words exchanged. 

     http://diaryofarepublicanhater.blogspot.com/2015/02/keynes-vs-abba-lerner-on-pubic-debt.html

     http://diaryofarepublicanhater.blogspot.com/2015/02/some-more-thoughts-on-abba-lerners.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+DiaryOfARepublicanHater+%28Diary+of+a+Republican+Hater%29

     More on the discussion I had with Greg on the actual use of public debt-he thinks the very phrase should be retired but then that's what Sumner says about inflation; change doesn't happen overnight. Anyway, here's Bill Mitchell on public debt. 

    "That is a very powerful statement and allows the reader to ask the right questions by way of gaining a better understanding of what is what. Under the mainstream lie that debt is issued to fund net spending, the right questions are more veiled. So the obvious question is why would market participants need securities?"

     "Once you answer that question you gain an appreciation of what it is all about? Then you are in a better position to understand that governments issue public debt to drain reserves not to finance net public spending"

     http://bilbo.economicoutlook.net/blog/?p=10404

     Another point though about this debate over MMT and functional finance is that according to the MMTers it was not until Nixon closed the gold window that monetary theory become modern, prior to that they allow that public debt really was public debt. So was Lerner's functional finance less true when he first wrote it than now?

    On to politics.  As Greg Sargent says, all the theatrics of funding the DHS are likely to end up how these battles always end up. At some point-maybe after DHS has been nominally shut down for a few days-Boehner will do what he says he can't do and pass the Senate bill with the help of Democrats in the House. 

   "But we’ve seen this particular thriller a number of times already. Here’s how it always goes: We are told there’s no way Boehner would ever dare move must-pass legislation with a lot of Democrats.  He’s stuck! Then pressure builds and builds, and Boehner does end up passing something with a lot of Democrats. Last I checked, he’s still Speaker."

    "We’re hearing that again today. Roll Call quotes several House conservatives hinting that Boehner had best refrain from passing any clean DHS funding, or his gavel is in doubt. Okay. But back in early 2013, the fiscal cliff deal, which allowed some high end Bush tax cuts to expire, passed the House with only 85 Republicans and 172 Democrats, and we were told Boehner’s Speakership was at risk. Similarly, in early 2014, Boehner allowed a clean debt ceiling increase to pass the House with only 28 Republicans voting for it, and we were again told his Speakership was at risk. Does anyone else notice a pattern here?"

     "The fact that Boehner has the mere option of passing clean funding with the help of a lot of Democrats is rarely even mentioned. You can read article after article about this whole showdown and not be informed of that basic fact. Thus, the actual reason we’re stuck in this crisis — Boehner is delaying the moment where he does pass something with Dems for as long as possible — goes oddly unmentioned. Yet recent history suggests that Boehner himself knows this is how it will end, and that all of this drama won’t change the outcome."

     http://www.washingtonpost.com/blogs/plum-line/wp/2015/02/25/morning-plum-poor-john-boehner-is-helpless-in-face-of-conservative-rage/

     It really is very predictable. To bad there's no futures market for how this will turn out. Note that the fact that McConnell is now in charge in the Senate hasn't really changed anything. He's still the guy that has to come up with the plan that bails Boehner out but just because the GOP now runs the Senate doesn't make the House move any faster towards resolution. We still have to go through more theatrics before Boehner feels he can stop postponing the inevitable.