Comment Re: Does this remove the "menu costs" argument (Score 0) 192
Then why did Modigliani and Fisher say in their 1978 paper "Towards an understanding of the real costs of inflation": "The traditional view that because money is neutral, inflation produces no appreciable real effects is shown to hold approximately only for an economy whose institutions are fully inflation proof, e.g. a fully indexed one.", and why can't we fully index the economy?
Why did Israel use full indexation for decades while increasing their standard of living? What if the decision in the 1980s to use price controls instead of indexation was an arbitrary mood; why couldn't they have kept indexation going forever (they still use it today in fact)?
If your income goes up immediately with prices, why would you care about nominal inflation, because even if gas went to $10/gallon your income increase would allow you to buy the same amount you always did without losing any money?
Since the US currency has lost some 90+% of its value since the country's founding, yet the US is the world's premier superpower, hasn't indexation been used implicitly to keep real purchasing power rising even as nominal inflation has risen?
Do you just have a mood affiliation against indexation and no sound argument?