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Note this article is about world food prices, not the United States food prices.

> Debt to GDP is 130% and structurally basically guaranteed to nominally increase over the next 10 years

Debt to GDP has actually been declining since Q2 2020 and sits at ~125%. There is nothing that says increases are inevitable.

> CPI for energy is 25% percent right now.

Yes and it was at negative 17% for April of last year and stayed negative for the whole rest of the year. Were you worried about deflation at the time? If instead of spooking yourself with rates of change, you switch your graph to Average price data and look at Gasoline, you'll see that we're still below 2014 levels.

> The inflation writing is on the wall.

Why don't we look at US food price staples?

Eggs are nowhere near their 2015 high: https://fred.stlouisfed.org/series/APU0000708111

Milk has yet to reach 2014 levels: https://fred.stlouisfed.org/series/APU0000709112

Sugar has yet to reach 2012 levels: https://fred.stlouisfed.org/series/APU0000715211

Pork chops spiked up hugely, almost back to 2014 levels! They're going back down now. https://fred.stlouisfed.org/series/APU0000FD3101

Chicken too spiked higher (than ever before this time), and is now back at 2014 levels: https://fred.stlouisfed.org/series/APU0000706111

Rice is still lower than it was during the 2008 recession: https://fred.stlouisfed.org/series/APU0000701312

Ground beef is the only one that's surpassed 2014 levels: https://fred.stlouisfed.org/series/APU0000703112

I agree with the on topic point here - this food index doesn't really scream inflation (although it does scream tough times of someone). But...

> Debt to GDP has actually been declining since Q2 2020 and sits at ~125%. There is nothing that says increases are inevitable.

125% debt to GDP is well into the territory where countries do not pay their debts back in real terms. The US is a democracy, it is all but infeasible that the borrowings will be meaningfully repaid in full. Although physically speaking it is possible, if the US politicians thought that was feasible then the time to act was the 2000s. It is a bit late now. They've been at emergency debt levels (literally world-war level borrowing) for a decade now. Graceful recovery from that seems unlikely given the total lack of political will to do things the straightforward earn-more-than-spend way.

There's nothing that makes that debt load scary, unserviceable, etc. the US can raise taxes anytime. It's simply doesn't have to. It can play the annual debt ceiling chicken game without any real impact on its ability to issue new debt.

> There's nothing that makes that debt load scary, unserviceable, etc.

There absolutely is - there are a series of steps that will need to be taken to reduce that debt load. If anyone was seriously planning to see them through they wouldn't have let the numbers get that high.

This is emporor-no-clothes levels of debt; the plan is not to pay it back. If the plan was to pay it back then the plan would need to have started more than a decade ago. Who is trying to do that? Nobody. The plan is inflation.

There are two things that make debt unserviceable: debt payments and cost/rate to take on new debt.

Debt crises only happen when debt payments exceed ability to repay and the cost/rate to take on new debt spikes.

Everyone fails to appreciate the second factor when looking at large economy, stable country debt levels. High debt:GDP ratios are dangerous, but not intrinsically a crisis... until the market also loses faith.

Given that in the current international economic climate, the US can issue new debt, and find buyers, at <2%, that's a cheap way to buy time for even normal inflation levels to nibble away at debt.

Ironically, now is the perfect time to deficit spend, in the same way it's a perfect time for an IPO. Why would you not take money, invest it in something productive, if people are screaming to give it to you at negative real rates?

The US has been taking on new debt faster than inflation has chipped it away for around 40 years at this point. There is no evidence it is going to stop. If anyone who cared was anywhere near the levers of power it wouldn't have crossed 100% debt:GDP.

Sure it isn't a crisis right now. But the debt will continue to grow and at some point there will be a crisis because either rates will spike, or government manipulation of rates will turn out to have killed off real investment and critical parts of the economy will give out. And in neither of those scenarios are the people lending the US money going to see all of it come back.

Hopefully it is all lent by foreigners and not pension funds, that is all I can say.

There's nothing magical about 100% debt:GDP ratio. Why is "we need to work for a year to pay back all we have borrowed" qualitatively different from "we need to work 2 years" or 3. Or half a year.

First of all there's no need to pay it back in one year (or 2, or whatever fixed timeframe), it's very-very-very likely that if paying the debt service ever becomes a serious problem it's possible to switch it out with longer maturity bonds, and/or restructure it.

“The Treasury is already extending the WAM of the debt gradually over time under the current issuance profile.”

"The weighted average maturity (WAM) dropped from around 70 months just before the pandemic to less that 65 months - or just over five years - at the end of 2020 ..."

https://www.reuters.com/article/us-usa-economy-yellen-bonds-...

It's entirely logical to take on debt as long as it leads to positive revenue/growth. (Meaning as long as it has a positive return on investment.)

https://www.thebalance.com/who-owns-the-u-s-national-debt-33...

Raising taxes beyond a certain point tends to decrease the total tax haul as those with lots of money move income to other jurisdictions and some of others work less, leaning harder on social system (further increasing the public debt).

The US is very far from that.

How do you know?

The US economy is huge, people and companies are not likely to leave if the US increases taxes.

https://www.taxpolicycenter.org/briefing-book/how-do-us-taxe...

https://files.taxfoundation.org/20210517160849/The-tax-burde...

> There is nothing that says increases are inevitable.

Several trillion dollars in new spending proposals make it inevitable.

Most of those several trillion dollars of spending proposals are spread out across several to the 10 years, and many of those proposals are paired with revenue increases that will offset the spending costs.

So, no, the existence of spending proposals absolutely does not make it inevitable.

Have we not printed 1-3 trillion dollars in the last two years? Like, a substantial proportion of all circulating dollars? How does that not immediately devalue the dollar?

Disclaimer, I am not an economist and don't know what I am talking about.

But, the birds eye view formula from my macro classes is MV = PY, where M is the money supply, v the velocity of money, P prices, Y real GDP.

GDP is usually going up, we have more people (and we hope they are each more productive). So that means that either the money supply or velocity must go up, or prices go down (deflation). Velocity is fickle and probably interrelated with consumer expectations around P (if you think things are going deflate for one thing, you might wait longer to make a purchase hoping to pay less in nominal terms, and this has the effect of shrinking MV even more relative to PY).

Since V is hard to control directly, in practice M has to increase regularly to prevent deflation. What we saw with the pandemic was large decreases in V and unexpectedly small decreases in Y. The fed increased M and it absorbed this differential. My understanding though is that the inflation doomers think the drop in V was transitory and now we'll see a sudden spike in all that money being unlocked and circulating

I assume that inflation (CPI) can be reflected by the increase of money supply only when people can't find a way to transfer the money to somewhere inflation-proof and can only spend it on consumer goods. That's absolutely not the case in modern days. Look at the housing price, that's where the money's gone.

Basically that’s my understanding. Anywhere you stick the money with low velocity will have the same effect on the left hand side of the equation to absorb increases in money supply. You’re right that people pick durable assets like houses to put it in, but it would have a similar effect on the velocity of the money supply if they buried cash in garbage bags for 15 years en-mass. People don’t do that because they expect reasonable and small inflation; you could imagine if that expectation went away though (either expecting deflation or very high inflation) how the money supply lever could stop being effective.

Through the velocity lense, the fact that QE and stimulus checks have very different inflation effects also becomes apparent- if you give a check to someone living paycheck to paycheck, they will spend it in their local community nearly immediately and it will be passed around quite a bit before getting locked into an asset price somewhere. If you edit the banks accounts at the fed or have the fed buy assets though, it seems to go quickly into asset prices where it sits for years before leaking into the economy as a whole, with a much much lower velocity. So $1 there != $1 here in terms of increasing prices.

First of all, the monetary base is only a small share of money supply - most of that is debt.

Secondly, printing those dollars does immediately devalue the dollar, just not to the degree you might expect.

The average American has no savings, they will not immediately renegotiate their wages upon the news that this money has been created. Therefore, their opinion about the value of the dollar has little impact. They have no dollars to sell for other things, they spend just as they used to, demand stays the same, prices are stable if not for supply issues. Stimulus checks are an exception to this, but we did see price increases in anticipation of that spending.

Those who manage wealth on the other hand already know that dollars are trash, now they are just a little bit trashier. They do not hold large dollar positions in the first place, instead they buy up all sorts of assets - stocks, bonds and real estate. This inflates prices and depresses interest rates, increasing paper wealth and encouraging cheap borrowing - exactly what the government wants.

In other words, massive inflation has existed for years, it just does not affect every part of your life equally. If you are in the market for a house, your purchasing power as a worker has been completely annihilated. If you are in the market for a hamburger, you are fine.

I was responding to a claim that the recent proposals for new spending made it inevitable.

Past spending isn’t relevant to the claim I was responding to.

"Democrats openly admit that their strategy is to pass new entitlements like national child care, disguise their cost by pretending to phase the programs out inside the 10-year budget window, but assume they will become permanent as they always do. This means the real cost of the Sanders-Biden-Pelosi budget is $4 trillion, and it will put the U.S. on a path to European entropy."

https://www.wsj.com/articles/the-3-98-trillion-trojan-horse-...

First, that WSJ editorial is pay-walled, so I’m not going to respond to anything from the WSJ editorial. Rather, I’ll respond to the Penn Wharton analysis [1]

First, I don’t take exception to the Penn Wharton decision to assume permanency of a bill (though it’s odd to me when the press then refers to it as a scoring of the reconciliation proposal, when it explicitly notes that it isn’t a scoring of the proposed legislation). However, it does seem odd to me to rely on such a scoring to describe the inflation of that assumed spending as “inevitable”.

Is it fair to say it’s the goal of the Democrats pushing this legislation to make these programs permanent? Yes, that’s the goal. Does that guarantee that will be the case? As someone who wants many of these programs to become permanent, no, it’s absolutely not inevitable that these programs will become permanent.

Second, the argument was not that spending will increase, but that debt to GDP to increase. For that to be the case, you need to show that the debt will increase (and faster than GDP).

To do that, you need to consider the revenue side as well. The JCT score considers the actual proposal (not the assumed future proposal) and finds revenue that mostly offsets the spending [2]. This means the “spending proposal” would have limited impact on the deficit, and therefore the debt.

The Penn Wharton scoring does absolutely nothing to convince me of the inevitability of the debt to GDP increasing. First, it’s based on at least two pieces of hypothetical legislation. Second, it assumes no revenue changes are made when those programs are made permanent.

[1] https://static1.squarespace.com/static/55693d60e4b06d83cf793...

[2] https://www.jct.gov/CMSPages/GetFile.aspx?guid=3fbf5966-deea...

Forgive me if I do not consider the WSJ to be a credible source regarding this subject and this holds doubly true for the opinion pieces they run. To be honest, unless the WSJ editorial board is frothing at the mouth I know that any government proposal or program is far too small or ineffective to actually be worth the effort. They say you know a politician is lying when their lips are moving and I know a WSJ opinion article is lying to me when they make the effort to print the words onto the page.

I'm curious what your source of news is.

Daily/weekly read list is The Economist, FT, BBC, New Scientist and sometimes Le Monde or Suddeutsche Zeitung if there are events across the channel I need to care about; I will scan articles from the Times and Guardian but mostly for laughs.

The WSJ used to not suck. I had a subscription through college up into the early 2000s and my college roommate interned for them prior to joining as a copy editor in the early 90s so I have a bit of a soft spot for what the WSJ used to be. The opinion/editorial section was always hot garbage, but it used to be the case that the articles were high quality; ever since Murdoch bought them the quality of journalism has gone to shit and now the journal is only useful to wrap fish or as the punchline to a bad joke.

Fair enough.

>Debt to GDP has actually been declining since Q2 2020 and sits at ~125%.

I don't understand how this argument can be made in good faith. Q2 2020 GDP was down over 9% (32.9% annualized.) That that trend was transitory is shown by the 33.4% annualized growth the following quarter.

You didn't just draw a trend line from an outlier. You drew it from the single most extreme outlier in the recorded history of US GDP.

Time will tell.

Or the 5th option: things continue the way they have been for the past decade of strong real GDP growth, moderate to low inflation, and rising deficits, and strong stock market, bypassing Japan stagnation. Predictions of crisis , hyperinflation, stagflation are popular but typically as far as the US is concerned, the most optimistic outcome tends to be the most probable.

Rates can only be kept so low before a real crisis comes and there are no levers to pull to soften the landing. Maybe the crisis isn’t for a while, but eventually the economy will overheat at the current pace, that’s just the business cycle.

> Rates can only be kept so low before a real crisis comes

Ah yes, newton's 4th law.

Depends on the time frame of the debt. If most of it is in multiyear bonds then a bad year or two is not so dire, though I agree that the US has some structural challenges coming over the next two decades.

Also, one of the things I don't really understand is why people in the US quote debt to GDP ratios when net debt to GDP is strictly superior.

Digital currency and negative rates?

Isn't that just inflation in a Halloween costume?

Inflation: your cash loses real value.

Negative rates: your cash loses real value and nominal value.

The winning strategy over the long run is not betting on the most probable event, but rather hedging your bets so you don't get wiped out by ignoring other possibilities.

Except rates were realistic, debt to GDP was moderate for the entire time you are discussing and now they aren't even close so thid doesn't hold much weight for me.

Inflation isn’t relative to any one commodity you need to look at everything from Big Mac’s and steel to street drugs.

Using the normal inflation measurements gives you a number around 5%. Which is all of 2% above the FED’s target. It’s a point of concern but no where near the double digit numbers people are talking about.

As to energy costs, those always fluctuate. Oil is at 81$ today and it dipped under 20$ in 2020, except in 2008 it hit 140$ even ignoring inflation.

Your first 2 paragraphs are contradictory…the fed’s normal inflation measurement is a very limited set of goods. No one really knows what inflation is at if we “look at everything”.

Oil price is also not a good gauge of inflation because it’s heavily controlled and doesn’t always reflect what you see at the pumps. When oil went to negative in 2020 you didn’t see free gas, maybe slightly cheaper, but no where near the change in crude/WTI prices.

That isn’t a contradiction, that’s the normal difference between any measurement and reality. Your speedometer isn’t accurate to 200 decimal places let alone actually correct.

So yep nobody knows real inflation out to even 3 decimal places, but that’s not a big deal in practice.

3): The dollar's status as the world's reserve currency should not be taken for granted. China holds 15% of US treasuries by itself. Saying that 'there is a huge structural demand for dollars' is like saying that 'the housing market is rock solid'. It is until it isn't.

Also I am not sure whether the decision to hyper-inflate is in Fed's hands. If inflation continues to rise faster than anticipated (contrary to what Powell said on Wednesday) then the Fed is caught between a rock and a hard place as the only feasible course of action will be to hike rates substantially and inevitably trigger a market correction. I leave you with this little chart I like: https://i.imgur.com/dIJXesa.png

Social security and Medicare can't go bankrupt. They're transfer programs, not savings accounts.

what happens if the transfer in is substantially less than the transfer out?

Wait 'till you hear what rich boomers are doing with Medicare avoidance trusts!

What!?

Yeah, the government pays for absurd amounts of advanced health care using even advanced experimental drugs if you put all your assets in a Medicare avoidance trust. The states chip in too. My mother's a multi-millionaire who spent most of her life as a non-working investment banker's wife and she's getting Cadillac brain cancer surgery and huge amounts of incredibly expensive drugs for free from the government, thanks to the magic of paying an accountant.

Some of the options here assume that one can dictate what will happen in the future in a top-down manner.

"Pulling a Japan" and "Hyperinflating" are not choices that bureaucrats can dictate will or will not happen.

> Hyper inflate : basically off the table

This will not age well.