US inflation jumps to 31-year high amid global supply chain crisis
theguardian.com
theguardian.com
So while the climb up is bad, the prices themselves aren't even unprecedented. In lieu of an extraordinary global supply chain crisis, these numbers actually seem impressively low. We cocked up everything for a year and prices finally shot back to... prices from 7 years ago?
If fed policy has any effect at all, I think we owe them one for being so cool-headed and non-drastic these past two years. They're doing much better than politicians or the media, at least.
[1] I have some commentary here, and more in a reply to user `anm89` https://news.ycombinator.com/item?id=29114086
What's also concerning is that the velocity of money is really low while M2 money supply is very high. If the velocity picks up we could be in a world of hurt.
It's various first and second derivatives + the amount of "potential energy" in the system that have (informed) people scared.
You mean... like... a first derivative? What am I mistaken about? I literally said literally exactly this:
>> It's various first and second derivatives + the amount of "potential energy" in the system that have (informed) people scared.
(and, in fact, it's not just the rate of inflation but also several other related rates of change and rates of rates of change and stocks of things that can fuel changes in those rates, but engaging in that nuance seems a bit fruitless given that you seem to be literally repeating my own point back to me while thinking you're disagreeing with me.)
> The rate of inflation growth is horrible right now.
yes thanks for repeating my point for me.
For those curious (like I was) about the exact numbers for that I quickly found this chart [1] from the St Louis Fed that strongly demonstrates OP's point. Only partially related to this, the sustained downward trend starting with about 2006 is really interesting, I'm wondering if there are any (relatively) recent papers written about this phenomenon.
With GDP being mostly the same trend it has been this chart is just tracking the surge in M2.
It seems like having large supply is desirable/correct when velocity is low.
The Fed's next step is to slow down this inflation, and they will do so by raising rates. The Fed's dot plots shows that they will reach the rate of the 30Y Treasury bill sometime around 2024, but with this data they might bring that up to 2023. This will, like every single other time they set the Fed Funds Rate above the 30YT, cause a recession 6 months afterwards, which will bring down the inflation pressures. Problem resolved?
That's totally standard, and not yet the true problem. The problem is after that. Once we reach that recession the Fed quickly drops the interest rate and that brings us out of the recession. But interest rates are already so low, we've already pumped so many dollars into the system, that it might not cut it. We might get cascading failures, we might get stuck in a depression. This might be the end of the long-term debt cycle.
Also in 2008, it looks like money velocity decreased during the recession (as it's been doing almost monotonically since the mid 90s). It looks like after the crash, velocity increased slightly, and indeed the supply contracted just slightly at basically the exact same time.
And doesn't whether that dollar is "destroyed" depend on why the borrower can't pay it? If it's because someone else got ≥ $1 richer off the borrower, then it seems to me like the supply of money in the economy as a whole hasn't actually gone down.
Hyperinflation is going to change everything. It’s happening.
How easily you just brushed off the successful startup ceo of not one, but two huge tech startups (Twitter, Square).
What do you think it takes to be able to do what he did? Oh no, he's just a crank because he likes Bitcoin now, let's just brush off everything he says from now on. It's not like he's someone who's actually proven himself capable and as someone worth listening to.
Read it as "he's a crank and also likes bitcoin".
Anyways. There's undeniably a massive PR campaign right now to get retail investors into crypto. Fucking football players and media personalities are taking paychecks in bitcoin and posting PR-drafted tweets about it.
Even if I were still long crypto, I'd be sitting the next few months out. Way too reminiscent of dotcom -- folks who know nothing about finance, investing, or crypto are "investing" in highly volatile speculative vehicles. This only ends one way.
I have never said that inflation is not real, only that this price inflation has merely returned prices to 2011-2014 levels (excepting beef, which is actually at a new high).
I'm not saying food prices (even broad baskets like the this) represents inflation. The broad indexes are better for that. But it's not true to say that food prices are at the same level as a decade ago.
You have to look at prices on the margin.
meanwhile if you're rich you prob got richer
perhaps we need to rethink how healthy inflation really is
The problem with blowing off inflation because you think it empowers workers is that the latest round of inflation more than erased all the wage increases that were provided. In real terms, workers have been falling behind.
So perhaps to make those labor demands more real, it might be a good idea if the government wasn't competing with the private sector for goods and services.
Until that point in time, I will view any doomer narrative about inflation and the proposed solutions for it with extreme skepticism, especially when the proposed solution is convenient for capital and hard on labor.
Might you tell us your approximate location?
It's fairly miserable to endlessly hear how a problem is 1x big when it's actually 4x big for most folks in your region.
People reporting their experience will have significant distortion due to how our minds work.
However, what even that misses is coupons and sales.
Anyone who has access to a kitchen can with practice use minimal time and effort produce meals that are competitive with processed options from frozen foods, grocery store chickens, and of course fast food joints. Though cuts of meat have gone way up in price, whole chickens are still reasonably priced for those who can process a bird which is not really that hard.
Median family income is 80K in 2021. The median HH income for 2021 will come out soon, but it will be north of 70K.
Over the last generation, indications are far over half experienced regular struggles.
2019 - nearly 70 percent of Americans have less than $1,000 stashed away https://www.statista.com/chart/20323/americans-lack-savings/
2021 - Firehosing cash directly to the public helped some: 25% had no emergency savings, 26% say they have some emergency savings https://www.cnbc.com/2021/07/28/51percent-of-americans-have-...
Most people experience "regular struggles", by definition. Life is a struggle. But we have a way of defining who is poor and who isn't in terms of income, and it's good to use the same language as everyone else. The "large majority" of the U.S. is not poor. That's just obviously true from the income data I cited.
If that data is not enough, look at SCF wealth data here:
https://www.federalreserve.gov/econres/scf/dataviz/scf/table...
Median Household networth of 50-75 percentile - what you call "large majority" - is $240K. That's not poor.
Median Household networth of 25-49.9 percentile is $58K. Also not not poor.
Median (50th percentile) networth is $121K.
I really encourage more of a reality-based approach to throwing around phrases like "the large majority of Americans are poor".
This seems obtuse. The entire thread is focused on finances. It should be self-evident my post is referring to financial struggles.
> But we have a way of defining who is poor and who isn't in terms of income, and it's good to use the same language as everyone else.
Different metrics aren't a different language.
> The "large majority" of the U.S. is not poor.
A narrowly crafted a declaration makes it easier to find metrics that fit. With that comes a weird assumption that those metrics are the same ones that matter to poor Americans.
For actual people - the meaningful measures of financial health are the long term security of food, housing, medicine and the resources needed to maintain them (eg:savings,transportation).
For actual people - when those things become unobtainable, a state of poverty is in play.
If preferred metrics aren't reflecting long-term or recurring conditions of poverty, maybe we should pivot to metrics that do.
You aren't citing a "different metric". You are citing an unscientific internet poll by Bankrate.com, whose results were released as a PR announcement meant to encourage people to open savings accounts. The "no savings" means "no money in a savings account" by those who answer the poll. You know nothing about whether these people were even in the labor force, how old they were, what money they had in checking accounts or 401Ks or money market mutual funds, and whether they were a representative sample (N=hundreds). Because an internet poll is not a study, and a marketing campaign is not scientific data.
This is clickbait. If you have a quality study not published by bankrate.com, then please cite it. And also explain why you are ignoring the US Census and the SCF, which is what everyone who studies household wealth uses.
I am citing the gold-standard academic study of household finances -- the survey of consumer finances, and the gold standard study of income as determined by the Census. This is not a situation of "different metrics", this is a situation of bad data versus good data leading to bad conclusions versus accurate conclusions.
Please look to the Census and academic studies to form your worldview of the state of US household finances rather than Bankrate.com's marketing department.
Again, this seems obtuse. It is interesting that your inference of a single poll ignores the many (well publicized) savings studies, that are regularly conducted by a wide number of organizations.
> I am citing the gold-standard study of household finances conducted by the Federal Reserve regularly since the 1970s
That's nice. Metrics adopted in the 1970s based on data from even earlier decades doesn't universally inspire the confidence that you seem to feel. I'd offer that metrics that well reflect the ~entirety of America who faces a meaningful risk of losing housing/medicine/food would likely be the metrics that most matter to people facing those risks.
Otherwise it feels similar to hearing the unemployment rate is 4.9% while >24% of 16-64 aren't working.
Yes, the definitions. Is it a definition or a lived experience? Politicians love to define away poverty.
These definitions are how millionaires were able to claim they are poor to get assistance during COVID.
Life is a struggle. But why? Why is it a struggle in this country, the "richest" country? Why do I have to be homeless, living in a minivan, fighting a mental illness? That is by design. This squid game we are living in is a design, it has rules, and we can change them in a second. But most people just want to be the next million/billionaire so they are afraid that changing the rules will mean they do not get the piggy bank of money they dangle over your head.
As a society we are poor. Compared to people in countries like France and Finland, we are poor, because we are always faced with these life and death decisions about jobs and healthcare. That is what it feel like to be poor; always guarding yourself, always frightened.
Hell, as a yearly income, that's poor much less a networth. Not destitute, but definitely poor. You can't afford to live anywhere near a city and probably live in a trailer or worse (shack with limited services). The metric is by household, so no splitting with roommates.
Not really, because this is primarily young people who are building savings. By retirement age, the savings are much higher even for the median household. Even in the 45-54 cohort, the median networth is 168K. By the time you reach 55-64, median HH income is $213K. Post-retirement, 65-74, median network is $266K. Then it starts to decline as people spend down their savings, so 75 and over it's $254K.
I mean, I guess you can call whatever you want "poor", but we have standard definitions for these things.
And an income of $58K is not "poor" for any age, but FYI median household income for all ages is north of $70K.
It is today and going forward, as far as anyone can tell.
The big deal is exponential growth, which both viral spread and inflation exhibit and which almost nobody has a good intuition for. 1.5% inflation over 10 years means that prices go up 16%; this is what most folks (outside of Silicon Valley) have experienced in recent memory. 5% inflation over 10 years means that prices go up 63%. Your Big Mac will cost $6.50 instead of $4. 20% inflation (like we've seen in housing, or ground beef) means that prices go up 6x. Your average house will be $2M rather than $300K.
Folks who look at the numbers and say we're doomed are plugging the data into a mental model of inflation, government debt, and the money supply and realizing that the logical conclusion is that the dollar is going to go to zero soon. Folks who look at the numbers and say there's nothing to worry about are looking at the numbers today.
If something goes wrong (or more wrong) we will have no effective economic tools available because they are constantly running as if we are in crisis already.
More like 13 years.
https://www.federalreserve.gov/aboutthefed/bios/board/defaul...
If we get hyperinflation, maybe housing will be affordable again?
Tough time for retirees and folks who put money in the bank already (and not the stock market), but what else is new.
This isn’t hyperinflation, nor is it on the precipice. It’s not in the same ballpark, it’s not in the same league.
The only way the US experiences hyperinflation is if the petrodollar system completely collapses along with several other shocks to the system at the same time. Not impossible, but completely separate and distinct from current fed policy.
The petrodollar system was always going to come to an end at some point, the problem has been that we’ve governed over the last 40 years as though it was a fact of nature.
The petrodollar is The Prize the US receives for being willing to enforce global shipping lanes across the world's oceans. Without that overwhelming force, things rapidly collapse as Iran shuts the Strait of Hormuz.
Which is why I think the next 10 years will display how little control the US military is able to exert. 20 years of pointless war have ground the US military into dusty incompetence. Do we want to protect Taiwan or our access to the Persian Gulf? We may only be able to keep one of them.
Second, how many soldiers in the Chinese PLA or PLAN have ever fired a weapon against a hostile force? The US has spent the better part of two decades in an active war environment. For better or worse, there's value to having actual experience with large-scale invasions. It's not being "ground into dusty incompetence", it's being battle-tested.
Third, the US military doctrine since WWII has been about fighting two wars at once. We can certainly protect Taiwan and the Persian Gulf at the same time. If we couldn't, then any intervention wouldn't be credible because the second we invade a nation, all other strategic objectives would be at risk.
Someday? Probably. Now? Unlikely.
I don’t know how we would even quantify in any real what odds on any of these events practically speaking. Do you?
A lot of the inflation we are seeing is due to base effects from last year. Oil prices literally went negative at one point and are only back to pre fracking boom levels.
The demand collapse and now demand spike we’re seeing only started occurring very recently (less than 6 months ago for the spike), and we don’t know what will happen. We’ve never had anything like it occur in a modern economy at this scale.
So probably not going to end the world or anything, but we really don’t have any precedent for this situation.
The fed funds rate is technically disconnected from, but highly correlated to, the TSY yield curve, particularly at the short end.
Our current sovereign debt-to-GDP ratio does not really permit a 10y TSY yield above about 4.5% without calling into question our ability to service the debt.
Powell is painted into a corner - he simply can't hike significantly. He faces the short term prospect of a market tantrum (which the Fed is very sensitive to), but more importantly a long term sovereign servicing crisis.
The good news is that the average maturity on the debt at 65 months means that the FRB can, if they choose, find the cajones to hike rates and then "retire for personal reasons" before the real pain hits, at which point it will be someone else's problem.
Situation is worse now, because it's highly likely that the U.S. Government would go bankrupt if they had to roll over their debt at higher rates, given that the U.S. debt-to-GDP ratio skyrocketed from 105% in 2020 to 130% now.
Is it even possible for a sovereign nation to go bankrupt in its own fiat currency?
It is crazy that the Democrats are the fiscal conservatives these days while the Republicans are much more irresponsible (though Obama and Biden are definitely nowhere near Clinton in terms of responsibility, they are way more responsible than Bush/Trump).
And rates can always go lower from where they are now. It's not like the Fed is out of room if they wanted to lower rates further.
This is going to take until after the new year maybe Q1-Q3 timeframe to see if it is transitory.
Reminder: we had an unprecedented global supply collapse followed by shutdowns and border closures for more than a year combined with historic levels of fast moving monetary growth during that time. We now have a situation of incredible levels of built up demand, a labor shortage and supply chain issues. Not to mention significant amount of illness and deaths as a result of a pandemic.
There were bound to be second and third order effects. The system needs some time to adjust.
What happens when the number of dollars approximately doubles in 2 years as it happened?
Do you think prices stay the same and everything is just 50% off?
Reality is that the current number is off by reality quite a bit, real number has to be much higher. It's just math and the worst part... it can't be just reversed.
Do you think countries that don't use the USD will remain unaffected? People keep blaming this on the fed "printing money", but that logic only holds water when just the USA is affected.
Everyone is experiencing inflation; it's a global phenomenon. Some countries have it even worse than the USA because their local production is getting redirected to the USA, where even higher prices will be paid.
In two years, things will very likely cool down globally.
If commodity inflation is caused by an over abundance of USD, then there would be a whole host of side effects from this. One of which, is as I said, price inflation localized to the USA. The second would be a weakening of USD relative to most other strong currencies. So let's look at that:
USD : Euro - Slightly weaker relative to 2020, but overall, right around the average strength over the past ten years.
USD : GBP - Same as the Euro.
USD : CAD|SGD|AUD - Weaker than 2019, but much stronger than the 10 year average.
USD : JPY|INR - Very strong
USD : CNY - much weaker than 2019, better than 2018, right about at the 10 year average.
It's there, but only slightly. And only after 2-3 years of crazy strengthening.
I predicted about 2x inflation as a best-case outcome a year ago. Worst-case outcome would have been serious structural damage, in terms of business bankruptcies, lost jobs, lost mortgages, etc.
Unless we get into a hyperinflationary cycle, we came out pretty well, economically.
Our public health response, on the other hand, was and continues to be a disaster.
I am now starting to wonder if the unrealized gains tax is the 'reversal' and the interdemensional checkmate on hidden wealth.
You're a monster.
What do you mean by "number of dollars approximately doubles in 2"?
I think OP was talking about monetary inflation. We nearly double the money supply so it should translate to a nearly double price inflation.
> it can’t just be reversed
I don’t know where you’ve gotten this idea from. The fed can destroy money just the same as it can create it.
You only have to look back to 2019. [1]
[1] https://www.investopedia.com/the-fed-continues-to-reduce-its...
Look at 5 year view.
It really has to be that. There's no other logical/sane justification for it. Fed is monetizing govt deficit spending and artificially suppressing long term rates to support asset prices to make things look good in the short term.
On a risk adjusted basis, it's obviously awful policy.
The only reason he was is that Yellen was recommending a raising of interest rates in 2018 and the sitting president was worry about the optics of that going into reelection. In comes Powell, the man willing to kick that can down the road.
Raising interest rates was the right move in 2018. It's just that the economic benefits of doing such takes a few years to pay off.
Is there any logic behind this timeline prediction?
People equate the fed not hitting their 2% target with hyperinflation and it’s absolutely maddening to see the level of discourse drop to astounding lows when this happens.
Has tuition even notably increased in the last 12 months?
The best thing that could happen for me is major deflation. But it is too politically unpopular, I bet it will be years before we get a fed chairman who has the spine to raise rates. So I'm reduced to angrily complaining online and shaking my fist at the sky while our rulers at the fed prop up boomers and leave my generation out to dry.
I would confidently bet money that they raise rates in 2022.
At the end of the day, the fed has to take its queues from the fiscal policy that’s in place. This time around is very very different from 08.
Now, im not trying to downplay the fact that elevated inflation can cause issues, but it so so challenging to keep that nuance when every discussion devolves into “we are on the precipice of +1,000% inflation” when the inflation rate went from 1 to 6.
Obviously 6% won't do that but at higher levels its the complex dynamics driving inflation than good old supply demand balance. And don't think that exports will solve hyper inflation because at that point other countries will also expect devaluation in currency which becomes a self fulfilling prophecy. Again not applicable to dollar and USA for the moment but at higher inflation levels anything is possible.
In the future, not only is it possible your money will buy you less, it is also possible that no amount of money, no matter how large, can obtain what you need.
For instance, anything with a silicon chip in it. For some goods, every known upstream retailer is out of stock, with no idea when it will be replenished, and the resellers are doing business at way above MSRP.
This is just a fundamental misunderstanding of what causes hyperinflation.
https://www.stlouisfed.org/on-the-economy/2017/april/us-manu...
See for example:
UK: https://www.reuters.com/world/uk/boe-chief-economist-says-uk...
Australia: https://www.reuters.com/business/australia-core-inflation-sp...
China: https://www.reuters.com/world/china/chinas-factory-gate-infl...
Germany: https://www.reuters.com/world/europe/german-inflation-could-...
Brazil: https://www.reuters.com/article/brazil-economy-inflation/upd...
There's no magic here.
Americans, please don't imitate Argentina, keep a healthy economy.
"Why the inflation we're seeing now is a good thing" -MSNBC tweet that got deleted.
Edit: "Yes, inflation is back, and you should probably be relieved if not outright happy."
https://www.reuters.com/business/inflation-revival-is-victor...
It's not a good thing in my opinion, but who's to say it's not transitory?
https://www.marketwatch.com/story/people-are-having-a-cow-ov...
We want more of this though right?
I sense that many people can't understand the difference between opinions or editorials and news.
I sense that many people actually enjoy the inflammatory way news is sometimes covered unless it's different from the way they'd like to see it.
I sense that people can't understand how a single new outlet can have varying opinions and points of view on a single issue and will choose a single one out of many to make their point.
Imagine how different things would be if people were intelligent consumers of news.
I don't think you can have a news industry dependent on clicks and profits and have no sensationalism. I also don't think you can have a completely unbiased media when people, based on their consumption, don't seem to want it. It's unrealistic given the different biases and motivations that people have.
>We want more of this though right?
Yes, in principle, but with the caveat that they don't do this in a partisan and selective way. For instance the whole "Kids in Cages" phenomenon is still happening but we never hear about it anymore - in fact they're just called "Child Migrant Facilities" by the press secretary and the media is basically silent compared to the fervor they were covering the situation previously. To me at least, the fact that they calmed down isn't a consolation because I sense they're just doing it because their preferred team is in charge now.
I think journalists are masters of rhetoric and can spin a situation in so many diverse ways while still being almost entirely accurate and truthful. It all depends on what facets of the situation they want to present and the insinuations that come along with it.
There have been facilities before, but this isn’t happening the same way it was where separation was on purpose. There are stories covering the current conditions, but I think you’re overlooking the fact that the prior administration and supporters seemed to embrace and encourage that narrative because they saw it as a deterrent.
> I think journalists are masters of rhetoric
You should meet the average journalist. Just like any other industry, the vast majority are unremarkable people. They’re not rhetorical masterminds. Like most people they see and write things from their point of view.
What’s more interesting to me is how some of the biggest names in media are obviously the rhetorical masters you speak of. I’m referring specifically to the TV and YouTube stars. Some of them are incredibly good at being convincing even if often contradictory or wrong. I also think video can be effective in ways text cannot be.
What I'm saying is there are reasons to believe it can go back to normal.
The narrative in the media would be have taken a whole another level - scare mongering, etc if it wasn’t the Blue team in the office. I don’t really trust anything but hard numbers from sites such as TradingEconomics or FT.
I have no horse in this race but Blue teams vs Red team is getting really dull and frankly annoying. Everyone seems to be wearing tinted glasses. I have higher standards for media and information that I listen and trust - opinions on HN doesn’t cut the mustard. Usually it’s safe to assume that opposite of the current HN zeitgeist is true (I only joke slightly).
They are two heads of the same beast, moving back and forth very rapidly and calling it progress.
Meanwhile popular policies like universal healthcare[0] and marijuana legalization[1] are never addressed. ( To name a few, there are many more ).
And the reason is clear. Tying healthcare to employment keeps people from organizing effectively. If you have a family, and you are on strike, your employer cutting off your healthcare is a brutal move. Also, people get fat off the bureaucracy.
Similar for marijuana legalization. Need to keep the prisons fed with new "forced customers" so the gravy train keeps rolling.
0: https://www.pewresearch.org/fact-tank/2020/09/29/increasing-...
1: https://www.pewresearch.org/fact-tank/2019/11/14/americans-s... 1:
If the party in power is the one the media outlet favors then the party can do no wrong. If the media outlet doesn't support the party then every step the party takes is wrong with no exceptions.
Maybe that's how its always been.
I watch the stock market which is even worse for this. Every day you'd see "Stocks down as investors weigh COVID", followed by "Stocks up as investor COVID fears wane". Which may be true, but not alternating seemingly every single day for a while.
It's like someone sees something happen, wants to write an article, and the boss says "nope, put something catchy on the title."
You also can't cherry-pick a handful of things that have gone up a lot and then assume that it applies to everything. Some things have gone up in price, others haven't. Inflation is sitting at about 6%, which after a decade+ of sub-2% might seem like such a shock, but it isn't really a big deal.
This is the one aspect I feel like most people gloss over the most. Most people I graduated high school with are dual income households.
This doesn't rule out a "demand spike following COVID" as mentioned by the parent. It's like a cartoon where someone (COVID) steps on the hose and a big bulge of water (demand + extra savings) forms. Now that bulge is working its way through the economy causing shortages (analogy completely falls apart here).
That last part is a key one to remember: the pandemic isn't even close to over. Ignoring the people who are dead or suffering long-term health problems, there are a ton of people who either left the workforce for various reasons (childcare, health, etc.) or switched fields and/or locations. That directly increases costs to businesses which have to pay more in wages but it also will have ripple effects for years anywhere buyers are chasing a supply chain which is limited by worker shortages.
Eventually the panic buying slows or stops and the orders clear, but it can take years for this to happen.
"Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output" -Milton Friedman
Edit - it's true. There's a very well established connection between inflation and money supply. Hell, the entire point of QE is to try stimulate inflation to encourage spending to encourage growth. It's not some unknown effect...
Beef has been too expensive for years, the only beef I've bought for years from grocery stores is bulk pack ground on sale but now on sale is $7/lb.
Chicken breast has been my main staple, on sale usually for $2-3/lb, now it's on sale at $5/lb for the cheap bulk packs.
Around me it's a wash to cook at home or eat out (at small restaurants/food trucks). I expect restaurants to jack up the prices more soon because they've been fairly sticky.
Pork and chicken here are quite cheap at 70c/100g for pork and 50c/100g of chicken.
Then again we don't use as much meat per serving here(approx 80-120g per person, on an average dinner).
the reason you should be concerned about these prices in relation to their 2008 crisis prices is because the countermeasure that resulted in 2008 relief --Quantitative Easing-- cannot be used again because we effectively never quit using it to prop up the last decade of commercial market performance.
https://en.wikipedia.org/wiki/Quantitative_easing#US_QE4
the Federal reserve also has no leverage to modify the prime interest rate to combat this inflation, as it already sits near-zero and the fed funds rate has been agreed to stay at under a quarter of a percent. modifying any interest rates in 2021 would blow up the corporate credit bubble, so the fed is mostly just bloviating about "transient inflation" to no ones real entertainment.
https://en.wikipedia.org/wiki/Corporate_debt_bubble
finally, the bond buyback taper the Federal reserve has been touting since July 2021 but too terrified to implement is effectively meaningless as its not set to end until next July at the earliest, effectively allowing uncorrected inflation to continue another eight months. the fed hasnt announced any further countermeasures after this...they just assume a bond taper will coincide with the purported end of covid and surge of consumer confidence which never manifested in 2021. Instead the supply chain continued to fail and vaccine targets were never met.
Id conject the level of wishful thinking driving fed policy at this point should be enough to tenure Powells resignation sometime in March. the only thing combatting stagflation at this point is corporations like Amazon who know if they dont do something about real wages in the absence of effective federal policy it will start to reflect on their earnings reports, and even they seem recalcitrant to take any real steps unless the union comes a knockin.'
...huh? If you want to lower inflation you'd typically raise interest rates...
(These sorts of stupid-simple mistakes are pretty typical from inflation fearmongers in threads like this one... a lot of words that make it sounds like they know what they're talking about but sprinkled with incredible tells like this one.)
> in a low-gravity environment, everything becomes much heavier to lift
> brb hold my cryptobags
The smart mmoney is on rates staying low for a long time which shows you just how powerless the Fed is right now.
They would LOVE to raise rates. They can't.
lol? whut? Stop talking about government debt, it's a stupid talking point used to beat people over the head with who want to govern by misleading voters into believing that government debt is the same as household debt.
Also, what weak economy? Economic growth is up, wages are up, unemployment is down, personal debt is down. The only thing that is currently "weak" in the US economy is our JIT supply lines, and that will work itself out eventually.
Agree with this take. The GDPNow estimate for Q4 growth is 8.5%. A lot of this seems to be getting lost in the politically obsessed back-and-forth.
> Stop talking about government debt, it's a stupid talking point
Said not a single respectable person in economics or finance ever.
There's no real alternative to stuffing money into Treasuries, so it's kind of a moot point right now.
That usually happens in the beginning stages of high inflation scenario.
Also government debt is not the same as household debt, however it still matters especially at these high levels. There is a breaking point just no one knows where it is. 300% gdp? 500%? 700%. At some point it will break down.
The only two things that can actually make the system collapse in the next 30 years are:
- a communist revolution in the US (this is not happening anytime soon, do not worry).
- zealots with a debt fixation, who would rather collapse the entire economy because they think debt is immoral. This one is a little bit more likely, but given the strong ties between the financial sector and the political parties in the US, I really doubt these people would ever be in charge. Republican, when they don't control the White house, are prone to rant about how debt is unsustainable and should be reduced at all cost, but whenever there is a Republican president, the debt keeps rising.
Also, there is exactly zero historical instance of hyperinflation caused by public debt labelled in a country's own currency. Zero.
There's little rational reasons to believe public debt will cause hyperinflation, and as I mentioned above there are in fact powerful effect acting in the opposite direction.
The only reason people make the link between those two is that hyperinflation is the canonical example of an economic catastrophe and because people believe debt to be immoral, it must lead to a catastrophe in the end. This is a religious/moral discourse, which has no link with the actual world.
And to conclude, keep in mind that high level of public debt is a political decision (borrow from the wealthy instead of taxing them) it would be quite straightforward to fix (with the 60s income tax level) but it's in the interest of no-one with a bit of political power.
For the record: most of inflation comes from rising costs in the supply chain (from supply issues, resources scarcity and/or wage raises). This is where we are now.
There exists instances of hyperinflation related to debt (Weimar republic's for instance) but this was due to debt labelled in a foreign currency (basically gold in this case).
Yoy 6% for october. Inflation is already up. What are they waiting for? 10%? 15%?
Also Powell isn't Volker by a long shot. I don't recall the Volker pivot because a few traders weren't having a good day.
You realize that this figure was only calculated a few days ago, right? What reaction time do you expect?
Maybe. The policy responses to inflation are to increase supply and/or raise interest rates. Both of those put downward pressure on housing prices. So, inflation devalues the debt you owe (good for household) but also devalues the underlying asset (bad for household).
This doesn't make much sense when rent/imputed rent are primary drivers of inflation.
To make this happen we'd have to build new homes like crazy while keeping the interest rates low.
Large, complex, distributed, networked systems, like interconnected cloud datacenters, electric power grids, and global logistics networks, can get "stuck" in a degraded state due to a confluence of highly local bugs that are difficult to diagnose -- especially when no single entity controls the entire network end-to-end. Hoping and waiting for things to get better on their own might not be enough.
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[a] Note: I'm not saying it's the most important problem. I'm saying it's the most pressing, in the near term, because a well-functioning global economy is a prerequisite -- a necessary condition -- for solving all important problems. Please don't attack a straw-man.
[b] https://www.inc.com/kevin-j-ryan/flexport-founder-twitter-sh...
https://en.wikipedia.org/wiki/Demand-pull_inflation
https://en.wikipedia.org/wiki/Cost-push_inflation
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[a] https://www.connexionfrance.com/French-news/Which-products-a...
How does reduced supply lead to higher prices?
I don’t think we’re ever going back to the pre-pandemic past. Climate change is simply becoming too disruptive to supply chain networks. This probably would have happened anyway, the pandemic just moved it up by 5-10 years.
Couple this with the fact that we’re going to eventually have food shortages at least locally in the short-to-medium term, which will destabilize the developing world and raise global food prices as more countries have to import from “bread basket” countries like the US and China and consuming even more global logistics capacity than it does today. This long-term famine is already happening in Central America and is driving more and more migrants north every year.
> This long-term famine is already happening in Central America and is driving more and more migrants north every year.
This is certainly a problem but not nearly a major reason that migrants are coming north. They're coming north because they can make their monthly salary from northern triangle countries in a few days in the US. These are economic migrants, regardless of what the news tells you, evidenced by the fact that almost none of them are accepting offers of asylum in Mexico and choosing to continue to the US.
The cities are overcrowded and these countries have little industry outside agriculture, which is increasingly difficult and expensive thanks to climate change. So of course they flee north; and Mexico has many of the same problems with collusion between police and organized crime — particularly when targeting migrant populations.
How is this evidence? If Mexico isn’t my home either and I already have to start my life over why wouldn’t I keep going to a place with even more opportunity?
I'd love to lock in a cheap mortgage,even if money is worth 10% less next year, my mortgage remains the same.
In terms of investment property or flipping, there are many factors and you might want to look at what happened historically.
For example, raising interest rates significantly like Volcker did in the 80s stopped new home building cold because new buyers could not afford mortgages. They stopped building the subdivision my family lived in for 3-4 years when this happened. In general, people who bought just before that period did not see a return on their home for a decade-plus, but the economy rebounded quickly after that period
https://www.cnbc.com/2019/12/09/when-volcker-ruled-fed-peopl...
My current 401k contributions alone would cover the mortgage.
Ideally when I don't live their I'd rent it out.
In reality I'd say inflation is closer to 60% than 6%.
The gaslighting is unbelievable. Now they are saying that spending trillions in ridiculous handouts will LOWER inflation!? Are you freaking kidding me?
This is not some natural state of a affairs and more a matter of intentional policy[1] by one (and sometimes both) major parties. Consider the recent attempts to fuck up the USPS.
If you rewind ~60 years you find the US government sending people to the moon on extremely short timelines and building the foundations of the internet.
Let's be honest here - our world is headed towards "Snow Crash". All you can do is hope you land in a good burbclave.
Why would equities be included in inflation? That doesn’t make sense to me.
The markets still believe the FED knows better than you. But hey, the great thing about our system is that you're always allowed to bet against it.
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
Investopedia is often where I go to find out more about particular topics, their articles are comprehensive and clear and you can dig pretty deep into most subjects. A good place to start is understanding the difference between fiscal policy (what the government does) and monetary policy (what the central bank does):
https://www.investopedia.com/ask/answers/100314/whats-differ...
Economics In One Lesson - Henry Hazlitt
The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War - Robert Gordon
I can't recommend this book highly enough. And for those with a short attention span, 30 Second Economics gives a nice overview of many economic concepts (a few paragraphs per concept).
[1] https://www.amazon.com/Ascent-Money-Financial-History-World/...
In fact, it's hard to find much even on Google Scholar....
This is the problem with a lot of heterodox econ, btw.
Hayek also never embraced all the stuff Austrians taught, such as Mises claiming neoclassical was completely flawed, whereas Hayek accepted the majority of neoclassical as correct. Hayek does not take Mises a priori approach to economics whatsoever. There's plenty more. So if your claim is that Austrian is reasonable because a big person believes it, this is not that person.
Whenever someone points out that Mises and Austrian economics is not very relevant to modern economics, and someone invariable pulls out the lone closest thing they can find, know that this is not quite true.
>The main reason why the Austrians tend to be snubbed is that their insights are primarily qualitative
There's entire subfields of well published and researched economics that do this that are not Austrian.
If you simply google "why is Austrian economics snubbed" you get a whole host of decent sources showing how it fails to match empirical evidence. That is the reason it's snubbed. It sounds pretty, appeals to Libertarians, but does not match observed evidence. That's good enough reason to stop any line of thought from being accepted science.
(Of course, when you build your entire field on rejecting empirical evidence, of course you end up with beliefs and theories that do not match empirical evidence, so no surprise there).
Neither does academic economics; there's absolutely zero consequence for an economist who repeatedly makes incorrect predictions. The ones who actually can make predictions with statistically significant accuracy work as quants or traders, not economists, as anyone who can make accurate predictions of the future can easily make six to seven figures doing so.
That aside, the fundamental predictions in microeconomics between Austrian and neoclassical economics are pretty similar, so you can't say Austrian theory doesn't work without also saying foundational neoclassical microeconomics doesn't work.
Unless we see commensurate rises in wages we are in for some real difficulty if this continues.
Recommendation: Ban non-ideal conditions.
I could be wrong but it's just something I've noticed over the years.
During the decade of the 1970s, there was some phenomenal levels of inflation, and the S&P500 inflation adjusted returns for the decade were about -20%