Definitely an interesting read but I'm surprised he doesn't even approach the notion of asset price inflation being the primary form of inflation from all this money printing that's been going on.
These days gold prices seem to be driven by fear: gold tends to spike up on market crashes, as a flight to quality. I think people aren't afraid enough yet; they're still feeling greedy.
Because it's not “inflation” as that term is used without modifiers, which is increase in the nominal price of final consumer goods and services.
Asset inflation is a different thing than general inflation and it makes no sense to conflate them.
Instead, they’re using “non market rent” or some such nonsense to estimate housing costs. Measured as it was then, our current inflation rates are significantly higher than they were at the end of the seventies, even though they’re reported as being lower.
Inflation has been redefined to exclude asset prices, and that directly broke its traditional relationship with the actual cost of living. Given that, I’d argue it’s fair game to point at asset prices as evidence of out of control inflation.
This situation is textbook Orwellian Doublespeak: Rational conversations about inflation are now nearly impossible to have, since all the useful vocabulary has been sabotaged. Instead of talking about inflation, we get tripped up on vocabulary and semantics.
No, it's not.
Residential real estate is an asset, housing is service.
Imputed rent (the cost of rent forgone as a result of choosing to reside in the property you own rather than renting it out) is the cost (the money given up in exchange for) that service, for homeowners choosing to reside in the home they own.
> Inflation has been redefined to exclude asset prices,
Inflation has generally excluded asset prices for the entire 102 years for which the US has measured it, as the fundamental concept has always been measuring final consumer goods and services prices, not assets. The exception, for a 30 year period in the middle (starting in 1953 and abandoned in 1983) was homeownership costs, which was a clumsy way of dealing with the fact that only counting direct rent, as had been done from 1919, was completely of ignoring housing costs for the growing group of homeowners. The switch to the owners equivalent rent method in 1983 returned the measure of inflation to it's core purpose, while not excluding homeowners actual costs of housing.
I'm no socialist, but I think a common interpretation of the american dream (or prosperity in general, really) is that a hard, reasonably intelligent & frugal worker can one day employ what they've earned to enable others to to meaningful work. I.E. they can own a small but meaningful part of the economy above and beyond what they require for sustenance.
Common investments have ballooned disproportionately to the value of goods and services they provide to society. The companies aren't making the world that much better, but the people who own them are reaping rewards as if they are.
There's no real price discovery anymore. Don't low interest that stimulate the economy fundamentally mean keeping inefficient businesses afloat?
The classes that rely on wages and salary are getting priced out of financial mobility. I'm not super familiar with programs outside the US, but our dual mandate of 'stable prices and max employment' seems to translate to 'keep the poors working as hard as they can, and make sure the basic feed (market basket of goods) is cheap'.
Stuff like housing, cars, health care, and higher education (stuff that really matters) either isn't in the market basket or seems to under-measure an average person's lived reality. Tons of people have heard of the 'burrito index'. Seeking alpha is mostly trash, but even a quick glance-over of this guy's graphs is telling:
https://seekingalpha.com/amp/article/4419060-dollars-purchas...
No, I’m making the point that if “ a redefinition of the basic structure of inflation as to whether it includes any assets or not renders discussion meaningless because it invites semantics argument, then the “last guy” is wrong that is the effect of the 1983 change to exclude homeownership costs, because that ship had already sailed in 1953 when changes were made to include them in the first place.
> I'm no socialist, but I think a common interpretation of the american dream (or prosperity in general, really) is that a hard, reasonably intelligent & frugal worker can one day employ what they've earned to enable others to to meaningful work. I.E. they can own a small but meaningful part of the economy above and beyond what they require for sustenance.
Like, why is the “I’m no socialist” disclaimer even there when you go on to articulate exactly the standard, capitalist interpretation of the “American dream”: if I spend enough time on the treadmill of wage labor, I get to become a microcapitalist.
It's like saying “I’m no secularist, but I think people should be obliged to follow the Ten Commandments on pain of death”; the lead-in disclaimer is unnecessary.
Were you a socialist, you’d think people were entitled to a share of control ab initio as a worker, as a matter of right, not as a reward for slaving away at wage labor for a sufficient time for which they would sacrifice accumulated surplus wages, and that your entire statement was silly. (I know, I checked with a socialist.)
In any case, that has nothing to do with cost of living.
> The classes that rely on wages and salary are getting priced out of financial mobility.
To the extent that's true, it's a problem of fiscal not monetary policy. Monetary policy (at least, the levers Congress has chosen to provide the Fed to address it) is a too blunt instrument to be used effectively to control that well, that's the domain of the much wider array of economic tools that remain in Congress’ sole control, like the whole of taxing and spending policy.
> I'm not super familiar with programs outside the US, but our dual mandate of 'stable prices and max employment' seems to translate to 'keep the poors working as hard as they can, and make sure the basic feed (market basket of goods) is cheap'.
No, it doesn't really do either of those.
OTOH, the first part is the effect of a whole lot of downward relative tax burden shifts over the last four decades.
> Stuff like housing, cars, health care, and higher education (stuff that really matters) either isn't in the market basket
All of that in, in fact, in the market basket. (Used cars have actually been the largest component, IIRC, of the recent aggregate inflation increase.)
> or seems to under-measure an average person's lived reality
Claims about what things subjectively seem to do relative to subjective impressions are...slippery, at best. But the concrete effects you blame on inflation have much more clear policy sources, that are neither inflation nor monetary policy.
>
When these people get paid interest they will repeat the process which means there is an insufficient supply of money in the real economy to repay loans forcing people to borrow to service their interest payments.
This means debts grow faster than the economy. When people eventually spend the money the value of the economy gets adjusted upwards .e.g. prices rise via inflation.
Alternatively inflation stays low forever. There is an excess of savings hitting a limited number of investments that can only earn negative yields. By simply not investing people can isolate themselves from these losses which should be impossible ( cough deposit insurance). This forces interest rates into negative territory.
How? Where do you park more than 250k to keep it outside the economy?