Inflation rises to 7% in December (led by energy)
bls.gov
bls.gov
This exactly why fixed inflation targeting is a bad idea and Market Monetarist advocated NGDP Level targeting and New Keynesians simply want the Central bank to do that correctly manually.
Consumer Price Level measures might be useful for other things, but not at input for your central banking function.
The supply shock you need to be worried about is the shocking oversupply of new dollars competing for the same resources.
It’s not a surprise that we’ll hear tons of information saying that printing money isn’t a bad thing, or that it isn’t the cause of any current monetary outcomes.
> As a result, though, many people may now be eligible for substantially more money while unemployed than they made while they were working. A new analysis by Peter Ganong, Pascal Noel and Joseph Vavra, economists at the University of Chicago, uses government data from 2019 to estimate that 68 percent of unemployed workers who can receive benefits are eligible for payments that are greater than their lost earnings. They also found that the estimated median replacement rate — the share of a worker’s original weekly salary that is being replaced by unemployment benefits — is 134 percent, or more than one-third above their original wage. A substantial minority of those workers, particularly in low-wage professions like food service and janitorial work, may end up receiving more than 150 percent of their previous weekly salary.
https://fivethirtyeight.com/features/many-americans-are-gett...
I used to think this way as well, but after browsing /r/wallstreetbets I am not at all convinced you need to have wealthy or responsible to invest/trade/gamble in the stock market. And unemployment abuse is a larger more complex topic.
Are you arguing people aren’t relocating or something to that effect?
You might say "oh, well the rich are bidding up gas and food prices, poor people can't afford and ummmm drive and eat less". It sounds silly and it should but even if that were happening, and was the sole causal factor, it would mean the food and gas markets were not clearing, and that is clearly also not happening.
And even if that were happening the sellers would be being irrational. For surely they would lower prices after the rich were fed and gassed up so they could sell the remainder of their goods, and make more money. (the profit rate would go down but the total profits would go up.)
No matter how you cut it, the Monetarist story is false and ridiculous given the evidence.
Another example--the federal government enables "easy money" as higher education loans, which has enabled universities to massively overcharge for mostly low quality education.
The data doesn’t seem to support this, at least not yet. The owner occupancy of units has been increasing since 2016 and increased after 2020.
The increase in housing prices has been extraordinary, but seems in large part due to people who actually intend to live in that housing.
The monitarists' conception of inflation is a temporary distortion where all the money stock and flows pick up. What you are describing is a spacial distortion where certain people / goods get unfair treatment. The latter is indeed quite dubious, but it's not the same as the former!
Conventional monetary policy is lame and fairly ineffective, but I have seen claims that raising rates is better at destimulating than lowering is at stimulating. What a tough nuance to convey!
It did go down. Now its back to normal.
Source?
This is what I could find: Personal Consumption Expenditures
Also savings rate has gone back down after a spike that coincided with stimulus payments
Now it could catch up, or Omicron could blow over and we continue fixing supply chain issues.
The traffic jam is just the echo of the initial accident, remember.
It's not about being useful, but about the fact that the mob is growing more unhappy every day because their buying power is dwindling, which in turns makes elected politicians quake in their boots.
And as much as everyone would like to claim or even in some case believe that central banks are independent entities, this is a complete pipe dream, they are - at the very least - subject to influence peddling like everyone else.
Inflation originally meant 'an increase in the money supply' (what we now call m1), which is what we've seen over the past two years. When the governments enacted their responses to COVID, many predicted 'inflation', and some denied it would happen. Does this count? What would 'count'?
/s
If we get to choose which categories get excluded from CPI after every bad report it ceases to be a good metric.
Home purchase price was taken out of CPI-U in 1983 (and CPI-W in 1985) and replaced with an owner-equivalent rent measure that gets at the cost of consumption of shelter (the service that housing provides).
Tl;dr: Housing expenses were not removed; house purchases were (and replaced with a rent-equivalent measure).
The accusation is that OER is a terrible way to measure rent increases. OER is determined by surveys asking homeowners "If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished and without utilities?"
It's a crazy way to measuring housing inflation for most people. Especially since there are statistics that directly just measure rent increases and the BLS could use those.
> At what point do you acknowledge that there has been a general increase in the price level? If you agree that there has been an increase, when do you think it counts as 'inflation'?
Inflation is an rise an average of prices. It is a symptom, not a single disease.
Monitarists might say there is "the" inflation where all the prices go up, and no good "real activity" excuse to point the finger that. That's like...just their theory, man.
Until the panic is clearly done and production is clearly stabilized, occam's raiser says don't worry about such spooky stuff.
Its not about 'acknowledging' increases in the price level, The price level CPI measure is just a measure, if it goes up, I do 'acknowledge' that.
However, what and if monetary policy should be, should not be guided by CPI inflation.
> Inflation originally meant 'an increase in the money supply' (what we now call m1), which is what we've seen over the past two years.
This is true for a very long time ago but has not been used like that for many decades.
Bringing that point up is really a non issue, even in the 70s people were not using it like that. Basically no modern economics has ever viewed it like that.
This is just a confusing point and argument about language. Yes, if you use that definition inflation has been high, but that does not actually change the policy response at all.
> When the governments enacted their responses to COVID, many predicted 'inflation', and some denied it would happen. Does this count? What would 'count'?
Again, you seem to be not at all understanding what I am arguing. I am not arguing that inflation doesn't exist.
CPI Inflation simply doesn't mean what people think it means in terms of central bank policy.
I have made no statement about what central bank policy should be, I have not actually studied the numbers in detail.
Not necessarily.
> Well, we are finding that to be less and less true. So something else is going on beneath the surface.
That's fine. We have ways to do monetary policy while accepting whatever else is going on.
If you target NGDP Levels your demand function already balances supply and demand correctly by itself.
>That's fine. We have ways to do monetary policy while accepting whatever else is going on.
That assuming you think the Fed won't make a major policy mistake or hasn't already. You act like monetary policy is simple, it's not. I think MMTers have ruined a lot of people's perception on the complexity of monetary policy.
If there is a supply shock, you will have lower real growth but monetary policy will not react to that because its a real signal.
Market Monetarists were very active training to tell people that the Fed in 2008 were actually deflationary. That I think is what eventually will be the consequences, just like it is with the Central Bank.
I'd think that the root supply issues were easing over last year, so much of what we are seeing is still an echo what's already come.
If omicron blows through as fast as it arose, I'd say things are looking up. Still team transitory.
If they are not hitting targets its just bad leadership.
So never fall into the trap of thinking the central bank has not 'teeth'. They could hit almost any target they wanted.
The only thing that needs to change is the mind of people on the control board.
What's worse is that the complex is full of unoccupied and newly vacated units. You can tell because the lights are kept on 24/7 and they installed new LED bulbs. This makes me wonder why they would treat current tenants so badly by raising rents so much when so many of those units that are being vacated remain empty?!? Surely it would be better to be less aggressive and have a higher occupancy, no?
It’s all about appreciation. Rent is nice but tenants are a hassle.
Do you live in a large complex owned by a big company? In my experience large companies don't even attempt to negotiate.
I've tried in the past at two different complex and never got a response until I walked my ass to the front desk and then was told "we don't do that". My buddy tried that same thing at his complex right at the height of covid when everyone was moving out of the city and still got no response. Two months later they sent him an email asking why he left and what they could do to get him back. I think big companies send any attempts at negotiation straight to the trash.
Contact your city councilperson and state rep/senator. Public policy doesn't need to punish this sort of behavior, but we should at least stop rewarding property owners who do this sort of thing.
A 35% increase is far above average, but if people are paying it and it’s not enough to get people to move out, then it’s really just market rate.
On the other hand, if it’s high enough that people start moving out and the new vacancies are hard to fill, those rents will come down very quickly.
One of the strangest things about rent increases in my area is that everybody complains about them, but few people ever bother moving out. The even stranger thing is that most of the people I knew who went remote chose to move to more expensive cities, because that’s where they decided they wanted to live. I suspect rents will continue to rise sharply in hot areas until people are actually willing to vote with their feet.
Unfortunately, this is unlikely. We’re in an era where building owners would rather let their properties sit empty for years than consider even a modest reduction in price.
Why would they move out when everyone is increasing rents?
It's a net neutral result. If you're upset that rent is going from $1200 to $1500, then voting with your wallet and moving somewhere else doesn't work when rent is $1500 everywhere.
Apartment complexes don't compete on price. They don't have to, since every basically needs a place to live, and so they will charge as much as they possibly can. If minimum wage goes up $2, you can bet the landlords will be salivating over how they'll be able to increase rents by $300/month and capture the money, and renters will be stuck paying it because the alternative is to go homeless.
That’s different then your assertion that a minimum wage increase would be disproportionately taken up by housing- that’s probably true, but that’s not due to a lack of competition on price, it’s due to more money chasing the same supply. And it’s quite possible that a minimum wage increase could see new entrants chasing rising prices on the low end side- perhaps enabling more people to rent houses as a multi family household rather than apartments.
What we are seeing is an underlying demand shock (the effects of stay at home orders and WFH causing people to want to consume more housing on per person basis, combined with more money from changed consumption patterns and government programs ) that combined with a supply issue (historically low housing construction after the 2008 recession combined with global supply and labor issues) that has created a situation of historic demand chasing historically little supply inventory. If we finally see sufficient housing construction then you’ll see prices stabilize and possibly even come down, because those new units compete with the existing units.
It's a reasonable assertion, but I'm a bit more cynical. I don't think prices are consistent due to competition based on price, I think it's consistent because they've all figured out what the maximum rent is the market will bear. Again, the important thing to remember is that people need housing. The sellers of housing are taking advantage of that and will charge the absolute highest price they can.
There's no reason to compete on price when you're essentially guaranteed a customer.
> If we finally see sufficient housing construction then you’ll see prices stabilize and possibly even come down, because those new units compete with the existing units.
I've seen first-hand people arguing against construction of new housing. They try to frame it as worrying about traffic, but the quiet part is that they know the higher supply could cause their home value to level off.
We need to stop looking at real estate as a form of investment. It creates extremely perverse incentives that result in housing scarcity for the lower classes.
a 25 percent increase for me, I would buy but I don't want to hassle with a home bidding and don't plan on living in this state much longer.
35% does seem steep, but it doesn't seem fair to compare against last year's rent when it was likely heavily discounted due to COVID.
Then rent those homes out at a substantial profit
https://www.washingtonpost.com/business/interactive/2021/inv...
I wish we had only 7% inflation here... (Argentina)
In competitive industries like software engineering, you quit and get a new job and then they pay you 10-20% more. In monopsony industries like government, you suck it up and get a 3% cost-of-living increase while gradually falling behind on inflation. In unionized businesses (there aren't many left), your union fights for a 7% pay increase and you basically stay awash with inflation. In competitive small businesses, you try to quit to get that big raise but then find that no other small business has the money to pay you, so you spend your nights, weekends, and downtime on the job doing a data science bootcamp and then quit for a 10x salary boost.
It was the same in the 1970s. My mom (teacher) said that when she entered the workforce in the late 60s, teachers were paid about 20-30% less than professional occupations like doctors, lawyers, and engineers. By the early 1980s, the latter were making 2-3x more but teacher salaries had barely budged. By the time I entered the workforce in the mid-00s, software engineer starting salaries were about the same as teacher pre-retirement salaries, mid-career was 2-3x more, and the top end was 10x+ more.
We do have unions in the US, though I've not worked in a union shop before. Union contracts vary, but I get the idea it's not uncommon for them to include pay adjustments based on inflation.
Labor shortage -> real worker power -> solidify gains with unions
Trying to boost unions when labor is on the ropes is foolish preaching from vicarious onlookers.
Sucks for everyone else though. Especially with the artificial housing shortage.
I plan on living in this house until I croak. If I do happen to move for whatever reason, the increased value doesn't help since likely, ALL houses have gone up. My $300K house being worth $600K doesn't really help when the house I'll need to buy is also now $600K.
Maybe I’m just getting old, but when I look around at our economy, housing, the crypto fascination, etc. it all looks like scams, hype, and fomo to me.
When the big bailouts happen, I’m gonzo. Just don’t know where to yet. Maybe I’ll live on a sailboat to try and minimize the impact of the insanity.
This is the case for all forms of money making in the last couple years. It's quite depressing that actually being protective, smart and risk adverse to this idiocy is the worst situation to be in.
It's like everyone is playing with fake money and you're standing there saying it's not real, but they keep finding new ways to convince themselves it is. Meanwhile your real money is getting old and dusty.
The root issue as far as I can tell is supply is incredibly poorly managed. When I was living in Vancouver, there was a lot next to us that was waiting for permission for 2 years to build a low rise, mixed use building in an area already zoned for it. Don’t get me started on “historic” homes in dense areas.
Not at all what I’ve been reading. We have a record high 2.5 trillion in mortgage debt, and a lot of that debt (especially in the last year) is high risk.
In a more ideal world, we want mortgages to get more expensive (so that housing itself would get cheaper).
* Assuming a fixed interest rate of course. Don't put that evil on anyone.
I am a homeowner and don't want my home value to double when real income has barely moved in the same period. That's not sustainable.
Even if I could sell without repurchasing, to pocket the cash, there's another generation behind me that's going to need a place to live.
You can't just have entire generations of homeless people without it affecting society.
If only retirees, and highly paid professionals are shielded from housing increases I’d expect all other prices to become correlated with housing as workers demand commensurate wage increases or start refusing to work for negative earnings.
That's already happening. IMHO you have the causality backwards - prices started rising in 2020, and then some workers have captured some of that surplus by switching jobs, and now landlords are trying to capture the workers' surplus by raising rents. Rents follow wages, which follow profits, which follow prices, and then prices follow rents & wages again in the wage/price spiral. Homeowners have an advantage because their biggest cost of living is fixed, while rents generally rise to capture all available wage surplus.
The folks who really get screwed are the ones with fixed incomes but variable expenses, either a renting retiree or someone who plans to stay at the same employer for a lifetime. You should be aggressively changing jobs and going where the money is to capture some of the large amounts of money that are floating around. People who do that usually do better than average.
Note that while this is happening bad things happen. It often is the case that you have to live on less real purchases for a few months until your wages go up. However as a homeowner the mortgage not changing means it only takes one or two rounds to get ahead of this forever (that is before you never revert to worse than when you bought the house - you can go backward in purchasing power but not that much), while as a renter your rent will increase yearly and that is often a big hit against your wages that won't increase at the same time (and often not at the same rate - it will balance out in 5 year but that is a long time to live)
Don't read the above as a rant against renting. There are other pros of renting. You need to make the right decision for your personal situation.
I suspect what ProfessorLayton means is that they specifically own a house and so sucks for the rest of us.
0: https://www.pewresearch.org/fact-tank/2021/08/02/as-national...
I vehemently agree that those who don't own appreciating assets are worse off, which is why I said it "sucks", because it does. But it isn't most households.
Lastly, young people in particular are also less likely vote at all, let alone for their own interests. Before the pandemic, the housing shortage was entirely artificial, and the main reason housing keeps skyrocketing is political. There just isn't enough supply to keep up with demand, yet people without homes don't show up at their local council meetings demanding more housing supply the same way NIMBY homeowners show up demanding less.
Raising home prices have much worse effect of kicking away the ladders for the new generation to own their own home, while doing nothing for those who already have a home to live in and desire to keep doing so (other than possibly raising their property taxes).
edit: 89% of US homes are occupied. Of these, 58% are owner occupied. https://www.census.gov/housing/hvs/files/currenthvspress.pdf
https://newsilver.com/the-lender/millennial-home-buying-stat...
https://www.forbes.com/sites/eriksherman/2021/10/27/the-futu...
We all know labor is weak, so we start expecting wages to rise last, but that is not what happened this time, for there was a genuine tightening of the labor market.
For some definition of "own".
Most do have some amount of equity in their home and have a big fat mortgage to repay.
I am sorry, but that's not exactly "ownership" in my book.
As to your second point (inflation up => cost of mortgage down), only true if wages go up, which, unless I am mistaken ...
Yes, agreed. You are merely renting land from the govt.
That is not the case everywhere, btw, IIRC.
Ireland (I believe, to be verified) and China don't have things like property taxes.
Unless something has changed since the recent reports of the inflation surge on the non-energy side, housing hasn't been a big part of it (used auto prices were, IIRC, the single biggest component—which also doesn't hit most people regularly...)
It's not that housing prices aren't up, it's that CPI can't (yet) capture the change.
Unless something has changed since the recent reports of the inflation surge, housing hasn't been a big part of it (used auto prices were, IIRC, the single biggest component—which also doesn't hit most people regularly...)
Everyone is ahead but small bussiness owners without bubble-worthy assets who just relied on too-cheap labor to make a profit.
Yes it does shield you fron rent increases. Specifically because by owning a home you have also purchased an income producing asset that perfectly hedges your rent increase. For every dollar that rent goes up and you have to pay more, you also get an additional dollar in income from that increased rent. Ie shielding you from the affect of any increase.
It's the same thing as buying a stock, and then shorting that same stock (or buying a put). Yes the stock may go down, but for every bit it does, your other investment up down meaning you are now shielded from (or hedged against) any changes in stock price.
Inflation is the best thing that can happen to you if you owe highly leveraged debt on appreciating assets. The more debt the better.
Your debt payments stay stable, the asset price goes up, your wages go up, and within a few years the payments are negligible compared to your salary.
Compare this to a renter - your rental payments go up, your wages go up.
For anyone who isn't, it's a huge loss or at the very least, a huge widening of the gap.
>"For example, rank-and-file workers in leisure and hospitality — the lowest-paying sector of the U.S. economy — got a nearly 16% raise in 2021, to $16.97 an hour. That means the average employee at a bar, restaurants and hotel saw pay rise more than two times faster than inflation, amounting to a net 9% increase in annual pay.
Similarly, rank-and-file workers in transportation and warehousing saw their annual pay rise 8.4%, to $25.04 an hour in December. Retail workers got a 7% increase to $19.20. These either exceeded or matched inflation."
Your dollars being worth less is bad for people who have a lot of dollars. Which by definition isn't people at the bottom. You're seeing prices go up because people at the bottom of the American food-chain have been getting paid more as covid has impacted supply chains and the workforce.
https://www.cnbc.com/2022/01/12/higher-pay-eclipses-inflatio...
This isn't a comment against inflation, it's a comment against printing lots of money to protect investments at the top.
Inflation being a side-effect of not having a depression is still inflation. The blame doesn't just suddenly evaporate.
The US caused most of the world's inflation.
>The blame doesn't just suddenly evaporate.
>The US caused most of the world's inflation.
The world follows the US in nearly all cases when there's a problem with the economy. That's what being a lead economy in the world means.
housing and rent here havent gone up here in india.
usa asset bubble seems a bit insane from outside.
And don't let anybody tell you otherwise:
This is totally because of fiscal deficit.
I think it's because of supply chains inadequate to supply surging demand from people flush with cash. It's the toilet paper drought spread out across the entire economy.
New vehicles: 11.8%
Used cars and trucks: 37.3%
The bad news is that the new vehicle and food price increases are almost certainly sticky.
Energy is the big tricky question mark. The big worry post-pandemic was about US shale production never returning, but it's starting to look like we'll hit the 2019 highs in US domestic production some time in the next year or so. I suspect we're past the peak in terms of rate of growth, but it's hard to say if the new prices are sticky or if we'll see a meaningful decline in the next year or two.
(I've started to build a strategy for selling off my energy holdings and I'm still on the fence about what to do with Ford and GM.)
Food price is also highly cyclical and related to supply constraints of pure commodities which always correct.
I guess I should've clarified. Vehicle prices for equivalent vehicles probably aren't sticky, but the statistic reported here is sticky.
Electrification will increase average sale price. But the amortization schedule will lengthen, operating cost will decrease, and maintenance will plummet. So might still be a win for consumers.
But I don't think avg sale price will come down meaningfully. You'll see a big shift from ICE to E, though, and yes, ICE prices will come down a lot.
> Food price is also highly cyclical and related to supply constraints of pure commodities which always correct.
Suffice it to say that I'm not betting on commodities in either direction but I've got a huge position in Tyson.
Bolts were going for ~$25k at ~250 miles range.
2023 ID.4 is an SUV/Crossover with probably ~240 mile range rumored for ~35k (and $7.5k off tax credit)
Mach-E is an SUV/Crossover with ~250 mile range for ~$44k (and $7.5k off tax credit)
I wonder if that's the new normal, or if haggling will make a comeback?
* excluding some undesirable makes/models that would have sold poorly without huge incentives pre-pandemic anyways.
It doesn't help that the fed is literally lying out of its teeth and realistically will do everything they can to AVOID raising interest rates. They are all corrupt as hell, secretly trading stocks under our noses.
I've got one I'll sell you for $15K over its 2020 purchase price. Perfect condition at only 20K miles.
I understand most people on HN likely enjoyed a great run in tech bubble but you have to admit speculation here is simply mind boggling (even after the recent SaaS crash).
This doesn't jive with this at all.
Meat, poultry, eggs jumped 12-13% and seems like that isn't coming down anytime soon.
So companies did not know they had pricing power, and they just realized that? All of them? They all had the same epiphany at the same time?
Only people that got screwed were a thin band of middle class small bussiness owners. Fuck them they're leaches anyways on what has been too-cheap unskilled labor for decades.
If anything the subsidies for renewable energy (build out and research) would give fossil fuels more competition.
https://twitter.com/M_C_Klein/status/1480538926398029824 consumer spending is down, this flat-out rules out "too much money chasing too little goods" as the root cause, for surely then sellers would lower prices to sell enough more more volume to raise back consumer spending and increase total profit.
If anything, taxes could have a cooling effect and lower demand.
What does this mean? Are you saying that there exists a program in this package that will take less than a year, or are you saying that all of the programs in this package could be wrapped up within a single year? If the latter, fine. If the former, you're using careful phrasing to be intentionally deceptive, which is not a way to argue with people you're trying to convince.
But to be clear, if this is deficit driven, it is driven by the tax cuts from the previous congress.
Maybe we should keep the taxes in the new bill and get rid of the new spending
The inflation from the stimulative policies in effect today won't even show up for six months
To what extent might this affect Bitcoin (or other proof-of-work) mining?
I've heard that PoW mining is notoriously energy hungry. Does a big increase in energy prices merely slow the mining down, or is there some tipping point that could make PoW-based crypto markets crash and die?
Disclaimer: I'd like to buy a new GPU in 2022.
PoW is the solution to an important set of interconnected problems, and as long as the network has value, PoW will keep bidding for energy to secure that network.
It's been said, correctly IMHO, there is only Proof-of-Work and obfuscated Proof-of-Work. Rephrased, nothing is cheaper than Proof-of-Work: https://www.truthcoin.info/blog/pow-cheapest/