Inflation rose 9.1% in June, even more than expected | Hacker News Reader

Inflation rose 9.1% in June, even more than expected

cnbc.com

288 pointsmfiguiere549 comments

Meanwhile, Gold takes a dump, falling 1%:

https://www.tradingview.com/chart/?symbol=NASDAQ%3ATSLA

Remember how gold was going to protect you from hyperinflation?

Something nasty is brewing in the economy. It will be obvious when it hits but until then it will be confusing as hell.

The bond and eurodollar markets have been signally for about a year now that the nasty thing will be a recession that will force the Fed back into accommodative mode as early as this year.

The funny thing is that both can be true. Inflation can soar and the economy can crater. The Fed can be accommodative while inflation runs hot. It has happened before. If it happened again, it's hard to imagine a scenario that would cause greater confusion.

> On a monthly basis, headline CPI rose 1.3% and core CPI was up 0.7%, compared to respective estimates of 1.1% and 0.5%.

Here's the number to pay attention to. CPI increases are accelerating. Have a gander at this chart:

https://fred.stlouisfed.org/series/CPIAUCSL

Also notice how that chart only goes in one direction - up and to the right. There are very brief periods in which it reverses, only to return to trend with a vengeance.

I doubt this is monetary inflation. It's price inflation due to a supply crunch brought on by the pandemic shutdowns (whose effect was delayed) and the Russian invasion of Ukraine. Then throw in other factors like housing undersupply in developed countries, continuing depletion of "easy" oil, and Chinese threats against Taiwan.

Gold tends to be (but is not guaranteed to be) a hedge against monetary inflation but not against supply crunch driven inflation. Prices are going up because prices are actually going up.

Define "monetary inflation" and how to measure it. It would also be helpful if you could point to a metric that allows one to distinguish "monetary inflation" from some other kind.

> Define "monetary inflation" and how to measure it

Core PCE jumping [1]. Core is elevated. But between that and headline is a lot of energy price volatility.

[1] https://www.bea.gov/data/personal-consumption-expenditures-p...

Why would that be a measure of "monetary inflation." Shouldn't such a metric actually measure, you know, money?

> Why would that be a measure of "monetary inflation”

The price of money is contained in the interest rate. There are loads of models for turning credit spreads and duration curves into a Fed-neutral level, but I have my doubts.

We have no metric for the part of inflation caused by monetary policy. If we did, central banking would be solved. Instead, we have various measures that include some confounding variables and exclude others. Core PCE excludes most volatile, non-monetary contributors to prices. If core PCE spikes, it’s hard to argue the cause isn’t systemic and widespread, i.e. monetary or something with similar breadth. CPI spiking, on the other hand, has more explanations which must be rejected before we can conclude monetary origins.

>It's price inflation due to a supply crunch brought on by the pandemic shutdowns (whose effect was delayed) and the Russian invasion of Ukraine.

Pandemic, probably yes. Ukraine? Probably not. The supply problem is over-optimized supply chains, which means "we build everything in China, and they're not producing." I just got a time estimate of 52 weeks for a 1200A distribution panel, and things like breakers >600A have similar restrictions.

All of this compounds up and down the chain. But luckily, a lot of suits on Wall Street are making tons of money, so everything will be fine, right?

> But luckily, a lot of suits on Wall Street are making tons of money, so everything will be fine, right?

Look at risk assets, and consider whether that supports your assertion.

I read that retrospectively, as:

~ But luckily, a lot of suits on Wall Street are making tons of money forcing the global economy into this put-all-your-eggs-in-the-Chinese-manufacturing-basket strategy, so never mind any potential risks to the larger global economy outside Wall Street in the second or third decade of the twenty-first century; those suits on Wall Street are making tons of money and that's the main thing, so everything will be fine, right?

And sure, it was -- for a while. And for those suits on Wall Street, it probably still is: They've made their [m|b]illions. (Not sure what you mean by "risk assets", but I do know this: If they're really risks, you and I will probably be on the hook for them, rather than those suits on Wall Street.)

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

> I doubt this is monetary inflation. It's price inflation due to a supply crunch brought on by the pandemic shutdowns

Take a look at M2 money supply [0]. Pumping huge amounts of fiscal stimulus into the global economy caused this. Inflation has been driven by poor policy decisions.

> Then throw in other factors like housing undersupply in developed countries

There has been a housing stock shortage for over a decade, that's not new, so it's hard to argue that's a proximate cause [1].

> continuing depletion of "easy" oil

There's plenty of oil available [2]. New technology (hydraulic fracturing, horizontal drilling, etc.) allows for accessing reserves that were too expensive previously. There has been structural underinvestment in O&G thanks to misguided green/ESG policy.

> Chinese threats against Taiwan

How does this drive inflation? If anything, China has reduced inflationary pressures by decimating economic activity with Covid lockdowns.

> Gold tends to be (but is not guaranteed to be) a hedge against monetary inflation

Gold has been a great hedge against inflation in the long run. When measured in gold, a soldier today earns a similar salary to a Roman soldier 2000 years ago [3]. However, gold is not a good hedge against inflation in the short term. When inflation goes up, interest rates go up. When interest rates go up, the opportunity cost of owning gold increases. It should be noted that interest rates have steadily declined throughout history.

[0] https://fred.stlouisfed.org/series/M2REAL

[1] https://smile.amazon.com/Shut-Out-Shortage-Recession-Univers...

[2] https://bettermeetsreality.com/how-much-oil-is-left-in-the-w...

[3] https://www.mining.com/what-a-roman-centurions-pay-says-abou...

The Russian invasion isn't what caused inflation. I don't believe in the "Putin's price hike" because inflation was already picking up speed in Q2 2021, well before the invasion.

It's likely that there are a multitude of causes each contributing a bit.

Many many different areas are experiencing "perfect storms" to cause huge disruptions and shortages:

https://www.bloomberg.com/news/articles/2022-07-11/thirteen-...

> protect you from hyperinflation?

We are not in a hyper inflationary environment. Hyperinflation is when monthly inflation rate is above 50%, or more than 12,800% per year.

Gold and what army?

People repeat these gold lines like it's the 19th C. Today its a shiny metal sold by ponzi schemers to paranoids.

It's illuminating to observe the disparity between what gold vendors say they believe and what their actions suggest they believe. They claim that gold is the only safe place for your wealth, so the wise thing to do is give them your risky, value-less paper dollars and receive shiny metal. But their actions are the opposite, they are happy to take all of your paper dollars and give you the shiny metal that used to be theirs... No one would give away something valuable for something less valuable, their actions imply that they ascribe more value to the paper dollars than the shiny metal.

* Job markets are still extremely strong

* We're seeing June numbers. Gas prices lately have plunged relative to where they were

* supply problems are moderating

The one thing the fed should be worried about is another unexpected supply shock -either a COVID wave that affects Asia etc, or natural disaster that drastically affects energy. Then, the economy is in a deep bind and the fed has their hands tied.

Financial markets are leading indicators of job markets. The stock price is about expected future performance. When that bad performance materializes they decrease hiring and start layoffs. Then tax income decreases, which leads to public sector budget issues, so they start cutting too.

Strong job numbers are negative for the economy and markets now. It implies future inflationary pressures.

We're almost certainly below the natural rate of unemployment, meaning even a declining CPI isn't enough for the Fed to stop hiking

> Gas prices lately have plunged relative to where they were

Have they? Where, and by how much?

I'm still seeing ~$5/gal gas around here...

Oil prices are down 25% since mid June. Gas prices are down roughly 8% on average in the USA during the same time.

But remember, California $6/ga gas is Texas $4/ga gas.

Crude oil has plunged. Gas prices pretty much remain elevated. I still see a lot of locations in Los Angeles charging preposterous $7+ a gallon with general prices pulling back $0.25-$0.30. That's a not a plunge.

I didn’t see anywhere above 6.69 in Pasadena

I see $7 all over Burbank and Encino, especially off of freeways.

Here in Dallas I was seeing gas for $4.85 a couple weeks ago and sub $4 today.

"Job markets are still extremely strong"

It seems like that is only true if you're in a niche (like skilled tech) or if you're <$20/hr. I see tons of openings for shit jobs (low wage and/or bad environment).

Even being in tech and making under the national average for devs, I don't see many good jobs posted that fit with my experience. I'd like to switch industries, but that would generally require a significant pay cut and other downsides with things like working construction, warehouse, driving a truck, etc.

> I see tons of openings for shit jobs (low wage and/or bad environment).

This is evidence of a strong job market.

It’s also evidence they’ll all eventually be raising their wages even more than they have to attract workers.

Which will then further increase inflation (somewhat).

There is a desperate need for auto technicians, starting $60hr in small towns.

Amazon, Walmart, Publix are paying pickers $30/hr

Buckey's, Loves, all paying over $20hr with benefits

The mechanic route is something I thought about. It seems a little questionable given the shift to EVs with lower maintenance needs and manufacturers (TSLA) being restrictive.

Becoming an electrician is currently at the top of my list. There should be considerable future work with all the various popular changes (EV chargers, solar panels, old homes being updated, new home and office construction, etc).

The last few years of zero interest rates has meant that a lot of people made a shitload of money . There is plenty of cash and liquidity around.28 year old FAANG engineers with 600k in savings and a house (as an oldie I am in awe). Inflation is here to stay for the next 5 years at least no matter what the Fed does about it . Plenty of people sitting on cash and multiple houses at 2.x% mortgages . They have plenty to splurge on that trip to Aruba.

I find this disappointing because it basically says "anyone who works for a W2 will cause inflation if they are successful"

That shows to me that capitalism is broken if success means inflation. We should be able to swim in cash reserves and safety and not be penalized for it.

> it basically says "anyone who works for a W2 will cause inflation if they are successful"

Then take comfort in that armchair analysis being wrong. If it were true, if FAANG employees’ pay were driving inflation, we’d expect to see local inflation correlate with FAANG employment.

It does not. In fact, almost the opposite is true, with inflation in the interior outpacing that on the coasts [1][2]. (Shipping.)

[1] https://www.bloomberg.com/news/articles/2021-11-11/inflation...

[2] https://www.jec.senate.gov/public/index.cfm/republicans/anal...

Isn’t this a result of inflation in the interior finally catching up to the ridiculous pace that the coasts have had as coastal money flees inward due to WFH and unaffordable housing prices?

My armchair analysis is that we have heavy inflation in what were low-mid CoL cities as the big money remote workers cash out of the coasts for cheaper locales

Or in other words, the rest of the country catching up to the big cities

No idea if this is the truth of course

> we have heavy inflation in what were low-mid CoL cities as the big money remote workers cash out of the coasts for cheaper locales

Internal migration is too slow and too small to explain the interior’s price shocks. Also, it’s not like the coasts are withering away. Real GDP growth in California and New York was better than the national trend in Q1 2022; the interior saw the worst of the real economic shock [1].

[1] https://www.bea.gov/news/2022/gross-domestic-product-state-1...

>Internal migration is too slow and too small to explain the interior’s price shocks.

As anyone who paid any attention to the housing market in the past 2yr knows, if you have 10 houses and 11 buyers...

>the interior saw the worst of the real economic shock

That places that have economies that are more dependent on physical goods, services that cannot be performed remotely and high volume low margin types of business (which are heavily affected by supply chain stuff and commodity prices) should not surprise anyone.

How does any of this relate to testing the hypothesis of FAANG employees driving inflation?

My primary point was that the extra demand caused by FAANG driven monopoly money suddenly sloshing into these other markets could easily cause prices to increase far beyond what the dollar values and number of people would make you think because supply for all sorts of things is not elastic enough over a short enough time period.

At least in housing, this seems to be the case... In cities like Seattle, the DMV area, etc., I hear about price decreases and homes sitting on the market for weeks.

Where I'm located(east coast LCOL area), we still compete with ~15 bidders for every house, and they're still reliably selling within 2-3 days for 10% over asking, all cash, with inspections waived.

Obviously part of this is a supply issue, but, I have a strong suspicion the rise of remote work is a contributor to price increases near us. We live a short distance(~1-2 hrs) from several major metros, and with the flexibility to go into the office only a few days a month, It's feasible to take a much higher paying job in somewhere like NYC and commute. Local wages for engineers here are/were also much lower than what was offered for typical remote roles, so I'm sure that's causing an additional upward pressure

I would not describe it as broken.

It could simply be a consequence of the parameters of nature not offering humans unlimited energy and resources.

While I agree with the premise of finite energy and resources here, I don't agree that current systems are an inherent consequence of it. It's the way we as societies have allowed things to be structured. They don't have to be structured in such a way. Energy and resources have various allocation models that can be adopted, we just seem to be moving right back to the darwinistic models more and more which makes me question the stability of societies in general, especially as allocation systems tend to deviate away from natural allocation systems yet remain darwinistic.

If we continue along competitive models for allocation to the end, we're right back where humans started before forming societies except in an articicial darwinistic model which I'd say people are increasingly rejecting, so we need to start thinking a bit more about more equitable allocation systems than we currently have. Right now, I'd say the general population is pretty fed up with existing allocation systems.

> While I agree with the premise of finite energy and resources here, I don't agree that current systems are an inherent consequence of it. It's the way we as societies have allowed things to be structured. They don't have to be structured in such a way.

Yes, I do not see a problem with capitalism coexisting with a wealth transfer mechanism to constantly “reset” the game a little bit to prevent extreme disparities. Well, other than the fact that humans would have to allow it to occur.

Any attempts to do that generally end-up with the smaller business owners being "reset" by the .1%, while the W2 class drink kool-aid

> If we continue along competitive models for allocation to the end

Competition is a very strong motivator for progress. Even if you didn’t embed it formally within a society, I bet it would very quickly arise and build upon itself.

Anti-competitive practices are the cornerstone of unregulated societies (via mafias), but it certainly would in the (theoretical) absence of that. It's a fundamental property of entities that try to achieve things, of which humans are the prime example.

You can still have competition and create competitive forces that drive and motivate people, they don't have to be tightly coupled to fundamental energy and material resources needed for survival, or, they can follow classic models that assume necessary baselines for enjoyable survival levels for everyone and then provide luxury allocations for competitive successes. There's all sorts of options out there instead of directly mirroring natural selection in abstract human created systems.

That is not at all what is going on here…it’s not the people with all the money, it’s the underlying monetary policy(little to no interest rates for a decade combined with money printing) that led to those people having that money. If a tech company couldn’t borrow cheap money early on, they couldn’t afford those wonderful compensation packages.

Google’s profits have vastly outstripped the money invested into it. They could have borrowed at 20% and still been wildly profitable.

The argument is that without cheap money, Google/FB's customers wouldn't have the cash to plow into ads.

Apple, Netflix, Amazon, and Microsoft aren’t advertising supported and while Google does profiting from cheap money Google’s margins are insane. So, they can take a significant reduction in revenue without changing their business model.

I keep getting YouTube adds for the same kind of things I have seen on TV. Tide pods, dish soap, toilet paper etc alongside Door Dash’s attempt to recruit workers. They would definitely make less money without door dash but not enough to matter. Much like how startups keep splurging on Super Bowl commercials but the Super Bowl would still make lots of money without them.

The argument is about zero interest rates, not success or capitalism.

But perhaps those are somehow related.

Oh, they are perfectly related.

as opposed to China's economy, by example?

The moment a centralised institution controls interest rates, and has the ability to buy government debt (in other words finance government spending without the market buying bonds), you are NOT talking about capitalism, but about government controlled markets.

> finance government spending without the market buying bonds

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

“The public holds over $22 trillion of the national debt. 3 Foreign governments hold a large portion of the public debt, while the rest is owned by U.S. banks and investors, the Federal Reserve, state and local governments, mutual funds, pensions funds, insurance companies, and holders of savings bonds.”

> The public holds over $22 trillion of the national debt.

This is amazing. A very few seem to realise that it says the public buys and holds a promise on a future productive capacity of that same public. It's as if I paid another person for the privilege of promising myself to behave and work for that person overtime in the future.

Ok, but the fed bought bonds on the market and artificially drove down interest rates doing so. And also financed part of government debt.

I don’t see how the holdings of it matter, that’s completely different to the bonds being sold on the open market, which the fed was buying

Since when capitalism is defined as a system where governments intevene into the market forces to bail out losers by unbacked printed money?

Yeah I'm in my 40s and I don't have that much in savings. Of course, working in failed tiny startups without 401k plans for most of my 20s didn't help. I've been doing my best to make up for lost time the past few years, but I've still got quite a ways to go before I get to that point.

But 600k in the bank is still not the norm for Americans, only a small percentage of them. Most are really struggling right now.

Having it as debt instead of in the bank sounds even better as inflation eats your debt away.

Only if your wages go up as well

Who keeps 600k in the bank? I could have it in stocks and be making around $16k/year in dividends right now (that's just me picking a stock at its current price and dividend, I'm sure it would have been over time otherwise), while riding out the recession.

If you believe that the stock market is going to go downhill as well, investing in a stock is only worthwhile if it loses less than it pays in dividends.

I guess that a lot of people are on the fence about whether they should short stocks since "everything is going down" or just sit on their cash reserves, eat the inflation and hope to buy in again once the bottom has been reached.

Or you can stop trying to time the market and keep buying through the downturn. Might make less money that way, but you also don't risk totally mistiming the bottom, like a lot of people likely did back in March 2020 during what ended up being the shortest recession ever.

Granted I think this recession is likely going to be significantly worse and longer than that one. I'm still taking advantage of the the 25% discount on stocks and buying, though.

Also I suspect we're in for some terrible shit in the next 5-15 years with the way the environment is heading (the physical environment, i.e. lack of water, topsoil, ocean acidification, etc), but I also suspect we're in for at least one more solid bull run before that happens.

What if stocks will go down for the next 30 years, like it happened in Japan?

If it lasts for multiple decades, then that flies in the face of the entire history of the US stock market and we're probably in for a US collapse at that point (especially considering most of the biggest companies in the US are multinational) and keeping money in dollars in a bank is probably equally foolish.

I've lived through crypto winters before that have lasted 2+ years. If I had bought a little bitcoin every week during that time I would easily be retired now. I plan to do the same during this downturn, but focused more on stocks (also getting a small amount of crypto). I didn't have the spare cash back in 2008 during the Great Recession, or I would have done extremely well for myself then too.

If for some reason the stock market stays fucked for decades, then I am acquiring other assets too, like precious metals. Also guns and ammo and goods to barter with might not be a bad idea in that case.

> If I had bought a little bitcoin every week during that time I would easily be retired now.

Problem is that bitcoin is a ponzi and doesn't have any revenue/profits but just FOMO.

If you bought tulips at the bottom and sold at the top...

Oh it's a ponzi you say? Well if only someone on the internet had mentioned that sooner I wouldn't have wasted my time with bitcoin then. Let me just sell everything real quick...done. /s

Thanks for being casually insulting. I know Hacker News is full of those comments so I'm used to it, but I'm not sure how you expected me to respond to your comment there, or what benefit it would add.

Your comment comes off to me as if I said something like "Oh look, I just got a pet mouse!" and you responded "Mice are crappy pets. It's going to bite you and give you the plague."

For the record, I said buy every week (as in DCA, or just buy no matter the price, all the way up until now), and I'd be retired now. That's not 'buy at the bottom, sell at the top'. It's currently $20,000, and that's not "at the top", the top was ~$69,000 in Nov 2021, so now is nowhere near the top right now.

First crypto winter I held bitcoin through, the price was hovering around $200 every week for two years, so I could and should have been buying more that entire time, instead of checking the price every couple of months to see if anything changed and buying nothing.

But I probably could have accumulated at least 40 coins potentially based on my income then, with a few sacrifices (by that I mean less going out to eat and buying a bunch of random video games that I'd often play once or twice and never again...still a problem I have today, it just makes up a smaller percent of my paycheck now). I was excited in bitcoin even then, but I was also a lot poorer, making about 15-20% what I'm making now, and I also wasn't prioritizing it as much as I could have been.

Even still, I'm not dumping all my earnings into this stuff. I put far more into my 401k/stocks than I do crypto.

Note: I mined bitcoin when the price was ~$300 knowing full well it was a ponzi.

If you DCAd on tulips and sold at the top you'd be set for generations.

You are talking with too much feelings. I understand. But it's ponzi all the way down.

> I put far more into my 401k/stocks than I do crypto.

Every single $1 you put is every single $1 into a ponzi. I'm sorry. I wish I too had generational wealth and did fancy art fulltime.

If you want something more real life and high risk/return, check out TQQQ & HFEA. I do those.

This has never really made sense to me. Maybe if you're a big player somewhere, but the average person didn't get a 9% raise in June, inflation isn't really affecting their debt at all

And with the economy cooling off, workers shouldn't expect to get raises anywhere close to the official rate of inflation anytime soon.

>>Having it as debt instead of in the bank sounds even better as inflation eats your debt away.

This is a crazy hack, in countries like India where a home/rent-income is a defacto investment, being in debt is cleverest way you can can have your investments subsidised by the economy(general public).

One of the biggest things you can learn as an adult is to be comfortable with manageable levels of debt.

> 28 year old FAANG engineers with 600k in savings and a house

This is truly such an exxagerated strawman. It’s such a minuscule number of people, and they’re definitely not 28. Plus, the sky high salaries are for senior engineers, not juniors.

I know plenty of folks who this describes? FAANG workers who got in at 20, no kids, own homes and have hundreds of thousands in the bank.

Plenty == affect the global/USA economy? Have you considered you live in a bubble?

FAANG don’t even employ enough people for this to make a dent on anything other than housing prices in FAANG commute localities.

The FAANG example was exaggerated, but the core point still stands. Across the board, labor in US has seen sharp income increases the last couple years, and families have had elevated savings rate for a lot longer. Plus, nobody was spending anything in the beginning of COVID. That latent spending power of households is now being deployed, and huge contributor to inflation.

I don't see how Covid savings would increase the price of butter and meat really. Inflation is all over the board and escalated in January (?).

It is just Fed printing money like there is no tomorrow.

600k in savings, not a 600k salary which I agree would be exceptionally rare and not the norm for 28 year olds (but definitely possible in the finance world for the top performers)

A FAANG engineer that joined just out of school (~22 years old) and spent 6 years getting regular promotions, awards, maybe a move into management, etc. and all of their initial stock awards vested could very well have 600k saved over that time. Doubly so if they're married and their spouse is in the same situation.

Yes, I read savings not salary.

I still disagree, there’s so much in income/other taxes that are applied. They spend on exorbitant rents and overpriced goods. Most such people are not frugal by any stretch.

If you could link any survey/study/statistics on the number of such 600k saving individuals, I’d love to see it. Until then, it’s a strawman.

Lowest level Facebook managers are in the 550-600k TC range[0]. Not sure though how that compares to other FAANGs, or how likely it is to get there in your 20s. Honestly I'd expect it to be easier to get to M1 at FB than to get into the upper upper echelons of the technical ladder.

[0] https://www.levels.fyi/company/Facebook/salaries/Software-En...

It may be "a lot of people" in an absolute sense, but it's still only a small fraction of the population. Specifically, the fraction that was already very wealthy.

The poor are getting worse off, with wages not rising nearly fast enough to keep pace with inflation (not to mention being basically sacrificed to keep the great money machine running during COVID).

And they're already starting to do something about it: the unionization push is accelerating (I saw several weeks ago a figure that at the beginning of the year, there were zero unionized Starbucks, and at the time of that posting, they had just unionized the 150th), and if inflation continues at this rate—or higher—without some significant changes in wages, etc, we might start to see bigger problems before long.

Others are discussing that the 28 yo FAANG engineer is such a small population that it's not relevant to the larger picture, which may be true, but misses the larger point that _lots_ of people had extra money of which the FAANG engineer is just one example. Home owners refinanced. Parents got the child tax credit. Federal and state-level stimulus checks. And businesses took 75% of PPP dollars for purposes other than wages.

https://www.stlouisfed.org/publications/regional-economist/2...

> Gold takes a dump,

"gold" or actual physical metal gold? What I hear is that getting gold or silver metal delivered is almost impossible.

I think a lot of problems are being aggravated by the failure of the "market makers" and market reports that are more to influence than inform.

See also the Nickel market.

Kitco seems to have some ready for delivery https://online.kitco.com/buy/2014RCM/1-kg-Gold-Royal-Canadia...

Russia was cut off from the gold market, I imagine it would create temporary disturbance in physical gold supplies.

not 'gold market', but 'western gold market'

western media tend to omit that it's the west against Russia, not the world

Anecdotally, I just purchased some physical gold. Even though it was a holiday, it arrived at my doorstep within 24hrs..

> "gold" or actual physical metal gold? What I hear is that getting gold or silver metal delivered is almost impossible.

What do you mean? That inflation fears caused consumers to clear out the retail channel, or that "investment" gold is often something that just sits in a bank vault and can't reasonably delivered except to a specialist?

Those are both valid; to be specific i refer to having heard acquaintances complain that they cannot find retailers willing to ship to them (in the USA), this was in April but I haven't heard them cheering so I assume they're still hunting. For further information this person is specifically after smaller coins; the market for bigger bars is probably different.

Every single shiller was wrong.

Gold and crypto protect against inflation.

Bonds should be 20-40 percent of a portfolio.

Apple and MSFT and the rest of big tech are safe havens.

It's always a good time to buy a home, as supply is at a generational low and will remain like that for a decade, we will become like Canada so you shouldn't wait to buy.

My favorite one is, you can't time the markets. Quite obviously a lot of people correctly timed the market's trends starting around the end of 2021, and the reasoning was pretty sound. I'm kicking myself today for dismissing them.

Thinking you can't time the markets is a fallacious story that buy and hold investors believe in. It may be beneficial, as many tend to sell low and buy high, but it's nothing further from the truth for me.

Assuming someone can time the market, what reason would they have for not cracking into the list of the world’s wealthiest people within a couple decades?

It might be worth distinguishing here between 'some people that can time the market' and 'market conditions that can be timed by some people'.

'You can't time the market' would preclude both, but I think GP is talking about scenario 2 and you are talking about scenario 1.

This one was easy though. Practically everyone was looking around while the pandemic stock market was exploding, realizing that it didn't make sense.

For me, Tesla was the flashing red sign, it's market cap was something close to that of the entire auto industry combined. I had a big expense coming up this year, so I went ahead and sold a bunch of stock in January.

Ya but it hasn't made sense for years. Which is why you can't time it. You just got lucky. Tesla didn't make sense when it was $250/share prior to the stock split. Look where shorting got you.

Selling a stock that you think is obviously overvalued isn't "timing the market." You're just applying market fundamentals. Timing the market would be shorting a bunch of Tesla.

Lack of credit, capacity constraints.

For decades?

Yes. If a strategy can only make $1m a year, you won't become a billionaire from it.

It seems like the only inflation hedge was to short the entire market (Stocks, Crypto, Gold...)

I'm not sure how you can confidently make any conclusions about any of this while we're in the midst of it. We're not through to the other side of this downturn yet, so who knows what could win?

My casual observation that I'll probably forget about in a few years and maybe remember the next time a real downturn (I'm too young to have ever paid attention to the economy, economic news, etc. during a downturn) happens is that, most likely, everyone gets scared of the uncertainty and dumps their assets in to cash so they're ready to pay off any debts they have. What happens next is unknown.

> Quite obviously a lot of people correctly timed the market's trends starting around the end of 2021

How many incorrectly timed the markets in 2020? In 2019? Etc.

I felt real smart when I sold my BTC at the ~$18k peak way back when. I even told myself I'd wait til it dropped to $2k before I bought more. Seemed smart back then. Not so smart now. Granted, I still made money, but I left a lot on the table.

With bitcoin you could have bought back in at $3500-6000 and rode it back up in March of 2020, and had a bigger bag in the process (or the same bag plus a bunch of cash). Granted things were really scary then.

I'm the even bigger dummy. I held through that $18k peak and crash in 2018, and still held through the $68k peak and crash last year. Still holding, but could have made way more if I had sold even a piece of it when it hit my target ($54k) instead of waiting for the $100k everyone kept promising was definitely going to happen based on previous cycles. Oops.

My gut said sell at 69k or even much before. I 100% knew 100k was impossible. Truly I expected 75k or so. But I listened to the shills.

Key lesson -- if a shill has good information, take the information. But make your own decision at the end of day. How it fits into your mid/long term goals etc.

Honestly I was expecting 75-80k myself, and was planning to sell a good chunk then (up to 50%). The 100k I was a little less sure about.

But it didn't even get that far. Dropped almost immediately after getting to its ATH, which usually doesn't happen. The world had to shit the bed and take it down with it before that.

> expected 75k or so

Based on what?

The shills

Not OP, but I believe the answer is "on nothing". There is no way to know where it will go. It's just supposition and very specific numbers like this make me cringe hard.

That’s my conclusion after a bunch of losses that could have been gains (not in btc): ease in and out rather than trying to time the market and buy/dump all at once.

> Still holding, but could have made way more if I had sold even a piece of it when it hit my target ($54k) instead of waiting for the $100k everyone kept promising

Why not sell now? Wouldn’t you still make a decent profit?

#diamondhands

> I'm not sure how you can confidently make any conclusions about any of this while we're in the midst of it. We're not through to the other side of this downturn yet, so who knows what could win?

I saw some of the same predictions as GP, they were all about the start, not the middle or end.

> Quite obviously a lot of people correctly timed the market's trends starting around the end of 2021, and the reasoning was pretty sound.

You mean when some of the Fed officials sold? Sound reasoning, indeed.

"You can't time the markets" doesn't mean it's not possible. It means if you do, it's luck

Timing the market is often read literally, like someone bought or sold at peaks and bottoms. But a lot of people saw the bear markets coming. Whether they sold in November or August, they correctly timed. Buy and hold investors made the wrong move by holding. It was obvious then to many.

Bears have been predicting the next recession every year since 2008, and calling it "obvious" too. The ones who got the timing wrong -- most of them -- slink away, while the ones who more or less got it right will brag for the next decade. So it goes.

But you're using the results of a Pachinko machine to say that some balls knew the right place to land. There have been people pulling money because a crash is coming any day since the start of the bull market. Sure, it's possible to time the market but it's equally possible to make the wrong prediction.

> Whether they sold in November or August, they correctly timed. Buy and hold investors made the wrong move by holding. It was obvious then to many.

In a decade or so I strongly believe my investment will be up significantly from those November numbers. I won't care what happens right now, it literally doesn't effect my plans to withdraw the cash when I retire.

There's a classic scam (I'm sure it has a name, but I don't know it) where the scammer gives out predictions for some stock or other: they pick their (large) group of targets, then send half a prediction that it will rise, and the other half that it will fall. After the appropriate time passes, they are proven right to one half, and wrong to the other.

Then they take the half they got right, and do the same thing again. After a few iterations, their pool of marks is smaller...but they also believe that the scammer is never wrong. (I believe the scammer then tells them they need to put a large sum down—which the scammer will, of course, handle for them...and then absconds with it.)

You're focusing on the ones who got it right, ignoring the ones who got it wrong, and calling it smarts. It's very unlikely to be so. The market as a whole should always be treated no differently than the scammer's entire initial pool of marks.

John Allen Paulos describes this in his book, Innumeracy.

(Excellent book, by the way)

Bob Hope does this in the beginning of "The Lemon Drop Kid," but with horses instead of stocks.

You forget that you have to time the market correctly 2 times. 1 time when selling, and 1 time when buying back in.

Show me the person who can consistently time the market.

The data is pretty clear on this one: even the professional investors that did better than the index in one period, were not able to do the same in the following period.

Buy and hold, there is nothing better. Try to be smart and you will lose.

I know it's read literally, that's why I explained what it actually means

Why do you think housing is a safe haven? Interest rates will continue to rise, thus making a monthly mortgage payment more expensive. People can flat out not afford to purchase homes at these levels if interest rates rise. It's simple math.

> Why do you think housing is a safe haven? Interest rates will continue to rise, thus making a monthly mortgage payment more expensive. People can flat out not afford to purchase homes at these levels if interest rates rise. It's simple math.

But if you get your mortgage now, you don't have to worry about those future increases. IIRC, most American mortgages are fixed rate.

yes, but you still risk paying too much, and then if you have to sell for any reason, risk taking a huge loss. Lots and lots of people lost a ton of money in real estate during the 2008 downturn by overpaying and then being forced to sell.

The price of a home doesn't really matter. You're effectively buying yourself a monthly payment. $1M 30 yr loan @ 3% vs 7% is $4,200/mo vs $6,600/mo.

If interest rates do go up a lot, there is a good chance housing will crash, at least proportionally.

All of the points above were sayings, slogans being repeated that we see today are incorrect.

Interesting username, btw!

Markets don't move that quickly, especially housing. It took over 2-4 years the last two times the market tanked.

"Interesting username, btw!"

Ha! Thanks. You should see the @mentions I get on IG. Turns out a lot of people are often mad at the bank...

Edit: Ah, wow I can't read. I need a cup of coffee :)

American fixed rate mortgages are locked in for the life of the loan. If you get an ARM (adjustable rate mortgage) this is not the case. A fixed rate mortgage is a hedge against rising rents and rising interest rates. New landlords buy in at higher rates/higher prices and rents will increase as a lagging factor.

Yes, everything that goes wrong with the house is now your responsibility. Yes, you will pay property taxes. Landlords are not in the business of renting at a loss in cities just yet. Occupancy rates are still high.

Most loans are fixed rate...

There are a few items that make home ownership in the US financially advantageous: * As others have mentioned, most US Mortgages are fixed-rate. (https://www.tandfonline.com/doi/full/10.1080/15214842.2020.1...) * You also have homestead exemptions and associated limits on property tax increases (https://en.wikipedia.org/wiki/Homestead_exemption) * The mortgage interest deduction * The ability to refinance with a lower rate interest rate in the future

For anyone that is not currently a home-owner, I'm afraid you're correct.

The fed can't realistically let house prices fall too far. If they do, a lot of loans would only be partially secured. That would have far-reaching implications, and could potentially leave a lot of people homeless and the banks holding a bag of bad loans.

It would also wipe out a lot of people's savings.

I think interest rates will stabilize in the near future. I don't think they can continue to go up without demolishing the economy.

> My favorite one is, you can't time the markets.

Exactly. My favorite one was about Cloudflare stock. Look at the responses in [0] when it was more than $210 per share, For Bitcoin reaching >$60K 'This isn't even close to what will be the all time high.' [1] and I suggested many to run away from the market [2] and one said 'Stock market up 1% today on both this news and decades-high inflation.' which that obviously didn't age well.

So as you can see, it looks like so far I (and many others) were able to time the market and predict the 2022 crash, especially in crypto. [3]

[0] https://news.ycombinator.com/item?id=29355360

[1] https://news.ycombinator.com/item?id=26840880

[2] https://news.ycombinator.com/item?id=29508238

[3] https://news.ycombinator.com/item?id=29752372

Spot-on predictions!

If I predict this coin flip will be heads, and I flip it, and it is heads… does that mean I can predict coin flips? What if I do it three times in a row?

What if I do it 10 times in a row? [1]

[1]: https://youtu.be/rwvIGNXY21Y

False equivalency.

We have loads of information available to us which is correlated with stock market performance.

With enough information about the coin's motion while it is in the air, one might be able to predict a coin flip pretty accurately too.

Your [0] is based on AWS competition, not a Cloudflare fault nor did their stock start falling immediately.

The other three citations are basic speculation from Apr 2021, and 6-7 months ago. Not sure how this counts as “timing” the market.

If it isn't clear to anyone right now. There are no safe assets, there haven't been a lot of options for the last year. Your best bet is to minimize your losses. Hold cash- lose ~7-8% real value. Safe bonds are probably your best bet for the short term or owning a inflation protected business however those are rare and a recession is coming along. I guess there's a case for some risky short bets but that makes the problem worse.

It just feels like there is about to be an asset wipeout across the spectrum - like a forest fire clearing out the forest for new growth.

Don't run to the exits because that's an even worse outcome unless your holding leveraged stock bets.

You can buy $10k of I-bonds per year. That is a safe haven, even if small.

There's a way to effectively get more by gifting

You have to be careful not to do anything illegal with that approach.

I don't think it's illegal. You are holding it within the confines of their online system

Can anybody, or is it just for US people?

US only

> US only

Other countries have their own alternatives. For instance, here in Brazil we have the NTN-B, a federal government bond which can be bought by anyone and currently returns the inflation plus 6% (see https://www.tesourodireto.com.br/titulos/precos-e-taxas.htm which calls it "Tesouro IPCA", with IPCA being our main inflation index). And it doesn't have any "only 10k per year" limit.

> It just feels like there is about to be an asset wipeout across the spectrum

That's generally expected when interest rates rise. Most assets have value now because they ought generate returns in the future -- but you can get interest between now and in the future, and if you can get a lot of that interest now, why would you spend so much on what is still a long way off?

The thing that's different here is you can get some interest now but less interest than the rate of inflation so you are only minimizing losses as your real value is decreasing.

> My favorite one is, you can't time the markets. Quite obviously a lot of people correctly timed the market's trends...

Whoa. Think about it, there are constantly people thumping their chests and posting their theories about how things are under and over-valued, and pretty much everything else (like the world ending). If you think that because some people made a winning bet with their money that timing the market in general is a good strategy, I'd suggest you never play poker seriously.

2010: All this pump is fake. Sell!

2014: All this pump is fake. Sell!

2018: All this pump is fake. Sell!

2022: All this pump is fake. Sell! See, you can time the market.

The funny thing is, it was fake--caused by 20 years of extremely cheap debt-money.

I would agree, there are fundamental reasons that would suggest different outcomes for investments, and that's sort of an illustration of why you can't time the market. Even if you know the truth, and you believe that the market will always eventually reflect the truth, it's difficult to know how long that correction will take.

“The market can remain irrational longer than you can remain solvent.”

We didn't lose twenty or even ten years of gains though; only about one year. So the Cassandras were wrong nine out of ten times.

> Quite obviously a lot of people correctly timed the market's trends starting around the end of 2021, and the reasoning was pretty sound.

Surely at any time somebody correctly timed the market.

Yes, when there are both buyers and sellers (which is the definition of a market that clears), there will always be a number of trades that were right, and an equal number that were wrong.

yeah, every single "hedge' except oil/gas and real estate failed

real estate has a lot of lag though so you are probably paying above market price for homes today

Super low rates and a bunch of time on peoples' hands caused the biggest zero sum game in years. Pump and dump.

No new value created, just people playing musical chairs until the music eventually stopped.

I feel your pain, I was deep in it too and my gut was telling me the way forward. But I ended up listening to the shills, mostly because I'm relatively young and wanted to lean towards more exposure than less.

I've been around since before the dot-com crash, and while "you can't time the markets" is true to some extent, some people take it as an excuse to turn their brains off entirely and ignore fundamentals.

Remember, every single shiller is selling you their product. A few additional thoughts:

> Gold and crypto protect against inflation.

No insurance policy pays when the house is already on fire.

> Bonds should be 20-40 percent of a portfolio.

If you believed in inflation north of 3%, why the hell would you own bonds?

> Apple and MSFT and the rest of big tech are safe havens.

Megacap tech is still up tremendously from the 2020 lows. Not saying they're going higher, but they've weathered the recent storm pretty well.

> It's always a good time to buy a home, as supply is at a generational low and will remain like that for a decade, we will become like Canada so you shouldn't wait to buy.

This was good advice if you were planning to live in your home you could have locked in rates at generational lows. Sure you were paying up for the house, but your mortgage payments would have been absurdly low. And yes, I'm almost positive over a 15-30 year period you'd be able to recoup your principle.

> If you believed in inflation north of 3%, why the hell would you own bonds?

Inflation protected bonds earning nearly 10%?

The "not timing the markets" is an incredibly privileged take: for many people they are getting hired and fired cyclically -- when markets are high they are getting paid and when markets are low they might not be, and might be taking money out of their savings investments; so if they are doing their best to cost average when they have cash flow that permits they might be losing money.

gold and crypto protect against inflation? gold i kinda understand, but crypto? how?

Theoretically, Bitcoin is a deflationary asset, it’s supply is limited.

In practice, crypto is very prone to hype cycles.

> Theoretically, Bitcoin is a deflationary asset, it’s supply is limited

Assets aren’t inflationary or deflationary. Prices are. Prices, denominated in crypto, have inflated through the moon this year as the value of the currencies crashed.

There are plenty of things in the world with naturally or artificially fixed supply. Anyone pitching them as deflationary is talking tripe.

wrong, a true asset of that class would not only limit but actively reduce the number of tokens in circulation afaik

crypto was sold as a deflationary investment, because supply of some crypto currencies is limited, i.e. no more than 21 million bitcoins are planned to be mined in total.

That's the exact reason I have all my Star Trek TNG collectible plates! Only 1000 made baby!

Can I have NFT for one of those?

Based upon my understanding of the current state of NFT's you can make an NFT of whatever you want, even if it's the copyrighted media of someone else.

> because supply of some crypto currencies is limited, i.e. no more than 21 million bitcoins are planned to be mined in total.

But herein lies the trap. While any particular crypto currency may have limited supply, there is theoretically an infinite amount of crypto currency (people can and do create new ones out of thin air when an existing one has run its course). To top it off, these are not productive assets.

>It's always a good time to buy a home, as supply is at a generational low and will remain like that for a decade, we will become like Canada so you shouldn't wait to buy.

Sadly, this one hasn't been disproven yet (I hope it will be soon). All we've seen is record home cancellations which may or may not be a leading indicator [0]

[0] https://www.cnbc.com/2022/07/11/homebuyers-are-canceling-dea...

> you can't time the markets

What is generally meant by this is that you cannot know the future so you cannot know when is the most optimal time to buy or sell.

Now, you can react to trend (eg your “trends starting around the end of 2021”) and sell, for instance. But when are you going to buy again (ie can you know when the bottom is?).

Bonds were not a good idea because rates were historically low. If you can't time the market then why bonds should not be 20-40 percent of a portfolio?

> Here's the number to pay attention to. CPI increases are accelerating

This by itself is not surprising. The fed has a target of 2% inflation which means that even in the best case, CPI will by an exponential that gains 2% per year.

Gold falling 1% relative to the strong USD doesn't invalidate it as a long term savings strategy.

>> The funny thing is that both can be true. Inflation can soar and the economy can crater.

The solution to that is raising interest rates. Possibly a massive rate hike. Look for the Fed to do a full percentage point or more next time. The party is over. They're trying to be gentle so as not to destroy the housing market like last time. But housing is going to drop, no question.

That is the consensus view. But what if it doesn't work? What if the rate hikes keep coming fast and furious and the CPI keeps rising even faster?

Recall that until the late 1970's the thought that inflation could persist through a recession seemed absurd.

Nobody is ready for that scenario because they think it's impossible. But then again, how many predicted the situation we find ourselves in right now?

This is fear mongering. If what you say might happen ends up happening we are fucked. There’s no reason to even consider it because there is no way to hedge or protect against it.

It’s like showing up to a job site with all the tools in the world and worrying that you’ll need a tool that doesn’t exist. Do not fall into paralysis by analysis.

The end of that inflationary period coincided with oil prices dropping, which isn't really something Volcker had any control over. Real supply shocks really are real supply shocks.

Many people predicted the situation we're in right now. What perplexed us all is that the ZIRP era lasted as long as it did without having the current effect.

We're heading for a consumer debt crisis. Outside of the tech bubble, average people are in a dire situation.

> What if the rate hikes keep coming fast and furious and the CPI keeps rising even faster?

Same thing that happened with the housing crisis in 2008. Consumers are going to default, and instead of the banks sharing the risk in the market they helped over inflate, Wall Street's going to get bailed out, because entering a deflationary environment is absolutely off the table.

> But what if it doesn't work? What if the rate hikes keep coming fast and furious and the CPI keeps rising even faster?

The beatings will continue until CPI improves.

>> Nobody is ready for that scenario because they think it's impossible.

Stagflation? Of course it's possible, that was the 1970's. The question is if the Fed is willing to do the unpopular thing needed to stop it. And then the follow-on is weather congress is willing to address the federal budget and pay down the debt (obviously not since they already missed the chance to do it before rates rise) painful as that will be.

As long as we're all fucked together (including rich people and wall street) I think we'll be OK in the end. It's the trying to play favorites that is probably causing the most damage.

On my Show HN project https://news.ycombinator.com/item?id=32081943 I've downloaded this CPI-U series and plotted the inverse of it, showing the reduced real wealth by carrying a dollar forward (green line on homepage), or go directly to it: https://totalrealreturns.com/s/USDOLLAR (but there is some explanatory text about "baguettes" only on the homepage if you find the y-axis confusing!).

You can plot other assets too, such as gold https://totalrealreturns.com/s/GLD

Crypto also going down the shitter, the next $10k drop in price will probably arrive before the end of the month.

We cannot make sense of it because we try to assess a global problem with American data.

It would be an easily explainable problem if the US and only the US printed a ton of money and got overheated market.

The problem is that virtually every country printed a ton of money during the pandemic. So the demand overheated globally.

On the supply side we have:

a) Chinese factories working intermittently due to COVID restrictions

b) Russia who cannot participate freely in the gas market anymore and their threat to cutoff Europe during winter

c) The supply chains are experiencing full scale bullwhip effects working overtime to satisfy demand that is not there anymore.

These incur huge import costs to any country.

So even if the US had printed zero additional dollars the past two years, we would still be experiencing inflation due to the vast raises of the cost of our imports.

Supply issues can be alleviated with less demand, which is precisely what the fed attempts by raising interest rates. So your logic about not printing dollars not having an effect isn’t spot on imo. You also ignore the fact that USD is the reserve currency making it difficult to compare to other countries.

Inflation metrics don’t care about demand levels.

It’s just a basket of goods.

The question of how many people can afford this basket is a different question.

> question of how many people can afford this basket is a different question

And that question’s name is demand.

Let’s assume that we over reaching 10% of the global oil market, meaning that due to high demand we extended the supply by adding 10% expensive sources of oil.

To get the prices back to the original we need to bring down by 10% the *global* demand.

That means that the US needs to cut 50% their oil consumption (demand) if they are to act alone.

These are not realistic things.

By increasing rates on USD you can affect demand globally. We are not in isolation as you seem to be so convinced. Also I have no idea why you'd compare global supply to domestic demand. Again, reserve currency and petrodollar status.

> By increasing rates on USD you can affect demand globally.

That's like saying that by pointing my fan to blow onto the road, I can move the cars.

In theory and all else being equal, yes. In practice, cars have drivers that steer to stay on the road.

Similarly, other countries around the globe have their own central banks that regulate their local money supply to achieve their own goals.

The demand curve hasn’t changed

That's kind of the point. We haven't seen demand drop yet which is further driving inflation.

That’s good though. We generally want demand to stay strong. Inflation sucks but if it’s just prices going up because supply went down, well that’s just the breaks.

Demand should fall. Because of the [1]bullwhip effect.

- Someone wants a car and ask the car dealer

- car dealer orders 3 just in case because shortage

- distributor orders 6 for the same reason

- factory makes 12 because parts are short in stock

Result: cars in demand 1, cars in stock 12. No more just in time production and huge demand imbalance.

[1]https://web.archive.org/web/20220627205956/https://www.washi...

In your example, demand doesn’t decrease, it stays stable while supply increases.

If anything you don’t want demand destruction if we are anticipating such a drastic increase in supply.

right, it is relative in a way too right? because for the factory and parts suppliers the demand is what comes down the supply chain... So one day they will be producing and getting parts for 10 cars and the next time nothing at all. So the part suppliers will see the demand of its production to fall, even though there might still be 1 person buying one car.

It's good news if demand stays strong at a certain price point. If we are in a highly inflation environment and demand does not drop however that is not so good.

Japan doesn't have high inflation.

neither does China, the second largest economy

This is a boon for anyone with a fixed mortgage, aka a big chunk of the middle class. Other than gas prices increasing I don’t understand what the average person is worried about. Their biggest monthly expense (mortgage) is effectively plummeting month by month, while the value of their home has increased significantly. Even if the stock market is plummeting, most people have the bulk of their net worth tied to their home, not stocks. Their wages are keeping up with inflation anyway. All that is well worth the ~$100 extra per month in gas. That can be mitigated somewhat anyway by driving less, taking public transit, or getting a hybrid/electric car. The main losers seem to be renters, and bankers.

Your argument only makes sense if you are getting pay raises that are commensurate with inflation. Not everyone is. Some people might lose jobs (or not get one amidst a hiring freeze) because the nominal non labor cost of operating the business might go up than they can increase prices (or labor costs could go up because other employees are demanding raises).

>the value of their home has increased significantly

This causes their property taxes to go up, too, adding to the pressure.

> The main losers seem to be renters

Home ownership rates are decreasing; and you really forgot people on fixed incomes or no incomes (living on the street).

Of course, no one ever expects renters to do well in the long run economically in a capitalist system, regardless of what the inflation rate is. And same is true for people living on the street. Those groups don't do that well in any economic cycle, that's why the conventional wisdom has always been try to own a home. I am talking about middle class mortgage holders, people who do own homes. For the first time ever it seems like they are the ones coming out on top in this economic "crisis" but they seem to be the ones complaining about it the loudest.

I was complaining about inflation when I was making 26k and working more hours than was "legally allowed". I was also complaining about inflation when I was Lyft driver. I promise you other Lyft drivers were worried about inflation too.

"Their wages are keeping up with inflation anyway" - That's absolutely not true. At best they get 1% percent negotiated by a contract.

Isn't that what the "problem" is? Tight labor market => higher wages => people have more money to spend => higher prices. Wages are absolutely keeping up with inflation or even surpassing it, I'm seeing it in jobs I'm hiring for. All my employees received a minimum 10% pay increase over the last 12 months. If your pay only went up 1% this year you need to find work elsewhere. With a tight labor market that shouldn't be hard.

Not everyone is a software developer. For example nurses, paramedics, daycare workes which experience extremely tight labor market the salaries are not going up. Actually they slashed the pandemic bonuses so the salaries are going down. They are bringing people out of retirement that are willing to work for the current wages. My son's daycare had a new educator who could barely walk with a cane(not to mention to lift a child) because yonger workers refuse to work for the low salaries.

I am not talking about software developers, I am talking warehouse workers, customer support specialists, bookkeepers. If they're having trouble finding employees it simply means they're not offering enough money for the job. Ask what the CEO is paying himself if he's complaining about not being able to find workers. I post ads in the $25-30/hr range and get about 500 resumes in 2 days, plenty of qualified applicants to choose from.

Gold is not a good hedge against inflation https://www.nber.org/system/files/working_papers/w18706/w187...

> Something nasty is brewing in the economy. It will be obvious when it hits but until then it will be confusing as hell.

It's only confusing because of FUD from governments who know damn well we've entered a world-wide inflationary death spiral driven by the debt created to perpetuate the idea of infinite growth, even in the face of the system repeatedly trying to correct by popping bubbles. Turns out that reinflating the very bubbles that just popped is exactly the wrong strategy.

Also, in the US we are facing the fact that the vast majority of emergency debt created to combat economic shocks from COVID was embezzled by corporations and fraudsters.

Record profits across the board for corporations, highest CEO pay ratios ever recorded, massive housing bubble; the monied class is making off with their spoils and cashing the stock market in. Meanwhile they are sticking it to consumers with inflation (even shrinkflation) and then complaining about worker shortages!

> vast majority of emergency debt created to combat economic shocks from COVID was embezzled by corporations and fraudsters

I would at least expect that to be less inflationary than that same amount of money ending up in consumers’ hands and being rapidly spent without an offsetting increase in production.

When the government opens up the feeding trough, it should expect pigs to show up. I agree that it probably can’t be blocked up front, but fraud needs to be prosecuted aggressively after the fact.

They printed 10x as much money into asset markets, but I am sure they will blame stimulus checks.

You’re missing the parent’s point: in a counterfactual scenario, if as much money was handed directly in stimulus checks as was used to pump assets, the actual inflation would be even worse, because velocity of stimulus money is much higher than velocity of asset.

No, I did not miss the point that asset markets have lower velocity. Quite the opposite: I found it obvious and repulsively self-serving to invoke this as an excuse for rich people to print and pocket ten times as much money.

I don't see anywhere that I said that it was a good excuse to do that, merely that (in a thread specifically about inflation) I commented on the relative impact on inflation of high-velocity money vs low-velocity money.

You repeated a talking point that has been widely invoked to rationalize printing lots of low-velocity money.

And yet people have argued for decades that stimulus money going to corporations is multiplied many times over because those corporations supposedly create jobs which supposedly creates even more economic activity. Why is it not the case that stimulus money to corporations creates multiplicative inflationary effects in the same way?

Companies grow by producing supply of products/services for sale. They also turn around and employ staff. The first sentence represents the creation of supply; the second the creation of demand [via the payments of wages]. That's much more balanced than if you just give money to consumers, increasing demand without a corresponding increase in supply.

You conveniently left out the part where they are entitled to pocket it if they can, sending it straight into rich peoples' brokerage accounts, where it was intended to go all along.

Yes, the brokerage accounts of rich people have less velocity than the bank accounts of poor people. This makes it more scandalous, not less. People who didn't need the money took ten times as much, because they could, and now they are pointing accusing fingers at the little people. Again.

The irony of this statement is that it's so often the case that people argue for lower taxes with "I know how to spend my money better than the government!" Then when it comes to stimulus money, it's the complete opposite: "Don't give it to consumers, that'll cause inflation! Give it to corporations, they know how to spend it! They'll make jobs or something!"

My gut feeling is that you’re correct and this is money printing coming home to roost. But lots of folks say that isn’t what it is. And I’m not an economist. What sources have you found helpful to explain what’s going on?

Given the Fed doesn’t even know what’s going on your gut is probably just as good a source: https://www.foxnews.com/media/fed-chairman-powell-admitting-...

There is this from Dalio who suggests money printer go brrr policies sank the Dutch and Brits: https://youtu.be/xguam0TKMw8

While all the fancy math is great for drawing geometric shapes, human intuition and basic arithmetic run the economy; human intuition for quantity has been evolving for millions of years whereas our fancy languages are only 5,000 years old (so says historians). We annotate our arithmetic operators differently for calculus and the rest of higher level math, but at the end of the day with only 13% of the adult public possessing an “advanced degree” most people make pretty basic arithmetical decisions.

Smart people used their education to get ahead but the rest of the world has caught up and caught on as <50% believe in higher powers now; elites are just people, not specials to be kowtowed by.

So what’s happened is again elites tried to form concrete agency habits into the masses (like religion did) but the masses agency does not concretely conform to rigid mathematical objects and the elites are now out of touch; either by stubbornness or age, they can’t handle they’re the ones losing ground all this time.

So they tinker with official math to keep us in line: https://www.nytimes.com/1997/02/27/business/job-insecurity-o...

So in the end economic policy was always politically motivated power consolidation for the elites, and the public, probably thanks to the meta awareness of our communities the internet provides, has caught onto the big picture game. Like Assange said; only the highly numerate will be able to see. I like to think it’s because such minds are not as swayed by cable group think.

So here we are saving like the Fed said and emotionally normalizing to a recession coming because that’s what we talk about, and so we’ll create a self fulfilling prophecy of it because like the number say, only 13% have an advanced degree; the masses will go along with Jerome Powell and the cable news channels telling them; stop spending, save, because a recession is coming. And stopping that simple arithmetic spending at scale will trigger a recession.

Subs will get cut to services. Services die off. What’s left is the new “real economy”, and off we go again. Conveniently not giving a toss about general public who got hurt while the elites look smart for getting us to believe they saw the future, and ignore that listening to them really just modified our economics behavior to make it all true.

It seems to me traditional the story of supply side constraints (lots of places cut capacity for COVID, China is shut down) plus pent up demand (from savings and all the government spending) caused inflation.

When looking at TIPS and inflation expectations it looks like it's not quite self reinforcing yet.

But there wouldn't be anywhere near the same level of demand (pent up or otherwise) if there wasn't any money printing / near 0 interest. (Government spending is over budget - they were able to spend more than they have because Fed gave them a good chunk of the money they printed in exchange for treasuries).

This is what people seem to forget. Trade involves two items, so you gotta look at both sides of the trade (in this case credit+dollars vs goods). Dollar supply has increased dramatically since 2020, credit near free, while the supply of goods has decreased. Obviously that's a recipe for inflation.

Had dollars+credit decreased with the supply of goods instead, people selling goods would have trouble demanding more dollars. For hyperbole, if only 1 dollar existed, no one could sell something for more than 1 dollar, no matter the supply of goods. People might still try to demand more than 1 dollar for their goods, but trade with dollars would cease to happen until they reduced their demands to <= 1 dollar.

If the government drastically increased interest rates during covid you're right we'd have less inflation. I don't see the argument here.

> This is what people seem to forget. Trade involves two items, so you gotta look at both sides of the trade (in this case credit+dollars vs goods). Dollar supply has increased dramatically since 2020, credit near free, while the supply of goods has decreased. Obviously that's a recipe for inflation.

I don't think anyone forgets this. The standard model says supply constrained + generous fiscal/monetary policy = inflation.

Looks like I misinterpreted your post.

The parent post mentioned "money printing coming home to roost. Lots of folks say that isn’t what it is." I too seem to have encountered people saying the money printing is a non-factor, and it's just supply chain problems. In reality, both are factors.

I think the dollar is just fine. The problem is that there’s a war in Europe that’s making food and energy more expensive. And also China is just off on its own facing a real estate collapse + the fallout of idiotic lockdowns.

Things will cost more. That’s hardly surprising. Energy is really important.

My memory reaches further than February 2022, and I clearly remember the prices were going up already before then.

If your memory doesn’t include the global pandemic that shut down global supply chains then I wouldn’t be calling attention to it.

Of course prices went up.

Problem with citing the pandemic is the dissonance that red folk were very against shutting things down for just this reason. Meanwhile resurgence of COVID proved the shutdowns did little on a 5 year timescale

That doesn’t sound like a problem

Folks gained some immunity (and experience in dealing with COVID) since the first few waves.

Plus at best there was a big slowdown, but there was no serious shutdown, many people still worked and got COVID, eg. people who would have otherwise worked at the port. (Though even a serious lockdown doesn't help much. (We saw this in China.)) And mask wearing was so far from ideal that it was not able to seriously decrease the transmission of the disease.

Aaand of course the boosters could have been much much better (containing new variants): https://www.slowboring.com/p/were-getting-an-omicron-optimiz...

What's true is the shut/lock/slow part made no sense after we got the vaccines, and it's also quite obvious that there was just not enough stockpile of basically anything to do a ~1 month lockdown to stop the spread of the disease. (And the moment the first international plane landed it would have started again.)

Yes, of course the prices went up due to frantic actions taken by governments in the course of the pandemic. My point here is simply that blaming the inflation on war is simply trying to shift our attention and absolve themselves of responsibility.

No, it’s just showing that costs are going up because things are harder to produce. Simple as that.

What if prices going up in December was due to fed policy / interest rates, but prices going up in March was due to the war in Ukraine?

You can't just assume the price spike in December is the same thing that we're seeing in March or June.

Prices weren't just going up in December, they've been going up since 2020. The asset class boom beginning in 2020 was mostly just a graph of inflation. Trillions of new dollars in the economy, record low interest rates, PPP loans. I don't know if you realize this, but the actual economy wasn't booming then.

The CPI data took years to catch up because consumers are quite price sensitive and detecting and responding to increased demand is a delicate process.

The war on domestic oil production dramatically increased any existing inflation.

> The war on domestic oil production

The way you worded that somehow makes me think you aren't talking about the OPEC+ deal from 2020 that drastically reduced oil supply. Because strangely, not a coincidence, domestic production has been up since that deal expired.

I don't disagree that oil prices drive inflation since almost everything needs transportation, especially in the US where even domestic goods have to travel huge distances. But a "war on domestic production" is not evidence based.

Closest thing that could be serious considered a war was OPEC+, which I understand why Trump did it, prices were plummeting and we wouldn't want the entire sector to crash.

Also, as a reminder, oil prices have already been there (and even higher, briefly), between 2008 and 2014.

> [...] we've entered a world-wide inflationary death spiral driven [...]

Not all countries are experiencing high inflation at the moment.

https://www.ft.com/content/088d3368-bb8b-4ff3-9df7-a7680d4d8...

Vast majority.

Yes, many countries. But not all.

Which suggests that persistently high inflation is caused by the same thing it's always caused: (local) money printing.

Not some abstract worries about excessive (?) debt or 'fraudsters' etc or so.

Japan has always been the leader in money printing, yet they're also experiencing the least inflation.

Japan is an economic outlier in a lot of ways (i.e. savings and birth/immigration rates).

And I think it's a great example that most of the actual drivers of economic outcomes are unmeasurable. What we actually measure and react to are themselves second order effects of those primary drivers.

Which is why we can compare two situations with similar (second order) metrics (but different primary drivers) and be puzzled by different macro outcomes.

I think instead is that the mistake was to measure them in terms of money, which is a token, a signal, and hence not "real" (not to mention subject to feedback loops when trying to focus economic policy on that signal !)

As you suggest, it's important to make a clear distinction between nominal and real variables in economics.

However, nominal variables are also subject to feedback loops.

That's because they haven't printed enough money.

If they printed enough money, they could generate all the inflation they wanted (or live in economic utopia.)

Basically, keep using newly printed money to buy up assets around the world. At some point you either own the globe, or you'll get the inflation you wanted.

As much as I know that governments and central banks are to blame for inflation in a general sense, it can’t be understated that A LOT of this inflation is due to starting and stopping factories, ports, etc. in response to Covid over the past two years. There’s a long chain to finished products and when one link in the chain has an issue, everything else downstream suffers and price increases compound.

In short, a lot of what’s happening comes back to the debate we had during the early part of the pandemic... one side said shutting down the world would have major consequences down the line and we’re seeing that now.

This bothered me during those discussions everyone who pointed out the potential impacts to the economy were shouted down for "caring more about money and people" and "putting the rich ahead of grandma" like the economy was some nebulous abstract betting ring that only effected the powerful and wealthy.

No one seemed to understand that those kinds of things were going to have much more drastic effects for everyday people as well. This same thing goes for the stock market, sure I don't have a ton of money it it, but I do keep putting money in my 401k and so do a lot of other people that are depending on it for their retirement, when the stock market takes hits it effects me just as much as the "elite".

IMHO, the earliest shutdowns were defensible on the basis of ignorance: we knew so little about the communicability and lethality of SARS-CoV-2.

It would have been irresponsible to risk chicken with something that might have had MERS lethality.

Eventually we put tighter bounds on those quantities, and could make more informed decisions. But yes, all stages of the pandemic were unfortunately people talking past each other, without being actually curious about the pros/cons of various approaches.

But it's been awhile since the political class has had to deal with an actual existential science problem... so that muscle wasn't very strong.

We've had massive deficits for decades. It requires pretty strong evidence to claim that the problem is something that is common to the past few decades rather than the things that are unique to the last couple of years.

I've asked here in another thread but didn't get an answer.

What can the average _not_a_billionaire_ investor do to weather this out (not knowing exactly what _this_ is)?

In my example I have most of my money on Index funds (with a 60/20/20 split between US markets, China markets, and sector specific ETFs) plus an emergency fund that lasts me about 12 months and I (unfortunately now) earn in Euros.

There is no good answer. I think Lyn Alden said the same in a tweet recently. You will most likely lose no matter what short term.

My conclusion is that long term it's probably good to be in stocks. The problem is that stocks might go down a lot before recovering, years from now. And of course you cannot time it.

If you expect inflation and continual shortages, the best bet is probably to invest in commodities.

They're already pulling back this year though:

https://finance.yahoo.com/quote/DJP

If you believe in factor investing, value stocks have historically performed ok in inflationary times.

I've been using AVLV and AVUV, but they've been down since I bought them in May.

My best guess: * You can invest in covered call funds[1] (like QYLD) and equity-linked notes (like JEPI) as a hedge. This will lose out to index funds in the long-term, but should be better during volatile periods. * The US has I-bonds[2]. An equivalent may exist in your country. * Having an emergency fund is good. * Diversified investments is good.

[1] - https://www.blackrock.com/us/individual/literature/investor-... [2] - https://www.treasurydirect.gov/indiv/research/indepth/ibonds...

> Record profits across the board for corporations, highest CEO pay ratios ever recorded, massive housing bubble; the monied class is making off with their spoils and cashing the stock market in

> Meanwhile they are sticking it to consumers

That's a lot to parse, but I'll give it a try.

"Record profits across the board for corporations" - Record profits is exactly what you would expect with lingering low interest rates + lowered rates from COVID response + unleashed demand post-COVID. This was by design, because profitable companies don't fire everyone and create a recesssion from unemployment. Or tank the stock market and thus housing market and thus create a recession.

And you're a quarter out of date. Profits and margins have been compressing in Q1 2022 and look to continue.

"Highest CEO pay ratios ever recorded" - Exactly what you'd expect with a roaring stock market, given equity-biased compensation. That will correct, as it always does.

And furthermore, talent compensation is already increasing and on every HR department's priority list. [0]

"Massive housing bubble" - Low interest rates + stimulus + lack of supply + sudden demand spike = price spike. Fed rate hikes will cool this off fairly quickly.

"The monied class..." - You mean, everyone?

"... making off with their spoils and cashing the stock market in..." - Reallocating and diversifying assets?

"Meanwhile they are sticking it to the consumers with inflation..." - Who is "they"? Some generalized bourgeoisie who control the means of production and arbitrarily set prices?

See earlier point (and google for statistics) and margin compression for what's actually happening: companies are passing along less than all of their own cost increases.

[0] https://www.pwc.com/us/en/library/pulse-survey/executive-vie... (I hate big-4 management consulting pablum, but it's a quick distillation)

I'm following along with your breakdown, but I'm not clear what point you're trying to make here?

> "The monied class..." - You mean, everyone?

Are you asserting that you believe the parent is using "The monied class..." to mean everyone? Which doesn't seem to be the case.

Or are you asserting everyone belongs in "The monied class", if so, that seems so overly broad as to be a bit ridiculous?

To me, the subject of "the monied class is making off with their spoils and cashing the stock market in" seems intentionally generically-bad, so as to be outrage-driven agreeable to everyone.

Are we talking about the hyper-wealthy? Business owners? Business managers? Investors in general? It's unclear.

There are a lot of complicated things going on and being generically angry at people with "more" money is uninformative and unproductive.

As near as I can tell, the parent's policy prescriptions amount to (1) we should allow asset bubbles to pop harder, (2) we should have created less(?) or more strictly controlled(method undefined?) COVID emergency debt, and (3) we should implement price controls for consumer goods(?).

Frankly, it IS outrageous that a few dozen or hundred people own more wealth than 50% of the population. It would be one thing if that wealth was well and duly earned, and well and duly enjoyable. But when an individual commands hundreds of thousands of lifetimes of wealth[1], an unimaginable sum that they cannot even physically enjoy in their time on Earth, and at the same time both pursues more money and tells us that they should be taxed less, I call fucking bullshit!

[1] At $300 billion supposed net "worth", Elon Musk could retire ($3 million a pop) literally 100,000 times over. Or, he could retire, not making another cent, and live one hundred thousand times better than the average person. If his wealth only grew at par with inflation, he could literally spend $100k a year for three million years.

The fact that this much money is earmarked for this person, or any person really, is only possible because the enormous pyramid schemes they are able to set up which are paid into by speculative investors.

In my frank and honest opinion, there are NO words you can say, NO ideas you could have, NO labor that you could undertake, and NO buttons that you can push that morally justify the tax on humanity's subsequent activities that funnel that much wealth to you. Hands down. And with that money you have zero goddamn problems that justify you offering policy input that personally benefits you. We should shun such money addicts, not lionize them.

You should thank Fed for pumping up stocks and keeping interest rate below inflation.

At that level it's not wealth, in the sense that we think about wealth: it's relative power.

The power to make something happen. Like "Long range electric cars should be a thing, now" or "Reusable rockets should be a thing, now." Even and especially when most other people think it's impossible and disagree with you.

Or you can just build a gold-plated swimming pool and ensure your descendants never have to work.

Is that productive? Eh. Versus what? It certainly allows for more risk-taking than government, minimum-cost bidding projects would target. DARPA et al. aside.

It's certainly not fair.

But from a fairness of opportunity perspective, there are certainly more egregiously-born examples who have objectively produced less to show for it than Musk. Or than Ted Turner, to use another random positive example. (E.g. Barbara Hutton for a negative example)

Elon Musk doesn't have 300 billion dollars. He owns 17% of a company that, if all the stock got sold at its current price, would be worth 743 billion dollars (plus similar for SpaceX, so I think your estimate is too high). Similar situations are true for most billionaires. They're not hoarding money. They have built and own organizations that produce very valuable goods and services.

Hacker News is a forum for entrepeneurs. The idea that successful entrepeneurship results in valuable companies shouldn't be foreign. Nor the knowledge that societies that confiscate the fruits of successful entrepeneurship, will soon not have any entrepeneurship at all.

Maybe the consequences of that in terms of individual wealth ownership are unpalatable to you, but the alternative would result in an option that is net significantly worse for society.

> confiscate the fruits of successful entrepeneurship

I don't accept this framing. That framing is what I thought 20 years ago. It's been the root of a major realignment of my thinking in realizing that these people more accurately have been successful at creating large organizations of people that instead do that fruit production, fight to keep themselves on top of that organization and channel the majority of the profits of those organizations to themselves. How else could you explain the massive, some would call obscene increase of CEO pay ratios over the past four decades? Are CEOs 10x or 100x more productive or good at making decisions than four decades ago? Do they do 10x or 100x more work? It's completely implausible. CEOs continue to be compensated insanely well, even when they make bad decisions and their companies go under.

The real answer is such titans have been more successful at changing the culture to make it acceptable to channel a larger and larger portion of their organization's profit to themselves. It's all mathematically impossible that these people could have done anything to produce so much more "entreprenurial" fruits themselves. Rather, they are the ones confiscating those fruits from their employees and their companies and are benefiting from the casino-like nature of speculative investment markets fueled ultimately by money created out of thin air by debt.

And on top of that, they tell us that they are being stolen from! Gaslighting horseshit.

> Maybe the consequences of that in terms of individual wealth ownership are unpalatable to you, but the alternative would result in an option that is net significantly worse for society.

The alternative? Surely there are more than two ways of organizing society: (i) one with successful entrepreneurship but large wealth inequality, and (ii) presumably one without successful entrepreneurship along with various other characteristics that make that society clearly "net" worse than it would be in (i).

For example, I could imagine a tax regime which resulted in a cap on individual wealth at, say, 1% of GDP. Or 5%. Or 0.1%. Or ...

It's not clear to me that there's an unambiguous demarcation between only two types of societies, and one which is observed across all possible policy or economic schemes.

The monied class isn’t everyone, the fact that you would suggest such implies you aren’t aware of the distribution of wealth in the US.

10% of households own 90% of the stocks held by households. Close to half hold none at all.

I am indeed aware of this.

Well your statements just don’t line up in that case

The real problem is the labor market.

With boomers retiring and deaths and disability due to covid taking workers out of the pool, along with suppression of immigration, there's a large overhang of jobs compared to workers. This is giving average workers negotiating power which is creating wage growth.

That is what the Fed and the business pages are really most concerned about and the sternest warnings from the Fed are about the labor market. Not the headline CPI numbers.

The fact that the "man on the street" now believes that inflation is purely a monetary phenomenon, though, means that every time wage inflation rears its head that people will clamor for the Fed to punish the economy.

The Fed is going to have to crash the economy to create a recession and thereby cause deflation. There will almost certainly be detonations elsewhere in the economy (commercial and residential real estate most likely) that will further cause deflation. High CPI will be transitory because this Fed doesn't care about tanking the economy. Billionaires also don't care about tanking the economy, the past 20 years have taught them they always wind up even more on top than before.

What will be interesting though is to see what happens when they've had enough of pain and start to support the economy again, then inflation will probably come roaring back, since its causes are now the structural conditions of the wage market. Then there will be renewed calls to tank the economy again and people will object to the Fed doing anything to try to support the economy with exactly the same rhetoric here. In the near term future (~10 years) any time the inflation numbers tick up the stock market may crash on its own now.

I suspect we're now in for a decade or more of stagnation, although alternating periods of inflation and recession should average out. I might be wrong though if the billionaires decide it is too painful and want the Fed to turn the money spigot back on. But as a lot of this comment section shows, the managerial class has now been taught to really deeply hate the Fed doing that, and believes it to be the root cause of all that is ill.

I suspect the massive money printing going on for years has had no impact because most of that money never actually landed in the hands of actual people and just existed to be sucked up by wall street and elites. And they dont spend in a way to impact prices.

But enter covid money printing actually reaching normal people (even if alot of it got soaked up too), plus the elites using the money to buy things normal people want instead of rich people nonsense (buying housing as "safe" investment during covid), plus all the money that was going towards servicing student loans getting spend in the economy, plus normal people using their power to get more wages due to worker shortages and here we are.

I think it is more that the earlier money printing addressed more normal, slow moving business cycle issues, and so slowly backing off of it worked exactly as planned. With COVID, the money printing was addressing a fast moving and fast correcting temporary effect of organic and top-down behavior changes in the early part of the pandemic, which snapped back hard with general reopening, meaning the normal pace of unwinding fiscal and monetary stimulus was too slow to prevent the measures meant to prevent catastrophic depression and deflation combining with the rapid economic rebound to produce inflation (there’s some pieces that didn’t rebound which actually exacerbated the inflation effect, e.g., supply chain capacity.)

> I suspect the massive money printing going on for years has had no impact because most of that money never actually landed in the hands of actual people and just existed to be sucked up by wall street and elites. And they dont spend in a way to impact prices.

Yes. I think we had something like monetary inflation but it was all captured by the upper 1% and 0.1%. The policies suppressed wages down the Ginni Coefficient ladder and actually contained inflation. This produced low interest rates due to low CPI inflation expectations. But it would up producing what economists call asset bubbles rather than inflation. This has also built up over the past 30-40 years ever since Volker in 1980, it goes way beyond the post-2008 recovery and the pandemic.

We're now seeing the point where this has all become unsustainable, and the masses are clamoring (rightly) to get a share of it. Either we're going to allow that inflation to run downhill now and re-price via inflating wages and suck up the smaller pain of inflation, or I think we're going to have to inflict truly severe economic pain of multiple deep recessions. Given how much people now deeply hate inflation, now that wage inflation has reached the baristas and food service people, it looks like we're going to choose recession.

Another element here is that a lot of that "money printing" went overseas. Agree with what you say, this time it was all sent domestically as part of stimulus checks.

Markets price in the future, not so much the present.

Right now the gold market is pricing in a Volcker-style freakout by central banks.

If Powell pivots, this will surely reverse.

Worth noting that the dollar has been on a major rip due to certain circumstances. If you compare gold to euro or yen, it's doing quite well.

Here is what I think is happening:

the assumption that stocks hedge inflation has clearly been borne out of false over the past year

Inflation is not a tax as commonly assumed. This is why people who are dumping revenue-generating assets and bonds and are content with 'losing' 8%/year by being in cash, because they aren't really losing anything.

You only get 'taxed' by inflation if your consumption habits or preferences are aligned in such a way as to match the components of the CPI, which for the wealthy/rich they aren't. The rich don't need millions of dollars of food, healthcare, or gasoline. If you already own a home, then your hedging needs are already mostly fulfilled.

For someone who has much less money, then inflation is more like a tax, because your will be spending a lager % of your income on essentials, such as food and gas, which are tracked by the CPI.

> assumption that stocks hedge inflation has clearly been borne out of false over the past year

There are no short-term hedges to inflation outside the money markets. (And even they are highly imperfect.) Real assets broadly hedge against inflation in the long term, almost by definition.

it's taking a long time though.

Historically the fed has prioritised managing inflation over unemployment. My bet is that we will go through a recession without monetary easing until the CPI gets back in line.

Since gold has not been pegged to the US dollars since 1971 you will not see any quick changes in gold prices. It will come, but it will be delayed by several months if not a year.

Since the dollar is really a petrodollar now what you’ve been seeing in oil prices has been the hedge against inflation.

I'm not optimistic about our future because no official will say the obvious, the $14 trillion injected into the US economy is driving this inflation. To put this in scale, US GDP is $23 trillion. This is helicopter money on a scale we've never seen in the US, much of it going to large banks and corporations. What did people think was going to happen? Raising rates marginally isn't going to soak up all this money, and even when it does and inflation eventually goes back to 1-3%, we'll still see the higher cost of living that has accumulated over the last few years. That means the typical American will be at least 10% poorer. But at least they got those checks for a few thousand dollars a few years ago.

https://www.covidmoneytracker.org/

Dead on. Helicopter money while at the same time forcefully shutting down production lead us where we are right now. Constraining actual economic output while pumping up demand with cheap money.

"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

That website double counts money creation. When the Federal Reserve buys government bonds as part of quantitative easing, they aren't "creating money." They're converting bonds into cash. It's an equivalent exchange.

That is new money.

When a government bond is first sold, the buyer gives the government money.

Then when the Fed buys it back, it creates news money for the purchase.

When the Fed buys the bonds back, they remove the bonds from circulation, so it's an equivalent exchange. Likewise, when they sell their bonds as part of raising interest rates, they're removing money from circulation, which is also an equivalent exchange. The only time something is created from nothing is when the Treasury issues new bonds to fund increasing government spending.

This is not accurate.

Post-2008, the fed did their quantitative easing by buying non-treasury bond like mortgage debt, etc.

It’s new money because the original money received for the bond doesn’t disappear.

Yes within that transaction it’s neutral (seller gives up $1M bond for $1M cash). But overall, new money has been injected.

Ok. So in that case, you're not counting bonds as "money". In that case, you can't count the stimulus as new money because that was funded by bonds.

I emphasize that this isn't a great interpretation because the root of the problem lies with Congress's inability to balance a budget, not the Fed. If our budget were balanced, then the Fed would instead raise interest rates by selling more bonds, which destroys more money. Because we're already issuing so many new bonds already, the Fed doesn't have to sell as many.

Bonds aren’t money any more than stocks are.

If the fed buys with new money, it expands the supply, whatever they buy.

If someone issues debt and exchanges existing money for bonds, there is no change to the money supply.

There are several definitions of what you can consider money. Physical cash is M0. Including money in your bank accounts gives you M1. In the modern age of electronic banking, M1 is what people broadly think of as money.

Treasury bonds are considered M4 money. It's not as liquid as M1, but so long as if you don't want to liquidate it, it isn't much different from M1.

>If someone issues debt and exchanges existing money for bonds, there is no change to the money supply.

I'm not sure what you mean by this. Issuing debt is creating money. This is true for commercial banks as well. When a bank issues lends you $10k to buy a car, that's money that had never existed before. You receive $10k from the bank. Meanwhile, the bank's depositors are still entitled to withdrawal the full amount they deposited in the bank.

Yes, lenders can create money because they only need to hold a small reserve should the loan default.

But that monetary inflation multiplier is stable if the money supply is stable.

When the fed buys up assets using new dollars that expands the money supply, which can then be multiplied through lending.

not sure what you mean by this. QE is essentially creating money. Though, in our current economy more money was created by loans especially mortgages than QE.

QT is the processes of reducing money supply so is paying off the loans. If more people pay off the loan than new people taking up loans due to higher interest rates, the money supply falls.

Actually the website is fine. I mean that the OP was double counting money injected in the economy by adding up legislative actions and executive actions with federal reserve actions. If you consider bonds money, then QE isn't injecting new money because that removes bonds. If you don't consider bonds money, then the stimulus spending isn't injecting new money, because that was funded through bonds.

raises hand Proud bullion owner.

The published CPI might not be that important - any small trader who cares about gold probably doesn't care too much about inflation. It isn't like the amount of money printing is a secret, when I care to check I measure the gold price vs the monetary aggregates.

And any big trader probably has better data available than the government statistics.

> And any big trader probably has better data available than the government statistics.

Government data is the gold standard.

Traders spend money trying to predict what the government numbers will be. It can be difficult to emulate, since it involves talking to real people, but there are brokers out there for consumer spending data.

> The Fed can be accommodative while inflation runs hot.

The Fed will not become accommodative before the inflation is beaten. The Fed will keep increasing rates, recession be damned. They won't do the mistake that the '70s Fed did.

> Remember how gold was going to protect you from hyperinflation?

I remember some particularly catastrophising conspiracists claiming it would, but I don't remember giving the idea credibility.

From what I understand, Gold is a hedge against government, not inflation.

Professional investors don't use gold as inflation hedge, that's internet wisdom.

> Something nasty is brewing in the economy. It will be obvious when it hits but until then it will be confusing as hell.

It could also that in prices will not behave as you'd expect due to large-scale, persistent, quantitative easing: https://news.ycombinator.com/item?id=32083245

> The bond and eurodollar markets have been signally for about a year now that the nasty thing will be a recession that will force the Fed back into accommodative mode as early as this year.

I've heard this quite a bit but I don't think it's true.

The FED is raising rates purposefully, knowing this will cause a negative turn in the economy possibly (and likely) leading to a recession.

Their goal is (perhaps indirectly but still intended) to cause a (controlled?) recession by raising interest rates.

It doesn't make sense they would they seek to undo a recession that they induced. Eventually they will once inflation is back down but the FED can (and should) keep raising rates until inflation comes back down.

I wouldn't be surprised to see interest rates at 6, 7 or even 8% if inflation continues at its current level or continues to rise.

> Gold takes a dump falling 1%

*You can't buy fire insurance when your house is on fire. Insurance prices also skyrocket when everyone is freaking out about the need to buy insurance.*

And guess what you do when inflation hits hard and you need to pay for things? You sell your gold. It's happening in Sri Lanka[0], I'm sure its also happening else where across the developing and even in the developed world.

Gold is still up 15% since before the pandemic in USD, in every other currency its up even more.

If you're buying now you're buying as a hedge against whatever inflation will come in the future.

Even in 1975 when inflation was at 9% gold prices collapsed by 30%!!!

Unfortunately, you need to time markets to some extend to get the full benefit of any hedge since you necessarily only profit when someone else is willing to buy at a higher price.

[0]: https://theprint.in/world/sri-lankans-selling-gold-amid-econ... [1]: https://www.nytimes.com/1975/12/31/archives/gold-rush-in-us-...

> Notice how that chart only goes in one direction - up and to the right.

Up and to the right does not imply that CPI increases are accelerating, which I agree is the problem. You can have a perfectly healthy economy with linear, constant inflation, that's been the case for most of history. Some small, relatively consistent amount seems to be good for a society, it encourages reinvestment rather than hoarding. Straight lines are good, parabolas are dangerous, they usually turn into hyperbolas as an economy collapses.

Is it going up and to the right faster and faster? Here's a chart of the month-to-month delta of that chart since May 2020:

https://i.imgur.com/Id8tGSE.png

It's noisy like all real data, but a linear fit says y = 0.0028x - 123.44, R² = 0.476. That suggests that CPI is going up and to the right about 1.5 points per month, equal to 0.5% monthly or 6.2% annually, but that each month the rate of increase gets larger by 0.0028 points. That's what we need to bring back to 0.

Nobody has a crystal ball, but would you expect housing prices to increase or decrease in the next year? I missed out on the low interest rates due to just not being ready to buy a house yet, but I think I'll be ready to buy sometime within the next year. Thankfully I've seen a couple of houses lately that we would be able to afford, but I can't help wonder whether our options would be even better as the recession and inflation continue.

If you bought gold at spot before the COVID debacle you're still ahead. I'd call that protection from inflation.

> Here's the number to pay attention to. CPI increases are accelerating.

That’s what it means to go from a 2% inflation rate to a 9% inflation rate.

The inflation rate is literally the slope of that chart. It’s a price chart, not an inflation chart.

> Also notice how that chart only goes in one direction - up and to the right. There are very brief periods in which it reverses, only to return to trend with a vengeance.

Yes, because deflation is generally considered a bad thing.

As others have mentioned, it's confusing if you don't know anything about how CPI works or how the reporting works

To bystanders it looks like inflation is up 8-9% every month, which is obviously false

If the growth of inflation resembles a step function, then the YOY change will be reported as being very high each month even if inflation is not changing on a monthly basis.

https://greyenlightenment.com/2022/07/03/sensationalism-and-...

Headlines that read "inflation rose 9% in $month$" are liable to cause a lot of confusion. A .5-.8 % monthly change looks way less bad than a 8-9% YOY change. The psychological implications of this are potentially huge because probably a lot of people think that inflation is rising 8%/month.

People generally know what it means. The impact is from the fact that they know real inflation is worse than what is reported, and if the reported inflation is more than expected that’s a pretty bad sign.

Also, any rise in prices, while small, is likely permanent at this point.

Given that the headline of the article is clearly wrong, as another commenter pointed out, I don't think people generally know what it all means. They have feelings associated to the topic, certainly, and those shouldn't just be dismissed. But humans are in general famously bad at dealing intuitively with numbers. Why should inflation be the outlier to this rule?

The headline can be fixed by adding just one word.

Yes. It should say: "inflation rose to 9.1% in June".

> The psychological implications of this are potentially huge because probably a lot of people think that inflation is rising 8%/month.

It does not help that all the big ticket items people are interested in purchasing (land, healthcare, education) have all been increasing at far greater rates than official statistics for 10+ years now.

Who cares if bread is inflating at 0.5% per year if the house you are saving for goes from $300k to $600k and the education you got for $20k/year is now $60k/year for your kids.

My pet theory is that the rising cost of housing is responsible for the vast majority of economic disruption over the last 20 years (for everyone, even home owners.)

Service/factory/teaching/childcare/eldercare jobs don't pay enough to buy a house and renting has become highly predatory, so anyone who can get out of those professions and into finance/tech/marketing (often useless but high paying jobs) will do it. The people who stay in those professions get burnt out and deeply frustrated.

It feels like most of the jobs that provide inherent, tangible benefits to society don't pay enough to provide a stable life.

That is quite an apt description of the plight of current millenials. That and declining birthrates, perhaps they are inextricably linked?

This talk by Elizabeth Warren, before she was a US Senator, talks a lot about this problem of essentials like housing, education, and healthcare going up much faster than, say, a new TV price: https://youtu.be/akVL7QY0S8A

Unless you live in Argentina, where inflation increases around 5/6% per month

"If the growth of inflation resembles a step function"

Did you mean 'growth of prices'?

(If you did, your comment makes perfect sense to me. If you didn't, then I have misunderstood your point.)

The whole headline is wrong, not just because they're talking about a yearly increase not a monthly one.

_Prices_ rose 8-9% YoY, not inflation. Inflation is by definition the increase in prices, so inflation was 8-9%.

Prices also went down during covid so if something had a price of $1.05 in 2020, $1.00 in 2021, then $1.08 in 2022, YOY shows the price went up 8% but it’s only gone back to normal. In the 70s it was several years in a row of 10% inflation which I doubt we’ll see.

Edit: it would also be interesting to see if the basket of goods the CPI uses shifts during that time. If people were using less transportation, perhaps transportation costs should have been weighted less for 2020 even though we know the price increased due to supply constraints.

What prices went down during covid? Housing? Vehicles? Food? I recall only gas was cheaper.

In case anyone is curious, the following are the seasonally-adjusted monthly changes for the past twelve months, from the oldest to the newest: 0.5%, 0.3%, 0.4%, 0.9%, 0.7%, 0.6%, 0.6%, 0.8%, 1.2%, 0.3%, 1.0%, 1.3%.

https://www.bls.gov/news.release/archives/cpi_02102022.htm https://www.bls.gov/news.release/archives/cpi_07132022.htm

To highlight a couple of things in particular: The monthly rates do not resemble a step function. The increase for this latest reported month is the highest for the past year, at 16--17% annualized.

Key point: “ Much of inflation rise came from gasoline prices, which increased 11.2% on the month and just shy of 60% for the 12-month period. ”

This has nothing to do with monetary policy.

Yeah unfortunately “energy” is a significant cost for most economic activity. Yours beginning to see “we’ve tried to hold back increases as much as possible but we can’t any more and we’re raising prices”.

Yet core inflation is 5% which is also very high.

Fed’s expected to raise interest rates in response, so perhaps it does.

They're still very far off actually making a difference, ie. you'd want the rate within 2% of the observed inflation, so c. 7%

I think they'll stop long before that because even at 10%, they're not going to be able bring inflation down -- most of the causes being supply-side

Last time USA had a real inflation problem, Jimmy Carter pushed the fed and they jumped rates to 20%. That stopped inflation, as well as Carter’s re-election.

Biden’s own party is having cold feet about him running again. I don’t think they’ll make it viable for him to run. They’ll let the rumors fly and allow someone else to be the nominee.

So he need not think about implication on his re-election as there won’t be any.

Great point. He didn’t really seem to want to be Pres anyway. Not that the Pres has all the much power over the economy anyway, but hopefully since he probably doesn’t have anything to lose anyway, he’ll simply push towards the best thing for the country rather than best thing for re-election or party.

Let's be honest here; most of the cause, is corporate greed.

People will always be greedy. Pretending otherwise is delusional.

Forcing people compete and provide the best / cheapest product with the fewest resources is how wealth is built up for all. Rich and Poor.

Letting companies that are inefficient fail and go out of business is how you manage them.

Government picking winners and losers is how you screw everything up.

It seems consensus is calling for something like 3.5 to 3.75. But it’s all speculation.

Interest rates can actually bring down supply-side inflation. With most things being bought on debt, making that money drastically more expensive will eventually erode demand. With demand falling it brings it better inline with the lower supply levels, easing the inflationary pressure on prices.

The same downside to all of economics still applies though. We can't actually predict what will happen and the larger the changes made the bigger the unintended consequences we will see down the road.

Sure, i suppose inducing a recession does bring prices down, eg., oil dropping is now just a recession in demand. Fair point.

It really sucks when it's phrased so directly like that, but yeah that's basically it. Slowing down inflation means causing a lot of pain along the way, no matter how you go about it

Perhaps not, but energy is the "everything killer" of inflation since it's a major input to nearly every business that happens in the physical world (and it's non-trivial for the virtual world as well).

I'm in Europe and I had a very favorable energy contract for the last couple of years. Well, that contract ended and my rates got hiked 800%.

It sure put everything I do on a daily basis inside of the house into perspective.

Imagine if we had a fully electrified economy instead of this petrol-economy crap.

There was a period where prospectors tried to hurry up and hoard all the uranium deposits they could find only to discover the stuff occurs at a rate to not be economical.

(And supposedly covering an area the size of NM with solar would provide all the worlds energy needs.)

This is how you get the electrified (or whatever else) economy.

Without the pain of higher fossil fuel prices, there is little incentive to change.

I’ve taken to calling gas “conflict fuel” to remind myself to avoid using it as much as possible in my daily life. Helps more than just a desire to not impact the climate.

I don't really care, I will use whatever energy source is the cheapest. Subsidise green energy or tax dirty energy so that's true, and people like me will naturally switch.

Or else why would you reply, right?

The nickel wars are coming to fuel the battery factories.

Batteries have a lot more flexibility outside of lithium. LFP batteries don't have nickel and work well enough for cars.

European countries have managed to set national goals and work systematically towards them, putting them far ahead of the US's non-strategy of "the market will fix it" FUD that we've been fed from Miltonites for decades.

The biggest thing European countries have done is make fossil fuels prices higher by increasing taxes. A solution that is not politically palatable to the vast majority of the US, due to the sacrifices in quality of life it would entail.

> make fossil fuels prices higher by increasing taxes

Biggest thing? No.

In Germany, where I lived for 7 years, this is only one component of a much broader strategy that includes investing in electrified infrastructure, including subways, trams, busses, long-haul trains, higher fuel efficiency standards, direct subsidies for renewables, direct investment in renewables, including projects to build them, higher efficiency standards for appliances, lightbulbs, timer-based circuits to turn off lights, broad public awareness of the role of conservation, and not tolerating as much climate change denial bullshit coming out of fossil fuel companies and political parties.

It's almost like they decided to mobilize and actually do something, treating this like a problem that can be decomposed and solved by thinking about it and doing stuff instead of tinkering with taxes, which have a tendency to be immediately undone upon the next economic downturn. Hope, they say, is not a strategy.

> It's almost like they decided to mobilize and actually do something, treating this like a problem that can be decomposed and solved by thinking about it and doing stuff instead of tinkering with taxes

The incentive to do something comes from making gas prices higher, or “tinkering with taxes”.

The US has cheap fuel at the pump, incentivizing people to continue buying SUVs and pickup trucks with 5+ liter engines that get 10 to 20 miles per gallon. It incentivizes people to live on quarter acre lots in far flung suburbs that require individual cars to get around. The people living this lifestyle do not want to spend money on public transport, or dense living. They have the life they want, in big houses on big plots of land, getting around in the luxury of their personal vehicles.

They will vote for the politician who continues to enable and make this life easier, they will vote to make roads wider, and prioritize car transportation over walking and bicycling and public transport.

Why would I want my taxes to increase to build a rail network when I have my own large, luxurious vehicle with which I can get to anywhere I want, anytime I want, without having to share the space with random others for 20 cents per mile worth of fossil fuel?

I can retype my reply if you like, or you could reread it. Government leaders at every level invested real money, time, and effort in building actual infrastructure. They did actual work, you know, planning, studying, proposing, designing, discussing, approving plans and projects, funding actual projects, building actual projects, deploying actual projects. They didn't just adjust a few numbers on paper. They are doing the logistics to accomplish the goals they set out. Funnily enough, things happen when you do them instead of hoping others will.

Government leaders were elected to do that work because the voters wanted the government leaders to invest real money, time, and effort in building actual infrastructure.

People in the US are going to vote for a 16 lane highway so their individual cars can go faster, they are not going to vote for a train to replace some of the demand for the 16 lane highway.

> Funnily enough, things happen when you do them instead of hoping others will.

That is not how allocating tens of billions or trillions of taxpayer dollars works in the US. You have to have the sufficient votes in the legislature to “do things”.

Well I'm gonna stop responding because you keep editing your comments to significantly expand and make different points, so everything is a moving target. (I tinker with comments too sometimes but I am trying to keep it to just minor clarifications).

> That is not how allocating tens of billions or trillions of taxpayer dollars works in the US

Of course this is oversimplified FUD, but I was under the impression that we were talking about the relative merits and effectiveness of policies designed to result in "electrified infrastructure" and it is absolutely clear that your original assertion of tinkering with taxes does not and never has worked except as part of an actual plan.

>Government leaders at every level invested real money, time, and effort in building actual infrastructure.

These are the same leaders who, when Trump at the UN warned four years ago that Germany is endangering itself by increasing dependence on Russia, laughed on camera (<https://www.youtube.com/watch?v=FfJv9QYrlwgepe>).

Germany is now facing the consequences of the greatest mistake its leaders have made in 80 years, an existential threat to the German (and thus European) economy and even nation-state. You know this. Yet you instead lecture the USA—home of Tesla—on how ACKSHUALLY it need to build more e-infrastructure. The mind boggles.

Wonder if the Fed will start paying for solar and heat pumps to help curb inflation /s

There are existing Federal subsidies for solar installs.

Or bike lanes or public transit...

Wonder how bad natural gas prices will be this winter.

European countries are preparing for (energy) rationing. Record heat does not help either.

Consumers in neighboring countries, like Norway, are experiencing almost 100-fold increases in energy prices as a lot of energy is being exported. I'd be amazed if American energy firms aren't exporting LNG hand over fist to EU countries, as the situation is as dire as ever.

Sadly there have been some problems at the export terminals for LNG to Europe. That's caused the price of natural gas to go down a lot in the US and up in Europe. Yet another displacement.

https://www.npr.org/2022/06/10/1104118546/freeport-natural-g...

> I'd be amazed if American energy firms aren't exporting LNG hand over fist to EU countries, as the situation is as dire as ever.

Unfortunately, Freeport LNG terminal, the 2nd largest terminal in country, had fire and not expected to be fully operational until early next year. So even if US can produce more natural gas, they just don't have enough available capacity to export.

https://www.reuters.com/business/energy/us-regulator-finds-u...

Short-term at least, the US is relatively limited on LNG export capacity (and the facility that had an equipment failure basically cancels out the projected increases for this year until it's fixed). https://www.eia.gov/todayinenergy/detail.php?id=50598

AFAIK there's not exactly an abundance of idle ships to transport LNG either.

>It's just gasoline

>It's just housing

>It's just plywood

>It's just food

Humans are biological, liebig's law of minimums applies.

> This has nothing to do with monetary policy.

How can you be so certain? Gasoline prices started rising well before the war:

https://fred.stlouisfed.org/series/GASREGW

I would agree that the war has made a bad situation worse. But to say this has "nothing to do with monetary policy" seems like a stretch.

Most of the pre-war rise was recovering from the covid crash of gas prices. The price overshot its pre covid level a bit, but that can be explained through supply issues (you can't increase production on a dime; demand was difficult to predict; and suppliers prefer to under produce than over produce)

We have a president who is hostile to oil. Let's ignore if that is a good / bad idea for moment.

It's been long enough that price of gas reflects those decisions. Except we've been drawing down our strategic oil reserves to keep prices cheap for the moment. So really it should be a lot higher.

Real pain will begin when the reserve runs out of good oil.

https://www.washingtonpost.com/business/energy/the-us-is-dep...

Gas is pulling up the CPI right now, but it's always volatile. Shelter is slow, strongly linked to monetary policy, and the highest-weighted component in the CPI basket, and it's up 5.6% YoY, with a lot of inertia to keep growing. That suggests to me, in a back-of-a-napkin way, that about half of the current inflation is due to monetary policy.

Shelter tracks CPI less energy pretty closely, especially during the recent surge: https://fred.stlouisfed.org/graph/?g=RJqZ

Refinery capacity has shrunk in the US, so even with more crude, we would likely still have price increases.

There's more than just monetary policy and war. Monetary policy would imply demand for gas is up, driving prices up. But demand for gas is still lower now than it was pre-covid.

Oil is on its way out the door. Oil companies all have projections that show demand for oil increasing in the short term and decreasing in the long term. The list of their options to (1) increase their profits by (2) increasing the supply of oil are all investments that only pay off in the long term. Hence, even as prices rise in the short term, they are making calculations off the long term and finding it not very profitable to increase supply. Simple economic theories of corporate response to supply and demand don't work nearly as well with this long-term, short-term incentive difference.

Correct me if I'm wrong but that chart shows gas prices on feb 21 being as high as in 2014, that upward trend just looks like a recovery from the $1 gas we had at the begging of the US "stay at home order"

Core inflation, which excludes energy, rose at a 8.8% annualized rate. The current YoY figure is 5.9%

So no, it's not just about gas. If you look at the numbers it's across the board and broad based.

The Fed made a historic and pretty obviously needless mistake in delaying their response. Now we get to enjoy the fruits of either a severe recession or unchecked inflation if they decide to chicken out

Which elements of CPI aren't indirectly tied to the cost of energy?

Rent, which is rising close to the fastest pace on record for the CPI.

But depends how many leaps you want to take to justify its relation to energy

Nothing in the breakout of the CPI data shows slowing in pretty much any category

> Rent, which is rising close to the fastest pace on record for the CPI

I’m renovating a home. Shipping is higher, due to labor conditions as well as fuel costs. If I rent it out a few times a year, as I’m considering, I will price to make that back. I’m sure those with purely rental properties are similarly inclined.

Yes, the economy is interconnected.

I also decided to increase rent on my rentals cause the price of bread doubled and my daily sandwich got more expensive

I never consider my own costs when choosing how to price a rental. I will always charge market rates. If market rates are higher than my costs, great. I won't lower my rates, I'll just pocket the extra money. Similarly if market rates are lower than my costs, I can't just stubbornly keep the rates high. No one will rent from me. If that goes on for a long time I'll decide it's a non-performing asset and sell it.

I called myself out as a marginal source of supply. I love my renovations. I don’t need the cash. If a lease can’t cover my costs, altogether, I would prefer to not rent and not risk the damage.

Input costs eventually filter to the outputs.

Housing was/is directly affected by Covid supply shortage.

Cars, chips, energy, supply shocks etc are what’s causing all this increase in CPI. I would even say there’s not much (monetary) inflation, on the contrary, deflation of the USD might break the system.

Just repeating disproven mantras from a year ago.

Chip supply is higher than prepandemic. Demand is even higher due to fiscal stimulus. Not even worth discussing, its obvious to anybody that has been following the data closely.

Look at retail sales figures on FRED and explain to me how this is not a primarily demand driven inflation:

https://fred.stlouisfed.org/series/RSXFS

You and many others are conflating "shortage" with "supply side issues". Shortages can be driven by excess demand just the same as constricted supply

But bear in mind also that the price of gasoline is not directly tracking the price of oil: it's much more expensive now than it was a few years ago when oil was about the same price.

A lot of the "inflation" we're experiencing right now is straight-up price gouging. There have been a number of reports of record profits amid all of this.

> But bear in mind also that the price of gasoline is not directly tracking the price of oil

There's always been a substantial lag. Production/shipping always takes time, plus you've got the sticky price effect to contend with. The falling price of crude today will result in cheaper prices at the pump later this year, but not immediately.

That's likely true, too. I'm hopeful that we will, indeed, see some drop in the price of gas (though frankly, I'm also expecting to see prices rise again before winter...which is going to be rough in some places).

But from what I understand, gas prices also rose much faster in proportion to the price of oil than they have in past oil price spikes. And while I haven't seen any numbers specifically for oil/gas companies, we've definitely been seeing record profits alongside the rising prices in various places these past few months.

I can't claim that it's the whole of the current inflation, but there's definitely some opportunistic price gouging going on.

If you’re talking about retail gas prices a lot of that is inventory driven. Think about it, if I buy a tanker truck of diesel that takes a week to sell @$3/gal and prices start to rise, sure I’ll rapidly match prices, but maybe be willing to be a bit cheap (since I make most of my money on the convenience store), but now fast forward 6 months and I buy a cargo @5.5 and prices start to drop, I’m going to be inclined to lower prices as slowly as I can try to limit at how much of a loss as I going to sell my fuel high cost basis fuel (where it becomes a little anti-consumer is I can probably rely on the station across the street to be in the bind, and so neither of us are in a rush to mark to market until we have newer lower cost basis inventory)

That’s called supply and demand - global refined product demand is at/above pre-Covid levels, global refining capacity has been reduced (partly due to Russian war/covid/feedstock conversions). That’s why you see historically high crack spreads.

For a few more details, US refinery capacity is down 5% or 1 million barrels per day from pre-COVID figures, so once the economy started unfreezing from that demand exceeded supply. Worldwide it's 3 million bpd. For the US, a significant part of the loss in distillate production was being made up by imports from Russia, which of course have been ended by sanctions.

Aside from undoing the sanctions, there's physically no way to fix this in the medium term aside from demand destruction from a recession or worse. In the medium to long term oil companies are not going to make major investments that will never be paid back because of anti-fossil fuel policies.

Dollars are dollars so if a companies profit is up 9% yoy and inflation is 9% yoy, real profit increase is 0%.

> This has nothing to do with monetary policy.

Monetary policy right now. It has everything to do with monetary policy for the past few years, which created trillions of new dollars.

I wish people would stop acting like the world is fine aside from gasoline. Food at home is up 12% from a year ago

- cereals and bakery products up 13.8%

- Flour and prepared flour mixes up 19.2%

- fruits and vegetables 8.1%

- Canned vegetables 14.3%

- Dairy and related products 13.5%

- Fresh whole milk 17.1%

- Meats, poultry, and fish 11.7%

- Eggs 33.1%

- Nonalcoholic beverages and beverage materials 11.9%

- Roasted coffee 16.8%

- Other Foods 14.4%

- butter and margarine increasing 26.3 percent.

It's not surprising that food prices rise when gasoline and natural gas prices rise. You need the gas for transporting and producing food, and you need natural gas for manufacturing fertilizer.

All this products require energy resources to produce. Energy resource prices are volatile thus everybody has to add safe margins. Not really a lot more to say - world is not fine, there is a war in northern parts which is rare. There are additional factors contributing to inflation (covid spending etc.)

> I wish people would stop acting like the world is fine aside from gasoline.

The reason why is there an (appropriate in my opinion) focus on gasoline and other crude-oil products is that other commodities and services relies on this commodity. We're not yet in a state where we can use other resources as substitute for it (either because green energy is not that scaled-up or because crude oil directly contains what is needed - for example fertilizers and plastics).

Perhaps worth noting poultry and especially chicken eggs are subject to truly transitory inflation due to the current avian flu outbreak: https://en.wikipedia.org/wiki/2020%E2%80%932022_H5N8_outbrea... Have not checked up on it for a while, but in the US it hit laying hens much harder than any other poultry category.

You are of course generally correct, food inflation for what I buy is roaring and significantly above topline CPI.

As a community HN has a strong normalcy bias to the point where they will flag and down vote comments and articles that challenge it too much. The worst something can be admitted to be is "not great now, but we'll have a fix in soon". In general this community is blind to any of the major systemic issue we are facing that are likely to forever decrease our quality of live.

I'm reminded of an interview with a few years back with the mayor of Tangier, an island which is visibly sinking off the coast of Virginia. In one instance the mayor points to a part of the sea where a community playground used to be, and when asked about climate change, without skipping a beat, replies that he just doesn't see any evidence for it.

That was a few years back now, and it was then I realized that for a certain subset of the population, no matter how real the decline of our civilization is, they will never see it. The Hoover dam could stop running from the emptying of lake mead, we could have global crop failures and being living with intermittent power outages, all of us living lives that are unquestionably worse off than 10 years ago and people in the community would still be decrying that everything was media sensationalism (even though the media rarely reports on anything being as dire as it is).

It's still 6% inflation even if you take out food and energy: https://www.bls.gov/charts/consumer-price-index/consumer-pri...

Obviously Russia is making it worse, but I think it's naïve and simplistic to say monetary policy has nothing to do with it. I would still argue monetary policy must comprise a slight majority of the blame.

Don't forget very handsome and ever-rising corporate profits. They've been taking advantage of headlines to raise prices, reduce quality/quantity and cut expenses.

This is nonsense.

Unless there is a monopoly, companies have to offer the lowest / best deal or they go out of business quickly.

Food and many other industries are extremely competitive and there is no wiggle room to just raise prices and laugh at poor people.

If transportation is 50% of your products price (end to end); and fuel cost doubles, then you have to raise prices 50% just to break even.

This is true. Large plastic tanks, like 3-5k gallon ones for water storage doubled and potentially heading for tripling in prices because of this simple fact: You can only put like 3-5 on a truck that has to drive from very far away. It makes it so that if your state does not mold plastic, then you are directly paying for the fuel of that truck.

I'd say a cartel works about as well as a monopoly. I think you're right about food, but you can get vertical(? - I can never remember vertical or horizontal) integrations at some points like it seems we have with beef - lots of people can grow cows, but if a cartel gets control of the processing plants, they can squeeze the market at both ends.

> Unless there is a monopoly, companies have to offer the lowest / best deal or they go out of business quickly.

I don't know why you think companies like competition more than they like profits. Companies raise their prices in lockstep a lot: sometimes it is coordinated, mostly its not. Despite your faith in perfect competition: established companies do not want a race to the bottom - which is a classic iterated prisoner's dilemma scenario.

Bet most of those rely on heavy regulations of the government to prevent competition.

A number of things raise the bar: CapEx, regulations, or even high marketing costs (e.g. if one wants to compete against Coca-cola/Pepsi: making flavoured water isn't hard, over-regulated or expensive, but customer acquisition in that space is expensive).

Incumbents rarely want to rock the boat against other, similar-sized incumbents.

Far from nonsense. Oil is controlled by a global cartel. Everything in your supermarket is made by "brands" owned by a handful of companies, produced from raw materials made usually by a handful of producers. They've each carved up the world between them and sit on unprecedented pricing power. How is the US food market competitive? I also note you didn't actually challenge the fact that US corporate profits rose after the pandemic, with fatter margins despite rising costs.

Corporates are trying to buffer up for the incoming recession. If they have no cash reserves they will go bankrupt.

Sure. Shareholder interests and all that. But regardless of the reason why companies might be fattening up (come on, do you really believe they'd leave money on the table even in the best of times?), the fact is they're doing this at the expense of American households. That doesn't make it hunky-dory. And to bring it back to the original topic, that too is inflationary.

If you're right, next months CPI print should be 20-25% less because gas prices decreased by that amount. Willing to place a bet?

Some things to consider

* Job markets are still extremely strong

* We're seeing June numbers. Gas prices lately have plunged relative to where they were

* supply problems are moderating

The one thing the fed should be worried about is another unexpected supply shock -either a COVID wave that affects Asia etc, or natural disaster that drastically affects energy. Then, the economy is in a deep bind and the fed has their hands tied.

> We're seeing June numbers. Gas prices lately have plunged relative to where they were

This doesn't match what I am seeing. Gas prices seem just as high as they were a month ago, if not slightly higher.

Over US Gasoline prices have dropped almost 7% in the past 30 days, in the middle of the summer. That's a pretty drastic drop.

https://ycharts.com/indicators/us_gas_price

Well, it would be nice to be where they are dropping that much. According to GasBuddy's charts Portland, Or has only seen a 2-3% drop in prices since the peak.

They are down about 7% over two weeks in my New England city. A bit moreso in the rural areas. OP can call it a "plunge" but it's down from literally the highest I've seen it in recent history to just slightly less of the highest I've seen it in recent history.

> * Job markets are still extremely strong

Less so in Silicon Valley (which should be relevant to the HN crowd), as far as I can tell working at one of the relatively few Silicon Valley tech companies that hasn't slowed hiring yet.

I've still not heard of any engineers failing to find jobs. There's just less desperation by recruiters.

There have been a sharp uptick in layoffs...but it seems like those folks are getting snatched up almost as soon as they're let go the market is so hungry for talent.

The market has cooled off but the prior market was ridiculously hot. Still many good jobs to be had in tech

It was ridiculously hot but I would compare it to brakes being slammed with so many companies instating hiring freezes or slow downs like Meta, Snap, Salesforce, Microsoft, Uber, Robinhood, and Stripe.

> Gas prices lately have plunged relative to where they were

Where I am I wouldn't really call it a plunge. It was $5.50-6 a month ago, now it's $4.90-5.50 but it was $3.50-3.90 in 2020-2021.

> Inflation rose 9.1% in June, even more than expected

No, prices rose 9.1% over the year ending in June, not 9.1% in June—why is all inflation coverage (or, at least, headlines) so bad, even in outlets that are notionally business/finance focussed either reporting annualized monthly or quarterly inflation as being the actual inflation in the month/quarter or reporting annual inflation through a month as being actual inflation in the month?

This will be the 3rd once in a life-time crash since I left school. This time I finally also have savings that I can lose in the crash.

Same here. I was meaning to buy an apartment, but that's not going to happen.

During Covid, the price of real estate went up so much, that the increase of the 20% down payment, which is recommended in my country, is more than I can save in year. I'm saving 60% of my income and I'm in the top 20% income bracket.

This is why I’m wary whenever I see “top X% in the income bracket.” I think it’s misdirection, because if you can’t afford something, then you can’t afford it, regardless of how well off the statistics say you are. You can save for a down payment, and then interest rates and mortgage will obliterate you. So really, the scale for these things in terms of affordability starts somewhere beyond what you’re making - and most of the upper 20% I bet, and then extends onwards to the actual ruling/owner class.

So the metric we should use isn’t this. It’s something else.

I won’t speculate with the usual HN nonsense of armchair economists. I will say I remember Michael O’Church’s two ladder theory and I agree with it based on personal observations.

Is it expected to be able to save for an entire down payment in one year? It took me and most of my friends closer to 10 years.

The price increase of the downpayment was higher than my savings in that year.

If you have cash savings, then you’re ideally positioned to take advantage of lower real estate prices without suffering (as much) from the impact of higher interest rates.

If prices go down, which they probably won't in my city.

Also, Input everything in ETFs, as everyone told me.

I will probably escape to the countryside in a couple of years.

I'm actually not even eligible for a mortgage any more considering that interest rates around here are at 6,50%, which is more than the 30-year average.

Same here. I graduated college during the financial crisis. It's been a wild ride.

The economy always has cycles. Expecting constant upward growth is unrealistic.

I went through 2008 and lost 30% of my portfolio. It’s up 300% since then.

You’ll survive.

Surviving isn't the issue, I'm doing fine. Affording a house is. Reaching the standard my parents had.

Good luck with that. My parents purchased 60 acres of beautiful land and built a very nice house on it. My dad was a construction worker and my mom was a part time school bus driver/eventually USPS worker.

My wife and I both have degrees. There's no way we could ever afford their place. The population has increased too much and space - even in rural areas - is finite.

My parents did the same.

Of course when they bought it was a podunk town and they bought on the edge of city limits.

Now it’s a city of 2M and their property is regarded as central.

Of course I couldn’t afford it.

But I could certainly buy on the edge of some podunk town today.

It is weird how the vast majority of commenters on HN ignore any adjustments for changes in quality in housing discussions.

Housing prices seem pretty inline with population growth after adjusting for location and building quality differences.

With rising rates expect housing to fall.

Canada had a massive run up and with increasing rate the ‘burbs of Toronto are down 25% in the last two months.

Unless you have a crystal ball, I wouldn’t count on the current trend continuing.

> with increasing rate the ‘burbs of Toronto are down 25% in the last two months

Are you saying that real estate prices in Toronto suburbs have fallen by 25% in two months? That's incredibly quick; generally real estate crashes take a couple of years to play out and bottom out at a ~40% decline.

Yes, median sales price is down 25-30% since rates started going up.

That said, those same places were up 50-100% during Covid. But the latest drop bring them back to pre-Covid levels.

However, rates just went up 100 bps today and will likely go up by another 100 bps by year end.

Canada is looking at a major correction, but that said, the median price in Canada is 2x the US, so there is plenty of room to fall.

If these monthly numbers are year-over-year, and if most of the inflation uptick happened within the last 12mo, then we're likely to see 8-9% every month now until we get a year of 8-9% months in no? After that, if inflation has stopped rising, it should in theory drop down fast.

Very true.

But prices dropping? Not happening.

So inflation might 'return' to 2% or whatever for the year, but the damage is done, prices are much higher now.

Prices are dropping or being moved around.

For example - amazon goods - prices haven't really changed much but its so affordable to buy at amazon because of the negligible shipping. 5 years ago it would have cost you $150 bucks to same day/overnight a package. Today i can order batteries, dog food and cleaning supplies and have it show up by 3pm. So pricing has "changed" if you ask me - you don't get the cheapest goods compared to other stores but the overall price is low because it shows up to my front door super quick and saves me time/money in other places.

Beyond that - i'm seeing pricing settle. I build lifepo batteries, prices were way up but coming down. Construction goods are trending down. Lumber is up and down variable on supply but coming down.

Dining out prices have gone through the roof though... just had a terrible meal the other day and for crappy food it was 48 bucks for 2 people. So I'm just gonna cut out dining out unless i know i'm paying for premium. I'd rather spend 150 bucks for a meal i'll never forgot that is a 3 hour experience than 50 bucks for something thrown in a microwave and slapped on the table. So there is the value vs reward thing to think of here..

but other things - 3d printing is cheap, hobbies are cheap... cars? expensive, I invested in an EV bcause electricity is cheap and speaking of electricity Solar and home battery systems are so cheap now compared to before that i offset some costs of cooling by just buying new AC, new efficient appliances and using new panels.

what prices are you seeing stay up? even fuel is below 4 bucks a gallon and struggling to stay up

Lol, if you can get a decent meal in midtown Manhattan for $150 that would indeed be unforgettable! :-)

midtown manhatten has been inflatted since i've been alive

I think the OP's point is that as prices aren't dropping and the comparisons are with this time last year before the fuel price spike, a year of "8-9% YoY inflation" headlines is prices having risen 8-9% once, not some compounding effect. Which doesn't mean central bankers wouldn't be happier if the rate was 0.3 points below expectations rather than 0.3 points above it, but the June YoY figure being way ahead of the 2% we used to see reflects stuff that happened earlier in the year, not a spiral that needs addressing asap.

If the YoY figure was around 2% in June, that wouldn't imply a reversion to normal economic conditions, it would imply stores had run round slashing prices.

A return to 2% YOY inflation would be awesome beyond belief. the damage would be done, but the market would probably recovery fast, like in the 80s when inflation fell from the peak in 1979-1980.

> until we get a year of 8-9% months

Why until then? I think it would be until we have reached one year past the Fed's decision to raise rates [enough to 'fight' inflation]. But that's just a guess, since their stated reason for raising rates is to fight inflation. The economy is too complex for me to understand, but I suppose that turning down the spigot of monetary stimulus should probably have its intended effect.

As a side note, I still find it wild that we're talking about sub-2% rates as NOT stimulative. It really does seem analogous to drug abuse, where the user needs larger and larger amounts of the drug to feel its effects.

Otherwise, yeah I think you're right, we'll see this for a while because these are all YoY comparisons, not MoM.

Headline inflation rose at a 17% annualized rate MoM in this report.

Core at 8.8%

The headline is quite confusing, and I think should be 'Inflation rose TO 9.1% year-on-year in June' or something like that.

the monthly change should be reported instead of the annual

Monthly is harder to measure because consumer preferences and behavior change from month to month, based on eg weather and holidays

I agree. That phrasing always gives me a moment of "9.1%? Is that vs. last month or last June?" before it kicks in and I realize it's YTD phrased in as sensational a way possible.

I think it’s year over year (same date as last year) , not ytd (since January 1st)

Why would CNBC write a headline that clearly doesn't make sense? Would people not understand if they just added the word "to" to the headline? Or does it just sound more alarmist this way? It just makes me think that part of the reason why people don't understand inflation is because the reporting is of poor quality.

Prices are up, wages are up, but last I checked (admittedly a month or two ago) profits were doing just fine. That profits are still solid under so many adverse conditions indicates to me that there is a lack of competition in the market, very little competitive pressure on pricing. The Fed isn't going to fix that with rate hikes, and there doesn't seem to be any interest in enforcing the anti-trust laws that we have on the books. I think we're in for an exciting ride, though I'm happy to hear why I'm wrong. :-)

Profits or profit margins? Because a change in profits commensurate with price and wage changes is pretty logical.

Supply shocks caused the lack of competition. It's a seller's market.

Wages are not up.

https://twitter.com/paulkrugman/status/1530257168078974976

Paul Krugman just can’t stop being wrong. How this guy has any credibility anymore is beyond me.

He's paid precisely to be wrong, he's just a gaslighting agent at this point.

Remember when he said the internet would have no greater economic impact than the fax machine?

https://twitter.com/ggreenwald/status/1395549665765040130

Correct, it's just the fax machine basically ran the second half of the 20th century.

Krugman himself admitted that his prediction was woefully wrong. Read near end of: https://www.snopes.com/fact-check/paul-krugman-internets-eff...

Some pundits are valuable in that you can fairly reliably go in the opposite direction they advise.

Jim Cramer FTW

I dunno how it's doing in the current market, but some wag tracked how an "Inverse Cramer ETF" would do and it was pretty good. https://wccftech.com/the-inverse-cramer-etf-is-still-beating...

The inverse Cramer ETF has +11% returns this year vs -20% for the SPY :D

My goodness. Soes that ETF actually exist? Where can I find it?

Paul Krugman produced some quality work in the past but he has been a partisan pundit for quite some time now.

Isn't this the “economist” who promised good economic times under Biden because Biden wasn’t Trump?

He also predicted a global recession under Trump in 2016: https://www.nytimes.com/interactive/projects/cp/opinion/elec...

The. We have the other hacks telling us why inflation is “good”. I wish they got their stories straight.

Mainstream media teaches sheep to listen to anyone on everything they say and agree with them, because the article is from the New York Times.

Don't be one and listen to people like Paul Krugman, who isn't keeping up.

These are June’s numbers which don’t show the recent drop in gas and food. Inflation may have peaked, in which case he was only off by a few weeks.

Releasing millions of barrels from a strategic reserve to make the gas price drop 5% while overall gas is still up 70+% is not a sustainable action. We don't have an unlimited strategic reserve. Its a stunt to get people to temporarily believe the administration is doing something so they will go support them on the internet.

The primary reason for gas prices declining is that global oil demand is down.

He’s a propagandist

Headline is misleading:

- it wasn't inflation that rose, but prices (inflation is the first derivative of prices wrt time)

- the rise wasn't 'in june' (a single month) but 'in the 12 months to june' (a year)

The common assumption was that stocks would hedge inflation, this is wrong.

nothing is a good hedge except real estate it would seem.

Very curious if real estate can hold value in the hottest markets in the US, though. I recently moved from Denver, where housing prices doubled or even tripled in the last couple of years. In the mountains of CO, there's places where prices quintupled.

I suspect that those price trends aren't sustainable, and have to deflate or stagnate at some point. In the LONG term, decreased immigration and birth rates in the US eventually have to result in lessened real estate demand. But that's probably going to happen on the order of decades, not months or years. Real estate in a lot of the US is at least a fairly stable investment (especially for wherever you want to live anyway!).

Someone said above that the only real hedge was to short the entire market. I think within a year, if interest rates rise, house prices will drop inversely.

> nothing is a good hedge except real estate it would seem.

This is similar to the best arguments I've seen for gold as well. It isn't a fortress against inflation and should only be part of a portfolio, but at the end of the day owning a physical object is better than a paper IOU

real estate is not that good of a hedge, as it will tank after rates raises.

I don't think that's a common assumption, inflation means stricter monetary policy which slows growth for companies so stocks go down.

Real estate is not a good hedge against inflation, check out this video to see how there is no real proven hedge against inflation[1] (supporting papers in the videos description)

1. https://www.youtube.com/watch?v=1a3XnvRCcVo

It's amazing how much all of the responses so far seem to be missing why this is the case. Assuming you have no choice but to live somewhere and pay for it, already owning at a 30-year locked in monthly payment benefits you as long as average monthly payments for comparable housing for new home buyers and renters keeps going up. Whether that is because of price increases or interest rates going up doesn't matter. If interest rates rise and home prices fall, but your monthly payment stays lower than what new buyers and renters are paying, you still benefit.

I never understood that logic. Like, why would risky assets rise their prices when central banks are paying more interest?

It might make sense if stocks were not overvalued. Which they clearly are. As realistically valued if the companies can keep increasing prices in line with inflation the underlaying value should match the economy in general. So the value of companies would inflate too... Thus inflation not having effect.

But, we are now at least in my mind dealing with overinflated stock market. Propped up and pumped by cheap debt. And with rising rates that can't go on.

Imagine being paid to do a single job - keep inflation under control - and then being so horribly wrong that you conclude a year ago that inflation was transitory.

If it were a single job, it would be easy, but: The Federal Reserve System has been given a dual mandate—pursuing the economic goals of maximum employment and price stability.

And on the employment front, they’re doing very well! Continued very low unemployment.

Recession is becoming a reality and that equates to companies laying off their employees. Don't count your eggs before they hatch.

Imagine being given a job, but very very few tools with which to accomplish that job, none of them adequate to the task at hand.

And the last ditch tool is to cause a recession. Instead, if we had tools for more localized fixes to supply chains, we would greatly increase our wealth, instead of spending recessionary quarters with people idle and destitute.

It shouldn't be that surprising, the economy is too complex to be able to accurately predict. It's impossible to succeed at their job.

Imagine telling someone how bad they are at their job without even realizing their actual job. It’s literally called a “dual” mandate.

No part of that dual mandate requires pumping up the markets.

Unemployment is at record low. Inflation is at record high. Then why these measly hikes? Inflation has been in an uptrend for 18 months. Unemployment has been robust for nearly a year.

Current federal rates? 150bps.

The dual mandate has been overtaken by Wall Street addicted to the cheap money punch bowl.

The Fed has stated that it's within their mandate to let inflation run higher since it's been so low the past decade, to have a long term 2%. Their thinking was, while unemployment isn't down to pre-covid levels (it wasn't until March 2022, the date of their first hike), the last decade is actually -4% under a long term 2% average. 2021 coming in at 6% inflation would be a 2% inflation average the past decade, but it still only came in at 4.7%. Inflation at 3.3% this year would still be exactly a 2% average, and we're currently overshooting that, thus the frantic 75 bps hikes. But with July's numbers already looking greatly down, the rest of the year could still prove like a 2.2% yearly inflation over the past decade.

Feel free to look at how low inflation has been: https://www.usinflationcalculator.com/inflation/current-infl...

75 bps hikes are not frantic. Hikes should be 300 bps to be barely enough.

75 bps hikes are unprecedented in the last 40 years, since Volcker, and they are happening every month right now. By historical measures, I'd consider it frantic compared to most of history being long periods of unchanging rates.

Look at the gradient of the recent hikes: https://www.macrotrends.net/2015/fed-funds-rate-historical-c...

Keeping interest rates 7% points below inflation is unprecedented in all history, by historical measures, I'd consider hikes are 2 years too late and tiny.

1.5% federal rate when inflation is 9% isn't going to have any impact at all.

Read some of the comments on YouTube or Facebook where the bottom 50%ile congregate. People are hurting bad, especially because of the rent increases.

Now that they've been so slow to act, inflation has a good chance of becoming endemic. Its steeped into services now which tends to be very sticky.

and as usual all the promised inflation hedges: gold, bitcoin, oil, all falling.

They're not reacting to CPI inflation, but rising interest rates. Markets expect monetary policy to keep tightening in response to CPI inflation.

When Fed is expected to ease monetary policy, these assets will start going up. It depends on how the economy reacts more broadly to rising interest rates.

These assets can be seen as a hedge to easy monetary policy, rather than a hedge to CPI inflation.

Gold hasn't fallen dramatically year over year. It spiked last in Feb and March this year which isn't terribly surprising given that Russia had just invaded Ukraine and could possibly go down in history as having fired the first shot of WWIII.

A year ago gold was about $1800/oz, now its $1717/oz. Thats a drop of around 4.6% while inflation is up 9.1%. Good is priced in dollars, it hasn't lost value so much as it hasn't been hit as hard by inflation.

I guess we can expect the Fed to raise rates even higher in a few weeks now? This'll really be interesting for the ramifications on the PE/VC community given how they live off of low interest rates but of course, I worry more for everyday consumers who get hurt by this. But how this affects homebuilding will also be interesting, I know anecdotally from friends who have been searching for houses for a while that now people are actually listening to offers and things are even getting knocked down in price but I hope that homebuilders still go out and build new houses even if the market slows a bit.

75bps increase went from ~30% probably to ~80% based on the moves in the bond market based on these number.

So, probably so.

A builder near us has had a deal fall through 2x in the past 3 months, and each time, they relist the house with an extra $100k tacked on. crazy times.

To the economists out there: how much is inflation a self-fulfilling prophecy? Are people who set prices known to think: "hey, we're in an inflationary market, let's jump our prices too!"?

The "open" markets will tend to fix this issue, over time - the problem is that the markets can stay irrational longer than you can stay solvent.

Yes, has already been happening. Companies have been increasing prices just because they know consumer sentiment expects prices to be increased.

That alone does not allow them to increase prices and maintain market share.

Lack of competitors able and willing to sell at lower prices is also necessary, i.e. low supply.

Unfortunately people who set prices are known to have to eat and seek shelter too. They're not some formless bogeyman.

People is the important word in the question.

This is exactly whats happening. No one (private citizens seeking raises, nor corporations setting prices) is willing to be the one to take the hit.

Everyone wants a 9% raise, everyone wants more for their products because operations cost more, inflation rises even more next month, rinse repeat

In Hungary the gov uses similar reasoning for not raising the wages of public workers too much, in order to avoid this feedback loop.

https://en.wikipedia.org/wiki/Wage-price_spiral

> Excluding volatile food and energy prices, so-called core CPI increased 5.9%, compared to the 5.7% estimate.

I'm not an economist, and as a layman I'm confused why they exclude something as 'core' as food and energy from core CPI; apparently 'core' is commodities like apparel, new vehicles, used vehicles, medicine, alcohol, and tobacco, and services like shelter, medical care, and transportation. Food is up 12% year-over-year, so not much more than the overall stat, the big contributor is petroleum products: Piped natural gas service is up 38%, gasoline commodities are up 60%, and fuel oil commodities up a whopping 98%.

The chart at BLS.gov [1] is a decent way to explore these parameters; before submission to /r/dataisbeautiful I'd ask that the sub-levels should have slightly different colors for each bar (keep the 'green' for 'other' distinction, but use multiple shades of green), and that there was some indication at upper levels of the fraction from each sub-category. For example, energy services are listed at 19.4%, but only have two categories of electricity at 13.7 and natural gas piping at 38.4. The average of those two is 26%, which is larger than 19.4...for what reason?

[1] https://www.bls.gov/charts/consumer-price-index/consumer-pri...

Which means the Fed will continue to let ~$90B out of its $9T portfolio of treasuries and agency-sponsored mortgage-backed bonds mature and be paid off every month, without recycling the proceeds back into newer holdings to replace the old ones. The innocuous-sounding name for this process if "quantitative easing," but its impact may be far from innocuous.[a]

Consider: Every treasury that matures must be refinanced by the US Treasury by issuing new treasuries, and most mortgage-backed bonds are paid off before maturity via home sales financed with new mortgages. Therefore, bond investors other than the Fed -- that is, mutual funds, ETFs, sovereign wealth funds, pension plans, individuals, etc. -- will have to buy an additional ~$90B of newly issued treasuries and mortgage-backed bonds, give or take, every month, going forward.

And that means all investors other than the Fed must find ~$90B/month x 12 = ~$1.1T/year to buy newly issued treasuries and mortgage-backed bonds. In practical terms, they will have to withdraw ~$1.1T/year in aggregate from all other financial assets they own. The price of all such other financial assets, including "safe havens" like gold and Bitcoin, may not behave as predicted by any model!

[a] You can see it has already started here: https://fred.stlouisfed.org/graph/?g=RINc

No PHD needed, just a ruler.

https://tradingeconomics.com/united-states/money-supply-m2

Switch to 10 Year view. Put your ruler on the line. You should get a bit under 18,000.

It's actually 22,000. So pretty simple maths. It's 22% inflation from simple 'printed too much money'. This is monetary policy gone wrong. Though if you zoom it, they did stop printing money and have been pulling out a minuscule amount in the last few months.

So there's 22% inflation just from monetary policy. Then you have inflation from various other sources like cancelling oil projects causing supply issues. You have carbon taxes causing pretty big harm to the food industry. Afterall I'm not familiar with any combine harvesters or tractors that get good mileage. Long story short, there's about 40% inflation locked in. If it doesnt rise above 9.1%, then it's years more of this.

What is the primary way to remove the extra money? Higher rates? If so that seems like its taking a bit of money from everyone that needs more money than they have, whether that is to buy a house, start a business, or... Is there some way to remove the extra money from those who has more money than they need instead?

Normal Operations consist of (mainly) controlling the interest rate at which a central bank will pay out on reserves (cash / assets) that other banks deposit in it. This is known as the base rate / reserve rate, and varying this rate can vary the reserves at the central bank, and therefore the money in the economy.

So, what should the average retail investor do about it?

I think you're looking at it the wrong way.

Currency devaluation isn't about your investing. It's about trying to earn that small money in the first place. Don't focus on your passive investment, but rather how you are producing the money to get into that investment.

Thanks for this, today I learnt something new. Compared this to China, Germany and India - neither of these countries have weird graph as USA!

One would want a log scale on the vertical axis, right?

It's relative to population growth and an artificial inflation rate funding the government. They matched the natural gold inflation due to mining.

The line I was pointing out was totally fine pre-2009. Not the case anymore.

Something I don’t see a lot is the postponement of Student Loan debt. It’s $1.6 trillion, and people that owe the money (me included) are living lives like they aren’t ever going to pay it back. That’s a huge monetary injection into the economy, and will probably have major shocks when the payments continue.

Writing is on the wall. The recession (depression?) is already here. The housing market has already taken the hit - it crashed upward in price this time around and now activity is grinding to a halt in most markets around the United States. Contract activity is down 20% or more in most major areas, both YoY and QoQ. The fed rate hike spooked buyers and most activity is institutional, many of whom are going to offload when the short-term rental market bottoms out. The question most people should be asking is what should I park my assets in to weather this. My opinion is that there isn’t much that’s going to be safe this time around. Burry’s water meme might come true finally.

Ugh. Second derivative again. Haven't seen a headline like that since the 1970s.

One of the Fed's key charges is to maintain price stability by maintaining inflation at around 2% YOY.

It should be clear by now that the Fed is unable to achieve its goals and is a failure according to their own stated goals.

As are most other (or all?) OECD countries at the moment. It would be better to compare with other countries inflation instead of the 2% target at this point.

The Fed's charter is based on comparing against our own targets though. If the whole building is on fire, it isn't useful to say the person in apartment 3b is doing well because their place is less on fire than down the hall

Fed is to a certain degree the central bank of the whole world. Other country faring worse does not absolve the Fed, because the Fed is the culprit for all of them.

In case anyone is curious, the second-largest economy in the OECD (which also has a 2% inflation target) reports inflation of 2.1--2.8%: https://www.reuters.com/markets/asia/japans-may-consumer-inf... https://tradingeconomics.com/japan/inflation-cpi

“One of”

It’s called a “dual mandate” for a reason. They try to maintain 2% while also lowering unemployment as much as possible. Unemployment is fine while inflation is hot, thus the 75 bps raises you’re seeing every month.

But, understand that economic conditions can arise where they have to balance both hot inflation and high unemployment, neither of their ideals but involve figuring out the best trade-off.

The reality of the situation is that we need a double-digit rate increase to soak up all this inflation (at least 14% according to Taylor Rule) which will promptly crater the markets and throw us in a long recession just like in the 80s. So instead we're getting half a percent every other month which is one of those things that the FED does to pretend they're working on a solution. It seems like the question going forward is going to be whether Jerome Powell is going to be saving the economy or his seat and so far it's looking like the latter.

This is more relevant than ever: https://benoitessiambre.com/macro.html

I’ve been re-reading John Kenneth Galbraith’s “The Affluent Society” recently. Originally published in 1958, but some sections were updated by Galbraith in 1998. Here are some interesting and relevant paragraphs:

"The public response to inflation is interesting. It is widely deplored and condemned. Politicians of both parties have taken a strong position against it. Conservatives, anciently the self-designated custodians of the 'honest dollar,' have continued to stress this tenet of their faith. Businessmen, bankers, insurance executives and nearly every type of professional public spokesman at one time or another have warned of the dangers of continued inflation. Meanwhile, liberals have deplored failure to take effective action while often proposing none themselves. Next only to the virtues of competition, there is nothing on which the conventional wisdom is more completely agreed than on the importance of stable prices. Yet this conviction leads to remarkably little effort and, indeed, to remarkably few suggestions for specific action. Where inflation is concerned, nearly everyone finds it convenient to confine himself to conversation. All branches of the conventional wisdom are equally agreed on the undesirability of remedies that are effective. [...]

Monetary policy [that is: a rate increase at the Fed] collides with the process of consumer-demand creation and, since it works on business investment, is in conflict with our emphasis on growth. It is also ineffectual, discriminatory and, possibly, dangerous. Fiscal policy [that is: gov’t taxation to reduce the money supply] is sharply at odds with the commitment to a level of output that ensures full employment and the accompanying economic security. Direct controls [that is: price controls on things like oil/gas], which in theory might reconcile high employment with price stability, are under a heavy ideological cloud. [...]

... [1998 update from Galbraith:] The United States has seen some years of relatively low unemployment and very mild inflation, though no diminished fear thereof. The new situation reflects the declining power of unions and the growing importance of industries -- consumer services, entertainment, the arts, professions and much advanced technology -- where they are absent or unimportant. Here the wage/price interaction and spiral is not a factor. As often in economic life, change in controlling circumstances has brought appreciable economic change, how permanent one does not know."

Curious what effects this will have on capital holders deployment of capital. From my loose understanding, in a low rate environment, capital holders try to control for risk. It’s hard to make up a loss on .5%.

On the other side, if inflation is near 10% - then why wouldn’t you spend the capital you have on a productive asset? Your cash is going to zero from simply doing nothing.

This goes along with record profits, so maybe this more of a example of how currently the US market is not competitive. Companies can just raise prices and there is no counter-balancing market forces where competing companies offer lower prices and get the business.

Good thread by Paul Krugman: https://twitter.com/paulkrugman/status/1547202926149378048?t...

How much longer can we really exclude food and energy?

They have been excluding these for years, but I think they have real impacts on people's lives.

I get they are hoping to smooth things out, but who are they really helping here?

This is bad and they need to turn it around quickly but it’s not going to be painless. People will suffer the consequences of easy money coming home to roost.

What’s sad is the third world dictatorship pandering we see with regards to dealing with inflation via fuel subsidies and other exacerbating gimmicks.

First you do all you have in your power to deprioritize fossil fuels and then you accuse fossil fuel companies AND franchisees of being thd culprits in order to hide bad policy decisions.

In addition they say this is the cost of transitioning to green energy. So, what is it. A cost we need to bear, bad policy decisions or bad service stations?

We need actual people who on know what’s they’re doing in appointed positions.

I don't understand why there's so much support for stimulus checks right now. Isn't their effect the exact opposite of what you'd want during high inflation?

what these stats don't mention at times, that it's more than 9% they quote here month on month on a relative dollar basis.

Do we have trustworthy media that analyzes the cause of inflation? I find it insulting that Biden government first denied everything and then blamed Russia for everything even before the war started. I mean, really? Russia has the GDP of a single city in China, and they have their own shit to deal with. On the other hand, I'm curious why Biden government does not blame Trump government, at least to some degree. Trump's government expanded credit for trillions of dollars too, right?

Somehow people got really partisan when it came to issues like inflation, when I just wanted to know the truth.

P.S., I also find it insulting that Biden blames gas station owners and corporates for their greed. I thought "hoarding and profiteering" is the term that communist countries used to justify their tyranny. Case in point, that is exactly the reason that Chinese government used to nationalize millions of business back in the 1950s, and tens of thousands of people were executed for being "greedy" or "anti-revolution".

I also find it insulting that politicians were advocating price control. They didn't know that price only reflects the value of goods or how price control played out in the Nixon era? Somehow the left in the US are really receptive to the idea of price control and punishing companies. Did I miss something obvious, or the Democrat base are really into the communist shit?

> Did I miss something obvious, or the Democrat base are really into the communist shit?

Yes. Communists in particular analyze and judge people, not as individuals, but on group identity (like proletariat and bourgeoisie). One's group can be just about anything. Have you noticed how hard Democrats have been pushing race and sexual identity issues over the past 10+ years?

Meanwhile the Nasdaq is opening positive and the S&P and Dow are only slightly negative.

We are attempting to evaluate the situation based upon past experience which, in all likelihood, will not apply as we move forward. Things are changing, and economics, sociology and the like are not of the immutable laws realm like physics. We have built a world predicated upon vast supplies of cheap energy with comparatively very high energy density which will not be replaced like-for-like. What must change is how we function, what we depend upon and what we value as a global community.

We - i.e. all of us who inhabit the place we call earth - need to really come to terms with all that is happening and stop hanging on to the antiquated belief that, at some point, all will be “normal” again. It won’t. And that doesn’t mean we have to give in or give up. But we do have to change - our habits, our beliefs, our worldview. When you look at, discerningly look, scrutinize and acknowledge, all that is going on, all the crises (or perhaps you prefer cataclysms, catastrophes, calamities ... - pick your favourite) including climate, energy, water, food, economic, justice, humanitarian, authoritarian, autocratic, diplomatic, political, geopolitical, … we absolutely must see the forest and the trees and step out of the comfortable illusions and delusions we tenaciously embrace. We must begin to deeply adapt to changes coming and ruggedize our lives.

In some ways it astonishes me that people are so deeply certain of their certainties, of the “can’t happen” mentality, but in other ways, I get that we have been groomed to believe that capitalism, companies, governments, and technology will solve all of our problems if we just continue to be good little consumers and not rock the boat.

But massive and sustained discontinuities are coming. And fast.

With gold being down oddly enough, I read somewhere that some banks like Citi and another (trying to find source rn, but on mobile) have large short positions on paper gold, artificially pushing it down.

Gold price just doesn’t make sense, especially with a near record interest in it during the last few years.

"Inflation swindles everybody"

- Warren Buffet

Dumb question: If last month was 9% inflation, and the month before that was 7% inflation - does that mean we’ve experienced a 16% inflation?

No, it's YoY, meaning from May 2021 - May 2022 prices rose 7%. From June 2021 - June 2022 prices rose 9%.

People are getting confused by this

The YOY is 7-9%

The monthly change is around .5-.8% , so nowhere close to 16%

16% inflation in 2 months would be very, very bad!

It depends are you discussing percentage points or percentage.

From 7% 10% rise is 0.7%.

In case anyone is curious, the monthly change was 1.3%: https://www.bls.gov/news.release/archives/cpi_07132022.htm

Putting aside the fact that the numbers are year over year and not month to month, that isn't how percentage increases work. If you have a quantity that goes up 9% and then goes up another 7%, it has then gone up (1.09 * 1.07) - 1 ~= 16.63%. This is how compounding works. In a single period, it doesn't make much of a difference, as you can see, it's barely more than 16%, but over many periods, compounding results in much greater cumulative growth than if you simply added the increases together.

There’s only one truth you need to know about capitalist economics, the bigger the boom the bigger the bust.

Hold onto your diapers because it has only just started.

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