Comment by OrangeMonkey | Hacker News Reader

Comment by OrangeMonkey | Hacker News Reader

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You almost certainly know more than me on this topic. I am freely admitting ignorance, compared to you, before I comment.

That said, I cannot see any circumstance that exists that would result in bringing inflation to our target rates without a recession and much higher rates. From what I have read on fintwit, we have never brought inflation down without raising our interbank lending rate above the inflation rate.

What is worst is that wages are increasing too - "wage-price spiral". Except due to war, the only way we have broken a wage price spiral before is via a deep recession.

So in our future, we have either a large increase in the interbank lending that would result in zombie companies going out of business, and investment liquidity drying up leading to a recession - or we accept high inflation and the wage->price spiral which will naturally (at extremes) lead to a recession.

Look, I'm asking for your insight here - I can't see a soft landing because its historically not happened. I can't see a path without recession due to the choices we have to make. How is a soft landing here possible?

I'm also not an expert, but heck that's what the comments section is for.

Hitting the Fed's target would require deflation. We would need to average -0.5% month over month inflation for every month from now until the end of the year. (N.b., that's for the Fed's target, not the 5% mark in the comment you are responding to. 5% would be significantly easier, at the obvious cost of it being 5% YoY inflation.)

> What is worst is that wages are increasing too

My understanding from what I have read is that this is largely on the lower end. E.g., Amazon offering $15/h is driving those earning minimum wage up … but this is just pushing real minimum wage closer to its historic highs — which it is well beneath, so I don't think this should necessarily drive inflation. Price would go up not so much because labor costs, but because corporate greed wouldn't want labor capturing their fair share of the profit.

Tech in particular has been article after article about layoffs, or how the VC money is stopping. (And this matches my experience as an "normal" IC eng: I've lost >10% of my salary since the start of the pandemic.)

Even should inflation recover, then there is the problem of the higher interest rates for anyone in my age bracket who might like a mortgage some day. Housing market when.

You forgot to mention governments going out of business too. Half of US debt (15 trillion) needs to refinanced in less than two years, which is unaffordable if interest is above inflation.

That's affordable if they buy their own debt through "quantitative easing" - which means printing money - but then you're back to inflation getting worse.

I am NOT an expert, and this is just my OPINION.

From my perspective the root cause of inflation is a lack of housing (near where people need / really want it). Compared to my parents it is a herculean task for someone younger than 40-50 to get a starter house, near a stable job, that actually has a career path where settling down makes sense. Particularly where I grew up / currently live (near Seattle, WA).

Maybe houses are cheap in some places in the country, but those places are not where I am or need to be.

We need an overhaul on building policies. I'd like to see tougher building CODE (better built houses) and much simpler zoning with less red tape. Sustainable, tax base vs maintenance expenditure positive, already environmentally impact ready interface packages on the shelf for areas that can be built to provide the features an area needs. More like simulated city planner games.

As a deflationary measure, tax the rich for real. Instead of handing out more stimulus that will be priced into the inflation of goods; a hidden tax on the non land-owning middle class; increase buying power and quality of live for all by decreasing the wealthy's advantage and increasing the commons and public works.

Tougher building codes and lower prices are opposing demands. Tougher codes mean it’s more expensive to build or retrofit. Zoning is to land as codes are to structures - tougher zoning = higher prices.

Its possible that tougher buildings codes but with also much less restricted zoning could lead to lower prices. I'm not familiar enough with housing to know how much each affects the current market.

Building takes time, so this would be 2+ year market... but we've gotta start some time since for the last ~50 years 'enough' housing has not been built, there's a lot of unmet demand, which is why the market is so inelastic.

If you assume that productivity is fixed, and that relative shares of profits, wages, and taxes are fixed. Then the above is true. The reality is that the above have complex non-stationary relationships. Labor can get more expensive and more efficient. Speculative investment can be reduced, and capital/government can reduce/increase their share of the economy.

A soft-landing was possible post-WW2 US economy, where the US both inflated away large debts and maintained high GDP growth rates. We'll see how things shake out.

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