Why Firms Are Struggling with the U.S. Economy’s Soft Landing | Hacker News Reader

Why Firms Are Struggling with the U.S. Economy’s Soft Landing

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38 pointsmooreds85 comments

I don't think it's a soft landing because the economy wasn't really crashing to begin with. Inflation was up largely due to Covid issues and some panic around Russia's invasion of Ukraine. Both have eased on their own.

It really does look like this was an opportunity for capital to regain some leverage they lost and crack the whip. Which, to be fair, at least in the tech sector was probably warranted. But not really what the Fed should be enabling.

Plenty of sectors are seeing record profits, such as energy. It's simply price gouging.

With as large of economic disturbance we have seen in the last 3 years, you will find examples of almost anything. However, I can assure you as some who was in manufacturing during this period, it was not just price gouging. There were true shortages up and down the supply chain, supplier quotes that used to be good for 30 days were good for 24hrs, and distributors that thought they had plenty of stock found themselves cleaned out by companies panic buying. It was incredibly hard to run a supply chain and for smaller companies, almost impossible to predict the cost of good sold (COGS). If you can't predict the cost to make something, you better raise the price enough to be sure you don't lose money. Many companies had to hire extra people just to track price changes and manage the supply chains. Building anything efficiently was crazy hard. On top of that, in certain markets, people were spending like crazy which made it very hard to stay stocked.

This whole idea of "simply price gouging" is completely inaccurate for many industries.

Given that the purchasing power of money is constantly decreasing, why would you not expect to see record profits, especially after the most annual inflation in decades?

Changes in profit margin would be the relevant metric to see if a business has gained or lost pricing power.

Correction. oil and gas. Solar and wind aren't seeing record profits - though they are seeing record installa.

Hard to ship Solar And wind overseas where the need is

Do solar panels not fit in shipping containers?

Manufacturing solar panels is an entirely different industry from running a solar farm.

Right and shipping them is yet another industry

Maybe I don't understand the point you're trying to make

Back when the inflation hoopla started I watched the newshour desk (Amna, looking at you) very poorly hype it up. They had economists on to talk about it and they shrugged it off as corporate profiteering. You can always tell when they don't want to hear the truth. I yelled out the answer a few minutes before the economist did.

They didn't invite her on to talk again. For some reason they just froth at the mouth at the prospect of systemic inflation. They will grab the reigns of the culture war and flog it mercilessly to the finish line but will never call out corporate collusion against workers nor the abuse of consumers lest Facebook or Walmart ease up on the "donations."

> for capital to regain some leverage they lost and crack the whip. Which, to be fair, at least in the tech sector was probably warranted.

Capital has way more, by a large margin, leverage than labor. Big technology companies were far from have less leverage that tech workers. Why do you think that it is fair that a reduction in that difference is ended?

I don’t think this comment was about capital and labor, but instead between capital and management. Maybe there is a better phrase. Finance capital and business?

The idea is that capital has had very little control the operations of business over the past 10 years, due to low interest rates. This leads to businesses that don’t make money continuing to grow, and bubble conditions, is more or less the idea. I’ve also seen this idea of the Millennial Lifestyle Subsidy also being related to interest rates.

Management are the (mostly-unwitting) foot soldiers for capital. Generally they either come from capital already, or are labor attempting to jump into the capital class.

The petite-bougeoise [1] as they were once known

[1]https://www.oxfordreference.com/display/10.1093/oi/authority...

> Inflation was up largely due to Covid issues

I don't know why people still believe this. Supply chain issues account for 2-3% of inflation immediately after COVID restrictions eased. The other 6-7% is corporate profiteering off of the perception of supply chain issues. You can see this clearly from the record profits being reported.

Why would you say it's they and not the tremendous amount of money pumped into the economy through COVID programs and artificially low interest rates?

That money is included in the 2-3% I mentioned, the remainder is showing up on the corporate balance sheets as profits because they jacked up prices. For instance, see:

https://youtu.be/udITRL9-t08

Agree with all of this, and it's even worse because collusion is not necessary. The profiteering requires no coordination at all. Just the narrative of inflation alone creates the smokescreen for individual corporations to all do this in lockstep without needing to so much as make eyes at each other across a tradeshow floor. Perfect deniability.

So what do you guys want more rate hikes till when?

Cuz it seems like rate hikes are pretty much the only working lever the dumb mindless machine has.

that is one of the few levers the Fed has. Congress not acting is the real problem.

I want my fellow person to earn a living wage for a working day, no matter the work and a safety net for when we all fall on bad times.

If that means my burger goes up a dollar, I’m fine with that.

Corporate profits are an effect, not a cause. And you’d expect profits to hit records after 20% cumulative inflation + not being able to hire enough people to expand the business.

I don’t buy the supply chain argument much either, but I think the huge economic stimulus from the Fed and government + many people dying or exiting the workforce led to both wage inflation (pretty glaringly obvious looking at eg fast food pay, also in the amount of HC expansion in big tech, etc) and more dollars chasing goods/services that did not increase as quickly as the money supply.

The total stimulus was less than $3000 for most people and last provided a year ago. How can someone not work just getting that?

Ok, now add all the money infused to the economy because of PPP and 0% interest rates, QE (did you know the Fed bought almost as many MBS during COVID as during the GFC?), rent forgiveness, and enhanced unemployment. All that money doesn’t just affect the person that receives it, it increases the monetary supply and flows throughout the entire economy

I’m not saying people weren’t working because of the 3k stimulus or enhanced UE at all. I’m saying that those policies, along with many others, created inflation. When people have more money while the economy produces the same (or less) amount of goods/services you get inflation

"I’m saying that those policies, along with many others, created inflation. "

What matters is what had the most effect, you also only mentioned the stimulus in your original comment.

Sorry, jargon misunderstanding. All of those policies are stimulatory. I figured people would understand that “economic stimulus from the Fed + government” referred to all stimulus, not just the personal checks from the government

Regardless, I stand by my assertion that these policies are the cause that led to effects like low unemployment, inflation, and increased corporate profits. The people only pointing to corporations are just picking who they want to be responsible.

If A causes B which causes C then it can be said that A caused C.

Only if A necessarily causes B which then necessarily causes C. That is not the case, CEOs have agency to choose not to gouge their customers, aka C.

Edit: and Congress has agency to impose price controls. It's been done before when profiteering became a problem.

The “corporate profiteering” thesis is so blatantly motivated that it shocks me that this is treated as a serious hypothesis.

In what world is the massive, multiple waves of stimulus just completely unrelated but instead it’s those greedy corporations who are for some reason no longer bound by price competition.

The stimulus that actually reached people was tiny. It was, what, 2 $2k checks or something? That's about 2 months' worth of income.

There is no way in hell 2 months' worth of extra income in 2020 has anything to do with 3 years' worth of inflation.

Just noticing that 2 months worth of extra income is a 16% increase. Prices between 2020 and 2022 went up by, on average, 16%.

Also, payments to individuals and families accounted for only 30% or so of total Covid stimulus! But entities which are not people still spend money! Both on goods, services, and on salaries paid to people who then spend that money on goods and services.

It just seems crazy to me to say “no way, it has nothing to do with the $5 trillion dollar stimulus.”

1) I don't recall the details of the aggregate amount of stimulus, but the total stimulus was not the payments to regular people. That was actually only a tiny fraction of it. Most of it went to businesses of various sorts.

2) Huge numbers of people lost their jobs or had their incomes reduced by significant amounts in 2020 due to the pandemic. Framing it as "people got an extra 16% and that was it" is hopelessly oversimplifying the situation. Thus, I cannot put any credence in the idea that the fact that both of those were about 16% is anything more than a coincidence.

3) Again, the duration of the inflation is not in any way commensurate with the duration of the stimulus. The last payment was in...what was it? March 2021? and now nearly 2 years later there's still "inflation" and people are talking about it as if it's primarily caused by those two tiny little stimulus checks.

It just seems crazy to me to say "sure, that tiny bit of stimulus was the entire reason for several years of inflation; corporate greed has nothing whatsoever to do with it."

1) Yes but those business spent that money! On stuff, or services, or people! And spending drives prices up!

2) I agree it's a vast oversimplification, but the point is that money was put in and prices went up. They went up by an amount surprisingly similar to the amount of additional cash available. It's totally an oversimplification, but do you have a better explanation? Like your theory is that corporations are greedy? Sure. Are they greedier than they were before? Are the checks on their greed - competition and consumer reluctance to buy higher cost products - suddenly absent?

3) For a possible explanation of the duration, I would direct your attention to: https://www.reddit.com/r/wallstreetbets/comments/zd4ppn/hous... Essentially regular people, on average, still have a lot more cash than they had before the pandemic. Generally speaking I'd say this is great but the fact is that this cash is not associated with any productivity increases, we have the same amount of stuff, but more cash.

So prices go up.

1) Sure, but that stimulus is not the money that went directly to people. I'm not entirely clear on whether you were making the distinction previously, but far too many people (some deliberately, most, I think, not) blur that line, and talk about the total stimulus when referring to the number (because it's big) and when referring to societal effects (because they're measurable)—but then turn around and talk about the individual stimulus payments as if they were all or a majority of that when talking about how we shouldn't just be handing out money to people, etc.

2) I did propose a better explanation: Coincidence. Two data points that look similar, in a situation like this, is not enough to make coincidence particularly unlikely.

3) The most likely explanation for that seems to be that, because of the pandemic, we're not doing a lot of the things we were normally doing before. My family certainly isn't: we haven't taken a vacation since winter 2019, and we've cut out many of our previous habits that a) cost money, and b) put us more at risk for COVID. Now, I believe my family is fairly far toward one end of that spectrum, but I also believe there are enough people who have cut out at least some stuff (and not put it back yet) that it is, at least, a highly likely explanation for the phenomenon you cite there.

> In what world is the massive, multiple waves of stimulus just completely unrelated but instead it’s those greedy corporations who are for some reason no longer bound by price competition.

It's not unrelated, it's part of the 2-3% I mentioned. The out of control inflation we've actually seen is driven by corporate profiteering and is seen in the data:

https://youtu.be/udITRL9-t08

>> It really does look like this was an opportunity for capital to regain some leverage they lost and crack the whip. Which, to be fair, at least in the tech sector was probably warranted. But not really what the Fed should be enabling.

Railroad workers had to strike to get a single sick day. Across the board American labor has been getting flogged for years. Maybe Google's people should be flogged a little, but not because of the financial balance.

Let's not wish any workers to be "flogged." Google workers deserve their pay and others deserve more. What happens to them happens to me. Don't take the "divide and conquer" bait.

It gets me that there are so many people on HN against labor, then I remind myself that the site exists due to founding tech companies and that there are folks on here that just want a bigger whip.

Or some of us see echoes of Detroit 1950 in today's tech industry.

I'm curious which specific aspects you are referring to that have echos?

Companies that dominated their sector, got fat and lazy, and then were disrupted by foreign competition.

At this point I think it's clear to say this is not correct.

In fact the capital class lobbied hard for China being admitted to the WTO pushed hardest by Kissinger, NAFTA [1] and other legislation and restructuring to make offshoring easier in order to suppress both wages and labor power.

This was Ross Perot's entire platform [2]:

“You implement that NAFTA, the Mexican trade agreement, where they pay people a dollar an hour, have no health care, no retirement, no pollution controls,” Perot said during the second presidential debate in October 1992, “and you’re going to hear a giant sucking sound of jobs being pulled out of this country.”"

[1] https://www.nytimes.com/roomfordebate/2013/11/24/what-weve-l...

[2] https://theconversation.com/the-giant-sucking-sound-of-nafta...

The car companies were crushed by the Japanese decades before NAFTA.

It’s interesting that you seem to think that’s a fault of labor and not a fault of management. There are folks on here that go straight to blaming the workers as if management can do no wrong as they themselves are presumably part of the management class or aim to be. You can have workers push for better treatment without pointing to threats of foreign competition to stop progress.

I'd like some good content on business, the economy, and finance, and I tried that HBR article.

We will/won't have a "soft landing"? Okay question. Let's have some meaningful information for an answer.

In the article I saw a lot of words, very little numerical data, no meaningful graphs of data over time, and nothing at all on the supposed economic theory mentioned.

It looks like the article was some especially light version of some recent mainstream media headlines, that is, about as serious about business, ... as, hmm, the last Super Bowl half time show.

Net, HBR seems just determined, feet locked deep in reinforced concrete, to be light entertainment, trivial, and useless for meaningful information about the economy, etc. HBR believes that there is a law against publishing meaningful content about business, the economy, ...?

HBR, here is some breaking news: The Internet has arrived. The mainstream media centuries old nearly uniform practice trying to get as many eyeballs from just the mass audience is ending. Instead, the audience is splitting into partitions. Some of the partitions will actually have some meaningful content. The HBR can keep writing like the news did in the 1950s, 1930s, 1920s, ..., Franklin, etc., but some meaningful sources are in line to grab nearly all the HBR audience.

They can't provide data because it would contradict the story they're pushing about companies "struggling".

I think they were really hoping for a sharper correction so they could fire a bunch of people and discipline the workers. A nice high unemployment rate or at least a round of layoffs keeps people in line.

How sad for the multibillionaires

It is a K type recovery, the real economy that 99% of people suffer through hasn't recovered yet.

There is more nuance than that. There always is.

Unemployment is at a 60 year low. 10k Boomers retire a day, almost 3 million a year. About a million folks permanently exited the labor force during the pandemic, for a variety of reasons. Wage gains are wrestling with inflation. The benchmark rate increasing will continue to push down equities and real estate while providing risk free return for cash. In the Fed’s attempt to cool the economy, they have arrived at a soft landing.

If workers want wages to accelerate (or job security), they will have to organize and unionize as there is a lot of corporate and political momentum attempting to maintain the status quo of an extraction environment.

Expect to see profits decline as labor power increases and Boomer consumption declines (half of all people over 55 in the US have no retirement savings per the GAO, 1.8 million of them die every year per the CDC, but those folks clinging on to labor participation is also what’s preventing unemployment from declining further). The stock market is not the economy. Structural demographics have the wheel for the next decade. There is no labor shortage, just a shortage of people willing to work for poverty wages.

> Iowa has a stubborn, worsening labor shortage. Burt we don’t believe a bill advancing in the Iowa Legislature loosening child labor laws is a smart or prudent way to address it.

> Under the bill, 14-year-old Iowans would be allowed to work in industrial freezers and meat lockers, unloading vehicles and in laundry facilities. Fifteen-year-olds could work in light manufacturing and could work up to six hours daily. Sixteen-year-olds could work as bartenders with parents’ permission.

> But find two other provisions of the bill are the most troubling. One would permit businesses that conduct on-the-job training programs to seek state waivers allowing 14-17-year-olds to work in jobs related to manufacturing, mining, construction and processing.

Interestingly, the bill would not raise the minimum wage from $7.25/hr or improve worker benefits/working conditions.

Aside from being tragically disturbing, this is the stress you want to see if you care about workers. They are grasping at straws.

https://www.thegazette.com/staff-editorials/lawmakers-should...

Almost no one mentions housing's upwards pressure on wages.

In Seattle, renting a studio in a not-terrible part of town costs over $1500 a month. With prices like that, there is no room for "low paying" jobs.

Accordingly, everyone has had to raise wages, which means some types of businesses are no longer viable. Child care is a good example, between housing prices and higher wages, daycare in Seattle now starts at $22k a year, with well rated daycares charging around 30k a year, and at those prices many daycares are struggling to stay open! Staff turnover is high, employees cannot afford to live within commute distance of their jobs, but wages cannot go up any more because customers can barely afford prices as they are.

The answer is a royal-shit-ton of construction. The answer is the complete demolition of existing zoning laws and a dramatic rethinking of building codes[1]. We need to allow more in-home businesses[2], and allow a wide variety of different styles of housing to be built. The city needs to stop encouraging tall and narrow townhomes that are not livable by families, or really anyone over the age of 40, and stop mixing middle class morality with housing options[3].

If housing goes back to being an 8k a year expense rather than a 20k+ a year expense, wages can stop shooting up.

[1] As an example, if I wanted to add a new bedroom to my current, well insulated house, I'd have to get the entire structure of my roof replaced so I could fit in additional couple inches of insulation. I already had an energy assessment done and they confirmed that this change would have, quite literally, 0 impact on my home's energy usage. The law as it stands prevents me from adding more density to my existing house, so good job there city.

[2] Why can't I buy breakfast sandwiches out of the front of someone's garage as I walk to the bus stop? Why aren't more barbers working out of their house?

[3] Boarding houses and such are famously illegal in most US cities, even though they provide affordable, dense, housing.

Daycare in Seattle is expensive but not that expensive yet. We paid $1250/month last year, which is a far cry from $22k start.

I’m also a 47 year old who lives in a three story Ballard townhome. 3 of these replaced 1 SFH, so it’s a good deal for density.

Where did you find that price? All the schools I took a look at started at for infant/toddler care started at 1800/month and went up to 3k/month. This is including independent schools (for example https://www.utcs.org/enroll) and quality home based programs.

We got a spot down the street from our house at Ballard Lutheran, a church-based small non profit. We were paying $1800 before that (in Fremont), which is definitely $22k worthy. We definitely got lucky.

I’m still paying $950/month for my kids before and after school care, so that’s high compared to what we were getting before, but it is tough out there. Im also paying $1100/month for my niece’s daycare in…Spokane.

> Almost no one mentions housing's upwards pressure on wages

The causation direction is usually that rising wages cause housing price increases (assuming a tight housing market where houses are in high demand).

People bid against each other for a house, as much as they can just afford the mortgage repayments. If wages go up, then people can get a bigger mortgage, so they bid up to the amount the limit they can mortgage.

I presume a similar effect occurs with rentals - renters compete for limited rental properties and bid up the price to what they can only just manage.

Of course, when you have a huge mortgage (or rental bill), you presumably fight to earn more money, but that is a secondary effect.

> The causation direction is usually that rising wages cause housing price increases (assuming a tight housing market where houses are in high demand).

40k people move to Seattle each year. 20k new housing units are built. It is sadistic musical chairs, the losers end up moving out of the city at best, or homeless at worst. The winners are stuck paying a huge % of their salary to keep a roof over their head.

When I was looking to buy in 2020, around 10-15 new properties came up for sale in "desirable" neighborhoods (e.g. schools aren't trash) each week. You got to know the same people visiting the open houses each week.

It is a complete cluster fuck around here.

Drop 100k houses on the market and watch prices go down.

I don't think that relaxing work restrictions for 14-17 year olds is bad. At 14 I was capable and already doing many of the things that I was prohibited from doing for money. I was also working at 14. About the only work allowed for a 14 year old is retail and custodial work. It would have been great to be allowed to get paid for more kinds of jobs.

The DOL found 100 kids cleaning slaughterhouses across eight states. There will be harm and no accountability for someone else’s profits, just maimed kids with their future trajectory bent down. Fines will be paid as cost of business.

Retail jobs or similar roles with a lower hazard rating? Sure, why not. But mining, construction, or processing facilities? Probably not.

https://time.com/6256728/meatpacking-child-labor/

> More than 100 children—some as young as 13—were employed in hazardous jobs cleaning equipment like skull splitters, brisket saws, and bone cutters in meatpacking plants in eight states over the course of three years, the U.S. Department of Labor (DOL) says.

> Last November, DOL first accused PSSI of employing 30 minors, and a court granted the government a temporary restraining order to stop what a judge called “oppressive child labor.”

Read the link, it’s too much to cite it all here, but it’s damning.

To be clear - and there is no easy way to say it - the proposed Iowa law allowing 14 year olds to work in meatpacking plants is not designed to allow the politician's children to work there.

It is 100% designed as a gift to a major industry in the state to avoid fines[0] when they knowingly employee underage immigrants, primarily Hispanics from Central American, who are easily exploited both in pay and safety.

"On top of that, Senate File 167 would also free businesses from civil liability if a teen gets sick, is injured or killed on the job due to the company's negligence or the teen's negligence. The businesses would only be liable for "gross negligence and willful misconduct"—a much more difficult thing to prove in court."[1]

[0] https://www.washingtonpost.com/business/2023/02/17/child-lab...

[1] https://www.newsweek.com/iowa-bill-relaxing-back-child-labor...

How many children were maimed?

Plenty are exploited. How many would have to be maimed before it’s a cause for concern?

https://news.ycombinator.com/item?id=34938733

Why should a child need to work?

Because they want to. That is why I worked. Working is a great way to build skills while making a little scratch.

Why should young men and women be denied the independence and growth of making their own money, learning valuable skills, and being able to save for a car, or further training.

I went to college after a summer doing day labor. I knew I was unwilling to do that work for those wages long. It also paid for much of my first year.

I'm not sure why people instantly jump to unionization when making these types of claims. You assume that every company is cooperating to pay the same price for labor, when that's not at all the case.

It may only seem like that at the low end because of artificially high minimum wages in some states ($15/hr) which basically makes multiple skill levels of labor all pay the same when they used to pay different.

Also these two statements are in conflict:

> Unemployment is at a 60 year low.

> just a shortage of people willing to work for poverty wages

I don’t see how those are at all in conflict. Not many people are unemployed, so employers are having a hard time filling low paying positions. The first bullet is about supply (labor force) while the second is about demand (employers).

I guess I quoted without enough context. In my mind when reading in context they were in conflict, but reading again in isolation I agree they're somehow no longer in conflict.

I argue the minimum wage isn’t artificially high, it’s artificially low. Can you live on $7/hr? In many places, you cannot live on $15/hr either. When was the last time the federal minimum wage was increased? 13 years ago. 20 states do not mandate a minimum wage higher than the federal rate.

https://www.americanprogress.org/article/its-long-past-time-...

https://www.cnbc.com/2023/02/16/minimum-wage-many-workers-st...

https://livingwage.mit.edu/

Unions are not just for wages. They are also to counter at will employment and abusive labor practices. Starbucks and Amazon have been union busting and they have been forced to hire back the workers they improperly fired. To believe unions only serve to improve wages is short sighted when looking at the greater macro labor situation, where workers are treated as replaceable and disposable.

There's no such thing as an "artificially low" minimum wage, just one that doesn't distort anything because market conditions force everyone to pay more anyway.

If the minimum wage is below a living wage, it is artificially low. The market does not pay you more just because you need more to survive, hence the need for a solid wage floor. The thesis, high level, is: do we care about maximizing for profits (no or artificially low minimum wage)? Or some less profit and humans being able to live with dignity and some form of psychological safety (minimum wage aligned to living wage).

Minimum wages increase the cost of living by making low level services cost more. This is a circular problem.

Also the definition of "living wage" varies wildly depending on what kitchen sink people want to throw into it. People seem to think that everyone deserves to make enough money for luxuries whereas that shouldn't be the case in general.

> Can you live on $7/hr?

Yes, of course. The income taxes are almost zero (or negative), and for one person living by themselves in a studio apartment that's $400 for rent for a cheap studio apartment and $800 a month in groceries and gas, which is quite a lot.

And that's assuming you can't live out of your parents house as you work, which is the suggested way of doing this kind of thing. There's zero reason to move out if you can't afford it. It allows you to save up money and gain skills with less stress.

The "living wage" myth gets repeated way too often.

Citation for boomer retirement figure? I'm trying to keep an eye on this.

https://www.pewresearch.org/fact-tank/2020/11/09/the-pace-of...

People won’t increase their standard of living by making labor more expensive. This is simply going to accelerate economic momentum towards automatization. And silly efforts to try to tax “each” robot as a human, to provide for those displaced also won’t work. We are about to see a generation or two where social stratification will deepen and we won’t have the tools to mitigate it on time. But after that, we’ll reach a new equilibrium, either doing complementary jobs to machines, or moving to a new type of economy, and everything will be ok for future generations. Or the robots will take over, kill us, and carry the torch, which is also okay.

> There is no labor shortage, just a shortage of people willing to work for poverty wages.

The U6 indicates there is increasingly a labor shortgage. It's hovering around 6.5-6.6%. That's lower than the hot economy of the 1990s and it's lower than the rate achieved just prior to the pandemic. That general level has been reached only a few times in decades and only briefly.

Quite the contrary, income growth post-covid has disproportionately favored lower income groups[1]. White collar working professionals captured a disproportionate amount of the growth from the previous recovery as a result of over inflated speculative bubbles resulting from low interest rates lasting nearly a decade. Easy to justify speculative tech companies when you don't need to be profitable any time in the near future, but when interest rates are >0% reality sets in. The idea that the crunch is now hitting the "real" economy is a bit out of touch, but given HN's demographics it's not surprising there's so much screeching.

[1]https://www.dallasfed.org/cd/communities/2022/0808

The article talks only about nominal wage increases. It also has this gem:

> Due to the transient nature of pandemic inflation...

Real wages, overall, are decreasing: https://www.bls.gov/news.release/realer.nr0.htm

> Real average hourly earnings for all employees decreased 0.2 percent from December to January, seasonally adjusted

> Real average hourly earnings decreased 1.8 percent, seasonally adjusted, from January 2022 to January 2023

People focus solely on rates and seem to often forget that there is also the unwind of QE, which will happen irrespective of the inflationary environment. That will put some additional pressure on asset prices.

The idea that firms are struggling is a lie meant to justify layoffs and high interest rates. You can't have all of these companies making massive profits and sell a story that they're "struggling" with a straight face.

> though inflation has turned into rapid disinflation

Excuse me? No.

Disinflation, very confusingly, refers to a negative value of the second derivative of price with respect to time.

It is not a negative value for the first derivative of price, that’s deflation.

The speaker is making comparisons of quantities with different units, which is confusing, and the verb indicating transformation is inappropriate, but if you squint what they said is true:

The second derivative was going up, which heightened the salience of inflation, it’s now negative.

Without anchoring the statement with something like “while disinflation is happening, we’re still seeing modest inflation” would certainly have been clearer, I don’t think they’re quite wrong.

> “while disinflation is happening, we’re still seeing modest inflation”

The inflation we're still seeing is severe, not modest.

Our best guess at current instantaneous inflation (i.e., month over month, annualized) is just over 6% inflation. Which is above target, but is not severe. It’s 0.5% for the last month for which we have data, which (if it were precise and held constant, which it isn’t and won’t) annualizes to 6.17%.

Obviously the US is not accustomed to this rate, but there’s not a lot that breaks in the US economy with the rate where it currently stands. The money illusion makes people irritated, which has an impact on animal spirits, and Fed tightening has a more tangible effect on investment decisions.

Personally when my friends asked me “what does it mean that the US is doing all this deficit spending on pandemic subsidies?” circa 2020, I said, “it means rich people like me and my fellow software developers are likely to have our wealth diminished through inflation, but it will have positive distributive impact on the poorer folks in the economy”.

I think that’s been born out. It would be nice if we could dial inflation back instantaneously, but it does appear that we’re moving out of wage-price spiral territory, so I don’t think we have to fear years of stagflation or anything severe like that.

Ah, so it was intentional disinformation, not accidental misinformation. Good to know.

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