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Comment by stevenAthompson | Hacker News Reader

Some people seem to be disappointed that the economy isn't crumbling.

I wonder why?

Flippant response: Social media has normalized spending every waking moment feeling like the world around you is going to collapse and that things are horrible, and this is what happens when reality ends up doing something else.

I am not an economist, but I think it's the opinion of many that the only way to defeat inflation is to tip the economy over, and the more the economy resists the higher rates have to go, and the worse the tipping over event is going to be.

Except that inflation has gone down as fast as it went up. The Fed has paused rate increases to see if what they have already done is enough. The talk of lowering rates is because the Fed doesn't want to overshoot on the way down.

The rate of inflation is still about 50% higher than their stated objective. They want to pause to review like you mentioned in an attempt to nail the soft landing, but there is legitimate concern that inflation will remain too high and the Fed is going to break things in their search for 2%.

No, inflation has not gone down.

The rate of inflation growth has gone down.

Inflation is the rate of change of prices. In calculus terms, it's the first derivative of price. (I'm not sure what you mean by "the rate of inflation growth." Do you mean the second derivative of price, maybe?)

Inflation has gone down in the US. The last few months, if you extrapolate them to an annual rate, would (I think) be between 2 and 3%, which is the Fed's normal target.

Unfortunately, some of the recent price increases may stick. However, the US has seen strong wage growth, and many areas have high demand for labor. I've seen a surprising number of businesses with 1/4th of their usual positions open.

It's a good time to apply to better-paying jobs. Not so much in the tech industry, but in other industries.

On the other hand, with rates as high as they are, it's an awful time to buy a house or a car using a loan.

Yes, my mistake. I meant the effects of inflated prices. When people say inflation is dropping they sometimes confuse that with prices going down instead of the rate of inflation simply slowing.

No, inflation has not gone down.

It has. Inflation is the derivative of prices. Prices are increasing but less rapidly than before, which means that inflation has decreased.

Don’t you mean the rate of inflation is down? Prices are growing so they are inflating and not deflating. I am an idiot so beeing wrong is my thing.

https://en.m.wikipedia.org/wiki/Deflation

The amount of plain common-sense economics that everybody just accepts as obvious but is completelly bullshit is amazing.

Common sense is what you call something when you can't explain yourself.

In other areas, common sense tends to not be absolute bullshit as often as in economics.

Usually just the fact that something never works like the common sense implies is enough to remove a fact from the popular culture.

Can you be more specific? Which part of economics do you believe should be removed as a fact from popular culture?

Hum... You can look abou 3 comments upthread.

That's a widely popular fact. And yet there doesn't seem to be any correlation between growth and any positive amount of inflation. (There is a lot of correlation for negative inflation.)

Even the idea that "inflation" is something simple to define and measure is wrong.

I am not an economist, I do not even play one on TV. So forgive me if I sound naive.

That said, it seems intuitive that inflation and growth would be linked. Inflation means that there is more demand than supply, right? In response to that increased demand supply (and the number of jobs) are increased by profit seekers, which creates growth.

What am I missing?

I am no economist either. As I understand inflation is the reduction in purchasing power towards a basket of household goods and services.

So it’s not only ask and demand but many other factors like energy price rising and all the things that get into the cost of a product or service.

Inflation in the sense of growth is the more money it needs to have a transit of the value of goods the more goods are produced of value and sold so the net revenue for credits should be positiv and that over time is growth. Or otherwise said we have more stuff at the end of the day … jehaa

Edit:// the credit by the bank is the money supply in that case.

In my opinion that model sucks

But please don’t believe me I am no expert

https://en.m.wikipedia.org/wiki/Consumer_price_index

You are missing complexity. That model is naive, and the world doesn't really work that way.

But then, AFAIK nobody has a good model that actually explains what we see.

Anyway:

> Inflation means that there is more demand than supply, right?

Even in principle, balancing supply and demand is a task of price ratios. And most definitions of inflation make it something that doesn't reflect price ratios at all. Instead, it's usually about absolute prices.

Thanks for that explanation. I will try to learn more about it.

„The market regulates itself“ is certainly one.

„Everything gets cheaper“ is another one.

Inflation is the rate of change of prices. As long as it's positive, prices will keep increasing.

Inflation has gone down, but has not become negative (has not turned into "deflation").

I suspect it's more a reflection of the anxieties of the public in journalists than anything sinister.

But the undercurrent of, "I hope we fail" (but never me) is certainly present in a lot of discourse.

> I suspect it's more a reflection of the anxieties of the public in journalists than anything sinister.

To the extent there is a media response to popular perception involved, its very sifferent than that, nearly the opposite (the journalistic class frustrated at the lack of anxiety in the public), which is why it has increased in shrillness with the positive turn in the future expectations component of sentiment (and why you had to dig into the numbers to find that the “low sentiment” on the economy being flogged before that by journalists as an indicator of negative perception of current conditions was actually all in the future expectations component, with the current situation component being quite positive even when the overall measure was down.)

It’s like the announcers at a tight rope walk, NASCAR race or hockey game. The interest is driven in part by the danger, the threat of a fall, crash or fight. The fundamentals of the activity are beyond most of the audience’s comprehension and spelling it out would be hopelessly dull for people who already know and the people who aren’t interested enough to have learned about the activity before hand.

“Holiday Sales Figures Mostly Unchanged” is not a clickable headline. The paper boys would fall asleep before they shout “read all about it.”

Because there's legitimate concerns about high inflation generally, and in particular housing affordability (the latter especially in places like Canada that appear to be in a drastic real estate bubble).

If the economy doesn't slow, we'll see more rate hikes.

I do know of people who decided they couldn't get into the housing market (here in Canada) and have been drawing down their down payment savings to spend.

It's probably a very small portion of this spending increases overall, but interesting to see.

Rates here seem to have stabilized for the time being, and house sales are way down, so I think now we're going to finally see housing price declines this spring season.

The next 2-3 years will get rough as fixed mortgages renew, with my own mortgage payment expected to increase by nearly 50% at renewal, and 70% of the total payment will go to the increased interest payments alone. The total cost of my mortgage at today's rates would be triple what I signed on for!

I don't see how this won't wreak havoc on the average families finances.

Disappointment in the permanent increases in prices. All else equal, people want deflation after a period of elevated inflation levels.

This is definitely part of it. People need to adjust to a new price reality, and while they think they want deflation they certainly do not want what a deflationary period entails is happening in the economy.

The Fed will fight across the board deflation like crazy because that's how the economy ends up in a depression.

We did have high inflation for a year, and were told it was temporary, before tools were deployed. Would a sustained period of deflation be met with a similarly lagged response?

My understanding (I am not an expert) is that tools for dealing with deflation are much less effectively deployable and have ripple effects that can significantly damage the real economy.

The far right is outraged that the Biden administration has implemented socialism; the far left is outraged that they haven't.

I would say instead:

The Right understands that positive perception of the economy rebounds to the benefit of the incumbent President and they want Biden to lose to the Republican nominee for partisan reasons.

The far Left understands that positive perception of the economy rebounds to the benefit of the incumbent President and they want Biden to lose to Trump, who they expect to be the Republican nominee, for accelerationist reasons.

The news media likes negative spins because public insecurity drives news media consumption.

That's quite the broad brush you're using to paint the Left as accelerationists who favor Trump over Biden.

Leaving aside possible disagreement on definitions, it's worth noting that dragonwriter said "the far Left" - that may still be too broad a brush, but it would not seem to extend to the entire Left.

Or, they simply took the bait of 5% cash and were hoping some deals were going to be forthcoming.

You could say I'm one of those people. I want home prices to come down.

If the property-owning Boomers were to respond, in that housing-crash scenario, by voting for Trump, that'd be on them. I'm sick of being held hostage though.

You want me to choose a political leader? How about Mao, to shoot the landlords, or Khrushchev, to build some apartments?

Have you considering learning a new trade that pays better, or moving to a more prosperous area of the world as an alternative to razing the entire social order to the ground and installing genocidal despots in place of our leaders?

It just sounds like it might be simpler.

> Have you considering learning a new trade that pays better

I tried starting a lemonade stand and cutting back on Starbucks, but found, if I really wanted a roof over my head, that the thing to do was to SPAC a plausible-sounding company into the indexes.

> moving to a more prosperous area of the world

Those are precisely the ones with the inflated home prices.

> as an alternative to razing the entire social order to the ground and installing genocidal despots in place of our leaders? ... It just sounds like it might be simpler.

I dunno. It'll take 30 years to pay off a mortgage, but the Cultural Revolution was over in about a decade. I might still have some good years left after it ends.

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