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83% of Americans Are Belt Tightening Due to Inflation Pressures

forbes.com

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Re: 83% of Americans Are Belt Tightening Due to Inflation Pressures

#51

Post by markkanof »

blacksqr wrote: post #13
halsom wrote: post #7

Earlier quoted context omitted.

Most of those trillions were delivered to the ruling/corporate class who has used it to secure assets instead of create value. That is the source of this inflation. For example: https://www.msn.com/en-us/news/us/koch-e2-80-99s-foundation-...

If so, the solution to the problem presented in the article is simple: tax the rich.

Or even just stop giving the rich money that is taken from regular people. The money may not be directly taken from us, but printing money causes inflation, which is not really different from taking money in the form of taxes. At the end of the day all of us regular people still have less purchasing power.

Re: 83% of Americans Are Belt Tightening Due to Inflation Pressures

#52

Post by otnihoithiu »

thatfrenchguy wrote: post #42
ping_pong wrote: post #12

Economists like Bernanke have talked about dropping money from helicopters in the sky, in order to prevent deflation. What the government has done in the last year with its $10+ trillion in stimulus, is the exact definition of dropping money from helicopters and yet no one is pointing this out. Which means we must have narrowly averted a truly horrific situation as a country. The fact that everyone keeps talking abou…

And clearly we're seeing this not causing massive inflation, given the inflation is <5% everywhere over the last decade.

Housing, schooling, and healthcare are necessities that people will go deeply into debt to be able to afford. They will pull money out of their retirement to bid on houses or pay for their kids college. They will mortgage anything, and beg from friends and family, to afford healthcare.

These three items are well known to have costs that have risen above inflation for decades.

I offer an alternative explanation: these three items are so vital to people that they will sacrifice spending in other areas to support these costs. All of the unmeasured inflation of the past decades is represented solely in these items.

Re: 83% of Americans Are Belt Tightening Due to Inflation Pressures

#53

Post by ping_pong »

jdhn wrote: post #14
ping_pong wrote: post #12

Economists like Bernanke have talked about dropping money from helicopters in the sky, in order to prevent deflation. What the government has done in the last year with its $10+ trillion in stimulus, is the exact definition of dropping money from helicopters and yet no one is pointing this out. Which means we must have narrowly averted a truly horrific situation as a country. The fact that everyone keeps talking abou…

I could go for some deflation in the housing market right about now.

The Fed will do WHATEVER it takes to prevent house price deflation. They've already shown this during the Financial Crisis. Too much of the economy and financial system is based on house prices, there's no way that they can ever afford to see house prices decline in our lifetime.

Re: 83% of Americans Are Belt Tightening Due to Inflation Pressures

#54

Post by blacksqr »

jrs235 wrote: post #48
purple_ferret wrote: post #24

Earlier quoted context omitted.

The idea that more cash has driven up the price of basic goods this quickly is almost certainly frivolous. The pressure simply isn't there, especially with wages still so low. That's not to say prices haven't been suppressed over the years in various ways that combat normal inflation (6oz denim Jeans that are now 10% Spandex I'm looking at you) and there's a ton of money in the system that have mostly went into asset…

It's not just more cash (increase "demand"), it's also reduced supplies due to many businesses shuttering or reducing output during covid.

GDP only dropped 2.3% last year [0], so there's approximately the same amount of stuff to buy.

[0] https://www.bea.gov/news/2021/gross-domestic-product-4th-qua...

Re: 83% of Americans Are Belt Tightening Due to Inflation Pressures

#55

Post by mywittyname »

anotherman554 wrote: post #30

"6% indicated they experience price increases on everyday goods and services. Notably, they pointed to on groceries (96%), gas (93%), dining out (57%), and clothing (42%)" This is a poorly conducted survey if it's trying to show inflation is a problem. This response would be accurate even if inflation was just 2%. The concern isn't inflation but the amount of inflation.

Nominal inflation is fairly well hidden from people. The prices of most goods remain relatively static, or at least stay within a narrow band over an annual cycle. Producers have contracts for fixed prices on inputs and often outputs, so their prices are often fixed for a term. Frosted Flakes may remain $3.99 a box for five years, while a price increase to $4.49 is introduced gradually through sales and promotions.

So if people are experiencing inflation in the short term, that's notable.

Now, it's important to differentiate between inflation due to supply constraints vs. inflation due to long-term cost increases on inputs. For example, lumber is hella expensive right now, but it's probably not going to remain at the levels it is at in the long term. Whereas the cost increases of corn might be permanent.

Re: 83% of Americans Are Belt Tightening Due to Inflation Pressures

#56

Post by imtringued »

ping_pong wrote: post #12

Economists like Bernanke have talked about dropping money from helicopters in the sky, in order to prevent deflation. What the government has done in the last year with its $10+ trillion in stimulus, is the exact definition of dropping money from helicopters and yet no one is pointing this out. Which means we must have narrowly averted a truly horrific situation as a country. The fact that everyone keeps talking abou…

>What the government has done in the last year with its $10+ trillion in stimulus, is the exact definition of dropping money from helicopters and yet no one is pointing this out.

Well, kinda. It's like you're only flying the helicopters over company headquarters and LA's suburbs and nowhere else.

The stimulus checks and increased unemployment can be considered helicopter money from a practical perspective though because it reached everyone. It would be even better to spend it on infrastructure or building housing but you have to do something...

Re: 83% of Americans Are Belt Tightening Due to Inflation Pressures

#57

Post by ping_pong »

thatfrenchguy wrote: post #42
ping_pong wrote: post #12

Economists like Bernanke have talked about dropping money from helicopters in the sky, in order to prevent deflation. What the government has done in the last year with its $10+ trillion in stimulus, is the exact definition of dropping money from helicopters and yet no one is pointing this out. Which means we must have narrowly averted a truly horrific situation as a country. The fact that everyone keeps talking abou…

And clearly we're seeing this not causing massive inflation, given the inflation is <5% everywhere over the last decade.

We have seen massive inflation in asset prices. Just look at housing and the stock market, both of which took off after the Financial Crisis. This is the primary cause of the massive income inequality we see these days, because poor people can't afford houses and stocks but upper middle class and wealthy people can and do.

Re: 83% of Americans Are Belt Tightening Due to Inflation Pressures

#58

Post by lainga »

markkanof wrote: post #51
blacksqr wrote: post #13

Earlier quoted context omitted.

If so, the solution to the problem presented in the article is simple: tax the rich.

Or even just stop giving the rich money that is taken from regular people. The money may not be directly taken from us, but printing money causes inflation, which is not really different from taking money in the form of taxes. At the end of the day all of us regular people still have less purchasing power.

Well printing it and putting it into circulation causes inflation. If you give Bill Gates $1Tn and he hides it under his mattress, that does not cause inflation.

Re: 83% of Americans Are Belt Tightening Due to Inflation Pressures

#59

Post by giantg2 »

mywittyname wrote: post #40
giantg2 wrote: post #22

Earlier quoted context omitted.

"The fact that everyone keeps talking about more stimulus means that the government knows more than we do" Like what?

The US government collects data about production capabilities of pretty much every industry in America. Major companies do talk frequently with government officials about potential problems and roadblocks the business are facing, especially internationally. In addition, they have an enormous spy apparatus operating in probably every country on earth. Military satellites can be used to gauge production around the worl…

So what would they know that we don't? Hedge fund and industry analysts also pay a lot of attention to domestic and international production. Even stuff like public company shareholders meetings have a lot of insight.

The issue I would be more concerned with is the overall structure of the economy. For example, only 15% of money lending goes to actual production use. The other 85% is just a house of cards that is lending to be lent again, or invested in nonproductive ways. Basically moneylending inception.

Re: 83% of Americans Are Belt Tightening Due to Inflation Pressures

#60

Post by wolverine876 »

The headline confuses me: If that large proportion were 'tightening their belts', economic activity would decline and there would be no inflation. An inflation headline would be, '83% of Americans are buying new cars/computers/homes/washer-dryers' or '83% of Americans have borrowed more than last year'. Inflation is an excess of economic activity - too much money for the available truly valuable investments. It's people buying cryptographic strings, hoping they will go up in value, and the values nominally going up because so many are buying it.

I doubt 83% of Americans know what inflation is, much less know about the current debates around it or understand its effects. I question whether 83% could be reacting to reports of inflation.

Inflation has been turned into a bad word, but the post-Great Recession era of near-nil inflation is the anomaly. Generally, through most of my life of reading economists, a low level of inflation (e.g, 2-3%) is considered the healthiest state.

I think part of it is politicization: Whenever someone talks about government spending or stimulus, particularly around the Great Recession in 2008 and the Coronavirus pandemic, people who advocate for small government use inflation risk as an argument against it. My feeling is that has created two conditions: 1) the stopped clock is eventually right, and 2) they've built up inflation as so much of a demon that people are afraid of it.

The direct effects of inflation are to help people with lots of fixed debt and inflationary income, because your debt of 100,000 is still 100,000 while your income inflates from e.g., 50,000 to 52,000. And it similarly hurts people with lots of fixed income or assets. The indirect effects are complicated, but again, a low level of inflation - higher than recent experience - has long been considered optimal.

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