83% of Americans Are Belt Tightening Due to Inflation Pressures • Hacker News Board

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

#61

Post by new_realist » Wed, May 26, 2021, 6:40 PM UTC

lotsofpulp wrote: post #37

uncoder0 wrote: post #33

Earlier quoted context omitted.

I've always wondered why the government when doing these ~10 trillion stimulus to various industries just didn't give every person ~$30,000 during the last year spread out over the year. Probably because that would drive actual inflation.

Because the government does not want to upset the social ordering of people. So much of our lifestyle derives from the fact that those at the bottom have no choice but to work for those low wages and poor quality of life at work. Giving them an option upends all the assumptions that go into loans, and therefore having to raise wages would cause defaults for businesses, and otherwise wreak havoc for those who currentl…

Inflating the money supply wouldn't do what you describe. It would just make everything more expensive.

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

#62

Post by ping_pong » Wed, May 26, 2021, 6:40 PM UTC

newaccount2021 wrote: post #35

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…

The government stands more to lose by a rate hike than any other individual entity. Ten year notes are traded in an open market, and sold at auction - Treasury can't just set a price and expect people to pay. If the prevailing ten year rate reverted back to the historical average of 4.9%, 30% of the Federal budget would have to be dedicated to just servicing the interest on the debt. For Uncle Sam, low rates are abou…

> Treasury can't just set a price and expect people to pay

The Federal Reserve is the largest purchaser of UST, so effectively yes, they can. As long as QE is happening, and as long as the rest of the world doesn't stop calling USTs "risk-free assets", it won't ever stop. If somehow the US loses its grip on that status, though, all bets are off.

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

#63

Post by [deleted] » Wed, May 26, 2021, 6:40 PM UTC

uncoder0 wrote: post #33

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've always wondered why the government when doing these ~10 trillion stimulus to various industries just didn't give every person ~$30,000 during the last year spread out over the year. Probably because that would drive actual inflation.

[deleted]

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

#64

Post by new_realist » Wed, May 26, 2021, 6:41 PM UTC

blacksqr wrote: post #50

tobyjsullivan wrote: post #38

Earlier quoted context omitted.

> something other than increased consumer spending, like supply chain issues, is causing the inflation My (naive) understanding is these are tightly linked. The process is something like: => Consumers have more cash to spend on goods. => Consumers buy more goods => More demand is created for commodities to build those goods => Demand for commodities exceeds demand => Commodity prices inflate => Manufactured good pric…

Yes but the article explicitly states that the vast majority of consumers don't have more cash to spend. So the cause of the inflation must be something else.

Yes, it is caused by something else: the 28% of consumers who do have more cash to spend.

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

#65

Post by lotsofpulp » Wed, May 26, 2021, 6:41 PM UTC

ping_pong wrote: post #53

jdhn wrote: post #14

Earlier quoted context omitted.

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.

They will do whatever it takes to prevent asset price deflation in general. The last thing politicians want is people watching their 401k values go down, and they certainly want them to go up.

As far as I’m concerned, VTI is a better inflation protected security than TIPS for any 3+ year investment horizon.

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

#66

Post by imtringued » Wed, May 26, 2021, 6:43 PM UTC

lumost wrote: post #21

blacksqr wrote: post #8

Earlier quoted context omitted.

The article reports that 72% of respondents said their income has not increased. So whatever trillions of dollars were created don't seem to have made it to the populace. Either the respondents are not a representative sample of consumers, in which case the article's conclusions are of little value; or something other than increased consumer spending, like supply chain issues, is causing the inflation.

It's surprisingly plausible that wages would not rise and inflation would speed up. This can occur because companies lay off employees due to rising costs and lack of demand (while raising their own prices) or because the money is going to some alternate consumption. Food prices could increase today simply because one or more of the beneficiaries of those trillions of dollars has allocated it to land acquisition. Ret…

Take Germany as an example of stagflation. Last year we had to fell a lot of trees because bark beetles. Everyone was dumping their bad lumber. A CDU politician introduced a 85% quota so that the markets can recover but now the situation has reversed and some forest owners are not allowed to harvest their lumber despite high prices. For small businesses losing those last 15% may make it unprofitable to harvest at all. Making it illegal to run businesses serving hot markets is a recipe for cost increases without corresponding wage increases.

However, in the US the investment rate is going up and businesses are expanding production. The biggest factor right now is the semiconductor shortage and there it is just a matter of time before things return to normal.

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

#67

Post by otnihoithiu » Wed, May 26, 2021, 6:44 PM UTC

new_realist wrote: post #61

lotsofpulp wrote: post #37

Earlier quoted context omitted.

Because the government does not want to upset the social ordering of people. So much of our lifestyle derives from the fact that those at the bottom have no choice but to work for those low wages and poor quality of life at work. Giving them an option upends all the assumptions that go into loans, and therefore having to raise wages would cause defaults for businesses, and otherwise wreak havoc for those who currentl…

Inflating the money supply wouldn't do what you describe. It would just make everything more expensive.

If you gave every American 30k USD, most people would go out and purchase a 50k automobile.

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

#68

Post by imtringued » Wed, May 26, 2021, 6:45 PM UTC

lainga wrote: post #25

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-...

How does buying up assets lead to price increases in "groceries (96%), gas (93%), dining out (57%), and clothing (42%)"? Are the Koch Brothers hitting up Costco every day?

It doesn't drive inflation, it merely drives inequality and in specific circumstances it can cause needless unemployment or bullshit jobs.

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

#69

Post by dragonwriter » Wed, May 26, 2021, 6:45 PM UTC

wolverine876 wrote: post #60

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 peo…

> The headline confuses me: If that large proportion were 'tightening their belts', economic activity would decline and there would be no inflation.

83% at the bottom could tighten their belts, and the 17% at the top who control far more wealth could loosen theirs and economic activitt would increase.

> and there would be no inflation.

Even if we assume the first incorrect statement were true, this would still be wrong: there wouldn’t be demand-pull inflation, but there still could be supply-push inflation.

> Inflation is an excess of economic activity - too much money for the available truly valuable investments.

No, inflation is an increase in consumer price levels, and has nothing directly to do with investments, though there are indirect effects in both direction.

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

#70

Post by lotsofpulp » Wed, May 26, 2021, 6:45 PM UTC

new_realist wrote: post #61

lotsofpulp wrote: post #37

Earlier quoted context omitted.

Because the government does not want to upset the social ordering of people. So much of our lifestyle derives from the fact that those at the bottom have no choice but to work for those low wages and poor quality of life at work. Giving them an option upends all the assumptions that go into loans, and therefore having to raise wages would cause defaults for businesses, and otherwise wreak havoc for those who currentl…

Inflating the money supply wouldn't do what you describe. It would just make everything more expensive.

Giving everyone $30k would. Just the extra $300 per week that people were getting is causing them to be dissuaded from subjecting themselves to the bottom tier of jobs.

I’ve spoken to a lot of hotel owners and restaurateurs lamenting their inability to hire people for low wages part time work. And there are fast food restaurants around me that are closed at many times because they have no workers, especially for late night hours that they used to. Some hotel owners I know are closing off portions of their inventory because they cannot find housekeeping staff to clean their rooms for the wages/quality of life/stability they want to provide.

That is also the reason for all the PPP nonsense. Rather than simply paying the workers for lost wages and paying the businesses for lost revenue, PPP stipulations make it so the worker stays tied to the business.