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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

#111

Post by lotsofpulp »

dragonwriter wrote: post #89
lotsofpulp wrote: post #83

Earlier quoted context omitted.

It does for the low paying jobs that rely on people not having a choice. They already live on the bare minimum, but they have to clean toilets to get it. Now the government says you can live on the bare minimum, but you do not have to clean toilets. So now you have to raise wages to entice people to clean toilets. You are correct that it is not the exact same situation, but I think there would be even more disruption…

> So now you have to raise wages to entice people to clean toilets. Or so now people doing even more distasteful and/or lower-paid work outside of the formal economy because it can stack with means tested benefits can afford to clean toilets for low wages in the formal economy because it stacks with the now-unconditional benefits. Conjecture as to which effect dominates based on behavior with additional means-tested…

That's a good point, and I would like to see a universal basic income to see the actual effects.

But my conjecture would be we might see lower wages for desirable work, but higher wages for undesirable work.

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

#112

Post by candiodari »

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…

I don't get that reasoning. Obviously the Fed will prevent any such loop from happening, and it won't be the least bit controversial. They have many options to do this.

For example, the Fed can in fact print money and buy treasuries (which they already did). They can (and do) pay the "profit" on Treasury bonds to the government, which they could accelerate to immediately, then buy a boatload. Or they can change reserve requirements on banks. Or ...

Whatever you think is going to bankrupt the US government, it's not going to be treasuries. It's just not.

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

#113

Post by Black101 »

tmaly wrote: post #105

I always find it funny that the FED does not consider food and energy in the numbers. To the average American, if you food prices increase 50%, it is a big deal.

> I always find it funny that the FED does not consider food and energy in the numbers.

it's not funny... they fudge the numbers to make politicians look good

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

#114

Post by Black101 »

swiley wrote: post #9
anotha1 wrote: post #6

I'll take "inflation" if it means trillion dollar spending packages are more likely to reach human citizens instead of corporations.

This. We were already experiencing inflation (cost of living went up because housing went up because we bailed out a bunch of banks that should have failed.) This time it's just more obvious because the price of things people buy directly went up immediately.

I will never buy a home again if costs don't drop dramatically... because unlike what most people think, a house is generally not an investment, unless you rent it

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

#115

Post by machinebun »

tediousdemise wrote: post #92
AnimalMuppet wrote: post #81

Earlier quoted context omitted.

Adding $10 Trillion should have created a great deal of inflation - much more than we see. Therefore, if it were not added, we probably would see much worse than no inflation - we would see significant deflation. That's far more ruinous than mild inflation is.

Inflation is so low right now because the Fed is artificially forcing low interest rates. Dollars in circulation has little impact on it.

> Inflation is so low right now because the Fed is artificially forcing low interest rates. Dollars in circulation has little impact on it.

Inflation in the short term has more to do with elasticity of supply than demand (unless demand spikes hugely). Low interest rates don't have much to do with it (low rates are usually a tool to stimulate demand, but they only work when you don't have a pre-existing debt bubble that must be deleveraged).

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

#116

Post by jdhn »

sjg007 wrote: post #88
jdhn wrote: post #14

Earlier quoted context omitted.

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

You can still buy a cheap fixer upper in Detroit.

Funny you say that, I live near Detroit. I'd argue that the cheap fixer upper is seeing price inflation as well.

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

#117

Post by jdhn »

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.

At this point I'll take stagnating housing prices.

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

#118

Post by machinebun »

thrwawy12345 wrote: post #94
AnimalMuppet wrote: post #81

Earlier quoted context omitted.

Adding $10 Trillion should have created a great deal of inflation - much more than we see. Therefore, if it were not added, we probably would see much worse than no inflation - we would see significant deflation. That's far more ruinous than mild inflation is.

Why is deflation worse than inflation? I like it when the things that I buy get cheaper.

Deflation benefits those with savings and fixed-income and inflation benefits those with a large amount of loans - as well as making government debt easier to repay (at the expense of those with savings, treasury bonds and holders of government debt).

If you have deflation together with a large debt bubble (like we have now), many people & companies will have to default. Not saying it's good or bad, but politically that kind of pain is intolerable (the politicians who support it would get voted out)

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

#119

Post by machinebun »

ping_pong wrote: post #62
newaccount2021 wrote: post #35

Earlier quoted context omitted.

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.

It basically happened in the 1970s: https://en.wikipedia.org/wiki/Carter_bonds

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

#120

Post by machinebun »

new_realist wrote: post #64
blacksqr wrote: post #50

Earlier quoted context omitted.

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.

Them having the cash doesn't necessarily mean they spent it; plus, they could have spent it on deleveraging their debts (and not on consumption).

I tend to agree that all the inflation we are seeing right now is supply chain related (with the one exception of graphics cards - the liquidity injected into the system probably made price of crypto go up which accelerated the demand for GPUs, so the GPU issue is both a supply problem & demand problem)

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