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US inflation jumps to 31-year high amid global supply chain crisis

theguardian.com

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Re: US inflation jumps to 31-year high amid global supply chain crisis

#231

Post by tbabb »

ItsMonkk wrote: post #193
tbabb wrote: post #136

Earlier quoted context omitted.

Maybe a stupid question, but if the velocity goes up, couldn't/wouldn't the Fed contract the supply? It seems like having large supply is desirable/correct when velocity is low.

No. We live in a fiat currency world where every dollar is allowed to leverage 10x. This means that every dollar defaulted on results in the destruction of 10 dollars. Even during the housing crash of 2008, the money supply didn't contract because the government was forced to keep the money supply constant, and if they did not it would lead to cascading failures that would destroy the currency entirely. Allowing the…

Again, maybe dumb question, but what sense is "every dollar leveraged 10x"?

Also in 2008, it looks like money velocity decreased during the recession (as it's been doing almost monotonically since the mid 90s). It looks like after the crash, velocity increased slightly, and indeed the supply contracted just slightly at basically the exact same time.

Re: US inflation jumps to 31-year high amid global supply chain crisis

#232

Post by tdfx »

wayoutthere wrote: post #54
alphabettsy wrote: post #25

Earlier quoted context omitted.

Can you elaborate on why your view of the situation is so bleak?

Climate change, and how brittle the JIT-optimized global logistics system we built over the last 50 years is. We can and will need to adjust to a more flexible system to deal with the increased disruption from climate change, but that system will be more expensive and less efficient. Couple this with the fact that we’re going to eventually have food shortages at least locally in the short-to-medium term, which will d…

Can you elaborate on how you feel climate change has recently affected this issue? It seems more likely to me that the recent pandemic is the major issue.

> This long-term famine is already happening in Central America and is driving more and more migrants north every year.

This is certainly a problem but not nearly a major reason that migrants are coming north. They're coming north because they can make their monthly salary from northern triangle countries in a few days in the US. These are economic migrants, regardless of what the news tells you, evidenced by the fact that almost none of them are accepting offers of asylum in Mexico and choosing to continue to the US.

Re: US inflation jumps to 31-year high amid global supply chain crisis

#233

Post by IAmWorried »

wbsss4412 wrote: post #229
IAmWorried wrote: post #225

Earlier quoted context omitted.

6% is only looking at the CPI. Factor in equity prices, housing prices, tuition prices, and suddenly there is a lot more reason to panic.

Housing, tuition and equity prices have been skyrocketing for the last decade and no one panicked. Has tuition even notably increased in the last 12 months?

I don't exactly think people were very happy about it either. I mean look, I'm 24 years old and I don't own any of these assets. At the rate things are going now, I probably never will own these assets.

The best thing that could happen for me is major deflation. But it is too politically unpopular, I bet it will be years before we get a fed chairman who has the spine to raise rates. So I'm reduced to angrily complaining online and shaking my fist at the sky while our rulers at the fed prop up boomers and leave my generation out to dry.

Re: US inflation jumps to 31-year high amid global supply chain crisis

#234

Post by nightski »

tbabb wrote: post #231
ItsMonkk wrote: post #193

Earlier quoted context omitted.

No. We live in a fiat currency world where every dollar is allowed to leverage 10x. This means that every dollar defaulted on results in the destruction of 10 dollars. Even during the housing crash of 2008, the money supply didn't contract because the government was forced to keep the money supply constant, and if they did not it would lead to cascading failures that would destroy the currency entirely. Allowing the…

Again, maybe dumb question, but what sense is "every dollar leveraged 10x"? Also in 2008, it looks like money velocity decreased during the recession (as it's been doing almost monotonically since the mid 90s). It looks like after the crash, velocity increased slightly, and indeed the supply contracted just slightly at basically the exact same time.

Fractional reserve banking.

Re: US inflation jumps to 31-year high amid global supply chain crisis

#235

Post by standardUser »

nabakin wrote: post #91
standardUser wrote: post #33

Inflation reduces the value of debt and an era of increased inflation stands to benefit a lot of households. Of course, it helps if wages go up alongside prices, and they have. But even without wage increases, the value of debt lost to inflation is likely worth more than the value of salary lost to inflation for many households.

Wait until the banks raise interest payments to compensate. They're going to make their money back somehow. You can't game economics like that. There's always a cost.

True, but that's a problem for future debtors, and those who gamble with variable interest rates.

Re: US inflation jumps to 31-year high amid global supply chain crisis

#236

Post by unethical_ban »

IAmWorried wrote: post #224

In reality it's a lot higher than 6%. You have to understand that the CPI is utter crap. They have continually adjusted the definition of it over time to make inflation seem not as bad as it actually is. It doesn't include house prices, equity prices, college tuition, etc. And the number generated from the remaining categories is dragged down by cheap software and electronics. In reality I'd say inflation is closer t…

Notwithstanding the concerns about inflation, I challenge the notion that helping people feed their families when they're poor, redistributing wealth from the tippity-top to the middle and down, providing more education, and providing more healthcare to the elderly are "ridiculous". "Handout" is a dogwhistle.

Re: US inflation jumps to 31-year high amid global supply chain crisis

#237

Post by sbelskie »

IAmWorried wrote: post #224

In reality it's a lot higher than 6%. You have to understand that the CPI is utter crap. They have continually adjusted the definition of it over time to make inflation seem not as bad as it actually is. It doesn't include house prices, equity prices, college tuition, etc. And the number generated from the remaining categories is dragged down by cheap software and electronics. In reality I'd say inflation is closer t…

Home values are “included” in the form of rental equivalence, which is widely considered to address a number of flaws with just including house value. And contrary to popular belief, from 1983 when the switch was made until 2007, rental equivalence actually increased CPI compared to the old method.

Why would equities be included in inflation? That doesn’t make sense to me.

Re: US inflation jumps to 31-year high amid global supply chain crisis

#238

Post by standardUser »

somebodythere wrote: post #116
standardUser wrote: post #33

Inflation reduces the value of debt and an era of increased inflation stands to benefit a lot of households. Of course, it helps if wages go up alongside prices, and they have. But even without wage increases, the value of debt lost to inflation is likely worth more than the value of salary lost to inflation for many households.

How does inflation help debt become more serviceable if incomes don't go up to match?

If a person's $100k salary loses 20% of its value, but their $400k in mortgage and student loans also lose 20% of their value, it will be years before the lost value from their salary outweighs their 'gain' from the reduced value of their debt. They'll then have opportunities to increase their income, usually with the help of rising wages that accompany inflation, but that reduction in the value of their debt is permanent.

Re: US inflation jumps to 31-year high amid global supply chain crisis

#239

Post by trimbo »

999900000999 wrote: post #174

Would buying property be a good inflation hedge. I'd love to lock in a cheap mortgage,even if money is worth 10% less next year, my mortgage remains the same.

If you're going to live in or use the property for a long time, possibly. I've also been looking at buying property with these mortgage rates, but it's not intended as a short term investment.

In terms of investment property or flipping, there are many factors and you might want to look at what happened historically.

For example, raising interest rates significantly like Volcker did in the 80s stopped new home building cold because new buyers could not afford mortgages. They stopped building the subdivision my family lived in for 3-4 years when this happened. In general, people who bought just before that period did not see a return on their home for a decade-plus, but the economy rebounded quickly after that period

https://www.cnbc.com/2019/12/09/when-volcker-ruled-fed-peopl...

Re: US inflation jumps to 31-year high amid global supply chain crisis

#240

Post by r00fus »

kyleee wrote: post #149
r00fus wrote: post #140

Earlier quoted context omitted.

Politics. Rates had to go down for the re-election effort.

I think that is probably naive, they can't raise rates for many reasons including the fact that it would basically immediately blow up significant parts of the economy that are only enabled/possible due to rock bottom rates

"immediately blow up" - if such fragility exists, is it a good thing? I mean, even raising rates a few basis points causes such collapse...
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