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Inflation surges to its highest since 1990

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Re: Inflation surges to its highest since 1990

#41

Post by actually_a_dog »

skohan wrote: post #26
noduerme wrote: post #23

Earlier quoted context omitted.

"rich in cash"? No. Just those without other assets. Are you rich in cash if all $100 you have is in cash? Inflation is the most regressive tax possible on the poor.

Only if wage inflation doesn't keep up with price inflation. If wage inflation keeps pace, it's actually a fairly progressive result since debt loses value relative to wages. For people without income or assets it's a disaster.

Very true. And, unfortunately, thus far, the wage growth we saw earlier on in the pandemic has not held, because it was largely the result of lower paid people becoming unemployed. Wages have barely budged relative to inflation since 2019, even if you only consider employed people. We're definitely in the "very not good" scenario here.

See https://www.pewresearch.org/fact-tank/2021/09/07/despite-the...

Re: Inflation surges to its highest since 1990

#42

Post by jacquesm »

jstx1 wrote: post #3

It's helpful to have a look at the graph in the article and to remind yourself that the numbers are reported year-on-year. Inflation spiked up in the first half of 2021 and the comparison is between the current month and the same month last year so prices could stay the same and you would still report high inflation for a while (until the back end of the comparison window catches up to the moment in time when inflati…

Also note that due to the compound nature of inflation 2% or 4% is an entirely different ball game in the longer term.

Re: Inflation surges to its highest since 1990

#43

Post by jacquesm »

pa7x1 wrote: post #16
ur-whale wrote: post #5

Inflation is boiled frog style taxation. Unfortunately, it's taxation that makes the weakest suffer the most. Oh, and the govt would like you to believe they have a way to control it. Yeah sure, I'm going to turn that knob that is one input of a perfectly chaotic system, and I know what is going to happen. Let's see how that empty promise actually turns out.

Inflation does not affect (relatively speaking) the poorest more. On the contrary, it's a tax on people that have a lot of cash or cash-equivalent assets. That's not the poor. The poor have either very little cash or even negative (via debt), so inflation benefits them. And you can see this historically, too: Historical inflation rate chart: http://www.aboutinflation.com/_/rsrc/1369736825466/inflation... Wealth gap i…

All things being equal (income for one) inflation in the most practical sense dis proportionally affects the poor and the middle class.

In a numerical sense the rich may suffer more but they won't eat a sandwich less because of it, whereas poor people may end up much poorer and the middle class (aka the comfortably poor) are significantly impacted.

Re: Inflation surges to its highest since 1990

#44

Post by noduerme »

skohan wrote: post #34
noduerme wrote: post #29

Earlier quoted context omitted.

Minimum wage is always going to lag way behind inflation. In practice, almost all wages lag behind inflation. But "people without income or assets" is my definition of "poor" and ...yeah, inflation basically takes a meager $1200/mo government check and makes it worthless. they're already on the brink of starvation.

I don't disagree with the overall point that it's likely that inflation will hurt a lot of economically vulnerable people. I do think defining poor as unemployed is way too narrow. There are plenty of people who are employed and also poor.

>> I do think defining poor as unemployed is way too narrow.

Definitely. You floated the idea that inflation would be progressive if the creditors have to pay higher wages (if wages rise in sync) while their loan portfolios in "old dollars" become essentially a worthless write down. There's a beautiful, even just economic logic to that. The trouble is that the lag itself becomes wealth under inflation. Normally, TTL between promising a worker a check and sending it gives a nominal value for holding that money as long as possible in an interest bearing or inflation-proof asset. Under inflation that time differential goes wild. Sometimes within a day or two, the value of the payment is gone by the time it gets to the employee. This is before it even enters the system as purchasing power.

Time becomes the most crucial element of profit and control, under inflation.

Re: Inflation surges to its highest since 1990

#45

Post by goodpoint »

pa7x1 wrote: post #38
goodpoint wrote: post #20

Earlier quoted context omitted.

> Inflation does not affect (relatively speaking) the poorest more. Not at all: people with low incomes struggle the most to get raises. And those who barely get to the end of the month struggle the most when their purchase power decreases by 5%. > On the contrary, it's a tax on people that have a lot of cash or cash-equivalent assets. No, wealthy people tend to invest theirs saving in various things that resist or o…

I think you are confusing two things. The poor may struggle to reach ends-meet more than the rich, of course. But that doesn't mean that relatively speaking inflation is a regressive tax that the poor have to carry the burden of disproportionately. > No, wealthy people tend to invest theirs saving in various things that resist or often even beat inflation. This is easier said than done. Given a risk-free rate it's no…

> But that doesn't mean ...

I explained how salaries are not automatically tracking inflation, especially low ones.

https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...

https://www.epi.org/productivity-pay-gap/

Re: Inflation surges to its highest since 1990

#46

Post by qeternity »

the_gastropod wrote: post #37
qeternity wrote: post #27

Earlier quoted context omitted.

Yes but through hedonic adjustment fuckery, many CPI measurements, especially housing, are complete nonsense. Basically, if the cost of housing is rising, but the quality of housing is also rising, then these things will offset to a degree as far as CPI is concerned. It’s one of the reasons healthcare inflation is so absurdly underrepresented. CPI basically assumes that you could pick any level of quality for a good…

Of course CPI is imperfect and worthy of plenty of criticism. But one must acknowledge: it’s an incredibly complicated thing to try and measure. This cynical conspiracy theory that big bad government is twisting its evil mustache and trying to make inflation look low is… well, I don’t think it holds up to much scrutiny.

Completely agree. And hedonic adjustments are not a bad thing either. As you say, inflation is an insanely complex beast that we don’t really understand.

But it’s worth pointing out that certain agencies use CPI imperfections when it suits them: the Fed has pointed to low inflation for years as justification to continue its monetary policies. And then when CPI no longer backs their actions, they change the narrative and claim it’s “transitory”.

CPI isn’t broken. It can’t be broken. It’s just a metric with a methodology.

But our interpretation of CPI is broken at best, and manipulative at worst.

Re: Inflation surges to its highest since 1990

#47

Post by [deleted] »

noduerme wrote: post #32
ignasheahy wrote: post #28

Earlier quoted context omitted.

This is completely wrong, it disproportionally affects the poor and middle class the most because all they have is their wages and a little bit of cash. Wages are not that elastic and will certainly lag behind. Rich are heavy on assets and it doesn't affect them at all unless they are stupid enough to convert those assets to cash during high inflation period (it of course doesn't happen).

I agree. I'm not ashamed to admit though, I'm still a little baffled by Buffet's backing off into "cash" - or out of the market - I guess cash means different things to different people...

[deleted]

Re: Inflation surges to its highest since 1990

#49

Post by the_gastropod »

qeternity wrote: post #46
the_gastropod wrote: post #37

Earlier quoted context omitted.

Of course CPI is imperfect and worthy of plenty of criticism. But one must acknowledge: it’s an incredibly complicated thing to try and measure. This cynical conspiracy theory that big bad government is twisting its evil mustache and trying to make inflation look low is… well, I don’t think it holds up to much scrutiny.

Completely agree. And hedonic adjustments are not a bad thing either. As you say, inflation is an insanely complex beast that we don’t really understand. But it’s worth pointing out that certain agencies use CPI imperfections when it suits them: the Fed has pointed to low inflation for years as justification to continue its monetary policies. And then when CPI no longer backs their actions, they change the narrative…

What incentive is there for the Fed to continue printing as opposed to doing the right thing? What’s the conspiracy here?

Re: Inflation surges to its highest since 1990

#50

Post by danielrpa »

pa7x1 wrote: post #16
ur-whale wrote: post #5

Inflation is boiled frog style taxation. Unfortunately, it's taxation that makes the weakest suffer the most. Oh, and the govt would like you to believe they have a way to control it. Yeah sure, I'm going to turn that knob that is one input of a perfectly chaotic system, and I know what is going to happen. Let's see how that empty promise actually turns out.

Inflation does not affect (relatively speaking) the poorest more. On the contrary, it's a tax on people that have a lot of cash or cash-equivalent assets. That's not the poor. The poor have either very little cash or even negative (via debt), so inflation benefits them. And you can see this historically, too: Historical inflation rate chart: http://www.aboutinflation.com/_/rsrc/1369736825466/inflation... Wealth gap i…

This is so wrong I don't know where to start. I'll just say 2 things:

a) your charts are a classical example of "try hard enough and you will find 2 charts that correlate"

b) Inflation affects the poor because they don't, and sometimes can't, hold assets that traditionally protects the rich from inflation, such as real hard assets (such as real estate) and a sizeable chunk of stocks (some types) and bonds (TIPS and short duration). The poor lives paycheck to paycheck and see their income staying the same while everything else around them is increasing in price.

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