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Have we been thinking about inflation all wrong?

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Re: Have we been thinking about inflation all wrong?

#141

Post by Nbox9 »

fennecfoxen wrote: post #131
dnautics wrote: post #130

Earlier quoted context omitted.

To be frank, for a small sliver of wage:mortgage ratios this could be fucking fantastic... for "young wage-earners" who already have a house (like me! but I'm not really that young anymore). For other wage-earners, not so much, sad trombone.

Yeah, if you're at all on the fence, or close to the fence, it's a fine time to get a mortgage, even if house prices have gone up somewhat. An excellent inflation hedge!

Rising interest rates is likely to have a significant downward pressure on home prices. Think carefully before entering a very leveraged position (like the 3.5% down FHA loan) in the current market.

Re: Have we been thinking about inflation all wrong?

#142

Post by scottiebarnes »

overtonwhy wrote: post #122
scottiebarnes wrote: post #56

Earlier quoted context omitted.

> but if the alternative is to have shrinking GDP and massive unemployment, I would rather have some inflation. This is the general problem with central banking. Politicians and governments will ALWAYS take action to "save the economy", whether that is a small downturn or a big one. There's too much pressure to not use the magic money printer. Short term election cycles incentivize everyone to just fix the problem as…

Disregard new accounts that claim the sky will be falling. The debt will always be going up and there will always be inflation. That's how fiat currencies work. Research the federal reserve and it's stated objectives to understand why.

If the way fiat currencies work is constant devaluation in the name of increased short term spending, then it makes the currency utterly terrible to invest and save in in the long term.

If this is how its supposed to work, then your money is a toxic asset which should be handed off as quickly as possible to someone else.

And so if no one actually wants this asset, then it makes it valueless.

Re: Have we been thinking about inflation all wrong?

#143

Post by giaour »

dnautics wrote: post #130
fennecfoxen wrote: post #126

Earlier quoted context omitted.

Don't worry, it'll be great! You'll get a 10% raise, and prices will only be up 15%.

To be frank, for a small sliver of wage:mortgage ratios this could be fucking fantastic... for "young wage-earners" who already have a house (like me! but I'm not really that young anymore). For other wage-earners, not so much, sad trombone.

Or for young wage earners who have significant student debt. Pretty much anybody who has more current liabilities than current assets can expect to benefit from some degree of inflation

Re: Have we been thinking about inflation all wrong?

#144

Post by chasd00 »

rglover wrote: post #93

When you have to write propaganda about a thing that's long-term been identified as "bad," (with ample historical examples) actually being a good thing, you're being willfully dishonest and in denial. Many here will fight and bicker and kick and scream but Bitcoin is the only solution to the absolute ruin being dangled over the millenial and younger generations (primarily because it disconnects state/human control of…

i don't know about bitcoin but you do have a point about the current spin being put on high inflation. High inflation is universally known as bad for an economy.. until now for some reason.

Re: Have we been thinking about inflation all wrong?

#145

Post by whakim »

tombert wrote: post #35
whakim wrote: post #3

The basic assumption here is that inflation reduces inequality. That's plausible (it certainly was a strong contributing factor to the great reductions in inequality that occurred between 1920 and 1950). But inflation is also an extremely blunt-force instrument: lots of people who aren't very wealthy also get hurt. I'm not sure why we'd want that in a world where fiscal policy (i.e., taxation) exists, unless we've ju…

Wouldn't most billionaires have most of their money in real estate and the stock market (e.g. with index funds or hedge funds or something of that ilk)? It probably was especially true in 2020, when it was so cheap to get into the stock market and the bailouts made it seem like inflation was inevitable [1]. I would think that most poorer people don't have stock portfolios filled with DIA or QQQ shares; the poorer peo…

It depends, because different types of assets respond differently to inflation. The wealthier you are, the more likely you are to have more esoteric investments. The bottom 50% of the wealth distribution in most countries (including the United States) own almost no assets (including cash in savings accounts) and are often debtors, so they may find that inflation reduces their debts to a greater degree than their savings.

Re: Have we been thinking about inflation all wrong?

#147

Post by trhway »

jaymicha wrote: post #102
trhway wrote: post #80

Earlier quoted context omitted.

> 7% is higher than we would like, but if the alternative is to have shrinking GDP and massive unemployment, I would rather have some inflation. The alternative is to have typical 2-3% of inflation and correspondingly the typical 2-3% of GDP growth with healthy labor market. The 7% inflation does get you that 7% GDP growth we're seeing and red hot labor market, yet it is just a temporary effect, like a shot of stimul…

I'm not sure this is true - the base case seems to be the Eurozone, the countries of which intervened in their economies enough to forestall a depression, but not to the extent that the US did. Eurozone inflation is just a notch above 5%, unemployment rate right about 7%. In the US it's 7% and 4% respectively. In effect, the US traded a ~2% rise in yearly inflation for a ~3% reduction in unemployment. Reasonable peop…

If such trade worked then the whole world would have already been practicing it for many decades. Yet what we know from the last 100 years of such attempts is that there is the sweet spot of 2-3% inflation, and deviation from it into either direction is punished.

Re: Have we been thinking about inflation all wrong?

#148

Post by TameAntelope »

oonerspism wrote: post #136
TameAntelope wrote: post #96

Earlier quoted context omitted.

We may need inflation to drive job growth now, and we've definitely needed inflation to drive better job growth. An office job being created because a paper company can support an additional employee due to inflation is a better situation than continuing to work in a warehouse job. Inflation will eventually recede, but that new job will give opportunity to the worker. Scale that up by a factor of millions across the…

The truly poor do not have jobs, nor much hope of one in future. They are on fixed state incomes at best, which if they are lucky may have a trivial rise some years after the fact. We don't need to get terribly cerebral to note the basic mechanism of proportion, whereby $10 added to the daily food cost of a person who makes $50/day is vastly more impactful than the same $10 added to the daily food cost of a person wh…

The whole point is that $10 added daily food cost results in the food producer being able to hire more employees, which means the person who makes $0/day can make $300/day now.

Also these numbers are super weird. It's probably more like $10 total daily food cost going up to like $10.30, and going from making $30/day (part time minimum wage) to $50 (near full-time minimum wage).

Re: Have we been thinking about inflation all wrong?

#149

Post by jonnycomputer »

jbay808 wrote: post #57

When it starts to get really burdensome to keep your promises, the idea of breaking them gets really attractive. But that doesn't come for free. It costs credibility. The cost of central banks breaking their inflation-control commitment when inflation starts running hot, is that the market starts pricing in their unwillingness to raise interest rates. This fuels a whole bunch of other inflation feedback loops, and th…

Stability is a notion that depends on scale. You might have a long slow decline that feels relatively stable, but leaves you in a bad place. It seems to me that was the trajectory we were on.

Re: Have we been thinking about inflation all wrong?

#150

Post by tharne »

giaour wrote: post #143
dnautics wrote: post #130

Earlier quoted context omitted.

To be frank, for a small sliver of wage:mortgage ratios this could be fucking fantastic... for "young wage-earners" who already have a house (like me! but I'm not really that young anymore). For other wage-earners, not so much, sad trombone.

Or for young wage earners who have significant student debt. Pretty much anybody who has more current liabilities than current assets can expect to benefit from some degree of inflation

> Pretty much anybody who has more current liabilities than current assets can expect to benefit from some degree of inflation

Except for the fact that they're getting a pay cut year after year. This is why the general public gets so mad about inflation. Like another commenter mentioned, inflation screws over anyone who works for a wage.

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