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Have we been thinking about inflation all wrong?

thewalrus.ca

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Re: Have we been thinking about inflation all wrong?

#261

Post by HarryHirsch »

lumost wrote: post #182
e4e78a06 wrote: post #175

Earlier quoted context omitted.

Poor people are making _nominal_ income gains. Their real income is actually declining because wage gains aren't keeping up with inflation despite a red hot labor market. It's almost like rents rise to match incomes unless you build more housing. Rent control just means that the costs get offloaded to other things like the security deposit, application fees, and deferred maintenance. You can't regulate the market out…

Except, with higher interest rates the nominal price of housing falls relative to wages. A worker can reasonably hope to buy there way out of rents at some point in the future (assuming the price of the house is set as a multiple of it's rental equivalent cash flow discounted over time)

You are discussing the theory. The practice is that housing has been severely underproduced since 2008. Since the GFC, the state of Massachusetts has been adding on average 15000 units/year. You can't buy what doesn't exist, and with the present shortages you can't even build. It's a long-standing policy problem, but not a monetary policy problem.

Re: Have we been thinking about inflation all wrong?

#262

Post by imtringued »

foolinaround wrote: post #139
JackFr wrote: post #90

Earlier quoted context omitted.

> The US Federal debt is currently $30 trillion USD. This is never getting balanced, ever. There's only one possible eventual outcome with this system. The US debt to GDP ratio is currently slightly higher than it was at the end of WWII. It is significantly lower than that of Japan, who has a debt to GDP ration similar to those the UK ran during portions of the 19th century. There are very good reasons for government…

> the national debt is permanent and exists by design. Can you pls point me to something about its design?

Monetary savings = debt by definition. No debt no money. One should ask why money is taking a one way route though. It remains stuck in bank accounts.

Re: Have we been thinking about inflation all wrong?

#263

Post by dnautics »

BitwiseFool wrote: post #203
friedturkey wrote: post #195

Earlier quoted context omitted.

Yeah, deflation is awful. Imagine our continuously increased production and efficiency resulting in goods becoming cheaper and the value of the working person’s dollar going farther. Horrifying.

There's this really weird dichotomy where whats "good for the economy" is often bad for you as an individual, and vice versa.

Sure because the people who decide what is "good for the economy" have different interests than pretty much every other individual in it.

Re: Have we been thinking about inflation all wrong?

#264

Post by missedthecue »

imtringued wrote: post #256
sleepingadmin wrote: post #66

The walrus being a far-left MMT proposing place wrote this when inflation was at 3.5% or so. It's now much higher and very evidently out of control. The article quotes Mark Carney, as if he were on their side. BoE under Carney have raised interest rates twice: https://tradingeconomics.com/united-kingdom/interest-rate and that hasn't even dented inflation. https://tradingeconomics.com/united-kingdom/inflation-cpi I be…

Inflation is never out of control, the only thing that is out of control is our desire to deny reality. You can stop inflation at any point with a negative interest rate. The moment you do that you can start increasing reserve requirements, if you are ambitious you can go all the way to 100%.

Lower interest rates decreases inflation? Can you explain the mechanics behind that?

If interest rates went negative, I would literally borrow and spend and much money as I could.

Re: Have we been thinking about inflation all wrong?

#265

Post by HarryHirsch »

hparadiz wrote: post #258
vorpalhex wrote: post #172

Earlier quoted context omitted.

We are pretty close to full employment. Rising groceries and fuel costs hurt everyone, but that hurt is more so on the poor who have less overall cash flow.

I remember gas hitting $4 during the Bush administration on the east coast when I was still in high school. Meanwhile I'm currently paying 4.50 at costco for Premium gas. Given recent inflation I think that we're actually paying less for gas than we did during the Iraq war.

Under Bush II you could actually afford a roof over the head, that's why you didn't notice the energy prices quite as much. Commutes might have been shorter as well then.

Re: Have we been thinking about inflation all wrong?

#266

Post by imtringued »

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.

There will always be inflation (temporary and permanently via mining) and debt goes up with a gold standard too. That's actually a general property of permanent money.

Re: Have we been thinking about inflation all wrong?

#267

Post by dnautics »

prewett wrote: post #250
prichino wrote: post #211

Earlier quoted context omitted.

This deflation is bad meme comes straight from the big international bankers of the early 20th century (JPM et al.). They cared mostly about liquidity and stable exchange rates. Unless you are one of them, please stop parroting "would be extremely bad". Would it be different from now? Probably. Extremely bad? For whom?

People who have debt is the canonical set for whom deflation would be bad Including everyone who has a mortgage: your payments stay the same, but you earn less, so they take up a larger portion of your income. Naturally this can lead people who have debts that they could have serviced without deflation now cannot service them, so they go bankrupt. This also happens with any company that has debt (which is pretty much…

"People who have debt" is dominated by financialized instruments: shorts, options, forex, margin trading, etc. all exist due to easy access to debt at low interest rates.

Re: Have we been thinking about inflation all wrong?

#268

Post by friedturkey »

ska wrote: post #237
dnautics wrote: post #217

Earlier quoted context omitted.

"no reason to invest your money" You mean with deflation people will suddenly no longer want for more money? Sign us up!

> You mean with deflation people will suddenly no longer want for more money? Sign us up! No, they mean that people will want jobs and not find them. [addition: this is at least the orthodox view behind small inflation targets as policy, that on the whole it's the best trade off]

Japan is said to be deflationary (until covid at least) and lacks an unemployment problem.

Re: Have we been thinking about inflation all wrong?

#269

Post by lamontcg »

lumost wrote: post #182
e4e78a06 wrote: post #175

Earlier quoted context omitted.

Poor people are making _nominal_ income gains. Their real income is actually declining because wage gains aren't keeping up with inflation despite a red hot labor market. It's almost like rents rise to match incomes unless you build more housing. Rent control just means that the costs get offloaded to other things like the security deposit, application fees, and deferred maintenance. You can't regulate the market out…

Except, with higher interest rates the nominal price of housing falls relative to wages. A worker can reasonably hope to buy there way out of rents at some point in the future (assuming the price of the house is set as a multiple of it's rental equivalent cash flow discounted over time)

And the real value of debts fall, including student loan debt, housing debt and even consumer credit.

I think we're going to hit a wall soon where we either need to forgive or inflate debts away. The alternative is likely to be a crushing depression and fiscal austerity that is much less than any of the downsides of inflation.

If you're a largely debt free upper-mid to upper class tech person then the your personal viewpoint will be that inflation is all bad with no upside, because you have no crushing debts and you just think everyone should pay their debts and its a moral problem. Economically in the broad economy, though, your businesses are likely to be crippled by debt deflation when it really hits the bulk of the population.

Re: Have we been thinking about inflation all wrong?

#270

Post by imtringued »

scottiebarnes wrote: post #165
dragonwriter wrote: post #151

Earlier quoted context omitted.

> then it makes the currency utterly terrible to invest and save in in the long term. That's why it's called “current-sy” (only slightly joking) It's for current use as a medium of exchange. For investment/savings, you go to productive assets. That's the whole point. Mixing those functions doesn't help anything.

No, money is supposed to be good at storing value as well. That's why gold evolved as the world currency over the last 8000 years, and that's why central banks still hoard it in bunkers. You can't easily devalue it by creating more of it. You're failing to understand that treasury bond markets have an important function in the macro economy; ideally, a safe way to save and store value with low risk. And they are larg…

Storing value in the bodies of other people without their consent is an absurd concept. Unemployed bodies starve and must be subsidized.
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