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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?

#281

Post by rory »

NovemberWhiskey wrote: post #164
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.

If interest rates don't rise, then sure - inflation is likely to show up in higher housing costs, which means you'll deflate away that loan and your asset will appreciate. If interest rates rise, then you have one or two problems. If your loan isn't at a fixed rate, then you'd better hope you can still afford your mortgage. Say you paid a 20% downpayment on a home worth $375K. A $300K note at 3% is a $1,250 per month…

While everything you said is true:

1) 2) Treasury rates are still super low, even with high CPI inflation. It's not at all obvious interest rates will go up by much even with sustained 5-10% inflation, since society's ratio of capital to productivity is at an unprecedented level.

Re: Have we been thinking about inflation all wrong?

#282

Post by jibe »

lamontcg wrote: post #269
lumost wrote: post #182

Earlier quoted context omitted.

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 v…

The lowest poorest 20% have the highest credit card debt to income ration (almost 25%). Inflation will crush them. Cost of debt will go up, cost of living will go up. Inflation is the worst for poor people.

Re: Have we been thinking about inflation all wrong?

#283

Post by colinmhayes »

hammock wrote: post #271
zozbot234 wrote: post #129

Earlier quoted context omitted.

Yup. The kernel of truth behind Austrian theories of macroeconomics/the business cycle is that interest-rate based policy setting is inherently an unstable system. If the central bank makes policy errors that fail to stabilize the underlying target (whether inflation, nominal income, exchange rates, whatever) the whole system starts spiraling away from that unstable equilibrium point, and the subsequently needed corr…

True to form, since the Fed was created, each new crisis has been bigger and sooner than the last.

This just isn't true. THe country was pretty much perpetually in economic crisis during the late 19th century, largely because of the lack of ability to perform monetary policy.

Re: Have we been thinking about inflation all wrong?

#284

Post by imtringued »

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…

Bitcoin is permanent money. It suffers from the same provlem. Introduce it as a global currency and one day you will realize that there are more than 20 million Bitcoin. I can guarantee it. Permanent money simply doesn't work. The world isn't as permanent as gold.

Re: Have we been thinking about inflation all wrong?

#285

Post by imtringued »

yazantapuz wrote: post #205
fshbbdssbbgdd wrote: post #140

Earlier quoted context omitted.

Argentina’s problem is it owes debt in dollars, so inflating the peso doesn’t reduce the debt.

No. Our problem -I live in Argentina- is that we spend like there is no tomorrow and no consequences.

Yes every permanent money system suffers from this problem. You can permanently take money out of circulation thereby forcing the government to replenish the supposedly lost money.

Re: Have we been thinking about inflation all wrong?

#286

Post by colinmhayes »

friedturkey wrote: post #195
uses wrote: post #173

Earlier quoted context omitted.

Inflation doesn't exist as a policy to stiff wage earners. Inflation exists as a reality of a growing economy (more goods and services needs more money to cover them). The alternative is deflation, which would be extremely bad. So what we aim for, is low inflation. Which we've had for ~40 years. Low, controlled inflation is the vastly preferable alternative to any amount of deflation, so it's the side of the scale we…

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 will not be many working people if the economy is deflationary. Please read a macro book so you at least understand what you're arguing against before spouting nonsense.

Re: Have we been thinking about inflation all wrong?

#287

Post by rory »

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%.

Is this a novel theory or are you confused? Banks would just borrow all the cash needed to cover their outstanding loans from the Fed, and get paid by the Fed for doing so.

Standard theory is that higher interest rates == lower inflation.

Re: Have we been thinking about inflation all wrong?

#288

Post by rglover »

imtringued wrote: post #284
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…

Bitcoin is permanent money. It suffers from the same provlem. Introduce it as a global currency and one day you will realize that there are more than 20 million Bitcoin. I can guarantee it. Permanent money simply doesn't work. The world isn't as permanent as gold.

You don't understand Bitcoin, then. Look into the halving mechanism. The supply isn't a variable just set by anyone. And even if you mess with that algorithm, the rest of the network would have to accept the changes (which would designate a hard fork and create a new currency that wasn't Bitcoin).

Re: Have we been thinking about inflation all wrong?

#289

Post by imtringued »

sleepingadmin wrote: post #50
kkoncevicius wrote: post #21

The best one-sentence description of inflation I've heard is: inflation is a hidden tax on savings. People who save money are hurt the most. It's as if the newly printed money is generated by taking a bit from anyone according to how much cash he/she has stored away.

>The best one-sentence description of inflation I've heard is: inflation is a hidden tax on savings. People who save money are hurt the most. It's as if the newly printed money is generated by taking a bit from anyone according to how much cash he/she has stored away. Who are the people who save money? Or rather, more specifically are either holding cash or in bonds whose real-yields are very negative? Tourists, down…

The ultra rich have more of everything. They have more money, more stocks, more land, more intellectual property, more monopolies more of absolutely everything.

Meanwhile most people keep their savings inside their body as human capital. Most people make a living by utilizing this human capital. If inflation gets them a job it is worth it.

Re: Have we been thinking about inflation all wrong?

#290

Post by HWR_14 »

nine_k wrote: post #204
wolpoli wrote: post #179

Earlier quoted context omitted.

> It's important that errors be promptly corrected, and expectations about future policy remain properly "anchored" to the right target. It would be interesting to know if inflation expectation has become unanchored in the mind of the general public, because, ultimately, inflation expectation causes inflation.

I don't think that inflation is as easy to cause without a fresh supply of money. And you know who prints fiat money.

> And you know who prints fiat money.

I imagine you mean the fed, but I don't know what point you're making.

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