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U.S. inflation reached a new four-decade high of 8.6% in May

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Re: U.S. inflation reached a new four-decade high of 8.6% in May

#71

Post by somewhereoutth »

im_down_w_otp wrote: post #36
voisin wrote: post #8

Earlier quoted context omitted.

> They can't raise interest rates quickly because it would nuke the easy-money economy (i.e. the entire economy) that has become addicted to low rates. This is exactly why the easy-money economy should never have been allowed to occur and persist for so long.

It's been the entire basis for the _MASSIVE_ explosion in VC investors and tech investment though. Without it way, way fewer people would be here and we'd all be making way, way less money. So, it's kind of a double-edged sword.

The problem is that a lot of that investment has been a miss-allocation, i.e. the money should have been directed elsewhere (schools? hospitals? real businesses?). Given that much of what we do is not actually that useful in the big scheme of things, I would suspect our inflated pay is somewhat unearned (though paling in comparison to top exec pay)

Re: U.S. inflation reached a new four-decade high of 8.6% in May

#72

Post by effingwewt »

mountainriver wrote: post #64
joemazerino wrote: post #53

Earlier quoted context omitted.

The economy should have failed during the 2020 crisis. That's the point. Government intervention not only prolongs the pain but inevitability increases it as it tries to save.

Sorry that’s just not true, government intervention can absolutely break the economy out of equity traps when a recession hits. If people are scared to lend/spend money it’s a self fulfilling prophecy, and can make things much worse

I disagree. Not only did the intervention help no one but the banks, but when they were bailed out with taxpayer money, they were refusing loans to the point they were sued over it. While using the same funds to pay obscene CEO bonuses.

We stopped having a free market at that moment, and we've seen things go right back to the same exact spot only worse.

Our entire financial system is bullshit now, it's one huge moral hazard.

Re: U.S. inflation reached a new four-decade high of 8.6% in May

#73

Post by sfe22 »

hungryhobo wrote: post #68
sfe22 wrote: post #49

Earlier quoted context omitted.

Deflation being much much worse is a nice joke. You telling me that if gas and food and rent lowered in price over time, I will be worse off? Stuff are supposed to become cheaper as technology advances yet we only either get high or low price increases, all to fund the rich in the government.

what if your income is also lowered over time?

Thats also fine, especially if priced drop more. But even in a sane economy I would expect most would get raises as they work faster and better, even as prices fall.

Re: U.S. inflation reached a new four-decade high of 8.6% in May

#74

Post by version_five »

ramblenode wrote: post #70
spamizbad wrote: post #63

Earlier quoted context omitted.

> Deflation being much much worse is a nice joke. Deflation is more of a nightmare than a joke. It basically means the economy has significantly contracted and that wages are going to plummet across the board. This leads to a massive spike in debt defaults.

To what extent is the risk due to a society built on debt?

It's completely due to that, but so is the fact that we can have nice things.

Re: U.S. inflation reached a new four-decade high of 8.6% in May

#77

Post by credit_guy »

spamizbad wrote: post #63
sfe22 wrote: post #49

Earlier quoted context omitted.

Deflation being much much worse is a nice joke. You telling me that if gas and food and rent lowered in price over time, I will be worse off? Stuff are supposed to become cheaper as technology advances yet we only either get high or low price increases, all to fund the rich in the government.

> Deflation being much much worse is a nice joke. Deflation is more of a nightmare than a joke. It basically means the economy has significantly contracted and that wages are going to plummet across the board. This leads to a massive spike in debt defaults.

Deflation is never a problem in a fiat money economy. You can print your way out of a deflation.

In the 19th century and in 1929 currencies were pegged to gold, so you could not just print money. All periods of economic crisis were deflationary, and the central banks did not have a lot of tools to fight that. That’s the origin of the idea that deflation is worse than inflation. This is just bogus nowadays.

Re: U.S. inflation reached a new four-decade high of 8.6% in May

#78

Post by adam_arthur »

pbuzbee wrote: post #75

Does anyone have any financial advice on how to handle extended periods of inflation? What about if it turns into stagflation?

The tricky thing is that the right action really depends on whether the Fed is serious about tackling inflation.

Buying assets is a terrible hedge, if those assets are valued for 0% rate env, and we're entering a 5%+ rate env. Housing and 100x sales tech stocks are a great example

My view is that the Fed is serious, and we'll run up to ~4% 10y and suffer a recession that kills off inflation.

Hold cash until the discount rate peaks, then buy bonds. Wait for recession fears to peak, then buy equities.

4% 10y is a safe buy level imo, but entirely possible that we go even higher, or suffer recession/disinflation before then.

Energy inflation is likely here to stay though

Re: U.S. inflation reached a new four-decade high of 8.6% in May

#79

Post by adam_arthur »

zaccusl wrote: post #43
TurkishPoptart wrote: post #35

All-time high for U.S. inflation All-time high for gas prices ($6/gal in Seattle!) All-time high for food prices Needless to say, elections in November are going to be VERY interesting.

Why? If Republicans control congress what will be different? Is the US going to be the only country in the world to get inflation under control? Is the GOP that good? What are their solutions (serious question)? Because all I here is "CRT bad" and "don't say gay". I never hear anything proposed to solve any of this.

Well, if a single additional R senator had won in 2020, the ARP wouldn't have passed and inflation at these levels largely wouldn't have occurred to begin with.

Gridlock is the best thing we can get right now. They are still pitching BBB among all of this, which is frankly amazing.

Despite inflation being a horrible political anchor for the Democrats, they have yet to pitch any economically sound policy to combat it. They keep talking about proven to fail economic policies such as price controls, or blaming Russia/Corporate Greed.

Re: U.S. inflation reached a new four-decade high of 8.6% in May

#80

Post by adam_arthur »

commandlinefan wrote: post #48
zaccusl wrote: post #43

Earlier quoted context omitted.

Why? If Republicans control congress what will be different? Is the US going to be the only country in the world to get inflation under control? Is the GOP that good? What are their solutions (serious question)? Because all I here is "CRT bad" and "don't say gay". I never hear anything proposed to solve any of this.

> If Republicans control congress what will be different? Um, well, a lot will be different, but nothing with regards to gas prices or inflation. And this is coming from somebody with a passionate bordering on maniacal hate for democrats.

US oil companies don't invest in new supply because you can't model a 10y return on your projects when the government could ban/heavily tax them sometime over those next 10 years.

So yes, a Democratic admin that cancels projects and talks about windfall tax on oil company profits does disincentivize new supply and raise the cost of oil/gas.

The net result may be even worse greenhouse gas emissions as poor countries turn to coal as a cheaper alternative to Oil.

The energy transition needs to be responsibly managed... a cold cutover will backfire in a huge way, as I'm sure we'll see in November

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