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Something I haven’t seen discussed much is the impact of inflation on the existing federal debt. This is actually a positive for taxpayers as the federal debt will become cheaper. Obviously we’re still spending a ton and are issuing debt at higher rates now, so it’s not some kind of magic cure or anything.
But the government also has a deficit. Which means it's exchanging low % notes for high % notes.
It seems the Fed is stuck in a state of overreaction. First they overshoot on money printing, then they disregard early signs of inflation, and now they're in a panic in the opposite direction. Seeing the news this week that Bernanke said that the Fed should be able to pull off a soft-landing now in 2022 gave me an uncomfortable déjà vu -- he said the same in 2006 and 2007, right before he raised rates enough to kick…
Earlier quoted context omitted.
In fairness, inflation seems largely driven by energy prices, which in turn are driven by the Russian invasion of Ukraine. Not the top event I'd imagine a bank predicting well.
Energy prices which have LATELY, MAYBE, been driven by failed attempt of the US applying sanctions to Russia over the invasion of Ukraine. Reminder: https://www.csis.org/analysis/biden-makes-sweeping-changes-o...
Russia is now selling a fraction of the oil they were pre-war for 70 cents on the dollar. The sanctions haven't failed.
You can argue either side to this, and make a good case. My personal preference is to trigger a recession and reduce inflation. The easy cop-out solution is to say a "big f*ck off" to pensioners, lower middle class, and poor people and let inflation soar, but I believe that long term this would be more destructive to the general economy. Better take the long term view here and not kick the can down the street.
A key driver to inflation is that wages for lower-income workers was finally starting to rise. Tanking the economy will hurt these people the most. But yes, inflation would flatten.
Something I haven’t seen discussed much is the impact of inflation on the existing federal debt. This is actually a positive for taxpayers as the federal debt will become cheaper. Obviously we’re still spending a ton and are issuing debt at higher rates now, so it’s not some kind of magic cure or anything.
Earlier quoted context omitted.
When America shuts down or reduces its own oil supply, those holding the rest of the world's supply get more leverage.
We reduced our oil production before the invasion. Gas prices were multiplying before the invasion. Putin did not force the reduction of our own supply. The current administration did. The invasion may have been the consequence of the reduction of our production and amplified the "price hikes", but it wasn't the cause of the "price hikes", the initial action of reducing production and relying on foreign imports was.
You can argue either side to this, and make a good case. My personal preference is to trigger a recession and reduce inflation. The easy cop-out solution is to say a "big f*ck off" to pensioners, lower middle class, and poor people and let inflation soar, but I believe that long term this would be more destructive to the general economy. Better take the long term view here and not kick the can down the street.
I just wish it was done earlier and more cheaply during otherwise good times.
You can argue either side to this, and make a good case. My personal preference is to trigger a recession and reduce inflation. The easy cop-out solution is to say a "big f*ck off" to pensioners, lower middle class, and poor people and let inflation soar, but I believe that long term this would be more destructive to the general economy. Better take the long term view here and not kick the can down the street.
Earlier quoted context omitted.
How does IRS win here?
Unless the tax brackets are adjusted, inflation with rising wages means more people in higher tax brackets. If corporate earnings go up, there's more for the IRS too though that might be wiped out by the lessening value of each dollar.
Stocks rallying a bit. I expect we'll see dead cat bouncing at least until we get the next CPI numbers.
It seems as though the dip buying will continue but perhaps the fed wants a smoother road back to reality.
i would like to see it recover