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The anti-inflation pivot of 2022

adamtooze.substack.com

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Re: The anti-inflation pivot of 2022

#81

Post by dragontamer »

ch4s3 wrote: post #64
dragontamer wrote: post #35

Earlier quoted context omitted.

Everything is bad for the poor though. Rising rates fixes inflation, but reduces employment. As it turns out, unemployment is bad for the poor. Lowering rates improves employment, but comes with inflation risks. As it turns out, the poor also hate inflation. Screwed if you do, screwed if you don't. Dual mandate says that the Fed aims for as good employment as possible, while also aiming at a targeted 2% to 3% inflati…

I'm referring to core inflation because it shows upward trend across all prices, which means people without much disposable income will feel the pinch everywhere. High inflation also erodes savings, making it hard to get out of poverty, particularly the generational type. Unemployment is obviously a problem, but the labor market is super tight right now. There's room to fight inflation without a big dip in employment…

> I'm referring to core inflation because it shows upward trend across all prices

Hmm. I think you're mistaken. "CPI" is across all prices. "Core-CPI" is across most prices (ignores energy and food).

Turns out that poor people use electricity and eat food, at least in America. Upon first glance, it would seem that "CPI" is a better measurement. The issue, as I stated earlier, is that energy/food prices swing wildly in ways completely unrelated to economics. (Look: war in Ukraine... Food prices and Oil prices in peril. Its not "unimportant", its just unpredictable and unrelated to greater economic issues)

We ignore energy/food not because they're "unimportant", but because they're too volatile to draw conclusions from. Even without wars, there's famine, hurricanes, storms, disease, swarms, locusts, etc. etc. which wreck food/energy prices. Even with a perfectly balanced economy in a peaceful world, Mother Nature would still wreck us in an unpredictable fashion.

Re: The anti-inflation pivot of 2022

#82

Post by kagakuninja »

Nursie wrote: post #47
seydor wrote: post #19

> It is the most concerted effort to slow down growth and employment in the interests of monetary stability that we have seen since the 1980s. I see it as a war of generations. The boomers/genXers are eager to preserve their wealth and are once again dumping on young people. The 70s was a period of high inflation, it was also, according to piketty a period of high income equality for the world over. The central banks…

And now Gen X are included in the anti-boomer rhetoric. Great. As a tail-end UK Gen Xer, while I have some wealth I have built from working for over 20 years, I missed out on houses costing 2-3x your income just as much as the younger generations did. I'm not sitting on a million dollar property that I paid 10c for in 1972, largely because I wasn't born then...

Welcome the the club, mate. I'm a tail-end boomer (born 1963), and missed out on most of that gravy train boomers had. Apparently we are all selfish right-wing assholes.

Boomer hate is stupid. The enemy are the elites, corporations and billionaires.

Re: The anti-inflation pivot of 2022

#83

Post by t_mann »

mjburgess wrote: post #7

This article appears to take place in a universe where interest rates at central banks are at counter-inflationary levels. They've been inflationary for a decade, and continue to be so. With inflation at 10%, fears about "going too far with interest rates" make sense only *at least* north of 5%, and realistically, 8%.

The https://en.wikipedia.org/wiki/Real_interest_rate is defined as the nominal interest rate minus inflation. So with your numbers, nominal rates would have to go a lot higher than you suggest to result in positive real rates.

Re: The anti-inflation pivot of 2022

#84

Post by [deleted] »

Nursie wrote: post #47
seydor wrote: post #19

> It is the most concerted effort to slow down growth and employment in the interests of monetary stability that we have seen since the 1980s. I see it as a war of generations. The boomers/genXers are eager to preserve their wealth and are once again dumping on young people. The 70s was a period of high inflation, it was also, according to piketty a period of high income equality for the world over. The central banks…

And now Gen X are included in the anti-boomer rhetoric. Great. As a tail-end UK Gen Xer, while I have some wealth I have built from working for over 20 years, I missed out on houses costing 2-3x your income just as much as the younger generations did. I'm not sitting on a million dollar property that I paid 10c for in 1972, largely because I wasn't born then...

[deleted]

Re: The anti-inflation pivot of 2022

#85

Post by UncleMeat »

roflyear wrote: post #53
fennecfoxen wrote: post #38

Earlier quoted context omitted.

We've had many years of 0% rates and 2%ish inflation. A return to that status quo ante isn't exactly crushingly tight monetary policy. But perhaps inflation will fall before we hit 8%.

Inflation is 8% right now, not 10%. So 6% seems to be a good "target" - but many economists in the US are thinking that inflation will not stay at 8% (that is the hope...) so they are aiming for a rate that reflects a 5.5-6.5% inflation rate over 2023 - which is from anywhere from 3.75% (I think at this point this is too low) to 4.75% (higher than expected). This makes a lot of sense to me and I think we'll see aroun…

Inflation was 8% averaged over the past year. Right now, the calculation is much more complicated and we observed nearly net zero price change of the basket over the past two months.

Re: The anti-inflation pivot of 2022

#87

Post by ParksNet »

rel2thr wrote: post #11

Month to month inflation has been flat or near flat for some months now. It’s seems like we had a price spike in December/Jan for various reasons and now things have stabilized. If trend continues it seems we should be back in normal yoy inflation rates shortly once we start comparing against that post spike floor

The USA is emptying the Strategic Petroleum Reserve at a rate of 1 million barrels per day. Crude is typically extracted from the ground at about 15 million per day by that country.

When the SPR draining is finished (for midterms), upward pressure on energy prices globally will resume.

Re: The anti-inflation pivot of 2022

#88

Post by myth_drannon »

ericmay wrote: post #44
ddorian43 wrote: post #41

Earlier quoted context omitted.

Nah. Canada real estate has to take the hit.

What effect will that have? If some Canadians go underwater on mortgages, won’t others who were priced out be able to afford now? I guess some will lose jobs but what’s the big downside from a country perspective with having cheaper housing? Or are you concerned about immediate effects?

It's not only about being underwater on mortgages, but having your morgtage payment double (and maybe tripling soon...). Reddit is full of panicking homeowners who are starting to straggle with payments. This will have a wide effect on the whole economy because any discretionary spending will evaporate.

Re: The anti-inflation pivot of 2022

#89

Post by taolegal »

rel2thr wrote: post #11

Month to month inflation has been flat or near flat for some months now. It’s seems like we had a price spike in December/Jan for various reasons and now things have stabilized. If trend continues it seems we should be back in normal yoy inflation rates shortly once we start comparing against that post spike floor

> Month to month inflation has been flat or near flat for some months now

Inflation compounds and we've been at relatively high inflation for a while now. Of course the Biden admin will want to just normalize this sustained inflation.

People are effectively getting around a month of salary stolen from them. Transaction cost of a new job hurts most people & depresses wage growth (the obvious side-effect of monetary expansionism).

It's fair to say that we won't experience deflation since no central bank will allow that. And our high debt load prevents raising interest rates anywhere near the necessary amount, if you compare it to Volcker. The only responses they seem to have, in practice, are: print tons of money or print slightly less than that.

We're trapped in a debt spiral and my guess is that the world suffers enormously from central planning (artificially low interest rates in the modern era in order to finance government disasters) and the US suffers less than everyone else because of their global hegemony (reserve status), economy & geography.

Re: The anti-inflation pivot of 2022

#90

Post by UncleOxidant »

spywaregorilla wrote: post #78
buscoquadnary wrote: post #73

Earlier quoted context omitted.

This is the basic premise of this talk by Petar Zeihan https://www.youtube.com/watch?v=Wi_nFz1CJSI&t=2s

Pretty much. I think he's too eager to write off certain things to paint a wholly American picture, but he's generally got it right. The China story is not as clear. But the Europe picture is pretty plain. America is gonna eat it's lunch.

I'm not sure we want to (or intend to) eat Europe's lunch - we'd like a fairly strong Europe. But yeah, for now Europe's lunch will be eaten.
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