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The anti-inflation pivot of 2022

adamtooze.substack.com

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Re: The anti-inflation pivot of 2022

#91

Post by roflyear »

UncleMeat wrote: post #85
roflyear wrote: post #53

Earlier quoted context omitted.

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.

Correct.

Re: The anti-inflation pivot of 2022

#92

Post by CSMastermind »

A4ET8a8uTh0 wrote: post #61
nie100sowny wrote: post #34

> A generation of young people whose education was blighted by COVID lockdowns, will face a closed labour market. But shortly after, when all inefficient companies bankrupt, they'll wake up in the booming economy, finding places in perspective businesses. Crisis is good for the economy in the long term. I only worry that governments won't allow young trees to grow after the forest's fire.

Eh. It sounds great in theory, but in practice ( including in US, where all the more recent crises shown ) inefficient companies get saved if they are sufficiently connected or 'important' enough to the system writ large. I am not defending the practice, but I want to point to obvious flaw in the analysis since it diverges from reality somewhat ( I just noticed the inclusion of government involvement ).

The government bails out comparatively few businesses.

While many, myself included, dislike the practice, I don't think it happens on a large enough scale to make a significant impact on the economy at large.

Re: The anti-inflation pivot of 2022

#93

Post by slaw »

t_mann wrote: post #83
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.

> Since 2010, the U.S. Treasury has been obtaining negative real interest rates on government debt

Wikipedia says we had negative real interest rate since 2010, but it was only -2%, now we have -7% real interest rate.

Re: The anti-inflation pivot of 2022

#94

Post by endtime »

myth_drannon wrote: post #88
ericmay wrote: post #44

Earlier quoted context omitted.

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.

Are adjustable rate mortgages common in Canada?

Re: The anti-inflation pivot of 2022

#95

Post by dragontamer »

roflyear wrote: post #48
ddorian43 wrote: post #41

Earlier quoted context omitted.

Nah. Canada real estate has to take the hit.

Has to? Why?

It is common to have adjustable rates in Canada, while the standard in USA is fixed rates.

So in these times where rates go up, it makes Canadian homeowners suddenly have to pay more for their houses they're already living in.

Re: The anti-inflation pivot of 2022

#96

Post by fleventynine »

MisterBastahrd wrote: post #72
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…

Gen Xers are mostly still 30 years from retirement. This is the work of the ownership class who are seeing their profits nibbled away by employees who want to be paid a fair wage for their labor and aren't afraid to change jobs because millennials and gen Z aren't going to "go the extra mile" without being compensated for it.

There are millennials who are less than 25 years from retirement age.

Re: The anti-inflation pivot of 2022

#97

Post by reasonabl_human »

dragonwriter wrote: post #66
landemva wrote: post #65

Earlier quoted context omitted.

I agree with much of this. If we got the Fed out of the business of propping things up, the downturn would be quick and underperforming assets would change hands and quickly be productively redeployed. Instead, Fed in partnership with government will prop this up and protect the incumbents/existing winners.

> If we got the Fed out of the business of propping things up, the downturn would be quick and underperforming assets would change hands and quickly be productively redeployed Interesting belief. Things like the Long Depression challenge it, though.

Where do you folks go to learn on these macroeconomic topics?

Re: The anti-inflation pivot of 2022

#98

Post by endtime »

CSMastermind wrote: post #92
A4ET8a8uTh0 wrote: post #61

Earlier quoted context omitted.

Eh. It sounds great in theory, but in practice ( including in US, where all the more recent crises shown ) inefficient companies get saved if they are sufficiently connected or 'important' enough to the system writ large. I am not defending the practice, but I want to point to obvious flaw in the analysis since it diverges from reality somewhat ( I just noticed the inclusion of government involvement ).

The government bails out comparatively few businesses. While many, myself included, dislike the practice, I don't think it happens on a large enough scale to make a significant impact on the economy at large.

I don't really feel like I know much about this, so someone may point out an obvious way in which I'm wrong, but:

How do you measure the effects of the moral hazard created by the post-housing crisis bailouts circa 2008? Are major financial institutions incentivized to take outsized risks if they're too big to fail? How can we be sure that doesn't "make a significant impact on the economy at large"?

Re: The anti-inflation pivot of 2022

#99

Post by csours »

t_mann wrote: post #80
csours wrote: post #37

Earlier quoted context omitted.

I ask this question every so often on economic threads - Are jobs created or discovered? What field of study is most associated with "new jobs"?

The fields are macroeconomics and labor economics. I don't understand your other question, so it's hard to answer. What do you mean by "discovered"? Discovered by whom, the employer or the the employee? But you may be interested in knowing that models of labor markets are often based on matching models - you've got two groups (employers, employees) and everyobdy is trying to find {one,many} members of the other group…

> The fields are macroeconomics and labor economics

As I understand it, those are mainly concerned with reduction in labor costs.

Job discovery is a phrase used by Clayton Christensen to describe finding a job to be done. He uses it to describe finding a product to sell to people to perform some function in their lives - a job to be done by a product that you make. I'm using it as an alternative to the idea of "job creation" because I don't think that's real.

There is a certain political narrative about job creation and job creators. I tried to find support for it in academia and I could not.

I didn't want to put all this in my original question because then I would only get political replies.

---

About politics - Yes my question has some political motivation, but I am genuinely interested in the subject. My motivation is not to prove or disprove, but to learn. You don't have to believe that about me, but I do.

Re: The anti-inflation pivot of 2022

#100

Post by spywaregorilla »

UncleOxidant wrote: post #90
spywaregorilla wrote: post #78

Earlier quoted context omitted.

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.

Yes I agree on both points
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