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The anti-inflation pivot of 2022

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Re: The anti-inflation pivot of 2022

#181

Post by andsoitis »

spywaregorilla wrote: post #30

I think the US (and Canada) just needs to ride the tide and let all the other boats sink. Pretty much everyone else is screwed. I think people are underestimating the second order effects of the US still having stable energy and farming capabilities. We'll see more stuff get done here and less stuff done elsewhere. Unemployment will be great here no matter what we do really. It will suffer in other countries. Though…

> US still having stable energy and farming capabilities

Don’t these industries depend on inputs from around the world?

Re: The anti-inflation pivot of 2022

#182

Post by bilsbie »

UncleOxidant wrote: post #173
Bombthecat wrote: post #162

Earlier quoted context omitted.

Europe missed the train and train doesn't reverse when missing the station.. Energy and infrastructure are the venes of Europe which clocked and overstretched to the max. Something will need to give and it already begins by small bakeries closing and more to follow.. It wont end well. I don't believe we will have any growth in Europe for the next 3 years. Who is going to invest in Europe if energy is literally unpred…

Yeah, bakeries are energy intensive. Methane generation from sewage would be one way to (relatively quickly^) replace some of the natural gas that was coming from Russia. And as a side benefit fertilizer could be produced from the same sewage. ^ even so it would probably take a couple of years to get methane generation going at scale.

On the other hand we’ve managed to have bakeries for 1000s of years before most modern energy sources were discovered.

Re: The anti-inflation pivot of 2022

#183

Post by lend000 »

A lot of analysts put excessive weight on interest rate activity. Especially when rates start rising into reasonable territory (closer to the inflation rate), the effect tapers. For example, if the Fed raised rates to 100% tomorrow, it would be almost the same economic effect as if they raised it to 1000%. It would essentially just stop all borrowing in the affected channels and cause banks to reduce lending to the point where they don't find themselves needing to take a reserve loan and pay that rate.

Arthur Hayes did an entertaining write-up of some of the other factors the Fed can use, two of which are either not being leveraged or actively conflicting with the interest rate hikes [0]. We could guess at political motivations for going soft on inflation until the election (while appearing to be hard on inflation) and then really ramping it up (including finally reducing the Fed's balance sheet and ramping up reverse repo sizes) in November when inflation continues, predictably, because the Fed keeps expanding its balance sheet and interest rates are still low (relative to most of its history).

[0] https://blog.bitmex.com/teach-me-daddy/

Re: The anti-inflation pivot of 2022

#184

Post by spaceman_2020 »

throwawaymaths wrote: post #158
spaceman_2020 wrote: post #152

Earlier quoted context omitted.

I'm a fan but he does get a little too blinded by America patriotism. His predictions about other countries start getting too comically apocalyptic to be taken seriously at times.

Well he does get credence for predicting invasion of Ukraine (which was also thought to be comically apocalyptic). Twice. He's been remarkably consistent in calling bad times for china and it's certainly gotten worse over there in the last year. I think there are a few other things that have lined up, like Sri Lanka collapse being a bellwether for his forecasts.

Yeah, he has been accurate. But he's also been screaming that China is going to collapse within this year, which seems very far fetched.

Do agree with his broad thesis though. America is in a very good spot.

Re: The anti-inflation pivot of 2022

#185

Post by UncleOxidant »

bilsbie wrote: post #182
UncleOxidant wrote: post #173

Earlier quoted context omitted.

Yeah, bakeries are energy intensive. Methane generation from sewage would be one way to (relatively quickly^) replace some of the natural gas that was coming from Russia. And as a side benefit fertilizer could be produced from the same sewage. ^ even so it would probably take a couple of years to get methane generation going at scale.

On the other hand we’ve managed to have bakeries for 1000s of years before most modern energy sources were discovered.

Wood is an option, but it will require a lot of wood to fire Europe's bakeries.

Re: The anti-inflation pivot of 2022

#186

Post by chernevik »

jmyeet wrote: post #8

Here's the lesson I want people to learn: we had 40+ years of stagnant real wages (overall; there are exceptions). What happened in the pandemic was: 1. People realized going into an officce to work was unncessary and even anachronistic for many jobs; 2. Employers like employees in the office as a form of control; 3. Employers made short-term decisions to lay off huge amounts of people (even after taking PPP loans fo…

> The pandemic created a situation where a lot of people could (and did) get their first real increase in wages in decades.

Er, no. See https://fred.stlouisfed.org/series/LES1252881600Q.

Real wages are up since 1980, with a particular spike beginning in Q1 2017 and ending in Q2 2020.

The onset of lockdowns clearly began a _decline_ in real wages.

Re: The anti-inflation pivot of 2022

#187

Post by mlsu »

I heard a while back the idea that interest rates are a proxy for stability.

That more stable societies support low interest rates, because in a stable society, money is more likely to be paid back 1, 5, or 10 years from now.

Does the sharp rise of interest rates in the past year indicate that we are existing a period of prolonged stability and entering a period of relative instability?

Re: The anti-inflation pivot of 2022

#188

Post by blagie »

roflyear wrote: post #54
refurb wrote: post #26

Earlier quoted context omitted.

Of course there needs to be a premium to lend money. Why would I lend someone money to get the same amount back (in real terms)? You'd need at least some premium to account for risk of non-payment, changes in inflation, etc. There doesn't need to be a consistent premium to borrowing money. So if I borrow $1M for 30 years right now the interest rate doesn't have to be 10% because most people assume inflation will come…

To safely park cash. Think government securities.

This is correct. If you have $100B, what are your options?

1) Risky return-yielding instruments, like stocks and bonds

2) Non-liquid assets, like land

3) A Scrooge McDuck giant vault full of cash

4) ... and so on.

In many cases, a negative interest account works better than any of the above.

Sweden was the first to employ them in 2009, with an interest rate of -0.25%. The world didn't implode, as people predicted. If I deposit $100B overnight at -0.25%, I've lost just north of half a million dollars for that night. That's enough to push me to look for other places to stash my money (stimulating the economy), but not enough to break me (assuming I have $100B, which unfortunately, I don't).

Critically, if the economy is collapsing, and you expect stocks to go down, removing other places to stash money can prop them up.

Re: The anti-inflation pivot of 2022

#189

Post by nostromo »

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%.

Besides tanking all asset prices initially - that actually could pave the way for more inflation.

US federal debt is 30 trillion dollars. If the federal government had to pay 10% interest on its debt, it’d require almost all of federal spending be paid on our debt.

Of course that’d never happen. Instead they’d just borrow more to pay the interest, which means more dollars would be minted and we’d print several trillion dollars a year in unwanted stimulus each year just paying our federal debt. (Or enter a debt crisis.)

Re: The anti-inflation pivot of 2022

#190

Post by fulafel »

spywaregorilla wrote: post #30

I think the US (and Canada) just needs to ride the tide and let all the other boats sink. Pretty much everyone else is screwed. I think people are underestimating the second order effects of the US still having stable energy and farming capabilities. We'll see more stuff get done here and less stuff done elsewhere. Unemployment will be great here no matter what we do really. It will suffer in other countries. Though…

Continued unabated fossils use indeed is sinking the other boats to get ahead short term, but hopefully enough people will disagree to get some less cynical climate cognizant energy policy going there.
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