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Inflation is at a 40 year high. What can history teach us?

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Re: Inflation is at a 40 year high. What can history teach us?

#41

Post by UncleMeat »

rnernento wrote: post #36
ForHackernews wrote: post #24

Earlier quoted context omitted.

Ok, but why now? Why not 14 years ago, or 10 years ago, or 5 years ago? We've been in a zero-interest-rate, QE world for quite a while. Somehow I do not think it is as trivial as your 8th grade econ textbook might suggest.

I don't think you realize just how much of the money has been printed in the last 2 years. See fed balance sheet over time: https://www.federalreserve.gov/monetarypolicy/bst_recenttren... See M2 over time: https://fred.stlouisfed.org/series/M2SL

So? The argument is that inflation always happens when there is fiat printing. We printed a shitload of dollars between 2000-2020, yet inflation was low throughout that period. So the explanation is clearly insufficient.

Re: Inflation is at a 40 year high. What can history teach us?

#42

Post by jrm4 »

I'm no crypto fanboy by any means, but it's hard to not think that, if crypto doesn't completely die out this bear market, it's likely to be at least a somewhat significant factor in all of this.

Not saying it will save us all, but it seems like alternate stores-of-value are likely to be, well, valuable.

Re: Inflation is at a 40 year high. What can history teach us?

#43

Post by boole1854 »

seydor wrote: post #9
missedthecue wrote: post #3

Earlier quoted context omitted.

Who wants the poor to be poorer so long as the rich are a little less rich? How is that a good thing?

Is that meant to be ironic or not? It is a fact that [real] incomes have not risen for decades, and now , at least in europe, we are facing catastrophic consequences https://www.newyorker.com/news/john-cassidy/pikettys-inequal...

> It is a fact that incomes have not risen for decades

Is this a fact?

I just checked the data from the US Census Bureau [1]. Here is what I see (all numbers inflation-adjusted to 2021 equivalent [2]).

Note: I chose 1994 as the comparison year since that was as far back as the Census data I looked at goes.

1994 median individual income: $44,618

2021 median individual income: $60,008

1994 mean individual income: $58,005

2021 mean individual income: $83,039

[1] Source: https://www.census.gov/data/tables/time-series/demo/income-p... . I used the 'Worked Full-Time, Year-Round' data since that was available for both 1994 and 2021.

[2] Using the PCE inflation index, which includes energy and food prices: https://fred.stlouisfed.org/series/PCEPI -- I used January 1994 and January 2021 as the reference points.

Re: Inflation is at a 40 year high. What can history teach us?

#44

Post by pphysch »

DoingIsLearning wrote: post #13

Is there a historic precedent for Quantitive Easing? Is there a historic precedent for Quantitive Tightening? We have been at it since 2008 that means there is little historic data to draw any preemption from, we are on unchartered waters at this point.

A major aspect of QE is creating artificial demand for USTs (the Fed becomes a buyer), i.e. price support in the wake of the GFC. That is intimately related to the USD as global reserve currency, which is not something there is much historical precedent for.

In the past, reserve currencies died for many compounding reasons. QE is a novel scheme to prolong the USD's life as a reserve currency, and is only possible due to modern financial technology. It's definitely not sustainable and can only prolong the inevitable crash in demand for USTs as faith in Washington continues to wane globally. Kicking the can down the road.

Re: Inflation is at a 40 year high. What can history teach us?

#45

Post by rnernento »

lagrange77 wrote: post #26
WalterBright wrote: post #15

History teaches us that inflation will continue as long as the government keeps printing fiat money with no backing. For a historical example, the Confederacy had high inflation. The printing press was in Richmond. When Richmond was threatened with a siege, the Confederacy hustled the printing press out to get it to a new, safer location. Confederate inflation paused during the move. The reason is pretty simple - the…

> History teaches us that inflation will continue as long as the government keeps printing fiat money. That's what you hear a lot, especially these days. But is it really true? What exactly is the signal path, that leads from more money to a higher inflation? I guess, there is a fair amount of psychology involved.

I mean it's pretty straightforward right? There are now more dollars in play all after the same amount of goods, each dollar has less purchasing power. Why are you so quick to throw out the simplest explanation?

Re: Inflation is at a 40 year high. What can history teach us?

#46

Post by nichohel »

lagrange77 wrote: post #26
WalterBright wrote: post #15

History teaches us that inflation will continue as long as the government keeps printing fiat money with no backing. For a historical example, the Confederacy had high inflation. The printing press was in Richmond. When Richmond was threatened with a siege, the Confederacy hustled the printing press out to get it to a new, safer location. Confederate inflation paused during the move. The reason is pretty simple - the…

> History teaches us that inflation will continue as long as the government keeps printing fiat money. That's what you hear a lot, especially these days. But is it really true? What exactly is the signal path, that leads from more money to a higher inflation? I guess, there is a fair amount of psychology involved.

The "signal path" is simply the presence of more money, which means that purchasers have more money to pay.

Re: Inflation is at a 40 year high. What can history teach us?

#47

Post by bsaul »

mc32 wrote: post #31
ForHackernews wrote: post #16

Earlier quoted context omitted.

Assuming wages rise (they are), debtors benefit from inflation as their debts become less onerous in real dollar terms. Most Americans are debtors.

So, Brazil had it good when they had high inflation because debtors... Wait... doesn't CC rates go up during inflationary times? But Ok, maybe we should follow the example of Brazil, right?

It’s very different if your debt is in your national currency ( that will loose value if your country turns to shite), or in another currency. US can print money as long as it wants to pay its debts. It may have an impact on the interest rate for future debts, but at least it won’t default on the current ones.

Re: Inflation is at a 40 year high. What can history teach us?

#48

Post by sbf501 »

WalterBright wrote: post #15

History teaches us that inflation will continue as long as the government keeps printing fiat money with no backing. For a historical example, the Confederacy had high inflation. The printing press was in Richmond. When Richmond was threatened with a siege, the Confederacy hustled the printing press out to get it to a new, safer location. Confederate inflation paused during the move. The reason is pretty simple - the…

The more currency flooding the economy, the less wealthy the rich people are. Inflation occurs because the owners need to remain wealthy, hence prices go up everywhere. If it were possible for the top few to do with a little less, prices wouldn't have to skyrocket.

Re: Inflation is at a 40 year high. What can history teach us?

#49

Post by jollybean »

WalterBright wrote: post #15

History teaches us that inflation will continue as long as the government keeps printing fiat money with no backing. For a historical example, the Confederacy had high inflation. The printing press was in Richmond. When Richmond was threatened with a siege, the Confederacy hustled the printing press out to get it to a new, safer location. Confederate inflation paused during the move. The reason is pretty simple - the…

No - this is completely false.

As an economy expands, it needs more currency to facilitate growth.

A 'very hard currency' would strangle an economy with ugly deflationary issues.

Moreover - with a 'hard currency' the system will fail and collapse when it faces an existential shock such as an internal failure (bank collapse), war, pandemic.

The objective is to provide 'the right' amount of liquidity for the economy as needed, and, during times of crisis to be able to release enough liquidity to see the economy through the crisis.

Yes, the 'price will be paid' in later years for excess liquidity in terms of higher prices, but that's not necessary a bad thing, it's just accounting. It depends on the distortions. If the community accepts that 'yes, resources needed to be diverted to pay for xyz' then that's 'the cost' and it's going to be borne out in higher prices.

And yes, if Central Banks print wily nilly and provide too much supply this will result in hyper inflation.

But fundamentally, this idea that fiat = untenable is completely false.

Re: Inflation is at a 40 year high. What can history teach us?

#50

Post by 7speter »

ForHackernews wrote: post #24
WalterBright wrote: post #15

History teaches us that inflation will continue as long as the government keeps printing fiat money with no backing. For a historical example, the Confederacy had high inflation. The printing press was in Richmond. When Richmond was threatened with a siege, the Confederacy hustled the printing press out to get it to a new, safer location. Confederate inflation paused during the move. The reason is pretty simple - the…

Ok, but why now? Why not 14 years ago, or 10 years ago, or 5 years ago? We've been in a zero-interest-rate, QE world for quite a while. Somehow I do not think it is as trivial as your 8th grade econ textbook might suggest.

No one wants to talk about the actual problem, and will blame government printing money. What’s different now from any point in the last 12 years is that we are at full employment. Going over that causes the economy to overheat. As a study partner for an economics course put it (he took more economics than I did): too many hands competing for goods, the prices go up.
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