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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?

#81

Post by jrm4 »

wpietri wrote: post #66
jrm4 wrote: post #42

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.

If you compare the volatility of common cryptocurrencies with the volatility of pretty much any major currency, crypto is way worse. (E.g., GBP and US inflation are around 9%, this year, but Bitcoin and Ethereum are down by 70%). The most important thing for a store of value is that it actually holds value, but crypto has a poor track record there.

Sure. I'm less going by "history" and more by "first principles." Crypto provably does what it says on the tin to some degree, even if that degree is low. I wouldn't use recent past performance as a strong predictor of immediate future performance; thinking more long term possibilities.

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

#84

Post by WalterBright »

fladrif wrote: post #71
rnernento wrote: post #45

Earlier quoted context omitted.

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?

Because sometimes you lose the important details in the generalization. Counter example would be that the dollars created aren't spent depending on how they're distributed. If put under people's mattresses, put into the stock market, or sitting in a savings account, those don't enter circulation and increase the flow of money.

What happens to the dollars you put into a savings account or bought stocks with? Do they disappear?

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

#85

Post by patricius »

ForHackernews wrote: post #19
nsxwolf wrote: post #12

Print lotsa money, get lotsa inflation.

Yes, but why now? They have been printing money for a long time. This is a question I have never seen these inflation hawks answer: If printing money triggers inflation, why is there a 14 year lag on that effect?

There was no lag. You just didn’t see dramatic price increases in consumer goods. But you saw substantial increases in the price of stocks and real estate for instance. Also in healthcare and education.

Now new money is being spent on consumer goods while supply of goods and services have been severely restricted during the corona panic. Of course soaring energy prices is now also contributing.

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

#86

Post by wpietri »

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 with no backing.

You do realize that the US has had fiat money for decades, right? Including our longest period of low inflation, a run of nearly 4 decades. So it would seem history teaches us the opposite.

"For every complex problem there is an answer that is clear, simple, and wrong." -- H. L. Mencken

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

#87

Post by [deleted] »

zie wrote: post #28
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…

This is a very simplistic viewpoint. One could also argue that Inflation happens when people don't trust that their government will pay back all the money borrowed. The US govt has been on a spending spree as of late, but hasn't yet bothered to mention how they are going to pay for it. In 2008/2009, the US govt was also on a spending spree, but did promise to pay the bill eventually. Inflation didn't spike in 2008/20…

[deleted]

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

#88

Post by merely-unlikely »

IncRnd wrote: post #73

A good working definition of inflation is a general increase in prices and a fall in the purchasing value of money. There will generally be inflation when there are fewer goods to purchase or when the money supply increases. History teaches us that the government, often through good intentions, decreases the supply of available goods. There are many reasons this happens. Recently, people were told to stay at home, an…

A good example of unintended consequences is the proposed ban of US exports of gasoline. The intuition is that will boost supply in the US market, but that intuition fails for large chunks of the country. The East Coast is heavily dependent on imports due to a lack of pipeline capacity and US flagged ships (see Jones Act). So if exports are banned then international market prices go up, and East Coast imports become more expensive. Pockets located near refiners might get cheap gas but most of the population ends up worse off.

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

#89

Post by prottog »

UncleMeat wrote: post #41
rnernento wrote: post #36

Earlier quoted context omitted.

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.

The government is sandbagging CPI figures in order to lower its obligations that are tied to the official inflation rate, like Social Security payments. This isn't some underworld conspiracy theory; look at some of the academic discussion around ShadowStats.

If we take home prices, comparing 2000 to 2019 (before the pandemic-related craziness in the real estate market took place), they went up by 85% in that time period[0], compared to 48.5% in the CPI[1].

[0]: https://fred.stlouisfed.org/series/ASPUS

[1]: https://www.minneapolisfed.org/about-us/monetary-policy/infl...

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

#90

Post by jrm4 »

groby_b wrote: post #57
jrm4 wrote: post #42

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.

Why? What would make it more valuable than other stores of value? Bitcoin is roughly at end-of-2020 valuation. So is the NASDAQ. So is the S&P500. So is the Dow. In fact, for most other stores of value, "dies out in this bear market" isn't even a consideration - the statement is reflective of a (perceived?) higher volatility of the crypto market. If this is showing anything, it's that crypto currencies are just as vu…

The thing that makes anything valuable, which is people who believe that it's valuable? Markets aren't rational.

Like I said, I'm not using recent past performance to try to make predictions. I'm more considering first principles et al.

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