Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

yarn.pranshum.com

Post reply on HN
Print view View original

101–110 of 550 posts

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

#101

Post by WalterBright »

dasil003 wrote: post #59
zie wrote: post #28

Earlier quoted context omitted.

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…

There’s also a tipping point where inflation is self propelled because everyone is used to it so they just proactively raise prices on a regular basis. I experienced this growing up in Brazil in the 80s and 90s. It’s hard for Americans to relate, but essentially the mentality is spend/invest every penny you get before it loses value. Took some creative policy to break the cycle: https://en.m.wikipedia.org/wiki/Plano_…

> There’s also a tipping point where inflation is self propelled because everyone is used to it so they just proactively raise prices on a regular basis.

This is called cost-push inflation. Unfortunately, that theory doesn't explain where the extra dollars come from.

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

#102

Post by blevin »

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.

It depends on your admissible vintages for historic precedents. The Bank of Japan has been doing Quantitative Easing for over 20 years and has also extended it to include ETF share purchases.

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

#103

Post by virissimo »

foobarian wrote: post #20
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. Of course, that is almost a tautology. The devil is in the details. No inflation is bad because the economy stops. High inflation is bad because of erosion of purchasing power and negative impact on nearly every participant in the economy. So what do you do to get that sweet spot of about 1-2% inflation? I'd say rai…

> No inflation is bad because the economy stops.

How much net inflation was there in Europe between the Napoleonic Wars and the start of WWI? Do you think "the economy stops" is a fair description of this time period?

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

#104

Post by seydor »

boole1854 wrote: post #95
seydor wrote: post #58

Earlier quoted context omitted.

https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...

I have spot checked the data cited there to compare with the Census data... The 'median' earnings data they cite comes from the BLS 'usual weekly earnings' release. One can check that release on the bls.gov website. It is labeled "Series Id: LES1252881500". I compared Q1 1994 to Q1 2021, inflation adjusted using the PCE index: 1994: $750 2021: $983 That is an increase of 31.1%. The Census data which I cited previousl…

no increase in purchasing power though. what good is more money if you can't buy more things

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

#105

Post by jelliclesfarm »

1. we should gently force a recession. 2. reduction in money supply. 3. this can be achieved through higher interest rates. 4. there will be higher unemployment rates. 5. home prices will fall down and speculation will cool. 6. inflation should be capped as soon as possible.

I am sure America is on the job. For all it's shortcomings, noone had to starve due to bad economic policy in this country and not for decades. Having to file for bankruptcy and living less grand is not the same as starvation death level poverty. And this, btw..still exists in many countries around the world. In America(not speaking about other economies), we'll be fine. It will be weird ride for the next decade, but this isn't bad for America. If we were a corporation, we have sufficient moat.

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

#106

Post by WalterBright »

wpietri wrote: post #86
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

> You do realize that the US has had fiat money for decades, right?

Yes, since 1914 when the US switched to fiat money.

> Including our longest period of low inflation, a run of nearly 4 decades

The US had zero net inflation from 1800 to 1914. How much net inflation do you think happened in those 4 decades? What would a 1914 US dollar be worth today?

I'll help you out. $29.92

https://www.usinflationcalculator.com/

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

#107

Post by sofixa »

BitwiseFool wrote: post #70
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 have only a layman's understanding of financial markets, so keep that in mind. The explanation I've heard is that most of the QE in the 2010's was metered out in such a way that the average person wasn't receiving funds and the money wasn't quickly and directly going into the economy. The post 2008 QE purchased troubled assets and freed up institutions to lend money. It could be said that most of that QE money woun…

You're not entirely wrong, but you're missing a massive piece of the puzzle, a war that is impacting the global markets in multiple very important raw material segments (oil, foodstuffs, various metals, general instability due to war involving a nuclear power in Europe, not to mention the fact that the nuclear power is losing ans it's dictator is starting to sound desperate). When prices of many products go up due to raw materials price booms, you get inflation.

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

#108

Post by marcosdumay »

kelseyfrog wrote: post #52
foobarian wrote: post #20

Earlier quoted context omitted.

> History teaches us that inflation will continue as long as the government keeps printing fiat money. Of course, that is almost a tautology. The devil is in the details. No inflation is bad because the economy stops. High inflation is bad because of erosion of purchasing power and negative impact on nearly every participant in the economy. So what do you do to get that sweet spot of about 1-2% inflation? I'd say rai…

Why are interests rates as a money sink preferable to the more direct approach of simply sinking money out of supply via tax? They seem to amount to the same thing at the end of the day - siphoning dollars out.

Why governments don't do monetary policy by fiscal means? Well, because the central bank is the authority on monetary matters, and the congress the authority on fiscal matters. They don't even usually agree on what direction to go. (Things are this way on every democracy.)

But that specific question, nobody would take money out of the economy by fiscal means, even if they could. You would need huge fiscal changes to have the same effect of a small monetary restriction. And you don't do huge fiscal changes, ever.

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

#109

Post by jelliclesfarm »

beerdoggie wrote: post #54

In California, people fitting certain economic criteria are now being issued $1000 checks for inflation relief. This is beyond ludicrous. We have printed so much money, the only solution is to... print more? It's almost like it is all a sneaky backdoor to letting the government redistribute wealth without real oversight...

yes. even though technically california doesnt 'print money'. people are more important than economy. the 'redistribution' is happening to help the most vulnerable and that's exactly what surpluses should be used for..seems like a good use of money to me.

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

#110

Post by IncRnd »

foobarian wrote: post #92
ryanisnan wrote: post #62

Earlier quoted context omitted.

I'm not very versed in economics, but can you explain "No inflation is bad because the economy stops."?

There are some other comments that probably described it better, but as an example: let's say inflation is negative. That means it is good to keep cash. What happens is everyone starts hoarding cash under their mattresses and there is no liquidity around to help exchange goods, and everything slows down. With a small inflation, there is no incentive to hoard cash, and there is enough liquidity to make sure goods get…

But, the economy doesn't stop when there is no inflation or deflation. Well, I suppose that depends on your meaning of the word economy.
Post reply on HN