Inflation is at a 40 year high. What can history teach us? • Hacker News Board

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

#211

Post by sidewndr46 » Wed, Oct 05, 2022, 3:26 AM UTC

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…

I've never heard anyone tell me they were going to quit working because the US government wasn't printing money fast enough.

I have heard people tell me they weren't making enough money to cover their expenses on a month-to-month basis as a result of cost increases. These happen to correlate with inflation.

There is no way an economy would stop just because there was no inflation. Would Microsoft suddenly decree that if the US government won't print US dollars, it won't sell you a Windows license key? Even in the case of extreme deflation, it only becomes an issue when you have people trying to do weird things with physical currency like cut a penny into 1/4s and use it to buy different goods.

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

#212

Post by lowercased » Wed, Oct 05, 2022, 3:28 AM UTC

michaelcao wrote: post #207

Mark Twain once said that “History never repeats itself, but it does often rhyme. We should use the bottom up approach for investing stocks. I don't believe that macro prediction is useful. Nonetheless, we should prepare for the worst because the recession is looming.

I'm not sure Mark Twain actually said all that... :)

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

#213

Post by pkaye » Wed, Oct 05, 2022, 3:31 AM UTC

Negitivefrags wrote: post #208

wins32767 wrote: post #78

Earlier quoted context omitted.

California doesn't print money, the Federal Reserve does. California is required to balance its budget by law, like every state but Vermont. Nearly every state has more money than normal right now (some of it from high tax revenues due to nearly full employment, some due to federal stimulus), so they're finding ways of getting rid of the money. This is a second order effect from the much too large stimulus in 2020/20…

You would think that there would be something more useful to do with the money, like fixing the infrastructure.

Any excess taxes above some budget threshold has to be refunded to the public due to some proposition.

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

#214

Post by landemva » Wed, Oct 05, 2022, 3:31 AM UTC

jollybean wrote: post #183

WalterBright wrote: post #177

Earlier quoted context omitted.

> What instance decides, if some printed money does or does not have collateral? A great question. No actual decision is made, it's just that there are more dollars floating chasing the same value, so the price in dollars gets bid up.

This is misleading. There is a 'decision' made and there is always collateral - at the bank, and even at the Fed. The 'decision' that might be made, is what kind of assets to accept on the Feds balance sheet. At a private bank, they can do whatever they want with respect to what kind of assets they accept as collateral, within regulatory requirements. They have capital ratios to uphold, but if they take stupid risks,…

This is misleading.

The Federal Reserve assumprion of bank's underperforming loans was done in 2008 with funds created out of thin air. The value of the underperforming loans was significantly less than face value, which is why banks could not sell them on the market. The Fed gave full value with magic money it created.

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

#215

Post by bcrosby95 » Wed, Oct 05, 2022, 3:33 AM UTC

Syonyk wrote: post #21

> But if the main driver of inflation is the demand side, or inflation expectations, history indicates that a painful recession could be the only way to curb inflation. That's certainly the expected path forward, at least in the circles I associate with. "When the tide goes out, you find out who's swimming naked" seems a reasonable guess as to what's going to happen. Both at larger bank/investment firm scale and at t…

I went into college during the dotcom bust. Everyone told me I would be making peanuts. I'm pretty happy where I am.

I've lived my life trying to minimize the financial downsides. I want money for security, not to live the high life. I like my job, and don't feel the need to retire early - I would love to do it until I'm 6 feet under. I make a decent enough income, although not the level of many here. I bought a modest house (700k - hey, it's California) compared to what lenders wanted to lend me (1.3mil).

We could afford our expenses on two minimum wage jobs if need be. And that's with 3 kids.

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

#216

Post by abstrctComp » Wed, Oct 05, 2022, 3:34 AM UTC

Negitivefrags wrote: post #208

wins32767 wrote: post #78

Earlier quoted context omitted.

California doesn't print money, the Federal Reserve does. California is required to balance its budget by law, like every state but Vermont. Nearly every state has more money than normal right now (some of it from high tax revenues due to nearly full employment, some due to federal stimulus), so they're finding ways of getting rid of the money. This is a second order effect from the much too large stimulus in 2020/20…

You would think that there would be something more useful to do with the money, like fixing the infrastructure.

Why is stabilizing human beings economic anxiety not useful?

What theory of science dictates infrastructure is the best place to spend it? If the answer is none, it’s a purely social policy and you’re spewing politically correct memory. That infra spend is not an immutable law of reality means there are options other than “poison the sky with expansive vanity projects.”

Even then, there’s plenty of money for both, and human agency available for both. We can stop pretending money is what drives human invention and discovery. It’s politically correct spoken tradition since it’s not an immutable law; how we feel about other economic choices is a range of possibilities, not just the ones we have been raised to speak of

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

#217

Post by mgkimsal » Wed, Oct 05, 2022, 3:34 AM UTC

scarecrowbob wrote: post #206

taftster wrote: post #198

Earlier quoted context omitted.

Or we are forced to make them last longer.

That doesn't match my experiences; IME cars do last longer now. I have owned and spent substantial time driving a 1978 Buick Regal and a 1968 Westphalia VW van. I don't think that you're gonna see 200K miles out of either of those vehicles. The Buick had about 120K on it and was clearly on its last legs. It's likely been scrapped. The VW only runs because I sold it to a mechanical engineer who wanted to have a projec…

random anecdote: 2004 chrysler Sebring - nothing special, hit 180k before I had some 'unknown' engine problem. Mechanic spent a couple hours trying some stuff, and something worked, and I got another 60k miles out of it before it was time to let it go. That was over a 14 year period. If I was mechanically inclined, I probably could have done a little bit more on my own re: preventative/etc, to get a bit more out of it. Or... had I sunk another $2k in (estimate) to fix a bunch of stuff, who knows? I might have got another few years. But I went with something smaller, newer, better mpg, and probably overall better safety (12 years newer).

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

#218

Post by mixmastamyk » Wed, Oct 05, 2022, 3:36 AM UTC

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_…

Not really, it happened in the US in the 70s and early 80s. Not as high as in some countries, but enough to make a difference in behavior.

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

#219

Post by mixmastamyk » Wed, Oct 05, 2022, 3:39 AM UTC

WalterBright wrote: post #113

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…

> Of course, that is almost a tautology Inflation lags the money printing, so it isn't a tautology. > So what do you do to get that sweet spot of about 1-2% inflation? I'm amazed that propaganda of a sweet spot gets so heavily embedded into the popular wisdom. If there is a sweet spot for inflation, it's 0%. Note that the US had net 0% inflation from 1800-1914, while growing from subsistence farming to superpower.

^Became a superpower in the 1940s gearing up for WWII and then the only country left standing with brand new factories.

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

#220

Post by Bud » Wed, Oct 05, 2022, 3:40 AM UTC

sbf501 wrote: post #145

WalterBright wrote: post #122

Earlier quoted context omitted.

> Inflation occurs because the owners need to remain wealthy, hence prices go up everywhere. The fun thing about HN is I hear all sorts of unique economic theories not found in any econ book. P.S. If the wealthy (or everyone else) needs more money, and just raising prices will work, why don't they do that anyway? The answer is Supply & Demand, it's the Law, and is in every econ textbook.

> why don't they do that anyway? Ever heard of a company called Apple? They raise prices all the time because they can. Same with AT&T, or banks ATM Fees, or gas prices. Right now gas prices are at an all time high, and so are gas profits. > The answer is Supply & Demand, it's the Law, and is in every econ textbook. Also, that's Econ 101. Which isn't quite reality, it's idealized for simplicity because it is an intro…

Which prices is Apple raising? Have you gone and reviewed how much Apple's products cost in the 80s and 90s? You might want to do that, quickly, before the laughter gets so loud that you are deafened.