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?

#321

Post by abeppu » Wed, Oct 05, 2022, 7:27 AM UTC

ALittleLight wrote: post #257

unity1001 wrote: post #238

Earlier quoted context omitted.

> In California, people fitting certain economic criteria are now being issued $1000 checks for inflation relief. This is beyond ludicrous. Its not. Its happening in Europe too. Its a way to try to get people through the winter and avoid the energy crisis impacting ordinary people. That's what a government should do - take care of its people during extraordinary times.

That doesn't make sense though. You can't create energy by printing money. You just redistribute the value of your money. Maybe that's good - not clear to me why it's better to use inflation, which risks destabilizing the currency and punishes people who saved money, rather than straightforward taxes.

But in the Californian case, it's not printing money. The state government doesn't have the ability to make US dollars. The state must balance its budget, and cannot rely on debt the way the federal government does. The inflation checks are only possible because of a giant, historic budget surplus from 2021. Had inflation not gotten this bad, the checks would have still gone out in some other form (earlier in 2022 we were talking about it as a "tax rebate").

Though this action is redistributive, it is explicitly not about printing money. It is about spending excess tax dollars. You may have opinions about taxes in the state, and you may have opinions about redistribution, but overall if the state temporarily has a surplus (ie it shouldn't put this money towards increasing long running programs that will become a burden in future years), shouldn't it give that money back to the citizens in some form?

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

#322

Post by Gibbon1 » Wed, Oct 05, 2022, 7:29 AM UTC

RayVR wrote: post #320

compumike wrote: post #17

It may also help to see the cumulative inflation picture: https://totalrealreturns.com/s/USDOLLAR?normalize=end (disclosure: my side project) The 1974 and 1980 peaks from the article correspond to the steeper slope regions in those same years on my graph. (I'm plotting 1/[CPI-U price level], while the article is plotting d/dt [CPI-U price level]) On my y-axis is the purchasing power of a US dollar, relative to curren…

Great stuff! This is a nice demonstration of the variability of inflation and how under-trend we have been for many years. There was a strong push from some monetary policy people to move toward a longer term, average inflation targeting that would make the Fed have symmetric reaction functions to upside and downside inflation while attempting to keep a longer term average as the goal. One interesting explanation for…

My partial theory is oil production grew exponentially up till a bit after 1970. And before that the US had outstripped domestic supply and started having to import oil.

And you are right boomers household formation increased demand for stuff.

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

#323

Post by imtringued » Wed, Oct 05, 2022, 7:30 AM UTC

ALittleLight wrote: post #257

unity1001 wrote: post #238

Earlier quoted context omitted.

> In California, people fitting certain economic criteria are now being issued $1000 checks for inflation relief. This is beyond ludicrous. Its not. Its happening in Europe too. Its a way to try to get people through the winter and avoid the energy crisis impacting ordinary people. That's what a government should do - take care of its people during extraordinary times.

That doesn't make sense though. You can't create energy by printing money. You just redistribute the value of your money. Maybe that's good - not clear to me why it's better to use inflation, which risks destabilizing the currency and punishes people who saved money, rather than straightforward taxes.

>That doesn't make sense though. You can't create energy by printing money.

Think again. You can't create energy by cutting taxes either. The tax cut can only be spent on energy, exacerbating the problem by making wasting energy much cheaper.

A check on the other hand discourages people to buy expensive energy because they could be spending the subsidy on something else that isn't energy constrained.

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

#324

Post by adrianN » Wed, Oct 05, 2022, 7:33 AM UTC

fomine3 wrote: post #285

lmm wrote: post #184

Earlier quoted context omitted.

"Safely" is relative, but here in Japan kerosene heaters are totally normal in older homes.

I realized that kerosene heater without exhaust that often used in cooler Japan area is really bad after I bought CO2 meter. CO2 easily go 10000ppm if ventilation is a bit poor (even poor insulation). Kerosene heater with exhaust pipe seems to fine, but now heat pump is generally better option. Still it seems to good backup for not to be death by freeze.

I wouldn't burn anything indoors without having at least two carbon monoxide detectors in the room. Seems super risky to me.

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

#325

Post by ALittleLight » Wed, Oct 05, 2022, 7:35 AM UTC

adrianN wrote: post #319

ALittleLight wrote: post #312

Earlier quoted context omitted.

How would European governments printing more of their own currencies to give handouts to their citizens, resulting in inflation, resulting in their currencies becoming weaker, help buying energy from NA?

Not everyone gets the same amount of money, so that poorer people benefit from the scheme while richer people are more affected by the increased inflation.

Rich people are less affected by inflation because they have access to investment opportunities that aren't as affected - for example, I'm sure German billionaires have money in American hedge funds. The middle class are most negatively affected by the tax of inflation because they have enough money that having the value of it reduced by inflation is meaningful, but they don't have sophisticated investment instruments to hedge against inflation.

This takes us back to what I wrote originally - why is inflation the way to do this as opposed to just tax and spend? That is, why not create a specific tax and implement that and use the proceeds to pay for poor people's energy? Money printing is just a dishonest way to sneak a tax in on people who might not recognize it as a tax.

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

#326

Post by thebradbain » Wed, Oct 05, 2022, 7:36 AM UTC

deathanatos wrote: post #316

bcrosby95 wrote: post #215

Earlier quoted context omitted.

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 mode…

> We could afford our expenses on two minimum wage jobs if need be. And that's with 3 kids. Let's assume a $15 minimum wage. The housing one can afford on two such wages is $1,560/mo. On a $700k home, assuming 20% down, to repay the principal alone is $1,556/mo. A mortgage calculator says $3,800/mo once you have interest in there — or 73% of your gross income. And that ignores insurance & taxes. And those 3 kids.

I imagine that the OP probably has savings to fall back on (since they stress financial security), and more equity in the home than just the downpayment— not to mention that if they bought it not so recently (5-10 years back), the home value appreciation has likely been insane to still come out well ahead in even an 2008-esque crash, plus they could have refinanced at 2% fixed 30year rates in 2020-2021 drastically lowing their monthly payments even further, depending on how much equity they had.

Also, California just passed a law requiring minimum wage be $22 in some industries/companies of a certain size (and the next step will likely be rolling that out to all industries and companies, as they did with the $15 minimum wage between 2016-2020)

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

#327

Post by imtringued » Wed, Oct 05, 2022, 7:37 AM UTC

abeppu wrote: post #321

ALittleLight wrote: post #257

Earlier quoted context omitted.

That doesn't make sense though. You can't create energy by printing money. You just redistribute the value of your money. Maybe that's good - not clear to me why it's better to use inflation, which risks destabilizing the currency and punishes people who saved money, rather than straightforward taxes.

But in the Californian case, it's not printing money. The state government doesn't have the ability to make US dollars. The state must balance its budget, and cannot rely on debt the way the federal government does. The inflation checks are only possible because of a giant, historic budget surplus from 2021. Had inflation not gotten this bad, the checks would have still gone out in some other form (earlier in 2022 we…

Complaining about printing money is like complaining about the internal combustion engine in an electric vehicle. This is especially annoying when what people are really asking for is a speed limit. But since everyone keeps talking about the wrong thing nothing will get done just like how an ICE mechanic isn't going to fix your EV.

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

#328

Post by ALittleLight » Wed, Oct 05, 2022, 7:39 AM UTC

abeppu wrote: post #321

ALittleLight wrote: post #257

Earlier quoted context omitted.

That doesn't make sense though. You can't create energy by printing money. You just redistribute the value of your money. Maybe that's good - not clear to me why it's better to use inflation, which risks destabilizing the currency and punishes people who saved money, rather than straightforward taxes.

But in the Californian case, it's not printing money. The state government doesn't have the ability to make US dollars. The state must balance its budget, and cannot rely on debt the way the federal government does. The inflation checks are only possible because of a giant, historic budget surplus from 2021. Had inflation not gotten this bad, the checks would have still gone out in some other form (earlier in 2022 we…

I never said that it was inflationary in the California case. I don't think it is. As to whether or not the state should send checks to everyone - I don't really know anything about it and so don't have a firm opinion. My intuition is that individuals will likely spend the money better than the state would have, so that's good, and it's probably an indication that taxes are too high if the state has a big surplus.

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

#329

Post by [deleted] » Wed, Oct 05, 2022, 7:41 AM UTC

deathanatos wrote: post #316

bcrosby95 wrote: post #215

Earlier quoted context omitted.

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 mode…

> We could afford our expenses on two minimum wage jobs if need be. And that's with 3 kids. Let's assume a $15 minimum wage. The housing one can afford on two such wages is $1,560/mo. On a $700k home, assuming 20% down, to repay the principal alone is $1,556/mo. A mortgage calculator says $3,800/mo once you have interest in there — or 73% of your gross income. And that ignores insurance & taxes. And those 3 kids.

[deleted]

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

#330

Post by abeppu » Wed, Oct 05, 2022, 7:44 AM UTC

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...

Elsewhere in this subthread I pointed out that California is not printing money; it's spending surplus from 2021. California cannot print money bc we use US dollars and not CA dollars.

But I think a more interesting aspect of this is the cynical way language around the same idea has changed. The Franchise Tax Board is calling them a "tax refund", though your "refund" is based on your income being low, rather than your tax bill having been high. But the press has certainly been cooperative in calling them "inflation relief" recently, though the program was planned before inflation rose to the top of so many people's list of concerns. Politically, Newsome wants as much credit as possible for handing back a windfall of taxpayer money that came in mostly because of economic conditions he did not create and taxes that he did not introduce.

https://www.ftb.ca.gov/about-ftb/newsroom/middle-class-tax-r...