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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?

#351

Post by imtringued »

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…

That can't explain the era of extremely low inflation and it can't explain what is happening in Japan. It also cannot explain the Wörgl emergency money.

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

#352

Post by imtringued »

W3cUYxYwmXb5c wrote: post #132
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…

Monetary inflation is the increase in the money supply. Price inflation is one of the potential symptoms of monetary inflation. Too often people look at just one symptom to gauge the occurrence of the cause. Currently we are experiencing both, but people seem to want to ignore the inflation of the money supply, and scratch our heads over every other variable that affects prices.

Ok, now introduce negative interest rates on cash.

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

#353

Post by imtringued »

WalterBright wrote: post #99
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…

> perhaps it's more correct than your version. My version has lots and lots and LOTS of history backing it up. Did you know that the US had inflation when on the gold standard during the California and Yukon gold rushes? Did you know that Spain experienced massive inflation during the period when they were shipping the silver in S. America across the Atlantic? I could go on and on. > One could also argue that Inflati…

>But that is a one-time discount, not a cumulative process.

Providing liquidity is a cumulative process.

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

#354

Post by consp »

zie wrote: post #156
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…

I haven't dug into everything you are doing, but the biggest flaw I see seems to be that you assume Cash returns 0% nominal, i.e. that there is no return for holding cash. That is only true if you hide it under your mattress(and no deflation happens). Most people do not hide money under their mattress anymore, especially if they have large amounts of it. They put it in a bank account or in a MMF or some other interes…

Doesn't that practically mean the rich get richer and the poor stay poor? If it would be net 0 everything would stay the same?

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

#355

Post by imtringued »

WalterBright wrote: post #169
zie wrote: post #152

Earlier quoted context omitted.

I agree that there is lots of data that shows your version has some merit, but that doesn't mean it's 100% correct. I know of at least one instance where your version was incorrect(2008/2009). Again, I'm not arguing my version is correct, and I'm not even arguing that your version is completely wrong, because we literally do not know. Read some John Cochrane[0] if you want a more academic defence of my version(which…

> I know of at least one instance where your version was incorrect(2008/2009). One one hand, we have thousands of years of history with what causes inflation. On the other hand, we have one instance. I'd say one has to examine the one counterexample for something missed. (Your cite makes no mention of 2008/2009.) Extraordinary claims require extraordinary evidence. Recall my other post here about how making loans cre…

>One one hand, we have thousands of years of history with what causes inflation.

Yeah we know that inflation is caused by an insufficient internalisation of liquidity costs on the beneficiaries of liquidity.

This makes them destroy the supply of money that is available for transactions which then forces people to create new transaction available money to replace the loss.

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

#356

Post by magicalhippo »

JamesianP wrote: post #331
tsimionescu wrote: post #298

Earlier quoted context omitted.

1. There's no extra money - poorer people just consume less. 2. Because companies just take all of the difference as extra revenue, and prefer to increase salaries (if not just keep everything as profit) rather than reducing prices. Note that I'm not claiming that increased money supply doesn't cause inflation. It obviously does. I'm claiming it's not the only cause of inflation. It's sufficient, but not necessary fo…

It's not so simple though since there's indirect effects that immediately follow. 1. Everyone consume less. Even rich people have to buy less of something else to pay for the higher-priced gas. So demand goes down elsewhere driving down other prices. 2. If margins or salaries increase then it increases the incentive for competition to enter the market and compete on price.

> So demand goes down elsewhere driving down other prices.

Right, but given that those other things were non-essentials, it surely don't matter as much?

I mean, you need food. You don't need a lap dance. So you stop spending money on lap dances, using it on food instead. Prices on lap dances go down.

But you still need food, not lap dances, so the reduction in price for a lap dance doesn't make you suddenly start buying lap dances.

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

#357

Post by forgetbook »

mrb wrote: post #286
mikewarot wrote: post #245

Earlier quoted context omitted.

The F-150 is the lowest cost full size pickup truck Ford makes. If you can't put full sheets of plywood and 2x4s in it, it's not really a pickup truck. How Much Does the Ford F-150 Cost? The 2022 Ford F-150 starts at $29,990, which is the lowest base price in the full-size pickup truck segment. However, that's for the three-seat Regular Cab, so if you're looking for more room, take note of the Super Cab's $34,075 bas…

The 2022 Maverick has an engine literally twice more powerful than the 1962 F-100 (270 vs 135 hp). With your logic, picking on one tech detail of many, I could argue the 1962 model is "not really a pickup truck" with such a puny engine of weak towing abilities ! What this shows is that Ford merely decided to trade 18 inches of pickup box space for a second row of seat, a more powerful engine, and many other higher-en…

The one tech detail chosen is pretty relevant to the economic (as opposed to style) use-case here.

Being able to carry a 4x8' sheet is the difference between a productive vehicle or not for a significant chunk of the contracting tradesman market.

Sure, lots of users want trucks for other reasons where a short box does fine or a second row of seat is the winning feature regardless of box space, but the logic being applied for a full size bed requirement isn't arbitrary.

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

#358

Post by JamesianP »

vkou wrote: post #268
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…

Inflation will continue as long as the economy grows. If you want to experience deflation, all you need to do is start shrinking the real economy over the long term, and make everyone else aware of it. You'll also shut down lending, strangle spending, and remove all incentive to invest, but fortunately, the dragon hoard of cash that one has hoarded will start increasing in real value year over year.

You can also cause deflation by increasing productivity, which happens in a growing economy. More competition finds more efficient ways to produce.

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

#359

Post by rightbyte »

RickJWagner wrote: post #166
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...

Distributing more money is almost certainly unproductive. During Covid large checks were mailed out. Reddit was full of 'casual investors' throwing money at meme stocks that explained it was 'covid money' and thus didn't matter much to them. Student loan debt forgiveness is the latest madness. The end result? Those with the least money (the poor, and those on fixed incomes) are totally hosed. If you can't afford rent…

Handing out free money decreases the value of money for those that have money. The poor have hardly any money to be hit by inflation.

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

#360

Post by vladimirralev »

stingraycharles wrote: post #253
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.

Yeah in the grand scheme of things, this doesn’t impact inflation all that much, but it does help the people that need it most. Just like increasing the minimum wage to keep up with inflation does. Over the past year businesses have increased their prices all over the board, you can’t then just simply say “but inflation!!” when you want to help the people with some amount of compensation for this.

If you take it just one step further, the people "that need it most" really only need it in order to instantly donate it to the megacorps with pricing power at ever-increasing prices. The handouts help only in that instant and at the very next clock cycle that money is now in the hands of the megacorps. Printing money and handouts only help the top of the top in the pricing power hierarchy. If you want to actually help people you'd be doing taxes on excess. Everything else ends up in gigantic accumulation of wealth at the top in just a few steps down the game.
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