US annual inflation declines to 7.1% in November vs. 7.3% expected • Hacker News Board

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#101

Post by DonsDiscountGas » Tue, Dec 13, 2022, 5:34 PM UTC

mikewarot wrote: post #35

Reminder: Inflation is a vector, not a scalar. Ignore the abstraction at your own risk. Inflation is the rise in price of every single item for sale across a market, not just the "basket" of goods selected to be a good example, and subject to adjustment and correction over time. It is entirely possible that inflation that averages out to 10% for a year may double the cost of living for some people, and actually make…

Realistically, if there are goods that are deeply important to somebody, they will already be tracking that price. For most people that will be housing.

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#102

Post by A4ET8a8uTh0 » Tue, Dec 13, 2022, 5:36 PM UTC

runako wrote: post #96

A4ET8a8uTh0 wrote: post #86

Earlier quoted context omitted.

This may be the misconception that is driving this. Nothing will be cheaper ( decrease in price ). It will simply not appreciate in price as much ( price will increase less ). Agreed, especially in US where consumer spending drives the economy. Still, in US, for better or worse, a lot of personal wealth is stored in real estate ( which also manages to explain some US idiosyncrasies ). Deflation would 'destroy' equity…

> Nothing will be cheaper ( decrease in price ) I strongly recommend you review the definition of deflation. > Higher inflation means our debt is 'worth' less Inflation is a huge benefit to the debtor class, which includes most homeowners. The rhetorical tactic of focusing on high gas prices brilliantly misdirects people from asking the relevant question of why their wages aren't increasing at the same rate as inflat…

It is possible I am working with old mental models, but first search result defines it as:

"Deflation is a fall in the overall level of prices in an economy and an increase in the purchasing power of the currency. It can be driven by an increase in productivity and the abundance of goods and services, by a decrease in total or aggregate demand, or by a decrease in the supply of money and credit."

If prices increase ( albeit at a lower rate ), it is still inflation ( especially if purchasing power stays where it is, which it typically would ).

Can you elaborate on your thought process? It is possible I am misreading something.

Um.. I think I have to categorize that statement as wishful thinking. Federal minimum wage remains very low and even recent attempts to update it were shot down. I think 'eventually' is doing a lot of heavy lifting here ( it likely is true, but the time horizon on that statement is fairly long ).

I am open to discussion, but I am not convinced at this time.

[1]https://www.investopedia.com/articles/personal-finance/03091...

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#103

Post by slg » Tue, Dec 13, 2022, 5:37 PM UTC

cjbgkagh wrote: post #92

slg wrote: post #83

Earlier quoted context omitted.

I'm still not following your line of thinking. The nominal interest rate on holding cash is always 0%.

You’re right, I didn't read your question accurately. By cash I assumed interest collecting back accounts. The missing out of the opportunity to make risk free money is punishment enough. If people elect to do this then they don’t think it’s risk free and thus are paying a premium to reduce risk.

Ok, glad we are on the same page now. "Holding cash" is vague enough that it could still be in a bank. I thought it was clear what I was talking about since I made the distinction between savings accounts and storing cash under a mattress in my first comment. Savings accounts are risk-free in the same sense that US bonds are risk-free. There is technically some level of risk, but there would have to be a pretty unlikely turn of events to actually lose money. However, there are a whole lot of people out there that don't trust banks and don't trust the government.

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#104

Post by runako » Tue, Dec 13, 2022, 5:45 PM UTC

A4ET8a8uTh0 wrote: post #102

runako wrote: post #96

Earlier quoted context omitted.

> Nothing will be cheaper ( decrease in price ) I strongly recommend you review the definition of deflation. > Higher inflation means our debt is 'worth' less Inflation is a huge benefit to the debtor class, which includes most homeowners. The rhetorical tactic of focusing on high gas prices brilliantly misdirects people from asking the relevant question of why their wages aren't increasing at the same rate as inflat…

It is possible I am working with old mental models, but first search result defines it as: "Deflation is a fall in the overall level of prices in an economy and an increase in the purchasing power of the currency. It can be driven by an increase in productivity and the abundance of goods and services, by a decrease in total or aggregate demand, or by a decrease in the supply of money and credit." If prices increase (…

> "Deflation is a fall in the overall level of prices in an economy and an increase in the purchasing power of the currency..."

The first part of that sentence says that prices decrease. They do not increase at a lower rate, they actually fall in deflation. Deflation is negative inflation, if you want to think of it that way. Deflation is _not_ small positive inflation.

Since we are on a tech-focused site, the best example is that tech goods are typically deflationary. 1 TB of SSD costs less than it did 3 years ago. Imagine this happening to everything in the economy and you understand deflation.

The second part is maybe confusing you:

> increase in the purchasing power of the currency.

This says that if I have $100 and a good costs $10 today, I can buy 10 of them. If prices decrease (because this is deflation, prices go down) and now the good is $5, I can buy 20 of them with the same $100. The purchasing power of my $100 has increased.

> I think I have to categorize that statement as wishful thinking.

Average US wage in 1970 was about $6,200 (per year!). Then inflation spiked, prices rose on everything. Eventually that filtered back into the labor market because nobody will work if the wage won't buy food at the newly inflated prices. This will happen again, but it will take longer due to labor generally having less power in today's economy vs that of 1970. This will happen whether or not the minimum wage increases, but more of necessity -- laborers will not come to jobs that don't pay their bills.

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#105

Post by notahacker » Tue, Dec 13, 2022, 5:53 PM UTC

gumby wrote: post #73

geye1234 wrote: post #37

Earlier quoted context omitted.

Perhaps for businesses this may be true. It's hard to imagine for a consumer. I'm not going to delay the purchase of groceries, a fridge, a new roof or (if I'm feeling rich) a new car just because they may be 3% cheaper next year. I'm not saying this conventional wisdom is wrong, but it's not obviously right.

Actually, consumers very much do delay purchases, especially of big ticket items like white goods, cars, and houses in deflationary regimes, just as in periods of hyperinflation they do the opposite. This is easy to look up as there are many examples through history (especially of the latter — Brazil is an excellent and frightening example). Groceries, sure, but then as a consumer you are still impacted because suppl…

And indeed if consumers didn't delay purchases, we wouldn't see deflation.

Businesses don't collectively decide to reduce prices month after month out of generosity. They do it because the economy is in a position where none of them are selling enough at the current price. If everyone is selling less stuff at lower prices, then sooner or later the problem becomes the employees'...

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#106

Post by ClumsyPilot » Tue, Dec 13, 2022, 5:53 PM UTC

runako wrote: post #69

geye1234 wrote: post #37

Earlier quoted context omitted.

Perhaps for businesses this may be true. It's hard to imagine for a consumer. I'm not going to delay the purchase of groceries, a fridge, a new roof or (if I'm feeling rich) a new car just because they may be 3% cheaper next year. I'm not saying this conventional wisdom is wrong, but it's not obviously right.

> delay the purchase of groceries This will obviously not mean skipping eating, but will manifest more as fewer "special" meals like steak or lobster or whatever. > a fridge, a new roof If you are a homeowner, you know that most equipment failures are a decision to either repair or replace. In a deflationary environment, owners will bias toward patching things as long as they can. (The opposite is true in an inflatio…

> owners will bias toward patching things as long as they can

So if we live more sustainably, the economic system colapses?

Is that a bug or a feature?

I just had my landlord throw away the dishwasher because replacing the tiny pump was not worth the effort. Myfriend threw away a fridge because replacing a single part, the compressor, was not worth the trouble.

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#107

Post by notahacker » Tue, Dec 13, 2022, 5:54 PM UTC

wewtyflakes wrote: post #82

runako wrote: post #69

Earlier quoted context omitted.

> delay the purchase of groceries This will obviously not mean skipping eating, but will manifest more as fewer "special" meals like steak or lobster or whatever. > a fridge, a new roof If you are a homeowner, you know that most equipment failures are a decision to either repair or replace. In a deflationary environment, owners will bias toward patching things as long as they can. (The opposite is true in an inflatio…

All of those things seem okay, or even good.

Until your employer informs you that due to reduced sales, your salary will be falling even faster than prices...

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#108

Post by bryanlarsen » Tue, Dec 13, 2022, 5:55 PM UTC

nimbius wrote: post #47

josephcsible wrote: post #4

Remember that "declines" in this context just means that prices are going up slightly slower than they were before. It doesn't mean anything's getting any cheaper.

two tenths of a percent decline is barely a remarkable, let alone laudable achievement. This might be a sobering sentiment but US inflation is still out of control. ideal inflation is 2% and policy handbrakes like increases in the prime rate are too little too late as we should have sought percentage point increases a year ago as opposed to the fractional increments we saw last november. Arguably the half-percent mod…

Month over Month inflation was 0.1%, AKA 1.2% annualized. That sounds pretty close to the ideal inflation of 2% to me.

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#109

Post by bryanlarsen » Tue, Dec 13, 2022, 6:08 PM UTC

nostrademons wrote: post #59

sgerenser wrote: post #2

"The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1 percent in November on a seasonally adjusted basis, after increasing 0.4 percent in October, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 7.1 percent before seasonal adjustment." I feel like the rise of only 0.1% October->November is more significant than the 7.1% YOY headline number, which…

The MoM numbers are important, but the breakdown is also important. The breakdown is worrisome - MoM declines were almost entirely driven by gas and other oil-related commodities, and we're still seeing very significant inflation in food (0.5% MoM) and shelter (0.6% MoM). Food and energy are transient (prices can go down as easily as they go up), but shelter and wages are sticky (they very rarely go down, and usually…

Shelter and wages are lagging indicators -- they go up months after the impetus for their increase.

Oil prices doubled between 1975 and 1980 so it was still contributing.

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#110

Post by bko » Tue, Dec 13, 2022, 6:11 PM UTC

runako wrote: post #24

ChuckNorris89 wrote: post #17

Earlier quoted context omitted.

Can someone please school me on why that would be bad?

If the expectation is that everything will be cheaper next month than this month, that creates an incentive for everyone (and every business) to delay purchases as long as possible (because they will save money buying in the future). When everyone slows spending at once, it can lead to severe a recession or depression.

Why do people stand on line to buy the new iPhone every year when they know the price will drop significantly for that model in the next year? In fact all technology has steep depreciation (last year's TV model is significantly cheaper than when it first came out, even in absolute terms). But for some reason these are the hottest selling products