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

U.S. Inflation Accelerates to 40-Year High

wsj.com

Post reply on HN
Print view View original

121–130 of 239 posts

Re: U.S. Inflation Accelerates to 40-Year High

#121

Post by [deleted] »

pmorici wrote: post #92
bko wrote: post #60

Earlier quoted context omitted.

I don't think this can be solved by just tweaking interest rates. The fact is there are a lot more dollars in the field chasing the same number of products. Making it marginally more expensive to borrow money won't sop up enough dollars to prevent price inflation. Don't you love it how banks are not raising their interest rates on savings accounts? I remember in 2007 I was getting 4% on my savings accounts. There's n…

You can get 8% on stable coin deposits with Gemini Earn and BlockFi. After taxes it’s probably still a slight loss.

[deleted]

Re: U.S. Inflation Accelerates to 40-Year High

#122

Post by maerF0x0 »

commandlinefan wrote: post #38
marricks wrote: post #14

Inflation is a good thing for people with a lot of debt but not a lot of money. Think of the millions of student debt borrowers. Even if student debt isn't cancelled, it may get effectively cancelled one way or another. Which just goes to show, if WSJ or Bloomberg say something is bad, it may not actually be bad for you. Let's just hope the pressure stays up so wages keep on increasing. EDIT: I'd like to add, wage gr…

It also works out _sort of_ well for homeowners - at this rate, my house payment is going to end up being a minor inconvenience instead of my largest fixed payment. Of course, I'll still have to pay property taxes and insurance on the newly inflated value of the house.

the advantage gets priced into desirable markets. If interest rates go up, house prices go down. Why? because people cannot afford to mortgage as much when they pay more interest per dollar borrowed.

inflation (or the expectation for ones income to keep up with inflation) incentivizes spending more on houses (so long as the mortgage APR is below inflation) because the inflation is eating the debt YoY. So you may as well buy a lot of house.

That is until they raise the rates, or your income doesn't rise, etc.

Then see 2008.

Re: U.S. Inflation Accelerates to 40-Year High

#123

Post by skybrian »

InTheArena wrote: post #35
marricks wrote: post #14

Inflation is a good thing for people with a lot of debt but not a lot of money. Think of the millions of student debt borrowers. Even if student debt isn't cancelled, it may get effectively cancelled one way or another. Which just goes to show, if WSJ or Bloomberg say something is bad, it may not actually be bad for you. Let's just hope the pressure stays up so wages keep on increasing. EDIT: I'd like to add, wage gr…

Sucks for anyone retired - anyone who has saved over the years - anyone who wants to buy a house, or buy a TV. And it has a historical track record of getting out of control, and wiping out nation states. Not arguing that inflation doesn't have it's upsides. But it has some serious serious downsides.

It depends. If you're invested in the stock market, last year was very good for being retired. The S&P 500 was up 27%. (Most retirees will have invested more conservatively, but still.)

It's not good for being retired without having much retirement savings or not investing it, though.

Re: U.S. Inflation Accelerates to 40-Year High

#124

Post by randomdata »

djrogers wrote: post #58
eldavido wrote: post #27

Earlier quoted context omitted.

> a good reason to never let rates get this low in the first place My brother-in-law remarked that "the fed is overdue to raise rates". My reply: asset prices don't matter to ordinary people. You already know this, but the Fed's mandate is "price stability and full employment". Full employment is going great -- the job market is tight, low-end labor is seeing lots of wage growth, everyone who wants a job is getting o…

> What does matter is ... (rental affordability) Rental affordability is 100% correlated to asset pricing.

Rent reveals the true value of an asset. In a typical market asset value should correlate with rents, however in an asset bubble you would expect to see deviation where asset value increases beyond the rental factor.

Re: U.S. Inflation Accelerates to 40-Year High

#125

Post by weatherlite »

marricks wrote: post #14

Inflation is a good thing for people with a lot of debt but not a lot of money. Think of the millions of student debt borrowers. Even if student debt isn't cancelled, it may get effectively cancelled one way or another. Which just goes to show, if WSJ or Bloomberg say something is bad, it may not actually be bad for you. Let's just hope the pressure stays up so wages keep on increasing. EDIT: I'd like to add, wage gr…

> I'd like to add, wage growth is outpacing inflation[1]

This is based on a few months measurement yes? We have no idea what comes next over the coming 2 decades.

Re: U.S. Inflation Accelerates to 40-Year High

#126

Post by ldiracdelta »

dominotw wrote: post #26
marricks wrote: post #14

Inflation is a good thing for people with a lot of debt but not a lot of money. Think of the millions of student debt borrowers. Even if student debt isn't cancelled, it may get effectively cancelled one way or another. Which just goes to show, if WSJ or Bloomberg say something is bad, it may not actually be bad for you. Let's just hope the pressure stays up so wages keep on increasing. EDIT: I'd like to add, wage gr…

sucks for people like me with no debts though.

I'm not sure the psychic burden of debt is always worth missing the upside of inflation. I irrationally pay down low-interest loans even though it mathematically makes sense to invest those payments in something higher yielding. However paying off a loan to completion feels fantastic.

Re: U.S. Inflation Accelerates to 40-Year High

#127

Post by avz »

recursivedoubts wrote: post #7

We are in a tough spot. The Fed has held interest rates at 0 (negative, real terms) which makes all cash flows effectively infinite net present value. When rates are this low, small perturbations can be catastrophic for the NPV of, well, pretty much everything. I expect a lot of chaos with the economy whipping between inflation and deflation over the next few years as the Fed tries to ride the tiger. It's a good reas…

> The Fed has held interest rates at 0 (negative, real terms) which makes all cash flows effectively infinite net present value.

No, it doesn't. Net present value (NPV) of future cashflows is defined [1] as the sum over time periods of the ratio of the cashflow in the k-th period to one plus the discount rate raised to the power of k:

    NPV = sum_k r_k / (1 + i)^k
where i is the discount rate. Note that we are dividing by (1+i)^k, not by i^k. Thus, when i=0 the formula above simplifies to

    NPV = sum_k r_k
and NPV is just the sum of all future cashflows. No infinity enters the picture.

[1]: https://www.investopedia.com/terms/n/npv.asp

Re: U.S. Inflation Accelerates to 40-Year High

#128

Post by weatherlite »

scottiebarnes wrote: post #117
marricks wrote: post #14

Inflation is a good thing for people with a lot of debt but not a lot of money. Think of the millions of student debt borrowers. Even if student debt isn't cancelled, it may get effectively cancelled one way or another. Which just goes to show, if WSJ or Bloomberg say something is bad, it may not actually be bad for you. Let's just hope the pressure stays up so wages keep on increasing. EDIT: I'd like to add, wage gr…

Anyone with debt gets a win when inflation is high, as it basically shrinks their debt. Its a good thing in the short term for a specific group of people, but generally not good at all for the macro-economy or society in the long run. You see the consequences of low interest rates in other ways, ie housing prices.

> Anyone with debt gets a win when inflation is high, as it basically shrinks their debt.

There should be a few caveats - the interest rate has to be fixed (that's not always the case at all) and employment and wages need to go up as well (also not a given).

Re: U.S. Inflation Accelerates to 40-Year High

#129

Post by cjbgkagh »

yobbo wrote: post #54
marricks wrote: post #14

Inflation is a good thing for people with a lot of debt but not a lot of money. Think of the millions of student debt borrowers. Even if student debt isn't cancelled, it may get effectively cancelled one way or another. Which just goes to show, if WSJ or Bloomberg say something is bad, it may not actually be bad for you. Let's just hope the pressure stays up so wages keep on increasing. EDIT: I'd like to add, wage gr…

> Inflation is a good thing for people with a lot of debt Iff their income increases faster than their interest rate. > I'd like to add, wage growth is outpacing inflation Only applicable if it refers to median income (not mean income.)

The problem with the stats is that it could contain some major hidden factors; one is if the median income increased because people with lower income dropped out of the workforce. Another is increased income inequality. It could also be if wage growth was front-loaded with the pandemic and will peter out while inflation will continue unabated. And obviously median is much better than mean for a pareto distribution. Some of this might be easier to spot by looking at the quintiles over time.

People are being successfully brainwashed into believing high inflation will benefit them, either by increased wages or proxy debt forgiveness. It is utter madness.

I suspect the average person is seeing price increases beyond their pay so inflationary policy will become increasingly unpopular.

Re: U.S. Inflation Accelerates to 40-Year High

#130

Post by fallingfrog »

eldavido wrote: post #27
recursivedoubts wrote: post #7

We are in a tough spot. The Fed has held interest rates at 0 (negative, real terms) which makes all cash flows effectively infinite net present value. When rates are this low, small perturbations can be catastrophic for the NPV of, well, pretty much everything. I expect a lot of chaos with the economy whipping between inflation and deflation over the next few years as the Fed tries to ride the tiger. It's a good reas…

> a good reason to never let rates get this low in the first place My brother-in-law remarked that "the fed is overdue to raise rates". My reply: asset prices don't matter to ordinary people. You already know this, but the Fed's mandate is "price stability and full employment". Full employment is going great -- the job market is tight, low-end labor is seeing lots of wage growth, everyone who wants a job is getting o…

Asset prices do matter, but in an inverse way: ordinary people benefit when asset prices go down, especially housing. Of course, the government is doing everything in its power to make sure asset prices stay inflated, which tells you something about whose priorities they take seriously.
Post reply on HN