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

131–140 of 239 posts

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

#131

Post by squidlogic »

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 don't matter to ordinary people.

Can you provide some data on this assertion? I would be surprised to learn that the majority of ordinary people (assuming you mean something like 'net worth < $1MM USD') do not care about housing costs and car costs, which are both assets.

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

#132

Post by cleancoder0 »

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…

Is student debt with variable interest rates or just a fixed rate?

Because variable interest rates can get quite high due to inflation.

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

#134

Post by jbay808 »

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…

Agreed.

We've also seen that interest rate cuts amd QE are very weak at stimulating inflation, and very strong at stimulating asset values.

I'm coming around to the view that UBI should be used to fight deflation, and interest rates to fight inflation.

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

#135

Post by titzer »

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…

> I expect a lot of chaos

I am extraordinarily skeptical of essentially the whole comment except this. Economies are very complicated systems composed of many non-rational actors. All economics is voodoo IMHO. It's akin to try to predict the fluctuations in current on a motherboard's bus without having any conception of what program is running. Total guesswork on top of a system more complicated than human understanding.

We want to understand economies in terms of pipes and pressure and the complexity-equivalent of simple machines, when in reality the future is going to be dominated by black swans: crazy things like cryptocurrencies, cyberattacks, once-in-a-millenium climate/weather events, political revolutions, and fads.

Chaos, indeed!

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

#136

Post by vmception »

jhallenworld wrote: post #68
vmception wrote: post #29

Earlier quoted context omitted.

If you have hyperinflation then your stock market is going to overheat and bust through the top of your chart over and over again! :)) History books focus on the bread lines, but if you dig deep enough you can find the stock market charts and they are epic! The capital class made so much bank and dipped out, just remember to actually leave because the people come for you.

Yeah, it crashes up. Argentina is a good example of this for the their market in 1989-1990. https://www.ceicdata.com/en/indicator/argentina/equity-marke... (click max)

yeah, beautiful! have capital! never not have capital!

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

#137

Post by recursivedoubts »

avz wrote: post #127
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…

thanks

right, so the net present value of, say, a rental unit (or any ongoing productive investment) is the sum of an infinite number of payments which, if my math is correct here, is infinity (regardless of the recurring payment amount)

of course there is a risk discount as well, which, as I mentioned on a sibling comment, has been removed in many cases by the fed backstopping a lot of investments

there's a reason we don't see actual infinite prices, after all

my general point is that as interest rates get very low, npv gets really whippy and I expect that to be what we see going forward

just a guess and I'm not an economist, although experience suggests that's a point in my favor

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

#138

Post by Workaccount2 »

cjbgkagh wrote: post #82
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…

Wealthy people have access to lower interest rates, poorer people have to pay a risk premium. The advantage to the wealthy is exacerbated the closer risk free interest rates go to zero. Lower interest rates is hugely advantageous to the wealthy.

Never mind that when you reach a certain level of wealth, capital is your main source of more wealth. So capital becoming cheaper just goes straight to your bottom line.

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

#139

Post by recursivedoubts »

titzer wrote: post #135
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…

> I expect a lot of chaos I am extraordinarily skeptical of essentially the whole comment except this. Economies are very complicated systems composed of many non-rational actors. All economics is voodoo IMHO. It's akin to try to predict the fluctuations in current on a motherboard's bus without having any conception of what program is running. Total guesswork on top of a system more complicated than human understand…

> I am extraordinarily skeptical of essentially the whole comment except this.

You and me both!

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

#140

Post by lr4444lr »

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…

Tell the hundreds laid off this week at Peloton that asset prices don't matter. This stuff is a lot more interrelated than theorists with simple solutions like to think.
Post reply on HN