Inflation is differential and restructuring (2021) • Hacker News Board

Re: Inflation is differential and restructuring (2021)

#141

Post by Turing_Machine » Fri, May 27, 2022, 1:54 PM UTC

throw0101a wrote: post #138

Turing_Machine wrote: post #125

Earlier quoted context omitted.

> All currency is made up. Even gold, or bitcoin, or giant rocks Yes, but gold, bitcoin, and giant rocks can't be inflated at will, which is what the OP was complaining about. Simulated pieces of green paper can. Even with the formerly-used real pieces of green paper, there's a physical limit to how fast printing presses can run. With simulated pieces of green paper, you can just type some numbers into a computer and…

> Yes, but gold, bitcoin, and giant rocks can't be inflated at will, which is what the OP was complaining about. Governments have been fiddling with metal-based currencies going back to Ancient Rome and Han China: * https://en.wikipedia.org/wiki/Seigniorage Never mind what the general public has done as well: * https://en.wikipedia.org/wiki/Methods_of_coin_debasement#Coi... See Bernstein. > With simulated pieces of g…

"Fiddling with" is not the same as "can create arbitrarily without limit". You're still not addressing the OP's actual complaint.

Re: Inflation is differential and restructuring (2021)

#142

Post by dinom » Fri, May 27, 2022, 1:55 PM UTC

simonh wrote: post #115

ibeckermayer wrote: post #101

Earlier quoted context omitted.

Nonsense. Sure, deflationary shocks can be calamitous, like the Great Depression or the GFC. But steady deflation over time is logically the natural and good outcome of improvement over time—as technology advances and we get better at producing things, they should get cheaper, on average. Instead, our savings are buying us LESS over time, so that government can buy votes, fund wars, bail out defense contractors, phar…

Devaluing in-the-mattress savings is a good thing, hence all the many government schemes to incentivise small scale productive investment. Here in the UK that's through tax free consumer savings accounts like ISAs, but also pensions. Savings that are invested do work in the economy fund businesses, promote economic activity and aid job and wealth creation. Stuffed mattresses are a boat anchor on the economy. Having s…

What is "in-the-mattress" savings exactly... besides one person's savings that another wants to spend differently?

Who should be the ultimate judge of how capital is saved and invested? You? The government? What about the person who actually did the saving?

Taken to it's logical conclusion, saying that "devaluing in-the-mattress savings is a good thing" sounds a lot like "let's soak the rich" to me.... and it's a very slippery road to serfdom.

Re: Inflation is differential and restructuring (2021)

#143

Post by onlyrealcuzzo » Fri, May 27, 2022, 2:04 PM UTC

lesam wrote: post #134

helen___keller wrote: post #127

Earlier quoted context omitted.

Yes but what I’m saying is all fixed rate debt prices in interest rate risk. Any one creditor could be in a bad spot, but a creditor holding lots of fixed rate debt can / should be hedging against that risk. When we’re talking about institutions with billions of dollars (and not joe lending Bobby $20), I wouldn’t call them a loser unless they specifically failed to properly hedge their positions.

How would you hedge interest rate risk on trillions of dollars in US treasuries? Who takes the other side of that trade, and why? I don’t think that sort of hedge exists.

Isn't this the point of TIPS?

Re: Inflation is differential and restructuring (2021)

#144

Post by pakitan » Fri, May 27, 2022, 2:09 PM UTC

lucozade wrote: post #94

lottin wrote: post #51

Inflation is a change in the price level, i.e. an average. TFA argues that inflation is misleading because prices don't change uniformly, and therefore inflation doesn't fully explain every change in the price of every possible commodity and service. I think it's a straw man argument, because nobody claims that inflation fully explains changes in the prices of commodities. Instead, measuring inflation allows us to de…

That's not what he's arguing. He's saying that restricting money supply as a solution to inflation only makes sense if the average price inflation represented price movements well. His contention is that it doesn't so restricting money supply isn't a solution. I find that argument reasonably persuasive. His other point about inflation indices themselves being effectively useless, because of the inter price variabilit…

> His contention is that it doesn't so restricting money supply isn't a solution.

Restricting money supply may not be the solution. I don't think the author claims that restricting money supply can't be a part of the solution and a major part even. If he does, we have evidence to the contrary - 1980s in US. The inflation variation was even bigger then.

Re: Inflation is differential and restructuring (2021)

#145

Post by diffeomorphism » Fri, May 27, 2022, 2:16 PM UTC

aeternum wrote: post #5

The non-uniformity of inflation is interesting and has been brought up by many economists recently. I wonder if eventually the Fed will try to track inflation as a vector rather than a single number.

> I wonder if eventually the Fed will try to track inflation as a vector rather than a single number.

They already do, they just publish it as a single number for simplicity and ease of comparison. Multiply your vector by weights corresponding to "relevance" and you get PCE.

https://www.thebalance.com/personal-consumption-expenditures...

Re: Inflation is differential and restructuring (2021)

#146

Post by ryathal » Fri, May 27, 2022, 2:20 PM UTC

onlyrealcuzzo wrote: post #61

lordnacho wrote: post #39

Wow, this was the article I was looking for, it summarizes a number of thoughts about economics that I'd been having since the undergraduate days: - There's an authority about the field that really isn't deserved. The models are not made properly, and there's a lot of hand-waiving. I studied economics with a class of engineers and everyone pointed this out. - The pop-sci version of economics is a bunch of easy quips.…

The article talked a lot about winners and losers. It's interesting that there's no mention of debtors and creditors. The biggest winners in hyperinflation are people in massive debt. It's inflated away to nothing. The biggest losers are creditors for the opposite reasons. When inflation is just abnormally high (~8%), your debt doesn't get deflated to nothing, but you're getting a ~6% discount.

Debtors only benefit from inflation if their pay actually goes up. If you were making $15/hour 1 year ago and still making $15/hour now, you just get fucked.

Re: Inflation is differential and restructuring (2021)

#147

Post by helen___keller » Fri, May 27, 2022, 2:22 PM UTC

lesam wrote: post #134

helen___keller wrote: post #127

Earlier quoted context omitted.

Yes but what I’m saying is all fixed rate debt prices in interest rate risk. Any one creditor could be in a bad spot, but a creditor holding lots of fixed rate debt can / should be hedging against that risk. When we’re talking about institutions with billions of dollars (and not joe lending Bobby $20), I wouldn’t call them a loser unless they specifically failed to properly hedge their positions.

How would you hedge interest rate risk on trillions of dollars in US treasuries? Who takes the other side of that trade, and why? I don’t think that sort of hedge exists.

I don’t really know what specifically you’re referring to. I’m not aware of anybody trying to hedge trillions in treasuries in one trade. I’m not aware of anybody even holding trillions in treasuries except maybe a few foreign countries.

Hedging is done at the portfolio level using derivatives. This allows you to move your unwanted exposure to interest rate risk (or just about any kind of risk) to someone else in exchange for a premium. Whoever is taking that risk off your hands probably has a more diverse portfolio and wants the premium (ie their risk profile is different). In this manner, large fixed-rate creditors shouldn’t be largely exposed to rising interest rates, because they’ve been hedging that risk all along.

Re: Inflation is differential and restructuring (2021)

#148

Post by simonh » Fri, May 27, 2022, 2:23 PM UTC

dinom wrote: post #142

simonh wrote: post #115

Earlier quoted context omitted.

Devaluing in-the-mattress savings is a good thing, hence all the many government schemes to incentivise small scale productive investment. Here in the UK that's through tax free consumer savings accounts like ISAs, but also pensions. Savings that are invested do work in the economy fund businesses, promote economic activity and aid job and wealth creation. Stuffed mattresses are a boat anchor on the economy. Having s…

What is "in-the-mattress" savings exactly... besides one person's savings that another wants to spend differently? Who should be the ultimate judge of how capital is saved and invested? You? The government? What about the person who actually did the saving? Taken to it's logical conclusion, saying that "devaluing in-the-mattress savings is a good thing" sounds a lot like "let's soak the rich" to me.... and it's a ver…

In-the-matress savings are money that is not invested, such as cash stuffed in a matress.

This is the opposite of soaking the rich. The well-off generally have a very large proportion of their wealth invested in productive economic activities, with returns well above inflation.

Re: Inflation is differential and restructuring (2021)

#149

Post by ItsMonkk » Fri, May 27, 2022, 2:28 PM UTC

j7ake wrote: post #14

Inflation can be thought of as a high dimensional vector with dimensions equal to the number of objects you buy with money. Each person is affected by this inflation differently because they buy different things. To “solve” this problem, the government has decided to collapse this high dimensional object into a scalar number. And now we are seeing a divergence between this scalar number and the actual high dimensiona…

Are there any Personal Finance apps that gives you your own inflation number by tracking your spending? This seems like such an obvious feature but I've never seen it.

Re: Inflation is differential and restructuring (2021)

#150

Post by nagasadhu » Fri, May 27, 2022, 2:37 PM UTC

simonh wrote: post #115

ibeckermayer wrote: post #101

Earlier quoted context omitted.

Nonsense. Sure, deflationary shocks can be calamitous, like the Great Depression or the GFC. But steady deflation over time is logically the natural and good outcome of improvement over time—as technology advances and we get better at producing things, they should get cheaper, on average. Instead, our savings are buying us LESS over time, so that government can buy votes, fund wars, bail out defense contractors, phar…

Devaluing in-the-mattress savings is a good thing, hence all the many government schemes to incentivise small scale productive investment. Here in the UK that's through tax free consumer savings accounts like ISAs, but also pensions. Savings that are invested do work in the economy fund businesses, promote economic activity and aid job and wealth creation. Stuffed mattresses are a boat anchor on the economy. Having s…

That's basically saying u can't hold on to ur hard earned money after paying taxes. Give it to the government or some pension firm. And depend on the government and incompetent regulators to take care of you in your old age.