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Inflation is differential and restructuring (2021)

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Re: Inflation is differential and restructuring (2021)

#181

Post by kqr »

bko wrote: post #128
simonh wrote: post #109

Earlier quoted context omitted.

So you seem to be adding your voice in support for the article which, er, directly contradicts your views about money printing and current inflation. Right now we know for a fact that current inflation is a genuine global shortage of actual stuff. Crude oil, cooking oil, wheat, Chinese products. Plus American government overspending, to be fair, but that's just a US phenomenon. Of course that's inconvenient if you re…

> Plus American government overspending, to be fair, but that's just a US phenomenon. That's not true. US spent the most, but Europe spent €3.2 trillion. US spent $12 trillion but they had to "shore up" a lot of global banks because that's just what they do. About half went into asset purchases and liquidity measures. I take a simple approach. What would you expect to happen if you just created trillions out of thin…

> Printing a lot of money doesn't always cause inflation, but any time there is inflation there has been a lot of money printing.

In fact, you can even argue that inflation causes a lot of money printing! When the government has trouble affording things that have gotten more expensive, they have to print more money to be able to buy the services they need!

(Of course, any responsible government would then also provide a drain for the corresponding amount of excess money -- e.g. tax it back out of existence shortly thereafter -- but somehow it's much easier to get elected when you promise to buy things, and not so much when you promise to tax the money away again...)

Re: Inflation is differential and restructuring (2021)

#182

Post by kqr »

lbriner wrote: post #89

The problem is that politicians and armchair critics prefer simple sound-bites like "government spending caused this problem" or perhaps "a lack of government spending caused this problem", I can't imagine how many frowns you would get in parliament/congress if your explanation of why inflation is so high was as long as the article, even if it was much more accurate than a sound bite. People don't like the fact that…

This is why I dislike the popularity contests we call "democracy" today. If you so much as hint at the complexity of questions, if you happen to admit that something is a trade-off, or that there are risks with a policy, you're out of the system in seconds.

Not that I have a better suggestion, mind you. Maybe sortition with an advisory panel of experts? But how would the experts be chosen?

It would be easy to draw from the top ranks of some guild system -- but probably also highly inequitable, as guilds tend to restrict the profession to their likes.

Re: Inflation is differential and restructuring (2021)

#183

Post by audleman »

goodpoint wrote: post #153
orwin wrote: post #135

Earlier quoted context omitted.

Okay, but creating money at will is not a bug, its a feature. I know there is this myth of the "no crisis ever during the gold standard era", but this is false. We had a crisis every ten years or so, sometime way bigger than the 2008 crisis despite the economies being less interconnected. And those crisis sometimes were entirely disconnected from production issues, unlike 2008 that is clearly linked with the conventi…

> creating money at will is not a bug, its a feature Despite the stupid downvotes, this is true. Of course the mechanism can be abused by printing money that are not backed by real growth (like in the US), but most countries don't do that.

In reality, only 13% of our planet’s population is born into the dollar, euro, Japanese yen, British pound, Australian dollar, Canadian dollar or Swiss Franc. The other 87% are born into autocracy or considerably less trustworthy currencies. 4.3 billion people live under authoritarianism, and 1.2 billion people live under double- or triple-digit inflation. [https://bitcoinmagazine.com/culture/check-your-financial-pri...]

Since 1920, at least 55 hyperinflation events have taken place, destroying savings and creating economic hardship. [https://assets.website-files.com/614e11526f6630959fc98679/61...]

A stable currency and strong property rights are the exception, not the rule.

Re: Inflation is differential and restructuring (2021)

#184

Post by orwin »

stevesearer wrote: post #136
orwin wrote: post #135

Earlier quoted context omitted.

Okay, but creating money at will is not a bug, its a feature. I know there is this myth of the "no crisis ever during the gold standard era", but this is false. We had a crisis every ten years or so, sometime way bigger than the 2008 crisis despite the economies being less interconnected. And those crisis sometimes were entirely disconnected from production issues, unlike 2008 that is clearly linked with the conventi…

From my limited knowledge, I don’t believe hard money advocates would say there are never any crises, but instead that they are shorter lived and not as large.

They are even more wrong than i thought then. The longest crisis was caused directly by hard money, it lasted more than twenty years.

And it was NOT a production or energy crisis. That what people seems to not understand. Yes, 2008 was a bubble, but a lot of bubble bursted since the 70s and none of the burst created a depression like 2008. The only reason 2008 was this big is because it was an energy crisis, almost four time worst than the oil crisis of the 70s (which is also the first energy crisis). The gold/silver standard manufactured crisis (not helped with fractionnal banking tbh) that had no reason existing at all. Just made people poorer by design. This wasn't even caused by a famine or a war.

Here is my advice: unless the expert/advocate is an historian specialist of the 19th century (or even better: specialist of foreign trade or economics during the 19th century), do not believe anything he said. Don't believe me either, but "Those who cannot remember the past are condemned to repeat it", so look it up, just read on how interesting where the time of hard metal, how easy it is to raise interest rate without impairing trade when you have a gold standard. 19th century financial crisis in the western world despite the huge production boost from pillaging colonies workforce and ressources...

Re: Inflation is differential and restructuring (2021)

#185

Post by nomel »

Guest42 wrote: post #175
vectorfrog wrote: post #171

I found this analysis wildly off-base. No classical economist would suggest that increasing the money supply raises all prices uniformly, but the author seems to think that by showing that different goods' price changes are not uniform, that some how proves inflation is not a monetary phenomenon. What? From Thomas Sowell's Basic Economics - "Inflation is a _general_ rise in prices. The national price level rises for…

It feels as though nowadays people feel entitled to make stuff up and have it be real through sheer force of repetition and words with multiple syllables. It's concerning that there are degrees in qualitative economics and non-programming computer science.

Well, everyone is entitled to write their thoughts/opinions. There's nothing wrong with that. It's a wonderful exercise that everyone should do!

The real questions is why do people go to these thoughts/opinions rather than the "expert" thoughts/opinions?

Re: Inflation is differential and restructuring (2021)

#186

Post by geoduck14 »

helen___keller wrote: post #127
lesam wrote: post #120

Earlier quoted context omitted.

Creditors definitely do lose money when they price debt at 2% but inflation runs at 7%. Talking about mortgages misses the larger fixed rate bond market (government and company long term debt).

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.

This makes me wonder if Fannie Mae and Freddie Mac have hedged all of the fixed rate mortgages they have lent money for.

Re: Inflation is differential and restructuring (2021)

#187

Post by helen___keller »

geoduck14 wrote: post #186
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.

This makes me wonder if Fannie Mae and Freddie Mac have hedged all of the fixed rate mortgages they have lent money for.

I don’t know about “all”, but Fannie and Freddie do indeed trade derivatives as part of risk management

Re: Inflation is differential and restructuring (2021)

#188

Post by dragonwriter »

yxhuvud wrote: post #112
onlyrealcuzzo wrote: post #61

Earlier quoted context omitted.

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.

The most common reason for hyperinflation is that the productive capabilities of society has gone down the crapper. That mean everyone is a loser. Some more than others, but even the debtors are losers in that situation.

> The most common reason for hyperinflation is that the productive capabilities of society has gone down the crapper. That mean everyone is a loser.

Correction: The most common reason for hyperinflation is that the productive capabilities of the local economy has gone down the crapper. That mean everyone entirely dependent on the local economy is a loser. But, in the places where hyperinflation has occurred, it's not uncommon for elites to have significant foreign investments.

Re: Inflation is differential and restructuring (2021)

#189

Post by simonh »

dinom wrote: post #173
simonh wrote: post #166

Earlier quoted context omitted.

Short term bills are serving a useful economic function and pay interest, because they are useful to people. When I was saving for a deposit on a house I kept the money in savings accounts and ISAs, again those serve a useful economic function and pay interest. The basic fact is that money is a financial instrument created and managed by a government for their own purposes. They create it and therefore obviously they…

Useful is in the eye of the behold... that's largely the point. No one can judge what or how "useful" something is besides the rightful owner of the asset. That includes cash (under a mattress), bonds, stocks, options, toilet paper, apples, bananas, etc. If short term bills are serving a "useful economic function" and "in-the-mattress savings" does not... then there must be some asset that serves "the most useful eco…

There’s no appeal to authority or need for me to know the ‘intrinsic’ value of things. It’s up to individual people what they will pay for things, or sell them for. That’s what a market is.

Short term paper pays interest because it’s issued by people who need short term money and are willing to pay for it. There’s no central authority setting its value, no objective criteria, no law of physics, just actual people choosing to pay for something they need. Same with equities, same with bonds. Same with money itself.

As I said even central governments don’t set the value of money, only it’s supply, people set its value. That’s why the currencies in Venezuela and Zimbabwe collapsed. The people selling things chose how many ZB$ they wanted to sell things for, and buyers decided how much they would pay, and it turned to be a lot because there was so much around.

Nobody needs you to keep money in a mattress. It doesn’t benefit anyone, so they won’t pay you to do it no matter how useful you think it is to you. An economy with a significantly appreciating currency is set up to incentivise not engaging in economic activity, not investing and not lending isn’t going to work very well because those incentives have to be paid by someone somehow. Why would they do that?

Re: Inflation is differential and restructuring (2021)

#190

Post by littlestymaar »

BirdieNZ wrote: post #20
littlestymaar wrote: post #7

Earlier quoted context omitted.

> Staple foods might cost 25% more, but hey, those TVs are down 20%, so yay! It's even worse than that because most of the time the TV price don't really goes down by 20%, but by 3% and hedonic adjustment makes it appear as if it went down by 20% in CPI because some people estimated that going from HD to 4K increased the value by 17% … That's how we get figures saying that computers cost 20 times less than what they…

> That's how we get figures saying that computers cost 20 times less than what they used to be when in reality it costs a little less than 2 times less. Can't you buy old PCs for 20 times less than a (second-hand) modern PC? I bet this Pentium 4 desktop cost around NZ$2000 new: https://www.trademe.co.nz/a/marketplace/computers/desktops/n... but now it's going for NZ$100.

> Can't you buy old PCs for 20 times less than a (second-hand) modern PC?

You can, but it's basically a paperweight at this point (I doubt you can even find a recent OS that boots it). Whereas back in the day, such a computer allowed me to play AAA games, browse the web, watch movies, and use the MS office suite for work or studies. Just as the average today's computer.

There have been gains (engineering or scientific calculation benefit a lot from the additional available computing power), but for most user, the improvement is at best marginal (the games' graphics are better, but I doubt it makes kids this days enjoy their games more than what I did when I was 12) or even nonexistent (what's the productivity gains from Word 2021 compared to Word 2000 for a student writing a thesis ?).

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