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US inflation jumps to 31-year high amid global supply chain crisis

theguardian.com

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Re: US inflation jumps to 31-year high amid global supply chain crisis

#191

Post by ignasheahy »

tbabb wrote: post #136
nightski wrote: post #57

Earlier quoted context omitted.

It's not the prices people are necessarily scared with, it's the rate of increase. It's higher than was anticipated. What's also concerning is that the velocity of money is really low while M2 money supply is very high. If the velocity picks up we could be in a world of hurt.

Maybe a stupid question, but if the velocity goes up, couldn't/wouldn't the Fed contract the supply? It seems like having large supply is desirable/correct when velocity is low.

Of course they would try to do it - first of all raising interest rates. However they are basically trapped now and it's questionable if they can still control situation. With current debt levels it might be extremely hard to raise rates or sell instruments they hold that were bought with printed money (to take off liquidity of the market). On top of that I would say all the rich and influential are well positioned for high inflation so it's speculation but I wouldn't bet that Fed will choose hard recession scenario...

Re: US inflation jumps to 31-year high amid global supply chain crisis

#192

Post by spiralx »

mattmoose21 wrote: post #41

Reading this article and going through these comments make me realize that while I know what these words are I have a real lack of understanding how this stuff works. This may not be the best place to ask but do any of you guys have any recommendations on where to learn more about economics? Preferably something with good historical context.

These primers from the Bank of England cover what money is and how it is created in the modern economy, which would give you a better understanding of the subject than 90% of posters on these articles :)

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

Investopedia is often where I go to find out more about particular topics, their articles are comprehensive and clear and you can dig pretty deep into most subjects. A good place to start is understanding the difference between fiscal policy (what the government does) and monetary policy (what the central bank does):

https://www.investopedia.com/ask/answers/100314/whats-differ...

Re: US inflation jumps to 31-year high amid global supply chain crisis

#193

Post by ItsMonkk »

tbabb wrote: post #136
nightski wrote: post #57

Earlier quoted context omitted.

It's not the prices people are necessarily scared with, it's the rate of increase. It's higher than was anticipated. What's also concerning is that the velocity of money is really low while M2 money supply is very high. If the velocity picks up we could be in a world of hurt.

Maybe a stupid question, but if the velocity goes up, couldn't/wouldn't the Fed contract the supply? It seems like having large supply is desirable/correct when velocity is low.

No. We live in a fiat currency world where every dollar is allowed to leverage 10x. This means that every dollar defaulted on results in the destruction of 10 dollars. Even during the housing crash of 2008, the money supply didn't contract because the government was forced to keep the money supply constant, and if they did not it would lead to cascading failures that would destroy the currency entirely. Allowing the money supply, given all of the moral hazard we've shown so far, would be suicide to the economy.

The Fed's next step is to slow down this inflation, and they will do so by raising rates. The Fed's dot plots shows that they will reach the rate of the 30Y Treasury bill sometime around 2024, but with this data they might bring that up to 2023. This will, like every single other time they set the Fed Funds Rate above the 30YT, cause a recession 6 months afterwards, which will bring down the inflation pressures. Problem resolved?

That's totally standard, and not yet the true problem. The problem is after that. Once we reach that recession the Fed quickly drops the interest rate and that brings us out of the recession. But interest rates are already so low, we've already pumped so many dollars into the system, that it might not cut it. We might get cascading failures, we might get stuck in a depression. This might be the end of the long-term debt cycle.

Re: US inflation jumps to 31-year high amid global supply chain crisis

#194

Post by alphabettsy »

BitwiseFool wrote: post #186
alphabettsy wrote: post #97

Earlier quoted context omitted.

> I sense that they are intentionally covering the situation in non-inflammatory way. We want more of this though right? I sense that many people can't understand the difference between opinions or editorials and news. I sense that many people actually enjoy the inflammatory way news is sometimes covered unless it's different from the way they'd like to see it. I sense that people can't understand how a single new ou…

>> I sense that they are intentionally covering the situation in non-inflammatory way. >We want more of this though right? Yes, in principle , but with the caveat that they don't do this in a partisan and selective way. For instance the whole "Kids in Cages" phenomenon is still happening but we never hear about it anymore - in fact they're just called "Child Migrant Facilities" by the press secretary and the media is…

> “Kids in Cages”

There have been facilities before, but this isn’t happening the same way it was where separation was on purpose. There are stories covering the current conditions, but I think you’re overlooking the fact that the prior administration and supporters seemed to embrace and encourage that narrative because they saw it as a deterrent.

> I think journalists are masters of rhetoric

You should meet the average journalist. Just like any other industry, the vast majority are unremarkable people. They’re not rhetorical masterminds. Like most people they see and write things from their point of view.

What’s more interesting to me is how some of the biggest names in media are obviously the rhetorical masters you speak of. I’m referring specifically to the TV and YouTube stars. Some of them are incredibly good at being convincing even if often contradictory or wrong. I also think video can be effective in ways text cannot be.

Re: US inflation jumps to 31-year high amid global supply chain crisis

#195

Post by ignasheahy »

dlp211 wrote: post #124
anm89 wrote: post #68

Earlier quoted context omitted.

Right but with massive debts and a fairly weak economy that is show signs of continuing to slow, this is exactly why the Fed is between a rock and a hard place. The smart mmoney is on rates staying low for a long time which shows you just how powerless the Fed is right now. They would LOVE to raise rates. They can't.

> Right but with massive debts and a fairly weak economy that is show signs of continuing to slow, this is exactly why the Fed is between a rock and a hard place. lol? whut? Stop talking about government debt, it's a stupid talking point used to beat people over the head with who want to govern by misleading voters into believing that government debt is the same as household debt. Also, what weak economy? Economic gr…

>Also, what weak economy? Economic growth is up, wages are up, unemployment is down, personal debt is down.

That usually happens in the beginning stages of high inflation scenario.

Also government debt is not the same as household debt, however it still matters especially at these high levels. There is a breaking point just no one knows where it is. 300% gdp? 500%? 700%. At some point it will break down.

Re: US inflation jumps to 31-year high amid global supply chain crisis

#196

Post by rsj_hn »

WarOnPrivacy wrote: post #190
rsj_hn wrote: post #172

Earlier quoted context omitted.

Poor people are a large majority ? Like, 2/3? 3/4? Median family income is 80K in 2021. The median HH income for 2021 will come out soon, but it will be north of 70K.

> Poor people are a large majority? Like, 2/3? 3/4? Over the last generation, indications are far over half experienced regular struggles. 2019 - nearly 70 percent of Americans have less than $1,000 stashed away https://www.statista.com/chart/20323/americans-lack-savings/ 2021 - Firehosing cash directly to the public helped some: 25% had no emergency savings, 26% say they have some emergency savings https://www.cnbc.…

> Over the last generation, indications are far over half experienced regular struggles.

Most people experience "regular struggles", by definition. Life is a struggle. But we have a way of defining who is poor and who isn't in terms of income, and it's good to use the same language as everyone else. The "large majority" of the U.S. is not poor. That's just obviously true from the income data I cited.

If that data is not enough, look at SCF wealth data here:

https://www.federalreserve.gov/econres/scf/dataviz/scf/table...

Median Household networth of 50-75 percentile - what you call "large majority" - is $240K. That's not poor.

Median Household networth of 25-49.9 percentile is $58K. Also not not poor.

Median (50th percentile) networth is $121K.

I really encourage more of a reality-based approach to throwing around phrases like "the large majority of Americans are poor".

Re: US inflation jumps to 31-year high amid global supply chain crisis

#197

Post by mywittyname »

option_greek wrote: post #132
mywittyname wrote: post #111

Earlier quoted context omitted.

> What happens when the number of dollars approximately doubles in 2 years as it happened? Do you think countries that don't use the USD will remain unaffected? People keep blaming this on the fed "printing money", but that logic only holds water when just the USA is affected. Everyone is experiencing inflation; it's a global phenomenon. Some countries have it even worse than the USA because their local production is…

The money fed prints doesn't stay in USA. It floods the entire globe trying to find the maximum return it can. That is the reason all stock markets everywhere are at record highs and commodities are continuing to push upward. As more economies are getting heated, many have started raising their own interest rates to reduce inflation.

At some point, we need to accept that The Fed is not God of the World Economy. They can have a major impact on the country's economy, and they can influence foreign markets to a degree, but they are not responsible for everything. They just don't have that kind of power.

If commodity inflation is caused by an over abundance of USD, then there would be a whole host of side effects from this. One of which, is as I said, price inflation localized to the USA. The second would be a weakening of USD relative to most other strong currencies. So let's look at that:

USD : Euro - Slightly weaker relative to 2020, but overall, right around the average strength over the past ten years.

USD : GBP - Same as the Euro.

USD : CAD|SGD|AUD - Weaker than 2019, but much stronger than the 10 year average.

USD : JPY|INR - Very strong

USD : CNY - much weaker than 2019, better than 2018, right about at the 10 year average.

It's there, but only slightly. And only after 2-3 years of crazy strengthening.

Re: US inflation jumps to 31-year high amid global supply chain crisis

#199

Post by hindsightbias »

boringg wrote: post #27

Hey everyone - we need to chill out for a second. Stop buying the knee jerk reaction of the media trying to freak everyone out and get some good advertising dollars. This is going to take until after the new year maybe Q1-Q3 timeframe to see if it is transitory. Reminder: we had an unprecedented global supply collapse followed by shutdowns and border closures for more than a year combined with historic levels of fast…

Lumber is cheap for anyone who can build their own home. Home Depot as packed this weekend.

Re: US inflation jumps to 31-year high amid global supply chain crisis

#200

Post by ignasheahy »

WarOnPrivacy wrote: post #158
anonymouse008 wrote: post #126

Earlier quoted context omitted.

> Reality is that the current number is off by reality quite a bit, real number has to be much higher. It's just math and the worst part... it can't be just reversed. I am now starting to wonder if the unrealized gains tax is the 'reversal' and the interdemensional checkmate on hidden wealth.

Are you recommending the world spend a bit of it's hoarded wealth, to allow less money to be printed? You're a monster.

Are you saying rich and powerful have grandpa checking bank accounts and just refuse to spend it? They are owning real estate, land, companies, resources - that's where their wealth it. In high inflation scenario current wealth gap will look like good old times... Slight inflation is good, but high inflation will be troubling to a lot of regular people.
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