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U.S. Inflation Accelerates to 40-Year High

wsj.com

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

#231

Post by bryanlarsen »

hackeraccount wrote: post #230
bryanlarsen wrote: post #50

There are many competing theories for this inflation: 1. The increase in money supply. 2. Supply chain bottlenecks. 3. Corporate greed & tech monopolies. 4. Fundamental supply constraints. (mostly in the housing sector) Anybody trying to tell you that it's only or primarily one of them has a political motivation. It's all 4, with the first 2 being primary and both being important. To effectively solve inflation we ne…

But arguably one solution - slowing the increase in the money supply - will fix all 4 of them. This isn't like a fire that needs fuel and air to keep going and stopping it can be done by taking either away; One of the two items is technically trivial (raise interest rates) and politically unpopular to do - the other is politically popular and technically challenging (fix supply issues). If history is any guide we'll…

Raising the interest rates increases the unemployment rate and 9/10 times causes a recession. That's cutting off your nose to support your face.

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

#232

Post by [deleted] »

abernard1 wrote: post #199
corpdronejuly wrote: post #193

Earlier quoted context omitted.

The job market seems to be tight because the folks hiring are unwilling to pay folks to keep up with the inflation we're seeing. It's not worth it for many people in a family to take outside work when childcare costs so much more.

How do you suppose to quantify that? How do you suppose the Fed should quantify that? How do you suppose the parent poster can justifiably say we're at full employment without a hand-wavy appeal to authority? I won't agree or disagree with your comment, I will just say that the parent poster's comments are all unsupported by data. Clearly, we had a realm only two years ago with (1) millions of people more in the labo…

[deleted]

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

#233

Post by corpdronejuly »

abernard1 wrote: post #199
corpdronejuly wrote: post #193

Earlier quoted context omitted.

The job market seems to be tight because the folks hiring are unwilling to pay folks to keep up with the inflation we're seeing. It's not worth it for many people in a family to take outside work when childcare costs so much more.

How do you suppose to quantify that? How do you suppose the Fed should quantify that? How do you suppose the parent poster can justifiably say we're at full employment without a hand-wavy appeal to authority? I won't agree or disagree with your comment, I will just say that the parent poster's comments are all unsupported by data. Clearly, we had a realm only two years ago with (1) millions of people more in the labo…

Ultimately I only have anecdotes. But I suppose we could look at the child-care sectors employment growth vs other sectors to see if it's recovering at the same rate as the rest of the economy.

Not very strong evidence but I think it would support the idea that more families are taking care of children in the household economy rather than the cash economy if it is recovering less quickly.

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

#234

Post by hackeraccount »

bryanlarsen wrote: post #231
hackeraccount wrote: post #230

Earlier quoted context omitted.

But arguably one solution - slowing the increase in the money supply - will fix all 4 of them. This isn't like a fire that needs fuel and air to keep going and stopping it can be done by taking either away; One of the two items is technically trivial (raise interest rates) and politically unpopular to do - the other is politically popular and technically challenging (fix supply issues). If history is any guide we'll…

Raising the interest rates increases the unemployment rate and 9/10 times causes a recession. That's cutting off your nose to support your face.

Absolutely. If the attitude of people were - 7% inflation? No problem, let's just not have an increase in unemployment or a recession then I'd at least be sympathetic.

Instead people say "I can whip inflation without raising rates, increasing unemployment or causing a recession." What do you get? A recession. Rising unemployment. And inflation too.

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

#235

Post by theincredulousk »

JaimeThompson wrote: post #90

I would think that the impact of rising prices would be reflected in reduced profits but it seems like most of the major companies are reporting rather large profits. Could it be some of the inflation is simply companies taking advantage to raise prices not because they need to but simply because they can?

Yes, that is exactly what they're doing. One example: https://www.wsj.com/articles/inflation-yellen-biden-price-in...

It's exactly as obvious as you think. E.g. Supply and labor input costs go up 5%, and they raise prices 10%. Wherever convenient they will say "We're sorry to raise prices etc." and then during earnings calls the CEO will say "We're expecting upward price adjustments to increase our net margins in Q4". You know, a euphemism for "we're raising prices and that means more profit"

Corporations, especially the the huge conglomerates with adequate pricing power etc. drive inflation, not suffer from it. The elephant in the room today is that the classic economic model that suggests "oh but another company will come with lower prices and re-balance things" is simply unrealistic. Good luck elbowing in on P&G or Unilever for shelf space in supermarkets, commercial contracts, etc..

The other trick everyone is probably about to see is that when the supply chain crisis recedes and inflation comes down, that the consumer prices curiously remain high. Maybe market forces may claw them back over years, but in the meantime it will just be another incremental wealth transfer from mass-market consumers -> concentrated corporate profits.

The corporations will also kick and scream to avoid raising wages for their employees spending more on their own products, while simultaneously giving huge payouts to executives and investors through share buybacks with their newly minted profits.

It's not even interesting to theorize about anymore. It's boring and obvious. Maybe this is what dystopia is?

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

#236

Post by alasdair_ »

californical wrote: post #214
DanTheManPR wrote: post #206

Earlier quoted context omitted.

I'm glad I bought my house while rates are very low. While sticker prices are very high right now, the price when factoring in very low interest rates on mortgages are much closer to a historical normal (although still elevated because of the lack of new construction over the last few years). I'm worried for new buyers in the coming years getting stick with these same high sticker prices, AND high interest rates.

But when interest rates go up, the price of homes will drop. Sal is an average American. Sal can afford $1500/mo for a mortgage, regardless of interest rates. Today, Sal can get a 3% rate, meaning they can afford a $440k mortgage (with 20% down payment). If interest rates rise to 6%, Sal can now only afford a $310k mortgage for that same $1500/mo. If Sal were the only person who had this problem, then Sal would have…

>Sal can afford $1500/mo for a mortgage, regardless of interest rates.

If interest rates are 15% like they were in the early 80s, Sal will be expecting salary increases of >15% a year to keep up, so that $1500/mo won't stay that way for long.

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

#238

Post by altcognito »

abernard1 wrote: post #199
corpdronejuly wrote: post #193

Earlier quoted context omitted.

The job market seems to be tight because the folks hiring are unwilling to pay folks to keep up with the inflation we're seeing. It's not worth it for many people in a family to take outside work when childcare costs so much more.

How do you suppose to quantify that? How do you suppose the Fed should quantify that? How do you suppose the parent poster can justifiably say we're at full employment without a hand-wavy appeal to authority? I won't agree or disagree with your comment, I will just say that the parent poster's comments are all unsupported by data. Clearly, we had a realm only two years ago with (1) millions of people more in the labo…

> How do you suppose to quantify that? How do you suppose the Fed should quantify that? How do you suppose the parent poster can justifiably say we're at full employment without a hand-wavy appeal to authority?

The FRED numbers saying who is seeking work is the data and far supersedes the source you're not even naming. I'm guessing you're upset because a certain % of the population isn't in the workforce. Well, that's not what full employment is. Random commentors are on the internet don't decide the "full employment" really is. The term full employment applies to those people that are seeking work and can't find it. Unemployment is quite low.

> We also have been told for two years that inflation like this was impossible

"Inflation like this". I'm amazed that we've returned to inflation levels that were the norm for many, many decades during times of relative prosperity, and inflationistas think that they've suddenly been vindicated. No, I'm sorry, 7% isn't the Zimbabwe Republic inflation you've predicted for decades ad nauseum, and no, we've not suddenly adopted a Soviet command economy.

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

#239

Post by naveen99 »

18nleung wrote: post #46
naveen99 wrote: post #18

Earlier quoted context omitted.

Volatility adds a real time value of money on top of nominal interest rates.

How does this work? (I thought volatility mainly affected the value of options, not the underlying cash flows?)

Options expire and decrease in value as time passes.
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