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Have we been thinking about inflation all wrong?

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Re: Have we been thinking about inflation all wrong?

#231

Post by dragonwriter »

giaour wrote: post #192
dragonwriter wrote: post #154

Earlier quoted context omitted.

> Like another commenter mentioned, inflation screws over anyone who works for a wage. At worst, anyone who works for a fixed wage (and even then, the demand dynamics that create a fixed wage with inflation mean instead people just lose their jobs without inflation, because of the stickiness of nominal wages.)

> anyone who works for a fixed wage This includes anyone who works for minimum wage (assuming it's not indexed to inflation), and they are not likely to be able to handle a cut in real pay as easily as, say, middle class homeowners.

> This includes anyone who works for minimum wage

No, it doesn't, unless they have a contract fixing their pay at minimum wage; being currently paid minimum wage doesn't mean you don't get raises.

Re: Have we been thinking about inflation all wrong?

#232

Post by lumost »

jbay808 wrote: post #190
lumost wrote: post #180

Earlier quoted context omitted.

Counterpoint: Stability is a critical optimization criteria, but should be balanced with the need to maintain "dynamism". New ideas can't win if any time the entrenched hit problems they are bailed out. Maintaining employment is necessary for long-term societal stability, maintaining Goldman Sachs is not. In recent years our definition of stability shifted to one where market winners remain winners indefinitely.

I fully agree with your counterpoint, except that I don't think it's a counterpoint, because to my mind, such a focus on short-term stability (ie, bailouts) are a major driver of long-term instability! The reasoning for that seems inexorable to me. Once you lop off the deeply negative tail of any risk curve, market actors will gorge themselves on investments that have a positive average payoff but large systemic tail…

Tbh I think central bankers were betting that 0 interest rates would have inflated the economy out of bad debts. The pass on effect never materialized and asset managers went crazy.

If inflation hit 10% in ‘08 the banks would have been hammered on paper due to fixed income bets, but would never have been in danger of running out of cash due to new deposits.

Re: Have we been thinking about inflation all wrong?

#233

Post by imtringued »

dnautics wrote: post #132
jbay808 wrote: post #57

When it starts to get really burdensome to keep your promises, the idea of breaking them gets really attractive. But that doesn't come for free. It costs credibility. The cost of central banks breaking their inflation-control commitment when inflation starts running hot, is that the market starts pricing in their unwillingness to raise interest rates. This fuels a whole bunch of other inflation feedback loops, and th…

> If your goal is stability this is the thing to be questioned. Stability, at what cost? Is it worth tearing up the environment, tricking people into buying shitty disposable consumer products, financializing the economy, and stealing from the poor and unborn to give to the rich in the here and now? I don't really see anyone challenging the tradeoffs of stability in the economic discourse, it's just so often given as…

Consider the case of a depreciating asset like a factory. If the factory is not running and selling products then the factory will still incurr maintenace costs to keep it immediately deployable.

Consider that money carries no such depreciation. The owner will fire people and sell the factory parts to save himself the hassle of a depreciating asset. Workers lose their jobs. They incur costs of living like food even when they are unemployed. People depreciate just like capital does. The money capitalist abandons both his physical capital and his human capital. If you tell this story a marxist who hasn't read marx' second and third volume (specifically the parts that engels wrote) he wouldn't believe you.

Anyway, the conclusion is quite simple. Money is above everything. Therefore everything strives to be like money. Gold is permanent, human life is not, therefore we must grow the economy and reproduce faster than the rate we die, to create an artificial appearance of permanence.

Re: Have we been thinking about inflation all wrong?

#234

Post by xapata »

Nbox9 wrote: post #141
fennecfoxen wrote: post #131

Earlier quoted context omitted.

Yeah, if you're at all on the fence, or close to the fence, it's a fine time to get a mortgage, even if house prices have gone up somewhat. An excellent inflation hedge!

Rising interest rates is likely to have a significant downward pressure on home prices. Think carefully before entering a very leveraged position (like the 3.5% down FHA loan) in the current market.

Owner-occupied real estate investments don't suffer from margin calls. If the asset price crashes, what does it matter so long as I can afford the monthly payments? If the home value is "underwater" then I can walk away and rent for 7 years, if I think that's better value.

Re: Have we been thinking about inflation all wrong?

#235

Post by LoveGracePeace »

TameAntelope wrote: post #89
pdonis wrote: post #84

Earlier quoted context omitted.

> You don't think lowering healthcare costs, keeping sick people at home, and straight up giving parents of children cash resulted in fewer of the most vulnerable people in US society dying? I think this is a very nice theory which, unfortunately, doesn't seem to be borne out in the data. See below. > there absolutely was a substantial dip in deaths after the American Rescue Plan Act of 2021 was passed in March of 20…

So you go from saying what I claimed "isn't born out in the data" to saying there's no way of knowing when the effects kick in (though you do give some sense of timelines, which happen to line up pretty well with what is observed), to saying the effects we do see in the data (contradicting your first point) "can be explained by seasonality". Just sounds like you're making up whatever excuses you can to avoid giving c…

Occam's Razor doesn't apply by the merit of your correct use of the term "dump" implying excessiveness; whereas the correct application of Occam's Razor in a discussion, is no more than is required: https://towardsdatascience.com/stop-using-the-occams-razor-p...

Plus, you attacked the person instead of their ideas: "your convoluted mishmash of viewpoints".

Re: Have we been thinking about inflation all wrong?

#236

Post by oivey »

nickff wrote: post #183
lumost wrote: post #180

Earlier quoted context omitted.

Counterpoint: Stability is a critical optimization criteria, but should be balanced with the need to maintain "dynamism". New ideas can't win if any time the entrenched hit problems they are bailed out. Maintaining employment is necessary for long-term societal stability, maintaining Goldman Sachs is not. In recent years our definition of stability shifted to one where market winners remain winners indefinitely.

> "Maintaining employment is necessary for long-term societal stability, maintaining Goldman Sachs is not." The central banks rely on investment banks and other large institution to translate the low overnight rates into reduced commercial and consumer rates. The low interest rate, high inflation rate policies are extremely beneficial to the Goldmans of the world.

The low interest rate is beneficial to Goldman Sachs, but the high inflation rate is not. They are an investment bank that holds assets, and those assets are devalued by inflation. The the interest rate and inflation may have some correlation, but the last 15+ years have shown the correlation isn’t all that strong.

Re: Have we been thinking about inflation all wrong?

#237

Post by ska »

dnautics wrote: post #217
jokethrowaway wrote: post #199

Earlier quoted context omitted.

With deflation there would be no reason to invest your money, paralysing the economy. Some inflation is needed; what we don't need is https://brrr.money/

"no reason to invest your money" You mean with deflation people will suddenly no longer want for more money? Sign us up!

> You mean with deflation people will suddenly no longer want for more money? Sign us up!

No, they mean that people will want jobs and not find them. [addition: this is at least the orthodox view behind small inflation targets as policy, that on the whole it's the best trade off]

Re: Have we been thinking about inflation all wrong?

#238

Post by xapata »

rmason wrote: post #206

Most folks on HN aren't old enough to remember inflation as an adult and it's effects but I am. Nothing in my life hurt more people than inflation. If you were older and on a fixed income you were screwed, folks had to sell their possessions to survive. I remember farmers paying 20% interest to get loans for fertilizer, fuel and seed to plant their crop. The average person overnight had less buying power. The only pe…

40 years ago, there were many fewer stock market participants, and many more retirees on fixed income. Now it's relatively rare to retire with a fixed-income pension. More of us are shareholders now, with IRAs and 401ks.

Re: Have we been thinking about inflation all wrong?

#239

Post by imtringued »

naasking wrote: post #194
cool_dude85 wrote: post #171

Earlier quoted context omitted.

Why haven't I been reading this kind of hemming and hawing over the lack of full employment for, oh, the last 50 years or so? The fed has a mandate for that too, but somehow when they didn't manage to achieve it, I never heard about how society is going to collapse any minute now. Only when poor people are making income gains. Strange.

Full employment is not a desirable goal. There should always be some degree of unemployment because it indicates the labour market is actually working, with people moving between jobs, leaving jobs to get retrained, etc.

Full employment is a desirable goal because full employment is defined according to the desire to be employed. Someone who is leaving a job to be retrained is closer to full employment than an employee who is stuck in a part time role even though he is willing to work full time.

Someone who is working 40 hours but wants 20 hours is overemployed, not fully employed

Re: Have we been thinking about inflation all wrong?

#240

Post by xapata »

AnimalMuppet wrote: post #54
TameAntelope wrote: post #17

Earlier quoted context omitted.

The article's point is that it doesn't hurt the poor as much, because more poor people can find jobs, pay off their loans more easily, and they do make more money. Not to mention that the price of everything isn't going up a single number -- poor people can adjust their spending to account for the items that reflect the highest inflation, and focus on the goods that are least effected. The article isn't suggesting th…

But the article is wrong - it does hurt the poor. The reason is timing. Prices go up. Then, later , wages go up. That time gap is hard on poor people. The poorer they are, the harder it is.

Or the reverse: Wages go up, then prices go up. Inflation isn't guaranteed to be one way or the other. It's an aggregate measure.
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