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It’s mostly a demand shock, not a supply shock, and it’s everywhere

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Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#241

Post by rsj_hn »

nuerow wrote: post #224
rsj_hn wrote: post #214

Earlier quoted context omitted.

I'm not the one ranting here. Biden has 1) put a moratorium on oil and gas leases in Federal lands and waters 2) cancelled one pipeline already and is about to cancel another (which means prices go up as trucks need to ship in the fuel) The above makes oil and gas more costly to extract and to ship, which raises the price. Moreover he is lobbying to remove all investment tax deductions for Oil and Gas (even though ot…

> The above makes oil and gas more costly to extract and to ship, which raises the price. I'm not sure if you're just expressing your personal concerns over what you believe can hypothetically happen, or whether you're grossly misinformed. Meanwhile, even though gas prices are breaking records all over the world, in the US they are still below the prices from 2010, back in the days no one in the US was concerned abou…

> I'm not sure if you're just expressing your personal concerns over what you believe can hypothetically happen, or whether you're grossly misinformed.

So do you have an argument to make, or just a stream of ad hominem followed by smoke and mirrors?

You point out that oil and gas prices are high all over the world with a price gap between gas prices in the US and the rest of the world -- because gas is shipped overseas in LNG form and it's a separate market, thus there is generally a gap between world gas prices and domestic gas prices -- to address this we do things like build pipelines from cheap gas countries (like Canada) to other countries and we build more liquefaction plants. But you take this price gap as some sort of vindication of U.S. policy, that perhaps Biden is keeping gas prices low?

So let me spare you the trouble. The facts that Biden has restricted Oil and Gas drilling, cancelled one pipeline and is about to cancel another, and is trying to discourage oil investment by taking away the investment tax credits from this industry -- these increase gas prices, and gas prices have been increasing. Just not as much as in other parts of the world. That is true even if there is there is structural gas price gap vis-a-vis the rest of the world and even if prices are not at the level they were before the fracking revolution caused them to tumble and be truly affordable to many.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#242

Post by paganel »

kovacs wrote: post #142
surrealize wrote: post #37

Demand growth is what we want. Our economy has been largely demand-limited for a while. Demand growth boosts GDP growth. Corporations are sitting on huge piles of cash, so they're not investment-limited. Any labor market tightness raises wages, which have been mostly stagnant for a long time (until very recently). Wage growth is also good. If wage growth squeezes profits, then that's also good from a wealth inequalit…

Organic demand growth is what we want, not this Frankenstein economy that's been created since at least 2008 if not earlier. Demand doesn't boost GDP, producing real goods and services boosts GDP. You can't spend your way to prosperity despite what any of the insane MMT economists might say. I agree that wage growth is good but not in the manner it's happening right now, through insanely easy money policies creating…

> not this Frankenstein economy that's been created since at least 2008 if not earlier

For what it's worth the US has economically out-competed the European Union in that time-frame, with the US basically following Keynes and the UE going the austerity route most of the time (and only at times, begrudgingly, also following Keynes as a result of the Americans doing it first). There's also China that has out-competed the US and the UE both, but that's another story.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#243

Post by randomsearch »

Find it bizarre that people need to come up with new explanations (in other comments) for something that is straightforward, well understood, and has been so for a century.

Money supply goes up. Provided that gets into consumer’s hands, demand goes up. Depending on the velocity of money, the slack in the economy is quickly eaten up. In a recession there’s more slack. Slack is things like unemployed workers, warehouse stocks, easily accessible resources.

Once the slack is gone, this causes prices to rise.

None of this requires consumers to change their habits. It’s just a slight marginal increase in spending by _a vast number of people_, which has transitive spending effects. This is Keynesian economics 101. The only thing that is surprising is the speed at which this has happened.

The proximate cause is printing money. A more interesting point: during the Obama administration there was a collective feeling that they had not printed enough cash during the 2008 crisis. I think what we’re seeing is an over-correction for that now in the size of stimulus packages. Very much a product of Biden being there in 2008 and now. It’s well intentioned but the mistake is to equate the two events; there was little risk in 2008 of over stimulating the economy, because the recession damped velocity and capital accounts and liquidity requirements ate up the new money supply.

World leaders have made a basic error and high inflation is the inevitable consequence. I’m not knowledgable enough to know what the level of inflation we can expect will be, but 5% feels nowhere near the peak. The real danger now is that we get into a wage-price inflationary spiral, which we’re beginning to see signs of. That spiral is incredibly difficult to stop, as the U.K. discovered in the 80s when Thatcher and Lawson threw the kitchen sink at it and it still took years to have any effect.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#245

Post by Jensson »

throwaway34241 wrote: post #234
Jensson wrote: post #226

Earlier quoted context omitted.

But the cost of all of those things are tied to trade prices. Lets say we halve the value of a dollar, then we effectively halve the salary of every American worker relative to the rest of the world, and also halve the value of the American consumption market. That would massively reduce the stock value of all companies that mainly sells to the American market, which includes most big American companies. It would als…

I agree that it would affect the US's relative dominance but I don't see why the living standards of Americans would be massively reduced. For things like medical care, housing, education etc those costs are mostly domestic so it seems like the cost of buying foreign currency wouldn't make a huge difference there. The stock market is denominated in USD so at least nominally you'd think it would be OK (although export…

Those are pre pandemic numbers though, US imports just ballooned after they printed money to pay for the stimulus packages while exports dwindled. Without the pandemic things could have been fine for a few more decades, but now things looks way worse. At the moment the deficit is 80 billion a month, or a trillion a year, and the deficit is strongly trending upwards rather than improving as the pandemic ends.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#246

Post by rsj_hn »

Jensson wrote: post #229
rsj_hn wrote: post #223

Earlier quoted context omitted.

Look, there are some table stakes before diving in with strong opinions, so the first thing to understand is the balance of payments identity, namely current account + changes in capital account = 0 http://www.econ.yale.edu/~ka265/teaching/UndergradFinance/Sp... Now if there was zero foreign investment, then the U.S. deficit spending a lot (please don't use the word "printing money") would cause demand for foreign go…

> If the demand for assets is zero, then the price of dollars is whatever it needs to be so that our deflated dollar makes our goods sufficiently cheap and foreign goods sufficiently expensive so that the stimulus spending does not cause a trade deficit. This ignores the fact that dollar is used as a reserve currency. Since the dollar is a reserve currency people will want to keep it stable, so even though USA abuses…

> This ignores the fact that dollar is used as a reserve currency.

No, it's my whole damn point. Please re-read and stop it with the US "abusing" China by forcing them to run huge surpluses against us. These discussions are not helped with such emotional outbursts -- we are talking about currency markets, not your kids' tuba recital.

>Well, they stop buying dollars, the dollar crashes,

Yes, the whole point is to get them to stop buying dollars. That's the goal. And no, the dollar doesn't "crash", the dollar falls to its true value, the one in which exports = imports. That is the only possible sustainable value of the dollar.

> USA keeps digging their hole ever deeper

The only "hole" the U.S. is digging is allowing China to purchase an unlimited amount of dollars. You think China allows the U.S. to do that? It is capital inflows into the US that need to be reigned in, just as China does not allow unrestricted capital inflows into its capital markets.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#247

Post by nitrogen »

88913527 wrote: post #158
grayfaced wrote: post #101

Earlier quoted context omitted.

Efficiency at a trade-off of resiliency. If you're talking about discretionary purchases, you probably value efficiency over resiliency. If you're talking agriculture, we should value resiliency over efficiency.

If hair clippers become mildly more difficult to procure over a 2-year window of an 80 year lifespan, all-in-all the efficiency seems to be worth it. I get 78 years of low prices for goods are that are useful to my everyday existence, but not critically vital and to which there are reasonable substitutes, if I need something in a pinch.

Human experience simply cannot be averaged over large spans of times while ignoring the extremes. Dipping into the red means permanent damage. Imagine applying this line of thinking to your bank account -- "sure I spent $500k in two years on fast cars and fancy bars, but averaged over 80 years of paying small amounts of interest, the bank should be glad to make the sacrifice of stability in favor of efficiency."

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#248

Post by pfortuny »

arthur5005 wrote: post #68

What this doesn’t really address is the why? Yeah there’s more money floating around, so perhaps more people want to spend it, but why? Most people aren’t getting materially more stuff or even need that much more stuff, consumption’s already god damn conspicuous. Maybe everyone can afford a jet ski all of a sudden? No, the stims didn’t really do /that/ kind of wealth expansion. To me, this still looks like the bullwh…

When money has no value (rates=0%) you are better off spending it rather than saving…

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#249

Post by Bud »

ODILON_SATER wrote: post #123
jolux wrote: post #91

Just a warning that this is an article by a hedge fund expressing a view of our current inflationary period that I would argue is heterodox among the economic mainstream. I suggest reading Paul Krugman and Claudia Sahm for dovish views, or Adam Ozimek for a more critical view. In particular, the idea that “inflation expectations” can perpetuate inflation via a self-fulfilling prophecy effect has been called into ques…

Claudia Sahm? Krugman? I rather listen to the hedge fund guys, at least they have skin in the game, don't they? Claudia Sahm is extremely partisan, and so is Krugman. You know it's going to be bad when we are starting to hear from the media that inflation is actually a good thing --because people have more disposable income to spend on things. First, it was just a blip, then they told us it would go away in half a ye…

Before attacking Krugman (who has a Nobel Prize in this subject, btw) and dismissing him out of hand in favor of random hedge fund guys, please cite evidence, any evidence, that his supposed "partisan" attributes have affected his work or made it less reliable or accurate.

From where I sit, Krugman has been right a lot more often than the competition over the last few decades.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#250

Post by RC_ITR »

medvezhenok wrote: post #162
RC_ITR wrote: post #54

Earlier quoted context omitted.

The trickiest question in business that noone seems to get right: Q: How much money flows into "X" market? A: None, money flows THROUGH markets.

Yes, although you could argue that money that was transferred from a checking account to a brokerage account has « flowed into » a market, at least for the time it takes to settle any trades and for the counter party to withdraw theirs (since it will not be used for consumption)

Lol you’re giving me an opportunity to be snarky and I will not turn it down. :)

Yes, when an item goes through something, it is briefly inside of that thing. I agree.

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