Have we been thinking about inflation all wrong? • Hacker News Board

Re: Have we been thinking about inflation all wrong?

#331

Post by stormbrew » Fri, Feb 11, 2022, 1:15 AM UTC

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…

> 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.

I'm pretty sure that's been priced in for quite a while now, really. Interest rates have rarely gone up by much over the last 30 or so years, and for most of the last 20 they've been as close to 0 as they can go and still be called "interest".

Honestly, the big problem with this article is it acts like interest rates haven't already been abandoned as a tool of monetary control, and for a long time.

The way they 'control' it now is by using a kind of stimulus that keeps the markets from crashing without really adding much most people's income or spending. They just give it right to the finance industry and let it slosh around the market until the next crisis.

COVID's big variation on this is that some of that money went directly to people instead of businesses or the stock market, and it both caused some inflation and also kicked employers' asses into actually paying people enough to live on.

Re: Have we been thinking about inflation all wrong?

#332

Post by colinmhayes » Fri, Feb 11, 2022, 1:16 AM UTC

GeekyBear wrote: post #330

colinmhayes wrote: post #307

Earlier quoted context omitted.

Posting the m1 graph after they changed the definition is incredibly bad faith.

The data is the data. However, the graph certainly does show another inflection point after the start of the Biden administration, that has nothing to do with the previous change.

You can't compare the pre change derivative to the post change one, because they are literally measuring different things.

Re: Have we been thinking about inflation all wrong?

#333

Post by Melatonic » Fri, Feb 11, 2022, 1:19 AM UTC

The good side of inflation is that if your massively in debt then your debt just became less valuable. Your earnings probably did too but you can always try to get a raise or get a better job.

Re: Have we been thinking about inflation all wrong?

#334

Post by djur » Fri, Feb 11, 2022, 1:22 AM UTC

nine_k wrote: post #204

wolpoli wrote: post #179

Earlier quoted context omitted.

> It's important that errors be promptly corrected, and expectations about future policy remain properly "anchored" to the right target. It would be interesting to know if inflation expectation has become unanchored in the mind of the general public, because, ultimately, inflation expectation causes inflation.

I don't think that inflation is as easy to cause without a fresh supply of money. And you know who prints fiat money.

"Who prints money?" and "who creates money?" are two different questions with two different answers.

Re: Have we been thinking about inflation all wrong?

#335

Post by scottiebarnes » Fri, Feb 11, 2022, 1:24 AM UTC

colinmhayes wrote: post #325

scottiebarnes wrote: post #322

Earlier quoted context omitted.

Store of value means value is not easily eroded. Fiat money is not a good store of value because it is the easiest to erode (central bank changes a digit in a database, and new money exists). Tell me which country's fiat currency you'd be willing to hold for 100 years, and how much buying power you expect it to retain.

Fiat money isn't supposed to be held for long periods of time. That's literally the point. The government is incentivizing you to invest/consume it, otherwise we're in a liquidity trap. It's just supposed to allow people to to make transactions and be confident that the thing they are selling won't be worth 20% more tomorrow.

> It's just supposed to allow people to to make transactions and be confident that the thing they are selling won't be worth 20% more tomorrow.

Huh. I'm pretty sure the things people are buying costs 7.5% more compared to last year.

Those stupid people shouldn't have been holding money for a year, they should have bought that stuff a year ago.

Re: Have we been thinking about inflation all wrong?

#336

Post by MSM » Fri, Feb 11, 2022, 1:24 AM UTC

flavius29663 wrote: post #207

MSM wrote: post #39

Earlier quoted context omitted.

This administration has created a ton of money, but I also remember a previous administration going out of their way to literally put their name on the stimulus checks that were sent out following their trillions of dollars of stimulus passed...

I don't understand this bickering about Trump signing the checks, I got a check from Biden as well, with his signature.

Him signing the check doesn't matter to me either way.

However, there's some irony in the fact that we got money, printed out of nowhere, signed by the previous president, and yet there are people that act like inflation is solely a "current administration" problem.

Re: Have we been thinking about inflation all wrong?

#337

Post by Spooky23 » Fri, Feb 11, 2022, 1:24 AM UTC

hammock wrote: post #271

zozbot234 wrote: post #129

Earlier quoted context omitted.

Yup. The kernel of truth behind Austrian theories of macroeconomics/the business cycle is that interest-rate based policy setting is inherently an unstable system. If the central bank makes policy errors that fail to stabilize the underlying target (whether inflation, nominal income, exchange rates, whatever) the whole system starts spiraling away from that unstable equilibrium point, and the subsequently needed corr…

True to form, since the Fed was created, each new crisis has been bigger and sooner than the last.

Yes, it’s not like the good old days when you’d just hope JP Morgan was still in town to stave off depression.

Re: Have we been thinking about inflation all wrong?

#338

Post by pdonis » Fri, Feb 11, 2022, 1:30 AM UTC

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…

> 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

No, I didn't "go from" one of those criticisms to the other. I am making both of them. I am saying both of the following:

(1) The variation in the data can be explained by things we already know happen: seasonality and new variants emerging. So there's no need to hypothesize an additional effect just because you would like to claim that printing trillions of dollars of new money was a good idea.

(2) The model you are using to make your claimed prediction can't make any such prediction anyway, because it can't predict how long it should take for the effects of printing trillions of dollars of new money to show up in the data on COVID deaths. So even if we did see something in the data that could not be explained by seasonality and new variants emerging, we would have no reason to believe that it was due to printing trillions of dollars of new money.

It's perfectly possible for both of those things to be true.

> the effects we do see in the data (contradicting your first point)

My first point makes no such claim. Indeed, it says the opposite: it says there is variation in the data.

> Occam's Razor here says that the dump of money helped people, as that is by far the simplest explanation.

No, it isn't. The simplest explanation is the one that does not hypothesize any new effects over and above the ones we already know happen, like seasonality and new variants emerging. Both of these have been visible in the data throughout this pandemic. Indeed, both of these effects are well known and expected for any viral infection that causes respiratory illness. Or have you never heard the term "flu season" or been aware that flu vaccines have to change every year because of new variants?

Re: Have we been thinking about inflation all wrong?

#339

Post by Spooky23 » Fri, Feb 11, 2022, 1:30 AM UTC

e4e78a06 wrote: post #175

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.

Poor people are making _nominal_ income gains. Their real income is actually declining because wage gains aren't keeping up with inflation despite a red hot labor market. It's almost like rents rise to match incomes unless you build more housing. Rent control just means that the costs get offloaded to other things like the security deposit, application fees, and deferred maintenance. You can't regulate the market out…

Every student debtor is 7.5% less in debt in real terms than they were last year.

Many of the poor working people have made substantial gains. Dishwashers and line cooks in my area are making $30/hr in some cases now.

Nurses are a while other universe. My friends are taking a year off after one of them banked almost $400k as a visiting nurse. Our local hospital has 90% turnover in nursing and is almost exclusively agency nurses.

Professional workers are getting slower increases, but the dirty secret is that they are more productive and less needed. Even in technology roles, many areas are operated at bare minimum as hyperscale clouds absorb more and more workloads.

Re: Have we been thinking about inflation all wrong?

#340

Post by GeekyBear » Fri, Feb 11, 2022, 1:35 AM UTC

colinmhayes wrote: post #332

GeekyBear wrote: post #330

Earlier quoted context omitted.

The data is the data. However, the graph certainly does show another inflection point after the start of the Biden administration, that has nothing to do with the previous change.

You can't compare the pre change derivative to the post change one, because they are literally measuring different things.

There wasn't 1.9 Trillion dollars in additional Federal spending at the second inflection point in the graph of the money supply?

The Fed certainly expected at least some inflation from that much spending, although they seem to have missed the size of the increase.

>President Joe Biden's $1.9 trillion American Rescue Plan is contributing to elevated inflation but it isn't expected to overheat the economy, a new research paper from the San Francisco Federal Reserve concludes.

https://www.cnn.com/2021/10/19/economy/inflation-biden-stimu...