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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

#41

Post by pramanat »

naveen99 wrote: post #18
recursivedoubts wrote: post #7

We are in a tough spot. The Fed has held interest rates at 0 (negative, real terms) which makes all cash flows effectively infinite net present value. When rates are this low, small perturbations can be catastrophic for the NPV of, well, pretty much everything. I expect a lot of chaos with the economy whipping between inflation and deflation over the next few years as the Fed tries to ride the tiger. It's a good reas…

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

can someone explain this?

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

#42

Post by dahfizz »

jquery wrote: post #20
dahfizz wrote: post #15

Earlier quoted context omitted.

It's transitory, you right wing nut!!!

Isn’t some of this just a reversal of stuff like oil being negative, and supply chain shocks due to factories shutting down for Covid? Some of it is certainly transitory.

For some definition of transitory, all inflation is transitory. That's a pretty useless definition.

2 full quarters of inflation well beyond target levels (with an accelerating trend) goes beyond a transitory event, in my opinion.

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

#44

Post by recursivedoubts »

eldavido wrote: post #27
recursivedoubts wrote: post #7

We are in a tough spot. The Fed has held interest rates at 0 (negative, real terms) which makes all cash flows effectively infinite net present value. When rates are this low, small perturbations can be catastrophic for the NPV of, well, pretty much everything. I expect a lot of chaos with the economy whipping between inflation and deflation over the next few years as the Fed tries to ride the tiger. It's a good reas…

> a good reason to never let rates get this low in the first place My brother-in-law remarked that "the fed is overdue to raise rates". My reply: asset prices don't matter to ordinary people. You already know this, but the Fed's mandate is "price stability and full employment". Full employment is going great -- the job market is tight, low-end labor is seeing lots of wage growth, everyone who wants a job is getting o…

i don't think the fed's real mandate is price stability and full employment, those are nice to haves and they have to say that so they aren't run out of town on a rail but

their real mandate is: "protect the banks"

at this point, that may be changing to "protect their necks"

rock and hard place, we'll see what happens

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

#45

Post by bko »

rwj wrote: post #25
bko wrote: post #16

This is clearly a result of the monetary base expanding at unprecedented levels due to covid (~40% in 2 years). Around $12 trillion was allocated for covid measures and around $10 trillion disbursed. About half was legislative (income support, state local funding, loans) and another half was Fed mostly benefiting banks (asset purchases and liquidity measures). So far we've seen crazy asset inflation (weird the market…

Yes, clearly, because Covid hasn't disrupted anything else. /s I suspect that the causes are more complicated.

My belief is that printing trillions of dollars and growing the money supply by 40% in a short period of time has impacted asset prices, and now consumer prices.

If covid impacted other things (i.e. business), why are all asset prices up well above pre-covid levels.

The impact of the money printing outweighs any other covid impacts. Nothing covid related should tell us that Manhattan real estate should be above pre-covid levels w/ work from home, lockdowns and overall decrease in quality of life. It's the money supply

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

#46

Post by 18nleung »

naveen99 wrote: post #18
recursivedoubts wrote: post #7

We are in a tough spot. The Fed has held interest rates at 0 (negative, real terms) which makes all cash flows effectively infinite net present value. When rates are this low, small perturbations can be catastrophic for the NPV of, well, pretty much everything. I expect a lot of chaos with the economy whipping between inflation and deflation over the next few years as the Fed tries to ride the tiger. It's a good reas…

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?)

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

#47

Post by mberning »

eldavido wrote: post #27
recursivedoubts wrote: post #7

We are in a tough spot. The Fed has held interest rates at 0 (negative, real terms) which makes all cash flows effectively infinite net present value. When rates are this low, small perturbations can be catastrophic for the NPV of, well, pretty much everything. I expect a lot of chaos with the economy whipping between inflation and deflation over the next few years as the Fed tries to ride the tiger. It's a good reas…

> a good reason to never let rates get this low in the first place My brother-in-law remarked that "the fed is overdue to raise rates". My reply: asset prices don't matter to ordinary people. You already know this, but the Fed's mandate is "price stability and full employment". Full employment is going great -- the job market is tight, low-end labor is seeing lots of wage growth, everyone who wants a job is getting o…

Asset prices matter a lot to people that want to buy homes, cars, make investments, etc. unless you are a WEF/great reset acolyte.

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

#48

Post by macinjosh »

jquery wrote: post #39
dominotw wrote: post #26

Earlier quoted context omitted.

sucks for people like me with no debts though.

Take out some debt. I’m serious. That “free” money is there for you to take risks and invest with.

Hyperinflation begins when everyone decides this is wise and starts taking too many loans.

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

#49

Post by teraflop »

As usual, take headlines about inflation with a grain of salt.

Yes, the year-over-year inflation reached a new peak. But the month-over-month inflation rate has actually been declining since last October: https://www.bls.gov/news.release/cpi.nr0.htm

So when organizations publish a new article every month saying inflation is "accelerating", they're being incredibly misleading.

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

#50

Post by bryanlarsen »

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 need to attack all 4.

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