US annual inflation declines to 7.1% in November vs. 7.3% expected • Hacker News Board

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#41

Post by zppln » Tue, Dec 13, 2022, 4:57 PM UTC

runako wrote: post #24

ChuckNorris89 wrote: post #17

Earlier quoted context omitted.

Can someone please school me on why that would be bad?

If the expectation is that everything will be cheaper next month than this month, that creates an incentive for everyone (and every business) to delay purchases as long as possible (because they will save money buying in the future). When everyone slows spending at once, it can lead to severe a recession or depression.

I'm not sure I buy (heh) into this. I usually buy things because I need them, or want them in the moment. I'm not gonna postpone buying a washing machine because it might be cheaper next month. I'm not gonna pass on getting wasted because drinks are cheaper next month. I'm not gonna starve myself because food might be cheaper next week.

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#42

Post by dsfyu404ed » Tue, Dec 13, 2022, 4:57 PM UTC

slg wrote: post #38

monero-xmr wrote: post #31

Earlier quoted context omitted.

When considered logically the correct amount of inflation should be 0% - neither inflation nor deflation. This would give us stable prices and make it much easier to calculate what is increasing or decreasing in price without this other fuzzy “inflation” metric affecting it. However governments / central banks have convinced us that 2% is “correct” despite no evidence or research. It does help them print money and ba…

0% inflation would mean there is no penalty for sitting on your money. People putting their cash under their mattress instead of in savings accounts, CDs, bonds, and the like is bad for the economy. That is why economists generally prefer a small positive rate of inflation. It adds more incentive to both spend and invest.

>0% inflation would mean there is no penalty for sitting on your money. People putting their cash under their mattress instead of

This is an absurd claim. Nobody seriously considering mattress vs CD (or bonds in a low rate environment like we had 2008-2020) is swayed by a return of less than a couple percent. It is a security vs liquidity vs trust calculation, not a return based one.

Furthermore, as the other commenter points out, rates are correlated but not necessarily in lock step with inflation. The rate on your savings account is probably still sub 1% (although bonds have gone up).

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#43

Post by godelski » Tue, Dec 13, 2022, 4:57 PM UTC

ChuckNorris89 wrote: post #17

Wowfunhappy wrote: post #7

Earlier quoted context omitted.

Yes, if things were actually getting cheaper that would be "deflation" and it would probably be bad.

Can someone please school me on why that would be bad?

A consumer based society requires people to consume, or buy things. Because of this you want a low level of inflation so that people buy things now rather than next year and keep the money in the system moving around (ironically this theory of money also makes people that have more money than they can spend unhealthy to the system). You want the money constantly moving through the system instead of pooling up.

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#44

Post by jalopy » Tue, Dec 13, 2022, 4:58 PM UTC

It's more helpful to look at a graph to see trends: https://fred.stlouisfed.org/graph/?g=XCAY

As one can see, the CPI was fairly steep during the period from Jan 2021 till June 2022; from there it has visibly flattened.

EDIT: A rolling 6 month annualized rate makes the drop pretty obvious: https://docs.google.com/spreadsheets/d/1VCEwEDWCAaWhmbosXIcD...

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#45

Post by cjbgkagh » Tue, Dec 13, 2022, 4:58 PM UTC

slg wrote: post #38

monero-xmr wrote: post #31

Earlier quoted context omitted.

When considered logically the correct amount of inflation should be 0% - neither inflation nor deflation. This would give us stable prices and make it much easier to calculate what is increasing or decreasing in price without this other fuzzy “inflation” metric affecting it. However governments / central banks have convinced us that 2% is “correct” despite no evidence or research. It does help them print money and ba…

0% inflation would mean there is no penalty for sitting on your money. People putting their cash under their mattress instead of in savings accounts, CDs, bonds, and the like is bad for the economy. That is why economists generally prefer a small positive rate of inflation. It adds more incentive to both spend and invest.

Inflation is not interest rates, it’s perfectly normal and proper to have higher interest rates than inflation.

They’re only linked due to rehypothecation of money supply which is a problem in an of itself. But it gets a little complex to explain.

Edit: my brain skipped over the ‘cash’ part and assumed ‘risk free’ interest would still be collected.

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#46

Post by bryanlarsen » Tue, Dec 13, 2022, 4:58 PM UTC

ChuckNorris89 wrote: post #17

Wowfunhappy wrote: post #7

Earlier quoted context omitted.

Yes, if things were actually getting cheaper that would be "deflation" and it would probably be bad.

Can someone please school me on why that would be bad?

The times we've experienced deflation have been horrible periods in history.

We're fairly convinced that deflation is an effect rather than the cause, but nobody's really 100% sure that it's 100% effect and that deflation doesn't make things worse, so we try and avoid it.

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#47

Post by nimbius » Tue, Dec 13, 2022, 4:58 PM UTC

josephcsible wrote: post #4

Remember that "declines" in this context just means that prices are going up slightly slower than they were before. It doesn't mean anything's getting any cheaper.

two tenths of a percent decline is barely a remarkable, let alone laudable achievement.

This might be a sobering sentiment but US inflation is still out of control. ideal inflation is 2% and policy handbrakes like increases in the prime rate are too little too late as we should have sought percentage point increases a year ago as opposed to the fractional increments we saw last november. Arguably the half-percent model of increase was a dismal failure even when it was rolled out four months early in March to market and all we're left with is chest-thumping from the federal reserve each time it undertakes a half-percent increase and razes the castle of free money it built up over a decade in response to the 2008 collapse.

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#48

Post by mdemare » Tue, Dec 13, 2022, 4:58 PM UTC

monero-xmr wrote: post #31

ChuckNorris89 wrote: post #17

Earlier quoted context omitted.

Can someone please school me on why that would be bad?

When considered logically the correct amount of inflation should be 0% - neither inflation nor deflation. This would give us stable prices and make it much easier to calculate what is increasing or decreasing in price without this other fuzzy “inflation” metric affecting it. However governments / central banks have convinced us that 2% is “correct” despite no evidence or research. It does help them print money and ba…

You may not agree with the conclusions, or dislike the quality of the research, but of course there's research. There's always research with things like this.

https://www.stlouisfed.org/open-vault/2019/january/fed-infla...

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#49

Post by bnralt » Tue, Dec 13, 2022, 4:58 PM UTC

runako wrote: post #24

ChuckNorris89 wrote: post #17

Earlier quoted context omitted.

Can someone please school me on why that would be bad?

If the expectation is that everything will be cheaper next month than this month, that creates an incentive for everyone (and every business) to delay purchases as long as possible (because they will save money buying in the future). When everyone slows spending at once, it can lead to severe a recession or depression.

If anyone's interested, Japan is seen as a cautionary tale for the bad things that low inflation/deflation can bring. They've been fighting it for years[1].

[1] https://foreignpolicy.com/2022/04/25/inflation-japan-deflati...

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#50

Post by nativespecies » Tue, Dec 13, 2022, 4:58 PM UTC

geye1234 wrote: post #37

runako wrote: post #24

Earlier quoted context omitted.

If the expectation is that everything will be cheaper next month than this month, that creates an incentive for everyone (and every business) to delay purchases as long as possible (because they will save money buying in the future). When everyone slows spending at once, it can lead to severe a recession or depression.

Perhaps for businesses this may be true. It's hard to imagine for a consumer. I'm not going to delay the purchase of groceries, a fridge, a new roof or (if I'm feeling rich) a new car just because they may be 3% cheaper next year. I'm not saying this conventional wisdom is wrong, but it's not obviously right.

I wouldn't underestimate peoples' want (or need) to save extra money right now. Most working people will do anything they can to save in this economy.