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Inflation is at a 40 year high. What can history teach us?

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Re: Inflation is at a 40 year high. What can history teach us?

#461

Post by andrekandre »

commandlinefan wrote: post #194
groby_b wrote: post #74

Earlier quoted context omitted.

Given that California can't print money, why do you think those checks are "printing money"? And no, it's not a "sneaky backdoor". It's the government doing what it should do, tighten financial inequality gaps. And preventing unnecessary suffering. We're still a society, we occasionally take care of the weaker people amongst us. (Frankly, not often enough) And "without real oversight" is... you're aware this is going…

> the government doing what it should do, tighten financial inequality gaps No, that’s really, really not what the government should be doing.

what should it be doing?

Re: Inflation is at a 40 year high. What can history teach us?

#462

Post by andrekandre »

chasd00 wrote: post #116
7speter wrote: post #50

Earlier quoted context omitted.

No one wants to talk about the actual problem, and will blame government printing money. What’s different now from any point in the last 12 years is that we are at full employment. Going over that causes the economy to overheat. As a study partner for an economics course put it (he took more economics than I did): too many hands competing for goods, the prices go up.

Right, the thing the Fed is doing by raising rates is increasing unemployment but trying to not come right out and say it. Increasing unemployment decreases demand and therefore prices. A hard recession is how this is going to end IMO.

  > Increasing unemployment decreases demand and therefore prices.
said differently (and maybe cynically): the only way to reduce prices is to make people jobless and potentially homeless, destroying families and potentially peoples lives in the process...

maybe i am crazy, but this seems like a really bad way to run an economy?

Re: Inflation is at a 40 year high. What can history teach us?

#463

Post by Spooky23 »

Syonyk wrote: post #222
Spooky23 wrote: post #192

Earlier quoted context omitted.

You do you. But assets like real property are historically good investments. It doesn’t make sense to not buy the best house you can afford. I’m with you with cars… but even then the maintenance expense starts to catch up.

> It doesn’t make sense to not buy the best house you can afford. I heard that a lot in the 2006-2007 era. And plenty of people lost that "best home they could afford" back then. Fortunately, I couldn't afford a four-figure car, much less a house - though some other grad students seemed able to convince someone to offer them loans. No idea how all those worked out, I do hope some of them were able to keep the houses.…

I wasn’t saying “you do you” sarcastically. You ultimately decide what you can afford.

Being conservative debt is a valid strategy, but has risks. Buying the house you need at 25 may not be the optimal strategy if you’re going to be there when you’re 35. Bedrooms and school districts may matter more.

In my own case, my wife and I decided that we would send our kids to private schools and wanted to maximize our family time. So we bought a house in an urban area that was perfect for our goals, had a 10 minute commute and much less expensive than a suburban house of similar nature. We borrowed, but not excessively.

Financially, it’s not a high rate of return (probably about 3% annually). My same house in a town with a good school district would have generated a 10% return. But for me, liberating 150 hours of commuting time and not having a big mortgage was valued higher.

Re: Inflation is at a 40 year high. What can history teach us?

#464

Post by randomdata »

stopping wrote: post #348
WalterBright wrote: post #113

Earlier quoted context omitted.

> Of course, that is almost a tautology Inflation lags the money printing, so it isn't a tautology. > So what do you do to get that sweet spot of about 1-2% inflation? I'm amazed that propaganda of a sweet spot gets so heavily embedded into the popular wisdom. If there is a sweet spot for inflation, it's 0%. Note that the US had net 0% inflation from 1800-1914, while growing from subsistence farming to superpower.

Dismissing a contrary position as "propaganda" only stifles debate, and you haven't presented an argument against "sweet spots". It's a good mental model for many situations. What makes you think there doesn't exist an optimal inflation rate? 0% inflation is generally not a safe target. In an economy you want to avoid deflation at all costs. If consumers expect future price drops, demand can dip significantly and ind…

> If consumers expect future price drops

Which they do. The only time in US history where a significant inflationary spike was not followed by deflation was in the long run up (already making it an outlier) in the 1970s through 1980s, and inflation in that period transpired primarily due to wage inflation. As wages are the stickiest of all, you don't get downward movement on price when the tide shifts, you simply see unemployment shoot through the roof.

When fertilizer availability is no longer the most pressing concern facing humanity, something we are unlikely to not be able to resolve in due time, there won't be much reason for prices to persist. There is little to no stickiness here and it tumbles from there.

Re: Inflation is at a 40 year high. What can history teach us?

#465

Post by andrekandre »

WalterBright wrote: post #179
jollybean wrote: post #150

Earlier quoted context omitted.

I think you are misunderstanding fractional lending and collateral. Fractional lending seems a bit odd, but it's not like there is 'no collateral' - rather, there ends up being 'partial collateral'. As it turns out, that 'partial collateral' is enough - it's actually reasonable thing to do, because the vast majority of loans are repaid, it's not necessary to fully collateralize everything on the whole. Banks have to…

Rather bluntly, a central bank is central economic planning. Central economic planning always falls short of what free markets do. The idea that a central bank is able to control the financial markets better than free market forces is shown to be false (with actual data) by Friedman in "Monetary History of the United States". > The 'government' does not print money, the Central Bank does. I said "print money" as a eu…

  > The idea that a central bank is able to control the financial markets better than free market forces is shown to be false
thats probably true in many cases, but that got me thinking: was the great depression a failure of central banking or financial markets?

Re: Inflation is at a 40 year high. What can history teach us?

#466

Post by vladimirralev »

stingraycharles wrote: post #391
vladimirralev wrote: post #360

Earlier quoted context omitted.

If you take it just one step further, the people "that need it most" really only need it in order to instantly donate it to the megacorps with pricing power at ever-increasing prices. The handouts help only in that instant and at the very next clock cycle that money is now in the hands of the megacorps. Printing money and handouts only help the top of the top in the pricing power hierarchy. If you want to actually he…

From that perspective, anything always ends up in the top of the top of megacorps, and I find it not a very compelling argument to not help people just because they’re at the mercy of megacorps. You want to tax these megacorps additionally yes, especially if they’re profiting from the current situation. But at the same time, it’s also important to redestribute that wealth towards those who have the biggest problems r…

With handouts, you only redistribute the wealth for an instant and you need to keep printing to sustain it. On top of that, the stability of this system becomes dependent on active approach of handing out money (i.e. tight dependency on central government).

And I am not saying not to help the poor people. I am saying printing money doesn't help poor people, it helps the rich. If you want to help poor people like I said you can tax the excess, or you can provide a specific minimal food/energy/shelter. But again, handing out money for free only helps the top of top.

As a side note, you know a lot of the poorest people in EM and frontier markets save money in USD either to escape their own inflating currency or as a dollar peg in their country. These people are poor and suffer the inflation in global markets, but they do not benefit from the US handouts. They can never outbid a money printer. And that's in fact the likely cause of the riots across the world in countries that don't have swap lines with the Fed.

Re: Inflation is at a 40 year high. What can history teach us?

#467

Post by Shaanie »

dsign wrote: post #424
saurik wrote: post #395

Earlier quoted context omitted.

Is that surprising? Alternatively, do you have a fix in mind? Having power means you can build more things that give you more power faster than someone with less power. You can't change this using inflation, as people will just hold something else instead of cash (and, in fact, inflation seems to most punish the people with the least power, as those people are spending a much much greater proportion of their income o…

That blows my mind. I'm allowed to spend $10 in a bottle of alcohol or a packet or cigarettes, no questions asked, but I'm not allowed to spend those $10 in stocks of a tiny company unless I'm able to demonstrate that I sleep with the founders or make their lunch or run their accounting, or that I have so many millions on my name that investing $10 without doing any of the above really could not harm me.

It's not like accreditation exists to ensure poor people stay poor, framing it like that is disingenuous. Small-time investors are unlikely to be able to even semi-accurately estimate the value of a company, so they're much much more likely to be tricked into overpaying.

Re: Inflation is at a 40 year high. What can history teach us?

#468

Post by sumedh »

senectus1 wrote: post #315
hackerfromthefu wrote: post #236

Earlier quoted context omitted.

That is wrong, you can fix 100%. However in Australia the fixed terms are shorter, typically 1-5 years.

really? for mortgages? I've seen that for personal loans (done that myself) just never heard of or seen fixed term mortgages

> really? for mortgages?

https://www.commbank.com.au/home-loans/interest-rates.html

Check the fixed rate loans

Re: Inflation is at a 40 year high. What can history teach us?

#469

Post by sumedh »

mise_en_place wrote: post #300

It's very much a tale of two dollars, however. The dollar price index plummeted after abolishing the gold standard. Now it has risen substantially, as it did in 2008, to become the safe haven currency that all other countries are hoarding, due to inflation in their own countries. At some point this house of cards will collapse, specifically if the Fed capitulates in its fight against inflation and stops raising inter…

> to become the safe haven currency that all other countries are hoarding

Probably because most of the oil is traded in dollars.

Re: Inflation is at a 40 year high. What can history teach us?

#470

Post by jbay808 »

legulere wrote: post #266
IncRnd wrote: post #73

A good working definition of inflation is a general increase in prices and a fall in the purchasing value of money. There will generally be inflation when there are fewer goods to purchase or when the money supply increases. History teaches us that the government, often through good intentions, decreases the supply of available goods. There are many reasons this happens. Recently, people were told to stay at home, an…

Money supply increases don’t necessarily lead to inflation. They only do when there’s more consumer spending on products. In the recent low interest rate period, that didn’t really happen. Money instead went into an asset price bubble. What we need to do to curb inflation is to lower consumption. The best point where to do that is the rich with their excessive consumption.

> Money supply increases don’t necessarily lead to inflation[...] Money instead went into an asset price bubble.

In the short term, yes, but this is a precursor to inflation; eventually the inflated asset prices propagate to consumer prices. Some paths are: increased demand (the "wealth effect"), reduced productivity (eg. people retiring with their stock portfolios or quitting jobs to speculate on crypto/real estate), as well as rising rents.

Engineering trains us to analyze full cycles. There are a lot of perpetual motion machines that look promising on the expansion stroke.

Reduced borrowing costs can mask this pressure, as eg. rents remain low when mortgages are cheap, despite high housing prices. But when borrowing costs rise the floodgates are opened. Either the bubble pops and the paper asset "wealth" gets vacuumed away, or else it dumps that growth into consumer prices.

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