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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?

#531

Post by llampx »

grecy wrote: post #441
watersb wrote: post #425

Earlier quoted context omitted.

When the money was free (near zero interest rates), borrowing money to invest in capital was imminently responsible.

> borrowing money to invest in capital was imminently responsible It's funny how that is the view if a company does it, but not when an individual does it.

A company borrowing money to buy back stock sounds like me borrowing money to go on vacation. Rates are cheap, its a no-brainer right? Government will anyway bail me out as soon as a crisis hits, right?

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

#532

Post by gumby »

WalterBright wrote: post #189
gumby wrote: post #172

Earlier quoted context omitted.

> “breaking away” is a fictional movie. Please use factual references. I'm thinking of my friends who didn't go to university, or got their GED at 16, and have struggled as their factory jobs went away.

The economy has been on a long term trend of requiring more and more training since the start of the Industrial Revolution. Reagan's two terms saw explosive growth in the computer and software industry. If you're suggesting that Reagan should have tried protectionism, I suggest it is about as effective as the sanctions put on Russia & Iran to boost their economies.

I’m actually a big fan of Ricardo and free trade. Protectionism is not the only (and a destructive way) to address the dislocation of these kinds of transitions. But the USA of the 80s and 90s took then opposite path.

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

#533

Post by AnimalMuppet »

AnimalMuppet wrote: post #528
WalterBright wrote: post #517

Earlier quoted context omitted.

This is all unsupported by any evidence. The "deflationary spiral" theory is as wrong as its sister, the "inflationary spiral". Inflation benefits borrowers, hurts lenders. Deflation hurts borrowers, benefits lenders. The sweet spot is 0. The reason everybody believes that inflation is good for you is because of persistent government propaganda to sell that idea, because what inflation really is is a tax on your mone…

The "deflationary spiral" has empirical evidence from a fair number of financial crises in the 19th and early 20th centuries. It happened. A lot. And it was really destructive when it did.

Too late to edit, so replying to myself: There also is plenty of evidence for the "inflationary spiral". See Zimbabwe for a recent example.

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

#534

Post by naijaboiler »

blagie wrote: post #439
dkrich wrote: post #417

The most dangerous thing that can happen to an advanced economy is credit markets grinding to a halt. It was the panic of 1907 that created the federal reserve in the first place. Over the ensuing decades there was a very awkward path to eventually figuring out that at the moments where a complete halt to credit markets looks imminent, the fed should step in and release the jam. What we’ve learned is that just the kn…

I'm kind of inclined to agree. We want to avoid structural damage: Lost jobs, bankrupt businesses, lost mortgages, and so on. Structural damage leads to loss of real productivity, and real harm to people's lives. The only way I knew to get through COVID shutdowns was to devalue currency by about as much as we've done. I didn't mind the short-term money printing, and I expected inflation to result. The inflation is pa…

Spoken very fairly. For a central banker, it's either high inflation or high unemployment. Strangely enough, they prefer the latter. Inflation affects everybody mildly, a recession affects the unlucky few that lose their jobs very badly

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

#535

Post by jrm4 »

wpietri wrote: post #200
jrm4 wrote: post #81

Earlier quoted context omitted.

Sure. I'm less going by "history" and more by "first principles." Crypto provably does what it says on the tin to some degree, even if that degree is low. I wouldn't use recent past performance as a strong predictor of immediate future performance; thinking more long term possibilities.

I have to wonder when imaginary "first principles" speculation for crypto will give way to evaluating it on its actual track record.

I mean, it's extremely young in the history of the existence of money. I don't think you can say anything meaningful about its track record as of yet.

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

#536

Post by galaxyLogic »

xapata wrote: post #284
galaxyLogic wrote: post #277

There's two causes for inflation I think everybody agrees, too little supply and too much demand. The demand-caused inflation would seem to be self-correcting problem: When things cost more, people buy less of them. Then suppliers will have to lower their prices or at least stop increasing them, if nobody buys their product because of too high prices. In other words if people having too much money causes inflation, p…

> There's two causes for inflation I think everybody agrees, too little supply and too much demand. Price increases aren't always inflation. As the Federal Reserve Bank of Cleveland published, "Strictly speaking, inflation refers only to a drop in the purchasing power of money that results when a central bank creates more money than its public wants to hold. Inflation manifests itself as a rise in all prices and wage…

But isn't inflation measured by some kind of average price index?

If the consumer-price-index goes up we call it inflation whether it's caused by " central bank creating more money than its public wants to hold." or not?

Is it possible to measure "how much money public will want to hold"?

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

#537

Post by zie »

valenterry wrote: post #496
blagie wrote: post #487

Earlier quoted context omitted.

> No worries, I'm here to discuss and learn things, so happy about your reply! Thank you! I enjoy discussions with folks like you. > Maybe for the first time. If we're having regular bank failures, we're going to enter "failed state" status. Can you name any nation which regular bank failures which isn't a hellhole? People don't learn from once-in-a-lifetime events. It's also not what I want people to learn. Systems…

> Can you name any nation which regular bank failures which isn't a hellhole? That's a bit unfair, because there is no country (yet) where there is a system similar to what I proposed. If there were, then maybe it would be pretty normal and putting money on the bank that yields interest will just be seen and regulated as investing into stocks nowadays. > It's also not what I want people to learn. Systems like this ou…

> That's a bit unfair, because there is no country (yet) where there is a system similar to what I proposed. If there were, then maybe it would be pretty normal and putting money on the bank that yields interest will just be seen and regulated as investing into stocks nowadays.

You can do this in the USA, look up the ETF ICSH for instance :)

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

#538

Post by zie »

consp wrote: post #354
zie wrote: post #156

Earlier quoted context omitted.

I haven't dug into everything you are doing, but the biggest flaw I see seems to be that you assume Cash returns 0% nominal, i.e. that there is no return for holding cash. That is only true if you hide it under your mattress(and no deflation happens). Most people do not hide money under their mattress anymore, especially if they have large amounts of it. They put it in a bank account or in a MMF or some other interes…

Doesn't that practically mean the rich get richer and the poor stay poor? If it would be net 0 everything would stay the same?

Not because of this one thing, every bank offers some return on holding cash. Most are ridiculously low.

Personally I like to think of it as, the US govt guarantees a return on overnight cash based on the Federal funds rate. Banks and other people that hold cash will give you that rate minus some fee(s) for the hassle of keeping up with your cash for you. Most banks have a very hefty fee, but not all banks.

As of this writing:

The Federal Reserve will pay 2.56% for cash deposited with them.

Bank Of America pays 0.01%, for a fee of 2.55%/yr.

Ally bank pays 2.25% for their savings account for a cost of .31%/yr

If you are willing to hold cash in an ETF, ICSH will hold cash for a 0.08%/yr fee.

For the record, I'm not against Bank Of America, I have an account with them, but I don't hold much, if any, cash with them for any length of time, because I know they charge a lot for that service.

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

#539

Post by zie »

WalterBright wrote: post #202
zie wrote: post #182

Earlier quoted context omitted.

> (Your cite makes no mention of 2008/2009.) Incorrect: "One may look to politicians’ statements. Even in the Obama-era “stimulus” spending, the administration emphasized promises of eventual debt reduction. " And I have more to say on it later. My cite is from a world-class economist, not from some random person on the Internet. > One one hand, we have thousands of years of history with what causes inflation. > On t…

> There is no rigorous proof of what causes inflation. There's no rigorous proof that smoking causes cancer, either. All we have is a lot of correlation. The historical evidence of printing non-collateralized money corresponding with inflation is overwhelming. It corresponds with gold rushes, and silver rushes. It corresponds with debasing coins by mixing in cheap metals. Me, I'm going where the evidence leads. > I c…

> No, it does not. I wish I could create money to pay the interest on my loans, but I can't (at least not legally!). I use existing money to pay them.

LOL, wrong perspective, think of it from the banks point of view. They make money from you for creating money and letting you use some of it.

Again, this whole "creating money" thing is very simplistic perspective, they have limits on how much of this they can do, etc.

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

#540

Post by ephbit »

foobarian wrote: post #149
ephbit wrote: post #146

Earlier quoted context omitted.

> ... and everything slows down. Agree. And ... this is exactly what the ecosphere needs right now. People continuing to consume all the usual necessities as they always have and always will. And consuming less of all the extra wasteful unnecessary stuff that gets pumped out of factories because of a destructive culture of "increasing GDP is good".

Yes this is a great point. I wonder if to achieve that, a back pressure is required in the system that we are just not willing to put up with. Example, cruel warlords keeping the serfs in misery, or hunter gatherer tribes annihilating each other. Or more modern, some central authority allocating resources.

> I wonder if to achieve that, a back pressure is required in the system that we are just not willing to put up with.

By back pressure you mean some kind of negative feedback, I assume.

I think, more precisely, the problem is not that negative feedback is completely missing. The problem is, that technology and societies have implemented (mostly involuntarily so) lots of systems that effectively distribute the entirety of the negative feedback very widely across the members of society.

Like in a shared living situation where some people take great care to clean up after themselves and others do not. As a whole it somehow "works", without cleanliness getting out of hand, but only because some people are doing more than others. This way, those who do not clean up their own dirt, never even learn their real impact on the whole, because it's continuously remedied by others. Their negative feedback is effectively missing, so they get the impression that everything is fine.

On the worldwide scale it's an analogous situation.

Widespread governmental subsidies for energy are one of the biggest issues I see there. They redistribute a big part of production costs across all tax payers and eliminate a big part of negative feedback.

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