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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

#61

Post by skdlllaaa »

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.

You might be able to escape with saying 2020 COVID was a true disaster.

In 2021, the government (local and federal) used vaccines as a kudgel to create partisan politics around the logistics industry. Ports were shut down (for no reason), and truckers who didn't want to meet vaccine requirements were barred from entry to major ports such as in California.

In 2020 and 2021 helicopter money designed to help people ended up having a second order effect of making people less likely to work. Even if you made the desired "15 dollars an hour" the left asks for as a "fair wage" for burger flipping you still would make more money being on pandemic assistance.

Moreover, California law in particular has strange environmental regulations that further reduced the availability of trucks. Your average truck is worth a small townhome and you can't just sell it and buy a 2012+ model on a whim.

Indeed, the problem like usual is government interventionism through helicopter money and the manipulation of rates to protect the petrodollar in a crisis. It's not complicated, because like usual the finger can be pointed squarely at the fed and congress. We could've been heading back to normal in 2021 with or without vaccine rates being 99.9%. But the nanny state does not believe in personal responsibility (and neither do their constituents) and so here we are. This was compounded by the incessant bleeting of climate pearl clutchers that further reduced the availability of logistical firepower that could've bailed us out.

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

#62

Post by legitster »

recursivedoubts wrote: post #44
eldavido wrote: post #27

Earlier quoted context omitted.

> 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

The dual mandate is literally described on their website: https://www.chicagofed.org/research/dual-mandate/dual-mandat...

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

#63

Post by dcolkitt »

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…

> The Fed has held interest rates at 0 (negative, real terms) which makes all cash flows effectively infinite net present value.

This is only true for cash flows discounted by the risk-free rate. The discount rate of risk assets comes from the risk-free rate with a risk premium added on top (probably 6% or so today for the average blue chip equity).

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

#64

Post by 6gvONxR4sf7o »

If any of this is due to a tight labor market, or whatever you call it when it's hard to hire, I wonder if it would be better for society for people to negotiate improvements in how they're treated than improvements in how much they're paid.

Like if everyone negotiates a 20% raise, prices of everything probably increase by 20%, meaning nobody gets shit, and their savings are less valuable. So they come out behind, if anything. But if everyone negotiates a four day work week for the same pay, or better safety standards at work, or shit like that, I'd bet prices don't inflate nearly as much, so they actually could come out ahead.

But that seems like a prisoner's dilemma kind of thing. If only you get the raise, you come out ahead. If everyone gets the raise, you come out neutral.

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

#65

Post by marricks »

commandlinefan wrote: post #38
marricks wrote: post #14

Inflation is a good thing for people with a lot of debt but not a lot of money. Think of the millions of student debt borrowers. Even if student debt isn't cancelled, it may get effectively cancelled one way or another. Which just goes to show, if WSJ or Bloomberg say something is bad, it may not actually be bad for you. Let's just hope the pressure stays up so wages keep on increasing. EDIT: I'd like to add, wage gr…

It also works out _sort of_ well for homeowners - at this rate, my house payment is going to end up being a minor inconvenience instead of my largest fixed payment. Of course, I'll still have to pay property taxes and insurance on the newly inflated value of the house.

> Of course, I'll still have to pay property taxes and insurance on the newly inflated value of the house

Luckily mortgage payments are the larger than that chunk :D

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

#66

Post by recursivedoubts »

bko wrote: post #60
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…

I don't think this can be solved by just tweaking interest rates. The fact is there are a lot more dollars in the field chasing the same number of products. Making it marginally more expensive to borrow money won't sop up enough dollars to prevent price inflation. Don't you love it how banks are not raising their interest rates on savings accounts? I remember in 2007 I was getting 4% on my savings accounts. There's n…

I don't think the physical amount of dollars matters as much as most people do. Credit spends the same as money, so I view total credit as the real thing to watch.

That's one reason why, given the insane fiscal and monetary policy of the last two decades, we really haven't seen hyperinflation yet (and, in fact, briefly saw deflation.)

It's an unorthodox take, admittedly, but Steve Keen is a good economist to read on the topic.

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

#67

Post by fuckcensorship »

logicalmonster wrote: post #19

Does anybody believe that the 7.5% figure is completely accurate and not fudged and massaged to give an answer that won't entirely spook the market? It feels like their strategy is to avoid making a choice and letting the bubble unwind as slowly as possible to avoid political fallout. Unfortunately, we learned as kids that ripping off a bandaid faster is usually best, so this might prolong pain for a while.

Inflation statistics have been rigged for decades [1].

[1]: http://www.shadowstats.com/alternate_data/inflation-charts

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

#68

Post by jhallenworld »

vmception wrote: post #29
newyankee wrote: post #3

This was expected. I wonder though what happens now, is hyperinflation a real possibility. Is it really sensible to expect consistent positive returns from overall stock market this decade unless doing some active investments ?

If you have hyperinflation then your stock market is going to overheat and bust through the top of your chart over and over again! :)) History books focus on the bread lines, but if you dig deep enough you can find the stock market charts and they are epic! The capital class made so much bank and dipped out, just remember to actually leave because the people come for you.

Yeah, it crashes up. Argentina is a good example of this for the their market in 1989-1990.

https://www.ceicdata.com/en/indicator/argentina/equity-marke...

(click max)

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

#69

Post by dcolkitt »

bryanlarsen wrote: post #50

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 ne…

I'm sorry, but "corporate greed" doesn't make sense. Were corporations not greedy in 2017?

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

#70

Post by sokoloff »

commandlinefan wrote: post #38
marricks wrote: post #14

Inflation is a good thing for people with a lot of debt but not a lot of money. Think of the millions of student debt borrowers. Even if student debt isn't cancelled, it may get effectively cancelled one way or another. Which just goes to show, if WSJ or Bloomberg say something is bad, it may not actually be bad for you. Let's just hope the pressure stays up so wages keep on increasing. EDIT: I'd like to add, wage gr…

It also works out _sort of_ well for homeowners - at this rate, my house payment is going to end up being a minor inconvenience instead of my largest fixed payment. Of course, I'll still have to pay property taxes and insurance on the newly inflated value of the house.

High interest rates tend to depress borrowers’ ability to borrow (being constrained by DTI ratios), so house values tend to fall from interest rate increases in isolation (though rise with general inflation, so the combined effect is harder to predict).

It’s generally good for mortgage borrowers who don’t intend to sell.

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