Just a warning that this is an article by a hedge fund expressing a view of our current inflationary period that I would argue is heterodox among the economic mainstream. I suggest reading Paul Krugman and Claudia Sahm for dovish views, or Adam Ozimek for a more critical view. In particular, the idea that “inflation expectations” can perpetuate inflation via a self-fulfilling prophecy effect has been called into question lately: https://www.federalreserve.gov/econres/feds/files/2021062pap...
It’s mostly a demand shock, not a supply shock, and it’s everywhere
91–100 of 478 posts
Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere
#92Earlier quoted context omitted.
CPI is almost certainly gamed. http://www.shadowstats.com/alternate_data/inflation-charts
Is it? Can’t game it much or for long without being obvious because it’s compounding. Let’s say inflation is understated by 4% absolute per year. Over 40 years, that’s a factor of 4. https://inflationdata.com/articles/inflation-adjusted-prices... Is the fuel cost per mile traveled 4 times higher than it was in 1981? No. Fuel prices adjusted for CPI are about identical with what they were in 1981 ($3.80/gallon): https…
Fuel would be hard to game. It’s just fuel. Other components are trickier to calculate, like aggregate food prices or things involving hedonic regression. If there is gaming, you’d have to look at the tricky parts.
Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere
#93WARNING: This site has an obscenely obnoxious terms & conditions blocking modal. I would prefer this link to be removed, it is so egregious. Post something, or don't. Don't put up a blocking modal to force me to read some terms & conditions before reading the actual content.
Bridgewater would love to show you their content without the modal.
The only problem is, the lawyers who interpret things the US government says, are requiring them to show it.
Unfortunately, the government has decided you're too stupid to critically read words written by an investment firm. Your elected representatives believe you need to be reminded that investment firms might be writing bullshit to try and take your money.
The only problem is, if you're too stupid to use critical thinking when reading words on the internet, you're also not likely to be the type of person who would read a terms & conditions.
Welcome to exciting world of well intentioned but poorly thought-out legislation with hilariously irrational unintended consequences.
Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere
#94What this doesn’t really address is the why? Yeah there’s more money floating around, so perhaps more people want to spend it, but why? Most people aren’t getting materially more stuff or even need that much more stuff, consumption’s already god damn conspicuous. Maybe everyone can afford a jet ski all of a sudden? No, the stims didn’t really do /that/ kind of wealth expansion. To me, this still looks like the bullwh…
I may be wrong, but I don't think we need anything special to explain this, other than COVID.
Covid came, the economy died. No travel, restaurants, theaters etc, plus work clothes, beauty products ... Now covid is less of a problem every day, and those things are coming back ... we have a huge demand shock.
Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere
#95"Household balance sheets are now in a materially better state than they were pre-pandemic". I think this is completely of touch with the realities faced by different slices of society. I am a web developer who was working from home for many years before the pandemic. My experience is not even remotely similar to most people in the US. Edit: this article is written by a hedge fund. So they definitely live in their ow…
"Governments transferred a massive amount of cash to households, more than offsetting lost income from COVID." I don't understand this calculation either. It does not fit my own experience, or anyone else I know.
Likewise. I mean I do seem to have more money than before but almost none of it came via government transfers. I think we got $800 for our kids because they were schooled from home for a year or whatever. The rest is just not having things to spend it on, primarily eating out and travel. I certainly agree that huge numbers of people here in Canada benefited from government money to replace lost wages but they were mainly people in service industries who are hardly “wealthy”. So for real, what does this mean? Obviously in aggregate when you write a cheque to every person for $X it adds up, which is what I think happened in the US, but does it create wealthy households?
Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere
#96What this doesn’t really address is the why? Yeah there’s more money floating around, so perhaps more people want to spend it, but why? Most people aren’t getting materially more stuff or even need that much more stuff, consumption’s already god damn conspicuous. Maybe everyone can afford a jet ski all of a sudden? No, the stims didn’t really do /that/ kind of wealth expansion. To me, this still looks like the bullwh…
What everyone is going to have a real hard time wrapping their head around for the next few years: We built a highly efficient economy for a set of behaviors. A shock happened that caused a lot people to change their behaviors (probably for a long time, since they've had 2 years of 'practice'). Our economy, which was built for those old behaviors (living in cities, riding public transit, eating at restaurants, travel…
I just don't get why everyone maintains JIT manufacturing is bad, it's one of the many reasons we can have such reasonably low cost goods, its efficient.
Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere
#97For anyone scratching their head on what "MP3" is: monetary policy 3, i.e. "helicopter money," i.e. "the government be handin out them stimmies," i.e. the government injected COVID-19 relief funds into the economy, giving an across-the-board increase in demand for goods & services, but there aren't enough "goods & services" to keep up with this demand.
The government didn't even grant people a months worth of rent in my city. Not sure how that lead to such a huge infusion of demand that continues to persist, unless there are just that many people with very little rent who are driving this demand. Seems like such a small amount in the grand scheme of things considering most people even working a minimum wage job might see more money back on a tax return than the measly $1200 that's been dispersed.
Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere
#98First really thorough analysis of this situation that I have seen. It is surprising that this observation isn't more common, it is very obvious from looking at sectoral balance sheets...but, I suppose, not many people do this (it is odd to me that what was done during the pandemic had literally never been tried before, there was no economic logic for doing so, and no economist said: hold on, is this a good idea? And…
I think we can finally label neoliberalism a failure, it cant even direct capital to productive industried
It can. The govt has stopped it doing so.
Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere
#99Demand growth is what we want. Our economy has been largely demand-limited for a while. Demand growth boosts GDP growth. Corporations are sitting on huge piles of cash, so they're not investment-limited. Any labor market tightness raises wages, which have been mostly stagnant for a long time (until very recently). Wage growth is also good. If wage growth squeezes profits, then that's also good from a wealth inequalit…
Yes I was wondering why economists would think this was a bad thing. To someone like me who knows nothing, this seems like an obvious good thing.
Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere
#100For anyone scratching their head on what "MP3" is: monetary policy 3, i.e. "helicopter money," i.e. "the government be handin out them stimmies," i.e. the government injected COVID-19 relief funds into the economy, giving an across-the-board increase in demand for goods & services, but there aren't enough "goods & services" to keep up with this demand.
Thank god we have crypto & NFTs to help people use all this free cash
It doesn’t work like that though. If I buy BTC at 60k then someone is selling BTC at the same price. The fiat is just moving from one account to the next. The people getting cash-rich from crypto are either spending it (on lambos) or putting it back into the stock market.