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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

#91

Post by iancmceachern »

all2 wrote: post #51
dominotw wrote: post #26

Earlier quoted context omitted.

sucks for people like me with no debts though.

I was thinking about buying a truck recently and I got this bit of advice: "a loan is a hedge against inflation". More specifically, a fixed interest rate loan is a hedge against inflation. You are borrowing at an initial dollar value of A (in terms of inflation), and servicing your debt at a fixed rate, for a fixed time. During that time the value of the dollar decreases, and you now have a value of This presumes th…

And with a 0% loan it us even better

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

#92

Post by pmorici »

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…

You can get 8% on stable coin deposits with Gemini Earn and BlockFi. After taxes it’s probably still a slight loss.

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

#93

Post by dragonwriter »

djrogers wrote: post #58
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…

> What does matter is ... (rental affordability) Rental affordability is 100% correlated to asset pricing.

> Rental affordability is 100% correlated to asset pricing.

It's not, though.

In a very simplified toy model, maybe there should be a direct 1:1 link, but empirically in reality there isn't even close.

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

#94

Post by boring_twenties »

fuckcensorship wrote: post #67
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

I can't believe people are still citing shadowstats and expecting to be taken seriously.

It's been known bullshit for a decade and a half.

https://econbrowser.com/archives/2008/09/shadowstats_deb

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

#95

Post by karmasimida »

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…

They will have no option but to raise rate.

I don't think this is meant to be a balance act or achieving that is possible at this point.

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

#96

Post by bryanlarsen »

dcolkitt wrote: post #69
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?

Sure, but they weren't able to execute on that greed to the same extent that they were in 2017. Look at the profits of big tech in 2021 compared to 2017. In a well-functioning free market, most of the surplus is captured by the consumer rather than the producer. So excess profits are a sign of an inefficient market, and thus the drum beat for anti-trust enforcement against Google/Apple/Amazon/Facebook.

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

#97

Post by alasdair_ »

eldavido wrote: post #27
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…

> 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…

>My reply: asset prices don't matter to ordinary people.

Home values matter enormously to people. So does the value of their 401k, especially those aged 50+

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

#98

Post by bko »

recursivedoubts wrote: post #66
bko wrote: post #60

Earlier quoted context omitted.

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…

Total bank credit jumped 5% in about a month when the pandemic started and is continuing to grow at a very high rate historically. This is in addition to personal savings rate jumping from around 7% to over 30%.

There's a lot of money and credit is amplifying it

https://fred.stlouisfed.org/series/TOTBKCR

https://fred.stlouisfed.org/series/PSAVERT

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

#99

Post by ninkendo »

beamatronic wrote: post #17
adflux wrote: post #5

Cant imagine real estate not taking a hit when yields go up...

But the demand is still there. And many buyers powered by stock market returns.

Buyers' cost tolerance is driven by the cost of their mortgage, which is extremely sensitive to interest rate hikes, which typically rise as a way to curb inflation.

No cheap mortgages means a lot fewer eligible buyers.

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

#100

Post by tagoregrtst »

teraflop wrote: post #49

As usual, take headlines about inflation with a grain of salt. Yes, the year-over-year inflation reached a new peak. But the month-over-month inflation rate has actually been declining since last October: https://www.bls.gov/news.release/cpi.nr0.htm So when organizations publish a new article every month saying inflation is "accelerating", they're being incredibly misleading.

My math might be wrong, but according your source isn't the annualized month-to-month inflation 7.5%?

(1+0.6/100)^12 = 1.0744.

The year-to-year (multiply all seven rates and then power to 12/7) is 7.1% which is pretty close to 7.5% anyway.

(Also, note that the decrease over the last two months is probably due to the Christmas peak ending. Best case scenario, pie in the sky, for inflation is 3.6% which is higher than my mortgage rate)

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