[HN Gopher] Inflation rises to 7% in December (led by energy)
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Inflation rises to 7% in December (led by energy)
Author : rsj_hn
Score : 115 points
Date : 2022-01-12 20:13 UTC (2 hours ago)
(HTM) web link (www.bls.gov)
(TXT) w3m dump (www.bls.gov)
| LUmBULtERA wrote:
| In December my lease renewal offer included a 35% rent increase.
| I attempted to bargain them down to a lower increase, but the
| leasing office never even got back to me. At least according to
| the subreddit for my area, most apartment buildings here seem to
| be trying to increase rent 20-40%.
| Ericson2314 wrote:
| How much did they go down or not grow the last two years?
| LUmBULtERA wrote:
| My rent didn't go down.
| eckmLJE wrote:
| The question is really -- what was the rent for your unit
| before the pandemic began and the rental market in many
| cities became depressed. It's difficult to answer because
| plenty of people had just started a lease before the
| pandemic began, and had to endure that for a year as others
| may have received great deals on rent.
| LUmBULtERA wrote:
| It's true. We were expecting a decent bump in the rent
| offer, but not 35%.
| keyboardCowBoy wrote:
| Same issue here, paying $1200 for for a 600sq ft rental and new
| owners, made zero improvements and raising to $1500 because
| some complex down the road is charging that.
|
| a 25 percent increase for me, I would buy but I don't want to
| hassle with a home bidding and don't plan on living in this
| state much longer.
| xadhominemx wrote:
| Which city?
| LUmBULtERA wrote:
| Northern Virginia area.
| bowmessage wrote:
| Crystal City (based on your comment history)?
|
| 35% does seem steep, but it doesn't seem fair to compare
| against last year's rent when it was likely heavily discounted
| due to COVID.
| LUmBULtERA wrote:
| Haha yes -- I was trying to be vaguer in another comment but
| apparently I already said this a while back :).
| francisofascii wrote:
| My friend who lives in Chinatown area says his condo value is
| still down from Pre-Covid. So he thinks city prices in
| general are down, not up like the rest of the U.S.
| javert wrote:
| Hah, they say the crooked printed money goes first to those
| sucking the government teat, so this makes sense...
| alexk307 wrote:
| Crystal City is filled with landlords and building owners
| that feel like they are entitled to price increases ever
| since Amazon decided to build their HQ2 there. I was there
| before and after the announcement and the real estate prices
| doubled based on pure speculation that Amazon employees would
| come through flush with cash, wanting their 700k+ one bedroom
| apartments.
| willis936 wrote:
| This is the first I've heard of any rent going down anywhere
| at any time.
| superfrank wrote:
| > I attempted to bargain them down to a lower increase, but the
| leasing office never even got back to me.
|
| Do you live in a large complex owned by a big company? In my
| experience large companies don't even attempt to negotiate.
|
| I've tried in the past at two different complex and never got a
| response until I walked my ass to the front desk and then was
| told "we don't do that". My buddy tried that same thing at his
| complex right at the height of covid when everyone was moving
| out of the city and still got no response. Two months later
| they sent him an email asking why he left and what they could
| do to get him back. I think big companies send any attempts at
| negotiation straight to the trash.
| lapsedacademic wrote:
| Because they're making money off of the property, not the
| service. Accepting lower rents impacts valuations.
| mattwad wrote:
| This happened to us as well, but I know it happened all over
| our city. pretty standard for everyone who got a new lease
| during COVID times. I don't attribute any of it to inflation.
| Luckily, our new rent is still much lower than what they're
| charging new tenants, though.
| thebean11 wrote:
| Depending on where you are, your lease might automatically
| convert to month to month. This exact situation happened to a
| friend of mine in NYC, they didn't sign the lease and didn't
| move out, and are just paying the old rent. They are legally
| month to month and are entitled to 60 days notice if the
| landlord wants them out or raise the rent (landlord hasn't said
| anything yet). A lease renewal != notice of a rent increase on
| a month to month tenant.
| PragmaticPulp wrote:
| Rents will continue to increase as long as people continue to
| pay the increased rent.
|
| A 35% increase is far above average, but if people are paying
| it and it's not enough to get people to move out, then it's
| really just market rate.
|
| On the other hand, if it's high enough that people start moving
| out and the new vacancies are hard to fill, those rents will
| come down very quickly.
|
| One of the strangest things about rent increases in my area is
| that everybody complains about them, but few people ever bother
| moving out. The even stranger thing is that most of the people
| I knew who went remote chose to move to _more_ expensive
| cities, because that's where they decided they wanted to live.
| I suspect rents will continue to rise sharply in hot areas
| until people are actually willing to vote with their feet.
| friedturkey wrote:
| > On the other hand, if it's high enough that people start
| moving out and the new vacancies are hard to fill, those
| rents will come down very quickly.
|
| Unfortunately, this is unlikely. We're in an era where
| building owners would rather let their properties sit empty
| for years than consider even a modest reduction in price.
| BitwiseFool wrote:
| You know what makes my blood boil? My apartment complex is
| currently leasing me a 700 sq.ft. one bedroom for $940 a month.
| I decided to move because the rent is being raised to a
| whopping $1,524 a month before _other_ fees. Parking used to be
| free but now they are charging a flat $10 for an unreserved
| stall, $30 for a reserved one. Oh, and they added "Valet
| Waste" where we are forced to pay $30 a month for someone to
| pick up trash at our doorway. There are no doubt other fee
| increases I'm not aware of yet.
|
| What's worse is that the complex is full of unoccupied and
| newly vacated units. You can tell because the lights are kept
| on 24/7 and they installed new LED bulbs. This makes me wonder
| why they would treat current tenants so badly by raising rents
| so much when so many of those units that are being vacated
| remain empty?!? Surely it would be better to be less aggressive
| and have a higher occupancy, no?
| lumost wrote:
| It's only better to have high occupancy when you care about
| cash flow. Low/negative cost of capital means you only care
| about theoretical cash flow for valuation purposes. Given the
| rate at which home prices have been increasing landlords will
| make more money from appreciation than from rent.
| sokoloff wrote:
| If they raised the rent successfully on 2/3rds of the units
| to just over 3/2's of its old value, then it seems like they
| could afford to keep 1/3 of units vacant and available for
| new tenants who are willing to pay that higher rent. (They're
| no worse off on a cashflow basis and they have vacant
| inventory that represents possible upside.)
| izend wrote:
| This strategy only works because vacancy rates are low and
| interest rates are low.
| sokoloff wrote:
| I don't think the second condition is even needed. As
| long as you can raise the rent by over 50%, you can keep
| 1/3 of units vacant and be better off than last year;
| that's probably only possibly if overall vacancies are
| low.
| mistrial9 wrote:
| companies that profit well in high inflation environments
| are studied in some business schools. Part of the
| equation you describe is the (assumed) constant demand,
| and the ability to adjust frequently compared to life of
| the asset.
| sheeshkebab wrote:
| You gotta know how to negotiate with these crystal city
| buildings - mainly by just moving from one to another yearly.
| Sometimes just changing apt in the same building with the new
| lease is cheaper than staying in current one.
| ModernMech wrote:
| This is very true. My rent is pretty much the same as it was
| in 2010 because I've done this.
| tomjakubowski wrote:
| In this situation (identical apartment, different floor, 25%
| lower rent than my renewal offer), I asked my building
| manager to match the rent in my offer and they did. I made a
| simple argument that it would be wasteful not to (I spend
| money for movers, they spend for cleaners). I feel lucky now.
| justinator wrote:
| Rental management companies are accepting offers for leases
| that are hundreds of dollars/month more than asking price and
| in some cases expecting you to make that sort of offer, which
| is insane.
| [deleted]
| josephh wrote:
| And the administration wants to spend $1.75 trillion more
| dollars? Give me a break.
| CameronNemo wrote:
| How is spending by the US government related to energy prices?
|
| If anything the subsidies for renewable energy (build out and
| research) would give fossil fuels more competition.
| tpmx wrote:
| This inflation seems like a global thing.
| tartuffe78 wrote:
| The US dollar is a global thing as well.
| anderber wrote:
| Although inflation is global, some countries have it pretty
| low. For example, Portugal is at 1.16%. Two years ago it
| was negative. Another point is that Portugal is actively
| moving to renewable energy. Currently I believe they are at
| 28% or more.
| mikysco wrote:
| I think the logic is government dollars competing with
| private dollars, especially during a supply shock, will send
| prices up
| micromacrofoot wrote:
| Care to elaborate what you mean, or is this just vague
| political hand-wringing?
| knownjorbist wrote:
| The spending from the ARA and covid relief makes up a
| relatively tiny contribution to the CPI rising. It really has
| to do with supply chains and energy prices as the economy
| continues to improve "post"-COVID, as the article states.
| chewbacha wrote:
| Theoretically, spending that is funded by new taxes shouldn't
| cause inflation as the money is not "new". The deficit spending
| of the stimulus checks under both administrations was "new"
| money chasing substantially fewer products (supply line
| shortages).
|
| If anything, taxes could have a cooling effect and lower
| demand.
| lost953 wrote:
| The programs for spending the money are slated to last as
| little as a single year, while the taxes to balance the
| spending are expected to do so over 10 years. It absolutely
| is inflationary, particularly if any of these shorter than 10
| year programs get extended without new taxes to pay for them.
| pessimizer wrote:
| > The programs for spending the money are slated to last as
| little as a single year
|
| What does this mean? Are you saying that there exists a
| program in this package that will take less than a year, or
| are you saying that all of the programs in this package
| could be wrapped up within a single year? If the latter,
| fine. If the former, you're using careful phrasing to be
| intentionally deceptive, which is not a way to argue with
| people you're trying to convince.
| sokoloff wrote:
| If there are 10 programs that will all be paid for by 10
| years of tax increases and one program's spending happens
| all in a year and the others across a range of times,
| none longer than 10 years, that line of argument is
| convincing to me that there is short-term spending in
| excess of taxation married to pay for it, even if no
| programs overrun their budget or get extended without new
| taxes to cover the extension.
| lost953 wrote:
| Yes, the former. For instance, the Expanded Child Tax
| Credit, is extended for 1 year at a estimated cost of
| $190M if this were expanded to the 10 years the bill is
| supposed to be payed for, it would be larger than the
| entire bill is supposed to be.
| Ericson2314 wrote:
| Do not think raising interest rates would help in the pandemic
| disruption supply side issues that are the cause of this.
|
| https://twitter.com/M_C_Klein/status/1480538926398029824
| consumer spending is down, this flat-out rules out "too much
| money chasing too little goods" as the root cause, for surely
| then sellers would lower prices to sell enough more more volume
| to raise back consumer spending and increase total profit.
| madengr wrote:
| outside1234 wrote:
| Its a good point - with a subnote that they added taxes to
| cover the spending.
|
| But to be clear, if this is deficit driven, it is driven by the
| tax cuts from the previous congress.
|
| Maybe we should keep the taxes in the new bill and get rid of
| the new spending
| ruuda wrote:
| Keep in mind that there were 48% more US dollars in existence in
| November 2021, than in January 2019. That's a 15.0% increase per
| year. Most of this happened in March-May 2020.
| https://fred.stlouisfed.org/series/M2SL
| jjcon wrote:
| Well they also changed the definition of M2 (how many dollars
| are used in calculations) in May 2020.
| ur-whale wrote:
| Ah but just wait, there is an entire horde of people on HN that
| will more than happy to explain how what you just said and
| inflation are entirely uncorrelated phenomenons.
| pessimizer wrote:
| I can't believe we had 48% inflation, I must have missed it.
| coding123 wrote:
| Wood is sitting at 3x it was 2 months ago (again).
| brink wrote:
| I was unable to build last summer due to soaring prices, and
| feel like I will be unable to again in the spring. Biden
| inexplicably doubled the tariffs on imported lumber too. The
| situation genuinely hurts.
| SubiculumCode wrote:
| Its funny how inflation is happening across the whole world, but
| people want to blame U.S. money printing which got us through the
| pandemic without an outright DEPRESSION.
| ceejayoz wrote:
| This. The entire global economy ran into a solid brick wall all
| at once and we came out of it with single-digit inflation and a
| shockingly mild recession. Thus far, modern economic policy
| seems to have had a big win here.
| dominotw wrote:
| > happening across the whole world
|
| housing and rent here havent gone up here in india.
|
| usa asset bubble seems a bit insane from outside.
| blululu wrote:
| Digging in it looks like this is mostly driven by energy (oil).
| Of course there is oil in everything so that will spill
| everywhere sooner or later.
| ProfessorLayton wrote:
| The silver lining here is that most households in the U.S. own
| their home, so they're either shielded from a significant portion
| of inflation, or their mortgages are getting cheaper in real
| terms.
|
| Sucks for everyone else though. Especially with the artificial
| housing shortage.
| lottin wrote:
| Owning your own home doesn't shield you from rent increases,
| because you're still paying rent, since as a owner you're not
| getting paid the rent thay you would otherwise receive had you
| rented your property out. This means _you_ are paying that rent
| out of your own pocket. This may sound like creative accounting
| to some, but it 's not. The cost is very real, despite not
| being observable in terms of cash flows.
| yawnr wrote:
| This makes no sense. Owning a home is not paying rent. Paying
| a mortgage comes with the expectation of accruing equity in
| the home. Renting does not. You're comparing renting with
| being a landlord.
| FooBarBizBazz wrote:
| This is completely backwards! Yes, you get value from owning
| a house, and you can measure that in dollar terms by looking
| at comparable rents, but this isn't a _cost_ ; it's more like
| a _dividend_.
| ac29 wrote:
| This makes no sense. If you are living in the house you own,
| you can't simultaneously rent it out. Any rent you might
| theoretically receive would be essentially canceled out by
| needing to rent another place to live in.
| grey-area wrote:
| Nope.
|
| Inflation is the best thing that can happen to you if you owe
| highly leveraged debt on appreciating assets. The more debt
| the better.
|
| Your debt payments stay stable, the asset price goes up, your
| wages go up, and within a few years the payments are
| negligible compared to your salary.
|
| Compare this to a renter - your rental payments go up, your
| wages go up.
| jjk166 wrote:
| Shelter is a necessity. If you rented out your primary
| residence, you would then need to rent yourself, so if rent
| goes up everywhere then increase in rent prices is a wash.
| lottin wrote:
| Good point, yeah, I hadn't thought this through.
| BoiledCabbage wrote:
| > Owning your own home doesn't shield you from rent
| increases, because you're still paying rent,
|
| Yes it does shield you fron rent increases. Specifically
| because by owning a home you have also purchased an income
| producing asset that perfectly hedges your rent increase. For
| every dollar that rent goes up and you have to pay more, you
| also get an additional dollar in income from that increased
| rent. Ie shielding you from the affect of any increase.
|
| It's the same thing as buying a stock, and then shorting that
| same stock (or buying a put). Yes the stock may go down, but
| for every bit it does, your other investment up down meaning
| you are now shielded from (or hedged against) any changes in
| stock price.
| dragonwriter wrote:
| > The silver lining here is that most households in the U.S.
| own their home, so they're either shielded from a significant
| portion of inflation
|
| Unless something has changed since the recent reports of the
| inflation surge, housing hasn't been a big part of it (used
| auto prices were, IIRC, the single biggest component--which
| also doesn't hit most people regularly...)
| dragonwriter wrote:
| > The silver lining here is that most households in the U.S.
| own their home, so they're either shielded from a significant
| portion of inflation
|
| Unless something has changed since the recent reports of the
| inflation surge on the non-energy side, housing hasn't been a
| big part of it (used auto prices were, IIRC, the single biggest
| component--which also doesn't hit most people regularly...)
| jeffbee wrote:
| """The pandemic has seen extraordinary growth in home
| values... Because of the way shelter costs enter into the
| CPI, these increases in owned home and rental costs have not
| yet contributed much to overall inflation.""" - The U.S.
| White House
|
| It's not that housing prices aren't up, it's that CPI can't
| (yet) capture the change.
| Ericson2314 wrote:
| Not even everyone else: bottom 40% wages also went up big time.
|
| Everyone is ahead but small bussiness owners without bubble-
| worthy assets who just relied on too-cheap labor to make a
| profit.
| ur-whale wrote:
| > own their home
|
| For some definition of "own".
|
| Most do have some amount of equity in their home and have a big
| fat mortgage to repay.
|
| I am sorry, but that's not exactly "ownership" in my book.
|
| As to your second point (inflation up => cost of mortgage
| down), only true if wages go up, which, unless I am mistaken
| ...
| teeray wrote:
| Even if you bring a wheelbarrow of C-notes to the closing to
| pay for your house, you still never own a house the way you
| own a ham sandwich. If you fail to pay your property taxes,
| the government can kick you out and auction your house to
| repay itself.
| UncleOxidant wrote:
| At least the vast majority of those mortgages are fixed rate
| so that the monthly payment doesn't vary. Renting means your
| monthly payments can continually rise - those with mortgages
| are shielded from that.
| maxsilver wrote:
| How is that a silver lining, isn't that the worst part of the
| problem?
|
| In a more ideal world, we want mortgages to get more expensive
| (so that housing itself would get cheaper).
| gorjusborg wrote:
| Yes.
|
| I am a homeowner and don't want my home value to double when
| real income has barely moved in the same period. That's not
| sustainable.
|
| Even if I could sell without repurchasing, to pocket the
| cash, there's another generation behind me that's going to
| need a place to live.
|
| You can't just have entire generations of homeless people
| without it affecting society.
| Spivak wrote:
| Someone who owns their home by taking out a mortgage (in some
| sense) loves inflation because they're paying back their loan
| of, say 2010 dollars in 2020 dollars. Whether the interest
| rate on the mortgage (the cost of the mortgage) is high or
| low doesn't matter when it comes to this effect.
| the_optimist wrote:
| This isn't what most people would term a "silver lining."
| Inflation is a giant and nearly impossible-to-manage wealth
| transfer that afflicts everyone productive.
| sokoloff wrote:
| It's technically "most" but still just under 2 in 3.
| ctoth wrote:
| Renters headed about 36% of the nation's 122.8 million
| households in 2019, the last year for which the Census Bureau
| has reliable estimates. Because certain demographics - young
| people, racial and ethnic minorities, and those with lower
| incomes - are more likely to rent, those groups likely will be
| disproportionately affected when evictions resume[0].
|
| I suspect what ProfessorLayton means is that they specifically
| own a house and so sucks for the rest of us.
|
| 0: https://www.pewresearch.org/fact-tank/2021/08/02/as-
| national...
| ProfessorLayton wrote:
| My comment was not intended to be read as "FU, got mine". I
| was only pointing out that _most_ households in the U.S. are
| somewhat shielded from these high inflation numbers,
| especially since shelter is typically the biggest expense.
|
| I vehemently agree that those who don't own appreciating
| assets are worse off, which is why I said it "sucks", because
| it does. But it isn't most households.
|
| Lastly, young people in particular are also less likely vote
| at all, let alone for their own interests. Before the
| pandemic, the housing shortage was entirely artificial, and
| the main reason housing keeps skyrocketing is political.
| There just isn't enough supply to keep up with demand, yet
| people without homes don't show up at their local council
| meetings demanding _more_ housing supply the same way NIMBY
| homeowners show up demanding _less_.
| notch656a wrote:
| Unless you're selling your house to downsize or leave the
| country, raising home prices isn't a good thing. You have to
| live somewhere. Higher home values means higher property taxes
| (in many cases, almost paying for your whole house again, and
| now at inflated rates).
|
| Raising home prices have much worse effect of kicking away the
| ladders for the new generation to own their own home, while
| doing nothing for those who already have a home to live in and
| desire to keep doing so (other than possibly raising their
| property taxes).
| rapind wrote:
| I'm trying to find a way out/ hedge our economy (Canada,
| similar to U.S. except we can't print money to get out of it).
| I have a sinking feeling that either the idiots over leveraging
| themselves on bubble priced homes will get bailed out or the
| idiot banks who facilitate them will get bailed out... probably
| both. Which ironically makes me the idiot for not participating
| in the idiocy.
|
| Maybe I'm just getting old, but when I look around at our
| economy, housing, the crypto fascination, etc. it all looks
| like scams, hype, and fomo to me.
|
| When the big bailouts happen, I'm gonzo. Just don't know where
| to yet. Maybe I'll live on a sailboat to try and minimize the
| impact of the insanity.
| dghlsakjg wrote:
| As one of those people that bought a bubble priced house
| (rental stock in the town I live in just doesn't exist for
| the type of place I wanted) I'm pretty impressed with how
| much Canada can bury its head in the sand about the problem.
| I think in 4-5 years when all these mortgages get refinanced
| at (presumably) higher rates some weird shit is going to
| happen.
|
| The root issue as far as I can tell is supply is incredibly
| poorly managed. When I was living in Vancouver, there was a
| lot next to us that was waiting for permission for 2 years to
| build a low rise, mixed use building in an area already zoned
| for it. Don't get me started on "historic" homes in dense
| areas.
| [deleted]
| jurassic wrote:
| About 2/3 of people own a home, which is a lot, but I'm not
| sure I'd call it "most people". And for the 1/3 that do not own
| a home, often already at a disadvantage in ability to build
| wealth, they will continue to fall further and further behind
| as rents rise and their wages lose value. It's a bad situation.
| bowmessage wrote:
| 2/3rds of US persons? Or households? A cursory search leads
| me to believe the latter.
| tomjakubowski wrote:
| Is the figure that 2/3 of homes are owner-occupied? 2/3 of
| households own at least one home?
|
| edit: 89% of US homes are occupied. Of these, 58% are owner
| occupied.
| https://www.census.gov/housing/hvs/files/currenthvspress.pdf
| t-writescode wrote:
| And less than half of millenials (many of us are in our
| 30s) own a home:
|
| https://newsilver.com/the-lender/millennial-home-buying-
| stat...
|
| https://www.forbes.com/sites/eriksherman/2021/10/27/the-
| futu...
| justinator wrote:
| Not everyone lives in a house, friend. But you're correct, the
| burden of inflation rests more on the poor.
| DFHippie wrote:
| The poor and creditors. The poor, because they have less
| discretionary income and it isn't inflating to cover their
| inflating necessary expenditures. The creditors, because
| their assets are depreciating. The debtors in the middle see
| their debt, the creditors' asset, deflating.
| Ericson2314 wrote:
| wages counts in inflation. The poor may be better off or
| not based on what is stickier.
|
| We all know labor is weak, so we start expecting wages to
| rise last, but that is _not_ what happened this time, for
| there was a genuine tightening of the labor market.
| lumost wrote:
| How long will that shield hold? There are strong generational,
| economic, and social divides In who owns homes and who benefits
| from rising prices.
|
| If only retirees, and highly paid professionals are shielded
| from housing increases I'd expect all other prices to become
| correlated with housing as workers demand commensurate wage
| increases or start refusing to work for negative earnings.
| bluGill wrote:
| It is hard to break that shield. House payments stay the same
| with inflation. So if you were paying $1000/month and
| inflation doubles the price of everything you still pay
| $1000/month. Your income is likely to double in this
| situation, and while everything else goes up in price you
| still have that extra $1000/month in your pocket ($500 after
| accounting for inflation). Or you can do a cash our refinance
| to get a lot more cash and bring your payments up to
| $2000/month.
|
| Note that while this is happening bad things happen. It often
| is the case that you have to live on less real purchases for
| a few months until your wages go up. However as a homeowner
| the mortgage not changing means it only takes one or two
| rounds to get ahead of this forever (that is before you never
| revert to worse than when you bought the house - you can go
| backward in purchasing power but not that much), while as a
| renter your rent will increase yearly and that is often a big
| hit against your wages that won't increase at the same time
| (and often not at the same rate - it will balance out in 5
| year but that is a long time to live)
|
| Don't read the above as a rant against renting. There are
| other pros of renting. You need to make the right decision
| for your personal situation.
| nostrademons wrote:
| I assume you mean that while homeowners are protected from
| rising rents, they're soon going to be paying out the nose
| for _other_ goods, as the prices of goods & services
| produced by renters rise to match the new cost of living?
|
| That's already happening. IMHO you have the causality
| backwards - prices started rising in 2020, and then _some_
| workers have captured some of that surplus by switching jobs,
| and now landlords are trying to capture the workers ' surplus
| by raising rents. Rents follow wages, which follow profits,
| which follow prices, and then prices follow rents & wages
| again in the wage/price spiral. Homeowners have an advantage
| because their biggest cost of living is fixed, while rents
| generally rise to capture all available wage surplus.
|
| The folks who really get screwed are the ones with fixed
| incomes but variable expenses, either a renting retiree or
| someone who plans to stay at the same employer for a
| lifetime. You should be aggressively changing jobs and going
| where the money is to capture some of the large amounts of
| money that are floating around. People who do that usually do
| better than average.
| ericmcer wrote:
| Thank god the homeowners are protected from this. I was worried
| the >100% increase in home value they have seen in the last 5
| years might be pulled back a little.
| newaccount2021 wrote:
| Keep in mind that the Fed is only _talking about_ dialing back
| accommodation...so right now, strictly speaking, we are still
| stimulating
|
| The inflation from the stimulative policies in effect today won't
| even show up for six months
| lvl100 wrote:
| Rates will have to rise to cut inflation. But EM countries will
| be the ones to pay the price in the end.
|
| I understand most people on HN likely enjoyed a great run in tech
| bubble but you have to admit speculation here is simply mind
| boggling (even after the recent SaaS crash).
| jeffreyrogers wrote:
| Some recent early rounds put the post money valuation so high
| that prospective returns for later investors look terrible.
| shawn-butler wrote:
| USDA economists last month projected food increase prices in
| 20202 of 2%-3% and food away from home 3-4%.
|
| This doesn't jive with this at all.
|
| Meat, poultry, eggs jumped 12-13% and seems like that isn't
| coming down anytime soon.
| [deleted]
| nabla9 wrote:
| In all items less food and energy (Core CPI) these two stand out:
|
| New vehicles: 11.8%
|
| Used cars and trucks: 37.3%
| jhallenworld wrote:
| Newer vehicles have more DRM and more integrated systems, so
| they cost more to service and are therefore worth less than
| older vehicles. So these numbers make sense..
| FanaHOVA wrote:
| I bought a used Tesla in August 2020 from Tesla.com; I turned
| it in last month to get a longer range one from them. The trade
| in value was the same as the price I paid originally.
| lapsedacademic wrote:
| Exactly. That's clearly not sustainable. Either new car
| prices will keep going up or used car prices will plummet. I
| think the latter is _much_ more likely.
| lapsedacademic wrote:
| The good news is that the used vehicle market will almost
| certainly crash around 2022/2023 as new vehicle production
| catches up with demand. Currently, my 2020 used car with 30K
| miles can be sold for more than the MSRP for the 2022 model
| with identical trim. And it can even be sold for slightly more
| than actual quotes I've gotten for the 2022 model from dealers.
| There's obviously a supply shortage going on that will subside.
|
| The bad news is that the new vehicle and food price increases
| are almost certainly sticky.
|
| Energy is the big tricky question mark. The big worry post-
| pandemic was about US shale production never returning, but
| it's starting to look like we'll hit the 2019 highs in US
| domestic production some time in the next year or so. I suspect
| we're past the peak in terms of rate of growth, but it's hard
| to say if the new prices are sticky or if we'll see a
| meaningful decline in the next year or two.
|
| (I've started to build a strategy for selling off my energy
| holdings and I'm still on the fence about what to do with Ford
| and GM.)
| xadhominemx wrote:
| New vehicle prices are almost certainly not sticky.
| Competition between dealers and OEMs is normally fierce, and
| will revert to normal once we exit this supply-constrained
| environment.
|
| Food price is also highly cyclical and related to supply
| constraints of pure commodities which always correct.
| lapsedacademic wrote:
| _> not sticky_
|
| I guess I should've clarified. Vehicle prices for
| equivalent vehicles probably aren't sticky, but the
| statistic reported here is sticky.
|
| Electrification will increase average sale price. But the
| amortization schedule will lengthen, operating cost will
| decrease, and maintenance will plummet. So might still be a
| win for consumers.
|
| But I don't think avg sale price will come down
| meaningfully. You'll see a big shift from ICE to E, though,
| and yes, ICE prices will come down a lot.
|
| _> Food price is also highly cyclical and related to
| supply constraints of pure commodities which always
| correct._
|
| Suffice it to say that I'm not betting on commodities in
| either direction but I've got a huge position in Tyson.
| lotsofpulp wrote:
| I never see any electric cars on the road other than
| Tesla. To me, that means no other automaker has produced
| a compelling electric option yet, so I would not bet on
| significant ICE to E within the next few years (other
| than the increasing numbers of Teslas).
| reducesuffering wrote:
| In the Bay Area, there are many Chevy Bolts, VW ID.4, and
| Ford Mach-E. They are more competitive economically than
| their ICE counterparts when you include minimal operating
| expenses for energy and maintenance, and their possible
| 7.5k tax credit.
|
| Bolts were going for ~$25k at ~250 miles range.
|
| 2023 ID.4 is an SUV/Crossover with probably ~240 mile
| range rumored for ~35k (and $7.5k off tax credit)
|
| Mach-E is an SUV/Crossover with ~250 mile range for ~$44k
| (and $7.5k off tax credit)
| decafninja wrote:
| Seems these days you're getting a good deal if you pay MSRP
| for a new car *. You're getting a fantastic deal if you pay
| anything less, and it's not uncommon to be paying some kind
| of markup.
|
| I wonder if that's the new normal, or if haggling will make
| a comeback?
|
| * excluding some undesirable makes/models that would have
| sold poorly without huge incentives pre-pandemic anyways.
| uejfiweun wrote:
| I'll believe it when I see it. People have been so wrong
| about these supply chain issues that I am starting to think
| the whole thing is just permanently busted.
|
| It doesn't help that the fed is literally lying out of its
| teeth and realistically will do everything they can to AVOID
| raising interest rates. They are all corrupt as hell,
| secretly trading stocks under our noses.
| lapsedacademic wrote:
| In that case, cash out your 401(K) and buy a shitload of
| used cars.
|
| I've got one I'll sell you for $15K over its 2020 purchase
| price. Perfect condition at only 20K miles.
| selimthegrim wrote:
| He or she can always go to some country with a
| deflationary currency spiral and sell them.
| knownjorbist wrote:
| When & where have "they" been wrong about the supply chain
| issues? Everyone's talking about corrections this year and
| next. We're only 12 days into this year.
| mrleinad wrote:
| How are wages usually managed in the US on scenarios like these?
| From the outside, it looks like there are no unions to push for
| wage inflation raises, is that correct?
|
| I wish we had only 7% inflation here... (Argentina)
| aparks517 wrote:
| The companies I've worked for have had periodic (every 6 or 12
| months) performance evaluations with associated pay
| adjustments. The pay adjustment would be broken out into a
| cost-of-living increase (notionally tracking inflation) and a
| performance increase (or decrease I guess) based on the
| employee's performance evaluation. I'm sure it varies by
| employer, but this seems to be common in my area and industry
| at least.
|
| We do have unions in the US, though I've not worked in a union
| shop before. Union contracts vary, but I get the idea it's not
| uncommon for them to include pay adjustments based on
| inflation.
| nostrademons wrote:
| It's really variable across industries.
|
| In competitive industries like software engineering, you quit
| and get a new job and then they pay you 10-20% more. In
| monopsony industries like government, you suck it up and get a
| 3% cost-of-living increase while gradually falling behind on
| inflation. In unionized businesses (there aren't many left),
| your union fights for a 7% pay increase and you basically stay
| awash with inflation. In competitive small businesses, you try
| to quit to get that big raise but then find that no other small
| business has the money to pay you, so you spend your nights,
| weekends, and downtime on the job doing a data science bootcamp
| and then quit for a 10x salary boost.
|
| It was the same in the 1970s. My mom (teacher) said that when
| she entered the workforce in the late 60s, teachers were paid
| about 20-30% less than professional occupations like doctors,
| lawyers, and engineers. By the early 1980s, the latter were
| making 2-3x more but teacher salaries had barely budged. By the
| time I entered the workforce in the mid-00s, software engineer
| starting salaries were about the same as teacher pre-retirement
| salaries, mid-career was 2-3x more, and the top end was 10x+
| more.
| kamarg wrote:
| I wasn't old enough to be employed the last time the US had
| inflation this high but I can tell you that my current employer
| has stated that we aren't getting cost of living adjustments
| despite the high inflation. Instead they're claiming that
| raises will be based on each employees contribution to the
| company. Which would be great if they actually meant it since
| all of us engineers would be getting very significant raises.
| What will actually happen is that all of us will get about 2%
| raises, a bunch of people will quit because the job market for
| developers is great right now, and then the company will hire
| in a bunch of junior devs for higher wages than the current
| junior devs are getting.
| nradov wrote:
| So then the labor market is functioning as expected.
| micromacrofoot wrote:
| If you have a good job they recognize inflation and compensate
| accordingly, if you're 99% of the population you get screwed or
| find another job.
| Ericson2314 wrote:
| https://fred.stlouisfed.org/series/LES1252881600Q wage
| earners are up, even adjusted for this inflation.
|
| Labor shortage -> real worker power -> solidify gains with
| unions
|
| Trying to boost unions when labor is on the ropes is foolish
| preaching from vicarious onlookers.
| CoastalCoder wrote:
| Honest question from someone truly ignorant on these things:
|
| To what extent might this affect Bitcoin (or other proof-of-work)
| mining?
|
| I've heard that PoW mining is notoriously energy hungry. Does a
| big increase in energy prices merely slow the mining down, or is
| there some tipping point that could make PoW-based crypto markets
| crash and die?
|
| Disclaimer: I'd like to buy a new GPU in 2022.
| analog31 wrote:
| Quick look suggests that bitcoin energy consumption is a small
| fraction of world energy consumption. For me, it's hard to
| guess the effect on pricing. Bitcoin mining seems to be an
| arbitrage: Turning energy that's priced in one market, into
| money that can be spent in another market. This would seem to
| equalize energy prices across markets, while also discouraging
| countries from subsidizing energy.
| janoside wrote:
| The Bitcoin network is a global energy buyer with properties
| unlike any other. It will continue to bid for stranded and
| excess energy that cannot be used for other applications. With
| last year's Chinese mining ban the network has become more
| distributed than ever and is likely to be very resilient to US
| domestic energy-price swings.
|
| PoW is _the_ solution to an important set of interconnected
| problems, and as long as the network has value, PoW will keep
| bidding for energy to secure that network.
|
| It's been said, correctly IMHO, there is only Proof-of-Work and
| obfuscated Proof-of-Work. Rephrased, nothing is cheaper than
| Proof-of-Work: https://www.truthcoin.info/blog/pow-cheapest/
| aglavine wrote:
| As a Latin American, welcome to this awful club.
|
| And don't let anybody tell you otherwise:
|
| This is totally because of fiscal deficit.
| DFHippie wrote:
| > This is totally because of fiscal deficit.
|
| I think it's because of supply chains inadequate to supply
| surging demand from people flush with cash. It's the toilet
| paper drought spread out across the entire economy.
| tpmx wrote:
| To be honest, it's getting a bit scary.
| gedy wrote:
| Yeah this nice raise many of us got hopping jobs is evaporating
| quickly
| sokoloff wrote:
| How much of the nice raise came from companies realizing they
| finally had some pricing power?
| credit_guy wrote:
| > companies realizing they finally had some pricing power
|
| So companies did not know they had pricing power, and they
| just realized that? All of them? They all had the same
| epiphany at the same time?
| Ericson2314 wrote:
| If you had any stocks or equity the continuing bubble dwarfs
| inflation. Lower and upper class both did great in 2020-2021.
|
| Only people that got screwed were a thin band of middle class
| small bussiness owners. Fuck them they're leaches anyways on
| what has been too-cheap unskilled labor for decades.
| panick21_ wrote:
| This is a really bad measure of inflation for monetary policy
| This is a supply shock. This kind of inflation should not heavily
| impact your monetary policy.
|
| This exactly why fixed inflation targeting is a bad idea and
| Market Monetarist advocated NGDP Level targeting and New
| Keynesians simply want the Central bank to do that correctly
| manually.
|
| Consumer Price Level measures might be useful for other things,
| but not at input for your central banking function.
| nickff wrote:
| The prices of most of the (inflation measure) inputs have been
| increasing, with different delays and magnitudes; it's not just
| one or two of the inputs. At what point do you acknowledge that
| there has been a general increase in the price level? If you
| agree that there has been an increase, when do you think it
| counts as 'inflation'?
|
| Inflation originally meant 'an increase in the money supply'
| (what we now call m1), which is what we've seen over the past
| two years. When the governments enacted their responses to
| COVID, many predicted 'inflation', and some denied it would
| happen. Does this count? What would 'count'?
| RhodesianHunter wrote:
| The big numbers ARE driven by only one or two inputs though.
| Without used cars and housing, the supply of which took a
| huge hit for Covid related reasons, the print would be much
| lower.
| lumost wrote:
| Perhaps we should also swap rent increases for living with
| additional roommates, clearly consumers are choosing more
| communal living situations and we can thus discount rent
| price increases as well. Just like we took home prices out
| of CPI
|
| /s
|
| If we get to choose which categories get excluded from CPI
| after every bad report it ceases to be a good metric.
| sokoloff wrote:
| CPI is a survey-based methodology and captures how people
| actually spend their money. If something becomes rare and
| expensive and people curtail their consumption of it,
| that is itself a useful signal. If something becomes
| common and inexpensive and people buy a lot more of it as
| a result, also a useful signal.
|
| Home purchase price was taken out of CPI-U in 1983 (and
| CPI-W in 1985) and replaced with an owner-equivalent rent
| measure that gets at the cost of consumption of shelter
| (the service that housing provides).
|
| Tl;dr: Housing expenses were not removed; house
| _purchases_ were (and replaced with a rent-equivalent
| measure).
| nickff wrote:
| Well there are only a few main groups, and if we generally
| expect that some will respond faster than others, I'd say
| two or three going up would be quite indicative of general
| inflation. It seems like food, energy, and commodities
| (less food and energy) have gone up at different rates. The
| only major group that's been relatively stable (still about
| 4%) is services, and it seems likely that it's because many
| of them have been made illegal/unattractive for many recent
| months.
|
| https://www.bls.gov/news.release/pdf/cpi.pdf
| ur-whale wrote:
| > Consumer Price Level measures might be useful for other
| things, but not at input for your central banking function.
|
| It's not about being useful, but about the fact that the mob is
| growing more unhappy every day because their buying power is
| dwindling, which in turns makes elected politicians quake in
| their boots.
|
| And as much as everyone would like to claim or even in some
| case believe that central banks are independent entities, this
| is a complete pipe dream, they are - at the very least -
| subject to influence peddling like everyone else.
| hanoz wrote:
| _> supply shock_
|
| The supply shock you need to be worried about is the shocking
| oversupply of new dollars competing for the same resources.
| Ericson2314 wrote:
| Consumer spending has gone _down_. Too many dollars cannot be
| the problem if they aren 't being spent!
|
| You might say "oh, well the rich are bidding up gas and food
| prices, poor people can't afford and ummmm drive and eat
| less". It sounds silly and it should but _even if_ that were
| happening, and was the sole causal factor, it would mean the
| food and gas markets were not clearing, and that is clearly
| also not happening.
|
| And even if _that_ were happening the sellers would be being
| irrational. For surely they would lower prices after the rich
| were fed and gassed up so they could sell the remainder of
| their goods, and make more money. (the profit rate would go
| down but the total profits would go up.)
|
| No matter how you cut it, the Monetarist story is false and
| ridiculous given the evidence.
| javert wrote:
| Overprinting money causes massive economic distortion. For
| instance, the rich who get the money first are buying up
| all the houses, turning the US into a nation of renters.
|
| Another example--the federal government enables "easy
| money" as higher education loans, which has enabled
| universities to massively overcharge for mostly low quality
| education.
| Ericson2314 wrote:
| Yes inequality is inefficient.
|
| The monitarists' conception of inflation is a _temporary_
| distortion where all the money stock and flows pick up.
| What you are describing is a _spacial_ distortion where
| certain people / goods get unfair treatment. The latter
| is indeed quite dubious, but it's not the same as the
| former!
|
| Conventional monetary policy is lame and fairly
| ineffective, but I have seen claims that raising rates is
| better at destimulating than lowering is at stimulating.
| What a tough nuance to convey!
| pphysch wrote:
| Consumers haven't gotten a stimulus payment in a year.
| Consumers are not Primary Dealers getting huge amounts of
| cash every month through QE.
| nabla9 wrote:
| > Consumer spending has gone down.
|
| It did go down. Now its back to normal.
|
| https://fred.stlouisfed.org/graph/fredgraph.png?g=KOBi
| lumost wrote:
| The major lesson of the Fed's QE policy has been that QE does
| not put dollars into the economy evenly. Certain asset
| classes and professions get first crack at the newly printed
| dollars, and over time firms and industries specifically
| designed to capture printed money evolve e.g. wework.
|
| It's not a surprise that we'll hear tons of information
| saying that printing money isn't a bad thing, or that it
| isn't the cause of any current monetary outcomes.
| lotsofpulp wrote:
| I thought the guy that led Wework captured Saudi Arabian
| oil money via a Japanese VC.
| partiallypro wrote:
| If it's -only- a supply shock, then prices would eventually
| come down, right? Well, we are finding that to be less and less
| true. So something else is going on beneath the surface.
| ksdale wrote:
| Or there's still a massive pandemic happening and supplies of
| everything are still very shocked.
| SketchySeaBeast wrote:
| As I understand it we're still dealing with supply issues and
| will be for a long while still. Chips are still incredibly
| hard to source and that naturally affects a giant range of
| consumer products.
| BenoitEssiambre wrote:
| Note that the Market Monetarists have been increasingly vocal
| recently about central banks overdoing it (after a decade of
| criticizing for under stimulating). NGDP seems to also be
| overshooting.
| wernercd wrote:
| Nothing to see here guys... its good for normal people to pay
| double for things.
| germinalphrase wrote:
| Who's paying double?
| Rooster61 wrote:
| First time home buyers
| pessimizer wrote:
| People vote for that. The same people screaming about
| inflation would be screaming if house prices failed to beat
| inflation.
| ericmcer wrote:
| Isn't the value of a home that you get to live in it
| though? It seems ass backwards that we buy a house as an
| investment. Someone could move into a brand new house,
| smash all the walls up and rip out the copper pipes while
| squatting in it for 5 years, that doubles its value!
| Rooster61 wrote:
| Home owners would be. They want their home value to go
| up. I can speak from experience that it sucks ass to be a
| first time home buyer right now.
| jeffbee wrote:
| Absolutely. Anyone who goes around saying the solution to
| the housing crisis is to get low-income families into
| homes so they can build wealth, which is every American
| politician without exception, is talking out both sides
| of their mouth.
| jeffbee wrote:
| Used car buyers.
| oxymoran wrote:
| People buying used cars.
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