[HN Gopher] Have we been thinking about inflation all wrong?
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Have we been thinking about inflation all wrong?
Author : pseudolus
Score : 62 points
Date : 2022-02-10 18:04 UTC (4 hours ago)
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| rmason wrote:
| Most folks on HN aren't old enough to remember inflation as an
| adult and it's effects but I am.
|
| Nothing in my life hurt more people than inflation. If you were
| older and on a fixed income you were screwed, folks had to sell
| their possessions to survive. I remember farmers paying 20%
| interest to get loans for fertilizer, fuel and seed to plant
| their crop. The average person overnight had less buying power.
|
| The only people who benefited were the rich. If they owned land
| or buildings the prices shot up. If they were highly leveraged
| they could pay off their loans with cheaper dollars. If they were
| in business they could raise prices on what they sold and pass
| along the cost to someone else.
| djrogers wrote:
| It's telling that the vast majority of the pushback on the
| 'inflation is bad' viewpoint comes from well-off academics, tech
| folks, and just generally people who are hurt the least by
| inflation.
| Avshalom wrote:
| I unload trucks and stock shelves at Target. You think my
| viewpoint about inflation is gonna get published in a way that
| anyone sees?
| BitwiseFool wrote:
| There's a viral video going around of a Target employee
| placing a new price tag on Jimmy Dean breakfast biscuits.
| Sure it's not getting treated as seriously as an article in
| the New York Times written by Paul Krugman, but it's arguably
| having a greater impact than one of his milquetoast NYT
| columns on the subject. So please, do share what you're
| seeing.
| opportune wrote:
| Poor people can benefit from inflation in the sense of it
| wiping out debt or spurning wage inflation/decreasing wealth
| inequality
| dragontamer wrote:
| > wiping out debt
|
| Do poor people have access to severe amounts of debt?
|
| The #1 source of debt in the USA seems to be the home
| mortgage, and #2 is probably the car-loan after that.
|
| Poor people don't have access to home mortgages because they
| can't afford it: they're in the renter class. So all
| inflation does is increase the price of rents to them.
|
| Car loans are also somewhat difficult for people with low
| credit scores.
|
| EDIT: Ah right: student loan debt. Which is once again,
| largely a rich person thing in the aggregate. Poor people
| aren't going to college. The middle class who can go to
| college may get significant amounts of student debt, but its
| nothing compared to the student loans the upper-class get for
| Lawyer / Medical Doctor schools.
|
| > spurning wage inflation
|
| While average wages have inflated, have they increased by
| 7.5% over the past year? I don't think so.
|
| ---------
|
| You need to be relatively well off to have a home-mortgage
| that benefits from inflation. (+Home value while decreasing
| the value to the loan). In fact, it is the richest among us
| who have the access to the most amounts of debt instruments
| (ex: a home speculator / house-flipper may own 10 homes and
| 10 different mortgages, but they needed a high amount of
| capital to find themselves in that situation).
| glenstein wrote:
| I would add medical debt, student loans, credit card debt.
| dragontamer wrote:
| I think I accept your point on medical debt. Medical debt
| can happen to anyone.
|
| But even credit-card debt is dependent on your credit
| score. Poor people don't have good credit, and therefore
| their ability to take on credit-card debt is limited
| compared to a richer person.
| asdff wrote:
| They take on payday loans instead from predatory lenders
| you only find in poor neighborhoods.
| WillPostForFood wrote:
| Rich people are more likely have debt like fixed rate
| mortgages that inflation can wipe out. Poor people are more
| likely to have interest indexed debt like credit cards or
| variable rate loans that will crush them when inflation
| rises. Inflation is terrible for the poor. We can already see
| wages lagging behind inflation.
| TheGigaChad wrote:
| WillPostForFood wrote:
| Data does not support that. People with lower wages suffer the
| most with inflation. It's like a regressive tax. A $2 increase
| in the price of a gallon of gas takes a much bigger percentage
| chunk out of the disposable income of a minimum wage employee
| than tech folks.
|
| https://fivethirtyeight.com/features/most-americans-are-afra...
| reedjosh wrote:
| I think you misread the parent comment here.
|
| Your arguments seem to agree with it.
| tinalumfoil wrote:
| I think you and parent are in agreement. The wealthier can
| also afford to put more money in riskier but inflation
| resistant assets like stocks, so it goes beyond gas prices.
| yoyar wrote:
| Inflation of the money supply leads to prices that end up higher
| than they otherwise would have been.
|
| This does not necessarily mean nominally higher prices.
|
| This is a distinction that leads people to say things like: Obama
| did it and prices didn't go up. With the implication that it
| might be ok to inflate to infinity.
| chaostheory wrote:
| The people who tend win from increased inflation are debtors. Imo
| the demographic with the most amount of debt are not "young
| people" as the article states.
| uticus wrote:
| > If inflation were allowed to run a bit higher, it could deliver
| a long-overdue win for young people who have had to face a
| combination of stagnant wages and rising housing costs.
|
| My understanding is that inflation hurts fixed income, especially
| the elderly who don't have the advantage of young people where
| they can change jobs or absorb risk as readily.
|
| If that's true, then the "wrongness" of inflation has been
| pinpointed - it's ethically wrong to financially hurt our
| elderly.
| namdnay wrote:
| > it's ethically wrong to financially hurt our elderly.
|
| Why would it be more wrong to hurt the elderly than the young?
| The elderly are far wealthier
| cableshaft wrote:
| Youth don't have as much (or any) savings to lose and can
| switch jobs / demand a raise to make a higher wage. Anything
| they do have saved is probably invested and increasing in
| value along with inflation.
|
| Elderly just have less money to eke a living on, and can no
| longer get a job (most likely).
|
| Everyone gets hurt by inflation (well, maybe not if you have
| a ton of debt), but the elderly are stuck and can't do
| anything about it.
| uticus wrote:
| > The elderly are far wealthier
|
| Ignoring the stats, please think long term about your
| implications.
|
| Let's imagine you are a young person. Your wage increase
| means you have $20 to save for retirement, vs $10. However,
| if inflation remains average overall, by the time you get to
| retirement, your $10 buys $5 worth of stuff. On top of that,
| you are now old. A young person decides you are able to pay
| more because you've saved more (having had more time to
| save). Your $10 in retirement is reduced to $8, to buy $5
| worth of stuff.
| dnautics wrote:
| > If inflation were allowed to run a bit higher, it could deliver
| a long-overdue win for young people who have had to face a
| combination of stagnant wages and rising housing costs
|
| what the hell? Inflation exists as a policy to stiff wage-
| earners. This is arguably more likely to go exactly the other way
| than the author expects. Take it from a nobel laureate:
|
| https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...
|
| > it's really, really hard to cut nominal wages. Yet when you
| have very low inflation, getting relative wages right would
| require that a significant number of workers take wage cuts
| [...but when you _have_ inflation, their wages get cut without
| anyone being the wiser!!].
| uses wrote:
| Inflation doesn't exist as a policy to stiff wage earners.
| Inflation exists as a reality of a growing economy (more goods
| and services needs more money to cover them). The alternative
| is deflation, which would be extremely bad. So what we aim for,
| is low inflation. Which we've had for ~40 years. Low,
| controlled inflation is the vastly preferable alternative to
| any amount of deflation, so it's the side of the scale we
| target, giving a ~2% margin of error (~2% is the inflation
| level usually targeted by modern central banks).
|
| What Krugman is talking about is that cutting wages is
| extremely hard for employers to do. Nobody wants to take a
| paycut. So what employers do instead, being put in the
| situation of needing to cut payroll, is eliminate entire
| positions. Which on the whole is worse than a paycut because of
| the destabilizing effect to the individual and society. So a
| positive side effect of inflation (not the main effect, a side
| effect), is that in the absence of pay raises, low inflation
| creates a constant mild paycut unless there is specifically a
| pay raise. It makes the economy more resilient.
| prichino wrote:
| This deflation is bad meme comes straight from the big
| international bankers of the early 20th century (JPM et al.).
| They cared mostly about liquidity and stable exchange rates.
| Unless you are one of them, please stop parroting "would be
| extremely bad". Would it be different from now? Probably.
| Extremely bad? For whom?
| friedturkey wrote:
| Yeah, deflation is awful. Imagine our continuously increased
| production and efficiency resulting in goods becoming cheaper
| and the value of the working person's dollar going farther.
|
| Horrifying.
| jokethrowaway wrote:
| With deflation there would be no reason to invest your
| money, paralysing the economy.
|
| Some inflation is needed; what we don't need is
| https://brrr.money/
| dnautics wrote:
| "no reason to invest your money"
|
| You mean with deflation people will suddenly no longer
| want for more money? Sign us up!
| BitwiseFool wrote:
| There's this really weird dichotomy where whats "good for
| the economy" is often bad for you as an individual, and
| vice versa.
| fennecfoxen wrote:
| Don't worry, it'll be great! You'll get a 10% raise, and prices
| will only be up 15%.
| dnautics wrote:
| To be frank, for a small sliver of wage:mortgage ratios this
| could be fucking fantastic... for "young wage-earners" who
| _already_ have a house (like me! but I 'm not really that
| young anymore). For other wage-earners, not so much, sad
| trombone.
| NovemberWhiskey wrote:
| If interest rates don't rise, then sure - inflation is
| likely to show up in higher housing costs, which means
| you'll deflate away that loan and your asset will
| appreciate.
|
| If interest rates rise, then you have one or two problems.
|
| If your loan isn't at a fixed rate, then you'd better hope
| you can still afford your mortgage. Say you paid a 20%
| downpayment on a home worth $375K. A $300K note at 3% is a
| $1,250 per month expense, but at 8% it's $2,200 a month.
| People forget, but mortgage rates were 8% as recently as
| 2000.
|
| Even if your rate is fixed, new buyers have affordability
| problems due to the same phenomenon, which hits valuations.
| If you can afford $1,250 a month, maybe you can afford
| $1,500 after some inflation pads out your pay check.
|
| But, with rates at 8%, that's only a $200K mortgage, so
| maybe a $375K home is only a $250K home in the new rate
| environment and you're in negative equity all of a sudden.
| If you need to sell, then you're losing the initial
| downpayment and you may still end up owing the bank. If you
| can't cover it, say goodbye to your creditworthiness.
| giaour wrote:
| Or for young wage earners who have significant student
| debt. Pretty much anybody who has more current liabilities
| than current assets can expect to benefit from some degree
| of inflation
| tharne wrote:
| > Pretty much anybody who has more current liabilities
| than current assets can expect to benefit from some
| degree of inflation
|
| Except for the fact that they're getting a pay cut year
| after year. This is why the general public gets so mad
| about inflation. Like another commenter mentioned,
| inflation screws over anyone who works for a wage.
| giaour wrote:
| > inflation screws over anyone who works for a wage
|
| It can, but inflation affects current assets and
| liabilities immediately and only depresses wages over
| time. If inflation was 7% over the course of the year,
| you now owe 7% less on your outstanding loans (in real
| terms), while any real wage decrease would be amortized
| over the course of the year. Assuming inflation occurred
| at a fixed rate and that your nominal wage didn't change
| at all, you only actually lost 3.5% of your real wage.
|
| You're also now a worker in a "hot" economy, so you can
| look for a new job with a higher wage (or ask for a
| raise, citing inflation) and limit your real wage loss to
| 3.5% of one year's earnings.
|
| > This is why the general public gets so mad about
| inflation.
|
| I know this is uncharitable of me, but I think the
| general public gets so mad about inflation because people
| with large capital holdings try to get the public riled
| up, and then the average person just doesn't sit down and
| do the math for their own situation. The median member of
| the general public is a debtor, not a creditor, so modest
| inflation (or high inflation over a short period) is
| usually good for them, financially speaking. Deflation,
| on the other hand, could destroy them.
|
| For the bottom and top of the economic ladder, though,
| inflation is usually a bad deal, since minimum wages and
| safety net programs aren't normally indexed to inflation,
| and inflation erodes the value of savings and other
| current assets. Elevating the middle class at the expense
| of the poor is morally questionable, even if the rich get
| soaked along the way, too.
| dragonwriter wrote:
| > Like another commenter mentioned, inflation screws over
| anyone who works for a wage.
|
| At worst, anyone who works for a _fixed_ wage (and even
| then, the demand dynamics that create a fixed wage with
| inflation mean instead people just lose their jobs
| without inflation, because of the stickiness of nominal
| wages.)
| giaour wrote:
| > anyone who works for a fixed wage
|
| This includes anyone who works for minimum wage (assuming
| it's not indexed to inflation), and they are not likely
| to be able to handle a cut in real pay as easily as, say,
| middle class homeowners.
| fennecfoxen wrote:
| Yeah, if you're at all on the fence, or close to the fence,
| it's a fine time to get a mortgage, even if house prices
| _have_ gone up somewhat. An excellent inflation hedge!
| Nbox9 wrote:
| Rising interest rates is likely to have a significant
| downward pressure on home prices. Think carefully before
| entering a very leveraged position (like the 3.5% down
| FHA loan) in the current market.
| flavius29663 wrote:
| The thing is this: inflation raised every year, whether you
| want it or not. Job hopping only happens every few years.
| licnep wrote:
| It always seems weird to me how people think of inflation as a
| single number, when it is made of made of many different
| components, some prices might be going down or constant, while
| others are rising. Energy prices rising are definitely the most
| impactful ones cause they affect every sector.
| hartator wrote:
| Keeping readjusting pricing and no knowing what a dollar is truly
| worth is a net loss for the people. It's literally economics 101.
| miki_tyler wrote:
| Inflation washes out debt. Who think inflation is good? People,
| companies or institutions that are buried in debt to the tits.
| For the rest of us it is just an extra hand inside our pockets.
| causi wrote:
| Inflation washes out debt as long as wages are rising with
| inflation. If they're not it's just crushing us all.
| odonnellryan wrote:
| Not true. Likely with high inflation the real return on your
| debt is positive. My mortgage returned +4.5% last year. That
| is a great investment!
| odonnellryan wrote:
| It's also probably fine if you do not have large amounts of
| cash savings.
|
| Lots of people have debt. I think most or almost everyone has
| debt.
| CyberRabbi wrote:
| Throughout this entire "stimulus" fiasco, my faith in the ability
| of nominally smart people to independently reason about simple
| concepts like supply, demand, and inflation has been humbled.
|
| First there was a denial that inflation was occurring now there
| is an excessive panic that it signals the end of the economy. Can
| I get off this clown car?
|
| Periods of unusually high inflation happens. This happened in the
| 70s. It will happen again. The fundamentals of the American
| economy are changing but not in any dramatic way since at least
| the 90s. Everything is still made in China, we are still a
| service economy.
| jbay808 wrote:
| When it starts to get really burdensome to keep your promises,
| the idea of breaking them gets really attractive. But that
| doesn't come for free. It costs credibility.
|
| The cost of central banks breaking their inflation-control
| commitment when inflation starts running hot, is that the market
| starts pricing in their unwillingness to raise interest rates.
| This fuels a whole bunch of other inflation feedback loops, and
| then before you know it, the central bank wants to get inflation
| back under control again. But now nobody believes that they'll do
| what they say they're going to do, so they end up having to work
| twice as hard.
|
| If your goal is stability, it's better to just keep your promises
| to begin with.
| lumost wrote:
| Counterpoint:
|
| Stability is a critical optimization criteria, but should be
| balanced with the need to maintain "dynamism". New ideas can't
| win if any time the entrenched hit problems they are bailed
| out. Maintaining employment is necessary for long-term societal
| stability, maintaining Goldman Sachs is not.
|
| In recent years our definition of stability shifted to one
| where market winners remain winners indefinitely.
| nickff wrote:
| > _" Maintaining employment is necessary for long-term
| societal stability, maintaining Goldman Sachs is not."_
|
| The central banks rely on investment banks and other large
| institution to translate the low overnight rates into reduced
| commercial and consumer rates. The low interest rate, high
| inflation rate policies are extremely beneficial to the
| Goldmans of the world.
| jbay808 wrote:
| I fully agree with your counterpoint, except that I don't
| think it's a counterpoint, because to my mind, such a focus
| on short-term stability (ie, bailouts) are a major driver of
| long-term instability!
|
| The reasoning for that seems inexorable to me. Once you lop
| off the deeply negative tail of any risk curve, market actors
| will gorge themselves on investments that have a positive
| average payoff but large systemic tail risks, to exactly the
| degree that they're confident they won't have to bear those
| costs.
|
| (See the Canadian housing market where banks are happy to
| offer cheap mortgages with just 5% downpayments, a
| downpayment that represents mere months of price
| appreciation, knowing that they're government-insured in the
| event of a widespread market downturn).
|
| This will continue until it stops being profitable, which is
| when the overall level of risk and leverage has increased to
| the point that even the government can't guarantee those
| risks anymore. So a small crash gets delayed but magnified
| into a big one. Long-term stability sacrificed to short term
| stability.
|
| That's the cost of "moral hazard", which is a bad name
| because it sounds like a random risk that, if we're lucky, we
| might avoid. But it's actually another costly conserved
| quantity that accumulates and accumulates.
| clairity wrote:
| an inherently unstable but critical element of an economic
| system shouldn't be allowed to float on the whims of a few
| humans, especially with overwhelming corruptive pressure
| lapping against them incessantly.
|
| a central bank should be trying with all its might to precisely
| match the amount of money in the system exactly with the amount
| of productivity being generated. it shouldn't be trying to
| implement 'fiscal policy', but rather have exactly one singular
| (albeit complex) focus. any significant deviation should
| trigger immediate investigation, replacement, and (potentially)
| sanctions.
| jbay808 wrote:
| I agree. As a control theorist, I'd be much more comfortable
| with a PID controller running the ship, and I think it would
| do a better job.
| bee_rider wrote:
| I don't know much about either, but being confidently wrong
| can be a great learning experience so:
|
| They call these Automatic Stabilizers in the policy world.
| mountainriver wrote:
| Yup Denmark recently open sourced a lot of their fiscal
| policy and it works pretty much like this. Really great
| idea
| brandonmenc wrote:
| I would love some links on this, because it sounds
| fascinating.
| imtringued wrote:
| That's impossible without demurrage or negative interest
| rates.
| nimbius wrote:
| absolutely agreed, but the feds also faced with a none too
| enticing sword of Damocles in raising interest: corporate
| credit.
|
| The fed never acquiesced to its prior commitment to end
| quantitative easing measures after the great recession of 2008,
| instead they simply shifted their weight to bond buybacks
| during covid and shoveled yet more coal into the engines of
| commerce...the result was a booming stock market during
| paradoxic unemployment levels and low GDP. the market had
| become divorced from the concept of anything but money itself
| earning more money based on its own worth.
|
| "transient" inflation became a death-chant in the halls of the
| fed last year and as christmas sales languished and inflation
| pushed past five percent eventually the feds bond buyback
| program which was slated to "taper" in july was signalled to
| "end" in march. its hard to see that happening however, as
| using the market as a litmus for policy can never truly happen
| seeing as it seems entirely removed from the human condition,
| the worker or any tangible product outside investment itself.
|
| the relief is the prime interest rate, but raising it would
| immediately cause a corporate credit crisis after a major
| pandemic as companies have for now over a decade enjoyed zero
| percent, or even negative interest. the ones who are over-
| leveraged are the ones that cant find chips due to the chip
| shortage, or cant ship product due to "supply chain." in short,
| the usual suspects.
|
| So my guess is the feds going to try to ride out double digit
| inflation until somehow supply and demand return to normal,
| with a tacit nod to the end of high-roller credit being the
| bond buyback ending and an eventual december...maybe next
| january interest rate raise. One hopes it worked better than
| the QE tapering in 2011, which tanked the market six hundred
| points in a day and was immediately backtracked.
| mring33621 wrote:
| I'm not disputing the whole of your comment, but I don't
| think "christmas sales languished" was true at all for 2021.
| zozbot234 wrote:
| Yup. The kernel of truth behind Austrian theories of
| macroeconomics/the business cycle is that interest-rate based
| policy setting is inherently an _unstable_ system. If the
| central bank makes policy errors that fail to stabilize the
| underlying target (whether inflation, nominal income, exchange
| rates, whatever) the whole system starts spiraling away from
| that unstable equilibrium point, and the subsequently needed
| correction grows even larger. It 's important that errors be
| promptly corrected, and expectations about future policy remain
| properly "anchored" to the right target.
| wolpoli wrote:
| > It's important that errors be promptly corrected, and
| expectations about future policy remain properly "anchored"
| to the right target.
|
| It would be interesting to know if inflation expectation has
| become unanchored in the mind of the general public, because,
| ultimately, inflation expectation causes inflation.
| nine_k wrote:
| I don't think that inflation is as easy to cause without a
| fresh supply of money. And you know who prints fiat money.
| imtringued wrote:
| No, they completely miss the point. The fundamental problem
| with money is that you can delay your spending indefinitively
| thereby breaking the concept of supply and demand.
|
| Imagine an economy where you are self sufficient and sell but
| never buy anything ( cough germany).
|
| You keep accumulating more and more money and you could in
| theory spend it all, thereby cause a huge amount of
| inflation. That is the core of the deflation inflation
| paradox.
|
| There is never enough money in one part of the economy while
| the part with too much poses a threat that can deploy
| instantly without any warning.
|
| Selling and selling isn't a free market, it's not even a
| market.
| jonnycomputer wrote:
| Stability is a notion that depends on scale. You might have a
| long slow decline that feels relatively stable, but leaves you
| in a bad place. It seems to me that was the trajectory we were
| on.
| roenxi wrote:
| > It costs credibility.
|
| I enjoy the cut of the jib, but credibility isn't really that
| important. From memory, Argentina isn't credible. All that
| means is they have to pretend that they will pay high interest
| rates before people will lend to them. If the question is "can
| they pay back all their debts with real value?" angle the US
| position isn't credible either, the numbers have gotten too
| large. Doesn't mean much in practice.
|
| The real issues with a default are:
|
| 1. A country is being run by people who don't believe that
| written words should decide what they do and who won't keep
| their promises even in the most watertight of cases.
|
| 2. Either the polity or political leadership are incapable of
| medium term planning.
|
| 3. The sort of people who think 10-30 years ahead are being
| tricked into making bad financial decisions.
|
| So on the one hand a default doesn't matter to people who don't
| directly own the debt. On the other hand, if there is a
| default, a host of other problems are going to hit and the
| country won't be ready for them. It is a bad sign.
| jbay808 wrote:
| The credibility I'm referring to is: when Jerome Powell says
| "we have the tools at our disposal to control inflation, and
| if it persists, we will not hesitate to use them", how much
| do you update your expectations of future inflation and
| interest rates?
|
| If statements like that start to sound like a bluff and no
| longer cause you to update your expectations away from high
| inflation and low interest rates, then the Fed has lost a
| certain amount of credibility. And that credibility should be
| thought of in some sense a conserved value. It's not regained
| instantly, but rather only by the market being surprised to
| discover that the Fed wasn't bluffing. And that's an
| expensive surprise, because by definition, it goes beyond
| what the market priced in.
| cma wrote:
| They have a dual mandate on both employment and inflation,
| and have to balance.
| dnautics wrote:
| > If your goal is stability
|
| this is the thing to be questioned. Stability, at what cost? Is
| it worth tearing up the environment, tricking people into
| buying shitty disposable consumer products, financializing the
| economy, and stealing from the poor and unborn to give to the
| rich in the here and now? I don't really see anyone challenging
| the tradeoffs of stability in the economic discourse, it's just
| so often given as an unquestionably good thing.
| jbay808 wrote:
| Hmm; all of those things are what I would associate with
| breaking the stability promise, that is, _reneging_ on
| inflation control and holding interest rates low. That
| encourages borrowing and propels the price of assets.
|
| I'd expect your objection to be associated with _growth at
| all costs_ , not with stability.
| dnautics wrote:
| Stability in the current economic discourse implies _growth
| at all costs_ due to the way that our monetary systems are
| organized. "If we didn't raise the debt limit our economy
| would collapse"; discourse on "countries must meet their
| growth targets" e.g.
| BitwiseFool wrote:
| I'm not the person you responded to, but to me stability
| also implies artificially propping up parts of the economy
| that should otherwise be in-decline. It's not necessarily
| the same as growth at all costs, but I sense it is related.
| robbedpeter wrote:
| A significant part of answering that question in a good way
| depends on how exactly the current policies and
| infrastructure are responsible for the unprecedented-in-
| human-history decline in suffering and extreme poverty and
| increase in population and average quality of life.
|
| To frame the question - in order for things to be as good as
| they are, is it required to have a system in which winners
| like Jeff Bezos are inevitable, or in fact necessary for the
| system to function?
|
| You can plan and abstract theories and rule changes and
| ethics and morals, but human systems are chaotic and strange.
|
| Fallibility and mistakes and whim make economics at scale a
| really hard thing to predict.
|
| Another question would be if you think things are relatively
| good, does switching to better policies run the risk of
| destabilizing and losing all the relative gains for extended
| periods before the better system breaks even?
| cool_dude85 wrote:
| Why haven't I been reading this kind of hemming and hawing over
| the lack of full employment for, oh, the last 50 years or so?
| The fed has a mandate for that too, but somehow when they
| didn't manage to achieve it, I never heard about how society is
| going to collapse any minute now. Only when poor people are
| making income gains. Strange.
| vorpalhex wrote:
| We are pretty close to full employment.
|
| Rising groceries and fuel costs hurt everyone, but that hurt
| is more so on the poor who have less overall cash flow.
| adolph wrote:
| > We are pretty close to full employment.
|
| _The number of persons not in the labor force who
| currently want a job was little changed at 5.7 million in
| January. This measure decreased by 1.3 million over the
| year but is 708,000 higher than in February 2020. These
| individuals were not counted as unemployed because they
| were not actively looking for work during the 4 weeks
| preceding the survey or were unavailable to take a job._
|
| BLS publication "THE EMPLOYMENT SITUATION -- JANUARY 2022":
| https://www.bls.gov/news.release/pdf/empsit.pdf
|
| See also the Labor Force Participation Rate:
| https://fred.stlouisfed.org/series/CIVPART
| naasking wrote:
| Full employment is not a desirable goal. There should always
| be some degree of unemployment because it indicates the
| labour market is actually working, with people moving between
| jobs, leaving jobs to get retrained, etc.
| dsjoerg wrote:
| Their mandate is not for "full employment" but for "maximum
| sustainable employment".
| https://www.chicagofed.org/research/dual-mandate/dual-
| mandat...
| e4e78a06 wrote:
| Poor people are making _nominal_ income gains. Their real
| income is actually declining because wage gains aren't
| keeping up with inflation despite a red hot labor market.
|
| It's almost like rents rise to match incomes unless you build
| more housing. Rent control just means that the costs get
| offloaded to other things like the security deposit,
| application fees, and deferred maintenance. You can't
| regulate the market out of existence.
| lumost wrote:
| Except, with higher interest rates the nominal price of
| housing falls relative to wages. A worker can reasonably
| hope to buy there way out of rents at some point in the
| future (assuming the price of the house is set as a
| multiple of it's rental equivalent cash flow discounted
| over time)
| BitwiseFool wrote:
| >A worker can reasonably hope to buy there way out of
| rents at some point in the future
|
| I bought my way out of renting because I got lucky with
| Crypto. If I'm being brutally honest, I'm a homeowner
| because I bought the right lotto ticket.
| AmericanBlarney wrote:
| Because we've been at or near full employment most of the
| time.
|
| Also, the exact definition of full employment is fuzzy,
| whereas grocery bills rising is quite tangible.
| ccuqui wrote:
| Inflation is the direct result of governments printing money like
| crazy to hide why they spend money like crazy and continue to be
| extremely inefficient and corrupt instead of cutting expenses and
| becoming more efficient and leaner. And it mainly affects the
| poorest in society. How can that be good?! Don't take my word for
| it: see what is happening in Argentina, Venezuela, Brazil, etc
| and then decide for yourself how "good" it is to live in a
| country with high inflation rates...
| TremendousJudge wrote:
| Brazil has had its inflation under control (for Latin American
| standards, anyway) since the 90s, after the Plan Real. Also,
| Latin American runaway inflation is something that has been
| happening since the 60s, every measure under the sun has been
| tried to fix it, with only limited success in some cases.
| Anyway, it's a bit more complicated than "spending money like
| crazy and being corrupt".
| valcron1000 wrote:
| In Argentina the cause is plain and simply "spending money
| like crazy and being corrupt". Source: I've been living here
| for my whole life.
| ankaAr wrote:
| Inflation=bad
|
| Repeat with me: if the inflation is going up, I will run away.
|
| Laughs in Argentinian inflation (50% or more for last years)
|
| Put your money to work when inflation is running loose, look or
| save on another currency, stock stuff or buy something that is
| not loosing value.
|
| 1001 ways to survive in Latin America
| FrameworkFred wrote:
| Well, I guess the question is what will happen when Not-Canada
| manages to achieve stable prices while Canada lets theirs "run
| hot." It seems to me the rest of the world would make sure to
| hang on to Not-Canadian currency while being very willing to swap
| Canadian currency for everything else, which would increase the
| supply of Canadian currency, causing further Canadian inflation.
|
| Or is the author suggesting we should somehow convince the entire
| world to let their currencies "run hot"? What if a few holdouts
| went rogue and (gasp) maintained a relatively low rate of
| inflation for their currency?
|
| I can reason out why a low and steady rate of inflation might
| cause folks to keep money moving around in an economy, but a do-
| nothing approach seems silly and unworkable over the long term on
| a global scale.
| baragiola wrote:
| Trust me, you don't want inflation.
|
| Source: Argentinian
| TremendousJudge wrote:
| Hah, but this time _they_ have the dollar printer. They can
| actually take the convertibility of 1 dollar = 1 dollar all the
| way to the stratosphere if they want.
|
| Greetings from a fellow neighbor
| guiye wrote:
| yeah, today with 1 dollar you can buy a beer, then next year
| will cost you 2 dollars ;)
| fshbbdssbbgdd wrote:
| Argentina's problem is it owes debt in dollars, so inflating
| the peso doesn't reduce the debt.
| yazantapuz wrote:
| No. Our problem -I live in Argentina- is that we spend like
| there is no tomorrow and no consequences.
| theritis87 wrote:
| sneeze-slayer wrote:
| Rampant inflation is a problem. The inflation seen now in many
| places is not quite there. 7% is higher than we would like, but
| if the alternative is to have shrinking GDP and massive
| unemployment, I would rather have some inflation.
|
| In the US at least, a lot of the raise in the US CPI is due to
| rising energy costs (predicted months ago due to cold winter in
| Asia), used and new cars (the infamous chip shortages), and food.
| Rising food costs is a problem, but it is not a catastrophic
| problem. The US federal government could subsidize farmers that
| grow real vegetables, not just corn and soybeans. This would
| bring down the cost of real food and probably allow people to eat
| healthier.
| scottiebarnes wrote:
| > but if the alternative is to have shrinking GDP and massive
| unemployment, I would rather have some inflation.
|
| This is the general problem with central banking.
|
| Politicians and governments will ALWAYS take action to "save
| the economy", whether that is a small downturn or a big one.
| There's too much pressure to not use the magic money printer.
| Short term election cycles incentivize everyone to just fix the
| problem as fast as we can, future consequences be damned.
|
| You can get away with it in the short term, but over a long
| enough time horizon, you start to run out of bullets, as all
| the real value has already been plundered.
|
| The US Federal debt is currently $30 trillion USD. This is
| never getting balanced, ever. There's only one possible
| eventual outcome with this system.
| overtonwhy wrote:
| Disregard new accounts that claim the sky will be falling.
| The debt will always be going up and there will always be
| inflation. That's how fiat currencies work. Research the
| federal reserve and it's stated objectives to understand why.
| tharne wrote:
| The only problem with that is that inflation is a like a
| fire. When it's very small it can serve you, but once it
| gets bigger and you lose control of it you're f*ked.
| scottiebarnes wrote:
| If the way fiat currencies work is constant devaluation in
| the name of increased short term spending, then it makes
| the currency utterly terrible to invest and save in in the
| long term.
|
| If this is how its supposed to work, then your money is a
| toxic asset which should be handed off as quickly as
| possible to someone else.
|
| And so if no one actually wants this asset, then it makes
| it valueless.
| dragonwriter wrote:
| > then it makes the currency utterly terrible to invest
| and save in in the long term.
|
| That's why it's called "current-sy" (only slightly
| joking) It's for _current_ use as a medium of exchange.
| For investment /savings, you go to productive assets.
|
| That's the whole point. Mixing those functions doesn't
| help anything.
| scottiebarnes wrote:
| No, money is supposed to be good at storing value as
| well. That's why gold evolved as the world currency over
| the last 8000 years, and that's why central banks still
| hoard it in bunkers. You can't easily devalue it by
| creating more of it.
|
| You're failing to understand that treasury bond markets
| have an important function in the macro economy; ideally,
| a safe way to save and store value with low risk. And
| they are larger than stock markets.
| ericmay wrote:
| > No, money is supposed to be good at storing value as
| well.
|
| I think you're confusing wealth/assets with mediums of
| exchange. Gold for example is a pretty decent store of
| value but a nightmare for exchange. Want to buy a pack of
| gum? Why don't you shave a tenth of a gram off right here
| on the counter so I can measure it.. etc. You can see how
| crappy that is.
|
| USD however have never been great stores of value but are
| great currency because they're so liquid. _Everybody_
| accepts dollars. It's easy to trade and convert to other
| assets. How much is that pack of gum? Oh it's a dollar.
| Ok here you go. And that's that.
|
| The name of the game has always been converting dollars
| to productive assets.
|
| Along comes Bitcoin and cryptocurrency and now crypto
| currencies in general have _features_. Bitcoin sucks as a
| currency for buying stuff but is great at storing
| deflationary value (or so it seems). Monero sucks as a
| currency compared to the dollar but has privacy features.
| Etc.
| LoveGracePeace wrote:
| What does the age of someone's account have to do with the
| validity of their view? Inflation is bad. Rising inflation
| is very bad.
| JackFr wrote:
| > The US Federal debt is currently $30 trillion USD. This is
| never getting balanced, ever. There's only one possible
| eventual outcome with this system.
|
| The US debt to GDP ratio is currently slightly higher than it
| was at the end of WWII. It is significantly lower than that
| of Japan, who has a debt to GDP ration similar to those the
| UK ran during portions of the 19th century.
|
| There are very good reasons for governments should be prudent
| in their spending and high levels of debt are to be avoided.
| But no, it will never be balanced, the national debt is
| permanent and exists by design.
|
| > There's only one possible eventual outcome with this
| system.
|
| I don't think that's true, and I'm really not even sure what
| you're ominously hining at.
| foolinaround wrote:
| > the national debt is permanent and exists by design.
|
| Can you pls point me to something about its design?
| tharne wrote:
| If you read history books covering the time just before
| and after the American revolution, there was a lot of
| discussion of this topic at the time. A lot of the
| founder fathers, most notably Alexander Hamilton,
| believed a national debt was a good thing for the
| country.
|
| The belief is/was that by carrying a substantial debt,
| you give the bank and financial institutions skin the
| game and make their success tied to the success of the
| country.
|
| In the modern era it also gives individuals and other
| types of institutions a stake in the country's success.
| When people take about the U.S. national debt, much of
| the conversation goes to China and how much money we owe
| them. We owe them a lot, however, the biggest holders of
| U.S. debt are individual Americans with their 401ks and
| things like pension funds and university endowments.
| JackFr wrote:
| The largest holder of treasury bonds by far is the Social
| Security Trust Fund. (Which is, of course, an accounting
| fiction.)
| ericmay wrote:
| A couple of thoughts (may be wrong, interested in the
| discussion)
|
| When the government borrows money it borrows it at an
| interest rate. When rates are low, like close to 0% low like
| they are now, that's exactly when you want to borrow money.
| Want to fix bridges and invest in things? _Now_ is the time
| to borrow money to do that. It also has the added benefit of
| making past debt cheaper. This scenario that we 're in is
| made even more interesting by the fact that many governments
| also had to print tons and tons of money. While we're now
| over 100% debt-to-GDP, it's not unheard of and not so
| catastrophic that we can't recover from.
|
| I'm also unsure about rising wages here. If they continue to
| rise won't prices continue to rise to reflect wages? I'm also
| of the opinion that slow sales from 2020/2021 + supply chain
| issues have caused companies to raise prices. I don't think
| cereal actually needs to be more expensive. Shareholders do
| though.
| sfblah wrote:
| I think the bigger problem is that people stop being able to
| price anything in a reasonable way. Should companies be valued
| at 1x revenue? 2x? 10x? 437x? How do you decide if the value of
| the thing you're using as the denominator changes wildly.
|
| The downside of this is, instead of people working to create
| productive things, effort instead shifts to gambling and gaming
| the system. Witness what's happened all over our economy. It's
| like a cancer devouring everything: Robin Hood, GameStop,
| Crypto. You name it and it's turned into a casino. How does any
| of that increase human wealth?
| NovemberWhiskey wrote:
| > _The US federal government could subsidize farmers that grow
| real vegetables, not just corn and soybeans._
|
| I mean they could also just stop subsidizing corn production
| quite so much; that would probably be preferable to providing a
| larger subsidy to grow other things.
| BitwiseFool wrote:
| I wonder how much of an impact the Iowa Caucuses have on our
| government being so darn corn farmer friendly.
| flavius29663 wrote:
| Economists were saying some time ago on NRP that inflation
| becomes a vicious circle when it encourages/forces employees to
| demand higher wages "because everything is more expensive",
| which in turns makes everything more expensive, because wages
| are higher now.
|
| I think we are already there, everyone is jumping ship to get a
| higher wage right now, rampant inflation is here to stay
| xyzzyz wrote:
| > The US federal government could subsidize farmers that grow
| real vegetables, not just corn and soybeans.
|
| You can't subsist on "real vegetables". Vegetables form
| important supplement to the diet, but they are not basis of it,
| nor they ever been (people used to eat much more grain and much
| less meat and vegetables than they do now). Governments are
| subsidizing staples, because it is by far most effective way to
| ensure food security.
| sirspacey wrote:
| Having been a recipient of those programs "staples" are not
| what is being subsidized. The largest "food" producers are,
| like General Mills and Coca Cola.
|
| I could get soda but not fresh fruits or vegetables for my
| kids.
|
| We somehow have to keep discussing what real nutrition for
| children looks like and the impact it has on their ability to
| become productive citizens. It's really not that much of a
| mystery anymore, plenty of reproducible studies have been
| done, but our systems are still not designed to achieve it.
|
| Yes, it makes a massive difference what the goals of food
| security are.
| trhway wrote:
| > 7% is higher than we would like, but if the alternative is to
| have shrinking GDP and massive unemployment, I would rather
| have some inflation.
|
| The alternative is to have typical 2-3% of inflation and
| correspondingly the typical 2-3% of GDP growth with healthy
| labor market. The 7% inflation does get you that 7% GDP growth
| we're seeing and red hot labor market, yet it is just a
| temporary effect, like a shot of stimulant, which will soon
| produce a very heavy hangover.
| jaymicha wrote:
| I'm not sure this is true - the base case seems to be the
| Eurozone, the countries of which intervened in their
| economies enough to forestall a depression, but not to the
| extent that the US did. Eurozone inflation is just a notch
| above 5%, unemployment rate right about 7%. In the US it's 7%
| and 4% respectively. In effect, the US traded a ~2% rise in
| yearly inflation for a ~3% reduction in unemployment.
| Reasonable people can disagree on whether that was a good
| trade, but to say that we could have just "skipped" all the
| COVID disruptions and maintained low inflation, low
| unemployment and typical GDP growth strikes me as fantasy
| land. There wasn't any magical economic policy prescription
| that would make everything "normal".
| 01100011 wrote:
| Is there a reason you think US money printing, which
| increases the supply of the world's main currency, is not
| the cause of at least some non-US inflation?
|
| The suppression of interest rates in the US means it is
| cheaper to borrow loans in USD right? Those loans are
| available to foreigners as well. The asset price bubble is
| international at this point, and with it, the wealth effect
| leading to sustained levels of demand which would be absent
| if adequate pricing signals were still allowed to be
| effective.
| trhway wrote:
| If such trade worked then the whole world would have
| already been practicing it for many decades. Yet what we
| know from the last 100 years of such attempts is that there
| is the sweet spot of 2-3% inflation, and deviation from it
| into either direction is punished.
| unyttigfjelltol wrote:
| This nihlism about currency depreciation and deficit spending
| will end badly. Two plus two does equal four, no matter how much
| more profitable or convenient it would be for it to equal four
| trillion.
| ojbyrne wrote:
| This goes back in history to mention the 2008 financial crisis,
| but doesn't go far enough. Those who were around in the 70s
| remember stagflation - high inflation and high unemployment -
| https://en.wikipedia.org/wiki/Stagflation
| rglover wrote:
| When you have to write propaganda about a thing that's long-term
| been identified as "bad," (with ample historical examples)
| actually being a good thing, you're being willfully dishonest and
| in denial.
|
| Many here will fight and bicker and kick and scream but Bitcoin
| is the only solution to the absolute ruin being dangled over the
| millenial and younger generations (primarily because it
| disconnects state/human control of the currency and
| programmatically enforces a cap on issuance while ensuring
| transparency and consensus on a global level).
| chasd00 wrote:
| i don't know about bitcoin but you do have a point about the
| current spin being put on high inflation. High inflation is
| universally known as bad for an economy.. until now for some
| reason.
| rglover wrote:
| > High inflation is universally known as bad for an economy..
| until now for some reason.
|
| Because, presumably, the shoe is about to drop and they want
| citizens to willfully accept their savings/investments going
| to zero and replaced with a digital surveillance currency
| (CBDC or Central Bank Digital Currency). If they can convince
| the general population that "inflation is good," they're less
| likely to take flight to alternatives like metals, Bitcoin,
| land, etc or try to behead the bankers who stole their
| wealth. IMO, MMT is just Stockholm Syndrome rebranded for
| finance.
| standardUser wrote:
| I don't think anyone is arguing in favor of sustained high
| inflation, and we also don't currently have sustained high
| inflation. But some inflation _is_ good for the economy, and
| current inflation currently hasn 't gone much past "some"
| after being extremely low for a very long time despite
| obvious inflationary pressure.
| DethNinja wrote:
| High inflation rates just after a supply shock will wipe-out
| the middle class and push most to poverty.
|
| Honestly, I can't believe more people aren't buying Bitcoin at
| this stage.
| jonnycomputer wrote:
| It'd be one thing if we weren't seeing high economic growth at
| the same time as inflation. But we are. So maybe this is the
| thing we need to get labor back in a place where their salaries
| match their productivity.
| spaetzleesser wrote:
| "So maybe this is the thing we need to get labor back in a
| place where their salaries match their productivity."
|
| Otherwise all the economical growth is just BS for most people.
| steve76 wrote:
| mdavis6890 wrote:
| The thing to keep in mind is that what really matters is _stuff_
| : The goods and services that add economic value to our lives,
| like shoes, houses, food, sports games, accounting services,
| haircuts, etc. Also called the metaphorical "pie."
|
| Inflation is bad to the extent that it causes the total stuff we
| produce to go down or to become more poorly distributed, and good
| to the extent that it does the opposite.
|
| And a shrinking of the pie - a reduction in stuff produced -
| can/will cause inflation assuming people have the same or greater
| amount of money with which they can purchase that stuff.
|
| The more we stay focused on the production of stuff, and less on
| the quantity of money or inflation, the better off we will be,
| and inflation will take care of itself.
| mrtksn wrote:
| Sure, money is simply IOUs that we use as intermediary so that
| we can trade stuff and services and the number doesn't really
| matter as long as it is useful to facilitate the the stuff and
| services exchange.
|
| However, there are many things lost as that number is adjusted.
|
| Firstly, conventionally wedges and B2B contracts and prices are
| adjusted periodically for practical reasons. If the inflation
| is %50yoy, that means at the end of the year the money paid and
| received would be way off, which means people are not
| compensated fairly. People can't really function in an
| environment of ever changing prices and wedges, they can but
| it's very inefficient because everything becomes short term.
| Companies may have ways to cope with it but people who opted
| out for a simple life where they do their job and enjoy their
| lives get screwed over which causes social problems.
|
| Secondly, there's a reason why flipping burgers in the USA buys
| you an iPhone in 2 weeks but doing exactly the same job in
| Bangladesh it will take you many months and part of it is the
| nature and role of the western money, especially the USD but
| also EUR, GBP etc. If the monetary system that pretty much runs
| the world gets screwed things can get real fair real fast and
| fairness is not always meritocratic.
|
| Thirdly, most people don't have access or understanding of
| instruments to preserve their wealth. In high inflation
| countries, people simply pour their money into items and
| property the moment they receive it. It creates society with
| bad habits.
| pdonis wrote:
| _> Inflation is bad to the extent that it causes the total
| stuff we produce to go down or to become more poorly
| distributed, and good to the extent that it does the opposite._
|
| Even doing the opposite can be bad if it's the wrong stuff.
| It's not just the total amount of stuff that matters; it's how
| much of the stuff is stuff people actually need or want, as
| opposed to stuff that gets produced but never actually used
| because it wasn't produced to meet a customer need, it was
| produced because of misallocation of resources.
|
| _> The more we stay focused on the production of stuff, and
| less on the quantity of money or inflation, the better off we
| will be, and inflation will take care of itself._
|
| I agree with being focused on production, as long as it's
| production driven by actual customer needs. But that also means
| not just not focusing on the quantity of money, but taking away
| the government's ability to manipulate the quantity of money.
| Otherwise you will get misallocation of resources and you'll be
| producing the wrong things.
| mdavis6890 wrote:
| Yes, this is an important refinement of my position. And the
| next refinement would be to quantifiably measure the value of
| different stuff and prioritize and allocate resources among
| the products, taking into account their changing value over
| time and with respect to how much we already have. I'm sure
| we could keep going with this...
|
| But really if we could just start thinking in terms of stuff
| rather than money I think we'd be doing well :-)
| ren_engineer wrote:
| >I agree with being focused on production, as long as it's
| production driven by actual customer needs
|
| this has always been an interesting question to me, because
| in theory companies like Facebook are worth hundreds of
| billions despite making many people miserable and actually
| lowering productivity by wasting time.
|
| Basically part of the sin economy, things like gambling and
| drugs. All bring in lots of money but we'd arguably be better
| off without them. Facebook makes money by getting people
| addicted to their app by design.
|
| Customers and markets aren't rational if the people are
| driven by addiction, in which case it would make sense for
| the government to intervene. China is doing this by
| incentivizing people to go into hard sciences like
| semiconductors instead of consumer software
| mdavis6890 wrote:
| In 1000 years people will see most of our current internet
| the same way we see the pyramids at Giza, and they will
| wonder why we spent so much effort on something with no
| obvious value.
| usrusr wrote:
| I doubt it. Those rock piles are seriously famous!
| Landmark achievements of our internet will perhaps be
| known on the level the highlights of medieval
| scholasticism are known: experts exist, but people like
| me know as much as that Occam wasn't a barber and that
| somehow jokes about angels dancing on a needle are a
| thing.
|
| Look at how quickly the Rockefeller name faded: to people
| not particularly interested in the era, it's barely more
| a family that was so important they sponsored a cute ice
| rink.
| peteradio wrote:
| And then they find all the porn and it starts to make
| sense.
| pdonis wrote:
| _> in theory companies like Facebook are worth hundreds of
| billions despite making many people miserable and actually
| lowering productivity by wasting time_
|
| They are "worth" that amount not because they are creating
| that much wealth, but because they have developed a system
| that allows them to transfer that much wealth from others
| to themselves in a zero sum game.
|
| _> Customers and markets aren 't rational if the people
| are driven by addiction_
|
| In the sense that people can be manipulated, sure. But
| "addiction" is by no means the only way to do that.
| Advertising in general (which is how Facebook makes much of
| its money) attempts to do the same thing.
|
| _> in which case it would make sense for the government to
| intervene._
|
| But, as your example shows, we know what it takes for
| government intervention of this sort: it takes being China,
| i.e., having a government with virtually absolute power.
| And that is not a viable long term solution, because a
| government with such power, even if it uses it to do some
| good things, will use it to do many more very damaging
| things, and everyone ends up worse off on net.
| TheGigaChad wrote:
| rmbyrro wrote:
| It also incentivizes people to worry about how to keep their
| share of the pie the same size, instead of contributing to
| increasing the pie with services, products, innovations.
|
| That's precisely what happened to me. I'm taking some attention
| away from my business venture to protect my wealth from
| evaporating.
| sokoloff wrote:
| Isn't a growing business one of the best possible hedges
| against inflation?
| soVeryTired wrote:
| In economics, this viewpoint is known as the "classical
| dichotomy" [0]. IMO it's a bit of a dangerous way of seeing
| things since it blinds you to some important aspects of the
| economy. Inflation is particularly hard on people who don't
| have negotiating power, and in general those people aren't
| doing great to begin with.
|
| While the size of the pie is important, so is the means of
| distributing the pie and the assurance that pie will be served
| tomorrow.
|
| [0] https://en.wikipedia.org/wiki/Classical_dichotomy
| WillPostForFood wrote:
| _If inflation were allowed to run a bit higher, it could deliver
| a long-overdue win for young people who have had to face a
| combination of stagnant wages and rising housing costs._
|
| Inciting inflation to fix rising houses costs and stagnant wages
| is kinda crazy. It definitely won't help housing prices, and
| wages increases are almost always lag behind price increases.
| redisman wrote:
| I don't understand hire this helps. Personally I got a 4% raise
| against 7.5% inflation so..
| 01100011 wrote:
| I am beginning to think that the fed will try to engineer a
| situation where wage gains are leading prices in a wage price
| spiral. Why? Because inflation solves a world of problems(i.e.
| unsustainable debt). It avoids cancelling the 'wealth effect'
| currently deluding half the population into thinking they're
| rich. Inflation sucks when your wages aren't rising as fast as
| prices. Inflation isn't so bad, I think, when you are getting
| paid more but then subsequently prices rise. If a demographic and
| cultural shift causes a permanent shortage of workers, one could
| envision a scenario where wages have to rise to compete for
| talent and in that environment inflation could be tolerated.
|
| Inflation means the fed doesn't have to pop the asset, real
| estate and commodities bubbles. Those bubbles softly deflate as
| their prices only drop in real dollars as the USD loses value. A
| hundred million voters don't wake up feeling poorer, unless
| they're the suckers who own the fixed rate debt.
|
| As a moron who is currently holding lots of cash, I'm hoping the
| fed will have the fortitude to fight inflation. History shows
| they do not, however.
| bittercynic wrote:
| It's a tricky situation to be in. I try to believe that I
| cannot time the market, time in the market beats timing the
| market... but just can't bring myself to buy into it right now.
| It's been so long since we've had a recession, and it seems
| like we've forgotten the lessons of 2008. It may not be
| subprime mortgages this time, but lots of people seem to
| believe asset prices only go up, much like they did in 2007.
| Maybe this time really is different, but I don't believe it.
| gtsop wrote:
| An analogy of what I hear:
|
| A surgeon having a nearly dismantled body in front of them,
| thinking "hmm maybe I should have put a hanzaplast on that poor
| fella, maybe would have saved him"
|
| Surgeon being the "economists", body being the economy.
| sleepingadmin wrote:
| The walrus being a far-left MMT proposing place wrote this when
| inflation was at 3.5% or so. It's now much higher and very
| evidently out of control.
|
| The article quotes Mark Carney, as if he were on their side. BoE
| under Carney have raised interest rates twice:
| https://tradingeconomics.com/united-kingdom/interest-rate and
| that hasn't even dented inflation.
| https://tradingeconomics.com/united-kingdom/inflation-cpi
|
| I believe Carney has a speech tonight which most likely will
| touch on inflation and interest rates. Guess we'll see.
|
| MMT and UBI as political subjects have been utterly dead since
| the time this article was written. What a disaster of an article.
| bryanlarsen wrote:
| > It's now much higher and very evidently out of control.
|
| Monthly inflation is slowing, and is at an annualized 4.8%. We
| had a big spike in the summer/fall that's still showing up in
| our annual figures, but inflation itself is coming under
| control.
|
| https://news.ycombinator.com/item?id=30289147
| overtonwhy wrote:
| Yeah but they're a brand new user who is claiming that
| everything is terrible!
| nostrademons wrote:
| 0.6% monthly inflation annualized isn't 4.8%. Not really sure
| how you got 4.8%, but the computation you want is 1.006^12 =
| 1.0744, about 7.4% (which also happens to match the
| annualized figures).
| e4e78a06 wrote:
| Coincidentally government transfer payments funded by deficit
| spending reached a new low for the year [1]. I'd also add CPI
| underestimates true inflation because it uses hedonic
| adjustments, but in real life consumers don't keep buying
| crappier and crappier products. If you use 1980 methodology
| for computing CPI it's around 15% annualized now [2].
|
| [1]: https://www.wsj.com/articles/u-s-government-
| recorded-119-bil...
|
| [2]: http://www.shadowstats.com/alternate_data/inflation-
| charts
| mise_en_place wrote:
| Inflation favors the debtor, while deflation favors the saver.
| Obviously the world's largest debtor (US govt) will consider
| inflation to be desirable and necessary. Otherwise it would lead
| to a sovereign debt crisis if there are positive real interest
| rates leading to a US govt default.
|
| Keep an eye on the Fed, especially before the midterm elections.
| The Biden administration will put an extreme amount of pressure
| to continue quantitative easing, even if the Fed is signaling
| that rate hikes are coming soon.
| dragonwriter wrote:
| > Inflation favors the debtor, while deflation favors the saver
|
| No, deflation favors currency hoarders and lenders; the primary
| mechanism of saving is investment in productive assets, which
| deflation disfavors.
|
| > Obviously the world's largest debtor (US govt) will consider
| inflation to be desirable and necessary.
|
| Except it doesn't, except at a very low level; inflation in
| general (and _energy_ inflation, in particular, which is one of
| the main factors in the current overall inflation) is one of
| the most well-established objective factors adverse to
| reelection of incumbent politicians in the US.
|
| > Keep an eye on the Fed, especially before the midterm
| elections. The Biden administration will put an extreme amount
| of pressure to continue quantitative easing, even if the Fed is
| signaling that rate hikes are coming soon.
|
| If? The Fed is already tapering QE, scheduled to end it mid-
| March, _and_ signalling a mid-March rate hike.
| xyzzyz wrote:
| Inflation only favors the debtor if he doesn't have to take on
| more debt. USG has a lot of short term debt it needs to
| continuously roll over. If inflation persists, the yields will
| go up, so USG will roll over the current low interest rate debt
| to new high interest rate debt. Given how much debt it has, the
| service payments will skyrocket: at 130% debt to GDP ratio, and
| at 27% tax to GDP ratio, each 1 percentage point increase in
| yields translates to additional 1.3% worth of GDP going to debt
| service payments, which is around 5% of total government
| spending.
|
| That means that if current inflation persists, and the bond
| investors will expect 7% inflation instead of 2% inflation,
| they'll demand bond yields to be at least 5 percentage points
| higher. This will make the debt service payments go from
| current 6% of the budget to nearly 1/3rd of it, a tremendous
| increase. This will only increase fiscal pressure on the
| government, making it less credit worthy, which will push
| yields even higher.
|
| No, if you're indebted above your head with mostly short term
| debt, inflation does not make you happy.
| cpr wrote:
| Sure, let's whitewash the current administration's total failure
| and rebrand as a success.
| titzer wrote:
| I think there are _decades_ of bad policy stacked on top of
| each other that are responsible for the current mess.
| aaa_aaa wrote:
| Current administration created gazillions of dollars out of
| thin air, far more than previous ones. They deserve the
| credit.
| gilbetron wrote:
| Hmm - this stimulus check seems odd, then: https://image.cn
| bcfm.com/api/v1/image/106514776-158826265949...
| alphabettsy wrote:
| Far more?
| MSM wrote:
| This administration has created a ton of money, but I also
| remember a previous administration going out of their way
| to literally put their name on the stimulus checks that
| were sent out following their trillions of dollars of
| stimulus passed...
| flavius29663 wrote:
| I don't understand this bickering about Trump signing the
| checks, I got a check from Biden as well, with his
| signature.
| efdee wrote:
| [citation needed]
| GeekyBear wrote:
| The enormous increase in money creation is very real, but
| it started in the last year of the Trump administration.
|
| https://fred.stlouisfed.org/series/M1SL
| brandmeyer wrote:
| Relevant to interpreting M1 and its sudden jump in 2020:
|
| https://fredblog.stlouisfed.org/2021/05/savings-are-now-
| more...
| triceratops wrote:
| Pretty sure Covid stimulus started in March/April 2020,
| before this administration. People somehow tend to have
| amnesia about stuff that began under Republican
| administrations after a Dem administration takes over. See
| also: the 2008 financial crisis, the Afghanistan and Iraq
| conflicts.
| flavius29663 wrote:
| 2008 was caused almost single-handedly by Bill Clinton
| odonnellryan wrote:
| > Current administration created gazillions of dollars out
| of thin air, far more than previous ones. They deserve the
| credit.
|
| You mean the previous admin? Biden did not do much in
| response to covid.
| TameAntelope wrote:
| If the cost of preventing additional hundreds of thousands
| of dead Americans is a year or two of substantial inflation
| increases, this administration did right by me.
| pdonis wrote:
| _> preventing additional hundreds of thousands of dead
| Americans_
|
| But it hasn't. We have gotten the worst of both worlds:
| huge economic damage _and_ lots of dead Americans. More
| Americans have died of COVID since the current
| administration took office than before that. And since
| governments around the world have demonstrated that they
| cannot stop COVID, the least they could have done was
| refrain from inflicting the economic damage as well.
| TameAntelope wrote:
| None of what you wrote here deals with what I said, which
| is that _more_ Americans would have died, had we not
| spent the money we did.
| pdonis wrote:
| _> more Americans would have died, had we not spent the
| money we did._
|
| But we don't know that that is true, and it doesn't seem
| likely based on the fact that the data shows no
| perceptible changed based on the money being spent; the
| variations in the data are entirely due to seasonality
| and different variants appearing.
| TameAntelope wrote:
| You don't think lowering healthcare costs, keeping sick
| people at home, and straight up giving parents of
| children cash resulted in fewer of the most vulnerable
| people in US society dying?
|
| And there _absolutely_ was a substantial dip in deaths
| after the American Rescue Plan Act of 2021 was passed in
| March of 2021. Last summer was the closest to "back to
| normal" we've gotten since this pandemic started.
| pdonis wrote:
| _> You don 't think lowering healthcare costs, keeping
| sick people at home, and straight up giving parents of
| children cash resulted in fewer of the most vulnerable
| people in US society dying?_
|
| I think this is a very nice theory which, unfortunately,
| doesn't seem to be borne out in the data. See below.
|
| _> there absolutely was a substantial dip in deaths
| after the American Rescue Plan Act of 2021 was passed in
| March of 2021._
|
| First, the money didn't magically appear in everyone's
| pocket the day the act was passed, so if you were going
| to look for any effects, it wouldn't be right after the
| act was passed. You would have to allow some time for the
| effects to propagate. How much time? Of course nobody has
| any answer to that; anyone who claims to is just waving
| their hands and pushing an ideological position.
|
| Second, as I've already said, all the variation we see in
| the data can be explained by seasonality and the times at
| which various new variants appeared. So Occam's Razor
| says there was no significant effect due to all the
| additional money being printed.
| TameAntelope wrote:
| So you go from saying what I claimed "isn't born out in
| the data" to saying there's no way of knowing when the
| effects kick in (though you _do_ give some sense of
| timelines, which happen to line up pretty well with what
| is observed), to saying the effects we _do_ see in the
| data (contradicting your first point) "can be explained
| by seasonality".
|
| Just sounds like you're making up whatever excuses you
| can to avoid giving credit where credit is due.
|
| Occam's Razor here says that the dump of money helped
| people, as that is by far the simplest explanation. It's
| your convoluted mishmash of viewpoints that is
| objectively more complex.
| meerita wrote:
| How can be good to let inflation soar? Didn't the author of the
| article never stepped in Venezuela or Argentina?
| readthenotes1 wrote:
| Inflation is great for people and companies with fixed rate debt.
|
| I'm sure that the prospect of increasing personal and corporate
| wealth has nothing to do with the motivations for wanting more
| inflation though.
| yk wrote:
| The article appears to confuse several different mechanism, that
| all would manifest in inflation. On one hand there is the
| expansion of the monetary base after the financial crisis, that
| never ended up as price increases because the money got stuck in
| the stock market and businesses increase prices when they believe
| their customers can pay more, that is when wages rise. On the
| other hand, what we are seeing right now is the market adjusting
| to a covid economy, people suddenly need webcams, better laptops
| and office chairs and consequently these products rise in price
| because there are not enough of them. Now, in the second case the
| central bank can't do much about the inflation, because it is a
| production problem, not a monetary problem.
| whakim wrote:
| The basic assumption here is that inflation reduces inequality.
| That's plausible (it certainly was a strong contributing factor
| to the great reductions in inequality that occurred between 1920
| and 1950). But inflation is also an extremely blunt-force
| instrument: lots of people who aren't very wealthy also get hurt.
| I'm not sure why we'd want that in a world where fiscal policy
| (i.e., taxation) exists, unless we've just thrown up our hands
| and abdicated all responsibility about what kind of society we
| want to live in to unelected Central Banks.
| jhawk28 wrote:
| If anything it increases inequality. It hurts the poor the
| most. The wealthy are more immune because they will have their
| wealth in things that go up with inflation. When it is caused
| by the government spending more than it takes in, it is
| effectively a hidden tax. NONE of these things are new
| concepts. Even the belief that the inflation won't hurt is new.
| Many other societies have blindly thought they were immune
| until they were not.
| efdee wrote:
| When you say the wealthy are immune because their wealth is
| in things that go up with inflation, what exactly are you
| thinking about? Not stocks for sure. Maybe those who have
| money invested in property for hire, but even then whether
| your income goes up with inflation strongly depends on where
| you are location.
|
| Interesting to know: in some countries (eg. Belgium) wages
| are automatically adapted to inflation, so "the poor" aren't
| hurt at all.
| TacticalCoder wrote:
| > ... in some countries (eg. Belgium) wages are
| automatically adapted to inflation
|
| Only certain wages. Like public servant wages. Private
| companies paying normal people regular wages aren't forced
| to give them a raise. The minimal wage may inflate but if
| you're paid above minimal wage, there's no guarantee you'll
| see a raise.
| usefulcat wrote:
| Why would you not expect stocks to increase with inflation?
| Most of the time, stocks have far outpaced inflation for
| several decades now.
| TameAntelope wrote:
| The article's point is that it _doesn 't_ hurt the poor as
| much, because more poor people can find jobs, pay off their
| loans more easily, and they do make more money.
|
| Not to mention that the price of everything isn't going up a
| single number -- poor people can adjust their spending to
| account for the items that reflect the highest inflation, and
| focus on the goods that are least effected.
|
| The article isn't suggesting there are no downsides to
| inflation, it's suggesting that there are substantial upsides
| that directly address some systemic inequality in global
| society.
| AnimalMuppet wrote:
| But the article is wrong - it _does_ hurt the poor. The
| reason is timing.
|
| Prices go up. Then, _later_ , wages go up. That time gap is
| hard on poor people. The poorer they are, the harder it is.
| TameAntelope wrote:
| Wages going up is not what the article is talking about,
| wages becoming _available_ is what the article is talking
| about, as seen by our extremely robust jobs numbers.
| WillPostForFood wrote:
| But we are already at low unemployment before COVID and
| all the spending; we don't need inflation to drive jobs
| growth. It would be worth debating the tradeoffs if we
| were sitting at 10%+ unemployment with no path for
| improvement, but if anything, it is the job market
| starved for labor, not the other way around.
| TameAntelope wrote:
| We may need inflation to drive job growth now, and we've
| _definitely_ needed inflation to drive _better_ job
| growth. An office job being created because a paper
| company can support an additional employee due to
| inflation is a better situation than continuing to work
| in a warehouse job. Inflation will eventually recede, but
| that new job will give opportunity to the worker.
|
| Scale that up by a factor of millions across the country,
| and you've closed the income gap. That's the power of
| inflation.
| oonerspism wrote:
| The truly poor do not have jobs, nor much hope of one in
| future. They are on fixed state incomes at best, which if
| they are lucky may have a trivial rise some years after
| the fact.
|
| We don't need to get terribly cerebral to note the basic
| mechanism of proportion, whereby $10 added to the daily
| food cost of a person who makes $50/day is vastly more
| impactful than the same $10 added to the daily food cost
| of a person who makes $500/day.
| TameAntelope wrote:
| The whole point is that $10 added daily food cost results
| in the food producer being able to hire more employees,
| which means the person who makes $0/day can make $300/day
| now.
|
| Also these numbers are super weird. It's probably more
| like $10 total daily food cost going up to like $10.30,
| and going from making $30/day (part time minimum wage) to
| $50 (near full-time minimum wage).
| tjader wrote:
| Can't that same argument be used to lower the minimum wage
| when inflation is low?
| whakim wrote:
| This lacks nuance. Who inequality "hurts most" depends on a
| huge number of factors. As I previously mentioned, there have
| been numerous historical instances in which inflation
| contributed to dramatic decreases in inequality. The fact is,
| though, inflation's relationship to inequality isn't simple,
| hence my characterization of inflation as a "blunt-force
| instrument."
| jljljl wrote:
| This is partly true, but lower income individuals also tend
| to have a higher % of their net worth eaten up by debt (via
| credit cards, loans, mortgages, medical debt, etc). The
| burden of this debt decreases with inflation, since wages can
| grow to match inflation but past debt + fixed rates do not.
|
| Combatting inflation by raising rates can also lead to more
| inequality -- wealthy investors can get higher return on
| "risk-free" products like treasuries and savings, which leads
| to lower investment in the economy, slower growth, and fewer
| jobs.
| cjbgkagh wrote:
| The proportion of the risk premium paid by poor people to
| the total total interest rate decreases with higher risk
| free interest rates.
| [deleted]
| tombert wrote:
| Wouldn't most billionaires have most of their money in real
| estate and the stock market (e.g. with index funds or hedge
| funds or something of that ilk)? It probably was especially
| true in 2020, when it was so cheap to get into the stock market
| and the bailouts made it seem like inflation was inevitable
| [1].
|
| I would think that most poorer people don't have stock
| portfolios filled with DIA or QQQ shares; the poorer people are
| much more likely to have a savings account, and inflation will
| probably hurt them.
|
| [1] My parents made almost $100k by buying VOO shares at almost
| exactly the right time in 2020.
| whakim wrote:
| It depends, because different types of assets respond
| differently to inflation. The wealthier you are, the more
| likely you are to have more esoteric investments. The bottom
| 50% of the wealth distribution in most countries (including
| the United States) own almost no assets (including cash in
| savings accounts) and are often debtors, so they may find
| that inflation reduces their debts to a greater degree than
| their savings.
| spaetzleesser wrote:
| In the Germany of the 1920s inflation increased inequality
| enormously. People who had some assets had to start selling
| them off until they had nothing. Only people with large
| reserves could survive this and actually prosper because they
| could buy up more assets. Inflation kills the middle class who
| was on the way up. Germany still has a trauma from the 1920s.
| And rightfully so.
|
| Also: the wealthy will steer policy towards their benefit when
| things get tough for them. The bailouts of 2008 clearly showed
| this.
| oonerspism wrote:
| We will always be thinking about inflation wrong, if we consider
| it in isolation. (a rule true of most things, but I digress...)
|
| Intrinsic to inflation is it's relationship with Interest Rates.
| The global pendulum swings to inflation for a phase, and then it
| swings back to high(er) interest rates for a phase. "The squeeze"
| (or "the expansion"!, depending upon which side of the equation
| one falls) is put on in one direction, and then, some years
| later, the tables are turned and the squeeze is eventually
| applied in the opposite direction.
|
| So to consider inflation as though it were an isolated system
| able to be managed in it's own right will always be problematic,
| in the way of trying to change one cog of a clock mechanism
| (without considering the whole).
| TheMagicHorsey wrote:
| Inflation is bad in the sense it punishes people that made the
| right decisions and saved money for their retirement. Inflation
| eats away at the savings they made in their working life and
| makes them a pauper in old age.
|
| The argument that they should have been invested fully into the
| market is fine for educated people. But many uneducated people
| save cash because they do not have access to all the financial
| tools that educated people do.
|
| Inflation also empowers elites who have had access to debt.
| Inflation reduces the value of that debt in real terms and
| cements their wealth ... because they use debt to acquire real
| assets: real estate, companies, stock, etc.
|
| Inflation rewards the elites and punishes the working savers. It
| is a tool that is used to transfer wealth from the many to the
| few.
|
| So I oppose these periodic debasements of currency.
|
| Look at the examples of Venezuela and Argentina to understand the
| true dynamics of inflation.
| softwarebeware wrote:
| Betteridge's Law of Headlines says: "No."
| 1970-01-01 wrote:
| No. Just because your model of something isn't predicting as well
| as before doesn't mean it is 'all wrong'.
| kkoncevicius wrote:
| The best one-sentence description of inflation I've heard is:
| inflation is a hidden tax on savings. People who save money are
| hurt the most. It's as if the newly printed money is generated by
| taking a bit from anyone according to how much cash he/she has
| stored away.
| matzab wrote:
| _inflation is a hidden tax on savings_
|
| That's basically Germany's state motto.
| napoleon_thepig wrote:
| This assumes that the only possible cause of inflation is
| fiscal deficit monetization. This is just wrong.
|
| You could have scenarios where the central bank does not change
| policy but money supply increases because banks are lending
| more money and therefore using the discount window more.
|
| Also people could expect more inflation in the future, so they
| try to get rid of cash faster to buy goods. This increase in
| money velocity will also increase inflation.
| forgetfulness wrote:
| The people hurt in most tangible ways are the ones who don't
| have the capacity to save; if you were spending all your salary
| each month, living hand to mouth, inflation now means fewer and
| less quality goods and services. And that can be eating less
| nutritious food, having to use more worn down clothes, having
| to postpone medical/veterinary expenses further, etc.
|
| Now, it happens that in the US the people working the least
| paid jobs have seen a wage increase, but that won't be
| necessarily the case and they aren't the only ones on a tight
| budget.
| kkoncevicius wrote:
| The things is that markets adapt but lag behind. For a while
| the old prices are still in place while the money is being
| printed. Then, slowly, the market "notices" that the amount
| of money increased so the prices readjust. While the prices
| readjust - everything becomes more expensive. Your haircut is
| more expensive - so the hair stylists salary catches up. Your
| bread becomes more expensive so the farmers that produce
| flour also have their salaries catch up. Everything
| eventually catches up, except for the amounts of money that
| were allocated to savings.
| jbluepolarbear wrote:
| That's not true at all. Salaries aren't increasing at the
| same rate that food, goods, and services. Stuff gets more
| expensive at a greater rate than wages increase.
| kkoncevicius wrote:
| That's relative. If food gets more expensive - that money
| goes to someone, someone who is producing or selling
| food. Prices cannot increase without someone at the same
| time making more money.
| jbluepolarbear wrote:
| That money doesn't go to the people that need it. It goes
| to fuel, shipping, taxes, etc. the person stalking the
| shelves gets nothing, the person that works at the gas
| station gets nothing, the person on fixed income gets
| nothing, and on and on. Inflation only helps the top and
| the bottom gets recked.
| kkoncevicius wrote:
| I don't know, my hair stylist increased the price for a
| haircut 2 times during the past 2 years. She isn't rich
| by any means. People who work and can set their prices
| adjust fast. People who depends on salaries set by others
| lag behind, but eventually even the government wages
| catch up. What never catches up are the savings. If you
| had 10,000$ before inflation - that will be worth less
| after without any bouncing back.
|
| I don't think we disagree.
| jbluepolarbear wrote:
| Your hair stylist isn't making more net profit. Rent went
| up, supply cost went, utilities went up, frequency of
| patrons gone down. You should ask your hair stylist if
| the raised prices are keeping up with their rising costs
| to operate.
|
| And how much of that $10k will dwindle as your expenses
| go up and your income is no longer in surplus?
| bigodbiel wrote:
| And that's how profit is made!
| cobookman wrote:
| If the stock market and housing doesn't appreciate then
| inflation would harm us all. Couldn't the cost of living
| increase while investment vehicles stay flat caused by rising
| interest rates.
| pdonis wrote:
| Exactly. If more economists acknowledged this obvious truth, it
| would be much easier to have saner policies in this area.
|
| One thing to add is that, in addition to being a tax on
| savings, inflation also leads to misallocation of resources,
| because the newly printed money is not distributed equally. (If
| it were, it would actually have little economic effect, because
| all prices, including wages, would rise by exactly the same
| fraction and everybody's behavior would be unchanged, other
| than the unavaoidable tax on savings.) So the money that is
| being taxed away from those with savings is being given to
| whoever is favored by the authority that is printing the money.
| That allows those favored parties to bid away resources from
| others even if those resources would be more productively
| employed elsewhere. And so we get, for example, huge swaths of
| commercial real estate built (because one of the favored
| parties is financial institutions who give loans on real
| estate) and sitting empty for years, while our infrastructure
| crumbles because there aren't enough construction resources
| available to fix it.
| dandanua wrote:
| It's a tax on cash savings. It's what poor people hold. Rich
| people save in other ways. They also use huge loans. So that
| inflation can be advantageous for them.
| wodenokoto wrote:
| The whole point of inflation is to keep people from storing
| money under the mattress.
|
| Savings are to be invested. If investments can't beat inflation
| then you have a shrinking economy and no amount of deflation is
| going to get the wheels turning again.
|
| It's not that Keynesian economists don't understand that
| inflation is a tax on money, it's that they see the purpose and
| reason for inflation from a completely different angle than,
| say, Austrian economists.
| kkoncevicius wrote:
| Say we trade and I give you an apple. In return you give me a
| note saying "this note is a proof wodenokoto owns me one
| apple and can be exchange for one apple at any time". What
| good does making this note depreciate over time serve, except
| as a pressure for me to demand you return the apple as soon
| as possible?
|
| It acts as a mechanism which nudges me to lend less apples
| overall. If inflation is good, why not ramp it up to 200%? At
| that level it's clear that nobody would accept money and
| barter would take place instead. And my thinking goes that it
| is also bad at those lower percentages, except to a lesser
| degree. I don't see how it can suddenly turn to positive at,
| say 10%.
| ska wrote:
| > except as a pressure for me to demand you return the
| apple as soon as possible?
|
| What you describe is barter, not currency. If you can trade
| that note to someone else for a box of framing nails, then
| you are on to something.
|
| It's not pressure for you to ask for the the apple back
| soon, but to use it for _something_ soon not just sit on
| it.
|
| In theory this keeps the economy trucking along nicely. Of
| course, if it goes too far, you have a different set of
| problems.
| deltarholamda wrote:
| You can think about it in reverse as well. A stable currency
| gives a clearer price signal. Inflation distorts that signal in
| opaque ways.
|
| Which is why monkeying with how inflation is calculated usually
| means chicanery and tomfoolery is afoot.
| BenoitEssiambre wrote:
| This is mostly wrong. Inasmuch as there is a grain of truth, it
| might be that inflation is a tax on savings that are held as
| government paper. If inflation is predictable, private assets
| are not affected. Some times back, I tried to explain
| intuitively here: https://medium.com/@b.essiambre/the-world-
| deserves-a-pay-rai...
| randomsilence wrote:
| It is not only a tax on savings but also on wages.
|
| >If inflation were allowed to run a bit higher, it could
| deliver a long-overdue win for young people who have had to
| face a combination of stagnant wages and rising housing costs.
|
| That's a bold statement. Why should the adjustment be
| proportionally more when there is more inflation? Isn't it more
| likely that pay is merely adjusted to the previous level and
| the time of increased inflation just reduces the net income
| even more?
| sleepingadmin wrote:
| >The best one-sentence description of inflation I've heard is:
| inflation is a hidden tax on savings. People who save money are
| hurt the most. It's as if the newly printed money is generated
| by taking a bit from anyone according to how much cash he/she
| has stored away.
|
| Who are the people who save money? Or rather, more specifically
| are either holding cash or in bonds whose real-yields are very
| negative?
|
| Tourists, downpayments, and retirees.
|
| Flipside, who is benefiting the most right now? People who are
| leveraged the most. Jeff Bezos and amazon isn't building all
| these warehouses out of pocket. These are all being financed
| and amortized for 25 years at tremendously low rates with real
| yields in the negatives. Or rather Jeff Bezos is being paid
| HUGE money to take on debt.
|
| Retirees are getting poorer by the day giving their money to
| Bezos.
|
| High inflation disproportionally benefits the ultra rich by
| huge degrees.
| kkoncevicius wrote:
| Everyone is quick to talk bad about the "ultra rich". Ultra
| rich have means, they are intelligent, they have advisors,
| and they know how to adapt. If economy turned towards
| deflation those ultra-rich would liquidize their assets,
| store money, and benefit from that instead. When two opposing
| processes can benefit the rich I would say it's not in the
| process but in how you react to the undergoing changes and
| how you adapt.
| sirspacey wrote:
| Yes and no. It slows the pace of expansion, but it doesn't
| not necessarily mean they liquidate. I've yet to meet a
| billionaire who wants their net worth driven by the bond
| market.
| Johnny555 wrote:
| _Have We Been Thinking about Inflation All Wrong?_
|
| The answer is almost certainly "yes" because the economy is
| complex and you can't really distill it into a single number that
| gives a clear signal for "good" or "bad". Skew in the price of
| individual goods (like luxury cars, or food staples) can make the
| inflation number out of sync with the impact on average people.
| titzer wrote:
| Don't tell the 80s that!
| wolpoli wrote:
| There used to be a simulator called Chair the Fed [1] that shows
| the effects of various economic shock and the interest rate
| movements that's required to stablize the inflation rate and
| maintain full employment. In a negative demand shock similar to
| what we just experienced, it requires quite a bit of high real
| interest rate (Interest rate - Inflation rate) to slowly get
| inflation back down.
|
| Sadly, they removed the game early in the pandemic and I can't
| get it to work on archive.org.
|
| [1]: https://www.sffed-education.org/chairthefed/WebGamePlay
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