[HN Gopher] The anti-inflation pivot of 2022
___________________________________________________________________
The anti-inflation pivot of 2022
Author : disgruntledphd2
Score : 111 points
Date : 2022-09-19 13:10 UTC (9 hours ago)
(HTM) web link (adamtooze.substack.com)
(TXT) w3m dump (adamtooze.substack.com)
| seydor wrote:
| > It is the most concerted effort to slow down growth and
| employment in the interests of monetary stability that we have
| seen since the 1980s.
|
| I see it as a war of generations. The boomers/genXers are eager
| to preserve their wealth and are once again dumping on young
| people. The 70s was a period of high inflation, it was also,
| according to piketty a period of high income equality for the
| world over. The central banks are going beyond what is mandated
| by them. If I were young, i would not take that deal.
|
| https://www.newyorker.com/news/john-cassidy/pikettys-inequal...
| MisterBastahrd wrote:
| Gen Xers are mostly still 30 years from retirement. This is the
| work of the ownership class who are seeing their profits
| nibbled away by employees who want to be paid a fair wage for
| their labor and aren't afraid to change jobs because
| millennials and gen Z aren't going to "go the extra mile"
| without being compensated for it.
| fleventynine wrote:
| There are millennials who are less than 25 years from
| retirement age.
| MisterBastahrd wrote:
| It's why I said "mostly."
|
| Because most of them are going to work well into their 70s.
| [deleted]
| ch4s3 wrote:
| You know high inflation makes it worse to be poor right?
| Especially core inflation.
| bdw5204 wrote:
| Inflation isn't inherently bad for the poor. If you have
| debts and inflation is above the (fixed) interest rate on
| your debts, you're coming out ahead.
|
| The downside of inflation is wages and cost of living
| adjustments often don't keep pace with inflation because
| government statistics are rigged to understate the real rate
| of inflation and many things aren't even indexed to
| inflation. For example, the minimum wage has been $7.15 an
| hour in the US for about 15 years. Wage growth not keeping
| pace with inflation is, as far as inflation hawks are
| concerned, a feature not a bug as it increases public support
| for inflation hawk policies.
| dragontamer wrote:
| Everything is bad for the poor though. Rising rates fixes
| inflation, but reduces employment. As it turns out,
| unemployment is bad for the poor.
|
| Lowering rates improves employment, but comes with inflation
| risks. As it turns out, the poor also hate inflation.
|
| Screwed if you do, screwed if you don't. Dual mandate says
| that the Fed aims for as good employment as possible, while
| also aiming at a targeted 2% to 3% inflation rate.
|
| > Especially core inflation.
|
| EDIT: My understanding is that core-inflation isn't about
| "good or bad for people", its about "good or bad for
| statisticians". Food/Oil prices move too quickly and are
| therefore bad measurements. Too noisy. If food prices go up
| or down 10%, is it because the economy is bad? Or is it
| because of a terrible storm that wiped out a chunk of crops
| somewhere?
|
| Ignoring food means we ignore these volatility / storm /
| disease issues. Oil is similar. A war started in Europe, and
| lo-and-behold, oil prices went crazy, both upwards and
| downwards. There's no amount of economic policy you can do to
| predict a war.
| ch4s3 wrote:
| I'm referring to core inflation because it shows upward
| trend across all prices, which means people without much
| disposable income will feel the pinch everywhere. High
| inflation also erodes savings, making it hard to get out of
| poverty, particularly the generational type.
|
| Unemployment is obviously a problem, but the labor market
| is super tight right now. There's room to fight inflation
| without a big dip in employment.
| dragontamer wrote:
| > I'm referring to core inflation because it shows upward
| trend across all prices
|
| Hmm. I think you're mistaken. "CPI" is across all prices.
| "Core-CPI" is across most prices (ignores energy and
| food).
|
| Turns out that poor people use electricity and eat food,
| at least in America. Upon first glance, it would seem
| that "CPI" is a better measurement. The issue, as I
| stated earlier, is that energy/food prices swing wildly
| in ways completely unrelated to economics. (Look: war in
| Ukraine... Food prices and Oil prices in peril. Its not
| "unimportant", its just unpredictable and unrelated to
| greater economic issues)
|
| We ignore energy/food not because they're "unimportant",
| but because they're too volatile to draw conclusions
| from. Even without wars, there's famine, hurricanes,
| storms, disease, swarms, locusts, etc. etc. which wreck
| food/energy prices. Even with a perfectly balanced
| economy in a peaceful world, Mother Nature would still
| wreck us in an unpredictable fashion.
| ch4s3 wrote:
| > We ignore energy/food not because they're
| "unimportant", but because they're too volatile to draw
| conclusions from
|
| Yes, that's exactly what I'm referring to. I mean that
| looking at the core number gives a better picture of the
| trend.
| eli_gottlieb wrote:
| >There's no amount of economic policy you can do to predict
| a war.
|
| You can't predict a war, but you can secure your supplies
| of basic commodities against it, preferably by producing
| them domestically.
| dragontamer wrote:
| US production of energy (coal, natural gas, and even
| petroleum) is almost entirely domestic.
|
| The entirety of this year's fluctuations isn't because
| "we don't have oil/energy", but because global oil/energy
| prices were changing. In fact, USA exports more energy
| than we import.
|
| So the higher price of energy is "good" for the US
| economy, as our companies obtain higher profits.
| Nonetheless, it still means higher prices at the gas pump
| and other inflationary measures.
|
| --------
|
| Just having a domestic base of energy didn't do jack
| diddly squat for oil prices. Oil prices will rise and
| fall with geopolitical reasons.
|
| Now USA has a domestic energy source, which gives us a
| leg up compared to say, Germany, who was relying upon
| natural gas from a country to their East. But this has to
| do with supply of energy more so than price.
|
| Energy prices are also floating upon the weather. La Nina
| this year will give us a mild winter, meaning Europe
| won't need as much natural gas... which counter-acts the
| war somewhat. We're lucky that Mother Nature smiles upon
| us this year...
| lucumo wrote:
| > EDIT: My understanding is that core-inflation isn't about
| "good or bad for people", its about "good or bad for
| statisticians".
|
| Bad for making decisions. If there's too much noise in a
| signal you can't steer the ship. If you do try to take
| action on noisy data, there's a big chance that you'll
| over- or understeer, especially when effects are slow to be
| seen.
| Nursie wrote:
| And now Gen X are included in the anti-boomer rhetoric. Great.
|
| As a tail-end UK Gen Xer, while I have some wealth I have built
| from working for over 20 years, I missed out on houses costing
| 2-3x your income just as much as the younger generations did.
| I'm not sitting on a million dollar property that I paid 10c
| for in 1972, largely because I wasn't born then...
| seydor wrote:
| It's different in different countries. A common thread is
| that they own the real estate
| hindsightbias wrote:
| Just move in with boomer parents and wait for the
| inheritance.
| [deleted]
| kagakuninja wrote:
| Welcome the the club, mate. I'm a tail-end boomer (born
| 1963), and missed out on most of that gravy train boomers
| had. Apparently we are all selfish right-wing assholes.
|
| Boomer hate is stupid. The enemy are the elites, corporations
| and billionaires.
| danans wrote:
| > Boomer hate is stupid. The enemy are the elites,
| corporations and billionaires.
|
| Hate of any generation - especially an individual member of
| a generation based on their membership in it - is stupid.
|
| However, the critique against Boomers by younger
| generations is not about you as an individual, but is about
| largely Boomer-backed policies that pull up the the ladder
| of affordability behind them for housing and education.
|
| That doesn't mean every Boomer is to blame, or that the
| wealthy among younger generations don't often advocate the
| same positions as Boomers. But as a cohort, Boomers' voting
| patterns at both a national and local level have tended to
| exacerbate the specific problems of housing and education
| unaffordability.
| [deleted]
| nathanlied wrote:
| I do find the Boomer hate to be absolutely incoherent, but
| not new. Ultimately, the biggest factor is your economic
| class. If you're a boomer, but you're poor, you will live
| just as poorly as someone who's a poor Gen Z. If you're
| black and poor, you have far more in common on a day-to-day
| basis with a white poor person than with a black
| millionaire/billionaire.
| dragontamer wrote:
| Boomers / GenX can simply buy TIPS / I-Bonds if they're worried
| about inflation though.
|
| Honestly, given how much they're invested into the stock
| market, raising interest rates will hurt their 401k /
| retirement accounts the most. Its not like the stock market or
| bond-market likes it when rates go up.
|
| The job of an investor is to navigate these waters as the tides
| of the economy rise and fall. If you're in the wrong spot at
| the wrong time, you can lose everything. Alternatively, you
| keep your wealth spread out in a large basket of different
| goods: Stocks, Bonds (including I-bonds/TIPS), Cash, Real
| Estate, and hope for the best.
| [deleted]
| mech987 wrote:
| >The risk is that it will be excessively contractionary and will
| trigger a worldwide recession
|
| >Those who advocate a tightening of fiscal and monetary policy in
| the name of stopping inflation, do so because they fear a build
| up of inflationary momentum. That risk may be real. No less real,
| however, are the costs of the contractionary policy mix being
| applied now.
|
| My intuition on the problem is that no matter where we fall along
| the spectrum once it lands, we will have both unacceptably high
| inflation (which we've already had) and an unacceptably large
| recession. Don't know which one will hurt more yet.
| polskibus wrote:
| All it takes for a world power to be on its knees is a couple of
| years of dry and hot weather. It kills agriculture, nuclear and
| solar power plants, usually also wind ones. A combination of that
| and covid and war induced logistics disruptions is what is
| hammering EU now. It is not a single cause but a multitude.
| m3kw9 wrote:
| The fed in the US isn't going to handshake another countries fed
| so they all act like opec but for interest rates.
| skippyboxedhero wrote:
| It is very likely that we get a new Plaza Accord. Not now, but
| the dollar's strength is going to be absolutely ruinous for
| corporate America over the next 12 months. And, at that point,
| you will see a move towards monetary co-operation (the thing
| that Obsfeld is talking about).
|
| I do agree though: suggesting that the Fed stop rate hikes
| today because of the international consequences is madness. We
| are getting a much needed rebalancing, the Fed is kind of
| exporting deflation but this is being made up for with exchange
| rates moving downwards, the Fed's low rates during the last
| decade have heavily distorted international markets, continuing
| isn't helpful.
| mjburgess wrote:
| This article appears to take place in a universe where interest
| rates at central banks are at counter-inflationary levels.
| They've been inflationary for a decade, and continue to be so.
|
| With inflation at 10%, fears about "going too far with interest
| rates" make sense only *at least* north of 5%, and realistically,
| 8%.
| t_mann wrote:
| The https://en.wikipedia.org/wiki/Real_interest_rate is defined
| as the nominal interest rate minus inflation. So with your
| numbers, nominal rates would have to go a lot higher than you
| suggest to result in positive real rates.
| slaw wrote:
| > Since 2010, the U.S. Treasury has been obtaining negative
| real interest rates on government debt
|
| Wikipedia says we had negative real interest rate since 2010,
| but it was only -2%, now we have -7% real interest rate.
| nostromo wrote:
| Besides tanking all asset prices initially - that actually
| could pave the way for more inflation.
|
| US federal debt is 30 trillion dollars. If the federal
| government had to pay 10% interest on its debt, it'd require
| almost all of federal spending be paid on our debt.
|
| Of course that'd never happen. Instead they'd just borrow more
| to pay the interest, which means more dollars would be minted
| and we'd print several trillion dollars a year in unwanted
| stimulus each year just paying our federal debt. (Or enter a
| debt crisis.)
| sfe22 wrote:
| Why 8? Doesn't there need to be a premium for borrowing money?
| If i can borrow money at zero percent inflation adjusted rate,
| that is a great deal and still inflationary. I would say 12
| percent would be neutral on 10 percent inflation.
| mjburgess wrote:
| I was being conservative to give the author some room to make
| the argument. If rates are 8%, I can see this article at
| least being justified in its concern.
| roflyear wrote:
| The idea is that you are TRYING to drive inflation down. You
| can borrow at 8%, and that's great when inflation is at like
| 10-12%, but once inflation goes down (the goal of high rates)
| it's bad.
| koboll wrote:
| You are conflating backward-looking inflation (money has
| gotten 10 percent less valuable over the past year) with
| forward-looking inflation (we should lend at 12 percent
| interest because we expect money to get 10 percent less
| valuable over the next year). The former doesn't guarantee
| the latter; the latter is unlikely and gets unlikelier the
| more interest rates ratchet upward. That's why they are
| incremented - at a certain point inflation will inevitably
| reverse, and that point is likely below 12%, so going to 12%
| would unnecessarily knife the economy.
| blagie wrote:
| No, there doesn't need to be a premium on borrowing money.
| Why would there need to be a premium?
|
| If I can invest in businesses with 0% return and make a
| profit, that's generally good for short-term economic growth,
| and bad for long-term economic efficiency.
|
| I'm not arguing for more or less interest, but I don't think
| there is a "natural." Interest rates have gone negative
| several times in several contexts, and the universe didn't
| explode in a numerical singularity. I am arguing for having
| reason beyond "we've always done it that way" or "it doesn't
| make sense."
| refurb wrote:
| Of course there needs to be a premium to lend money.
|
| Why would I lend someone money to get the same amount back
| (in real terms)? You'd need at least some premium to
| account for risk of non-payment, changes in inflation, etc.
|
| There doesn't need to be a _consistent_ premium to
| borrowing money. So if I borrow $1M for 30 years right now
| the interest rate doesn 't have to be 10% because most
| people assume inflation will come down, so the _average_
| inflation over 3 years might be 3-4%, so an interest rate
| of 5-6% is probably enough of a premium.
| roflyear wrote:
| To safely park cash. Think government securities.
| blagie wrote:
| This is correct. If you have $100B, what are your
| options?
|
| 1) Risky return-yielding instruments, like stocks and
| bonds
|
| 2) Non-liquid assets, like land
|
| 3) A Scrooge McDuck giant vault full of cash
|
| 4) ... and so on.
|
| In many cases, a negative interest account works better
| than any of the above.
|
| Sweden was the first to employ them in 2009, with an
| interest rate of -0.25%. The world didn't implode, as
| people predicted. If I deposit $100B overnight at -0.25%,
| I've lost just north of half a million dollars for that
| night. That's enough to push me to look for other places
| to stash my money (stimulating the economy), but not
| enough to break me (assuming I have $100B, which
| unfortunately, I don't).
|
| Critically, if the economy is collapsing, and you expect
| stocks to go down, removing other places to stash money
| can prop them up.
| refurb wrote:
| Ok, fair point on that one. Eliminate the default risk
| and you're willing to take 0% or even a negative real
| interest rate.
| roflyear wrote:
| Yeah. But without getting value through some mechanism
| like that (or, imagine if you're convinced that equities
| will be flat or return negative over the next few years)
| you're correct - you should make money from lending
| money.
| FormerBandmate wrote:
| When interest rates are negative it's inherently
| inflationary. It won't destroy the universe but it
| encourages people and businesses to borrow to get
| additional resources (the deteriorating economic conditions
| right now make that a very bad idea, but in general this is
| true)
| fennecfoxen wrote:
| We've had many years of 0% rates and 2%ish inflation. A
| return to that _status quo ante_ isn 't exactly crushingly
| tight monetary policy. But perhaps inflation will fall before
| we hit 8%.
| roflyear wrote:
| Inflation is 8% right now, not 10%. So 6% seems to be a
| good "target" - but many economists in the US are thinking
| that inflation will not stay at 8% (that is the hope...) so
| they are aiming for a rate that reflects a 5.5-6.5%
| inflation rate over 2023 - which is from anywhere from
| 3.75% (I think at this point this is too low) to 4.75%
| (higher than expected). This makes a lot of sense to me and
| I think we'll see around a 4.5%-4.75% target rate by the
| end of 2023.
| UncleMeat wrote:
| Inflation was 8% averaged over the past year. _Right now_
| , the calculation is much more complicated and we
| observed nearly net zero price change of the basket over
| the past two months.
| roflyear wrote:
| Correct.
| tootie wrote:
| It also takes place in a universe where policy making ended in
| 2022. Fiscal contraction is happening because we just recovered
| from historic fiscal expansion due to the pandemic. Contraction
| will continue so long as growth continues. If we slide into
| recession and inflationary pressure ebbs, we'll just reverse
| course again.
|
| Honestly, I know cynicism and despondency are in vogue right
| now but the last 20 years have shown global policy makers are
| doing an absolutely outstanding job. Fiat currency and
| Keynesian orthodoxy have been vindicated at every turn.
| Obviously not everything has gone perfect but considering the
| amount of disasters faced, we've suffered far less than in the
| past.
| splitstud wrote:
| unholiness wrote:
| Macroeconomics novice here. What's the argument that interest
| rates need to be close to inflation rates to counteract it?
|
| It seems like there should be an intrinsic time-value of money
| (e.g. 1 stuff today is worth 1.05 stuff next year) which is
| tradable (supply of future-stuff will equal demand for future-
| stuff at some rate like 1.05). And that single rate of stuff-
| interest would exist if the central bank does nothing. If
| that's true, then in a long-run equilibrium, shouldn't there be
| zero inflation if the interest rate in dollars (i.e. the fed
| rate) matches that intrinsic rate of stuff-interest?
|
| Any explanation or links to the same would be helpful! I'm just
| past the point of grasping the fact that interest rates going
| _down_ causes inflation to go _up_ , but finding it hard to
| find sources on anything that give me intuition on answering
| e.g. _how much_ things would go up if you held one policy
| forever, and what factors that answer would depend on.
| skippyboxedhero wrote:
| I am a huge fan of Tooze and his books (Wages of Destruction is
| one of the best works of economic history, probably the best
| macro history imo, his more recent books are unfortunately
| terrible...but this is what happens when someone decides to
| become a celebrity academic) but this is from another reality.
|
| Unfortunately, the decade of continuous monetary intervention has
| completely addled the mind of usually intelligent people. Their
| response to everything is always the same: begin stimmy, continue
| stimmy.
| jmyeet wrote:
| Here's the lesson I want people to learn: we had 40+ years of
| stagnant real wages (overall; there are exceptions). What
| happened in the pandemic was:
|
| 1. People realized going into an officce to work was unncessary
| and even anachronistic for many jobs;
|
| 2. Employers like employees in the office as a form of control;
|
| 3. Employers made short-term decisions to lay off huge amounts of
| people (even after taking PPP loans for the purpose of preventing
| this);
|
| 4. After 1-2 years of suppressed demand, companies weren't
| equipped for the increased demand and couldn't hire back their
| staff at the same rate;
|
| 5. As always, there are no labor shortages, only under-market
| wages;
|
| 6. The pandemic created a situation where a lot of people could
| (and did) get their first real increase in wages in decades.
|
| 7. Much of those real wages have been eroded by inflation.
|
| Take all this together and you realize that policymarkers
| consider labor movements an existential threat to profits.
| Suddenly it's increased wages that are responsible for inflation.
|
| And then you have ideas (as in this post) where the only way of
| reining in inflation is by increasing borrowing costs, which
| hurts a lot of individual borrowers.
|
| Why isn't corporate taxation being used to control the money
| supply? It would have the same net effect except that it would
| fund the government rather than lenders. Several countries have
| imposed windfall profits taxes.
|
| We saw this last week with the averted rail strike. Those workers
| could face consequences for taking off _unpaid_ sick days for
| themselves or their family. To give them all 15 paid sick days a
| year would cost 3.5% of the industry 's _profits_ (~$680m /year
| IIRC for 125,000 workers). Not revenue. Profits.
|
| This system wants to keep you in debt, low-paid (just sufficient
| to service your debt) and have limited other options. Then you'll
| show up to work and not make trouble by asking for raises.
|
| That underpins all the policy decisions around inflation,
| interest rates and the looming recession.
| A4ET8a8uTh0 wrote:
| I will admit that to me this pandemic was eye opening in
| several different ways. One thing that surprised me is how lazy
| both management and propaganda machine in US is these days.
| They ( management ) have gotten so used to the idea that all
| they have to do is to hint at layoffs and people will
| immediately be motivated to do the work that they forgot how to
| do anything else ( the phrase I heard used to describe the
| situation was "I had to throw away my toolkit for WFH" ). As a
| result, WFH exposed management class as clearly coasting for
| the past few decades in terms of motivation skills alone.
|
| But as bad as management is, having watched OWS downfall, I did
| not expect propaganda effort for fighting WFH to be so
| downright awful. I still remember the initial batch of articles
| claiming commuting to work is my zen time. It felt so
| ridiculously bad that even people, who would normally accept
| any advertisement at face value kinda asked:"The fuck?" since
| it is so at odds with their daily experience.
|
| And now policy makers are openly discussing saying "Lets crash
| the economy so that companies can keep their leverage." I was
| always mildly cynical, but I found it ridiculously sad that "We
| are in this together." slogan is just a slogan the moment the
| sacrifice has to be shared by the ruling classes.
|
| And as always, the sacrifice hits the poor the most.
| AnimalMuppet wrote:
| > And now policy makers are openly discussing saying "Lets
| crash the economy so that companies can keep their leverage."
|
| Where have you seen policy makers openly discussing this? So
| far, it hasn't been open enough for me to see it...
| A4ET8a8uTh0 wrote:
| You don't have to search that far.
|
| I think the only reasonable objection here is whether
| individuals listed below could be considered policy makers,
| but the pattern seems relatively clear to me. Note that
| economy is weirdly connected to how a person feels. Just
| hearing that recession is just around the corner could
| potentially set it off ( not completely unlike say..
| shortage after hearing something is about to be no longer
| accessible or run on a bank after finding out it is about
| to under ). And not surprisingly, the same decision process
| also applies to CEOs[9].Edit: And of course, it helps when
| all the platforms sing the same song nearly in concert.
|
| Snippets indicating thought process from various government
| officials and their assorted influencers can be found with
| basic google search[1]("Some commentators argue that the US
| needs a recession to bring inflation down.") Those tend not
| to be some random bloggers with an idea, but rather a
| person with agenda in mind sometimes sending trial balloons
| into ether. Now those commentaries are much more careful
| now after initial outcry of some poorly chosen words, but
| Bloomberg in April[7] reported that "Labor demand is poised
| to ease, which will help the Federal Reserve tame inflation
| with less risk of triggering a recession." ( see also: "The
| Fed view is that when there's too much of an imbalance
| between labor demand and supply, you get a dysfunctional
| market with too much turnover and pay increases that lead
| to a unacceptable level of inflation.")
|
| If you follow Powell's original comments that raise all
| that recent ire, you could see how those could be easily
| construed as "Lets crash the economy" ( "There's too much
| demand. For example, in the labor market, there's more
| demand for workers than there are people to take the jobs,
| right now, by a substantial margin. And, because of that,
| wages are moving up at levels that are unsustainably high
| and not consistent with low inflation. And so what we need
| to do is we need to get demand down, give supply a chance
| to recover and get those to align.")
|
| Note that the May 2022 interview[8] comments are much
| softer as a result of pushback to some of the previous
| comments ( "And we need to get back to 2% inflation, that's
| the main thing. The main lesson is we must do whatever, you
| know, what we need to do to get inflation back to 2%. And
| we have the tools to do that. And we will." || "I will also
| say that the process of getting inflation down to 2% will
| also include some pain, but ultimately the most painful
| thing would be if we were to fail to deal with it and
| inflation were to get entrenched in the economy at high
| levels, and we know what that's like. " ||
|
| "Ryssdal: What keeps you up more at night: the prospect of
| inflation sticking around? Or the idea that you're going to
| cause a recession?
|
| Powell: Well, look, I think it's a very challenging
| environment to make monetary policy. And we certainly, our
| goal, of course, is to get inflation back down to 2%
| without having the economy go into recession, or, to put it
| this way, with the labor market remaining fairly strong."
| ||
|
| "The main lesson is we must do whatever, you know, what we
| need to do to get inflation back to 2%. And we have the
| tools to do that. And we will."
|
| Naturally, with few exceptions, few current officials ( say
| from FED or current Biden administration ) will put
| themselves on record by saying something like this, but
| former officials[4] have some reasons to do it regardless
| (""Almost certainly there will be a full-blown recession.
| If we're not in one yet, I think we will be in the next 12
| months," Dudley, the former president of the New York
| Federal Reserve, told CNN in a phone interview.").
|
| Separately, sometimes for their own reasons, various
| executives from private sectors feel the need to weigh in
| [5]( Stephen Ross in June predicted that "employees will
| recognize as we go into a recession, or as things get a
| little tighter, that you have to do what it takes to keep
| your job and to earn a living." Later that month, Intuit
| CEO Sasan Goodarzi told MarketWatch that "the power is
| shifting to employers," and as "people move from hiring to
| now cutting jobs, and a possible recession, you might see
| more of a move back to work.") on future recession and its
| impact on WFH.
|
| And just to add a little spice to this, I wanted to add my
| favorite relatively recent opinion piece[10], where author
| gleefully notes tech jobs will finally stop being cushy
| ("The chief executives of Meta Platforms Inc. META, +1.18%
| and Alphabet Inc.'s GOOGL, +0.26% GOOG, +0.21% Google have
| warned employees of tough times ahead -- with Mark
| Zuckerberg telling employees on the last day of the second
| quarter that the company faced one of the "worst downturns
| that we've seen in recent history" --and Microsoft Corp.
| MSFT, -0.09% is slowing hiring in some groups and
| eliminating a few jobs. Even the world's most valuable
| company, Apple Inc., AAPL, +2.51% reportedly plans to scale
| back hiring and spending, after profligate spender
| Amazon.com Inc. AMZN, +0.91% signaled cutbacks earlier this
| year.")
|
| We can then move to state officials, who stand to gain/lose
| from RTO/WFH. For example, NY Adams governor[6] ( "Adams
| has in recent weeks mounted a major advocacy push for
| private businesses in the city to order their employees
| back to their offices, arguing that the economy at large is
| hampered by telework policies popularized during the
| pandemic" || "I'm trying to fill up office buildings, and
| I'm telling JPMorgan, Goldman Sachs, I'm telling all of
| them, 'Listen, I need your people back into office so we
| can build the ecosystem.').
|
| Naturally, after several recorded conversations that
| indicated that type of thinking, PR campaign began to claim
| that it was never the case[3]("We're not trying to have a
| recession, and we don't think we have to,"||"That's what
| we're trying to achieve and we continue to think there's a
| path to that. We know that path has clearly narrowed... and
| it may narrow further.") and FED is actually trying really
| hard not to say stuff out loud[2] ("They're trying to slow
| down the overall economy, and that would include firms'
| appetite to hire, without ever saying that out loud," ).
|
| Perception is reality and it looks to me like more than
| just policy makers are involved in creating this particular
| scenario ( recession ). All this while the job market
| remains stubbornly strong.
|
| Still, I might be wrong. I am open to arguments.
|
| [1]https://www.ft.com/content/31b15e03-929f-40c1-b2f8-782df
| 4bd6... [2]https://www.bankrate.com/banking/federal-
| reserve/will-the-fe...
| [3]https://www.axios.com/2022/07/28/recession-fed-powell
| [4]https://www.cnn.com/2022/08/04/economy/recession-
| inflation-f... [5]https://fortune.com/2022/08/17/recession-
| return-to-office-ce...
| [6]https://www.nydailynews.com/news/politics/new-york-
| elections... [7]https://www.bloomberg.com/opinion/articles/
| 2022-04-12/fed-s-...
| [8]https://www.marketplace.org/2022/05/12/fed-chair-jerome-
| powe... [9]https://fortune.com/2022/06/17/majority-
| executives-anticipat...
| [10]https://www.marketwatch.com/story/its-the-end-of-
| fantasyland...
| bryanlarsen wrote:
| > Why isn't corporate taxation being used to control the money
| supply?
|
| That's exactly what the "Inflation Reduction Act" is doing.
| It's a significant increase in corporate income tax.
| juve1996 wrote:
| Corporate taxation is a great tool for managing inflation but
| our legislature is gridlocked and taxes are not popular. It's a
| shame because they would be particularly effective right now w/
| rate raises.
| softcactus wrote:
| I think corporate taxation is the only way out of this mess.
| Tax the profits, take money out of the system. It makes extra
| sense given that most of this money was injected into the
| system in 2020 anyways. It's not like it was 'earned' even in
| the traditional neoliberal capitalist sense. It was an economy-
| wide bailout and now that it has served its purpose, it's time
| for the money to return to where it came.
|
| Trying to tackle inflation by suppressing wages is both immoral
| and silly. How is that a 'free market' solution? It's the
| equivalent of price controls. I am glad that the Fed has taken
| that as their position, only because it seems to have made
| people across the political spectrum realize that there is a
| real antagonistic relationship between the architects of the
| system and those living within it.
| PopAlongKid wrote:
| The recent IRA law[0] does significantly increase corporate
| taxes at least on the big guys. Not sure if that counts as
| "controlling the money supply".
|
| [0]https://itep.org/four-tax-policy-wins-in-the-inflation-
| reduc...
| micromacrofoot wrote:
| > Why isn't corporate taxation being used to control the money
| supply?
|
| Because corporate donations are one of the primary ways to
| control politicians.
| chernevik wrote:
| > The pandemic created a situation where a lot of people could
| (and did) get their first real increase in wages in decades.
|
| Er, no. See https://fred.stlouisfed.org/series/LES1252881600Q.
|
| Real wages are up since 1980, with a particular spike beginning
| in Q1 2017 and ending in Q2 2020.
|
| The onset of lockdowns clearly began a _decline_ in real wages.
| candiddevmike wrote:
| Do you write this stuff anywhere else/have a blog? I like the
| way you laid out your viewpoint.
| rel2thr wrote:
| Month to month inflation has been flat or near flat for some
| months now. It's seems like we had a price spike in December/Jan
| for various reasons and now things have stabilized.
|
| If trend continues it seems we should be back in normal yoy
| inflation rates shortly once we start comparing against that post
| spike floor
| taolegal wrote:
| > Month to month inflation has been flat or near flat for some
| months now
|
| Inflation compounds and we've been at relatively high inflation
| for a while now. Of course the Biden admin will want to just
| normalize this sustained inflation.
|
| People are effectively getting around a month of salary stolen
| from them. Transaction cost of a new job hurts most people &
| depresses wage growth (the obvious side-effect of monetary
| expansionism).
|
| It's fair to say that we won't experience deflation since no
| central bank will allow that. And our high debt load prevents
| raising interest rates anywhere near the necessary amount, if
| you compare it to Volcker. The only responses they seem to
| have, in practice, are: print tons of money or print slightly
| less than that.
|
| We're trapped in a debt spiral and my guess is that the world
| suffers enormously from central planning (artificially low
| interest rates in the modern era in order to finance government
| disasters) and the US suffers less than everyone else because
| of their global hegemony (reserve status), economy & geography.
| refurb wrote:
| Chart 1 lays it out.
|
| https://www.bls.gov/news.release/pdf/cpi.pdf
|
| Inflation isn't _increasing_ much in August - relatively to
| July, but July was still high.
|
| That graph needs to go negative (a decrease in the inflation
| rate each month) for a long time before we get back to
| something "normal" like 2-3% inflation.
| scld wrote:
| That chart going negative would be deflation, not a decrease
| in inflation.
| colinmhayes wrote:
| I think you're misreading the chart. My understanding is that
| 12 months of 0 means a year over year inflation rate of 0,
| not the same amount of inflation as the year before.
| ninkendo wrote:
| Correct, the chart is a rate of change in the CPI itself. 0
| on the chart means the CPI hasn't changed, ie. no inflation
| that month.
| [deleted]
| bilsbie wrote:
| Meesa be thinking yousa confusing the second derivative with
| the first derivative.
| consp wrote:
| Around here there was a minor stationary period in may and june
| but was up before has gone up again since that, ymmv according
| to where you live.
| foobarian wrote:
| Don't forget that the Covid stuff finally seems to have settled
| to some kind of new "normal," and that it's a once-in-a-century
| event that is going to be very hard to make any comparisons to.
| groby_b wrote:
| ... assuming there are no further variants, and hand-waving
| long covid away, sure, it's settled.
|
| I think we'll find that just like reports of Mark Twain's
| death, rumors of the end of the pandemic are greatly
| exaggerated.
| spookthesunset wrote:
| > rumors of the end of the pandemic are greatly
| exaggerated.
|
| Only if people are stupid enough to repeat the last two
| years of nonsense. Take away all the fear mongering and
| testing and you probably wouldn't even notice covid was a
| thing. You'd get sick like you always do and just shrug it
| off as "that thing that was going around" like we all did
| in 2019...
| groby_b wrote:
| It is the (#2/#3/#4 depending on study) leading cause of
| death. We're currently at around ~150K dead/year - about
| 5 times the average rate of flu, about 3 times a really
| bad flu year.
|
| It has significantly affected workforce participation,
| with a large disability burden.
|
| You'd notice. Unless you're somewhat dense.
| conductr wrote:
| Not that I like it but, I happen to think it's just a new
| normal as well and if everyone starts behaving as if it's
| normal then the impact on global economics when compared
| to a similar period should be rather normal. Continuing
| lockdowns and other things that impact supply
| chains/production are examples of behaving like it's not
| normal. They will likely continue to some degree despite
| my opinions.
| groby_b wrote:
| Neither deaths nor disability can be wished away by "just
| behaving as if it's normal".
|
| As for "continuing lockdowns" - most of the western world
| hasn't had a single actual lockdown. So let's not pretend
| that's the issue, or a desired approach to the problem.
|
| What is needed is
|
| - data transparency, instead of reduced data collection.
|
| - _targeted_ measures, instead of blanket measures.
| Utilizing the above data, and focusing on leading
| indicators, not trailing ones.
|
| - a medical system that actually makes the tools we have
| available, as opposed to undermining them and pricing
| them out of range.
|
| - a focus on ventilation.
|
| - a normalization of mask wearing in public indoor
| settings.
|
| None of those are close to "lockdowns". That's a strawman
| nobody is asking for.
| spookthesunset wrote:
| You are right. Forcing "non essential" small businesses
| to close, stopping all events, closing churches, parks,
| playgrounds, schools, making it illegal to walk on "the
| dry part of the sand", disallowing dying people to have
| visitors, forcing hospitals to stop taking elective
| surgery, arresting people sitting on benches,etc... these
| all just ordinary things... right? Definitely not a
| "lockdown", right?
|
| What is a lockdown if that isn't? And how come those
| "real lockdown" places still have Covid? I'm very
| confused here.
| conductr wrote:
| Sorry I thought this was an economic conversation, I'm
| not really debating how best to manage the disease at
| this stage, but if X deaths a year becomes part of the
| run rate economics should normalize.
|
| > normalization of mask wearing in public indoor
| settings.
|
| However, I am curious how this is not normalized now?
| It's personal choice where I live and nobody blinks twice
| if you want to wear it. And my state is full of
| antimaskers. The issue becomes when you expect other
| people to wear it and they don't want to.
| ketralnis wrote:
| This is the problem of mostly successfully preventing
| fires or preparing for floods. "It wasn't that bad"
| _because_ it was handled, but since that was handled by
| somebody else it 's invisible to you
| spookthesunset wrote:
| "If we did it right you'll never even notice we did a
| thing" also happens to be an excellent way for any sleazy
| politician or "expert" to deflect any questioning.
| ParksNet wrote:
| The USA is emptying the Strategic Petroleum Reserve at a rate
| of 1 million barrels per day. Crude is typically extracted from
| the ground at about 15 million per day by that country.
|
| When the SPR draining is finished (for midterms), upward
| pressure on energy prices globally will resume.
| colinmhayes wrote:
| Core was .6% last month, pretty horrendous after July looked
| good.
| dragontamer wrote:
| Nothing against you in particular, but all the "inflation
| complainers" were using CPI (not core-CPI) back in
| January/February to talk about Fed inaction. Now that we're 9
| months later, with the Fed hiking rates, suddenly those _SAME
| PEOPLE_ are now complaining that the Fed rates are hiking too
| much.
|
| -------
|
| That being said, I agree with you. Core-CPI exists for a
| reason, and its a better measure of long-term trends.
| Oil/food prices change dramatically, while they're important
| real world measures of cost of living, they change too
| quickly to be useful. We should typically ignore oil/food
| prices and focus on other costs of living to try to glean the
| longer-term trend.
|
| But what's even worse than using "CPI" or "core-CPI", is when
| people switch between the two to make a focused political
| argument, rather than an analysis into the state of the
| economy. Stay consistent damn it.
| fennecfoxen wrote:
| Yeah, this _isn 't_ just a one-time transient price spike
| that happened months ago. August fuel prices fell a lot
| (10.6%), a gift! -- but core inflation erased all that
| progress, with a 0.1% month-to-month rise in the CPI overall.
| Food's up 0.8% in a month. Rent was up 0.7%. Cars were up
| 0.8%.
|
| We probably can't rely on fuel prices falling 10% again next
| month.
| landemva wrote:
| > fuel prices falling 10% again next month.
|
| Mid-term elections are approaching and gas pump prices are
| an easy talking point. With SPR releases, why won't USA
| fuel prices drop?
| fennecfoxen wrote:
| Okay, you've convinced me. Now how about the month after
| that?
| landemva wrote:
| No idea. Which circus tribe will be in charge?
| endtime wrote:
| Probably not the one who can make the SPR never run out.
| bryanlarsen wrote:
| The problem with core inflation is that it is a lagging
| indicator. Rent especially. If a landlord increases the
| rent on Jan 1 but your contract rolls over on Dec 1 that
| increase shows up in the December numbers.
|
| And yes gas has already fallen 10% in September. From
| $4.087 in August to $3.677 today.
| lend000 wrote:
| A lot of analysts put excessive weight on interest rate activity.
| Especially when rates start rising into reasonable territory
| (closer to the inflation rate), the effect tapers. For example,
| if the Fed raised rates to 100% tomorrow, it would be almost the
| same economic effect as if they raised it to 1000%. It would
| essentially just stop all borrowing in the affected channels and
| cause banks to reduce lending to the point where they don't find
| themselves needing to take a reserve loan and pay that rate.
|
| Arthur Hayes did an entertaining write-up of some of the other
| factors the Fed can use, two of which are either not being
| leveraged or actively conflicting with the interest rate hikes
| [0]. We could guess at political motivations for going soft on
| inflation until the election (while appearing to be hard on
| inflation) and then really ramping it up (including finally
| reducing the Fed's balance sheet and ramping up reverse repo
| sizes) in November when inflation continues, predictably, because
| the Fed keeps expanding its balance sheet and interest rates are
| still low (relative to most of its history).
|
| [0] https://blog.bitmex.com/teach-me-daddy/
| spywaregorilla wrote:
| I think the US (and Canada) just needs to ride the tide and let
| all the other boats sink. Pretty much everyone else is screwed. I
| think people are underestimating the second order effects of the
| US still having stable energy and farming capabilities. We'll see
| more stuff get done here and less stuff done elsewhere.
| Unemployment will be great here no matter what we do really. It
| will suffer in other countries.
|
| Though I'll admit, I still found the stat that of 20% youth
| unemployment in China to be shockingly high. The idea that
| they're lowering their interest rates is also bonkers to think
| about. Their economy has been slow motion train wrecking for
| soooo long now. God help them if they get another covid flare up
| over the winter and and are stupid enough to do another lockdown.
| mytailorisrich wrote:
| Europe has plenty of energy. They sit on huge gas reserves, for
| instance, but have decided to effectively ban using them by
| banning fracking while still being extremely dependent on gas.
| And not only that but most of gas imports came from a
| geostrategic adversary...
|
| This is all self-inflicted. You can't prevent people and
| countries from shooting themselves in the foot.
| ddorian43 wrote:
| Nah. Canada real estate has to take the hit.
| ericmay wrote:
| What effect will that have? If some Canadians go underwater
| on mortgages, won't others who were priced out be able to
| afford now? I guess some will lose jobs but what's the big
| downside from a country perspective with having cheaper
| housing? Or are you concerned about immediate effects?
| myth_drannon wrote:
| It's not only about being underwater on mortgages, but
| having your morgtage payment double (and maybe tripling
| soon...). Reddit is full of panicking homeowners who are
| starting to straggle with payments. This will have a wide
| effect on the whole economy because any discretionary
| spending will evaporate.
| endtime wrote:
| Are adjustable rate mortgages common in Canada?
| mostly_harmless wrote:
| supposedly about a 1/3 of mortgages are variable in
| Canada. But more importantly, fixed mortgages are almost
| all 5 year terms (or less). That is, every 5 years you
| have to renew your rate (even though the mortgage amount
| is for 25 years). That means every year, about 20% of
| homeowners are updating to the current fixed rate
| (assuming an random distribution of purchase date).
| Perhaps a big chunk renewed early in 2020, but by
| 2025/2026 all mortgaged homeowners will have a new higher
| rate.
| visiblink wrote:
| Canadian mortgages have separate amortization periods
| (say 20 or 25 years for example) and interest rate terms
| (generally 1-5 years, after which the rate has to be
| renegotiated -- and you have the option of transferring
| the mortgage to another lender at that time).
|
| You can also let your rate float with the market, which
| is called a variable rate mortgage.
| kansface wrote:
| Interesting. Do you know why mortgages in Canada are so
| different from the US? They seem much more risky on the
| buyer's side.
| mikem170 wrote:
| > Do you know why mortgages in Canada are so different
| from the US?
|
| The U.S. has been heavily subsiding mortgages since the
| great Depression, through programs such as FHA. Banks
| would not be willing to loan people money at such low
| rates over 30 years unless the government and taxpayers
| backed the loan.
| tel wrote:
| The USG massively subsidizes home ownership. The burden
| is passed down to taxpayers, but also may cause a drag on
| the global economy due to lopsided interest rate hedging.
| Analemma_ wrote:
| Nobody but the United States has long-term fixed rate
| mortgages: they're horrible for lenders because the
| lender has to assume all interest rate risk. The reason
| they exist in the US is because the government acts as a
| backstop due to pro-homeownership politics, but it causes
| a bunch of market distortions that are made invisible to
| American borrowers.
| rvense wrote:
| 30 year fixed-rate is very much the norm here in Denmark.
| There was a period of experimentation leading up to 2007,
| but I think fixed rate is very popular. I'm certainly
| happy that's what we went for when we bought our first
| house two years ago.
| synu wrote:
| We have them in the Netherlands.
| vkou wrote:
| Because it's more profitable for the lenders, and
| Canada's government is happy to bend over backwards to
| make old-boys-club-businesses like banks and telecoms
| comfortable.
| sleepdreamy wrote:
| The allure of home ownership in America is the fixed
| mortgage rate among other things. (Rent goes up each
| year, without question).
|
| I purchased a home at the start of this mess with an
| 2.6%. Right now it's hovering around 6%. I would say I
| MASSIVELY lucked out.
|
| Does Canada not fix the rate? I am confused -
| xxpor wrote:
| No, the US is the outlier with the 30 year fixed rates.
| Canada not only has variable rate mortgages, but instead
| of the rate just adjusting, they essentially have 5 year
| mortgages, with a balloon payment at the end. If you
| can't roll it over into a new load (say because your debt
| to income is now too high), you're screwed.
| gambiting wrote:
| Sounds the same as UK then.
| roflyear wrote:
| Has to? Why?
| dragontamer wrote:
| It is common to have adjustable rates in Canada, while the
| standard in USA is fixed rates.
|
| So in these times where rates go up, it makes Canadian
| homeowners suddenly have to pay more for their houses
| they're already living in.
| roflyear wrote:
| Well, I hope those people don't end up homeless. I don't
| see how the housing market crashing is going to be good
| for them.
| _whiteCaps_ wrote:
| IMO the best option for Canadian real estate is for
| prices to remain stagnant for a long time, allowing wages
| to catch up, and decouple the idea of your primary
| residence as being a good retirement plan.
| _whiteCaps_ wrote:
| https://www.cibc.com/en/personal-
| banking/mortgages/resource-...
|
| In variable rate mortgages, the amount going to principal
| vs interest changes. The monthly payments remain
| constant.
| humanlion87 wrote:
| Until you hit a trigger rate (depending on the mortgage
| specifics) at which point you have to start increasing
| your payments.
| spywaregorilla wrote:
| Sure. And that will suck. But the country will still be
| better positioned than anyone. Especially once they finish
| the pipeline to ship LNG to Asia
| suoduandao2 wrote:
| >Especially once they finish the pipeline to ship LNG to
| Asia
|
| I have my doubts that the US will allow that to happen. The
| resource curse is real.
| kylehotchkiss wrote:
| Canada's real estate situation makes no sense to me as a US
| citizen.
|
| * Plenty of land
|
| * Plenty of wood
|
| * Plenty of sources of fresh water
|
| * Pro-immigrantion policy could reducing construction costs
|
| * Seemingly high rate of 'cottage' ownership which seems like
| a second home to me, which seems to indicate abundance?
|
| * Remote working situation good
|
| * Fiber can't be that hard to roll out to new places right
| next to roads plus Starlink exists
|
| * People don't seem to mind the weather too much?
|
| In US, these things seem less abundant as lots of our land is
| allocated already as opposed to just being crown land
| lotsofpulp wrote:
| > * People don't seem to mind the weather too much?
|
| I would start with questioning this assumption.
|
| Also, based on their terrible choices of ISP and mobile
| networks, I would question this one too:
|
| > Fiber can't be that hard to roll out to new places right
| next to roads plus Starlink exists
| BirdieNZ wrote:
| > Plenty of land
|
| Land is generally not very valuable by itself, it is
| locations that are valuable (specifically desirable
| locations in growing cities). There are highly limited
| locations available in Canadian cities, particularly the
| desirable cities of Toronto and Vancouver.
|
| Same with the Bay Area, NYC, Hong Kong, Singapore, Sydney,
| Auckland etc. Singapore does probably the best job of the
| above at keeping housing relatively affordable despite very
| limited locations.
| buscoquadnary wrote:
| This is the basic premise of this talk by Petar Zeihan
| https://www.youtube.com/watch?v=Wi_nFz1CJSI&t=2s
| adamc wrote:
| He has a book out I'm reading. Good so far:
| https://www.audible.com/pd/The-End-of-the-World-Is-Just-
| the-...
| spaceman_2020 wrote:
| I'm a fan but he does get a little too blinded by America
| patriotism. His predictions about other countries start
| getting too comically apocalyptic to be taken seriously at
| times.
| throwawaymaths wrote:
| Well he does get credence for predicting invasion of
| Ukraine (which was also thought to be comically
| apocalyptic). Twice. He's been remarkably consistent in
| calling bad times for china and it's certainly gotten
| worse over there in the last year.
|
| I think there are a few other things that have lined up,
| like Sri Lanka collapse being a bellwether for his
| forecasts.
| ZeroGravitas wrote:
| Do you have a source for his Ukraine invasion claims?
|
| The last time someone mentioned this, they said he'd
| predicted they'd invade in 2014, which is after they'd
| invaded and annexed Crimea.
| tuatoru wrote:
| Well, they did invade Donetsk and Luhansk in 2014. I
| don't know if that was after his prediction, though.
| buscoquadnary wrote:
| After I got turned on to Petar Zeihan the first thing I
| did was went back and watched his older talks, after all
| plenty of people can make good sounding predictions,
| first you want to see what he was saying before to see
| his track record.
|
| I found a talk form 2018 in which he said there are going
| to be 3 major bush wars of global import, Ukraine-Russia,
| Iran-Saudi Arabia, and China-Indian Ocean. So far Ukraine
| has panned out, he also predicted where the political
| parties are going right now in the US and why they seem
| so out of whack.
| spaceman_2020 wrote:
| Yeah, he has been accurate. But he's also been screaming
| that China is going to collapse within this year, which
| seems very far fetched.
|
| Do agree with his broad thesis though. America is in a
| very good spot.
| colinmhayes wrote:
| I also predicted the invasion of Ukraine. So did the US
| intelligence service last summer. So did the state
| department when trump was trying to extort zelensky over
| military aid for a hunter Biden investigation. Not a hard
| prediction to make at all after no one gave a shit about
| crimea, especially given putins longstanding goal of
| Soviet reunification.
| JPKab wrote:
| Great book.
|
| I used to work in the Pentagon, and while we never took
| Zeihan's talks without a grain of salt, directionally he
| tends to be very accurate. Nations like China which lack a
| culture of immigration have extremely predictable
| demographic booms and busts, and Zeihan is spot on with
| those. He also hits on the reality of how dependent most
| nations, especially China, are on imports that pass through
| oceanic shipping lanes they have no ability to control or
| secure without the US Navy.
| throwawaymaths wrote:
| To be fair the us navy hasn't completely detached in the
| way that he expects... Yet. Shipping harassment hasn't
| appreciably gone up... Yet. It's also possible that cargo
| ships will arm themselves against pirates, which will
| increase the cost of shipping but maybe not as much as
| the most dire predictions.
| chernevik wrote:
| I suspect the point of "oceanic shipping lanes they have
| no ability to control or secure without the US Navy" is
| "shipping lanes they cannot secure FROM the US Navy".
|
| There is no way for a cargo ship to arm itself against
| submarines.
| spywaregorilla wrote:
| Pretty much. I think he's too eager to write off certain
| things to paint a wholly American picture, but he's generally
| got it right. The China story is not as clear. But the Europe
| picture is pretty plain. America is gonna eat it's lunch.
| UncleOxidant wrote:
| I'm not sure we want to (or intend to) eat Europe's lunch -
| we'd like a fairly strong Europe. But yeah, for now
| Europe's lunch will be eaten.
| spywaregorilla wrote:
| Yes I agree on both points
| Bombthecat wrote:
| Europe missed the train and train doesn't reverse when
| missing the station..
|
| Energy and infrastructure are the venes of Europe which
| clocked and overstretched to the max. Something will need
| to give and it already begins by small bakeries closing
| and more to follow..
|
| It wont end well. I don't believe we will have any growth
| in Europe for the next 3 years.
|
| Who is going to invest in Europe if energy is literally
| unpredictable and expensive?
| UncleOxidant wrote:
| Yeah, bakeries are energy intensive. Methane generation
| from sewage would be one way to (relatively quickly^)
| replace some of the natural gas that was coming from
| Russia. And as a side benefit fertilizer could be
| produced from the same sewage.
|
| ^ even so it would probably take a couple of years to get
| methane generation going at scale.
| bilsbie wrote:
| On the other hand we've managed to have bakeries for
| 1000s of years before most modern energy sources were
| discovered.
| UncleOxidant wrote:
| Wood is an option, but it will require a lot of wood to
| fire Europe's bakeries.
| lotsofpulp wrote:
| Unless those bakeries can deliver baked goods at similar
| cost to bakeries using modern energy sources, the problem
| still stands of the populace having a downward shift in
| consumption and expectations of their quality of life ,
| which typically has political ramifications.
| mancerayder wrote:
| Are people blaming environmentalists for attacking
| nuclear energy all these years? France stuck to it, but
| Germany seems to have bowed to pressure. The lesson is
| always to dismiss idealists and ideologues in politics.
| nus07 wrote:
| How does India do in all this? Their software development
| salaries in tier 1 cities are close to 100k or more. Lots
| of friends going back .
| xxpor wrote:
| 100K USD? That's wild. If you look at the GDP per capita
| ratios, that's like a dev in the US making $3.3 million
| [deleted]
| spywaregorilla wrote:
| Pretty poorly on food security. Energy situation won't be
| great. I would expect india to supplant China as the
| bogeyman over the next few decades
| bryanlarsen wrote:
| Wouldn't that be great? America can't seem to function
| without a bogeyman. The world would be so much a better
| place if the bogeyman was a democracy like India instead
| of China or Russia. Shift that Overton window!
| spywaregorilla wrote:
| My comment largely comes from India looking more
| authoritarian by the day, not to mention playing both
| sides of the Ukraine invasion.
| andsoitis wrote:
| > US still having stable energy and farming capabilities
|
| Don't these industries depend on inputs from around the world?
| fulafel wrote:
| Continued unabated fossils use indeed is sinking the other
| boats to get ahead short term, but hopefully enough people will
| disagree to get some less cynical climate cognizant energy
| policy going there.
| JPKab wrote:
| Mexico will be fine as well.
|
| North America is in a pretty good place compared to the rest of
| the world when it comes to energy/food/labor demographics.
|
| China is, unfortunately, a long way from the competent
| leadership of Hu Jintao and the other previous post-Mao
| leaders. Unlike the previous leaders (primarily selected on
| merit), who WANTED to prevent another Mao-like cult of
| personality, Xi is a deeply-insecure man whose rise was
| entirely built on family connections. He has fostered a cult of
| personality while simultaneously using the cover of anti-
| corruption stings to remove all of his CCP rivals, or anyone
| critical of him.
|
| The result is a huge departure from the previously competent
| CCP decisions. The current CCP is carrying out foolish, self-
| destructive, and non-sensical policies that can only make sense
| in the context of local decision makers desperate to please Xi.
| Xi is the ultimate centralizer of all decisions, having knee-
| capped the previous CCP policies of pushing decision making to
| local officials as much as possible. It's a real nightmare, and
| has resulted in China having an image of a shining (although
| somewhat authoritarian) city on a hill to a weird techno-
| dystopia with people starving in their apartments under
| absurdly stupid "Zero Covid" lockdown policies because the CCP
| can't admit the SinoVax is a complete failure.
| drekk wrote:
| China has 4x the population of the US. Abandoning zero COVID
| as a policy would lead to millions of deaths. How can you
| call SinoVax a failure when all of the non-mRNA vaccines
| perform similarly? The US has more COVID deaths than China
| has had cases. That's shameful, especially when the US sat on
| enough mRNA vaccines to completely immunize our population 9x
| over. Countries like Argentina that were guinea pigs for the
| Pfizer, Moderna, J&J vaccines couldn't get enough access
| because IP law is more important than stopping a global
| pandemic that disrupts manufacturing.
|
| Countries like China and Cuba had to manufacture their own
| vaccines without the new mRNA process and it was less
| effective as a result but still better than nothing. Cuba
| even had to get permission from the US to import syringes to
| be able to administer the vaccine they manufactured. How is
| that defensible?
|
| All of this without even saying that the CPC has an
| incredibly high approval rating
| (https://news.harvard.edu/gazette/story/2020/07/long-term-
| sur...), even when the polling is done by outside entities
| and anonymized. It seems incredibly condescending to treat a
| billion+ humans as inept drones under the iron grip of a
| tyrant simply because they're geopolitical rivals.
| TurkishPoptart wrote:
| Firstly, the mRNA "vaccines" do not produce any sort of
| immunity. AFAIK the Chinese vaccines actually work like
| traditional vaccines (i.e. cowpox particles to produce
| smallpox immunity). We really don't know the Covid death
| rate in China, whether there are excess deaths from Covid
| infection directly or as a result of the CCP's cruel and
| barbaric lockdown measures, which have caused reports of
| starvation in places like Shanghai.
|
| I also would not extrapolate public opinion about the CCP
| based on polling, even if it's done by outside entities and
| anonymized. Any Chinese with an IQ higher than room
| temperature would know better than to speak out against the
| CCP in a western-designed poll. Xi Jinping is leading his
| country like Stalin...they have GULAGs for dissenters.
|
| So, I don't disagree with you. I just think culturally, the
| Chinese are rightly reticent to express any
| antigovernmental sentiment, for good reason. Let's remember
| that the Chinese people have been occupied and oppressed by
| the Chinese Communist Party since the Chinese civil war. I
| pray for their liberation.
| WalterBright wrote:
| Central economic planning still doesn't work.
| tuatoru wrote:
| The specific failure modes we keep seeing are 1) having a
| country run by an autocrat who does not listen to advice, and
| ruthlessly stifles all dissent; and 2) using measures as
| targets.
| PKop wrote:
| Neither does no planning and complete decentralization (no
| national industrial policy, no trade barriers, letting
| important supply chains move out of your control or even into
| the borders of your adversaries).
| Proven wrote:
| WalterBright wrote:
| Actually, the chaos of the free market works very, very
| well at producing the most prosperous countries ever seen.
| thfuran wrote:
| Which country are you referring to? I rather suspect that
| their government is a good deal less hands off than
| you're implying.
| WalterBright wrote:
| The US is a fine example, especially the first century.
| thfuran wrote:
| Very nearly the first piece of legislation passed after
| the ratification of the constitution was a tariff.
| marcosdumay wrote:
| Well, the part of the China's economy that works isn't
| centrally planned.
|
| They do seem to have a very planned part (looks like so from
| the other side of the world), that isn't internationally
| competitive. But simply claiming that their economy is
| planned is clearly wrong.
| WalterBright wrote:
| > But simply claiming that their economy is planned is
| clearly wrong.
|
| I didn't claim that. I was pointing out that the centrally
| planned part isn't working. China has a mixed economy.
| csours wrote:
| I ask this question every so often on economic threads - Are
| jobs created or discovered? What field of study is most
| associated with "new jobs"?
| peteradio wrote:
| spark+kindling+gust
| vorpalhex wrote:
| Jobs are more often created than discovered.
|
| Tomorrow we might discover a new kind of math, requiring
| newly trained mathmeticians in a novel field.
|
| Those mathmeticians will need admins, business services,
| places to work, food, etc.
|
| Thus even the discovery of a few jobs has more jobs created
| than found.
| thaumasiotes wrote:
| The mathematicians don't need any more food than they did
| before the new kind of math was discovered. Why would you
| count that as job creation?
| carlmr wrote:
| The single mathematician no, but a new field would lead
| to the creation of a new building with new people at some
| point.
| thaumasiotes wrote:
| Every one of the people in that building needs the same
| amount of food they did before they moved in.
| jhundal wrote:
| Same amount of food yes. But if a mathematician was just
| sitting on the sidelines before this new field, they may
| decide it is more productive to trade time they spent on
| preparing food for more time to spend on math.
| vorpalhex wrote:
| Having food is not the hard part, the logistics of food
| is the hard part.
|
| Feeding one person is easy. Feeding 200 people with a mix
| of allergies is hard.
| Symmetry wrote:
| And while we're at it, if a tree falls in a forest with
| nobody around to hear, does it make a sound? I don't think
| there's any difference of facts to debate around created or
| discovered, just semantics.
| spywaregorilla wrote:
| I don't think that's particularly relevant here. We're going
| to see jobs open up in the US (and Canada) because even with
| higher labor costs, the strong dollar and available energy
| will make it easy to purchase goods and build things here.
| They won't be novel jobs so much as leveraging an absolute
| economic advantage against every pretty much every other
| nation on earth to steal jobs from other countries.
|
| But I guess to answer the question, jobs, especially at the
| bottom are "enabled" more than anything. We want people to do
| simple tasks, but tech advancements make it efficient enough
| to actually pay people to do it. Like rideshare drivers,
| ignoring valid claims about vc money burning. Some new types
| of jobs might be created or discovered but most jobs changes
| are about determining whether its viable to pay something to
| do something you want to do. The idea to have them do it has
| always been there.
| tuatoru wrote:
| What is the difference between "created" and "discovered"
| when it comes to jobs?
|
| Was "social media manager" created or discovered? How about
| (to take an older example) telex operator?
| t_mann wrote:
| The fields are macroeconomics and labor economics. I don't
| understand your other question, so it's hard to answer. What
| do you mean by "discovered"? Discovered by whom, the employer
| or the the employee?
|
| But you may be interested in knowing that models of labor
| markets are often based on matching models - you've got two
| groups (employers, employees) and everyobdy is trying to find
| {one,many} members of the other group that are a good match.
| csours wrote:
| > The fields are macroeconomics and labor economics
|
| As I understand it, those are mainly concerned with
| reduction in labor costs.
|
| Job discovery is a phrase used by Clayton Christensen to
| describe finding a job to be done. He uses it to describe
| finding a product to sell to people to perform some
| function in their lives - a job to be done by a product
| that you make. I'm using it as an alternative to the idea
| of "job creation" because I don't think that's real.
|
| There is a certain political narrative about job creation
| and job creators. I tried to find support for it in
| academia and I could not.
|
| I didn't want to put all this in my original question
| because then I would only get political replies.
|
| ---
|
| About politics - Yes my question has some political
| motivation, but I am genuinely interested in the subject.
| My motivation is not to prove or disprove, but to learn.
| You don't have to believe that about me, but I do.
| Jensson wrote:
| Saying that jobs are "discovered" instead of created is
| akin to saying that code is discovered instead of
| created. When you program you create code, there are many
| ways to structure it so the code will look vastly
| different, therefore it doesn't make sense to say that
| the code was discovered, it was definitely created.
|
| Jobs are the same, when you create an organization there
| are countless ways to structure it and you will create
| different jobs depending on how you do things. Job
| creators are the people who create organizations, the
| better they do their job the more these organizations can
| do with less people so the more wealth there will be to
| share, so job creation is an extremely important job.
| t_mann wrote:
| > As I understand it, those are mainly concerned with
| reduction in labor costs.
|
| Where does your understanding derive from? Reducing
| macroeconomics to "reducing labor costs" is akin to
| reducing classical mechanics to "computing projectile
| trajectories". I don't know Christensen but I take it
| that he's a business school professor and I guess that
| was the target audience he was speaking to there.
|
| You're not wrong that economics is a discipline that is
| not free from ideological biases, but I guess you're
| going a bit far in reducing the discipline to that.
| People still want to answer questions with data, like
| "what happens to unemployment (and exchange rates, and
| investment,...) if we raise interest rates?". Labor
| economics might ask more narrow questions like "what
| happens if we raise the minimum wage?". That's the sort
| of questions that economics deals with, not musing over
| the semantics of creation vs discovery.
| csours wrote:
| Thank you. I found this deck which really helped.
|
| https://economics.mit.edu/files/7400
|
| and Open Coursework page
|
| https://ocw.mit.edu/courses/14-661-labor-economics-i-
| fall-20...
|
| A labor matching model is better because it recognizes the
| need for a worker and a job opening, and for those to find
| each other.
| howmayiannoyyou wrote:
| > I think the US (and Canada) just needs to ride the tide and
| let all the other boats sink.
|
| Look at USD FX rates. The US may be able to purchase resources
| and goods abroad at more favorable exchange, but who can afford
| to buy US exports as the USD rockets skyward? And what is the
| logical follow-on to unobtainable USD units of trade?
| Substitutes that China, for example, are more than delighted to
| support if it means they exert (even) more control over the
| global monetary system.
| seibelj wrote:
| All the trinkets that could be offshored were done already.
| What the US manufactures now is high-end (chips) or protected
| by tariffs (cars). A lot of virtual stuff like software and
| call centers. I think we've hollowed out so much there isn't
| really much left to offshore.
| spywaregorilla wrote:
| FX rates are like racing logic. It might be better to be
| behind for a while (weaker currency) because that could have
| long term advantages like moving industry to your country.
| But you want to be in first place.
|
| The USD is strong because people need to buy things from the
| US to begin with. That is, at best, a "nobody goes there it's
| too popular" kind of comment. The idea that you weaken your
| currency to increase exports is something you do to benefit
| from growth, like moving industry to China. But if something
| like an energy shortage or a fertilizer shortage start
| limiting your ability to produce things with that
| opportunity, you're just doubled down on a bad situation.
|
| This isn't even a story on "reserve currency" status. This is
| just the US (and Canada) being in an incredible competitive
| situation. What do you do when there's a global food shortage
| and the US is the only country unhindered? You suck it up,
| buy those stupidly expensive US dollars, and import US food.
| And get screwed if you owe USD denominated debts while your
| currency goes down.
|
| And if the US finds it's not at the right level, it can
| always just... spend more money. It's basically free.
| Everyone's getting hit with inflation because it's genuinely
| harder to make and ship things. Slapping on some excess money
| sloshing around to try and keep things going is dangerous.
| code51 wrote:
| That's why petrodollar is part of heated conversations
| around the world.
|
| You do this enough and your allies become collateral
| damage, the system begs for a change. Rest of the world
| starts to only base their trades in gold (or some other
| standard) and when faced with USD debt, change the debt
| amount through policy. US _has_ to keep their (future)
| allies afloat either openly or with hidden support.
| consp wrote:
| No mention in the article why there is so much reaction from
| policy makers other than general monetary policy. In my opinion
| in some countries the politicians are scared shitless of large
| groups people not being able to pay the bills and actually taking
| action.
| steve76 wrote:
| nie100sowny wrote:
| > A generation of young people whose education was blighted by
| COVID lockdowns, will face a closed labour market.
|
| But shortly after, when all inefficient companies bankrupt,
| they'll wake up in the booming economy, finding places in
| perspective businesses.
|
| Crisis is good for the economy in the long term. I only worry
| that governments won't allow young trees to grow after the
| forest's fire.
| mistrial9 wrote:
| > Crisis is good for the economy in the long term.
|
| there is some name for this kind of dismissive optimism, but I
| do not know it.. suggestions?
|
| I hear this kind of thing from the Cato Institute Human
| Progress people, who have trillions in paper wealth and the Oil
| and Gas economy to defend. What could go wrong?
| 0xdde wrote:
| Internalized propaganda?
| munificent wrote:
| A forest fire might be good for the forest as a whole, but
| that's a cold consolation to any particular tree or rabbit
| who ends up turned to cinder.
| nie100sowny wrote:
| A better analogy would be a strong wind collapsing big and
| old trees :)
| A4ET8a8uTh0 wrote:
| << But shortly after, when all inefficient companies bankrupt,
|
| Eh. It sounds great in theory, but in practice ( including in
| US, where all the more recent crises shown ) inefficient
| companies get saved if they are sufficiently connected or
| 'important' enough to the system writ large.
|
| I am not defending the practice, but I want to point to obvious
| flaw in the analysis since it diverges from reality somewhat (
| I just noticed the inclusion of government involvement ).
| CSMastermind wrote:
| The government bails out comparatively few businesses.
|
| While many, myself included, dislike the practice, I don't
| think it happens on a large enough scale to make a
| significant impact on the economy at large.
| endtime wrote:
| I don't really feel like I know much about this, so someone
| may point out an obvious way in which I'm wrong, but:
|
| How do you measure the effects of the moral hazard created
| by the post-housing crisis bailouts circa 2008? Are major
| financial institutions incentivized to take outsized risks
| if they're too big to fail? How can we be sure that doesn't
| "make a significant impact on the economy at large"?
| mistrial9 wrote:
| the War economies are related to this phenomenon of massive,
| inefficient companies getting new contracts and new cash;
| similar to Old World central contract awards connected to
| long-term govt cash flows, I believe..
| desindol wrote:
| Crisis is never good look at the correlation between
| unemployment and excess mortality rates...
| nie100sowny wrote:
| I think you refer to the long unemployment.
|
| Crisis time needs to be shortened then. Banks should raise
| rates firmly, reaching levels higher than inflation. Big
| companies should not be artificially saved from collapsing,
| and regulations simplified. The unemployment period will be
| then short.
| landemva wrote:
| I agree with much of this. If we got the Fed out of the
| business of propping things up, the downturn would be quick
| and underperforming assets would change hands and quickly
| be productively redeployed. Instead, Fed in partnership
| with government will prop this up and protect the
| incumbents/existing winners.
| dragonwriter wrote:
| > If we got the Fed out of the business of propping
| things up, the downturn would be quick and
| underperforming assets would change hands and quickly be
| productively redeployed
|
| Interesting belief. Things like the Long Depression
| challenge it, though.
| reasonabl_human wrote:
| Where do you folks go to learn on these macroeconomic
| topics?
| FormerBandmate wrote:
| When big companies collapse people take huge losses, lose
| the trust in the economy necessary for things to grow, and
| the economy is hurt for a long time. The bankruptcy of
| Lehman Brothers almost destroyed the entire financial
| system, slow-motion collapses like GE and Sears that take
| decades are vastly preferable
| djbusby wrote:
| https://archive.ph/Xr8cv
| badrabbit wrote:
| Why do you need that for substack?
| djbusby wrote:
| The primary link blocks me after a short scroll. Couldn't get
| past "the fold". But with Archive I can read the full
| article.
| geerlingguy wrote:
| There's a dumb anti-pattern link that's like "I don't want
| to subscribe yet", but yeah, annoying nonetheless. I
| thought Substack was supposed to be a nicer alternative to
| Medium?
| TremendousJudge wrote:
| I don't see how could they be. They are under the same
| constraints and have the same incentives.
| djbusby wrote:
| Wow, I just went back a fourth time and the previous
| full-blocker modal/nagbox is gone and it's just at the
| bottom.
|
| Guess I was in the B group for a while.
| stackbutterflow wrote:
| Medium was a breath of fresh air when it started. Then
| they had to make money.
|
| Substack is a breath of fresh air. Then they will have to
| make money.
|
| It's the same cycle over and over, for every startup. I
| don't why at the start of a new cycle people think this
| time it will be different.
| howmayiannoyyou wrote:
| Monetary policy is far from the whole picture here. Global policy
| makers are dealing with about 25% of the global population being
| lifted from poverty over the last several decades and their
| increased consumption and wages are supply-side inflationary in
| ways not easily (or appropriately) reversed. The impact isn't
| just economic. Inflation is destabilizing (Venezuela, Argentina,
| Turkey).
|
| The west invested heavily in manufacturing and resource
| extraction in the developing world for profit (mostly) and virtue
| (slightly) and inflation was always the likely outcome.
|
| The only alternative to a global recession is step changes in
| productivity that relieves supply side pressure. Historically,
| those advancements can emerge quickly, but they are usually slow
| to propagate.
| landemva wrote:
| Much manufacturing left the West to relocate the pollution.
| Pollution colonialism.
| joshlemer wrote:
| Please. China and others who benefited from trade with the
| West could have chosen not to allow industries to operate in
| their countries. They prioritized the economic benefits over
| environmental concerns all on their own, it's not
| colonialism.
| mlsu wrote:
| I heard a while back the idea that interest rates are a proxy for
| stability.
|
| That more stable societies support low interest rates, because in
| a stable society, money is more likely to be paid back 1, 5, or
| 10 years from now.
|
| Does the sharp rise of interest rates in the past year indicate
| that we are existing a period of prolonged stability and entering
| a period of relative instability?
| ryathal wrote:
| This is probably a good way to think about it, but it's not a
| straight scale of 0% good and 100% bad. There's a goldilocks
| zone in there, things above that are bad for instability, and
| things below are bad for lack of caution.
|
| The rise is a correction that rates have been artificially low
| for 5-10 years, because the massive growth with no real risk
| assessment was addictive. If Fed rates get around 5% or more
| and they are still hinting at increases that's probably a bad
| sign for the long term. Short term instability already is
| happening.
| gizmo686 wrote:
| That assumes interests rates are set by the free market, which
| is not true in todays economy.
|
| The reason interest rates are going up is not a mystery. A
| dozen people meet semi-quarterly and vote on what the interest
| rate should be.
| mynameishere wrote:
| Blogger objects to central bankers doing their job. I imagine his
| book matches his views.
| slaw wrote:
| Interest rates are below inflation so bankers are clearly not
| doing their job.
| disgruntledphd2 wrote:
| He's not just a blogger:
| https://en.wikipedia.org/wiki/Adam_Tooze
|
| His books (particularly Crashed) are also really, really good.
| hef19898 wrote:
| Ok, so historian and author objects to current central bank
| policies. Not that much better...
| disgruntledphd2 wrote:
| To be fair, he's an economic historian. I am the OP and
| thought that this was a really interesting article on
| inflation, sorry that you don't agree.
| hef19898 wrote:
| There are worlds between a BA in economics being an
| economic historian and an expert in monetory policy. If
| Covid tought me something, it is listening to those doing
| it, or directly advicing those doing it, instead of all
| those people regardless of who they are, that obly stand
| at the sidelines.
| carlineng wrote:
| I would categorize it differently. Rather than just
| objecting to their policy, he is describing a reason why
| current policies are suboptimal, and suggesting ways that
| current policies could be improved. Namely, that domestic
| central banks around the world don't coordinate policy with
| foreign central banks, despite the existence of major
| feedback loops between foreign and domestic policy. He
| hypothesizes that the world economy would be better off if
| there were more global coordination on monetary policy.
| hef19898 wrote:
| And we all saw hoe that approach, in a much more
| contected system for sure, worked during the Euro crisis.
| Funny how we survived this and the EU isn't a ruined
| shambles.
|
| We just ruined average peoples lives in the southern
| part, especially Greece, in order to save the big banks.
| Proven wrote:
| pid-1 wrote:
| If one is well hedged and reduced exposition to markets before
| the hikes (basically anyone who was paying attention to
| inflation), a global recession might be a good thing. Inflation
| will be tamed, us labor markets will be relaxed and nonsense
| companies will die.
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