Inflation

[BoomBoom.sixpack]

Excellent article in the WSJ today. I thought it presented all sides fairly well, a rarity in the MSM.

https://www.wsj.com/articles/inflation-high-forecast-economist-goodhart-cpi-11646837755

No politics please!

First thought, 3% inflation is high? That's what all the worry is about? We're seriously contemplating intentionally causing a recession to prevent 3% inflation?

2nd thought: higher costs are translating more to lost profits than to higher prices in China. Does....does China have a better functioning market now than we do? Wtf.

Final thought: a country trying to hit a 2% inflation target when fundamentals call for 3 or even 4.....is not gonna have a good time.

 

[Quincy A. Wagstaff]

The true inflation rate is most likely between 10-20%.
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This is going to be a very interesting decade. I don't think the average American is prepared for it.

 

[Cooterpoot]

Anyone believing 3% is a damn fool. 3% is close to normal inflation.

 

[onewoof]

The true inflation rate is most likely between 10-20%.
link 1
link 2
link 3

This is going to be a very interesting decade. I don't think the average American is prepared for it.

Heard this same claim every decade now since 1980. Rinse and repeat.

 

[CookieMonster.sixpack]

I love this “no politics” rule on a thread about the economy.

I’m going to start a thread about the basketball team but no coaching talk please. Should be an awesome discussion.

 

[dawgoneyall]

Anyone believing 3% is a damn fool. 3% is close to normal inflation.

Spot on.....

 

[dawgoneyall]

I love this “no politics” rule on a thread about the economy.

I’m going to start a thread about the basketball team but no coaching talk please. Should be an awesome discussion.

He doesn't want anyone to actually mention the true cause and people responsible....

And everyone knows China's way of doing things is great and wonderful.....

 

[Maroon Eagle]

Yeah, saying “No Politics” in cases like these is ironically a political statement on its own.

Maybe people should just go with “Don’t be as cuckoo as you normally are here.”

After all, when you’re discussing topics of national and global interest, politics happen.

 

[PooPopsBaldHead]

You are constantly trying to deny what's happening with inflation.

1. The BLS system is terrible at measuring inflation properly, but it's the system we have and it's nowhere near 3%. The article mentions maybe 3% by the end of the year, even if that happens, the damage is already done. Our solar will have effectively been devalued by 15-20% in 2 years.

2. I posted this the other day, we have not even gotten started on housing getting captured properly by inflation, 4% last month... But there is a 13-16 month lag... It's coming.

3. Food still climbing. Real time IRI data showing all grocery up 9% yoy last week.

4. Energy and transportation... C'mon man.


I am not an "inflationista" as you have lumped me in before. Quite the opposite. I recognize the deflationary pressures of technology and global trade for years. I have always thought we tracked it wrong with poor weighting, OER, and hedonics, but still deflation has been the game. Until the summer of 2020.

That's when I started ringing the bell. So much fiscal stimulus when we needed to go broke for a little while to encourage austerity, it was inevitable. Too much dollar chasing too few of goods. It's a fire now. Everything is throwing more fuel on it. War on Ukraine... Inflationary. Worker shortage... Inflationary. Raising mortgage rates... Inflationary.

I feel bad for the folks just trying to get by. I'm fortunate enough to have seen it coming and been able to hedge a little. Many were not.

MMT has been taken out back and shot like Old Yeller.

Bloomberg now calling for a possible 10% print in May if energy doesn't peel back.


For a real world look, read through this site.

https://truflation.com/

 

[PooPopsBaldHead]

7.9% CPI print... Still climbing

 

[mstateglfr]

I love this “no politics” rule on a thread about the economy.

I’m going to start a thread about the basketball team but no coaching talk please. Should be an awesome discussion.

First, I did like your example- it was funny.

Discussing current event political decisions and issues in a rational manner seems to largely be OK on here, especially when historical evidence is provided alongside the comments.
Bombing a thread with crazy as **** unsubstantiated claims, assigning blame for things outside the power of the people and groups being blames, and misrepresenting reality whether its intentional or out of ignorance is all a good way to end it quickly.

Basically, keep the Qanon, New World Order, and blanket blaming type of **** away and there is a chance an informative discussion can take place for a longer time before being inevitably shut down.

 

[BoomBoom.sixpack]

You are constantly trying to deny what's happening with inflation.

1. The BLS system is terrible at measuring inflation properly, but it's the system we have and it's nowhere near 3%. The article mentions maybe 3% by the end of the year, even if that happens, the damage is already done. Our solar will have effectively been devalued by 15-20% in 2 years.

2. I posted this the other day, we have not even gotten started on housing getting captured properly by inflation, 4% last month... But there is a 13-16 month lag... It's coming.

3. Food still climbing. Real time IRI data showing all grocery up 9% yoy last week.

4. Energy and transportation... C'mon man.


I am not an "inflationista" as you have lumped me in before. Quite the opposite. I recognize the deflationary pressures of technology and global trade for years. I have always thought we tracked it wrong with poor weighting, OER, and hedonics, but still deflation has been the game. Until the summer of 2020.

That's when I started ringing the bell. So much fiscal stimulus when we needed to go broke for a little while to encourage austerity, it was inevitable. Too much dollar chasing too few of goods. It's a fire now. Everything is throwing more fuel on it. War on Ukraine... Inflationary. Worker shortage... Inflationary. Raising mortgage rates... Inflationary.

I feel bad for the folks just trying to get by. I'm fortunate enough to have seen it coming and been able to hedge a little. Many were not.

MMT has been taken out back and shot like Old Yeller.

Bloomberg now calling for a possible 10% print in May if energy doesn't peel back.


For a real world look, read through this site.

https://truflation.com/

Because the facts of value of the currency vs supply of goods points to the latter. Goods that are not supply constrained have not inflated. That's not a devaluation of the currency, right?

Doesn't mean the implications of this supply crisis aren't dire. But it does suggest that there's nothing we can do about it by raising rates.

Food: shop, and you won't see much inflation. Pretty sure people don't want their jobs to go away so they can drink premium soda out of the can for cheap again.

Fuel: come on. We both know how volatile that market is. I do remember saying a couple years ago that many people not buying fuel efficient cars would regret it in a couple years.

Housing: you've shown yourself how this is related to supply.

Meanwhile, profits are sky high for the monopolistic companies raising these prices. Not in China though. Care to try to explain that? Were you saying two years ago "buy meat company stocks cause their gonna jack their prices and see profits spike like never before"? Shouldn't part of our response be to rein in corporate consolidation?

I personally think we've let inflation be too low for too long, and in part are now paying the bill for that. I think expectations of low inflation can be dangerous just like expectations of high inflation. People don't plan ahead, people stop learning how to shop, prices stop reflecting and being responsive to market fundamentals. Companies start expecting cheap labor, can't forget that one too. Oh, and supply chains get strategically weak, that one too.

 

[Bulldog Bruce]

All I know is that recently I have been purchasing things with one price on a shelf or menu and when I look at the receipt, the price is different. At my local Target I bought some $10 Towels (price tag on shelf) and my reeipt showed I was charged $12 per towel. My Jimmy Dean sausage, egg, & cheese croissants with a $10.89 price ended up being $11.49. At Wendy's the large drink was listed at $2.19 on the drive-thru menu. My receipt said $2.49. No one was changing the price when I asked. Prices have gone up so quickly that they are behind in all their labeling. I would bet more of my items were similar but I didn't take notice.

 

[mstateglfr]

Based on what I see, inflation is higher than 3%. It could just be that I happen to purchase and consume things that are over 3% and there is a ton of stuff out that that has only gone up 1% to offset what I purchase and consume, but I would not bet on that.

“He argued that the low inflation since the 1990s wasn’t so much the result of astute central-bank policies, but rather the addition of hundreds of millions of inexpensive Chinese and Eastern European workers to the globalized economy, a demographic dividend that pushed down wages and the prices of products they exported to rich countries. Together with new female workers and the large baby-boomer generation, the labor force supplying advanced economies more than doubled between 1991 and 2018. Now, he said, the working-age population has started shrinking across advanced economies for the first time since World War II, and birthrates have declined as well. China’s working-age population is expected to shrink by almost one-fifth over the next 30 years.”

Some of these sort of discussions are confusing because not everything we spend our money is accounted for. For example, the CPI(Consumer Price Index) does not include housing costs because it views housing as an investment and not a consumption item. <-- I am19.83% sure I got that correct, but a smarter person should correct it if needed.

 

[MagicDawg]

Here's an enlightening article to consider:
https://imprimis.hillsdale.edu/inflation-united-states/

It offers a sweeping historical overview of the definition and causes of inflation.

The concluding paragraphs:

When the economy went into a deep recession with the bursting of the housing bubble in 2008, however, the government began running unprecedented budget deficits. The national debt, over $10 trillion in 2010, would double by 2017. With the onset of the COVID pandemic in 2020, deficits soared further as the government sought to mitigate the effects of shutting down much of the economy. The national debt now stands at $29 trillion—about where it was in 1945, relative to GDP.

But this breathtaking increase in the money supply did not, at least immediately, set off inflation. For while inflation is a monetary phenomenon, it is also a psychological one: when the expectation of inflation becomes widespread, it becomes a self-fulfilling prophecy.

That prophecy was fulfilled in 2021. With the Biden administration continuing pandemic relief, which discouraged many from seeking work, and restricting oil and gas production, inflation set in. Supply chain disruptions also contributed.

By December 2021, consumer prices were up seven percent on an annual basis, the highest in 40 years, while producer prices were up 9.6 percent, the highest since that statistic has been compiled. And the expectation of further inflation is now deeply embedded in the economy.

Regardless of this, the Biden administration is still pushing hard for its “Build Back Better” plan, which would add at least another $5 trillion to the national debt over the next decade. And President Biden has airily said that “Milton Friedman is no longer in charge.”

But unfortunately for the Biden presidency—and for the U.S. economy and the American people—Milton Friedman was right. Create too much money and you get inflation. We are witnessing the proof of that right now.​

 

[GloryDawg]

If Disco makes a comeback I am really going to get worried.

 

[johnson86-1]

Heard this same claim every decade now since 1980. Rinse and repeat.

If you've heard this claim in the 90's and 2000's, you're hanging around too many idiots. Even the official numbers (whether you want to look at CPI-U or PPI) are showing between 7-9%, and I think that's with housing not showing up yet.

 

[Cooterpoot]

A Little Debbie Iced Honey Bun has gone from .99 to $1.29. Damn commies!

 

[PooPopsBaldHead]

You are wrong on every single front.

Here is the entire argument you are making, supply is low. Horse ****. Its demand as much if not more than supply.

Housing. We are blowing away housing starts from the previous 3-4 years. Supply is up, demand is up more.

Beef. 2020 and 2021 were record production years. Sky high.

Vehicles definitely have a shortage and energy is volatile. But if you do not give $8 trillion dollars to people, 80%+ of which never missed a paycheck by the way, you get demand destruction. Nobody was driving up prices in 2008 and 2009 even though supply dropped. Why, were broke.

Without fiscal stimulus how many people are running out buying cars, homes, and wagyu ribeyes... Not many. We would have been in a recession. Austerity would have ruled the day. Supply chains and demand would be balanced.

Maybe a few people dip into savings, but not many. I'm not saying intervention was wrong, but this is the consequence. There were three possible scenarios.

1. Covid hits and government does nothing to help.... We going into a massive recession. Companies lay millions off and are very scared to bring them back. Unemployment is still today up near 10%. No inflation to speak of because there is no money to buy houses, cars, beef, or gasoline.

2. Covid hits and government does a little targeted stimulus by those affected (travel, hospitality, dining out.) There is probably some mild supply chain inflation on certain items.

3. Covid hits and government goes ape ****. $1000 month unemployment encourages many to quit working thus driving supply lower. Mortgage and rent moratoriums put tens of thousands in the bank accounts of millions. Student loan deferment puts tens of thousands of dollars in the bank accounts of millions . Interest rates go to zero making home buying and auto buying super attractive. 3 separate stimulus payments giving most households $6000+ helicopter money. Fed liquidity drives assets to the moon causing 2.5 million early retirements driving supply lower through worker shortages...

This will be my last time arguing with you. I am not perfect and have no idea what the future holds, but this is simple economics. You are stubborn as a mule with his dick in knot on this topic. You have been fighting me since July of 2020 on this. Take a lap.

 

[Cooterpoot]

I moved a good portion of my investments into more sheltered options. The other money I'm using to eliminate debt. (Mostly medical). Refinanced my house to 30 to free up cash (not including equity). Saving about $750 a month doing it. Costs me $160 to fill up, so that money will leave pretty quickly. We're all 17'd. Some in the butt.

 

[BoomBoom.sixpack]

Based on what I see, inflation is higher than 3%. It could just be that I happen to purchase and consume things that are over 3% and there is a ton of stuff out that that has only gone up 1% to offset what I purchase and consume, but I would not bet on that.





Some of these sort of discussions are confusing because not everything we spend our money is accounted for. For example, the CPI(Consumer Price Index) does not include housing costs because it views housing as an investment and not a consumption item. <-- I am19.83% sure I got that correct, but a smarter person should correct it if needed.

I certainly don't think current inflation is 3%, I guess I should have worded that better. The article states this guy's dire scenario is 3-4% inflation by the end of the year, then ongoing.

Part of the "problem" is that inflation measures are set up to measure the purchasing power of the currency, not to guage supply and demand effects. If beef goes up but chicken doesn't, they assume you'll just buy more chicken and less beef (I think), and don't count it as inflation, or offset it some maybe?

 

[Cooterpoot]

There's a housing construction backlog not seen since the early 70's right now. Construction in housing is 17ing insane!

 

[BoomBoom.sixpack]

Here's an enlightening article to consider:
https://imprimis.hillsdale.edu/inflation-united-states/

It offers a sweeping historical overview of the definition and causes of inflation.

The concluding paragraphs:

When the economy went into a deep recession with the bursting of the housing bubble in 2008, however, the government began running unprecedented budget deficits. The national debt, over $10 trillion in 2010, would double by 2017. With the onset of the COVID pandemic in 2020, deficits soared further as the government sought to mitigate the effects of shutting down much of the economy. The national debt now stands at $29 trillion—about where it was in 1945, relative to GDP.

But this breathtaking increase in the money supply did not, at least immediately, set off inflation. For while inflation is a monetary phenomenon, it is also a psychological one: when the expectation of inflation becomes widespread, it becomes a self-fulfilling prophecy.

That prophecy was fulfilled in 2021. With the Biden administration continuing pandemic relief, which discouraged many from seeking work, and restricting oil and gas production, inflation set in. Supply chain disruptions also contributed.

By December 2021, consumer prices were up seven percent on an annual basis, the highest in 40 years, while producer prices were up 9.6 percent, the highest since that statistic has been compiled. And the expectation of further inflation is now deeply embedded in the economy.

Regardless of this, the Biden administration is still pushing hard for its “Build Back Better” plan, which would add at least another $5 trillion to the national debt over the next decade. And President Biden has airily said that “Milton Friedman is no longer in charge.”

But unfortunately for the Biden presidency—and for the U.S. economy and the American people—Milton Friedman was right. Create too much money and you get inflation. We are witnessing the proof of that right now.​

And that's the argument that I don't buy, because goods that are not supply constrained have not inflated. That is NOT what Milton Friedman predicted.

You know, a lot of people predicted that corporate consolidation and supply chain shortening would lead to price gouging. Weren't they right? Why do people want to credit Milton Friedman instead?

 

[johnson86-1]

Excellent article in the WSJ today. I thought it presented all sides fairly well, a rarity in the MSM.

https://www.wsj.com/articles/inflation-high-forecast-economist-goodhart-cpi-11646837755

No politics please!

First thought, 3% inflation is high? That's what all the worry is about? We're seriously contemplating intentionally causing a recession to prevent 3% inflation?

THe article is somewhat of a mess. I think a lot of the comments it makes/quotes on high inflation is referring to the current inflation, not the projected 3-4% inflation Goodhart is referencing. The article also never distinguishes between when people are talking about real interest rates and when they are talking about nominal interest rates. I think Goodhart is mostly talking about real interest rates rising due to going from having a glut of low skilled workers entering the global workforce to having labor shortages as agin populations are not offset by new labor from developing countries? Can't tell if the 3-4% interest rate he is projecting is supposed to be real or nominal.

2nd thought: higher costs are translating more to lost profits than to higher prices in China. Does....does China have a better functioning market now than we do? Wtf.

Why would that be a sign of a better functioning market? Seems like maybe that would be a sign of healthier producers and/or better supply chains? It certainly could be that their markets are functioning better, but I think you need a lot more information to know whether US firms should be making lower or higher profits in this environment.

Final thought: a country trying to hit a 2% inflation target when fundamentals call for 3 or even 4.....is not gonna have a good time.

Trying to hit a 2% inflation target when the real interest rate is zero seems fine. If the real interest rate is approaching or passing 2%, I don't understand how that works or whether it would work.

 

[horshack.sixpack]

Economies run in cycles. Those cycles are largely lagging indicators. Those cycles can see perturbations based on world events/crisis, and sometimes they indicate a true "correction" to new steady state norms. I think that we are just in an inflationary period that we will only really know the true impact once when the world finds a new geo political "normal".

 

[Quincy A. Wagstaff]

Heard this same claim every decade now since 1980. Rinse and repeat.

Have you heard “highest inflation in 40 years” every decade since 1980? If so, it was inaccurate until now.

 

[onewoof]

If you've heard this claim in the 90's and 2000's, you're hanging around too many idiots. Even the official numbers (whether you want to look at CPI-U or PPI) are showing between 7-9%, and I think that's with housing not showing up yet.

View attachment 24026

 

[maroonmania]

The true inflation rate is most likely between 10-20%.
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This is going to be a very interesting decade. I don't think the average American is prepared for it.

This inflation thing at its base is fairly simple I would think. Over the past couple of years we have pumped a large amount of liquidity into the system while at the same time productivity overall has been stagnant if not lowered (COVID work issues, supply chain issues, etc.). Not hard to figure that if you have more dollars out there chasing fewer goods that there will be inflation. Its just taken a while for it to finally start working its way through the system given the massiveness of our economy. I mean if throwing money into the system willy nilly with no production to back it up had no eventual impact then you could just print your way out of debt.

 

[Pilgrimdawg]

3%??? Not even in the same ball park as reality. Actually go to the grocery store and buy your groceries for the next two weeks. On the way home, stop by the gas station and fill up. End of story.

 

[CookieMonster.sixpack]

Here's one of the MANY factors of inflation (particularly in the energy sector)

If you have the patience and time to read through it's pretty straight forward.

[TWEET]1501716518761119745[/TWEET]

 

[dorndawg]

nm

 

[dorndawg]

3%??? Not even in the same ball park as reality. Actually go to the grocery store and buy your groceries for the next two weeks. On the way home, stop by the gas station and fill up. End of story.

You could've just DM'd fishwater instead of big league'n the rest of us.

 

[maroonmania]

There's a housing construction backlog not seen since the early 70's right now. Construction in housing is 17ing insane!

Yep, there again you have lots of people with money wanting things but the supply side is backed up. Through the roof go the prices. People are going to charge whatever people are willing to pay.

 

[DoggieDaddy13]

He doesn't want anyone to actually mention the true cause and people responsible....

And everyone knows China's way of doing things is great and wonderful.....

"Resistance is futile. Assimilate or die (or spend the rest of your life in prison)."

 

[paindonthurt]

The lib references only QAnon and New world order.

 

[archdog]

The true inflation rate is most likely between 10-20%.
link 1
link 2
link 3

This is going to be a very interesting decade. I don't think the average American is prepared for it.

I will say this 1000 more times, supply chain issues is driving almost the vast majority of inflation. There is zero housing stock. There is issues all over the place with new materials for construction. Cars are pretty much nonexistent.
Mandatory wage hikes, although needed, is really ******* with the entire system. If everyone gets a pay raise, no one does. Make minimum wage 50/hour, and everything adjusts to meet the new cost.

 

[Leeshouldveflanked]

Just got off of a hour and half long company Webex..we are a $3B Worldwide Manufacturer that primarily sells parts for Equipment in Mining , Transportation, Oil and Gas, Areospace, etc …..
Taking in all of our cost, raw materials, healthcare, energy, freight, manufacturing labor etc our cost have increased 42% since January 2021. We are having our 4th 8-10% price increase since January 2021.

 

[archdog]

All of that is well and good, but the fact is domestic production halted when the price of oil dropped below what is a comfortable profit margin for them. Why produce oil domestically when you can just hold on, reduce the production, drive up the price of oil planet wide, and then start producing?
Oil companies do this all the time. They reduce their own production to make sure the price is a windfall for them. I support all of the actions in that twitter feed. Every single one of them. We as a country need to kill our dependence on oil. What that entire string never mentions is that there are literally thousands of current leases they could be using to produce energy domestically, yet those companies refuse to produce because it has only recently been profitable enough to consider it.

I for one would love for our country to not produce a single drop of oil unless absolutely necessary. Either that or go full on renewable with every option available and kill the internal combustion engine starting today.

I hate that countries in the middle east and Russia are even in a position of power due to their oil output. The sooner we transition the better.

 

[BoomBoom.sixpack]

You are wrong on every single front.

Here is the entire argument you are making, supply is low. Horse ****. Its demand as much if not more than supply.

Housing. We are blowing away housing starts from the previous 3-4 years. Supply is up, demand is up more.

Beef. 2020 and 2021 were record production years. Sky high.

Vehicles definitely have a shortage and energy is volatile. But if you do not give $8 trillion dollars to people, 80%+ of which never missed a paycheck by the way, you get demand destruction. Nobody was driving up prices in 2008 and 2009 even though supply dropped. Why, were broke.

Without fiscal stimulus how many people are running out buying cars, homes, and wagyu ribeyes... Not many. We would have been in a recession. Austerity would have ruled the day. Supply chains and demand would be balanced.

Maybe a few people dip into savings, but not many. I'm not saying intervention was wrong, but this is the consequence. There were three possible scenarios.

1. Covid hits and government does nothing to help.... We going into a massive recession. Companies lay millions off and are very scared to bring them back. Unemployment is still today up near 10%. No inflation to speak of because there is no money to buy houses, cars, beef, or gasoline.

2. Covid hits and government does a little targeted stimulus by those affected (travel, hospitality, dining out.) There is probably some mild supply chain inflation on certain items.

3. Covid hits and government goes ape ****. $1000 month unemployment encourages many to quit working thus driving supply lower. Mortgage and rent moratoriums put tens of thousands in the bank accounts of millions. Student loan deferment puts tens of thousands of dollars in the bank accounts of millions . Interest rates go to zero making home buying and auto buying super attractive. 3 separate stimulus payments giving most households $6000+ helicopter money. Fed liquidity drives assets to the moon causing 2.5 million early retirements driving supply lower through worker shortages...

This will be my last time arguing with you. I am not perfect and have no idea what the future holds, but this is simple economics. You are stubborn as a mule with his dick in knot on this topic. You have been fighting me since July of 2020 on this. Take a lap.

Someone is on their period today....

If I was wrong on every front, you could answer the 2 questions you ducked:

Why are non-supply constrained goods not inflating? (Why is the currency not devalued?)

Why are firms that are raising prices seeing record profits?

Overall US beef production has been flat for 20 years btw. Not in any way keeping up with population growth.

Eta: supply is also supposed to respond to changes in demand. Free market and all that. If supply can't increase to respond to increased demand....that's a supply problem, not a monetary phenomenon. (Granted, supply is fixed in some goods. But that reflects a supply and demand effect, not a devaluation in the currency.)

I just don't see how the facts support your position. You can't just predict a football team will win games because their D will smother opponents, then when they win all their games 60 to 50 say see I was right. The facts and details have to match your argument.

We were already headed towards insufficient housing supply and insufficient labor. We already had consolidated industries. Beef shortages were already being discussed before 2020. Pretty sure fossil fuel supply has been an issue before as well. Yes, a recession would have papered over this for a little while. So? The bill would have come due whenever the recession ended. Would that process have happened more slowly, and thus more smoothly with a better market response re supply? Granted, probably it would.

 

[Maroon Eagle]

Both you & CM are right.

And I'm thinking if there's increased US oil production, the transition you refer to will be sooner.