General A thread to discuss and follow the incoming inflation bomb

[Deleted member 1]

In 2020 the federal reserve made a noted change to its primary policy:

Guide to changes in the 2020 Statement on Longer-Run Goals and Monetary Policy Strategy

The Federal Reserve Board of Governors in Washington DC.

www.federalreserve.gov

The fed made two major changes. 1> There is an increased focus on full employment in the economy, now lowering focus on minimizing inflation 2> inflation targets are now "moderate" with room to float high after periods of low. These are not defined. That is, if you need more employment, let the inflation go up.

So that's what we've been doing and will continue to do.
Combined with wars, aging population, coronavirus, low interest rates for cheaper cash, etc. we have a huge amount of money printing and other pressures, yet the fed and others do not acknowledge the existing and coming inflation:



Here is the supposed inflation rate

Year​

Jan​

Feb​

Mar​

Apr​

May​

Jun​

Jul​

Aug​

Sep​

Oct​

Nov​

Dec​

Ave​

2021​

1.4​

​

​

​

​

​

​

​

​

​

​

​

​

2020​

2.5​

2.3​

1.5​

0.3​

0.1​

0.6​

1.0​

1.3​

1.4​

1.2​

1.2​

1.4​

1.2​

2019​

1.6​

1.5​

1.9​

2.0​

1.8​

1.6​

1.8​

1.7​

1.7​

1.8​

2.1​

2.3​

1.8​

This is a waste of time for the average joe that wants to know how these policies affect their day to day life:

Devalued cash, cheap credit, and pandemic demand shifts have put significant pressure on the staple stuff like groceries everyone needs. The feds preferred CPI that measures US goods misses several things

One of the primary ways that our modern CPI formula understates inflation is through hedonic quality adjustments. In simple terms, consumer goods that experience technological improvements are considered to have fallen in price when calculating the CPI even if the price has stayed the same or even increased in real life. For example, if a computer with an eight-core processor costs $1,000 today and most computers have sixteen-core
processors but cost $1,300 in two years from now, it may get recorded as only costing $800 for the purpose of calculating the CPI. Of course, that’s no consolation to the consumer who actually has to pay $1,300.

Because so many high-tech consumer products have entered our lives over the past forty years and those products have improved at a rapid rate, they have masked the very real inflation that has occurred in big ticket necessities like housing, healthcare, childcare, and higher education. Sure, it’s great that laptops, cell phones, and big screen TVs have been falling in price while gaining more features, but that doesn’t help Americans who are going bankrupt due to exorbitant medical bills, being crushed under the weight of student loans, and can’t find affordable housing anywhere.

The chart below from the American Enterprise Institute shows the dichotomy between high-tech consumer products, which have been falling in price, and big ticket necessities that have surged in price and are becoming increasingly out of reach for many Americans:

Assets are also way up:





As seen with quantitative easing and ZIRP (Zero interest-rate policy - Wikipedia)



Cheap cash pushes up asset prices

 

[Deleted member 1]

I'm an idiot, so don't take my word for this.
Let's check out deleted tweets from Michael Burry who predicted the big short housing crisis







open incognito

'Big Short' investor Michael Burry says 'prepare for inflation' — and warns bitcoin and gold might be at risk

"In an inflationary crisis, governments will move to squash competitors in the currency arena. $BTC #gold," Burry tweeted.

markets.businessinsider.com

 

[kneeblock]

This is all wrong Doc. Back to the drawing board.

 

[ShatsBassoon]

Holy shit is post secondary education ever a racket

 

[ShatsBassoon]

Inflation is okay because wages will be sure to rise as well.

"A rising tide raises all boats"

"Trickle down economics"

"Just gonna have to tighten your bootstraps"

 

[kneeblock]

Why this is wrong in simple terms:

1) There is a rebellion underway among neoclassical economists as MMT is gaining purchase in policy circles. Part of the analysis from AEI (no surprise) is ideologically pitched against MMT, as obviously is Burry's investor advice. Inflation panic and deficit hawkishness is trying to make a comeback in certain circles attempting to move past the populist insurgency. MMT has been good for populism, but bad for austerity evangelists which has serious implications for the management of a global north centric economic order.

2) CPI and food or "real goods" decoupling naturally happens during times of crisis due to much more basic laws like supply and demand. We would need to know more about this trend over more extended time than that graph offers. The reasons certain goods and services on your last chart have risen more sharply largely has to do with the marketization and deregulation of industries (e.g. education and healthcare).

3) Asset inflation has been a regular feature of the neoliberal order of the past 40 years. It comes and goes because of hoarding tendencies at the top, as has been documented through numerous crises, and is especially influenced by tax policy. What's missing is the role of tax policy in offsetting inflation, a cornerstone of the MMT framework. Unfortunately, there hasn't been much appetite for using that instrument appropriately among legislators and to the ultimate point of this argument, that's likely what will be needed or else we'll continually be subject to bubbles primed to burst somewhere, though not all bubbles burst and crisis cash doesn't always devalue, strictly speaking, especially with a global reserve currency.

Not trying to convert you to MMT because I'm not fully sold on all of its premises myself, but am trying to say see the forest for the trees, which is largely that as an economic theory, it's growing in influence and the inflation panic argument is a broadside against it. If the fiscal policy doesn't do some of what it's expected to do to balance the monetarists may eventually be forced to bring the pain, but that's a political question largely.

 

[Sheepdog]

Why this is wrong in simple terms:

1) There is a rebellion underway among neoclassical economists as MMT is gaining purchase in policy circles. Part of the analysis from AEI (no surprise) is ideologically pitched against MMT, as obviously is Burry's investor advice. Inflation panic and deficit hawkishness is trying to make a comeback in certain circles attempting to move past the populist insurgency. MMT has been good for populism, but bad for austerity evangelists which has serious implications for the management of a global north centric economic order.

2) CPI and food or "real goods" decoupling naturally happens during times of crisis due to much more basic laws like supply and demand. We would need to know more about this trend over more extended time than that graph offers. The reasons certain goods and services on your last chart have risen more sharply largely has to do with the marketization and deregulation of industries (e.g. education and healthcare).

3) Asset inflation has been a regular feature of the neoliberal order of the past 40 years. It comes and goes because of hoarding tendencies at the top, as has been documented through numerous crises, and is especially influenced by tax policy. What's missing is the role of tax policy in offsetting inflation, a cornerstone of the MMT framework. Unfortunately, there hasn't been much appetite for using that instrument appropriately among legislators and to the ultimate point of this argument, that's likely what will be needed or else we'll continually be subject to bubbles primed to burst somewhere, though not all bubbles burst and crisis cash doesn't always devalue, strictly speaking, especially with a global reserve currency.

Not trying to convert you to MMT because I'm not fully sold on all of its premises myself, but am trying to say see the forest for the trees, which is largely that as an economic theory, it's growing in influence and the inflation panic argument is a broadside against it. If the fiscal policy doesn't do some of what it's expected to do to balance the monetarists may eventually be forced to bring the pain, but that's a political question largely.

MMT is a wolf in sheep's clothing, comrade.

 

[Hauler]

I've been ringing the inflation bell for about 6 months now. It's already happening.

I'm thankful we have an economic genius like Maxine Waters in charge of the Financials Committee to keep it from running unchecked. Our housing, securities and banks are in great hands.

 

[Qat]

I've been ringing the inflation bell for about 6 months now. It's already happening.

Well stop ringing it then? Geez.

 

[FINGERS]

It's seems to have been in the post for nearly 13 years now.

Its not rocket science to predict it. I'd like to know why it hasn't already happened though.

 

[kneeblock]

MMT is a wolf in sheep's clothing, comrade.

Probably so. I like how it's getting people to rethink value and especially deficit spending, but it's still so detached from the underlying economy that it grosses me out.

 

[MMAPlaywright]

All of this is Greek to me.

 

[RaginCajun]

In 2020 the federal reserve made a noted change to its primary policy:

Guide to changes in the 2020 Statement on Longer-Run Goals and Monetary Policy Strategy

The Federal Reserve Board of Governors in Washington DC.

www.federalreserve.gov

The fed made two major changes. 1> There is an increased focus on full employment in the economy, now lowering focus on minimizing inflation 2> inflation targets are now "moderate" with room to float high after periods of low. These are not defined. That is, if you need more employment, let the inflation go up.

So that's what we've been doing and will continue to do.
Combined with wars, aging population, coronavirus, low interest rates for cheaper cash, etc. we have a huge amount of money printing and other pressures, yet the fed and others do not acknowledge the existing and coming inflation:



Here is the supposed inflation rate

Year​

Jan​

Feb​

Mar​

Apr​

May​

Jun​

Jul​

Aug​

Sep​

Oct​

Nov​

Dec​

Ave​

2021​

1.4​

​

​

​

​

​

​

​

​

​

​

​

​

2020​

2.5​

2.3​

1.5​

0.3​

0.1​

0.6​

1.0​

1.3​

1.4​

1.2​

1.2​

1.4​

1.2​

2019​

1.6​

1.5​

1.9​

2.0​

1.8​

1.6​

1.8​

1.7​

1.7​

1.8​

2.1​

2.3​

1.8​

This is a waste of time for the average joe that wants to know how these policies effect their day to day life:

Devalued cash, cheap credit, and pandemic demand shifts have put significant pressure on the staple stuff like groceries everyone needs. The feds preferred CPI that measures US goods misses several things





View attachment 28719


View attachment 28715


Assets are also way up:
View attachment 28716




As seen with quantitative easing and ZIRP (Zero interest-rate policy - Wikipedia)
View attachment 28717


Cheap cash pushes up asset prices
View attachment 28718

View: https://gfycat.com/commonartisticbadger

 

[jason73]

i dont know fuck all about this shit but i know a bareel of oil is 63 bucks today and the price at the pumps is higher than it was when it was over 100 bucks a barrel

 

[BeardOfKnowledge]

I've been ringing the inflation bell for about 6 months now. It's already happening.

More like a year.

I'm watching a lot of people here over extending themselves to get into bigger houses on "cheap" money. It ain't gonna end well.

 

[Hauler]

More like a year.

I can't remember when I started ringing the bell, but it's been a minute.

Spoiler

 

[BeardOfKnowledge]

I can't remember when I started ringing the bell, but it's been a minute.

I thought we all started discussing it when the interest rate went negative around this time last year. However, I might be thinking of conversations I had with co-workers. I work with a guy who makes the same amount of money I do. He and his wife are looking at a house worth 3 times what mine is. Maybe his family is rich? Maybe his wife makes oodles of cash, or maybe, just maybe he told us "Might as well, the money is never going to be this cheap again!"

 

[ShatsBassoon]

I thought we all started discussing it when the interest rate went negative around this time last year. However, I might be thinking of conversations I had with co-workers. I work with a guy who makes the same amount of money I do. He and his wife are looking at a house worth 3 times what mine is. Maybe his family is rich? Maybe his wife makes oodles of cash, or maybe, just maybe he told us "Might as well, the money is never going to be this cheap again!"

5 years and 3 mortgages later

 

[ShatsBassoon]

More like a year.

I'm watching a lot of people here over extending themselves to get into bigger houses on "cheap" money. It ain't gonna end well.

Borrowing money. It's the Canadian way.

Dollar down, dollar a day. Move up house, new truck platinum edition ?, 5th wheel, maybe a boat and a couple quads.

 

[Sheepdog]

Probably so. I like how it's getting people to rethink value and especially deficit spending, but it's still so detached from the underlying economy that it grosses me out.

You shouldn't like it. It's being used against us. If deficit terrorists actually believed their own nonsense, then the system would have collapsed. We would be better off if they believed their own lies rather than using Neo-Chartalism to create limitless asset bubbles and diverting all purchasing power to the super rich.

MMT advocates for perpetual extreme inequality and US financial imperialism, and the use of exploited labour to prop the system up. It is an ideology masquerading as dispassionate description.

It talks about its rules applying to any fiat currency, when in reality it is only describing the current US dollar-based global empire, which is only maintained through coercion and violence, not economic axioms.

MMT pretends its rules apply to the other major fiat currencies, but ignores the fact that these countries, like the UK, Canada and Australia, only enjoy their privileged position by operating as US vassals. If any of these countries tried to use MMT theories to transform their societies into worker havens, then they would be confronted by an angry and vengeful American god which would swiftly turn their currency into toilet paper.

MMT advocates for an essentially fascist system of not only the officially sanctioned privatisation of profits and socialisation of risk, but the limitless provision of capital to generate these profits. Nothing about that is good for workers.

 

[kneeblock]

You shouldn't like it. It's being used against us. If deficit terrorists actually believed their own nonsense, then the system would have collapsed. We would be better off if they believed their own lies rather than using Neo-Chartalism to create limitless asset bubbles and diverting all purchasing power to the super rich.

MMT advocates for perpetual extreme inequality and US financial imperialism, and the use of exploited labour to prop the system up. It is an ideology masquerading as dispassionate description.

It talks about its rules applying to any fiat currency, when in reality it is only describing the current US dollar-based global empire, which is only maintained through coercion and violence, not economic axioms.

MMT pretends its rules apply to the other major fiat currencies, but ignores the fact that these countries, like the UK, Canada and Australia, only enjoy their privileged position by operating as US vassals. If any of these countries tried to use MMT theories to transform their societies into worker havens, then they would be confronted by an angry and vengeful American god which would swiftly turn their currency into toilet paper.

MMT advocates for an essentially fascist system of not only the officially sanctioned privatisation of profits and socialisation of risk, but the limitless provision of capital to generate these profits. Nothing about that is good for workers.

I can generally agree with this take, but I'd not go quite so far as to say this modern chartalist incarnation is entirely dependent on continued US hegemony. Some MMTers use the idea of a reserve currency as an example and suggest it could easily pivot out of western hands to either international standardization or something cryptoesque or simply another reserve currency with more democratic inputs into its management in a world market. Of course the conspiracists use this to revive Amero talk and the like, but essentially the dollar has been doing all the work of the fictional Amero since Bretton Woods at least.

You make a good point that much of the dominant logic around MMT's innovations to theory relies on a kind of client state relationship to everyone else's economy, mostly due to the influence of the IMF and World Bank, but there is a real question of whether reorganization and/or meaningful democratization of these entities could lead to better pro-growth policies that actually bolster nation-states ability to back their fiat currencies from a position as equals.

Again, what I appreciate is that it's a step away from austerity as the default in US (and European) politics, but as we're seeing with Lebanon for instance, playing games with your reserve bank in the international market can lead to a cash crunch quickly and then you have to choose between your masters abroad or your people at home. Long form, it's probably going to be masters abroad as the Lebanese government has mostly decided.

Imo, US hegemony is drawing to its close anyway and MMT won't save it, but may be useful for at least getting past the inflation/deficit town criers during the transitional period. MMT has logical consistency as a part of a theory of money, certainly more than many people commonly understand, but unless and until there's an alt reserve, you're right that it could just be a way to talk up the dollar that relies on trickle down ethics at best.

 

[Deleted member 1]

It's seems to have been in the post for nearly 13 years now.

Its not rocket science to predict it. I'd like to know why it hasn't already happened though.

Deflationary pressures of the economy and banks hoarding cash out of the economy to replenish their balance sheets help prevent inflation following quantitative easing.

Likewise, massive deflationary pressure from the pandemic.

What happens when you do the same dance in a v-shaped recovery and when the economy is expanding rapidly, but you just keep printing more dollars to satisfy (often opposing) domestic and international goals?

The only argument at prevention of inflation in this scenario is a theory that expanded employment will first occur and through associated economic theory inflation will be avoided until that is tapped out to max. Friction in the market place will force inflation before those markers are fulfilled imo.

If the fed overshoots the recovery "letting things run hot" as the news and previous president referred to the credit backed asset bubble, then what? Indeed the fed wants an average of 2% over an unclear timeline. So looking at their own policy of being below 2% for so long would necessitate an increase for some significant periods (years).

Gonna run our borrowing the limit, exacerbate the K shaped recovery, and walk right into Triffin's dilemma == jump to the SDR or similar.

Right now we are getting less economic stimulus bang for our buck. We are spending ever so much more to get the desired response. And if things go worse then we have a model currently that leaves few tools fiscally or monetarily to further intervene

@kneeblock makes reference to this post and tangential subjects being trojan criticism for deficit hawks. Its not meant to be and I'm not advocating that position.

But if we are going to continue the current trend for the next 5 years (as the fed has alluded) then I see no where but serious dollar devalution.

 

[Deleted member 1]

playing games with your reserve bank in the international market can lead to a cash crunch quickly and then you have to choose between your masters abroad or your people at home.

dat trilemma, pick a side or perish

 

[FINGERS]

Deflationary pressures of the economy and banks hoarding cash out of the economy to replenish their balance sheets help prevent inflation following quantitative easing.

Likewise, massive deflationary pressure from the pandemic.

What happens when you do the same dance in a v-shaped recovery and when the economy is expanding rapidly, but you just keep printing more dollars to satisfy (often opposing) domestic and international goals?

The only argument at prevention of inflation in this scenario is a theory that expanded employment will first occur and through associated economic theory inflation will be avoided until that is tapped out to max. Friction in the market place will force inflation before those markers are fulfilled imo.

If the fed overshoots the recovery "letting things run hot" as the news and previous president referred to the credit backed asset bubble, then what? Indeed the fed wants an average of 2% over an unclear timeline. So looking at their own policy of being below 2% for so long would necessitate an increase for some significant periods (years).

Gonna run our borrowing the limit, exacerbate the K shaped recovery, and walk right into Triffin's dilemma == jump to the SDR or similar.

Right now we are getting less economic stimulus bang for our buck. We are spending ever so much more to get the desired response. And if things go worse then we have a model currently that leaves few tools fiscally or monetarily to further intervene

@kneeblock makes reference to this post and tangential subjects being trojan criticism for deficit hawks. Its not meant to be and I'm not advocating that position.

But if we are going to continue the current trend for the next 5 years (as the fed has alluded) then I see no where but serious dollar devalution.

whoa. That’s about 2 or 3 levels above of my understanding.

but to come back on a couple of things I may proffer a couple of things. The petro dollar is folding pretty hard right now, that’s intrinsic to the value of the dollar.

shell and bp have written off tens of billions Short term of their profits. Its not a lot short term but they can see the way it’s going. They are diversifying. Big time.

also. There are trillions of dollars not under the feds control ( technicality ) but it’s true with other countries.

china own allegedly over half of America’s debt. They could short the system by giving free money away to other countries on America’s coin.

the dollar could become worthless, hyperbole I accept, but without the oil to back it up in a decade or so all that money invested could become way less than its worth now,

i dont really know what I’m talking about but the dollar is something that could be attacked and affect the world more than a nuclear war.

there are a lot folks that would be happy at that. But then again a lot of rich folks won’t allow that to happen.

 

[Deleted member 1]

The petro dollar is folding pretty hard right now, that’s intrinsic to the value of the dollar.

Considerably overblown.