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> A recession is coming soon. Prolonged low unemployment rates are a pretty reliable sign that the economy is overheating. So are pricy Forward P/E ratios. So a

> A recession is coming soon. Prolonged low unemployment rates are a pretty reliable sign that the economy is overheating. So are pricy Forward P/E ratios. So are property bubbles. Yet inflation is remaining surprisingly low, implying our economy isn't really overheating. At least not for most of the country. > So are pricy Forward P/E ratios. So are property bubbles. The upper-middle and upper classes are the only groups that invest in property and stocks at any non-negligible amount. Actually, is it possible for the upper and upper-middle class economies to overheat while the lower class continues to stagnate? Perhaps this could explain the low inflation rates while the price of capital is sky-high.

klipt 9y ago
Inflation doesn't include housing costs, right? So cost of living can go through the roof but as long as consumables are cheap, official measures of inflation won't notice.
- roymurdock 9y ago
  It incorporates housing costs by measuring rental costs and imputing the rents of those who own housing: http://www.slate.com/blogs/moneybox/2014/02/24/housing_inflation_the_cpi_is_a_disaster.html http://www.slate.com/blogs/moneybox/2014/02/24/housing_infla...
smanatstpete 9y ago
>The upper-middle and upper classes are the only groups that invest in property and stocks at any non-negligible amount. Not true. A lot of blue collar workers have 401k plans which invest actively in the stock market.
- TheAdamAndChe 9y ago
  There are always exceptions to the norm, but that doesn't mean the norm doesn't exist: http://news.gallup.com/poll/190883/half-americans-own-stocks-matching-record-low.aspx http://news.gallup.com/poll/190883/half-americans-own-stocks...
mdorazio 9y ago
I feel like inflation has remained low because wages have barely budged despite employers constantly saying there's a labor shortage [1]. It's almost like we're in a weird place where only the upper end of the economy is overheating while the rest is oddly stagnant. [1] http://www.businessinsider.com/fed-official-businesses-should-raise-wages-before-complaining-of-worker-shortage-2017-8 http://www.businessinsider.com/fed-official-businesses-shoul...
- adventured 9y ago
  It's the Japanese debt trap. It's causing our unusually restrained inflation levels for the exact same reason it did with Japan. Too much of our income is going to service debt. It locks down the money that would otherwise be available to spur inflation. Not only is the debt service cost a restraint, but the vast outstanding debt levels also cause conservative behavior in all sorts of ways (whether at the consumer level, or higher up the financial chain). The higher US debt levels go vs income, the more difficult it will become to spur inflation in traditional ways. Ultimately, direct currency debasement will be the sole remaining means, as with the Japanese and Yen.
3pt14159 9y ago
For thirty years we've been incorporating low-skill Chinese labour into the global economy. That has depressed inflation for most manufactured things despite prolonged low interest rates. When slowing Chinese productivity growth is finally felt either inflation will normalize and the recession will hit. High debt rates, bad demographics in the west, and asset bubbles are going to make the next major recession especially hard. Especially if knowledge workers are able to emigrate out of their tax bases (either out of state or out of country).

klipt 9y ago

Inflation doesn't include housing costs, right? So cost of living can go through the roof but as long as consumables are cheap, official measures of inflation won't notice.

roymurdock 9y ago
It incorporates housing costs by measuring rental costs and imputing the rents of those who own housing: http://www.slate.com/blogs/moneybox/2014/02/24/housing_inflation_the_cpi_is_a_disaster.html http://www.slate.com/blogs/moneybox/2014/02/24/housing_infla...

smanatstpete 9y ago

>The upper-middle and upper classes are the only groups that invest in property and stocks at any non-negligible amount. Not true. A lot of blue collar workers have 401k plans which invest actively in the stock market.

TheAdamAndChe 9y ago
There are always exceptions to the norm, but that doesn't mean the norm doesn't exist: http://news.gallup.com/poll/190883/half-americans-own-stocks-matching-record-low.aspx http://news.gallup.com/poll/190883/half-americans-own-stocks...

mdorazio 9y ago

I feel like inflation has remained low because wages have barely budged despite employers constantly saying there's a labor shortage [1]. It's almost like we're in a weird place where only the upper end of the economy is overheating while the rest is oddly stagnant. [1] http://www.businessinsider.com/fed-official-businesses-should-raise-wages-before-complaining-of-worker-shortage-2017-8 http://www.businessinsider.com/fed-official-businesses-shoul...

adventured 9y ago
It's the Japanese debt trap. It's causing our unusually restrained inflation levels for the exact same reason it did with Japan. Too much of our income is going to service debt. It locks down the money that would otherwise be available to spur inflation. Not only is the debt service cost a restraint, but the vast outstanding debt levels also cause conservative behavior in all sorts of ways (whether at the consumer level, or higher up the financial chain). The higher US debt levels go vs income, the more difficult it will become to spur inflation in traditional ways. Ultimately, direct currency debasement will be the sole remaining means, as with the Japanese and Yen.

3pt14159 9y ago

For thirty years we've been incorporating low-skill Chinese labour into the global economy. That has depressed inflation for most manufactured things despite prolonged low interest rates. When slowing Chinese productivity growth is finally felt either inflation will normalize and the recession will hit. High debt rates, bad demographics in the west, and asset bubbles are going to make the next major recession especially hard. Especially if knowledge workers are able to emigrate out of their tax bases (either out of state or out of country).