9 ms·

The inflation due to quantitative easing has already happened at the higher economic levels. It just has not reached the main street yet.

by cft 8y ago

0xB31B1B 8y ago
Medical bills, home prices, education prices.... It has definitely hit main street
- user5994461 8y ago
  Medical bills are covered in many countries outside of the US. The inflation goes into home instead.
- padobson 8y ago
  I thought those particular examples were caused by federal subsidies and regulations juicing the demand side of the price curve via Medicare/Medicaid, Fannie/Freddie/FHA/USDA, and guaranteed student loans. As I understand it, QE (and monetary policy more broadly) juices the supply side of the price curve, leading to a general rise in prices due to the increased supply of the metric we use to measure prices (i.e. dollars). So it's likely QE has led to a general devaluing of the dollar that would lead upward pressure on all prices. The reason the three industries you mentioned have outpaced every other seems to be federal policies like subsidies and regulation juicing the demand side of the curve. It also seems like those three industries are fairly insulated from globalization and, to an extent, automation, which accounts for a lot of the downwards pressure on prices, offsetting some of the devaluing effects of QE.
  - moorhosj 8y ago
    ==So it's likely QE has led to a general devaluing of the dollar that would lead upward pressure on all prices.== QE started 10 years ago, why is it only showing up in the "all prices" data now? Inflation was historically low from 2009 to 2016, but is coming fast and hard now. This lends credence to the OP comment that it is flowing down to main street from higher economic levels. The higher economic levels are "assets" like homes, public and private stock, crypto, art, etc. ==The reason the three industries you mentioned have outpaced every other seems to be federal policies like subsidies and regulation juicing the demand side of the curve.== Have the countries with more government subsidies and regulations in healthcare (almost all of them) seen the same inflation in helathcare costs?
    - mywittyname 8y ago
      No - at least not when you consider cost as a percentage of GDP. https://www.healthsystemtracker.org/chart-collection/health-spending-u-s-compare-countries/#item-since-1980-gap-widened-u-s-health-spending-countries https://www.healthsystemtracker.org/chart-collection/health-... Looking at that chart, something happened in 2000 that caused our increase healthcare in cost as a percentage of GPD to accelerate.
      - moorhosj 8y ago
        Thanks for sharing this chart. You are right that things jumped on 2000, but I'm not so sure it is outside the broader trendline. For example, it went from 8.2% of GDP in 1980 to 11.3% by 1990.
rebuilder 8y ago
I'm wondering as well, how much of this is due to monetary policy pushing investors into higher-risk investments. That's been the point of QE and negative interest rates, right, although I don't recall hearing it framed as an attempt to push investors into taking on more risk?
- moorhosj 8y ago
  ==I don't recall hearing it framed as an attempt to push investors into taking on more risk?== Because that was never the goal. Investors are taking more risks because they have to in order to find return in a world where the interest rate was basically zero for 8 years.
  - rebuilder 8y ago
    And in the EU, going by financial reporting, that seems to have been the goal. I just haven't seen it mentioned that this means investors taking on more risk.
- jahewson 8y ago
  No that’s not the point of QE. The point of QE is to allow the government to continue deficit spending without running out of money. The treasury lowers the interest rate and then creates new money to buy cheap debt from the government when there would otherwise be no takers. The interest rate affects everybody, which allowed troubled banks to lend cheaply to each other in the wake of the financial crisis (good) but also means that low-risk investments generate very little return (bad). It’s the later that has pushed investors into riskier assets - whether or not that’s beneficial depends upon how much systemic risk there now is... which is not obvious, after all mortgage-backed securities were supposed to be safe but we all know how that worked out. The treasury would like to raise interest rates but this means that consumer debt will cost more each month and is painful for homeowners especially. So it’s a slow process. We may already have trapped ourselves in unstainably cheap consumer debt - much like those 2005-vintage mortgage “teaser rates”.
  - ascorbic 8y ago
hinkley 8y ago
Inflation period! A few percent a year compounded over almost 25 years adds up. My $8 lunches are now more like $14.
- jahewson 8y ago
  He’s talking about asset inflation, not consumer inflation.
  - hinkley 8y ago
    We are talking about startups achieving record breaking exits. If you want to compare apples to apples you need to set the numbers in the context and inflation (of any kind) is part of that context.
jahewson 8y ago
Better to call this “asset inflation”, not to be confused with good old fashioned consumer inflation. Given that we’re talking about high-risk, high-return investments of foreign money I don’t see why asset inflation is a particularly important factor - such investments will always be appealing. This money is being used to create good jobs and expand the real economy. Inflation of existing assets, not startups, is far more problematic for QE, e.g. housing, stock market, where there’s no value being created.

The inflation due to quantitative easing has already happened at the higher economic levels. It just has not reached the main street yet.

by cft 8y ago

The inflation due to quantitative easing has already happened at the higher economic levels. It just has not reached the main street yet.

0xB31B1B 8y ago

Medical bills, home prices, education prices.... It has definitely hit main street

user5994461 8y ago
Medical bills are covered in many countries outside of the US. The inflation goes into home instead.
padobson 8y ago
I thought those particular examples were caused by federal subsidies and regulations juicing the demand side of the price curve via Medicare/Medicaid, Fannie/Freddie/FHA/USDA, and guaranteed student loans. As I understand it, QE (and monetary policy more broadly) juices the supply side of the price curve, leading to a general rise in prices due to the increased supply of the metric we use to measure prices (i.e. dollars). So it's likely QE has led to a general devaluing of the dollar that would lead upward pressure on all prices. The reason the three industries you mentioned have outpaced every other seems to be federal policies like subsidies and regulation juicing the demand side of the curve. It also seems like those three industries are fairly insulated from globalization and, to an extent, automation, which accounts for a lot of the downwards pressure on prices, offsetting some of the devaluing effects of QE.
- moorhosj 8y ago
  ==So it's likely QE has led to a general devaluing of the dollar that would lead upward pressure on all prices.== QE started 10 years ago, why is it only showing up in the "all prices" data now? Inflation was historically low from 2009 to 2016, but is coming fast and hard now. This lends credence to the OP comment that it is flowing down to main street from higher economic levels. The higher economic levels are "assets" like homes, public and private stock, crypto, art, etc. ==The reason the three industries you mentioned have outpaced every other seems to be federal policies like subsidies and regulation juicing the demand side of the curve.== Have the countries with more government subsidies and regulations in healthcare (almost all of them) seen the same inflation in helathcare costs?
  - mywittyname 8y ago
    No - at least not when you consider cost as a percentage of GDP. https://www.healthsystemtracker.org/chart-collection/health-spending-u-s-compare-countries/#item-since-1980-gap-widened-u-s-health-spending-countries https://www.healthsystemtracker.org/chart-collection/health-... Looking at that chart, something happened in 2000 that caused our increase healthcare in cost as a percentage of GPD to accelerate.
    - moorhosj 8y ago
      Thanks for sharing this chart. You are right that things jumped on 2000, but I'm not so sure it is outside the broader trendline. For example, it went from 8.2% of GDP in 1980 to 11.3% by 1990.

rebuilder 8y ago

I'm wondering as well, how much of this is due to monetary policy pushing investors into higher-risk investments. That's been the point of QE and negative interest rates, right, although I don't recall hearing it framed as an attempt to push investors into taking on more risk?

moorhosj 8y ago
==I don't recall hearing it framed as an attempt to push investors into taking on more risk?== Because that was never the goal. Investors are taking more risks because they have to in order to find return in a world where the interest rate was basically zero for 8 years.
- rebuilder 8y ago
  And in the EU, going by financial reporting, that seems to have been the goal. I just haven't seen it mentioned that this means investors taking on more risk.
jahewson 8y ago
No that’s not the point of QE. The point of QE is to allow the government to continue deficit spending without running out of money. The treasury lowers the interest rate and then creates new money to buy cheap debt from the government when there would otherwise be no takers. The interest rate affects everybody, which allowed troubled banks to lend cheaply to each other in the wake of the financial crisis (good) but also means that low-risk investments generate very little return (bad). It’s the later that has pushed investors into riskier assets - whether or not that’s beneficial depends upon how much systemic risk there now is... which is not obvious, after all mortgage-backed securities were supposed to be safe but we all know how that worked out. The treasury would like to raise interest rates but this means that consumer debt will cost more each month and is painful for homeowners especially. So it’s a slow process. We may already have trapped ourselves in unstainably cheap consumer debt - much like those 2005-vintage mortgage “teaser rates”.
- ascorbic 8y ago

hinkley 8y ago

Inflation period! A few percent a year compounded over almost 25 years adds up. My $8 lunches are now more like $14.

jahewson 8y ago
He’s talking about asset inflation, not consumer inflation.
- hinkley 8y ago
  We are talking about startups achieving record breaking exits. If you want to compare apples to apples you need to set the numbers in the context and inflation (of any kind) is part of that context.

jahewson 8y ago

Better to call this “asset inflation”, not to be confused with good old fashioned consumer inflation. Given that we’re talking about high-risk, high-return investments of foreign money I don’t see why asset inflation is a particularly important factor - such investments will always be appealing. This money is being used to create good jobs and expand the real economy. Inflation of existing assets, not startups, is far more problematic for QE, e.g. housing, stock market, where there’s no value being created.