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I'm not saying I agree or disagree given mild inflation trends over the past decade, but how long do you think inflation takes to really get in gear if you're r

I'm not saying I agree or disagree given mild inflation trends over the past decade, but how long do you think inflation takes to really get in gear if you're right? We experienced deflation last month according to the consumer price index despite fiscal stimulus and Fed buying assets. [0] The consumer price index is definitely flawed. However, one thing I've heard is that the massive drop in demand and velocity of money is necessary to consider when analyzing inflation. I also was initially worried about inflation given the massive stimulus numbers we're seeing but have been reconsidering this. I'm not well-versed in this at all, but demand-pull inflation under Keynesian economics [1] or a drop in V (velocity of money) in the equation of exchange in the monetarist theory of money [2] seem to be what is supporting why folks are worried about deflation. I would venture to guess that this is part of why the Fed is doing these massive buys right now, too. Tangentially, pointers to good econ learning resources from anyone would be helpful. I've only started with Khan Academy and what I remember from old classes so far. [0] https://fred.stlouisfed.org/graph/?g=qH1p https://fred.stlouisfed.org/graph/?g=qH1p [1] https://en.wikipedia.org/wiki/Inflation#Keynesian_view https://en.wikipedia.org/wiki/Inflation#Keynesian_view [2] https://en.wikipedia.org/wiki/Inflation#Monetarist_view https://en.wikipedia.org/wiki/Inflation#Monetarist_view

neffy 6y ago
It's complicated. Hyperinflation occurs generally when the banking system's regulation is gets out of control and goes into a lending/money creation spiral. That can happen very quickly - within several month. All things considered what's more likely to happen at the moment though is a monetary implosion, as massive debt defaults occur destroying the money in the banking system. Which is why people are muttering about Great Depressions.
- thomashobohm 6y ago
  This is inaccurate; most economists think we're most likely to see deflation over the next several months as demand collapses. Considering the position of the dollar, a "monetary implosion" like you're describing is still exceedingly unlikely.
  - andreilys 6y ago
    Most economists also thought we had banished volatility, until 2008 happened. I wouldn’t put too much trust in that expert class given their track record.
    - thomashobohm 6y ago
      "Most economists" never believed that. Lots of people in finance did, sure, but they're not economists.
      - Qasaur 6y ago
        "Well, unquestionably, housing prices are up quite a bit; I think it's important to note that fundamentals are also very strong. We've got a growing economy, jobs, incomes. We've got very low mortgage rates. We've got demographics supporting housing growth. We've got restricted supply in some places. So it's certainly understandable that prices would go up some. I don't know whether prices are exactly where they should be, but I think it's fair to say that much of what's happened is supported by the strength of the economy." - Ben Bernanke, Chairman of the Fed, in 2005. https://mises.org/library/ben-bernanke-was-incredibly-uncannily-wrong https://mises.org/library/ben-bernanke-was-incredibly-uncann... What I don't understand is how people find it very difficult to admit that economists can be wrong sometimes and that their word is not gospel.
        thomashobohm 6y ago
        I don’t understand how your quote from Ben Bernanke is relevant. Where in the quote does Bernanke say that we’ve fully eliminated volatility? And how is he representative of “most economists?” I’ve said in other parts of the thread that economists can, in fact, be wrong sometimes. I just find the people making completely unjustifiable assertions about the economy, while simultaneously castigating the economics profession as some cabal of out-of-touch elites who can’t be trusted, unconvincing, when I know that the vast majority of economists are simply researchers trying to understand the world and how to improve it.
  - 6y ago
- IanDrake 6y ago
  You can print money indefinitely and not cause inflation as long as there is an equal demand for what you're printing. USD demand is very high globally and domestically right now. Let's hope that doesn't change over night.
  - thedudeabides5 6y ago
    Demand for dollars won't evaporate overnight. The thing about being a reserve currency is in a crisis, the entire levered world is short your currency. That, combined with the fact that it's not like any major developed economy is doing that much better, means US goods, services and financial assets are still pretty competitive with the rest of the world. The dollar is up 40% vs the lows of 2008. When DXY is back at 70, it's time to worry about a crack in the dollar reserve system. https://www.tradingview.com/symbols/TVC-DXY/ https://www.tradingview.com/symbols/TVC-DXY/
  - OscarCunningham 6y ago
    The worry isn't demand dropping over night, since in that case the Fed could just sell the assets it's been buying. The worry is that the value of the Fed's assets will drop overnight.
fuzzybear3965 6y ago
I had the same question a few weeks ago! Apparently, the delay between monetary stimulus and the time we'd notice inflation is estimated to be greater than 12 months. I found one of the sources whose abstract I scanned when I had this question[0]. Hedge: I'm not saying it's true or that I've verified any of the research, only saying that economists have studied the effects of central bank stimulus action on inflation rates and the economic response seems to take a while. [0] https://www.google.com/url?q=https://www.lancaster.ac.uk/staff/ecajt/inflation%2520lags%2520money%2520supply.pdf https://www.google.com/url?q=https://www.lancaster.ac.uk/sta...
- toomuchtodo 6y ago
  Direct link: https://www.lancaster.ac.uk/staff/ecajt/inflation%20lags%20money%20supply.pdf https://www.lancaster.ac.uk/staff/ecajt/inflation%20lags%20m...
skrtskrt 6y ago
It's worth noting that part of the reason that inflation statistics are so "low" is that there's an official adjustment done when things cost more but (supposedly) have increased quality, called a "Hedonic quality adjustment" This adjustment has been made multiple times in recent decades for housing, which is a large part of any given adult's spending. So the Fed economists keep saying "wow inflation is so low even after we pump gazillions of dollars in during QE", while ignoring the fact that easy money has lead to massive multinationals consolidating control of real estate and jacking prices up. So even if it is somehow true that houses have gotten better in some ways (I'm not really convinced), that doesn't matter to people lower on the income scale where the price of housing is the difference between having a roof over their head and not - they can't really afford to care about the latest greatest improvements in housing. They have a different demand curve - be homeless or spend most of their income on rent. Rent vs income since 1960: https://www.apartmentlist.com/rentonomics/rent-growth-since-1960/ https://www.apartmentlist.com/rentonomics/rent-growth-since-... Skepticism about the application of hedonic adjustments https://www.sgtreport.com/2019/12/what-worries-me-about-hedonic-quality-adjustments/ https://www.sgtreport.com/2019/12/what-worries-me-about-hedo... "The theory is that the vast majority of that 70% price increase of a Camry since 1990 is due to quality improvements, with buyers today getting a far superior Camry; and that only a smaller part of that 70% price increase is due to monetary inflation, namely the dollar losing its purchasing power"
- thomashobohm 6y ago
  That's not how any of this works; inflation statistics are calculated by the Bureau of Labor Statistic, independently of the Federal Reserve. There's no conspiracy among Fed economists to try and hide inflation.
  - skrtskrt 6y ago
    I didn't say the Fed calculated it. I did say they reference it to say their policies (or whoever's policies) aren't causing inflation. When a majority of leading economists subscribe to economic views that don't reflect the lived reality of an average person, it may not be a conspiracy, but the effect (groupthink) is similar.

neffy 6y ago

It's complicated. Hyperinflation occurs generally when the banking system's regulation is gets out of control and goes into a lending/money creation spiral. That can happen very quickly - within several month. All things considered what's more likely to happen at the moment though is a monetary implosion, as massive debt defaults occur destroying the money in the banking system. Which is why people are muttering about Great Depressions.

thomashobohm 6y ago
This is inaccurate; most economists think we're most likely to see deflation over the next several months as demand collapses. Considering the position of the dollar, a "monetary implosion" like you're describing is still exceedingly unlikely.
- andreilys 6y ago
  Most economists also thought we had banished volatility, until 2008 happened. I wouldn’t put too much trust in that expert class given their track record.
  - thomashobohm 6y ago
    "Most economists" never believed that. Lots of people in finance did, sure, but they're not economists.
    - Qasaur 6y ago
      "Well, unquestionably, housing prices are up quite a bit; I think it's important to note that fundamentals are also very strong. We've got a growing economy, jobs, incomes. We've got very low mortgage rates. We've got demographics supporting housing growth. We've got restricted supply in some places. So it's certainly understandable that prices would go up some. I don't know whether prices are exactly where they should be, but I think it's fair to say that much of what's happened is supported by the strength of the economy." - Ben Bernanke, Chairman of the Fed, in 2005. https://mises.org/library/ben-bernanke-was-incredibly-uncannily-wrong https://mises.org/library/ben-bernanke-was-incredibly-uncann... What I don't understand is how people find it very difficult to admit that economists can be wrong sometimes and that their word is not gospel.
      - thomashobohm 6y ago
        I don’t understand how your quote from Ben Bernanke is relevant. Where in the quote does Bernanke say that we’ve fully eliminated volatility? And how is he representative of “most economists?” I’ve said in other parts of the thread that economists can, in fact, be wrong sometimes. I just find the people making completely unjustifiable assertions about the economy, while simultaneously castigating the economics profession as some cabal of out-of-touch elites who can’t be trusted, unconvincing, when I know that the vast majority of economists are simply researchers trying to understand the world and how to improve it.
- 6y ago
IanDrake 6y ago
You can print money indefinitely and not cause inflation as long as there is an equal demand for what you're printing. USD demand is very high globally and domestically right now. Let's hope that doesn't change over night.
- thedudeabides5 6y ago
  Demand for dollars won't evaporate overnight. The thing about being a reserve currency is in a crisis, the entire levered world is short your currency. That, combined with the fact that it's not like any major developed economy is doing that much better, means US goods, services and financial assets are still pretty competitive with the rest of the world. The dollar is up 40% vs the lows of 2008. When DXY is back at 70, it's time to worry about a crack in the dollar reserve system. https://www.tradingview.com/symbols/TVC-DXY/ https://www.tradingview.com/symbols/TVC-DXY/
- OscarCunningham 6y ago
  The worry isn't demand dropping over night, since in that case the Fed could just sell the assets it's been buying. The worry is that the value of the Fed's assets will drop overnight.

fuzzybear3965 6y ago

I had the same question a few weeks ago! Apparently, the delay between monetary stimulus and the time we'd notice inflation is estimated to be greater than 12 months. I found one of the sources whose abstract I scanned when I had this question[0]. Hedge: I'm not saying it's true or that I've verified any of the research, only saying that economists have studied the effects of central bank stimulus action on inflation rates and the economic response seems to take a while. [0] https://www.google.com/url?q=https://www.lancaster.ac.uk/staff/ecajt/inflation%2520lags%2520money%2520supply.pdf https://www.google.com/url?q=https://www.lancaster.ac.uk/sta...

toomuchtodo 6y ago
Direct link: https://www.lancaster.ac.uk/staff/ecajt/inflation%20lags%20money%20supply.pdf https://www.lancaster.ac.uk/staff/ecajt/inflation%20lags%20m...

skrtskrt 6y ago

It's worth noting that part of the reason that inflation statistics are so "low" is that there's an official adjustment done when things cost more but (supposedly) have increased quality, called a "Hedonic quality adjustment" This adjustment has been made multiple times in recent decades for housing, which is a large part of any given adult's spending. So the Fed economists keep saying "wow inflation is so low even after we pump gazillions of dollars in during QE", while ignoring the fact that easy money has lead to massive multinationals consolidating control of real estate and jacking prices up. So even if it is somehow true that houses have gotten better in some ways (I'm not really convinced), that doesn't matter to people lower on the income scale where the price of housing is the difference between having a roof over their head and not - they can't really afford to care about the latest greatest improvements in housing. They have a different demand curve - be homeless or spend most of their income on rent. Rent vs income since 1960: https://www.apartmentlist.com/rentonomics/rent-growth-since-1960/ https://www.apartmentlist.com/rentonomics/rent-growth-since-... Skepticism about the application of hedonic adjustments https://www.sgtreport.com/2019/12/what-worries-me-about-hedonic-quality-adjustments/ https://www.sgtreport.com/2019/12/what-worries-me-about-hedo... "The theory is that the vast majority of that 70% price increase of a Camry since 1990 is due to quality improvements, with buyers today getting a far superior Camry; and that only a smaller part of that 70% price increase is due to monetary inflation, namely the dollar losing its purchasing power"

thomashobohm 6y ago
That's not how any of this works; inflation statistics are calculated by the Bureau of Labor Statistic, independently of the Federal Reserve. There's no conspiracy among Fed economists to try and hide inflation.
- skrtskrt 6y ago
  I didn't say the Fed calculated it. I did say they reference it to say their policies (or whoever's policies) aren't causing inflation. When a majority of leading economists subscribe to economic views that don't reflect the lived reality of an average person, it may not be a conspiracy, but the effect (groupthink) is similar.