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Inflation has only been on a downward trend since the early 80s, despite what everyone predicted when Nixon closed the gold window.

by xxpor 7y ago

lisper 7y ago
That's because the economy has grown more or less apace with the money supply (or, more accurately, because the Fed has controlled the growth of the money supply to keep pace with the economy). Now we are pumping cash into a shrinking economy. You can't do that for very long without producing inflation.
- dd36 7y ago
  It’s also because of the undermining of labor unions. They haven’t returned.
- antientropic 7y ago
  The WSJ editorial page has been predicting hyperinflation because of QE since 2008, but it stubbornly refuses to materialize. Maybe this time...
  - thedragonline 7y ago
    Doubt it. Money velocity has been steadily dropping since the mid-90s. Take a look at this chart from the St. Louis Fed: https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V My guess is that it will be absolutely crushed when Covid-19 finally shows up in the chart.
- lottin 7y ago
  They may be pumping cash but it doesn't seem that this is resulting in more consumer demand, which is what would lead to price inflation.
  - xxpor 7y ago
    This is a good point. CPI is very good at missing the classes of products that have seen massive price increases: housing, education, and other large assets. For everyone who will respond "oh but CPI has a housing component": https://slate.com/business/2014/02/housing-inflation-the-cpi-is-a-disaster.html https://slate.com/business/2014/02/housing-inflation-the-cpi...
    - lisper 7y ago
      Health care.
    - esoterica 7y ago
      Using rents and imputed rents and not home values is the correct way to include housing prices. When you buy a house you are not only paying for a place to live, you are also speculating on a financial asset. The CPI doesn't measure investment prices (eg. it doesn't include stock values) so to isolate the true cost of housing as a separate metric from the speculative value of the investment, it looks at imputed rent instead.

Inflation has only been on a downward trend since the early 80s, despite what everyone predicted when Nixon closed the gold window.

by xxpor 7y ago

Inflation has only been on a downward trend since the early 80s, despite what everyone predicted when Nixon closed the gold window.

lisper 7y ago

That's because the economy has grown more or less apace with the money supply (or, more accurately, because the Fed has controlled the growth of the money supply to keep pace with the economy). Now we are pumping cash into a shrinking economy. You can't do that for very long without producing inflation.

dd36 7y ago
It’s also because of the undermining of labor unions. They haven’t returned.
antientropic 7y ago
The WSJ editorial page has been predicting hyperinflation because of QE since 2008, but it stubbornly refuses to materialize. Maybe this time...
- thedragonline 7y ago
  Doubt it. Money velocity has been steadily dropping since the mid-90s. Take a look at this chart from the St. Louis Fed: https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V My guess is that it will be absolutely crushed when Covid-19 finally shows up in the chart.
lottin 7y ago
They may be pumping cash but it doesn't seem that this is resulting in more consumer demand, which is what would lead to price inflation.
- xxpor 7y ago
  This is a good point. CPI is very good at missing the classes of products that have seen massive price increases: housing, education, and other large assets. For everyone who will respond "oh but CPI has a housing component": https://slate.com/business/2014/02/housing-inflation-the-cpi-is-a-disaster.html https://slate.com/business/2014/02/housing-inflation-the-cpi...
  - lisper 7y ago
    Health care.
  - esoterica 7y ago
    Using rents and imputed rents and not home values is the correct way to include housing prices. When you buy a house you are not only paying for a place to live, you are also speculating on a financial asset. The CPI doesn't measure investment prices (eg. it doesn't include stock values) so to isolate the true cost of housing as a separate metric from the speculative value of the investment, it looks at imputed rent instead.