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People keep predicting inflation, but it remains stubbornly below the Fed's target rate of 2%, which is itself low compared to 20th century averages. https://e

People keep predicting inflation, but it remains stubbornly below the Fed's target rate of 2%, which is itself low compared to 20th century averages. https://en.wikipedia.org/wiki/United_States_Consumer_Price_Index#/media/File:Inflation_and_oil.png https://en.wikipedia.org/wiki/United_States_Consumer_Price_I...

rllearneratwork 6y ago
Yeah, maybe a gallon of milk did not increase that much. But did you see prices for houses? for education? for cars? for entertainment? even high-end electronics? Yes, for all those categories there are other (even more important) factors than inflation, but overall, we see a growth much larger than CPI
- pauldickwin 6y ago
  The prices for these things did not go up because the fed gave people stimulus checks to pay for their daily needs.
  - btilly 6y ago
    Yes they did. When you give people stimulus checks, they spend it. That money enters circulation. It winds up in the pockets of businesses. And from there to the owners of said businesses. Which, since they have money and this is a horrible business environment to invest in, means that money goes into assets. Which drives up the price of the assets.
- notafraudster 6y ago
  I'm having a hard time parsing your comparison; the prices for houses and education are out of control, the prices of cars rise rapidly but are mostly driven by the evolving conception of what cars are, entertainment and electronics seem historically cheap. Was your intent to say that all of these have rapidly increasing prices?
- rory 6y ago
  All the things you enumerated are included in the fed's calculation of CPI. Are you arguing their weightings are bad?
  - rllearneratwork 6y ago
    yes
    - rory 6y ago
      How then? Higher education and houses, sure, but car price inflation has been tame since the 90s, and equivalent electronics plummet in price over time. As far as I can tell entertainment has only gone up sharply in price where it's supply-limited (e.g. Hamilton, the Super Bowl), because more people are rich than in the past. I'm most curious about that one, since there are so many interesting substitutes and prices are all over.
  - speeder 6y ago
    FED changed the weightings in 1980, notably if I remember correctly they greatly reduced the importance of housing prices (not what they call "housing" category, but the price of the shelter itself) There was some article coming out some days ago about how when using old CPI calculations inflation is actually 10%, and wages are lagging extremely behind inflation when using old CPI.
    - Bjartr 6y ago
      Are there "unofficial" weightings available so that inflation could be analyzed under a different set of assumptions?
      - Qasaur 6y ago
        Yes: http://www.shadowstats.com/alternate_data/inflation-charts http://www.shadowstats.com/alternate_data/inflation-charts This site calculates CPI using the old way of calculating it, and according to that method the inflation rate is closer to 10%.
imtringued 6y ago
Why would this money increase inflation? It wasn't earmarked for consumer spending in the first place.
- pauldickwin 6y ago
  This exactly. Money was pumped into a deflationary environment.
- thisiscorrect 6y ago
  How do you, or the Fed in this case, earmark where a dollar goes? Paying interest in excess reserves is the only mechanism I've heard for them to keep money "locked up." Will that continue forever? What's the point of increasing the money supply if not to let it circulate?
  - 0xfaded 6y ago
    Historically that would have been public works employment through infrastructure investment. The government could have printed a bunch of money to build a giant nuclear is solar plant, and then have a revenue generating, publicly owned asset at the end of it. Instead the government printed the money to prop up existing asset prices. Just like increasing a company's cap table, there's nothing wrong so long as the new money is converted into a new asset of value that remains in the company's balance sheet. In fact, a well managed money printing event should dilute private wealth and replace it with public wealth, which is the sort of green new deal I support.
- loourr 6y ago
  That's literally how they define inflation, so money earmarked for consumer goods is the most likely to "cause inflation" by the Feds definition
scsilver 6y ago
The people who continue to jumble up inflation by its consumer defenition with the huge expanding of the amount of us dollars are only shooting their own wealth and anyone who listens to them's wealth in the foot. All you have to look at is stocks and home real estate to see that assets are ballooning no matter how cheap a dozen of eggs stays.
- foota 6y ago
  I mean, to some degree I'm not sure how much it matters. If there's some delayed response to the asset inflation then it'll be concerning, but why are inflated asset prices an issues in and of themselves?
  - toomuchtodo 6y ago
    Inflated asset prices means most folks are never going to be able to purchase a home, and equities (which generates wealth with no further effort besides the capital invested, for the most part) will continue to be owned by the wealthiest. Inequality worsens when asset prices increase faster than wages.
    - foota 6y ago
      This doesn't check out to me (well, the home part does, but I'm not sure we've seen significantly above normal growth there compared to historical norms, outside of hot coastal markets), but for other assets the price doesn't matter, as you can just get a fraction of them or they're split.
      - deleted 6y ago
        [deleted]
      - grey-area 6y ago
        The wealthy own a lot more assets than the poor, therefore asset inflation increases inequality.
      - dnautics 6y ago
cryptica 6y ago
CPI is not inflation. In fact, even CPI itself is not the same as it was before... According to 1980 CPI metrics, today's consumer price inflation is closer to 10% per year. If you consider stocks and other assets, real inflation is even higher. Banks just manipulate the numbers and statistics to make things seem better than they are. Hiding the inflation numbers is lucrative because it gives banks a free pass to print more money. The elite love tech stocks, cryptocurrencies and other assets which are in limited supply because they provide a mechanism to absorb and delay CPI inflation. Those limited supply assets just soak up most of the newly printed currency so that it doesn't leak into the economy and cause CPI increase... That's why P/E ratios of tech stocks are ridiculously low. But it's just delaying the inevitable CPI inflation. Eventually the value of stocks become completely detached from earnings to the point that it's no longer possible to justify the valuations based on earnings (or even the most optimistic future earnings). This is why Bitcoin and other pure scarcity assets like Gold and Silver are great because investors have absolutely no expectation of deriving earnings from these and they can never go bankrupt... There is no price point beyond which the value of these scarce assets cannot be justified. Bitcoin, other cryptocurrencies and other scarce non-productive assets can always be justified at any price point because their entire premise is that the monetary system is a pyramid scheme. The higher the price of Bitcoin, the more justified it becomes in its assertion that the system is a pyramid scheme and the higher its valuation.
kikokikokiko 6y ago
All this money HAS generated a lot of inflation already, you're just looking at the wrong place. Look at the S&P over the last decade, and especially look at the "V shaped recovery" of 2020.
- RobertoG 6y ago
  Inflation is not just a term that we can define how we like, it's an economic official indicator ergo, there is not discussion possible about if has happened or not. You are talking about a bubble.
  - rory 6y ago
    Actually, he's talking about asset price inflation, which is isn't redefining the term at all. Inflation just means an increase in prices. Specific inflation measurements like CPI and PCE are the official economic indicators you're thinking of. https://en.wikipedia.org/wiki/Asset_price_inflation https://en.wikipedia.org/wiki/Asset_price_inflation
bilater 6y ago
This was an interesting take about the counter acting deflationary effect of technology. Maybe this explains it? https://www.youtube.com/watch?v=F8lfLqnhuGs https://www.youtube.com/watch?v=F8lfLqnhuGs
remorses 6y ago
All this money is going in the financial market, you need to search for inflation there
marketingPro 6y ago
Do not use CPI as it doesn't take into account technology improvement and outsourcing. I'd take the big mac index over CPI.
- leetcrew 6y ago
  isn't the price of a big mac also subject to technology improvement and outsourcing? it takes quite a logistics chain to get all those ingredients where they need to go.
  - marketingPro 6y ago
    It's not a commodity though.

rllearneratwork 6y ago

Yeah, maybe a gallon of milk did not increase that much. But did you see prices for houses? for education? for cars? for entertainment? even high-end electronics? Yes, for all those categories there are other (even more important) factors than inflation, but overall, we see a growth much larger than CPI

pauldickwin 6y ago
The prices for these things did not go up because the fed gave people stimulus checks to pay for their daily needs.
- btilly 6y ago
  Yes they did. When you give people stimulus checks, they spend it. That money enters circulation. It winds up in the pockets of businesses. And from there to the owners of said businesses. Which, since they have money and this is a horrible business environment to invest in, means that money goes into assets. Which drives up the price of the assets.
notafraudster 6y ago
I'm having a hard time parsing your comparison; the prices for houses and education are out of control, the prices of cars rise rapidly but are mostly driven by the evolving conception of what cars are, entertainment and electronics seem historically cheap. Was your intent to say that all of these have rapidly increasing prices?
rory 6y ago
All the things you enumerated are included in the fed's calculation of CPI. Are you arguing their weightings are bad?
- rllearneratwork 6y ago
  yes
  - rory 6y ago
    How then? Higher education and houses, sure, but car price inflation has been tame since the 90s, and equivalent electronics plummet in price over time. As far as I can tell entertainment has only gone up sharply in price where it's supply-limited (e.g. Hamilton, the Super Bowl), because more people are rich than in the past. I'm most curious about that one, since there are so many interesting substitutes and prices are all over.
- speeder 6y ago
  FED changed the weightings in 1980, notably if I remember correctly they greatly reduced the importance of housing prices (not what they call "housing" category, but the price of the shelter itself) There was some article coming out some days ago about how when using old CPI calculations inflation is actually 10%, and wages are lagging extremely behind inflation when using old CPI.
  - Bjartr 6y ago
    Are there "unofficial" weightings available so that inflation could be analyzed under a different set of assumptions?
    - Qasaur 6y ago
      Yes: http://www.shadowstats.com/alternate_data/inflation-charts http://www.shadowstats.com/alternate_data/inflation-charts This site calculates CPI using the old way of calculating it, and according to that method the inflation rate is closer to 10%.

imtringued 6y ago

Why would this money increase inflation? It wasn't earmarked for consumer spending in the first place.

pauldickwin 6y ago
This exactly. Money was pumped into a deflationary environment.
thisiscorrect 6y ago
How do you, or the Fed in this case, earmark where a dollar goes? Paying interest in excess reserves is the only mechanism I've heard for them to keep money "locked up." Will that continue forever? What's the point of increasing the money supply if not to let it circulate?
- 0xfaded 6y ago
  Historically that would have been public works employment through infrastructure investment. The government could have printed a bunch of money to build a giant nuclear is solar plant, and then have a revenue generating, publicly owned asset at the end of it. Instead the government printed the money to prop up existing asset prices. Just like increasing a company's cap table, there's nothing wrong so long as the new money is converted into a new asset of value that remains in the company's balance sheet. In fact, a well managed money printing event should dilute private wealth and replace it with public wealth, which is the sort of green new deal I support.
loourr 6y ago
That's literally how they define inflation, so money earmarked for consumer goods is the most likely to "cause inflation" by the Feds definition

scsilver 6y ago

The people who continue to jumble up inflation by its consumer defenition with the huge expanding of the amount of us dollars are only shooting their own wealth and anyone who listens to them's wealth in the foot. All you have to look at is stocks and home real estate to see that assets are ballooning no matter how cheap a dozen of eggs stays.

foota 6y ago
I mean, to some degree I'm not sure how much it matters. If there's some delayed response to the asset inflation then it'll be concerning, but why are inflated asset prices an issues in and of themselves?
- toomuchtodo 6y ago
  Inflated asset prices means most folks are never going to be able to purchase a home, and equities (which generates wealth with no further effort besides the capital invested, for the most part) will continue to be owned by the wealthiest. Inequality worsens when asset prices increase faster than wages.
  - foota 6y ago
    This doesn't check out to me (well, the home part does, but I'm not sure we've seen significantly above normal growth there compared to historical norms, outside of hot coastal markets), but for other assets the price doesn't matter, as you can just get a fraction of them or they're split.
    - deleted 6y ago
      [deleted]
    - grey-area 6y ago
      The wealthy own a lot more assets than the poor, therefore asset inflation increases inequality.
    - dnautics 6y ago

cryptica 6y ago

CPI is not inflation. In fact, even CPI itself is not the same as it was before... According to 1980 CPI metrics, today's consumer price inflation is closer to 10% per year. If you consider stocks and other assets, real inflation is even higher. Banks just manipulate the numbers and statistics to make things seem better than they are. Hiding the inflation numbers is lucrative because it gives banks a free pass to print more money. The elite love tech stocks, cryptocurrencies and other assets which are in limited supply because they provide a mechanism to absorb and delay CPI inflation. Those limited supply assets just soak up most of the newly printed currency so that it doesn't leak into the economy and cause CPI increase... That's why P/E ratios of tech stocks are ridiculously low. But it's just delaying the inevitable CPI inflation. Eventually the value of stocks become completely detached from earnings to the point that it's no longer possible to justify the valuations based on earnings (or even the most optimistic future earnings). This is why Bitcoin and other pure scarcity assets like Gold and Silver are great because investors have absolutely no expectation of deriving earnings from these and they can never go bankrupt... There is no price point beyond which the value of these scarce assets cannot be justified. Bitcoin, other cryptocurrencies and other scarce non-productive assets can always be justified at any price point because their entire premise is that the monetary system is a pyramid scheme. The higher the price of Bitcoin, the more justified it becomes in its assertion that the system is a pyramid scheme and the higher its valuation.

kikokikokiko 6y ago

All this money HAS generated a lot of inflation already, you're just looking at the wrong place. Look at the S&P over the last decade, and especially look at the "V shaped recovery" of 2020.

RobertoG 6y ago
Inflation is not just a term that we can define how we like, it's an economic official indicator ergo, there is not discussion possible about if has happened or not. You are talking about a bubble.
- rory 6y ago
  Actually, he's talking about asset price inflation, which is isn't redefining the term at all. Inflation just means an increase in prices. Specific inflation measurements like CPI and PCE are the official economic indicators you're thinking of. https://en.wikipedia.org/wiki/Asset_price_inflation https://en.wikipedia.org/wiki/Asset_price_inflation

bilater 6y ago

This was an interesting take about the counter acting deflationary effect of technology. Maybe this explains it? https://www.youtube.com/watch?v=F8lfLqnhuGs https://www.youtube.com/watch?v=F8lfLqnhuGs

remorses 6y ago

All this money is going in the financial market, you need to search for inflation there

marketingPro 6y ago

Do not use CPI as it doesn't take into account technology improvement and outsourcing. I'd take the big mac index over CPI.

leetcrew 6y ago
isn't the price of a big mac also subject to technology improvement and outsourcing? it takes quite a logistics chain to get all those ingredients where they need to go.
- marketingPro 6y ago
  It's not a commodity though.