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> Remember that some people thought that government borrowing ... facilitated by quantitative easing (Fed bond-buying) ... was going to lead to substantial infl
by drtillberg 6y ago
> Remember that some people thought that government borrowing ... facilitated by quantitative easing (Fed bond-buying) ... was going to lead to substantial inflation. But it didn’t.
Every time someone says "but where's the inflation" I sigh. Look at literally any financial asset, SP500, stocks, real estate, even bond values (the inverse of interest rates). There is your inflation.
Maybe we like asset inflation, maybe we don't, but that's where it is. When the author claimed to be unable to find it, I stopped reading.
- deleted 6y ago[deleted]
- titzer 6y ago"Official" inflation is based on the CPI, consumer price index, which is based on a basket of goods, not including CoL things like housing. edit: I stand corrected. It does include housing, but this "Owners' equivalent rent of residences" counts the cost of a Mortgage, which of course is majorly impacted by interest rates. It doesn't include the value of the housing market directly, though. Does anyone actually think that the housing market is counted correctly? It is clearly outpacing inflation by a lot: https://dqydj.com/historical-home-prices/ https://dqydj.com/historical-home-prices/
- trident5000 6y agoCPI is a convenient basket for the fed to sell bonds ideally at a positive yield. Thats why things are left out.
- throw0101a 6y ago> for the fed to sell bonds The Fed does not sell bonds, the US government (through the Department of Treasury) does. They are independent of each other. (Then-President) Trump got lots of flack for going after US Fed Chairman Powell due to the desire to keep this independence as clear-cut as possible: * https://thehill.com/policy/finance/450283-powell-asserts-fed-independence-as-trump-blasts-central-bank https://thehill.com/policy/finance/450283-powell-asserts-fed...
- trident5000 6y agoYou are correct, I typed that too fast.
- 1915cb1f 6y agoThis is untrue. Housing is part of the CPI, and you can see everything that's included here: https://www.bls.gov/cpi/tables/relative-importance/2019.txt https://www.bls.gov/cpi/tables/relative-importance/2019.txt
- dragonwriter 6y ago> not including CoL things like housing. CPI includes both actual rents and imputed rents for home ownership. It doesn't include asset costs because it's a consumption price index, and doesn't measure additional costs to acquire non-consumption assets.
- em500 6y agoYou probably need another correction: CPI does not count the cost of a mortgage, nor interest payments in any direct way. What the CPI estimates is the price of shelter, by surveying renters how much rent they pay, and house owners how much rent they think their house would rent for. It's a bit frustrating that there are so many misunderstandings around this topic, while the BLS has clear and extensive explanations on their website. https://www.bls.gov/opub/hom/cpi/ https://www.bls.gov/opub/hom/cpi/ https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...
- chii 6y agoit's more that people have an innate desire to own (their residence). When they see prices of houses grow, they feel disenfranchised. They blame it on inflation - because to them, the house hasn't changed when its price grew.
- MrRiddle 6y agoHow can you have inflation while most of the services and commodities people are using are not increasing in price? Sure, you have equities rising, but that’s about it. Inflation because call options are flooding the market? Bonds are going down, real estate market is stagnant.
- mamon 6y agoCommodities prices might not be increasing right now, but that's not the point. The point is, Jeff Bezos's wealth is approaching $200B, Elon Musk is not far behind. Quantitive Easing and similar policies seem to be designed to increase wealth inequality - one more decade of such policy, one more big crisis, and all wealth will be concentrated in the hands of 0.01% richest men. Meanwhile middle class businesses are being drawn to banktruptcy by COVID-related lockdowns. We are slipping back in feudalism - soon most people will be at mercy of government, and small elite of billionaires.
- trident5000 6y agoWages are stagnant which means they dont need to raise the price of goods on the other side, theres your uptick in inflation.
- jonas21 6y agoI don't get it. If wages are stagnant and prices are stagnant, isn't that by definition zero inflation?
- trident5000 6y agoPrices are not stagnant. You can see that quite clearly from the average price of a big mac over the years.
- AmericanChopper 6y agoYou have to do quite a bit of statistical gymnastics to come to the conclusion that wages are stagnant. Wages are almost always increasing. The stagnation observations come up when you account for inflation (a statistic called real wages). Until recently, real wages had peaked in 1973, so if you only had two points of data, February 1973 and March 2019, they would make a perfectly flat line on a graph. That’s where you get your “stagnation”. In reality, they steadily trended downwards between the early 70s and mid 90s, and have since then been steadily trending upwards between the mid 90s and today. I’m sure COVID is going to confound this to a non-trivial extent, but in 2019 they were at the highest level recorded.
- alexpetralia 6y agoYes this failure to distinguish different types of inflation (wage inflation, financial asset inflation, consumer goods inflation) is a big analytical oversight.
- trident5000 6y ago"wheres the inflation?" "why cant I afford a house I dont get it"
- farseer 6y agoFor the average Joe, inflation is usually the price of milk, bread and eggs going up. America being an agricultural colossus with plenty of farm subsidies mean the price of essentials will not rise. Hence the unique manifestation of inflation in asset prices will not bring masses on the streets unlike most other countries. Coupled this with the fact that other countries are also printing money and are in worse shape ensures there isn't much to worry about yet..
- Supermancho 6y agohttps://chapwoodindex.com/ https://chapwoodindex.com/ There are resources outside the CPI or individual verticals, to measure inflation.
- SpicyLemonZest 6y agoThis index doesn't pass the sniff test. 10% annual inflation would mean that someone making $100k today has the same standard of living as someone making $40k in 2010.
- deleted 6y ago[deleted]
- throw0101a 6y ago> There are resources outside the CPI or individual verticals, to measure inflation. No, there are not. CPI is about measuring consumables that one needs to live: food, shelter (either rent or mortgage carrying costs), utilities, clothing, etc. If you want to measure something outside of this basket of goods, then use another word, because "inflation" / CPI is already taken and you're overloading it and causing confusion by conflating different things. This "index" is garbage. Please see "Inflation Truthers": > But if we take away the outlier 2020 data points, the average real annual GDP growth from 2010-2019 was 2.3%. The inflation rate in that time averaged roughly 1.8% per year. > If you’re one of the conspiracy people who believe inflation has actually been running at 5-6% per year, that would assume the economy has been contracting by 1-3% per year over the past 10 years. > And if you’re a full tinfoil hat person who assumes inflation is actually 10-12% per year, that’s like saying we’ve been in a full-blown depression and the economy has lost 80% of its value. * https://awealthofcommonsense.com/2021/01/inflation-truthers/ https://awealthofcommonsense.com/2021/01/inflation-truthers/ * https://news.ycombinator.com/item?id=25644580 https://news.ycombinator.com/item?id=25644580 So if the GDP grew "only" ~2.5%, then any inflation above that (as the 'truthers' claim), would mean were actually in a recession/depression for the last decade… which makes no sense. If inflation is >5% (per the truthers), then the economic growth would have had to been on top of that, for a nominal growth rate of >7%. Has anyone been claiming a US GDP growth of 7% or more?
- Jommi 6y agoYou're right and wrong. You're talking more specifically about asset price inflation. Read this: https://www.valuewalk.com/2014/11/central-banks-asset-vs-price-inflation/?amp=1 https://www.valuewalk.com/2014/11/central-banks-asset-vs-pri... Btw it's an incredibly good topic and if anyone wants to talk more about it I would love to start a clubhouse room.
- SpicyLemonZest 6y agoUnder the conventional definition, "inflation" exclusively refers to an increase in the general price level, so it doesn't make a ton of sense to talk about "finding" the inflation or one sector or another. An increase in prices within specific industries isn't inflation, just a price increase. (Of course, you're free to use nonstandard definitions if you'd like, but you can't just toss other perspectives out the window because they use the conventional ones.)
- dragonwriter 6y agoLike producer price inflation, asset inflation isn't what people are talking about when they talk about “inflation” without modifiers, which refers to consumer price inflation. When people predicted inflation from QE, they were predicting consumer price inflation. And depending on how you look at it, they were either right and that was entirely the point of the policy (if you look at the difference between actual results and what was predicted without the policy) or wrong because they failed to consider the deflation that would happen without the policy (if judged by a net standard rather than delta from without-the-policy expectations.) Pointing to asset price inflation to say “there is the predicted inflation from QE” is the fallacy of equivocation; shifting definitions to suit the argument.
- username90 6y agoGiving people more money doesn't make them buy more basic goods, just more assets, so price of normal goods doesn't go up but price of assets do.
- dragonwriter 6y ago> Giving people more money doesn't make them buy more basic goods, just more assets Under normal circumstances, in the limit as starting income approaches infinity, this is correct (marginal propensity to consume approaches 0 and marginal propensity to save approaches 1.) In the limit as starting income approaches 0, OTOH, the opposite is true (marginal propensity to consume approaches 1 and marginal propensity to save approaches 0.) While there may be some future society with the distribution of income such that the former limit is a decent approximation of average behavior, but for real current societies the latter limit is a fairly good approximation, with observed society-wide marginal propensity to consume in modern developed countries, IIRC, around 0.9 (90% of added income goes to spending, 10% to savings/investment.) > so price of normal goods doesn't go up but price of assets do Were that true, supply gluts in a commodity used for money (like, say, the result of Spain bringing in vast hoards of New World precious metals) would have no impact on nominal consumer prices while driving up nominal asset prices. This is, empirically, not true.
- lr4444lr 6y agoNot to mention the inelastic necessities of healthcare, education, and housing, which don't make it into the CPI basket.
- chii 6y ago> the inelastic necessities of healthcare, education, and housing, which don't make it into the CPI basket. they are all covered: https://www.bls.gov/cpi/questions-and-answers.htm#Question_10 https://www.bls.gov/cpi/questions-and-answers.htm#Question_1... see : https://www.bls.gov/cpi/factsheets/medical-care.htm https://www.bls.gov/cpi/factsheets/medical-care.htm https://www.bls.gov/cpi/factsheets/college-tuition.htm https://www.bls.gov/cpi/factsheets/college-tuition.htm
- lr4444lr 6y agoI stand corrected. Is this a new addition? Does it look at what people actually pay, or what insurance does? (Not trying to undermine your point - just genuinely curious.)