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> We’ve printed trillions of dollars and Congress is en route to print trillions more. First off: it's not Congress that controls the money supply, it's the Fe

> We’ve printed trillions of dollars and Congress is en route to print trillions more. First off: it's not Congress that controls the money supply, it's the Fed. They're independent. > The price for that has yet to be paid. What price is that? Inflation? Japan's M2 has risen a lot, and it hasn't seen any for decades: * https://fred.stlouisfed.org/series/MYAGM2JPM189S https://fred.stlouisfed.org/series/MYAGM2JPM189S * https://fred.stlouisfed.org/series/FPCPITOTLZGJPN https://fred.stlouisfed.org/series/FPCPITOTLZGJPN Japan's interest rate has been below 1% since April 1995: * https://fred.stlouisfed.org/series/INTDSRJPM193N https://fred.stlouisfed.org/series/INTDSRJPM193N From 2002 to 2006 it was 0.1%. The equation for inflation is: M x V = P x Q Everyone talks about "printing money" (money supply: M) with the Fed, but no one seems to pay attention to velocity (V). Which has dropped off a cliff: * https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V The Austrian, Milton Friedman Monetarists have been squawking about inflation for ten years: > We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment. * https://economics21.org/html/open-letter-ben-bernanke-287.html https://economics21.org/html/open-letter-ben-bernanke-287.ht... Meanwhile the Keynesians have been saying it wouldn't be a problem. Both sides made predictions, results are in, the experiment is over: Start listening to Keynesians.

lettergram 6y ago
You sure inflation isn’t here? Houses are up massively, land, cars, stocks, crypto, etc. The inflation measurement is off. But the inflation is here.
- throw0101a 6y ago
  You list assets, which have generally always gone up in value over time. Inflation, i.e. CPI, is (roughly) about cost of living through a basket of goods: * 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 If you don't believe the government-published CPI you can confirm their work, as others have done: * https://en.wikipedia.org/wiki/MIT_Billion_Prices_project https://en.wikipedia.org/wiki/MIT_Billion_Prices_project For your items: * Monthly carrying costs haven't changed much: prices up, but mortgage rates are down. Plus average square footage has gone up, so you're getting more. * Land depends on location, and urban prices have gone up because it's more cool to live in the city now than in the 1970s and 1980s. I live in Toronto, so I know all about land/housing prices over the last 10-15 years. * Modern cars have more power, while burning less fuel, and being safer, and on average lasting longer, for the same money. I own a 2003 Golf that I paid $30K for (in 2003). What's available for $30K is a lot better, and the equivalent dollars today is closer to $40K—which gets you some sweet things. * I was invested in 2008: I've seen stocks go up and down. * Crypto is a Ponzi scheme.
  - gruez 6y ago
    Presumably he's talking about asset inflation.
    - throw0101a 6y ago
      Valuations go up until they go down. See 2008, and 2000 before that, and ... As someone with another couple of decades until retirement I'd love a crash about now so that I could "buy low".
  - mxcrossb 6y ago
    I think your analysis is right, but if cars and houses are things that people buy with borrowed money, it does seem like interest rates being low would drive prices up. And it might increase the price of inflation proof assets like crypto. Is there a framework we should be describing this with besides the broad “inflation” term?
    - throw0101a 6y ago
      Cars are lasting longer, and how many cars can the average person own? There's also depreciation, so cars aren't 'quite' an asset, so trade-in is also limited if people want to rotate vehicles (unless one leases). > Is there a framework we should be describing this with besides the broad “inflation” term? If asset prices are higher than what they "should" be, then one generally calls that a bubble.
    - postingawayonhn 6y ago
      There's a practically unlimited supply of cars. If people start buying more manufacturers will produce more.
      - throw0101a 6y ago
        But they can only be produced at a finite rate, which may cause competition amongst buyers in the short term as they bid against each other for the finite number that are on the lot. Further, the resources needed as raw material are finite (unless we start asteroid mining), as is the energy needed in the process: we have only so many gigawatts we can produce at one time. More plants can be built, but those take resources as well: some of the very same resources that are needed to build the cars we're talking about.
- jessaustin 6y ago
  Presumably housing appreciation is somewhat offset by drops on commercial real estate: office space, video game storefronts, etc.
- mrec 6y ago
  Inflation is absolutely here. Assets are way up because "safe" stores of value - what money was supposed to be - haven't been keeping pace with inflation since 2008, so you have to either join the casino or watch your savings erode. A lot of younger people don't seem to realize that this is new. That you used to be able to put your money in a bank and not lose it. While rock-bottom interest rates are good in some ways, I don't see this as a positive trend overall, especially given how shark-filled the financial waters are for most people. I'm a big fan of the Vegas dictum - "there's a patsy at every table, and if you don't know who the patsy is, it's you". As a retail investor, you're pretty much always the patsy.
  - Robotbeat 6y ago
    Money is not supposed to be a "safe" store of value. It's supposed to be a stable one. Too low of inflation is bad because it means less investment in the physical economy. The Fed prints money to try to keep people from just hoarding cash. They want some inflation (and definitely not deflation) because a deflationary spiral means more and more money gets stuffed into mattresses instead of physical investments. Unfortunately we're seeing land prices and stock prices and crypto (etc) bid up instead of, say, a massive build out of factories and solar farms and multistory houses. (EDIT: We are seeing lots of houses being built, actually. Lumber is near all-time highs.)
    - mrec 6y ago
      > Too low of inflation is bad because it means less investment in the physical economy But why did this apparently only become the case after 2008? Positive real returns without gambling were acceptable before that, and we still got a gigantic speculative bubble, so why does it suddenly become reasonable to encourage bubbles even more? Was it just a coordination problem? An initial panic reaction to slash to zero, and then no central bank being willing to go first and unwind it? As you say, the other major part of this problem is the inability or unwillingness to steer money toward productive investment rather than speculation. Here in the UK it's housing that's the killer; my suspicion is that governments have become addicted to the jam-today enabled by the money created for mortgage loans, which will then have to be paid off on some other poor sucker's watch.
- imtringued 6y ago
  No, there is no inflation. When the Fed talks about inflation it talks about CPI inflation. Why is the CPI inflation rate important? Because unlike stocks and houses and other assets CPI tracks the real economy. If unemployment or underemployment is high then CPI inflation is low which tells you that the economy is doing very poorly. Most economies had their highest growth during years with moderate inflation. Maybe 4-5%. What you are calling inflation is actually the opposite. It's deflation. When hoarding assets becomes more profitable than working, the real world economy starts dying and CPI reflects that very well. Workers benefit from inflation because inflation is generally followed by productive investments. Driving prices of consumer goods up makes it profitable to produce them which makes it profitable to employ people to produce them. Deflation makes it harder to run a profitable business but it also makes it easier to run a non profitable business (that also includes overvalued businesses that do not earn enough to justify their valuation).
GizmoSwan 6y ago
Assets have been inflating. Velocity of money is a measure of economic activity. If Q is the GDP and constant, prices will go up if economic activity goes up. So only if economic activity does not pick up, will the prices not go up.
deepnotderp 6y ago
CPI has been kept down because of electronics and other manufactured goods like automobiles, things like healthcare, college education and textbooks and real estate have increased dramatically.
- imtringued 6y ago
  If that money was used to build new housing then it would drive economic growth. I'm still split on college education. In theory professors should see higher salaries and thus drive up CPI inflation. In practice universities overproduce professors and can hire them for the lowest salary possible.
- throw0101a 6y ago
  The Bloomber Commodity Index (BCOM) is at the same level now as it was in 1990: * https://www.marketwatch.com/investing/index/bcom?countryCode=XX https://www.marketwatch.com/investing/index/bcom?countryCode... Real estate is an asset: the CPI measures carrying costs, and those are fairly level. You get more automobile now for your money than in the past: I paid $30K for my 2003 Golf, and for the same $30K I get more safety, more horsepower, and better mileage. I agree that health care and education (in the US) are the main areas where costs have risen.
bzbarsky 6y ago
Unfortunately, Keynesians also made predictions (like fiscal spending moving rates off the zero bound, austerity hurting economic growth, etc) which did not turn out to be true, due to monetary offset. That is, Keynsians tend to over-focus on fiscal policy and ignore the monetary side, but in practice central banks end up sterilizing most if not all of what's going on the fiscal side, as far as I can tell. The only group I have seen making predictions over the last 10+ years who seem to be successful are the people suggesting that central banks do NGDP level targeting instead of what they're doing right now.
- throw0101a 6y ago
  In the last 10+ years fiscal spending has been half-hearted and anemic. As Krugman wrote back in 2009: > I see the following scenario: a weak stimulus plan, perhaps even weaker than what we’re talking about now, is crafted to win those extra GOP votes. The plan limits the rise in unemployment, but things are still pretty bad, with the rate peaking at something like 9 percent and coming down only slowly. And then Mitch McConnell says “See, government spending doesn’t work.” * https://krugman.blogs.nytimes.com/2009/01/06/stimulus-arithmetic-wonkish-but-important/ https://krugman.blogs.nytimes.com/2009/01/06/stimulus-arithm... Austerity does hurt economic growth: * https://krugman.blogs.nytimes.com/2012/04/24/austerity-and-growth-again-wonkish/ https://krugman.blogs.nytimes.com/2012/04/24/austerity-and-g... From what I've read on the topic, it's hardly ever been a good idea, especially in depressed economies: * https://en.wikipedia.org/wiki/Austerity:_The_History_of_a_Dangerous_Idea https://en.wikipedia.org/wiki/Austerity:_The_History_of_a_Da... > That is, Keynsians tend to over-focus on fiscal policy and ignore the monetary side AFAICT, Keynesians are both-and thinkers. Monetary is done first, but once you hit zero rates, then what more can you do from that angle? Printing money is only useful when you also have velocity, which has at first decreased and lately fallen off a cliff: * https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V At that point you have to move to fiscal. Krugman examined this in 1998 when Japan entered the quagmire before everyone else: * https://www.brookings.edu/bpea-articles/its-baaack-japans-slump-and-the-return-of-the-liquidity-trap/ https://www.brookings.edu/bpea-articles/its-baaack-japans-sl... > are the people suggesting that central banks do NGDP level targeting instead of what they're doing right now. Who is writing publicly on this topic, either in weblogs, articles, or Tweets?

lettergram 6y ago

You sure inflation isn’t here? Houses are up massively, land, cars, stocks, crypto, etc. The inflation measurement is off. But the inflation is here.

throw0101a 6y ago
You list assets, which have generally always gone up in value over time. Inflation, i.e. CPI, is (roughly) about cost of living through a basket of goods: * 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 If you don't believe the government-published CPI you can confirm their work, as others have done: * https://en.wikipedia.org/wiki/MIT_Billion_Prices_project https://en.wikipedia.org/wiki/MIT_Billion_Prices_project For your items: * Monthly carrying costs haven't changed much: prices up, but mortgage rates are down. Plus average square footage has gone up, so you're getting more. * Land depends on location, and urban prices have gone up because it's more cool to live in the city now than in the 1970s and 1980s. I live in Toronto, so I know all about land/housing prices over the last 10-15 years. * Modern cars have more power, while burning less fuel, and being safer, and on average lasting longer, for the same money. I own a 2003 Golf that I paid $30K for (in 2003). What's available for $30K is a lot better, and the equivalent dollars today is closer to $40K—which gets you some sweet things. * I was invested in 2008: I've seen stocks go up and down. * Crypto is a Ponzi scheme.
- gruez 6y ago
  Presumably he's talking about asset inflation.
  - throw0101a 6y ago
    Valuations go up until they go down. See 2008, and 2000 before that, and ... As someone with another couple of decades until retirement I'd love a crash about now so that I could "buy low".
- mxcrossb 6y ago
  I think your analysis is right, but if cars and houses are things that people buy with borrowed money, it does seem like interest rates being low would drive prices up. And it might increase the price of inflation proof assets like crypto. Is there a framework we should be describing this with besides the broad “inflation” term?
  - throw0101a 6y ago
    Cars are lasting longer, and how many cars can the average person own? There's also depreciation, so cars aren't 'quite' an asset, so trade-in is also limited if people want to rotate vehicles (unless one leases). > Is there a framework we should be describing this with besides the broad “inflation” term? If asset prices are higher than what they "should" be, then one generally calls that a bubble.
  - postingawayonhn 6y ago
    There's a practically unlimited supply of cars. If people start buying more manufacturers will produce more.
    - throw0101a 6y ago
      But they can only be produced at a finite rate, which may cause competition amongst buyers in the short term as they bid against each other for the finite number that are on the lot. Further, the resources needed as raw material are finite (unless we start asteroid mining), as is the energy needed in the process: we have only so many gigawatts we can produce at one time. More plants can be built, but those take resources as well: some of the very same resources that are needed to build the cars we're talking about.
jessaustin 6y ago
Presumably housing appreciation is somewhat offset by drops on commercial real estate: office space, video game storefronts, etc.
mrec 6y ago
Inflation is absolutely here. Assets are way up because "safe" stores of value - what money was supposed to be - haven't been keeping pace with inflation since 2008, so you have to either join the casino or watch your savings erode. A lot of younger people don't seem to realize that this is new. That you used to be able to put your money in a bank and not lose it. While rock-bottom interest rates are good in some ways, I don't see this as a positive trend overall, especially given how shark-filled the financial waters are for most people. I'm a big fan of the Vegas dictum - "there's a patsy at every table, and if you don't know who the patsy is, it's you". As a retail investor, you're pretty much always the patsy.
- Robotbeat 6y ago
  Money is not supposed to be a "safe" store of value. It's supposed to be a stable one. Too low of inflation is bad because it means less investment in the physical economy. The Fed prints money to try to keep people from just hoarding cash. They want some inflation (and definitely not deflation) because a deflationary spiral means more and more money gets stuffed into mattresses instead of physical investments. Unfortunately we're seeing land prices and stock prices and crypto (etc) bid up instead of, say, a massive build out of factories and solar farms and multistory houses. (EDIT: We are seeing lots of houses being built, actually. Lumber is near all-time highs.)
  - mrec 6y ago
    > Too low of inflation is bad because it means less investment in the physical economy But why did this apparently only become the case after 2008? Positive real returns without gambling were acceptable before that, and we still got a gigantic speculative bubble, so why does it suddenly become reasonable to encourage bubbles even more? Was it just a coordination problem? An initial panic reaction to slash to zero, and then no central bank being willing to go first and unwind it? As you say, the other major part of this problem is the inability or unwillingness to steer money toward productive investment rather than speculation. Here in the UK it's housing that's the killer; my suspicion is that governments have become addicted to the jam-today enabled by the money created for mortgage loans, which will then have to be paid off on some other poor sucker's watch.
imtringued 6y ago
No, there is no inflation. When the Fed talks about inflation it talks about CPI inflation. Why is the CPI inflation rate important? Because unlike stocks and houses and other assets CPI tracks the real economy. If unemployment or underemployment is high then CPI inflation is low which tells you that the economy is doing very poorly. Most economies had their highest growth during years with moderate inflation. Maybe 4-5%. What you are calling inflation is actually the opposite. It's deflation. When hoarding assets becomes more profitable than working, the real world economy starts dying and CPI reflects that very well. Workers benefit from inflation because inflation is generally followed by productive investments. Driving prices of consumer goods up makes it profitable to produce them which makes it profitable to employ people to produce them. Deflation makes it harder to run a profitable business but it also makes it easier to run a non profitable business (that also includes overvalued businesses that do not earn enough to justify their valuation).

GizmoSwan 6y ago

Assets have been inflating. Velocity of money is a measure of economic activity. If Q is the GDP and constant, prices will go up if economic activity goes up. So only if economic activity does not pick up, will the prices not go up.

deepnotderp 6y ago

CPI has been kept down because of electronics and other manufactured goods like automobiles, things like healthcare, college education and textbooks and real estate have increased dramatically.

imtringued 6y ago
If that money was used to build new housing then it would drive economic growth. I'm still split on college education. In theory professors should see higher salaries and thus drive up CPI inflation. In practice universities overproduce professors and can hire them for the lowest salary possible.
throw0101a 6y ago
The Bloomber Commodity Index (BCOM) is at the same level now as it was in 1990: * https://www.marketwatch.com/investing/index/bcom?countryCode=XX https://www.marketwatch.com/investing/index/bcom?countryCode... Real estate is an asset: the CPI measures carrying costs, and those are fairly level. You get more automobile now for your money than in the past: I paid $30K for my 2003 Golf, and for the same $30K I get more safety, more horsepower, and better mileage. I agree that health care and education (in the US) are the main areas where costs have risen.

bzbarsky 6y ago

Unfortunately, Keynesians also made predictions (like fiscal spending moving rates off the zero bound, austerity hurting economic growth, etc) which did not turn out to be true, due to monetary offset. That is, Keynsians tend to over-focus on fiscal policy and ignore the monetary side, but in practice central banks end up sterilizing most if not all of what's going on the fiscal side, as far as I can tell. The only group I have seen making predictions over the last 10+ years who seem to be successful are the people suggesting that central banks do NGDP level targeting instead of what they're doing right now.

throw0101a 6y ago
In the last 10+ years fiscal spending has been half-hearted and anemic. As Krugman wrote back in 2009: > I see the following scenario: a weak stimulus plan, perhaps even weaker than what we’re talking about now, is crafted to win those extra GOP votes. The plan limits the rise in unemployment, but things are still pretty bad, with the rate peaking at something like 9 percent and coming down only slowly. And then Mitch McConnell says “See, government spending doesn’t work.” * https://krugman.blogs.nytimes.com/2009/01/06/stimulus-arithmetic-wonkish-but-important/ https://krugman.blogs.nytimes.com/2009/01/06/stimulus-arithm... Austerity does hurt economic growth: * https://krugman.blogs.nytimes.com/2012/04/24/austerity-and-growth-again-wonkish/ https://krugman.blogs.nytimes.com/2012/04/24/austerity-and-g... From what I've read on the topic, it's hardly ever been a good idea, especially in depressed economies: * https://en.wikipedia.org/wiki/Austerity:_The_History_of_a_Dangerous_Idea https://en.wikipedia.org/wiki/Austerity:_The_History_of_a_Da... > That is, Keynsians tend to over-focus on fiscal policy and ignore the monetary side AFAICT, Keynesians are both-and thinkers. Monetary is done first, but once you hit zero rates, then what more can you do from that angle? Printing money is only useful when you also have velocity, which has at first decreased and lately fallen off a cliff: * https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V At that point you have to move to fiscal. Krugman examined this in 1998 when Japan entered the quagmire before everyone else: * https://www.brookings.edu/bpea-articles/its-baaack-japans-slump-and-the-return-of-the-liquidity-trap/ https://www.brookings.edu/bpea-articles/its-baaack-japans-sl... > are the people suggesting that central banks do NGDP level targeting instead of what they're doing right now. Who is writing publicly on this topic, either in weblogs, articles, or Tweets?