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This is the second inflation story to make the HN front page in the last two days, yet I remain unimpressed by the "running rampant" claim. According to the lat

This is the second inflation story to make the HN front page in the last two days, yet I remain unimpressed by the "running rampant" claim. According to the latest CPI inflation data (https://www.bls.gov/cpi/ https://www.bls.gov/cpi/), inflation was 2.6 percent over the last 12 months (as of April 13). This aligns with the Fed's 12-month target of 2 percent average inflation if we check historical trends (which implies that sometimes it will be over 2 percent). The linked story looks like cherry-picked data. Of course if average prices rise 2.6% percent, some outliers will rise more. But this hardly seems like a reason to panic.

omalleyt 5y ago
Month-on-month inflation was 0.6% last month, with much of the economy still closed (which should be deflationary). That’s a 7.5% annualized rate.
- spekcular 5y ago
  Sure, I agree that if the trend continues for a year, then we should start being concerned. But inflation has been below 2% since December 2018, and interest rates are at zero (which gives the Fed considerable latitude for implementing inflation control). The panic here seems a bit premature to me.
  - omalleyt 5y ago
    Here’s the personal savings rate: https://fred.stlouisfed.org/series/PSAVERT https://fred.stlouisfed.org/series/PSAVERT And here’s the money velocity: https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V When the economy actually reopens and people start spending again, prices will go boom.
    - spekcular 5y ago
      To clarify, the claim I object to is that inflation is currently, at the present moment, "running rampant." I agree that if the Fed does not handle things carefully then there may be problems in the future.
    - throw0101a 5y ago
      > When the economy actually reopens and people start spending again, prices will go boom. Yes, this has actually been predicted. See also 2010-11: > Then came a few months when inflation seemed to be rising after all. Consumer price inflation reached almost 4 percent; wholesale inflation went into double digits; the average price of commodities like oil and soybeans rose almost 40 percent in a year. Soon Republicans were haranguing Ben Bernanke, the Fed chairman, suggesting that his efforts might “debase the currency.” > But the Fed stayed its course, arguing correctly that rising prices were a temporary blip, not a harbinger of ’70s-style stagflation. Inflation soon subsided, and it has stayed low ever since. […] > So what’s going to happen in the months ahead? We’ll probably see a number of transitory price increases, not just because the economy is booming, but also because the lingering effects of the pandemic have produced some unusual disruptions — for example, a global shortage of shipping containers. > The question will be whether these price increases are a 2010-2011-type blip or something more dangerous. Smart observers will look past the headlines to measures of underlying inflation — not just the Fed’s standard “core” measure but things like the Atlanta Fed’s sticky price index as well. * https://www.nytimes.com/2021/03/22/opinion/us-inflation-stimulus.html https://www.nytimes.com/2021/03/22/opinion/us-inflation-stim... * https://archive.is/Vxj5h https://archive.is/Vxj5h We heard the same thing about printing money during the QE years. Still waiting for inflation after ~10 years.
benjohnson 5y ago
There is some weird inflation going on over the last decade here in the US. The price of the "basket of goods and services" in total has remained relatively constant - but the university student that needs housing and has heart attack would do well to search out a time-machine.
- spekcular 5y ago
  I agree there have been weird relative price increases. See for example this graphic: https://cdn.howmuch.net/articles/price-changes-in-usa-in-past-20-years-2294.jpg https://cdn.howmuch.net/articles/price-changes-in-usa-in-pas.... But this is not inflation. It's a completely different issue, with different causes and possible solutions.
  - tablespoon 5y ago
    > I agree there have been weird relative price increases. See for example this graphic: https://cdn.howmuch.net/articles/price-changes-in-usa-in-past-20-years-2294.jpg https://cdn.howmuch.net/articles/price-changes-in-usa-in-pas... > But this is not inflation. It's a completely different issue, with different causes and possible solutions. https://en.wikipedia.org/wiki/Baumol%27s_cost_disease https://en.wikipedia.org/wiki/Baumol%27s_cost_disease
- lamontcg 5y ago
  Housing, Health Care and Education as profit seeking enterprises seem to expand to the point where they confiscate all the wealth of the average person. So we work in order to feed those enterprises. That kind of "inflation" is driven by the necessity of the product. There's also another kind of inflation which comes from the 1% having too much wealth and the shift in the Gini coefficient. That makes all the things that wealthy people buy much more expensive and leads to asset bubbles. So Housing (again) along with stocks, bonds (driving the evaporation of risk premiums), the whole financial sector and art and baseball cards.
  - sershe 5y ago
    Interesting, why does profit seeking work for other necessities, like food (or pretty much anything really) but not in these 3 in particular (I would argue it also works fine in housing, if you take a median house). And how much housing do rich people really consume? What's special about housing, health care and education compared to say food, cosmetic surgery or tech is immense amount of govt meddling that both restricts supply and boosts demand. Everything from general regulatory burden to explicit things like zoning, certificates of need and healthcare subsidies, housing subsidies, etc. The results are predictable. Nothing whatsoever to do with profit seeking.
idiotsecant 5y ago
CPI is the very definition of cherry picking data.
throwkeep 5y ago
The Fed downplays inflation, using CPI to lie with statistics.
- throw0101a 5y ago
  It's actually the BLS that published the CPI numbers that the Fed uses: * https://en.wikipedia.org/wiki/United_States_Consumer_Price_Index https://en.wikipedia.org/wiki/United_States_Consumer_Price_I... And if you don't believe the BLS's basket of goods, you can confirm it for yourself: * https://en.wikipedia.org/wiki/MIT_Billion_Prices_project https://en.wikipedia.org/wiki/MIT_Billion_Prices_project Past studies have generally shown the official numbers to be pretty good.
tylerjaywood 5y ago
You should consider if the CPI is the best indicator or just the most popular https://www.investopedia.com/articles/07/consumerpriceindex.asp https://www.investopedia.com/articles/07/consumerpriceindex....
- spekcular 5y ago
  Do you have a suggestion for what we ought to use instead, and why it might be preferable to CPI? As your link notes, "It is the most widely watched and used measure of the U.S. inflation rate." I have not seen a reputable measure that suggests we are seeing "rampant" inflation somehow not captured by the CPI.

omalleyt 5y ago

Month-on-month inflation was 0.6% last month, with much of the economy still closed (which should be deflationary). That’s a 7.5% annualized rate.

spekcular 5y ago
Sure, I agree that if the trend continues for a year, then we should start being concerned. But inflation has been below 2% since December 2018, and interest rates are at zero (which gives the Fed considerable latitude for implementing inflation control). The panic here seems a bit premature to me.
- omalleyt 5y ago
  Here’s the personal savings rate: https://fred.stlouisfed.org/series/PSAVERT https://fred.stlouisfed.org/series/PSAVERT And here’s the money velocity: https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V When the economy actually reopens and people start spending again, prices will go boom.
  - spekcular 5y ago
    To clarify, the claim I object to is that inflation is currently, at the present moment, "running rampant." I agree that if the Fed does not handle things carefully then there may be problems in the future.
  - throw0101a 5y ago
    > When the economy actually reopens and people start spending again, prices will go boom. Yes, this has actually been predicted. See also 2010-11: > Then came a few months when inflation seemed to be rising after all. Consumer price inflation reached almost 4 percent; wholesale inflation went into double digits; the average price of commodities like oil and soybeans rose almost 40 percent in a year. Soon Republicans were haranguing Ben Bernanke, the Fed chairman, suggesting that his efforts might “debase the currency.” > But the Fed stayed its course, arguing correctly that rising prices were a temporary blip, not a harbinger of ’70s-style stagflation. Inflation soon subsided, and it has stayed low ever since. […] > So what’s going to happen in the months ahead? We’ll probably see a number of transitory price increases, not just because the economy is booming, but also because the lingering effects of the pandemic have produced some unusual disruptions — for example, a global shortage of shipping containers. > The question will be whether these price increases are a 2010-2011-type blip or something more dangerous. Smart observers will look past the headlines to measures of underlying inflation — not just the Fed’s standard “core” measure but things like the Atlanta Fed’s sticky price index as well. * https://www.nytimes.com/2021/03/22/opinion/us-inflation-stimulus.html https://www.nytimes.com/2021/03/22/opinion/us-inflation-stim... * https://archive.is/Vxj5h https://archive.is/Vxj5h We heard the same thing about printing money during the QE years. Still waiting for inflation after ~10 years.

benjohnson 5y ago

There is some weird inflation going on over the last decade here in the US. The price of the "basket of goods and services" in total has remained relatively constant - but the university student that needs housing and has heart attack would do well to search out a time-machine.

spekcular 5y ago
I agree there have been weird relative price increases. See for example this graphic: https://cdn.howmuch.net/articles/price-changes-in-usa-in-past-20-years-2294.jpg https://cdn.howmuch.net/articles/price-changes-in-usa-in-pas.... But this is not inflation. It's a completely different issue, with different causes and possible solutions.
- tablespoon 5y ago
  > I agree there have been weird relative price increases. See for example this graphic: https://cdn.howmuch.net/articles/price-changes-in-usa-in-past-20-years-2294.jpg https://cdn.howmuch.net/articles/price-changes-in-usa-in-pas... > But this is not inflation. It's a completely different issue, with different causes and possible solutions. https://en.wikipedia.org/wiki/Baumol%27s_cost_disease https://en.wikipedia.org/wiki/Baumol%27s_cost_disease
lamontcg 5y ago
Housing, Health Care and Education as profit seeking enterprises seem to expand to the point where they confiscate all the wealth of the average person. So we work in order to feed those enterprises. That kind of "inflation" is driven by the necessity of the product. There's also another kind of inflation which comes from the 1% having too much wealth and the shift in the Gini coefficient. That makes all the things that wealthy people buy much more expensive and leads to asset bubbles. So Housing (again) along with stocks, bonds (driving the evaporation of risk premiums), the whole financial sector and art and baseball cards.
- sershe 5y ago
  Interesting, why does profit seeking work for other necessities, like food (or pretty much anything really) but not in these 3 in particular (I would argue it also works fine in housing, if you take a median house). And how much housing do rich people really consume? What's special about housing, health care and education compared to say food, cosmetic surgery or tech is immense amount of govt meddling that both restricts supply and boosts demand. Everything from general regulatory burden to explicit things like zoning, certificates of need and healthcare subsidies, housing subsidies, etc. The results are predictable. Nothing whatsoever to do with profit seeking.

idiotsecant 5y ago

CPI is the very definition of cherry picking data.

throwkeep 5y ago

The Fed downplays inflation, using CPI to lie with statistics.

throw0101a 5y ago
It's actually the BLS that published the CPI numbers that the Fed uses: * https://en.wikipedia.org/wiki/United_States_Consumer_Price_Index https://en.wikipedia.org/wiki/United_States_Consumer_Price_I... And if you don't believe the BLS's basket of goods, you can confirm it for yourself: * https://en.wikipedia.org/wiki/MIT_Billion_Prices_project https://en.wikipedia.org/wiki/MIT_Billion_Prices_project Past studies have generally shown the official numbers to be pretty good.

tylerjaywood 5y ago

You should consider if the CPI is the best indicator or just the most popular https://www.investopedia.com/articles/07/consumerpriceindex.asp https://www.investopedia.com/articles/07/consumerpriceindex....

spekcular 5y ago
Do you have a suggestion for what we ought to use instead, and why it might be preferable to CPI? As your link notes, "It is the most widely watched and used measure of the U.S. inflation rate." I have not seen a reputable measure that suggests we are seeing "rampant" inflation somehow not captured by the CPI.