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Consumer Prices in U.S. Increase by Most Since 2009

• sbelskie 5y ago
  “The Labor Department’s data showed a 10% surge in the cost of used vehicles that accounted for more than a third of the increase in the overall CPI.”
  • m3kw9 5y ago
    I hope people won’t attribute 100% of that as inflation. It rather due to supply issues.
    • omalleyt 5y ago
      What factory makes used cars? It’s pretty hard to say there’s a “supply chain” for used vehicles
      • redm 5y ago
        The lack of new cars is driving up demand for used cars. Supply chain issues in new products increases used product value if demand is there.
      • ericabiz 5y ago
        New cars aren’t available due to chip shortages, which enhances demand for used cars. That being said, if you happen to have an extra car, now is probably the best time to sell it in recent history.
      • mywittyname 5y ago
        The USA needs to sell roughly 15 million new cars a year to maintain an adequate supply of used cars. Falling below that target will cause used car prices to rise in the following years.
        • mc32 5y ago
          Not necessarily. Cars that go out of circulation can be made road worthy, if demand for them is there. Having a supply of new cars means old second hand cars get retired even if they could be made just as road worthy as any other second hand cars.
      • oflannabhra 5y ago
        What happened 12 years ago? 2008 happened, and resulted in a decade of incredibly low new-vehicle output. Add in the Cash for Clunkers program, and used inventory levels are about as low as they’ve ever been. This is the same as the housing market, the result of a decade of underbuilding. Couple that with stimulus money making down payments easy, and low interest rates keeping monthly payments low, and you have a recipe for prices to take off like a rocket, from both ends of the supply-demand curve.
        • omalleyt 5y ago
          Right, that doesn't sound like a supply chain issue, that sounds like a decade of structural issues leading to a perfect setup for structural inflation
    • mc32 5y ago
      Money supply issues? Pumping this much free money into the economy is going to cause prices to go up. We’re seeing labor prices go up. Whether minimum wage should be 12 or 15 is tangential. We’re seeing where people will not take a job unless it pays significantly more than the can draw from COVID benefits. Those pay premiums mean your groceries, coffee, fast food, then rent, then real estate, etc., etc., is going to cost more.
      • greedo 5y ago
        Did you see the article/comment from Chipotle's CEO about the impact of increasing wages? Going up to $15/hour would increase menu prices between 2-3%. Labor prices have been low forever. Businesses have been taking advantage of low labor costs for service jobs literally for decades, pocketing the profits while expecting the government to fill the gaps with welfare/SNAP/EITC etc. And a good portion of this labor segment has decided (after experiencing the COVID lockdowns) that they don't need to put up with crap wages for a crap job. I worked in the restaurant biz for over two decades, and it disgusts me how much it (and other service jobs) take advantage of employees. I was repeatedly told that every time the minimum wage went up, we'd have to lay off employees, or cut benefits etc. And every time, net income went up for every place I worked. It's just BS. https://www.restaurantdive.com/news/chipotle-cfo-15-minimum-wage-would-be-very-manageable-with-menu-price-h/598904/ https://www.restaurantdive.com/news/chipotle-cfo-15-minimum-...
    • throwaway4good 5y ago
      It is. And we are in the middle of a global transition to electric vehicles which ultimately will be cheaper than gasoline powered ones.
    • frankbreetz 5y ago
      Inflation is still inflation if it is caused by supply issues.
      • matthewdgreen 5y ago
        Yes but the treatment is potentially very different. Having the Fed use its blunt monetary tools to control a price increase might not make sense if that increase is caused by a specific supply-chain issue. “Inflation is still inflation” is like a doctor saying “a headache is still a headache” and ignoring the fact that one patient’s headache is caused by an operable brain tumor, while the other drank too much the night before.
    • jerf 5y ago
      Inflation is a summary statistic, or, if you like, an effect rather than a cause. Though of course as it flows downstream it becomes a cause of the next round of effects. But still, fundamentally, it's an effect rather than a cause. All of the inflation has "reasons" behind it. That doesn't make it "not inflation".
    • dv_dt 5y ago
      Unfortunately "Inflation from too much money chasing too few goods" is often in people's mind with only a focus on too much money, and rarely any thought to too few goods - especially when we know right now it's almost certainly to a huge degree temporary supply dips in goods - with waves of covid still rising in international supply, as well as the logistics of companies dropping production during pandemic (e.g. w/ automotive chips). It's also a metrics problem - you can see inflation increases which are easy to equate to units of money, but I don't think there's as universal an index of supply. Likely some industrial output index over time would better quantify how much inflation is pandemic disruption of supply, vs money supply. I predict it's mostly supply disruption.
  • neogodless 5y ago
    I was considering selling my car 6 months ago, so I checked the KBB used car private party price/value, and it was around $12,500. That same report today says it is $15,500. (6 year old hatchback with top trim, very low mileage.)
• ericabiz 5y ago
  https://archive.is/IKNlf https://archive.is/IKNlf
• Nbox9 5y ago
  Demand for goods are at an all time high at the same time there are new serious challenging in producing more goods.
• deleted 5y ago
  [deleted]
• tcbawo 5y ago
  The Fed is unlikely to intervene in the short term because they have acknowledged that undershooting their 2% average inflation target means they have to allow it to overshoot from time to time. We're still working out supply shortages and imbalances. But, I expect they're only going to start tightening once we've exceeded 3% or more on an annualized basis.
  • BozeWolf 5y ago
    Maybe I do not understand you correctly, but the 4.2% is YoY.
    • frankbreetz 5y ago
      They are considering this "Transitory" meaning they think it will drop with no changes to the Fed's behavior. Yes, 4.2% is high inflation, but it has been lower then target for years now, so you might consider this "reflation", or higher then normal inflation in order to catch up to normal after years of lower then normal inflation. Also, as another comment points out most of this increase comes from increases in used automobiles, gasoline, and airline fares. This can all be explained by supply issues and large drop in those item last year at this time. The Fed's behavior have minimal effects on that.
      • dragonwriter 5y ago
        > Yes, 4.2% is high inflation, but it has been lower then target for years now, so you might consider this "reflation" That’s not really an argument that it factually is transitory, and I don’t think there is any real good reason to think “catch-up” inflation is any better than the regular kind. (OTOH, the context of the COVID rebound is a strong reason to think it is likely transitory.)
    • dragonwriter 5y ago
      Its YoY but its still viewed as transitory. Given that the period also saw the economic rebound from the COVID sharp drop, including the fastest quarter of economic growth ever recorded in the US, followed by two more unusually strong growth quarters, it’s not hard to see why. Unless that’s a sustained trajectory rather than just a rebound from one-time impairment, you wouldn’t expect strong demand-pull inflation to continue.
• jacob2484 5y ago
  Scary part is the Biden administration seems in denial of any inflation risks: https://www.reuters.com/world/us/treasurys-yellen-interest-rates-may-need-rise-modestly-2021-05-04/ https://www.reuters.com/world/us/treasurys-yellen-interest-r...
  • bryanlarsen 5y ago
    Do you have the right link? She says that the Fed will raise rates if necessary to combat inflation. That's not denial.
    • frockington1 5y ago
      The Fed used to say they would target 2% and just recently changed it to "an average of 2%". It's less denial and more of a changing in definition.
      • deleted 5y ago
        [deleted]
      • JumpCrisscross 5y ago
        Sure, but that’s the Fed. It’s odd to pin this in the Biden administration when it’s a Trump appointee running the Fed while a Biden Treasurer (and former Obama Fed chairwoman) raises and retracts the spectre of rate increases.
    • anewaccount2021 5y ago
      They can't. If the ten year note even reverted to the historical average of 4.9%, it would require 30% of the present budget just to service the interest. Rates will never appreciably rise, they can't or all borrowers will be crushed
    • dghlsakjg 5y ago
      also, The Fed is supposed to act as an independent body not under the control of the executive or legislative branch.
  • 5y ago
• bko 5y ago
  Unfortunate that the article mentions nothing about policymakers approving $12+ trillion in monetary and fiscal support to deal with covid. To put that to perspective, the US GDP is $21 trillion and Chinese GDP is $14 trillion https://www.covidmoneytracker.org/ https://www.covidmoneytracker.org/
  • frankbreetz 5y ago
    It does mention it. It doesn't harp on it. >>trillions of dollars in government economic stimulus
    • bko 5y ago
      I'm sorry, you're correct. This is the phrase > While Federal Reserve officials and economists acknowledge the temporary boost, it’s unclear whether a more durable pickup in inflationary pressures is underway against a backdrop of soaring commodities costs, trillions of dollars in government economic stimulus and incipient signs of higher labor costs. I still have issue with the characterization. It's "against the backdrop of ... trillions of dollars" as though increased price levels and increasing the money supply by 25% are unrelated. Many times these articles write about stimulus and people think its the $1600 checks some people received. But what doesn't get reported is what the lion share of the money actually went to, buying up financial assets from banks.
      • JumpCrisscross 5y ago
        > what doesn't get reported is what the lion share of the money actually went to, buying up financial assets from banks Fiscal stimulus is more powerful than the monetary kind. When the Fed buys a bond, at the end of the day, it’s buying up bonds. Someone must give up 80 to 99.99999¢ of wealth for $1 of liquidity. When Congress spends $1, it’s creating money. It may have to tax or borrow down the road, but that’s then, not now. Also, not sure how one can say monetary policy isn’t reported. It receives nearly weekly attention on even non-financial forums like Hacker News, and features far more prominently in financial, economic and crackpot rags.
      • 5y ago
• matthewdgreen 5y ago
  “The annual CPI figure surged to 4.2%, the most since 2008 though a figure distorted by the comparison to the pandemic-depressed index in April 2020. This phenomenon -- known as the base effect -- will skew the May figure as well, likely muddling the ongoing inflation debate.” We’re coming off of years of missing the 2% inflation target, combined with a pandemic that crashed everything through the floor. Seems like we have some room to let the economy re-open and wait for supply chains to settle out, before the Fed moves in and crushes things to give us another five years of missed inflation targets.
  • jerf 5y ago
    Yeah, I don't think the "base effect" is relevant here. These aren't employment percentages or something. Inflation is cumulative. How low or high it was last year isn't really relevant; 4.2% is simply high, full stop. I don't care if it's an "improvement" from 20% last year, it would still be high. I don't care if it was 1% last year, it would still be high. Comparing it to last year might be relevant for other things, of course, but it's not at all the "base effect" where a company claiming 30% growth year-over-year isn't really getting 30% because there's just a "base effect" of seriously depressed revenue last year... 4.2% inflation is just 4.2% inflation, full stop.
    • JumpCrisscross 5y ago
      > 4.2% is simply high, full stop. I don't care if it's an "improvement" from 20% last year, it would still be high Big part of that is gasoline and cars, both of which had non-monetary supply chain issues. Oversimplifying monetary policy is nice for dinner tables and political grandstanding. That is why independent central banks have the track record they do.
      • imtringued 5y ago
        The problem with the usual more money = more inflation argument is that you would have to restrict yourself to a certain subset of the monetary supply that is relevant to inflation but everyone wants to talk about the broadest definition of monetary supply that also encompasses a subset that is completely irrelevant to inflation.
• redm 5y ago
  The “stimulous” checks increase demand for goods, not services, which, combined with supply chain issues drives inflation. When you get that “free” money, people are buying that new tv they have wanted and not thinking about a haircut. Credit card debt is also falling rapidly.
  • mbg721 5y ago
    Maybe not a haircut, but at least anecdotally there's more demand for services like home repairs. People have been home all the time to be annoyed by whatever's broken, and they don't have to take a whole day off work to meet the repair person.
    • redm 5y ago
      There is more demand for homes and home improvements, but again, thats what's driving goods, like lumber, cement, etc. I would argue those are as much goods as services.
      • dragonwriter 5y ago
        lumber and cement are goods. The contractor I pay to convert them into home improvements is a service. Stimulus checks increase demand for both.
  • dragonwriter 5y ago
    > The “stimulous” checks increase demand for goods, not services It increases both; consumers receiving them but both goods and services, after all.
• holoduke 5y ago
  Not only in the US. Everywhere. If you look at prices for raw materials (metals, food, wood etc) there is a large increase visible. In combination with huge amounts of extra printed money leads to a significant inflation globally.
  • postpawl 5y ago
    The spike in wood prices is likely due to high demand from new building and housing renovations + a number of reasons for a supply shortage: https://www.vox.com/22410713/lumber-prices-shortage https://www.vox.com/22410713/lumber-prices-shortage
    • imtringued 5y ago
      Inflation is just a different way of saying high demand. The question is will that demand persist or will the supply side start expanding?
  • throwaway0a5e 5y ago
    Exactly. The prices of a handful commodities that underpin the economy have jumped. But all commodities are tied to all other commodities to some extent. We're gonna see those increases disperse into the rest of the economy. The trillion dollar question is which increases will persist and to what extent.
• Tangokat 5y ago
  If you want to know more about inflation I recommend reading Lyn Aldens recent post on it: https://www.lynalden.com/inflation/ https://www.lynalden.com/inflation/ Inflation is a complicated subject and is not as exact a science as some believe. For instance see this adjustment based on increase in quality: "Let’s pick the Toyota Camry as a direct comparison to reduce the size/type changes. The starting MSRP for the automatic was $12,258 in 1990. The starting MSRP in 2020 was $24,425. That’s a 100% price increase, almost exactly. That’s about 2.5% per year. Certainly we can allow for a substantial amount of quality adjustment in the new car CPI calculation. The new Camry has power everything, a navigation system, better safety features, and better gas mileage. But is the quality/size adjustment enough to reduce the actual price appreciation from 100% down to just 22% on a quality-adjusted basis during this three-decade period, as official new car CPI says was the case?"
  • frankbreetz 5y ago
    With cars, I think it is important to factor in how long it lasts. If a car lasts twice as long shouldn't it have half as much impact on CPI? I don't think that makes it too much of a stretch.
  • rhinoceraptor 5y ago
    The quality argument is a bit irrelevant because a 1990 Camry would be illegal to sell if it were made today. Obviously it's a good thing that safety, efficiency and emissions standards are going up, but those things aren't free.
    • jfoutz 5y ago
      I can only recall 3 forced upgrades, passive passenger restraints, which turned out to be airbags. Minimum MPG, across all cars sold (SUVs could be worse as long as other models improved). and crash survival, which turned out to be crumple zones. I wouldn't say irrelevant, but maybe "weak signal". I agree wholeheartedly that there are other aspects (like those regulations) that were not free. But a bunch of other stuff came along that was probably about the same price. Better paint. Plastic bits more resistant to being out in the sun. Navigation. I would claim, Corolla targeted the same market. Inexpensive sedan, probably a family's first car, and you could plan on that car being one of the kids' first car. So it probably targeted the same proportion of budget. On the other hand, the size of that market wasn't constant. There are a zillion confounding factors. I thought a little about gas itself, which I don't recall much regulation change around (but I might be forgetting) but I'd think gas in 1990 is about the same as gas in 2021. Seems like it was about 90 cents? just about 3 dollars now? (hand wavy numbers). Of course there was a war in the interim, and oil shale became feasible for a while. So that has its own confounding factors. Everything is changing all the time. Inflation seems like a thing, but it kinda feels like using epicycles to describe movements of the stars. It kinda works, but there is more going on in underlying system. I'm far from an expert, hell, this is mostly me relying on my selective memory. It feels like stuff is more expensive. but younger me might have had more energy and lower standards. I dunno. I guess this comment is just armchair observations. I think there is something going on, but it's a really complicated system, and I'm not Kepler.
• redm 5y ago
  There is a good breakdown of the CPI on the US BLS Site: https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category.htm https://www.bls.gov/charts/consumer-price-index/consumer-pri... Highlights that explain the overall 4.2% jump: * Used cars and trucks 21.0% * Gasoline (all types) 49.6% * Airline fare 9.6%
  • throwaway4good 5y ago
    I betcha all those things are going to go down again.
    • seriousquestion 5y ago
      On what timeline?
      • throwaway4good 5y ago
        Used cars and gasoline? Maybe a year or so ... flights not quite sure.
  • bko 5y ago
    Here are the components and their respective increases Table A. Percent changes in CPI for All Urban Consumers (CPI-U): U.S. city average Seasonally adjusted changes from preceding month Un- adjusted 12-mos. Oct. Nov. Dec. Jan. Feb. Mar. Apr. ended 2020 2020 2020 2021 2021 2021 2021 Apr. 2021 All items.................. .1 .2 .2 .3 .4 .6 .8 4.2 Food...................... .2 .0 .3 .1 .2 .1 .4 2.4 Food at home............. .1 -.2 .3 -.1 .3 .1 .4 1.2 Food away from home (1).. .3 .1 .4 .3 .1 .1 .3 3.8 Energy.................... .6 .7 2.6 3.5 3.9 5.0 -.1 25.1 Energy commodities....... .7 .5 5.1 7.3 6.6 8.9 -1.4 47.9 Gasoline (all types).... .7 .5 5.2 7.4 6.4 9.1 -1.4 49.6 Fuel oil (1)............ .7 3.3 10.2 5.4 9.9 3.2 -3.2 37.3 Energy services.......... .5 .9 .2 -.3 .9 .6 1.5 5.4 Electricity............. .6 .3 .4 -.2 .7 .0 1.2 3.6 Utility (piped) gas service.............. .4 3.0 -.4 -.4 1.6 2.5 2.4 12.1 All items less food and energy................. .1 .2 .0 .0 .1 .3 .9 3.0 Commodities less food and energy commodities.... .0 .0 .1 .1 -.2 .1 2.0 4.4 New vehicles............ .3 .0 .4 -.5 .0 .0 .5 2.0 Used cars and trucks.... .9 -1.4 -.9 -.9 -.9 .5 10.0 21.0 Apparel................. -.9 .7 .9 2.2 -.7 -.3 .3 1.9 Medical care commodities (1)...... -.7 -.4 -.2 -.1 -.7 .1 .6 -1.7 Services less energy services.............. .1 .2 .0 .0 .2 .4 .5 2.5 Shelter................. .1 .1 .1 .1 .2 .3 .4 2.1 Transportation services .2 1.3 -.6 -.3 -.1 1.8 2.9 5.6 Medical care services... -.3 -.1 -.1 .5 .5 .1 .0 2.2 https://www.bls.gov/news.release/cpi.nr0.htm https://www.bls.gov/news.release/cpi.nr0.htm
• anewaccount2021 5y ago
  And as usual, HN will dedicate the comments to debunking or diluting the inflation data that has been anecdotally obvious for some time
• cute_boi 5y ago
  This is what happens when printers work too much
• paulpauper 5y ago
  THis is like a calculus problem. We're talking tiny differentials of a differential of a small number to begin with.
• throw0101a 5y ago
  Meanwhile ten-year US bonds are 1.6%: * https://www.investing.com/rates-bonds/usa-government-bonds https://www.investing.com/rates-bonds/usa-government-bonds * https://fred.stlouisfed.org/series/DGS10 https://fred.stlouisfed.org/series/DGS10
• paulpauper 5y ago
  this makes stocks and real estate more attractive. you are not going to get 3-4% with cash or treasury bonds
• deleted 5y ago
  [deleted]
• lettergram 5y ago
  I think this is just the beginning and I don’t think there’s anything they can do... Current issues: 1. Illegal immigrants driving down wages 2. Paying citizens to stay home 3. Remove the need to pay rent 4. To get workers companies hire illegals or pay higher wages 5. Oil / energy prices increase -> higher delivery costs and prices 5. Wages increase leading to price increases 7. Biden proposed expanding federal debt by 50%, people don't want to buy our bonds 8. Pushing students home for the year, keeping more people out of the work place (further creating scarcity of workers)
  • axiosgunnar 5y ago
    > illegal immigrants driving down wages > people staying home reducing workforce these two should cancel each other out no?
  • imtringued 5y ago
    > I think this is just the beginning and I don’t think there’s anything they can do... What prevents the government from eliminating Trump's trade war tarrifs and increasing immigration? Yes, there are unorthodox ways to defeat inflation.
  • whydoibother 5y ago
    > 1. Illegal immigrants driving down wages > 4. To get workers companies hire illegals or pay higher wages Seems to me number 4 invalidates number 1. The companies who refuse to pay a livable income are driving down wages.
• merricksb 5y ago
  Another version of this story discussed earlier: https://news.ycombinator.com/item?id=27123086 https://news.ycombinator.com/item?id=27123086 (102 points/175 comments)
  • deleted 5y ago
    [deleted]
  • frankbreetz 5y ago
    Isn't this last month's report?
  • listenallyall 5y ago
    Not a dupe. That story links to the March release, this story links to a summary of the April release.
• bfrog 5y ago
  Pressure on the value of a greenback is mounting on all fronts. Hyperinflation seems a small stone's throw away.
• jonnycomputer 5y ago
  Most informed economic commentary I've read fully expected a brief spike in inflation, but does not expect any kind of runaway inflation over the medium and long-term. I'm just not worried, especially with the twin biases of news reporting: sensationalism and favorable coverage of the views of big finance.
  • omginternets 5y ago
    >favorable coverage of the views of big finance I'm horrifically ignorant of economics. Why is the "runaway inflation" story favorable to big finance?
    • igorkraw 5y ago
      Invest into stocks to save yourself from inflation maybe?
      • RosanaAnaDana 5y ago
        Buy real property if you can.
        • the_fire_friar 5y ago
          Not sure why this is down voted. Real estate is a common hedge against inflation. It's just much more complex of an investment vehicle and you can't just jump in and out of real estate like you can stocks. You could opt for a REIT instead. https://www.investopedia.com/terms/r/reit.asp https://www.investopedia.com/terms/r/reit.asp
          • staticman2 5y ago
            While I don't know why it was downvoted "Buy real property if you can" is pretty crummy advice, unless you think an investor doesn't have to do any due diligence and should "just buy" stuff. How do you know what property to buy? How much property should you own as a percent of your net worth? What is the expected return of the property? What is the likelyhood you will lose money on the property versus the likelyhood you will make money? Those are all important questions not addressed by "Buy real property if you can" As for Reits, there's not a lot of financial advisors advocating high investments in Reits. For example the Vanguard Target Retirement fund of funds have very little. The Schwab Intelligent Portfolio seem to call for 5% REITS in an example I pulled up online. Maybe you know something Vanguard and Schwab does not, but again, there's that question of due diligence.
• BryanBeshore 5y ago
  In 2018 I bought a Jeep Wrangler for $40,050. Vroom offered me $42,722 for it today
  • dave5104 5y ago
    Doesn't that have more to do with the automotive/chip supply issues than inflation?
    • imtringued 5y ago
      Inflation is pretty much always a supply issue.
    • spamizbad 5y ago
      Yes and 1/3rd of the inflation is attributed to vehicle prices.
  • SilasX 5y ago
    Another anecdote: my 2015 Infiniti just a few months ago was estimated at $15k, last weekend KBB showed $17.5k.
• lend000 5y ago
  Random length lumber futures are up 200% since the pandemic began. Copper and soybean futures are both up 60%. Industrial steel is up 133%. Industrial silicon is up 70%. Sunflower oil +114%. Wheat +20%. Platinum +29%. Gold +20%. Aluminum +32%. Energy futures +30%. Natural gas +42%. SPX is up 25%, despite almost certainly taking a productivity hit as a whole. The money is definitely flowing, and consumer prices will be a lagging indicator as multi-year supply chain contracts expire and are renegotiated on the higher raw materials prices.
• IG_Semmelweiss 5y ago
  There is no runanaway inflation because it is specific to asset classes, and, critically we have managed to export a great deal on inflation abroad. Look at asset prices outside of the US. A cursory look at home values in specific markets within colombia, Mexico, Russia and Argentina tell you a lot of where things are going, post COVID
• boatsie 5y ago
  Can someone ELI5 why inflation causes the markets to go down rather than up? Wouldn’t cash lose more ground during inflationary periods than equities? The equity in the underlying companies should be more resistant to inflation since the companies can and will raise prices to account for the inflation. And future earnings will also increase due to inflation lowering their P/E ratios. All this seems to point to increasing stock market exposure. If there’s a market sell off due to inflation, where are those dollars going?
  • omalleyt 5y ago
    There's something called the equity risk premium. This is essentially the extra rate of return investors want to get in order to hold stocks rather than Treasury bonds. When inflation is high, the yield on Treasury bonds goes up. This means that, for the same equity risk premium, investors require a higher rate of return from stocks. Rate of return is approximately E/P (i.e. the inverse of P/E). So therefore, P/E must go down. This is called P/E compression. It's why stocks don't perform as well during inflationary periods as physical assets (such as gold, silver, real estate, etc.)
  • bijant 5y ago
    If Inflation Markers are up, that increases pressure on the Federal Reserve to reduce QE and eventually even increase rates. When that happens liquidity will be removed from equity markets reducing valuations. If there were a smaller increase in Consumer Prices then the flow of liquidity into equities could continue unabated. That was the expectation. The markets are adjusting to these new facts on the ground.
  • nine_zeros 5y ago
    > Can someone ELI5 why inflation causes the markets to go down rather than up? It's only going down relative to previous highs because institutional investors are expecting to be able to get better returns by lending instead of by investing in equity. The reason they expect to get better returns by lending is because they expect the FED to react to rising CPI by raising interest rates. > If there’s a market sell off due to inflation, where are those dollars going? Anything that returns more. Mostly towards lending to humans, businesses, funds, countries what have you. Maybe also towards commodities which are essential and people will continue to pay for them (oil, copper) Inflation hedges such as gold and more recently, crypto which is turning out to be an excellent hedge against US Dollar. All of this still sucks for anyone being payed in cash. We are all just puppets in financial games.