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Unfortunate that the article mentions nothing about policymakers approving $12+ trillion in monetary and fiscal support to deal with covid. To put that to persp

by 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.
  - dragonwriter 5y ago
    > 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. No, its explicitly providing relevant context, which is the polar opposite in every respect to implying that they are umrelated.
pjc50 5y ago
There's an important message here: the money expands by that much and inflation is .. 4%? That shows the limits of a single number. It also shows up the "transmission mechanism" has been damaged; it doesn't affect wages or prices largely because so much effort has been expended over the last 40 years to prevent wages going up at all.
- bko 5y ago
  I would argue that much of the money expansion went to asset prices. Just look at the stock market, which is up 30% from PRE-covid levels. If you factor in reduced reduced demand from lockdown measures, then the market increase is even more astonishing. I wrote about the asset price increases before [0] This is unfortunate since it's essentially helping relatively wealthy asset holders as opposed to those most likely to be affected negatively by covid. [0] https://mleverything.substack.com/p/where-did-the-12-trillion-of-covid-76c https://mleverything.substack.com/p/where-did-the-12-trillio...
  - listless 5y ago
    I agree. The economy is complex. You can’t tie 12 trillion of spending directly to inflation. Negative side effects manifest in ways we don’t expect. In this case, drastically increasing wealth inequality. It’s interesting to me that software developers don’t intrinsically realize this more than your average person. Nobody knows better than us that making changes to a complex system can have catastrophic downstream effects and has to be extensively tested first.
    - bko 5y ago
      Most people assume that economics is like a washing machine where you have a few dials and knobs. Sometimes you need to tighten a screw here, apply some grease there, etc. But in reality, economics is more akin a complex biological system. We have a very rudimentary understanding of how it actually works. Sure, we can create drugs that calm us down or excite us, but we have very limited understanding of the underlying biological system. For instance, we still can't agree what the optimal diet for humans is with wildly contradictory regiments.
YinglingLight 5y ago
For the next couple weeks we are going to hear nothing but the word 'inflation'. This mantra is an excuse to raise interest rates and crash the economy. Expect crazier and crazier events to happen in a short time.
ericmay 5y ago
According to that tracker, only $6.9 trillion has been dispersed, not the full $12 trillion. I think my ad blocker doesn't jive with the site, as I can only see the first part that shows the three summary bars in the bar chart. Apologies if I'm missing something. You also have to keep in mind a few things: 1. Liquidity - how much of this (probably most of federal reserve spending) has gone to maintaining liquidity in the global financial system? That's not going to contribute too much to inflation. If you have the reserve currency, and nobody is willing to lend because they're in fear of going bankrupt or running out of cash while the economies of the globe were shut down, then you wind up having to inject tons of cash into the global economy to keep it liquid. The alternative is armageddon. 2. Low interest rates. When the U.S. government borrows money it pays an interest rate. While the $6 trillion number (or $12 trillion for that matter) may seem very high, it matters how much the U.S. is paying in interest on these loans. Can the U.S. government meet it's debt obligations? Yes? Good to go then. GDP (which sucks anyway) will rise and past debt will be inflated away. Similar to everyone rushing to buy a house, low interest rates are an opportune time for the government to borrow money too. Republicans are hemming and hawing about it, but if Trump was president they'd be doing the same deal. 3. It also matters what ROI you get for spending. Nobody seems to be talking about that. If the government borrows $100 at 0.4% interest or maybe even 0% interest and then turns that into a larger investment in the broad American economy, that's almost surely a good use of money even if it increases the overall debt load if it's actually increasing GDP. I wish I could find it again, and maybe some enterprising HN reader will have it available, but there was an blog post I found interesting regarding how much the U.S. could borrow. They argued it was probably an unlimited amount of money. If nothing else it's just an interesting take. We should be sensitive to government spending and actions of the Federal Reserve, but we need to do so smartly. Everyone running around screaming inflation! inflation! are missing the mark. My default in the financial space is when everybody is saying something is true, it's likely not. There's a lot of money to be made convincing lots of people of the truth of something that isn't true and while they're distracted you take lots and lots of profits at the institutional scale (hedge funds, etc.).
- 1_person 5y ago
  Yeah, the economy is going so great we've only had 2 armed uprisings in as many years with 2 orders of magnitude growth in housing cost versus wage growth or housing cost versus population growth while over half of the usable land area of the country is zoned for non-poors I thank God for the Republicrats printing a third of the national debt and mailing checks directly to their cronies every time I open Zillow and realize I have effectively earned negative income for a lifetime of labor
ineptech 5y ago
See, that sounds scary. But isn't "we printed a whole lot of money and didn't get high inflation" equivalent to "if we hadn't printed all that money, we would've had deflation"? (This is not a rhetorical question meant to imply you're wrong, I genuinely am not sure. It seems crazy that we could run the money printer like we have and not cause dire problems, but it also seems like that's what's happening.)
- lend000 5y ago
  Deflationary periods and natural recessions hurt in the short term, but they are also the most consistent periods in American history where wealth inequality decreases as the economy corrects and reallocates capital [0]. Staving them off at all costs for the last few decades via easy monetary policy is arguably one of the greatest contributors to the rise in wealth inequality, alongside poorly graduated income tax brackets and (to a lesser degree) automation. Charts: [0] https://www.federalreserve.gov/releases/z1/dataviz/dfa/distribute/chart/#range:1989.3,2020.4 https://www.federalreserve.gov/releases/z1/dataviz/dfa/distr... https://fred.stlouisfed.org/series/WFRBST01134 https://fred.stlouisfed.org/series/WFRBST01134
  - dannyw 5y ago
    Inflation reduces wealth inequality. inflation is good.
    - azinman2 5y ago
      It also depletes savings of the poor. You can’t say inflation or deflation is universally good or bad. They have many effects.
      - pessimizer 5y ago
        The poor don't have savings, they have debts.
        5y ago
ineedasername 5y ago
It's not just about 12+ trillion added to spending, real costs of business have increased, driving up prices, such as the need to retrofit work environments and provide PPE, production slowdowns due to the need to rotate staff or when an outbreak occurs: Meat prices spiked very high when significant portions of of the meat processing industry went offline, and those prices haven't gone down. The entire supply/demand curve for many product classes have changed as a result of people staying home and buying different things. Yes, Pumping this much money into the economy it's hard to avoid inflation, but there's more factors to it than just that variable.
- klmadfejno 5y ago
  I was curious about meat prices because this didn't match my personal experience: https://www.ers.usda.gov/data-products/meat-price-spreads/ https://www.ers.usda.gov/data-products/meat-price-spreads/ Looks like meat prices spiked in Q2, peaking around June/July, and have fallen again. They're still elevated from this time two years ago, but they did go down.
  - ineedasername 5y ago
    Yep, not long before that it when plants were shutting down temporary or reducing output. Then summer always pushes the prices up a bit too.
- lostapathy 5y ago
  As anecdata, I saw several local restaurants raise price a buck or two on burgers last year when supplies were crunched, and they promptly lowered them a handful of months later.
  - ineedasername 5y ago
    They may have lowered prices back down due to lack of customers with COVID precautions still in place. However beef prices can be somewhat regional. Where I am anything other than ground beef is mostly still at least $2/lb more than usual. Ground beef is it a little more than usual.

by bko 5y ago

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.
- dragonwriter 5y ago
  > 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. No, its explicitly providing relevant context, which is the polar opposite in every respect to implying that they are umrelated.

pjc50 5y ago

There's an important message here: the money expands by that much and inflation is .. 4%? That shows the limits of a single number. It also shows up the "transmission mechanism" has been damaged; it doesn't affect wages or prices largely because so much effort has been expended over the last 40 years to prevent wages going up at all.

bko 5y ago
I would argue that much of the money expansion went to asset prices. Just look at the stock market, which is up 30% from PRE-covid levels. If you factor in reduced reduced demand from lockdown measures, then the market increase is even more astonishing. I wrote about the asset price increases before [0] This is unfortunate since it's essentially helping relatively wealthy asset holders as opposed to those most likely to be affected negatively by covid. [0] https://mleverything.substack.com/p/where-did-the-12-trillion-of-covid-76c https://mleverything.substack.com/p/where-did-the-12-trillio...
- listless 5y ago
  I agree. The economy is complex. You can’t tie 12 trillion of spending directly to inflation. Negative side effects manifest in ways we don’t expect. In this case, drastically increasing wealth inequality. It’s interesting to me that software developers don’t intrinsically realize this more than your average person. Nobody knows better than us that making changes to a complex system can have catastrophic downstream effects and has to be extensively tested first.
  - bko 5y ago
    Most people assume that economics is like a washing machine where you have a few dials and knobs. Sometimes you need to tighten a screw here, apply some grease there, etc. But in reality, economics is more akin a complex biological system. We have a very rudimentary understanding of how it actually works. Sure, we can create drugs that calm us down or excite us, but we have very limited understanding of the underlying biological system. For instance, we still can't agree what the optimal diet for humans is with wildly contradictory regiments.

YinglingLight 5y ago

For the next couple weeks we are going to hear nothing but the word 'inflation'. This mantra is an excuse to raise interest rates and crash the economy. Expect crazier and crazier events to happen in a short time.

ericmay 5y ago

According to that tracker, only $6.9 trillion has been dispersed, not the full $12 trillion. I think my ad blocker doesn't jive with the site, as I can only see the first part that shows the three summary bars in the bar chart. Apologies if I'm missing something. You also have to keep in mind a few things: 1. Liquidity - how much of this (probably most of federal reserve spending) has gone to maintaining liquidity in the global financial system? That's not going to contribute too much to inflation. If you have the reserve currency, and nobody is willing to lend because they're in fear of going bankrupt or running out of cash while the economies of the globe were shut down, then you wind up having to inject tons of cash into the global economy to keep it liquid. The alternative is armageddon. 2. Low interest rates. When the U.S. government borrows money it pays an interest rate. While the $6 trillion number (or $12 trillion for that matter) may seem very high, it matters how much the U.S. is paying in interest on these loans. Can the U.S. government meet it's debt obligations? Yes? Good to go then. GDP (which sucks anyway) will rise and past debt will be inflated away. Similar to everyone rushing to buy a house, low interest rates are an opportune time for the government to borrow money too. Republicans are hemming and hawing about it, but if Trump was president they'd be doing the same deal. 3. It also matters what ROI you get for spending. Nobody seems to be talking about that. If the government borrows $100 at 0.4% interest or maybe even 0% interest and then turns that into a larger investment in the broad American economy, that's almost surely a good use of money even if it increases the overall debt load if it's actually increasing GDP. I wish I could find it again, and maybe some enterprising HN reader will have it available, but there was an blog post I found interesting regarding how much the U.S. could borrow. They argued it was probably an unlimited amount of money. If nothing else it's just an interesting take. We should be sensitive to government spending and actions of the Federal Reserve, but we need to do so smartly. Everyone running around screaming inflation! inflation! are missing the mark. My default in the financial space is when everybody is saying something is true, it's likely not. There's a lot of money to be made convincing lots of people of the truth of something that isn't true and while they're distracted you take lots and lots of profits at the institutional scale (hedge funds, etc.).

1_person 5y ago
Yeah, the economy is going so great we've only had 2 armed uprisings in as many years with 2 orders of magnitude growth in housing cost versus wage growth or housing cost versus population growth while over half of the usable land area of the country is zoned for non-poors I thank God for the Republicrats printing a third of the national debt and mailing checks directly to their cronies every time I open Zillow and realize I have effectively earned negative income for a lifetime of labor

ineptech 5y ago

See, that sounds scary. But isn't "we printed a whole lot of money and didn't get high inflation" equivalent to "if we hadn't printed all that money, we would've had deflation"? (This is not a rhetorical question meant to imply you're wrong, I genuinely am not sure. It seems crazy that we could run the money printer like we have and not cause dire problems, but it also seems like that's what's happening.)

lend000 5y ago
Deflationary periods and natural recessions hurt in the short term, but they are also the most consistent periods in American history where wealth inequality decreases as the economy corrects and reallocates capital [0]. Staving them off at all costs for the last few decades via easy monetary policy is arguably one of the greatest contributors to the rise in wealth inequality, alongside poorly graduated income tax brackets and (to a lesser degree) automation. Charts: [0] https://www.federalreserve.gov/releases/z1/dataviz/dfa/distribute/chart/#range:1989.3,2020.4 https://www.federalreserve.gov/releases/z1/dataviz/dfa/distr... https://fred.stlouisfed.org/series/WFRBST01134 https://fred.stlouisfed.org/series/WFRBST01134
- dannyw 5y ago
  Inflation reduces wealth inequality. inflation is good.
  - azinman2 5y ago
    It also depletes savings of the poor. You can’t say inflation or deflation is universally good or bad. They have many effects.
    - pessimizer 5y ago
      The poor don't have savings, they have debts.
      - 5y ago

ineedasername 5y ago

It's not just about 12+ trillion added to spending, real costs of business have increased, driving up prices, such as the need to retrofit work environments and provide PPE, production slowdowns due to the need to rotate staff or when an outbreak occurs: Meat prices spiked very high when significant portions of of the meat processing industry went offline, and those prices haven't gone down. The entire supply/demand curve for many product classes have changed as a result of people staying home and buying different things. Yes, Pumping this much money into the economy it's hard to avoid inflation, but there's more factors to it than just that variable.

klmadfejno 5y ago
I was curious about meat prices because this didn't match my personal experience: https://www.ers.usda.gov/data-products/meat-price-spreads/ https://www.ers.usda.gov/data-products/meat-price-spreads/ Looks like meat prices spiked in Q2, peaking around June/July, and have fallen again. They're still elevated from this time two years ago, but they did go down.
- ineedasername 5y ago
  Yep, not long before that it when plants were shutting down temporary or reducing output. Then summer always pushes the prices up a bit too.
lostapathy 5y ago
As anecdata, I saw several local restaurants raise price a buck or two on burgers last year when supplies were crunched, and they promptly lowered them a handful of months later.
- ineedasername 5y ago
  They may have lowered prices back down due to lack of customers with COVID precautions still in place. However beef prices can be somewhat regional. Where I am anything other than ground beef is mostly still at least $2/lb more than usual. Ground beef is it a little more than usual.