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There are some very intelligent folks making some very well reasoned arguments claiming we're about to see: - inflation returning to historical norms - transi

There are some very intelligent folks making some very well reasoned arguments claiming we're about to see: - inflation returning to historical norms - transient inflation followed by moderate inflation - transient inflation followed by a return to deflation - hyper inflation, with or without a loss of reserve currency status for the USD I'm just sitting here with a balanced portfolio and no leverage hoping to preserve my modest wealth. It certainly will be interesting to watch it play out. What is certain is that somewhere between 75-100% of all the predictions will be totally wrong and yet we will continue to believe the people making the incorrect predictions, especially when they reinforce our worldview.

throw0101a 5y ago
> What is certain is that somewhere between 75-100% of all the predictions will be totally wrong and yet we will continue to believe the people making the incorrect predictions, especially when they reinforce our worldview. Case in point, written over ten years ago, in November 2010: > 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...
- R0b0t1 5y ago
  A pretty empty statement, as noted QE did not really help employment and contributed to asset inflation. We haven't seen debasement yet, but we're 2/3 bad outcomes.
  - ivalm 5y ago
    That’s just really false. European austerity after ‘08 presents a nice counterfactual showing benefits of QE.
    - b9a2cab5 5y ago
      Deficit spending is not the same as QE. In fact they're orthogonal. Keynesian economists believe you should deficit spend during recessions and pay down the deficit during booms, but the latter part doesn't ever end up happening because raising taxes is politically toxic so the deficit gets inflated away via QE. The U.S. could just as easily have operated at a big deficit during the recession and paid it back during 2012-2018 without QE.
      - ivalm 5y ago
        That’s a half truth, if you want to sell lots of treasuries at low yield, which was the case, you have to QE. There is a clear benefit to low yield debt in deficit spending, and so far no real harm (>10 years later!)
        b9a2cab5 5y ago
        I would argue an asset bubble is quite a real harm, especially to future generations that are getting into the market at the current inflated valuation levels. But to each their own.
        ivalm 5y ago
        Asset prices as they impact real people are reflected in CPI, which shows low inflation. The fact that cash flow instruments are higher priced (and that’s largely because of low interest rather than QE) is kind of orthogonal to most people’s lives.
      - throw0101a 5y ago
        > Deficit spending is not the same as QE. While true, the European Central Bank (ECB) did raise rates at one point. Krugman (a Keynesian) sad this was a bad idea at the time, and that it would cause the recover to stall. And it did. Because the ECB is generally run by Germans and they have an (anti-)inflation fetish, and so at the first hit of it they 'panic. Moral of the story: listen to the Keynesian. I've been reading Krugman since ~2008, and he's been pretty right on most of the major monetary/fiscal policy points.
- throwaway34241 5y ago
  It's tempting to write off economics as a field based on this sort of stuff, but I think that would be unfair to the economics profession. I don't want to get too into the politics here, but I follow the financial news, and it's hard not to notice how the economic analysis can often be very different based on political affiliations. This letter was published in the Wall St. Journal, and many of the signatories work for the Hoover Institution, AEI, etc. I don't like saying it because it sounds so partisan, but these groups tend to be very concerned about the deficit / inflation / easy money policies during Democratic administrations. During the same time period, the top economist at the Times was predicting low inflation and a slow recovery, and of course the federal reserve board itself had a different view which is why it took the actions it did. So did wall street / the markets, which did not have high inflation expectations priced in. How economics is reported in the media is some combination of academic economics / politics / the media, and I'm not sure academic economics is really the biggest issue in that group. I think it's worth listening to what economists think, but it's important to look at their track record to be aware the media may be reporting a minority opinion in the field based on their political leanings.
  - spamizbad 5y ago
    If your top concern is fighting inflation, you actually have several other tools at your disposal than Federal Reserve policy. One example is raising income taxes. Others include supply-side pressure to lower the costs of major goods. Sadly, the former is politically risky and the latter takes a while to show up.
- b9a2cab5 5y ago
  They were right about some of that. QE didn't have any noticeable impact on employment, and although general inflation didn't see much impact (if any), asset inflation went through the roof. Housing prices, stocks, etc. all point to insane asset inflation. One could also make the argument that the skyrocketing cost of college is due in part to the lower interest rates caused by QE (along with government guarantees on student loans and the inability to shed them in bankruptcy). The currency didn't depreciate relative to other currencies, but is that because it held its value or because other currencies were also QEing their way out of the recession?
  - throw0101a 5y ago
    > They were right about some of that. QE didn't have any noticeable impact on employment, and although general inflation didn't see much impact (if any), asset inflation went through the roof. They were right about none of it. QE wasn't primary aimed at employment: that was what the stimulus was for. Except, in the US, the GOP deficit hawks insisted it be watered down. > 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... And when these folks were talking about "inflation" they were referring to CPI and the risk of Wiemar Germany, not assets. And I wish people would stop using "asset inflation", as it muddies the waters wit regards to what "inflation" means, and there's already another term: * https://en.wikipedia.org/wiki/Economic_bubble https://en.wikipedia.org/wiki/Economic_bubble And the reason why assets are going up is because there are "excess" savings: a bunch of money sitting around doing nothing because there's not much spending. Japan has been in this situation since the mid- to late-1990s: * https://en.wikipedia.org/wiki/Secular_stagnation https://en.wikipedia.org/wiki/Secular_stagnation Perhaps someone should start spending so the money is being used for something besides earning interest on interest. > The currency didn't depreciate relative to other currencies, but is that because it held its value or because other currencies were also QEing their way out of the recession? So basically another prediction by the inflationists was a no-op.
- lend000 5y ago
  We did get tremendous asset inflation. QE is arguably one of the greatest drivers of wealth inequality. If the QE was done to fund social security payments (i.e. a broad check to every American instead of asset inflation mostly benefitting the wealthy), we would see real inflation materialize. That is basically what is happening now, and commodities have already been putting up 30%+ inflation numbers. It's only a matter of time before the contract for the beef in your Big Mac (which was negotiated years ago) is renegotiated in the current inflated commodity market.
  - throw0101a 5y ago
    > We did get tremendous asset inflation. I wish people would stop using "inflation" in conjunction with "asset". It just causes confusion in what inflation actually means, and there's already a term for what you are referring to: * https://en.wikipedia.org/wiki/Economic_bubble https://en.wikipedia.org/wiki/Economic_bubble > QE is arguably one of the greatest drivers of wealth inequality. If the QE was done to fund social security payments That is the job of legislators, not central banks. In the US the Federal Reserve isn't a fairy godmother or genie that can solve all of society's ills. They did what they could and were allowed to make sure the system works. Where was Congress? > That is basically what is happening now, and commodities have already been putting up 30%+ inflation numbers. The price of copper tripled between December 2008 and February 2011: * https://fred.stlouisfed.org/series/PCOPPUSDM https://fred.stlouisfed.org/series/PCOPPUSDM And it led to… precisely nothing. A sluggish recovery which took too long because of a lacklustre stimulus because of the deficit hawks. These rise in numbers were predicted months ago: > 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. * 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
    - lend000 5y ago
      > there's already a term for what you are referring to A bubble suggests the inherent overvaluation in a natural market cycle. Inflation is used intentionally to differentiate that the price is higher because money was artificially injected, so the normal rules for identifying market exuberance (assuming you had perfect information) are distorted. > That is the job of legislators, not central banks. The central banks buy whatever debt the legislators need to be financed, in the real world. During the pandemic, that meant buying insanely expensive (low interest) treasuries to finance stimulus checks, as well as direct economic injections. > The price of copper tripled between December 2008 and February 2011: That's one commodity. Indexes exist so that we may prevent this misleading thinking. Law of large numbers, etc. As I posted a few weeks 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%. The real estate market is in a frenzy. SPX is up 25%, despite almost certainly taking a productivity hit as a whole. Shortages due to shutdowns are a factor, but all the same, if there's a shortage of everything and an excess of cash, what do you get? (...Inflation).
lumost 5y ago
I'm in much the same boat, ultimately this is why some form of stable money is required for a functional economy. The uncertainty causes one to think about hedging their bets rather than finding the next big thing, creating their own business, or simply planning for the future. I would say that the consensus view in the U.S./E.U./JP that central banks can run negative interest rates indefinitely is leading to some unsustainable peculiarities. Stocks should not be viewed as the only thing that can be owned, and future growth shouldn't be priced in decades in advance.
- pavlov 5y ago
  How would “stable money” incentivize finding the next big thing? Funding innovation is a hedge.
  - visualradio 5y ago
    "Stable money" isn't an exact policy. But in U.S. most money is created through real estate mortgages, so stable money could mean credit guidance, and countries such as China have used window guidance to avoid excessive real estate bubbles in order to maintain an industrial base. Ideally federally backed mortgages would be issued on security of the minimum replacement cost of fixed capital rather than on comparable sales price. If it costs $150,000 in labor and materials to replace a small house and fixtures with a new home of equal utility, but comparable sales price is appraised at $400,000, creating money through federally backed mortgages to sustain the valuation does not really create more money for private sector innovation, it creates asset gains for passive investors which are making money without innovating. Requiring federally backed mortgages and equity loans to be issued on at least half security of fixed capital whenever the comparable sales price exceeds 200% of the replacement cost would not starve the private sector of money, it would simply encourage investors not to throw away the industrial base economy the innovation economy was built on, or to at least fudge asset valuations higher by writing up the labor replacement cost rather than the intangible benefits so wages tracked productivity gains more closely.
- addicted 5y ago
  Stable money does not make much sense. First, what does stable money mean. Most people would agree what they mean is that if $5 today gets you a loaf of bread, that $5 will buy you a loaf of bread a year or so from now as well. Let’s say you have a closed economic system which only produces bread, has 10 producers, and $100 in total. Those 10 producers create 20 loaves of bread, so a loaf of bread is $5. But what happens if they are hit by a meteor and 5 of the producers die. Now you still have $100 but only 10 loaves can be produced. So what would it mean to keep the price of money stable? If you still force a loaf of bread to be $5, after the first 10 loaves are bought, you’re out of loaves ans the remaining $50 have effectively inflated away to be worthless. Instability of currencies, therefore, is a natural consequence of imbalances between the supply of money and the production of goods and services. The US has actually done a tremendous job keeping the USD fairly stable, by printing more money to account for growing economic output (due to a variety of reasons, technology being one of them). That being said, there is always a bias towards low inflation as opposed to low deflation, because deflation can be an economy killer. If the value of cash increases with time (in other words, if $5 today buys you 1 loaf of bread, it will get you 2 loaves of bread a year from now), then the risk adjusted returns from any investment needs to be that much greater for an investor to invest. Even a small percent or 2 of deflation can have an oversized effect that would lead to a significantly smaller economy.
542458 5y ago
I haven’t seen any well-reasoned arguments for hyperinflation.
- ericmay 5y ago
  Yea same. Inflation now has been lead by automobiles and semiconductors as far as consumer prices are concerned. And go figure that’s due to just-in-time manufacturing having a black swan event. The idea of hyperinflation meaning 20%-50% increases in prices month over month is nonsense. People point to countries like Germany at the end of WWI as if it’s relevant or telling - it’s not. The circumstances are so completely different you might as well argue we’ll have deflation because of it. Pure nonsense. There’s some concern about asset prices, though. Again, this is general inflation, however. I’d love to see a well-reasoned argument saying we are heading toward hyperinflation (somehow the U.S. only). But… I’ll believe it when I see it.
  - tryonenow 5y ago
    I think politically circumstances are far more similar in the US to pre-WWII Germany than most people realize.
- lasagnaphil 5y ago
  Hyperinflation will ensue once the US dollar suddenly and completely loses its status as a global reserve currency. This is because the US is a heavily import-based country that has relied on the it strength of the dollar. When that dollar stops having foreign purchase power, there will be a huge scarcity in a variety of commodities (mainly manufactured goods), which would only recover once domestic manufacturing recovers to provide the supply (which takes quite some time, to rebuild all those factories and infrastructure that were gone due to deindustrialization) That might possibly happen in the next few decades, but obviously this is quite far from what others have been talking about (money-printing and QE leading to hyperinflation)
  - activez 5y ago
    > This is because the US is a heavily import-based country Is it really? It is probably one of the countries that rely less per % of GDP on imports: https://en.wikipedia.org/wiki/List_of_countries_by_trade-to-GDP_ratio https://en.wikipedia.org/wiki/List_of_countries_by_trade-to-...
anm89 5y ago
> hyper inflation, with or without a loss of reserve currency status for the USD Honest question: Who do you hear suggesting hyper inflation is coming? I personally cannot think of many people publicly making this claim
- 01100011 5y ago
  I watch a lot of "economic doom porn" on YouTube these days and see it fairly often. Usually it's coming from a gold bug or a crypto zealot. I'd say Ray Dalio and Peter Schiff are pretty negative on the USD, although neither one is an economist.
  - anm89 5y ago
    Ha fair enough. I occasionally watch some of that as well although I try not to. But yeah my impression is that almost all of the voices calling for hyper inflation are coming out of that sector. To be fair, I would say even Dalio would expect strong inflation but not hyperinflation from what I've heard from him.
  - atq2119 5y ago
    I wouldn't call economic doom porn "very well reasoned". And conversely, if it's truly very well reasoned, I wouldn't call it porn.
    - anm89 5y ago
      They are one trick pony channels that create an echo chamber for their audience. However like many other terrible things with a following, there is a grain of truth that reels people in. I would argue there are a couple decent grains of truth in that mostly best to avoid category.
squidproquo 5y ago
If anyone dabbles in forecasting the Consumer Price Index (CPI), add your forecast here: https://www.unitarity.com/app/challenges/us-consumer-price-index/events/may-21 https://www.unitarity.com/app/challenges/us-consumer-price-i...

throw0101a 5y ago

> What is certain is that somewhere between 75-100% of all the predictions will be totally wrong and yet we will continue to believe the people making the incorrect predictions, especially when they reinforce our worldview. Case in point, written over ten years ago, in November 2010: > 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...

R0b0t1 5y ago
A pretty empty statement, as noted QE did not really help employment and contributed to asset inflation. We haven't seen debasement yet, but we're 2/3 bad outcomes.
- ivalm 5y ago
  That’s just really false. European austerity after ‘08 presents a nice counterfactual showing benefits of QE.
  - b9a2cab5 5y ago
    Deficit spending is not the same as QE. In fact they're orthogonal. Keynesian economists believe you should deficit spend during recessions and pay down the deficit during booms, but the latter part doesn't ever end up happening because raising taxes is politically toxic so the deficit gets inflated away via QE. The U.S. could just as easily have operated at a big deficit during the recession and paid it back during 2012-2018 without QE.
    - ivalm 5y ago
      That’s a half truth, if you want to sell lots of treasuries at low yield, which was the case, you have to QE. There is a clear benefit to low yield debt in deficit spending, and so far no real harm (>10 years later!)
      - b9a2cab5 5y ago
        I would argue an asset bubble is quite a real harm, especially to future generations that are getting into the market at the current inflated valuation levels. But to each their own.
        ivalm 5y ago
        Asset prices as they impact real people are reflected in CPI, which shows low inflation. The fact that cash flow instruments are higher priced (and that’s largely because of low interest rather than QE) is kind of orthogonal to most people’s lives.
    - throw0101a 5y ago
      > Deficit spending is not the same as QE. While true, the European Central Bank (ECB) did raise rates at one point. Krugman (a Keynesian) sad this was a bad idea at the time, and that it would cause the recover to stall. And it did. Because the ECB is generally run by Germans and they have an (anti-)inflation fetish, and so at the first hit of it they 'panic. Moral of the story: listen to the Keynesian. I've been reading Krugman since ~2008, and he's been pretty right on most of the major monetary/fiscal policy points.
throwaway34241 5y ago
It's tempting to write off economics as a field based on this sort of stuff, but I think that would be unfair to the economics profession. I don't want to get too into the politics here, but I follow the financial news, and it's hard not to notice how the economic analysis can often be very different based on political affiliations. This letter was published in the Wall St. Journal, and many of the signatories work for the Hoover Institution, AEI, etc. I don't like saying it because it sounds so partisan, but these groups tend to be very concerned about the deficit / inflation / easy money policies during Democratic administrations. During the same time period, the top economist at the Times was predicting low inflation and a slow recovery, and of course the federal reserve board itself had a different view which is why it took the actions it did. So did wall street / the markets, which did not have high inflation expectations priced in. How economics is reported in the media is some combination of academic economics / politics / the media, and I'm not sure academic economics is really the biggest issue in that group. I think it's worth listening to what economists think, but it's important to look at their track record to be aware the media may be reporting a minority opinion in the field based on their political leanings.
- spamizbad 5y ago
  If your top concern is fighting inflation, you actually have several other tools at your disposal than Federal Reserve policy. One example is raising income taxes. Others include supply-side pressure to lower the costs of major goods. Sadly, the former is politically risky and the latter takes a while to show up.
b9a2cab5 5y ago
They were right about some of that. QE didn't have any noticeable impact on employment, and although general inflation didn't see much impact (if any), asset inflation went through the roof. Housing prices, stocks, etc. all point to insane asset inflation. One could also make the argument that the skyrocketing cost of college is due in part to the lower interest rates caused by QE (along with government guarantees on student loans and the inability to shed them in bankruptcy). The currency didn't depreciate relative to other currencies, but is that because it held its value or because other currencies were also QEing their way out of the recession?
- throw0101a 5y ago
  > They were right about some of that. QE didn't have any noticeable impact on employment, and although general inflation didn't see much impact (if any), asset inflation went through the roof. They were right about none of it. QE wasn't primary aimed at employment: that was what the stimulus was for. Except, in the US, the GOP deficit hawks insisted it be watered down. > 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... And when these folks were talking about "inflation" they were referring to CPI and the risk of Wiemar Germany, not assets. And I wish people would stop using "asset inflation", as it muddies the waters wit regards to what "inflation" means, and there's already another term: * https://en.wikipedia.org/wiki/Economic_bubble https://en.wikipedia.org/wiki/Economic_bubble And the reason why assets are going up is because there are "excess" savings: a bunch of money sitting around doing nothing because there's not much spending. Japan has been in this situation since the mid- to late-1990s: * https://en.wikipedia.org/wiki/Secular_stagnation https://en.wikipedia.org/wiki/Secular_stagnation Perhaps someone should start spending so the money is being used for something besides earning interest on interest. > The currency didn't depreciate relative to other currencies, but is that because it held its value or because other currencies were also QEing their way out of the recession? So basically another prediction by the inflationists was a no-op.
lend000 5y ago
We did get tremendous asset inflation. QE is arguably one of the greatest drivers of wealth inequality. If the QE was done to fund social security payments (i.e. a broad check to every American instead of asset inflation mostly benefitting the wealthy), we would see real inflation materialize. That is basically what is happening now, and commodities have already been putting up 30%+ inflation numbers. It's only a matter of time before the contract for the beef in your Big Mac (which was negotiated years ago) is renegotiated in the current inflated commodity market.
- throw0101a 5y ago
  > We did get tremendous asset inflation. I wish people would stop using "inflation" in conjunction with "asset". It just causes confusion in what inflation actually means, and there's already a term for what you are referring to: * https://en.wikipedia.org/wiki/Economic_bubble https://en.wikipedia.org/wiki/Economic_bubble > QE is arguably one of the greatest drivers of wealth inequality. If the QE was done to fund social security payments That is the job of legislators, not central banks. In the US the Federal Reserve isn't a fairy godmother or genie that can solve all of society's ills. They did what they could and were allowed to make sure the system works. Where was Congress? > That is basically what is happening now, and commodities have already been putting up 30%+ inflation numbers. The price of copper tripled between December 2008 and February 2011: * https://fred.stlouisfed.org/series/PCOPPUSDM https://fred.stlouisfed.org/series/PCOPPUSDM And it led to… precisely nothing. A sluggish recovery which took too long because of a lacklustre stimulus because of the deficit hawks. These rise in numbers were predicted months ago: > 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. * 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
  - lend000 5y ago
    > there's already a term for what you are referring to A bubble suggests the inherent overvaluation in a natural market cycle. Inflation is used intentionally to differentiate that the price is higher because money was artificially injected, so the normal rules for identifying market exuberance (assuming you had perfect information) are distorted. > That is the job of legislators, not central banks. The central banks buy whatever debt the legislators need to be financed, in the real world. During the pandemic, that meant buying insanely expensive (low interest) treasuries to finance stimulus checks, as well as direct economic injections. > The price of copper tripled between December 2008 and February 2011: That's one commodity. Indexes exist so that we may prevent this misleading thinking. Law of large numbers, etc. As I posted a few weeks 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%. The real estate market is in a frenzy. SPX is up 25%, despite almost certainly taking a productivity hit as a whole. Shortages due to shutdowns are a factor, but all the same, if there's a shortage of everything and an excess of cash, what do you get? (...Inflation).

lumost 5y ago

I'm in much the same boat, ultimately this is why some form of stable money is required for a functional economy. The uncertainty causes one to think about hedging their bets rather than finding the next big thing, creating their own business, or simply planning for the future. I would say that the consensus view in the U.S./E.U./JP that central banks can run negative interest rates indefinitely is leading to some unsustainable peculiarities. Stocks should not be viewed as the only thing that can be owned, and future growth shouldn't be priced in decades in advance.

pavlov 5y ago
How would “stable money” incentivize finding the next big thing? Funding innovation is a hedge.
- visualradio 5y ago
  "Stable money" isn't an exact policy. But in U.S. most money is created through real estate mortgages, so stable money could mean credit guidance, and countries such as China have used window guidance to avoid excessive real estate bubbles in order to maintain an industrial base. Ideally federally backed mortgages would be issued on security of the minimum replacement cost of fixed capital rather than on comparable sales price. If it costs $150,000 in labor and materials to replace a small house and fixtures with a new home of equal utility, but comparable sales price is appraised at $400,000, creating money through federally backed mortgages to sustain the valuation does not really create more money for private sector innovation, it creates asset gains for passive investors which are making money without innovating. Requiring federally backed mortgages and equity loans to be issued on at least half security of fixed capital whenever the comparable sales price exceeds 200% of the replacement cost would not starve the private sector of money, it would simply encourage investors not to throw away the industrial base economy the innovation economy was built on, or to at least fudge asset valuations higher by writing up the labor replacement cost rather than the intangible benefits so wages tracked productivity gains more closely.
addicted 5y ago
Stable money does not make much sense. First, what does stable money mean. Most people would agree what they mean is that if $5 today gets you a loaf of bread, that $5 will buy you a loaf of bread a year or so from now as well. Let’s say you have a closed economic system which only produces bread, has 10 producers, and $100 in total. Those 10 producers create 20 loaves of bread, so a loaf of bread is $5. But what happens if they are hit by a meteor and 5 of the producers die. Now you still have $100 but only 10 loaves can be produced. So what would it mean to keep the price of money stable? If you still force a loaf of bread to be $5, after the first 10 loaves are bought, you’re out of loaves ans the remaining $50 have effectively inflated away to be worthless. Instability of currencies, therefore, is a natural consequence of imbalances between the supply of money and the production of goods and services. The US has actually done a tremendous job keeping the USD fairly stable, by printing more money to account for growing economic output (due to a variety of reasons, technology being one of them). That being said, there is always a bias towards low inflation as opposed to low deflation, because deflation can be an economy killer. If the value of cash increases with time (in other words, if $5 today buys you 1 loaf of bread, it will get you 2 loaves of bread a year from now), then the risk adjusted returns from any investment needs to be that much greater for an investor to invest. Even a small percent or 2 of deflation can have an oversized effect that would lead to a significantly smaller economy.

542458 5y ago

I haven’t seen any well-reasoned arguments for hyperinflation.

ericmay 5y ago
Yea same. Inflation now has been lead by automobiles and semiconductors as far as consumer prices are concerned. And go figure that’s due to just-in-time manufacturing having a black swan event. The idea of hyperinflation meaning 20%-50% increases in prices month over month is nonsense. People point to countries like Germany at the end of WWI as if it’s relevant or telling - it’s not. The circumstances are so completely different you might as well argue we’ll have deflation because of it. Pure nonsense. There’s some concern about asset prices, though. Again, this is general inflation, however. I’d love to see a well-reasoned argument saying we are heading toward hyperinflation (somehow the U.S. only). But… I’ll believe it when I see it.
- tryonenow 5y ago
  I think politically circumstances are far more similar in the US to pre-WWII Germany than most people realize.
lasagnaphil 5y ago
Hyperinflation will ensue once the US dollar suddenly and completely loses its status as a global reserve currency. This is because the US is a heavily import-based country that has relied on the it strength of the dollar. When that dollar stops having foreign purchase power, there will be a huge scarcity in a variety of commodities (mainly manufactured goods), which would only recover once domestic manufacturing recovers to provide the supply (which takes quite some time, to rebuild all those factories and infrastructure that were gone due to deindustrialization) That might possibly happen in the next few decades, but obviously this is quite far from what others have been talking about (money-printing and QE leading to hyperinflation)
- activez 5y ago
  > This is because the US is a heavily import-based country Is it really? It is probably one of the countries that rely less per % of GDP on imports: https://en.wikipedia.org/wiki/List_of_countries_by_trade-to-GDP_ratio https://en.wikipedia.org/wiki/List_of_countries_by_trade-to-...

anm89 5y ago

> hyper inflation, with or without a loss of reserve currency status for the USD Honest question: Who do you hear suggesting hyper inflation is coming? I personally cannot think of many people publicly making this claim

01100011 5y ago
I watch a lot of "economic doom porn" on YouTube these days and see it fairly often. Usually it's coming from a gold bug or a crypto zealot. I'd say Ray Dalio and Peter Schiff are pretty negative on the USD, although neither one is an economist.
- anm89 5y ago
  Ha fair enough. I occasionally watch some of that as well although I try not to. But yeah my impression is that almost all of the voices calling for hyper inflation are coming out of that sector. To be fair, I would say even Dalio would expect strong inflation but not hyperinflation from what I've heard from him.
- atq2119 5y ago
  I wouldn't call economic doom porn "very well reasoned". And conversely, if it's truly very well reasoned, I wouldn't call it porn.
  - anm89 5y ago
    They are one trick pony channels that create an echo chamber for their audience. However like many other terrible things with a following, there is a grain of truth that reels people in. I would argue there are a couple decent grains of truth in that mostly best to avoid category.

squidproquo 5y ago

If anyone dabbles in forecasting the Consumer Price Index (CPI), add your forecast here: https://www.unitarity.com/app/challenges/us-consumer-price-index/events/may-21 https://www.unitarity.com/app/challenges/us-consumer-price-i...