5 ms·

Two words: base effects. Year-over-year comparisons reflect the abysmal economic conditions during the pandemic. It's like comparing your current net income to

by aazaa 5y ago

Two words: base effects. Year-over-year comparisons reflect the abysmal economic conditions during the pandemic. It's like comparing your current net income to one year ago but one year ago you were unemployed and paying off student loans while today you have a job at Google. The comparisons to watch are month-over-month (MoM). The BLS reports MoM CPI increased 0.6%, after a 0.8% MoM increase in April: https://www.bls.gov/news.release/cpi.nr0.htm https://www.bls.gov/news.release/cpi.nr0.htm So the rate of CPI change is negative MoM. From the same page, BLS reports CPI less food and energy fell MoM from 0.9% in April to 0.7% in May. The real headline here should be that inflation is slowing on a MoM basis. It's that rate of change of inflation that matters. If it remains negative (disinflation), then price increases will continue to subside. But if CPI growth remains negative for long enough, it can translate into deflation. That's not an outcome being discussed widely now, and for that reason (among others) it should be considered seriously. Policy makers talk and act as if only one of those two outcomes truly terrifies them: deflation. Japan has been in an on-again-off-again deflationary slump for decades, despite the BoJ now owning a good chunk of the Japanese stock market, many years of QE, and substantial deficit spending.

bitshiftfaced 5y ago
> Year-over-year comparisons reflect the abysmal economic conditions during the pandemic. We can instead look at the growth over 12 months from May and compare it to that of April. If anything, I'd expect a more pronounced effect for April's YoY because it starts nearer to the bottom of the market. But instead, May's YoY looks slightly higher than April's.
whb07 5y ago
All of these “technical” measures are the work of people trying to explain and come up with clever ways to argue for their jobs and continuous involvement in monetary experiments. I want deflation to occur. There are enormous sectors where deflation is seen and everyone sees the obvious benefits[0]. But when it runs up against the work of the state printing money to finance the destruction of society, then deflation is seen as dangerous. The main argument the inflation lovers propose is, “well if the prices keep going down then people won’t buy anything as they’ll just wait longer for the product to get cheaper.” This is clearly false as the wants/needs are a “now” problem, and the PhDs at the FED have never seen the lines for Black Friday to purchase TVs and other consumer electronics. Why buy an iPhone 12 when in 2 years that same iPhone will be 50% off? Not only that, there is also an increase in sales by volume which could lead to more profits by lowering the price of a widget. There are huge segments of consumers that would consume at a lower price point! [0] Electronics/computing is an extremely obvious sign of deflation. Prices lowered, or goods improved and everyone benefits.
- lg 5y ago
  deflation is a tax on borrowing which discourages growth, causing more deflation ad nauseam.
  - bngybmgrglflps 5y ago
    Not ad nauseam. There's a floor, an equilibrium where countercyclical forces take over. (Besides: many people agreeing with this sentiment maintain that growth _per se_ is already an existential threat to human existence.) Inflation is a tax on saving which encourages malinvestment "bubbles" that fail catastrophically. Monetary policy addresses them by creating ever more money to encourage ever more synthetic growth. Once debt service threatens to consume the sovereign budget, monetary tightening ceases to be politically viable. Not for nothing, we appear to be living in the Keynesian "long run."
  - whb07 5y ago
    There’s massive deflation in consumer electronics and anything related to software and we’re seeing more consumption not less. “Hey Joe, I know you like that $1000 machine, but are you willing to buy a better one for $500?” “Gee, no thanks!”
- ericmay 5y ago
  > The main argument the inflation lovers propose is, “well if the prices keep going down then people won’t buy anything as they’ll just wait longer for the product to get cheaper.” I'm not sure if I have seen that argument very often. It's not a great one, for sure, because at some point prices kind of just stabilize long enough for people to decide it's time to make a purchase. So sure maybe that happens in the short term, but not the long term. The inverse is true too - people are rushing out to buy cars and things anticipating the prices will continue to go up. The strongest argument I've seen against strict deflation just comes down to competitiveness of exports.
- imtringued 5y ago
  >I want deflation to occur. There are enormous sectors where deflation is seen and everyone sees the obvious benefits[0]. But when it runs up against the work of the state printing money to finance the destruction of society, then deflation is seen as dangerous. Greece has deflation and Japan is very close to deflation. Are those countries examples to look up to? I don't think so. >The main argument the inflation lovers propose is, “well if the prices keep going down then people won’t buy anything as they’ll just wait longer for the product to get cheaper.” The argument in favor of inflation is that future incomes are greater than past incomes, therefore inflation is a tax on old money and helps new people enter into the economy and encourage them to keep working. The other factor is that inflation is like a bluing dye used in machining. It shows the high spots that you have to scrape off to get a flat surface. It can therefore be used to reallocate limited resources to more productive sectors of the economy. Inflation is an incentive to invest your money, as otherwise it would sit in your bank account and do nothing except cause unemployment, which causes the productivity of the country to go down. “well if the prices keep going down then people won’t buy anything as they’ll just wait longer for the product to get cheaper.” We have reached a point where billionaires (and companies) have more money than they could possibly spend in a lifetime. One billionaire doing nothing with his money is equivalent to a million poor people ($1000 in their bank account) not doing something with their money. As inflation is a percentage it affects people proportional to their savings, billionaires lose the most and are forced to invest their money for the benefit of the rest of the economy. Meanwhile poor people lose the least, because they don't have that many savings to begin with and the loss that they experience would be more than recovered by finding a better paying job or by finding a job at all. >[0] Electronics/computing is an extremely obvious sign of deflation. Prices lowered, or goods improved and everyone benefits. With inflation incomes go up and prices stay roughly the same. Therefore you benefit from productivity growth but not by hoarding old money earned hundreds of years ago. Meanwhile deflation works exactly the opposite way. The richer you are, the more you benefit from deflation. The earlier you have earned your money, the better.
imtringued 5y ago
BLS shows extreme inflation in energy prices and used car prices. Those things are not surprising and they certainly are going away once supply shocks in the semiconductor industry have been resolved. Oil didn't disappear from the face of earth either and it's known to be volatile all the time. If anything oil cartels love times like these and will pump more oil.
- majormajor 5y ago
  I feel like I understand a lot of the pandemic and post-pandemic demand spikes, but used cars elude me. Is it just people wanting new cars less, or less new cars being available?
  - brianlweiner 5y ago
    Two factors that I'm aware of: -- Early in the pandemic, travel was way down. Rental car companies unloaded a lot of their fleet that were sitting idle. Now that demand is back up, they are back on the market for vehicles. -- Semiconductor shortages: automobile manufacturers cut their orders in early 2020 anticipating a decline in demand. That decline never happened, so they're now now able to obtain sufficient chips for new vehicle manufacturing. Thus a decline in new car availability that might push some car-buyers onto the secondary market.
  - jihadjihad 5y ago
    Part of what's driving the prices in used cars upwards is the inability to manufacture enough new cars to meet demand, which in turn is caused by a global chip shortage / volatile chip supply.
  - deleted 5y ago
    [deleted]
  - danans 5y ago
    > Is it just people wanting new cars less, or less new cars being available? Both. New cars are very expensive and most people can't afford them. The used car market is nearly 3x the size of the new car market (in cars sold, not $). Also, as cars have become more reliable many who would otherwise buy new are buying lightly used off-lease cars (i.e. certified pre-owned). Many people understand the instant depreciation hit that comes with a new car, and want to avoid it. Add to all that there is currently a supply chain issue for critical parts needed for new cars.
xhrpost 5y ago
> Year-over-year comparisons reflect the abysmal economic conditions during the pandemic. Great point, May of 2020 is the valley for the price drop so makes sense to see it much higher since then as we "make up" for lost time. If we instead look back to February 2020 before the dip, can we annualize including that? If my math is correct, we could determine the average monthly inflation (not including compounding) and then multiply by 12 to annualize it? If so, we're looking at about 2.8% inflation, which is still above the Fed target but not terrible. 268.551(feb20)-258.824(may21) = 9.727 (( 9.727 / 258.824) / 16) * 12 = .0282 https://fred.stlouisfed.org/series/CPIAUCSL#0 https://fred.stlouisfed.org/series/CPIAUCSL#0
missedthecue 5y ago
The sum is a 2.7% increase and we are 5/12ths of the way through the year. The average monthly increase has been 0.54%. To keep inflation to only 3% this year we would need to slow to 0.04% per month. To keep inflation to only 4% this year we would need to slow to 0.18% per month. Continuing at a 0.54% pace, we will hit 6.48% inflation for the year. Additionally, deflation shouldn't terrify any central bank, because it's much simpler to remedy. Inflation is much harder to fix.
- RamshackleJ 5y ago
  Inflation is easy to fix, default on your debt and stop printing to service that debt.
  - jjeaff 5y ago
    You don't have to default on anything. Just raise taxes and service debt with that revenue and stop or slow more borrowing.
kerng 5y ago
Simple reason: money printing by the government. The loss of value of the USD is likely continuing if the aggressive printing goes on.
- quotemstr 5y ago
  Often, a simple common-sense understanding of the world produces better results than some complicated official narrative that all the important people profess to believe. It takes a lot of intellectual work to persuade yourself that some theory is right and that your eyes are wrong. Here's a graph of money supply over time [1]: https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL See the hockey stick on the right? That's going to cause inflation. I'm sick and tired of hearing about base effects, transient demand spikes, and other garbage. All of this complicated analysis amounts to a mixture of wishful thinking, deliberate public deception, and psychological denial of the obvious. The obvious reality is that there are a now more dollars chasing fewer goods and services, and that's going to increase the general price level. Don't try to bullshit me with some complicated theory that says otherwise. [1] This is the current up-to-date officially-supported M2 money supply series from the fed. It incorporates M1. Don't bullshit me by talking about the recent change in the definition of M1: it's all incorporated into M2 here.
  - deleted 5y ago
    [deleted]
  - jfengel 5y ago
    It has caused inflation. In assets. The stock market has gone through the roof. So have some other assets, like cryptocurrencies and some real estate. What it hasn't caused is significant inflation in consumer goods. That "hockey stick" has been going on for north of a decade, and the inflation rate for consumer goods has been under target for most of that time. The increased money supply isn't in the hands of consumers. The only money given directly to consumers was given at a time when enormous numbers of them were out of work, reducing demand. More dollars aren't chasing fewer goods and services. They're chasing the same supply of stocks (and houses and Bitcoins). It's long past time for the Fed to stop giving money to the asset markets. It's not "trickling down" in the form of business creation, as they hoped. It's just being used to pump up stock prices. But that also means that this isn't the sky-is-falling inflation monetarists have predicted 97 out of the last 2 times. This really, genuinely is part of all of that "garbage" you're so tired of hearing about but which is actually true. The inflation you seek really is obvious. It's right there, in the stock market. It doesn't require complicated analysis to see it.

by aazaa 5y ago

bitshiftfaced 5y ago

> Year-over-year comparisons reflect the abysmal economic conditions during the pandemic. We can instead look at the growth over 12 months from May and compare it to that of April. If anything, I'd expect a more pronounced effect for April's YoY because it starts nearer to the bottom of the market. But instead, May's YoY looks slightly higher than April's.

whb07 5y ago

All of these “technical” measures are the work of people trying to explain and come up with clever ways to argue for their jobs and continuous involvement in monetary experiments. I want deflation to occur. There are enormous sectors where deflation is seen and everyone sees the obvious benefits[0]. But when it runs up against the work of the state printing money to finance the destruction of society, then deflation is seen as dangerous. The main argument the inflation lovers propose is, “well if the prices keep going down then people won’t buy anything as they’ll just wait longer for the product to get cheaper.” This is clearly false as the wants/needs are a “now” problem, and the PhDs at the FED have never seen the lines for Black Friday to purchase TVs and other consumer electronics. Why buy an iPhone 12 when in 2 years that same iPhone will be 50% off? Not only that, there is also an increase in sales by volume which could lead to more profits by lowering the price of a widget. There are huge segments of consumers that would consume at a lower price point! [0] Electronics/computing is an extremely obvious sign of deflation. Prices lowered, or goods improved and everyone benefits.

lg 5y ago
deflation is a tax on borrowing which discourages growth, causing more deflation ad nauseam.
- bngybmgrglflps 5y ago
  Not ad nauseam. There's a floor, an equilibrium where countercyclical forces take over. (Besides: many people agreeing with this sentiment maintain that growth _per se_ is already an existential threat to human existence.) Inflation is a tax on saving which encourages malinvestment "bubbles" that fail catastrophically. Monetary policy addresses them by creating ever more money to encourage ever more synthetic growth. Once debt service threatens to consume the sovereign budget, monetary tightening ceases to be politically viable. Not for nothing, we appear to be living in the Keynesian "long run."
- whb07 5y ago
  There’s massive deflation in consumer electronics and anything related to software and we’re seeing more consumption not less. “Hey Joe, I know you like that $1000 machine, but are you willing to buy a better one for $500?” “Gee, no thanks!”
ericmay 5y ago
> The main argument the inflation lovers propose is, “well if the prices keep going down then people won’t buy anything as they’ll just wait longer for the product to get cheaper.” I'm not sure if I have seen that argument very often. It's not a great one, for sure, because at some point prices kind of just stabilize long enough for people to decide it's time to make a purchase. So sure maybe that happens in the short term, but not the long term. The inverse is true too - people are rushing out to buy cars and things anticipating the prices will continue to go up. The strongest argument I've seen against strict deflation just comes down to competitiveness of exports.
imtringued 5y ago
>I want deflation to occur. There are enormous sectors where deflation is seen and everyone sees the obvious benefits[0]. But when it runs up against the work of the state printing money to finance the destruction of society, then deflation is seen as dangerous. Greece has deflation and Japan is very close to deflation. Are those countries examples to look up to? I don't think so. >The main argument the inflation lovers propose is, “well if the prices keep going down then people won’t buy anything as they’ll just wait longer for the product to get cheaper.” The argument in favor of inflation is that future incomes are greater than past incomes, therefore inflation is a tax on old money and helps new people enter into the economy and encourage them to keep working. The other factor is that inflation is like a bluing dye used in machining. It shows the high spots that you have to scrape off to get a flat surface. It can therefore be used to reallocate limited resources to more productive sectors of the economy. Inflation is an incentive to invest your money, as otherwise it would sit in your bank account and do nothing except cause unemployment, which causes the productivity of the country to go down. “well if the prices keep going down then people won’t buy anything as they’ll just wait longer for the product to get cheaper.” We have reached a point where billionaires (and companies) have more money than they could possibly spend in a lifetime. One billionaire doing nothing with his money is equivalent to a million poor people ($1000 in their bank account) not doing something with their money. As inflation is a percentage it affects people proportional to their savings, billionaires lose the most and are forced to invest their money for the benefit of the rest of the economy. Meanwhile poor people lose the least, because they don't have that many savings to begin with and the loss that they experience would be more than recovered by finding a better paying job or by finding a job at all. >[0] Electronics/computing is an extremely obvious sign of deflation. Prices lowered, or goods improved and everyone benefits. With inflation incomes go up and prices stay roughly the same. Therefore you benefit from productivity growth but not by hoarding old money earned hundreds of years ago. Meanwhile deflation works exactly the opposite way. The richer you are, the more you benefit from deflation. The earlier you have earned your money, the better.

imtringued 5y ago

BLS shows extreme inflation in energy prices and used car prices. Those things are not surprising and they certainly are going away once supply shocks in the semiconductor industry have been resolved. Oil didn't disappear from the face of earth either and it's known to be volatile all the time. If anything oil cartels love times like these and will pump more oil.

majormajor 5y ago
I feel like I understand a lot of the pandemic and post-pandemic demand spikes, but used cars elude me. Is it just people wanting new cars less, or less new cars being available?
- brianlweiner 5y ago
  Two factors that I'm aware of: -- Early in the pandemic, travel was way down. Rental car companies unloaded a lot of their fleet that were sitting idle. Now that demand is back up, they are back on the market for vehicles. -- Semiconductor shortages: automobile manufacturers cut their orders in early 2020 anticipating a decline in demand. That decline never happened, so they're now now able to obtain sufficient chips for new vehicle manufacturing. Thus a decline in new car availability that might push some car-buyers onto the secondary market.
- jihadjihad 5y ago
  Part of what's driving the prices in used cars upwards is the inability to manufacture enough new cars to meet demand, which in turn is caused by a global chip shortage / volatile chip supply.
- deleted 5y ago
  [deleted]
- danans 5y ago
  > Is it just people wanting new cars less, or less new cars being available? Both. New cars are very expensive and most people can't afford them. The used car market is nearly 3x the size of the new car market (in cars sold, not $). Also, as cars have become more reliable many who would otherwise buy new are buying lightly used off-lease cars (i.e. certified pre-owned). Many people understand the instant depreciation hit that comes with a new car, and want to avoid it. Add to all that there is currently a supply chain issue for critical parts needed for new cars.

xhrpost 5y ago

> Year-over-year comparisons reflect the abysmal economic conditions during the pandemic. Great point, May of 2020 is the valley for the price drop so makes sense to see it much higher since then as we "make up" for lost time. If we instead look back to February 2020 before the dip, can we annualize including that? If my math is correct, we could determine the average monthly inflation (not including compounding) and then multiply by 12 to annualize it? If so, we're looking at about 2.8% inflation, which is still above the Fed target but not terrible. 268.551(feb20)-258.824(may21) = 9.727 (( 9.727 / 258.824) / 16) * 12 = .0282 https://fred.stlouisfed.org/series/CPIAUCSL#0 https://fred.stlouisfed.org/series/CPIAUCSL#0

missedthecue 5y ago

The sum is a 2.7% increase and we are 5/12ths of the way through the year. The average monthly increase has been 0.54%. To keep inflation to only 3% this year we would need to slow to 0.04% per month. To keep inflation to only 4% this year we would need to slow to 0.18% per month. Continuing at a 0.54% pace, we will hit 6.48% inflation for the year. Additionally, deflation shouldn't terrify any central bank, because it's much simpler to remedy. Inflation is much harder to fix.

RamshackleJ 5y ago
Inflation is easy to fix, default on your debt and stop printing to service that debt.
- jjeaff 5y ago
  You don't have to default on anything. Just raise taxes and service debt with that revenue and stop or slow more borrowing.

kerng 5y ago

Simple reason: money printing by the government. The loss of value of the USD is likely continuing if the aggressive printing goes on.

quotemstr 5y ago
Often, a simple common-sense understanding of the world produces better results than some complicated official narrative that all the important people profess to believe. It takes a lot of intellectual work to persuade yourself that some theory is right and that your eyes are wrong. Here's a graph of money supply over time [1]: https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL See the hockey stick on the right? That's going to cause inflation. I'm sick and tired of hearing about base effects, transient demand spikes, and other garbage. All of this complicated analysis amounts to a mixture of wishful thinking, deliberate public deception, and psychological denial of the obvious. The obvious reality is that there are a now more dollars chasing fewer goods and services, and that's going to increase the general price level. Don't try to bullshit me with some complicated theory that says otherwise. [1] This is the current up-to-date officially-supported M2 money supply series from the fed. It incorporates M1. Don't bullshit me by talking about the recent change in the definition of M1: it's all incorporated into M2 here.
- deleted 5y ago
  [deleted]
- jfengel 5y ago
  It has caused inflation. In assets. The stock market has gone through the roof. So have some other assets, like cryptocurrencies and some real estate. What it hasn't caused is significant inflation in consumer goods. That "hockey stick" has been going on for north of a decade, and the inflation rate for consumer goods has been under target for most of that time. The increased money supply isn't in the hands of consumers. The only money given directly to consumers was given at a time when enormous numbers of them were out of work, reducing demand. More dollars aren't chasing fewer goods and services. They're chasing the same supply of stocks (and houses and Bitcoins). It's long past time for the Fed to stop giving money to the asset markets. It's not "trickling down" in the form of business creation, as they hoped. It's just being used to pump up stock prices. But that also means that this isn't the sky-is-falling inflation monetarists have predicted 97 out of the last 2 times. This really, genuinely is part of all of that "garbage" you're so tired of hearing about but which is actually true. The inflation you seek really is obvious. It's right there, in the stock market. It doesn't require complicated analysis to see it.