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Inflation climbs higher than expected in June as price index rises 5.4%
- tracedddd 5y agoHigher than expected by government agencies, obvious to everyone else.
- gruez 5y agoWeren't "everyone else" expecting rampant inflation since last year, when the fed started printing money? I guess if you make that prediction long enough it'll eventually come true.
- debacle 5y agoInflation doesn't happen overnight.
- tracedddd 5y agoI don’t think a few years is really very long when dealing with an economy of this size. I never expected hyperinflation, just runaway inflation.
- rmah 5y agoIt is, in fact, a very long time. Because economic cycles these days are 5 to 10 years long (which is pretty long historically). Being a bit off on your inflation call by just 2 or 3 years is essentially the same as being completely wrong.
- imtringued 5y agoLast year? People complained about QE as soon as it appeared in the press more than 8 years ago.
- spamizbad 5y agoPeople thought the USD was going to hyper-inflate in 2008-2009 and took huge bets against it... it ended up deflating.
- moate 5y agoListen man, dudes on the internet are tapped in. They get this stuff. Those stuffed suits in washington, with their economics degrees and tight working relationships with the mega-corps influencing pricing, they don't know squat. Everyone knows the only person who understands economics is the person talking at you about how they're the only one who knows economics. /s It's higher than the feds expected, lower than the doom-prophets predicted, and still within the range that most people familiar with the Modern Money Theory would consider fine for the long term need to start taxing more heavily.
- skywhopper 5y agoGovernment agencies don’t predict inflation. The “expectation” mentioned is a survey of economists. No info on who they ask, and there’s no reason to think those surveyed have any special insight beyond their academic training.
- gruez 5y agoobligatory reminder that prices didn't increase 5.4% in june as the headline might suggest, the 5.4% figure is only year-over-year. The BLS summary describes it better: >In June, the Consumer Price Index for All Urban Consumers rose 0.9 percent on a seasonally adjusted basis; rising 5.4 percent over the last 12 months, not seasonally adjusted.
- throwaway6734 5y agoAlso: >Used car and truck prices comprised about one-third of the total CPI increase, lending support to the notion that the rise in inflation could abate in coming months.
- deleted 5y ago[deleted]
- deregulateMed 5y agoAs long as you didn't buy a car... Or had to hire new employees.
- notsureaboutpg 5y agoMy wife and I are moving because her university is back in person in a month, and everything is so much more expensive now. If you didn't throw every penny you had into stocks into the last year, you're basically losing money with how prices have risen for everything
- kaycebasques 5y agoOne quick thought that just occurred to me is that we are pinning this "transitory" narrative on the idea that the situation will probably improve in the particular industries with currently exploding increases in inflation. E.g. used cars. But perhaps there will be a series of surprises where once the problem is solved in one industry, a new problem pops up in another industry. I.e. perhaps we get a series of rolling inflation explosions in different industries. E.g. I'm hearing a lot of macro investors going long on oil because they believe there is likely to be simultaneous increasing demand (China) and decreasing supply (ESG investors forcing oil companies to wind down). It seems like that could start to pick up steam once the used car situation is resolved.
- matthewdgreen 5y agoIt's entirely possible that we'll have a series of supply chain crises in the future, and nobody can rule that out. The question is whether blunt central bank interventions (raising interest rates, reducing the money supply) are the right solution to those problems. Typically the "do we need to worry about inflation?" question is actually (implicitly) a question about whether we need to change central bank policy.
- imtringued 5y ago>A separate report from the department’s Bureau of Labor Statistics noted that the big monthly hike in consumer prices translated into negative real wages for workers. Real average hourly earnings fell 0.5% for the month, as a 0.3% increase in average hourly earnings was more than negated by the CPI increase. Wow, multiple stimulus checks, unemployment benefits and employees still have no bargaining power? What is going to happen to wages once all those people come back to work? Wages are not going to grow... Okay, this is a clear case of stagflation. Meaning inflation isn't driven by wages, which is generally where a conventional inflation spiral begins. It is driven by the inability to increase production of certain goods, primarily cars and the inability to import goods. Cutting stimulus or raising interest rates won't make this go away because the underlying reason isn't monetary at all. The $50 billion subsidies for semiconductors do make sense in this context (even if they are a net loss from a tax perspective) and they address the problem at its root.
- bravo22 5y agoI agree with your points but want to add that higher wages don't lead to high inflation directly. Higher spending does. If you have high wages and high savings it wouldn't lead to inflation in the same way that high wages and high spending would.
- handrous 5y agoHigher costs for any inputs, not just wages, can drive it as well, no? Even if spending remains flat, that is, prices go up and people just buy less stuff while spending about the same amount of money, or even spending less?
- bravo22 5y agoIf people buy less stuff that's a drop in demand and an increase in supply translating to lower prices. If input costs like energy go up, which affect virtually every item, then that can lead to higher inflation because the aggregate spending across everything can't drop.
- deleted 5y ago[deleted]
- ChrisLTD 5y agoAs long as wages continue to rise, this is great news for the vast majority of Americans that are in debt. Congratulations, your mortgage and student loans aren’t as a big relative to your income.
- gruez 5y agoBut then future loans will be at a higher interest rate?
- throwaway0a5e 5y agoWhich puts downward pressure on prices for things you buy with credit. And then you can refinance later so it's a wash. The problem you hit along the way is that people get screwed out of any ability to save money toward a down payment on anything as their wages lag the increased price of everything that they need to spend those wages on.
- anthonypasq 5y agothat assumes peoples incomes are increasing
- spamizbad 5y agoNo idea why this is downvoted. Its true - inflation can be good for those who carry large debts.
- WillPostForFood 5y agoYou better have fixed rates. It isn’t going to help lower income people who are more likely to have credit card debt or variable rate mortgages.
- spamizbad 5y agoMost low income people are already paying near their maximum legal rate on credit cards.
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- silicon2401 5y agoSo important question, where should we be storing money that we need in the short term (down payment) and long term (retirement savings)?
- JKCalhoun 5y agoShort term: mattress, Long term: still in index funds Warning, I am an internet rando and not an accountant.
- kaycebasques 5y agoRegardless of whether or not we are indeed in an inflationary environment, mattress (physical cash) is the opposite of what you'd want to do in an inflationary scenario. Read up on the experiences of any one who relied on a fixed income pension or salary during one of the really intense inflation episodes throughout history. E.g. you get $1000 a month and suddenly just a single loaf of bread is worth $5000.
- JKCalhoun 5y agoAgree, but with savings essentially zero interest the difference is in the noise. OP mentioned downpayment, which I (probably mistakenly) took to mean cash needed very soon. Honestly I have no idea what to do with cash needed a year out. Bear the brunt of pain that is inflation, I guess? I mean, sure, buy gold, a traditional hedge against inflation, but for just a year? And it still seems speculative at best.
- 3np 5y agoSome percentage of allocation in cryptocurrencies (BTC, ETH, maybe one or two more if you invest more time in reading up) may not be a bad idea. (I'm not implying to invest or speculate with what you can't afford to lose and this is not financial advise.)
- WJW 5y agoNot that it is an unimportant question, but HN is not a finance forum. If you need advice about this, please consult a qualified professional instead of asking essentially random people on the internet.
- deregulateMed 5y agoMy kids bank account just got taxed 5.4%. My pay went down 5.4%. Maybe it's not quite exactly like that, but I genuinely feel bad for anyone with USD.
- throwaway6734 5y agoIt's not like that at all. I don't.
- jstx1 5y agoYour purchasing power for the goods in the index changed by that much over a year. It didn't "just" happen. And you aren't necessarily affected to the tune of 5.4% - could be more or less depending on how you use your money.
- deregulateMed 5y ago>It didn't "just" happen Doesn't change the reality of it. And yeah it's savings for college, so it's just a wake up call to get out of USD and into diversified investments.
- jliptzin 5y agoIf you keep all your money in cash, sure. That should be a surprise to no one. If you have real estate, stocks, other assets, you're doing fine. My stock account went up 20% just in the last 6 months.
- deregulateMed 5y agoYeah guess I need to manage my toddlers money.
- jliptzin 5y agoWhy do you keep a cash account in your toddler's name? If you are saving for college, etc, that should be in something that grows over time, like stocks, not cash.
- gjsman-1000 5y agoWe should make a measure, as a form of protest, of Actual Revenue Per Median Household. How it would work is we'd take your typical, family household in the median (not the average to be less skewed by extreme results). We'd take the income, then subtract Income Tax, the median Property Tax, the median Sales Tax paid on all purchases that month, the median State Income Taxes paid, the cost of Tax Preparation software, and basically all other essentially-necessary government expenditures for the median American family and their lifestyle. The result would be a percentage of how much tax ultimately is paid to the government every month. Then, we adjust it every month for inflation caused by government expenditure, which has effects similar to a tax on your savings. The result of this measure, I expect, would grab headlines everywhere. I expect the actual percentage of money paid to the government every month or lost from inflation would shock people.
- deleted 5y ago[deleted]
- polygotdomain 5y ago> Inflation has been escalating due to several factors, including supply-chain bottlenecks, extraordinarily high demand as the Covid-19 pandemic eases and year-over-year comparisons to a time when the economy was struggling to reopen in the early months of the crisis. While this isn't surprising, it does feel that this is largely due to supply chains still dragging behind and those with jobs having more discretionary income due to not spending on other things. It also wouldn't surprise me if businesses are taking liberty with bumping prices to claw back a bit of what was lost last year, and to put pressure on demand as they struggle bringing workers back into retail focused positions. I think if we're still seeing these y-o-y figures by the end of the year, then we've got something far more serious on our hands.
- lefrenchy 5y agoAgreed, there will always be a lot of doom and gloomers predicting massive inflation but I think a lot of people just don't realize how much of our goods are dependent on international cheap labor (to keep prices low) and supply chains. That seems to me to be much more a factor at the moment than "money printing". We had a massive economic shock, it doesn't seem worrying to me that we'd have some rebound effects.
- abystander 5y ago> there will always be a lot of doom and gloomers predicting massive inflation Clearly if all the actually essential things like education, housing and healthcare are manifestly unaffordable - it's not a matter of prediction - it's already here. Conveniently these things are generally left out of the CPI that people use to claim whether inflation is happening.
- mywittyname 5y agoI think we don't talk enough about income gaps when discussing pricing for supply-constrained products. 75th percentile households have at least twice the income as a median household. And the 90th percentile nearly doubles in income again. 25th percentile households have half the income as a median. If you live in an average household, and you get into a bidding war with three other households, it's pretty likely that one of those households can afford to pay at least twice what you can. Bump that up to 10 households in competition, and it's likely that someone in that group can afford to pay at least four times as much as you can. This isn't even getting into the fact that household spending doesn't scale with income, so a doubling of income often results in more than a doubling in disposable income.
- mensetmanusman 5y agoCancels my 5% raise, doh!
- drewg123 5y agoused car and truck prices leaped 10.5%, accounting for more than one-third of all the price index’s gains I read just this morning[1] that used car prices are trending down. The leading indicator there is wholesale dealer auctions, and the the average price dropped 10% in June. So I think this aspect of inflation is starting to get itself under control. [1]https://www.npr.org/2021/07/13/1014697915/inflation-is-still-high-used-car-prices-could-help-explain-what-happens-next https://www.npr.org/2021/07/13/1014697915/inflation-is-still...
- mywittyname 5y agoOh no. No no no. Used cars prices are turbofucked for a good 5-6 years. You can't just magically poof into existence all the cars that weren't produced in 2020, 2021, and beyond. In 2009, new car production halved and it wasn't until 2015 that new car production finally matched the 2007 peak. Meaning the USA lost out on about 45 million cars which would have been produced during those six years. As a result, used car prices were elevated for quite a while. I bought two new cars in 2014 and a new 2014 model was priced at the same as a used 2012 model, and 2010 models were barely discounted. The USA has a strong "used cars = better deals" culture. So people don't generally buy cheaper cars new, they buy more expensive used cars for a similar price. This has lead to a nearly complete removal of the cheap car segment, meaning that there very few cheap new cars that people can purchase. Which means we need a 3-4 years of good new car sales in order to start really driving down used car prices.
- blacksqr 5y agoIt's a scary top-line number, but it should be kept in mind that inflation last June was 0.6% [0], exceptionally low, as a side effect of the pandemic and quarantine. So I think a lot of this supposed inflation is a transient effect of the statistics re-equilibrating after an extraordinary and unprecedented year of economic numbers in 2020. [0] https://www.usinflationcalculator.com/inflation/current-inflation-rates/ https://www.usinflationcalculator.com/inflation/current-infl...