5 ms·

Wait, people were saying/thought that this was runaway inflation and not a result of supply chain issues because of COVID and tons of people suddenly having to

Wait, people were saying/thought that this was runaway inflation and not a result of supply chain issues because of COVID and tons of people suddenly having to spend way more time in their house because of COVID? Maybe I'm ignorant of the inflation argument more than anything else but it doesn't even pass the sniff test in my opinion.

542458 5y ago
There seems to be a group of people who predict hyperinflation at the drop of a hat. I’m not sure if it’s paranoia or motivated reasoning though. Maybe a mix of both?
- deleted 5y ago
  [deleted]
- HWR_14 5y ago
  It may have started as one or the other, but at this point they've been predicting hyperinflation for so long that they now have motivated reason to be "right, just called it too soon"
- vibrato2 5y ago
  Or doubling the money supply in a year. Not exactly an unrelated event like a hat drop
- imtringued 5y ago
  I think people predicted hyperinflation since QE has been introduced. What people don't get is that QE increases base money. When banks run out of reserves the central bank gives them more. The reverse relationship doesn't have to hold. Giving banks more reserves does not force them to lend the money out. The relationship between bank lending and base money has been fully decoupled. Whenever QE increases the supply of bank reserves it introduces more noise into the statistics. Just because QE doesn't create inflation doesn't mean it is a free lunch though. QE purchases treasury bonds and effectively takes them out of the market. The government is paying interest to itself. There are institutions that need those treasury bonds which results in a collateral shortage. These institutions will continue buying treasury bonds driving interest rates slightly negative leading to a "technical" form of deflation however it is quite insignificant.
  - dhimes 5y ago
    QE stands for "Quantitative Easing" (I think) in case anybody else doesn't know.
  - mikeyouse 5y ago
    The other "half" to the inflation calculation aside from money supply is money velocity. If people and institutions aren't turning over the dollars, there obviously won't be inflation. As expected given the low inflation we've seen, V has rapidly decreased as M increased. https://fred.stlouisfed.org/graph/?g=GOR4 https://fred.stlouisfed.org/graph/?g=GOR4 (Both indexed to 100 as of the beginning of the 2007 recession)
fshbbdssbbgdd 5y ago
Enjoy this beauty from 80 days ago, in which the commenter predicts that “from a technical perspective, the 1Y chart on that page shows some real promise, for example higher highs and higher lows on multiple time scales.” https://news.ycombinator.com/item?id=27653861 https://news.ycombinator.com/item?id=27653861
rtkwe 5y ago
Reminds me of an article recently about how the nominal inflation 'target' was actually treated and executed in a way that made it a ceiling because the Fed and all the monetary policy wonk tweaks always missed low and if it did briefly exceed the target it was considered a reason to start tweaking things.
xfhgjxcfgh 5y ago
Low interest rates, QE, stimulus, and rocketing stock prices facilitated the hot real estate market as much as proximate covid policies. You are correct to guess there is a substantial discussion that you're ignorant of.
- Dylan16807 5y ago
  Low interest rates don't increase inflation do they? And rocketing stock prices are definitely not a part of inflation. QE and stimulus can certainly contribute, but "as much" is a pretty big overstatement. If anyone thinks inflation was a notable fraction of the price quadrupling, they're being ridiculous. Even a huge amount of inflation would only be 2-4% of the lumber price increase.
  - llbeansandrice 5y ago
    Yeah I'm not seeing how 4x in price is "due to inflation" it might "contribute" or something but I find it hard to believe.
  - oceanghost 5y ago
    Actually low interest rates are one of the primary causes of monetary inflation due to how fractional reserve banking works. The TLDR is this. I borrow a million dollars, and give it to you for a house. You deposit it, and your bank loans 97% of it to someone else. They deposit that, and loan 97% of that out again... ad infinitum. Commonly this is called the "money multiplier."
    - JumpCrisscross 5y ago
      > I borrow a million dollars, and give it to you for a house. You deposit it, and your bank loans 97% of it to someone else. They deposit that, and loan 97% of that out again... ad infinitum. This is how it's taught in school. The more-accurate version is that "whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money" [1]. Interest rates make borrowing cheaper. That spurs demand for loans which lets banks create deposits. To have the capacity to make those loans, the banks need sufficient reserve margin to meet the reserve requirement. This is usually a non-issue. They also need enough risk-adjusted capital. This is usually the issue. But if a bank needs more of this, and interest rates are low, it can buy the reserves through borrowing or equity issuance. Lower interest rates make both cheaper. [1] https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
throwawayboise 5y ago
Printing tons of money and handing it out to people who will spend it immediately tends to at least put pressure on prices.
- Dylan16807 5y ago
  "Pressure" sounds like it's in an entirely different ballpark from "runaway inflation"
gassius 5y ago
I don't know anything about lumber market and it's transitory conditions and fluctuations (other than a last week news where I live, northern Spain, that said that woods price are at all time high supposedly because demand is also at records high, from international markets including japan) so it may very well be a transitory price fluctuation because WFH or whatever. That being said, taking out the "runaway" adjective, inflation should be expected as a logical consequence of the monetary policy at least in US and Europe, and as a matter of fact, consumer price index are already up all across the board and both Fed and ECB had already adjusted their inflation target up. This should surprise no one, you just cannot increase the monetary mass by trillions in the year where the global economy shutted down due a global pandemic and not expect an inflationary spike. The global public debt won't be "paid" without an increase on inflation. And this is not a criticism on the political behind this. The decision was made to ease the economic impact of the pandemic both in the general public and the private sector and in most cases this was achieved, but that doesn't mean the impact does not exist, is just that is being spread out in 20 years, and part of that would be on inflation.
- llbeansandrice 5y ago
  I'm more than onboard with the idea that recent monetary policies have put pressure on prices, I just don't see how anyone can sanely say that a 4x price increase is (was) "caused by inflation". Of course implying that all or the vast majority of the increase is directly attributable to inflation, adding "runaway" back into the discussion.
  - gassius 5y ago
    Yeah I didn't intend it like an antagonistic answer, because actually is not a binary issue. Price takes in account many consideration, fluctuations in production and/or demand are one, monetary pressure is other, but there are many others (expectation of future behavior, for example). I would guess that, at this time, the larger the increase ratio, the more probable is that transitory elements are affecting the price. Just a minor caveat I would have with your answer is that inflation cause price increase, when for me the price increase is just an indicator of inflation, not a cause or consequence of it.
sneak 5y ago
Grocery prices still haven't come down.

542458 5y ago

There seems to be a group of people who predict hyperinflation at the drop of a hat. I’m not sure if it’s paranoia or motivated reasoning though. Maybe a mix of both?

deleted 5y ago
[deleted]
HWR_14 5y ago
It may have started as one or the other, but at this point they've been predicting hyperinflation for so long that they now have motivated reason to be "right, just called it too soon"
vibrato2 5y ago
Or doubling the money supply in a year. Not exactly an unrelated event like a hat drop
imtringued 5y ago
I think people predicted hyperinflation since QE has been introduced. What people don't get is that QE increases base money. When banks run out of reserves the central bank gives them more. The reverse relationship doesn't have to hold. Giving banks more reserves does not force them to lend the money out. The relationship between bank lending and base money has been fully decoupled. Whenever QE increases the supply of bank reserves it introduces more noise into the statistics. Just because QE doesn't create inflation doesn't mean it is a free lunch though. QE purchases treasury bonds and effectively takes them out of the market. The government is paying interest to itself. There are institutions that need those treasury bonds which results in a collateral shortage. These institutions will continue buying treasury bonds driving interest rates slightly negative leading to a "technical" form of deflation however it is quite insignificant.
- dhimes 5y ago
  QE stands for "Quantitative Easing" (I think) in case anybody else doesn't know.
- mikeyouse 5y ago
  The other "half" to the inflation calculation aside from money supply is money velocity. If people and institutions aren't turning over the dollars, there obviously won't be inflation. As expected given the low inflation we've seen, V has rapidly decreased as M increased. https://fred.stlouisfed.org/graph/?g=GOR4 https://fred.stlouisfed.org/graph/?g=GOR4 (Both indexed to 100 as of the beginning of the 2007 recession)

fshbbdssbbgdd 5y ago

Enjoy this beauty from 80 days ago, in which the commenter predicts that “from a technical perspective, the 1Y chart on that page shows some real promise, for example higher highs and higher lows on multiple time scales.” https://news.ycombinator.com/item?id=27653861 https://news.ycombinator.com/item?id=27653861

rtkwe 5y ago

Reminds me of an article recently about how the nominal inflation 'target' was actually treated and executed in a way that made it a ceiling because the Fed and all the monetary policy wonk tweaks always missed low and if it did briefly exceed the target it was considered a reason to start tweaking things.

xfhgjxcfgh 5y ago

Low interest rates, QE, stimulus, and rocketing stock prices facilitated the hot real estate market as much as proximate covid policies. You are correct to guess there is a substantial discussion that you're ignorant of.

Dylan16807 5y ago
Low interest rates don't increase inflation do they? And rocketing stock prices are definitely not a part of inflation. QE and stimulus can certainly contribute, but "as much" is a pretty big overstatement. If anyone thinks inflation was a notable fraction of the price quadrupling, they're being ridiculous. Even a huge amount of inflation would only be 2-4% of the lumber price increase.
- llbeansandrice 5y ago
  Yeah I'm not seeing how 4x in price is "due to inflation" it might "contribute" or something but I find it hard to believe.
- oceanghost 5y ago
  Actually low interest rates are one of the primary causes of monetary inflation due to how fractional reserve banking works. The TLDR is this. I borrow a million dollars, and give it to you for a house. You deposit it, and your bank loans 97% of it to someone else. They deposit that, and loan 97% of that out again... ad infinitum. Commonly this is called the "money multiplier."
  - JumpCrisscross 5y ago
    > I borrow a million dollars, and give it to you for a house. You deposit it, and your bank loans 97% of it to someone else. They deposit that, and loan 97% of that out again... ad infinitum. This is how it's taught in school. The more-accurate version is that "whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money" [1]. Interest rates make borrowing cheaper. That spurs demand for loans which lets banks create deposits. To have the capacity to make those loans, the banks need sufficient reserve margin to meet the reserve requirement. This is usually a non-issue. They also need enough risk-adjusted capital. This is usually the issue. But if a bank needs more of this, and interest rates are low, it can buy the reserves through borrowing or equity issuance. Lower interest rates make both cheaper. [1] https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

throwawayboise 5y ago

Printing tons of money and handing it out to people who will spend it immediately tends to at least put pressure on prices.

Dylan16807 5y ago
"Pressure" sounds like it's in an entirely different ballpark from "runaway inflation"

gassius 5y ago

I don't know anything about lumber market and it's transitory conditions and fluctuations (other than a last week news where I live, northern Spain, that said that woods price are at all time high supposedly because demand is also at records high, from international markets including japan) so it may very well be a transitory price fluctuation because WFH or whatever. That being said, taking out the "runaway" adjective, inflation should be expected as a logical consequence of the monetary policy at least in US and Europe, and as a matter of fact, consumer price index are already up all across the board and both Fed and ECB had already adjusted their inflation target up. This should surprise no one, you just cannot increase the monetary mass by trillions in the year where the global economy shutted down due a global pandemic and not expect an inflationary spike. The global public debt won't be "paid" without an increase on inflation. And this is not a criticism on the political behind this. The decision was made to ease the economic impact of the pandemic both in the general public and the private sector and in most cases this was achieved, but that doesn't mean the impact does not exist, is just that is being spread out in 20 years, and part of that would be on inflation.

llbeansandrice 5y ago
I'm more than onboard with the idea that recent monetary policies have put pressure on prices, I just don't see how anyone can sanely say that a 4x price increase is (was) "caused by inflation". Of course implying that all or the vast majority of the increase is directly attributable to inflation, adding "runaway" back into the discussion.
- gassius 5y ago
  Yeah I didn't intend it like an antagonistic answer, because actually is not a binary issue. Price takes in account many consideration, fluctuations in production and/or demand are one, monetary pressure is other, but there are many others (expectation of future behavior, for example). I would guess that, at this time, the larger the increase ratio, the more probable is that transitory elements are affecting the price. Just a minor caveat I would have with your answer is that inflation cause price increase, when for me the price increase is just an indicator of inflation, not a cause or consequence of it.

sneak 5y ago

Grocery prices still haven't come down.