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U.S. inflation rate rises to 13-year high of 5.4%

214 points by awnird 5y ago

unstatusthequo 5y ago
Printing free money has consequences. This is entirely expected with that causation. It will get worse. Hold value in assets, not money. Property, precious metals, art, whatever isn’t cash until the money printing stops.
- quotemstr 5y ago
  > Printing free money has consequences Yet the story we heard over and over from "experts" was that for some complicated theoretical reason exploding the money supply wouldn't cause inflation --- and then, after inflation became impossible to just ignore, that the inflation was due to complicated "supply chain hiccup" and would be "transitory". Whatever. Common sense is a real thing that exists. Expertise doesn't make someone correct: it just makes him knowledgeable. An expert under pressure to arrive at a false conclusion (often for political reasons) will use that knowledge to bamboozle you. The general public should think more critically and reflect on why they allowed motivated economic experts to tell them blatant (and not just in hindsight) lies about the consequences of running the money printer.
  - xadhominemx 5y ago
    The spike in energy and commodity costs has way more to do with supply side dynamics. Upstream suppliers have been hesitant to add capacity because they can’t tell if the spike in demand is sustainable or just a snapback post-lockdown. And OPEC in particular is pressing their advantage when no bank wants to fund frackers that have over invested and then wiped out 3 or 4 times now. We are seeing this in many industries. Inflation hawks/ideologues have called 15 out of the past 0 hyperinflationary cycles and this one will be no different.
  - nickthemagicman 5y ago
    "Trust the experts" has been the motto going around for a while now. It makes it easy to outsource your own critical thinking by letting the "experts" do it. The experts should just be one data point not THE SOURCE OF ULTIMATE TRUTH.
    - jpgvm 5y ago
      If you aren't a doctor your "own critical thinking" will have little bearing on the correct treatment or prevention of a disease/illness/injury, doubly so for complex ailments for viruses, cancers and genetic diseases. Pretty much the same goes for civil engineering, particle physics and any other highly trained field that requires vast quantities of knowledge to even intuit probable outcomes. Why is economics any different? I don't believe it is, I would say economics falls into a similar bucket as weather science where there are always large unknowns that make broad predictions imprecise but that doesn't invalidate their expertise and ignoring it is definitely foolish. Experts are experts for a reason. If you could intuit all difficult problems as a layman we would have already advanced science far beyond where we currently stand.
      - quotemstr 5y ago
        Skepticism of medical practice isn't a stupid Steve-Jobs-like trust in woo over science. It's getting multiple opinions, reading the underlying papers, asking "does this explanation make sense?", and checking for obvious mistakes --- as medicine, like any other human endeavor, is full of human error. Plenty of people have found cures for their medical problems only after they kept doggedly pressing medical people for things that made sense and actually worked for them. Something didn't seem right to them, and they pulled and pulled at threads to find out what it was. You don't need a medical degree to do that: you just need a brain. It's gravely concerning to see hostility directed at people who tell others to think for themselves, question experts, and adopt a general attitude of informed skepticism. Too many people get genuinely offended when you indicate that you're going to do your own thinking and not just follow "experts". They bring out cliches like "experts are experts for a reason" and "look at this one guy who did something stupid" and neglect, or even suppress, the idea that we at all, each and every one of us, scientists of our lives and competent to make our own decisions and form our own opinions.
  - bojangleslover 5y ago
    The same experts who leave education and real estate, two things everybody wants, off the CPI
    - mikeyouse 5y ago
      What? Both are included; https://www.bls.gov/cpi/factsheets/college-tuition.htm https://www.bls.gov/cpi/factsheets/college-tuition.htm https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...
  - Spooky23 5y ago
    > The general public should think more critically and reflect on why they allowed motivated economic experts to tell them blatant (and not just in hindsight) lies about the consequences of running the money printer. The reality of not taking action has consequences. The opening of the money floodgates in the 80s blunted the pain of the late 60s and 70s. The war economy of 2002- likewise dulled the lows.
  - titzer 5y ago
    > motivated economic experts Pretty much all economics that you just casually hear about is going to be economics intentionally put in service of furthering the system of rich and powerful elites. It's just more propaganda pushed at you and has absolutely no relation to what is good for society, the average person, the longevity of our civilization, or the environment. It is, in short, sophisticated bullshit to let rich people keep getting richer and live like the leeches they are.
  - goodpoint 5y ago
    If you are referring to economists, the "experts" are not experts. Knowledge matters and is important, otherwise we go down the path of novax and flat earth crowds.
    - thowaway1122337 5y ago
      like novax and flat earth are equivalent gaslighter
  - bell-cot 5y ago
    That public seems happy to be lied to, on all sorts of subjects, by politicians & salesmen & etc. Why should "the economy" and "economics experts" be special cases?
- newaccount2021 5y ago
  No, 100%, once inflation is undeniable, the Fed will be pressured to deflate by raising interest rates (and the "taper" talk is exactly the beginning of this and is expected before year's end). The asset bubble already happened, if you missed it by now, its too late to join.
- raelmiu 5y ago
  Preach.
- hn_throwaway_99 5y ago
  People love to say that, but it's actually supply slide shocks that are usually the primary culprit in inflation. The fed has been "helicoptering" money for years, but it has only been this year, when there have been real and substantial breakdowns in the supply chain and labor markets, than inflation spiked so much. Was the same with OPEC in the 70s, Zimbabwe, Weimar Germany - in all those cases there was a major destruction or restriction of supply capacity, not just money printing.
  - nickik 5y ago
    This is mostly wrong. Weimar Germany for example was actually doing well economically before they decided to print huge amounts of money for their foreign policy and that was for foreign policy reasons. In 2009 inflation actually collapsed for example and that was a supply side collapse far bigger then this year. > The fed has been "helicoptering" money for years They have also enacted major counter measures and the pure amount is no longer really a good description of policy. Around 2009 or 2010 they started paying interest on reserves. The CB has a number of tools.
    - MR4D 5y ago
      You’re right - “helicoptering” is no longer accurate - “airlifting” might be more appropriate. Remember, the Fed is buying $120,000,000,000 of bonds per month. That’s well beyond a helicopter’s capability!
      - nickik 5y ago
        It doesn't matter what the reserve is when the central bank has the power to prevent the movement of reserves in other ways. This is part of the complexity in modern central banking that people don't seem to understand. Many of the things you might have learn in school about how central banks operate are no longer the case. If cash actually flows depends on many factors.
    - ItsMonkk 5y ago
      Weimar Germany was a short squeeze on gold caused by the war debt. Germany printed money to buy gold, but the more they printed, the more gold cost. This was predicted by Keynes ahead of time.
- kome 5y ago
  This kind of inflation we are witnessing, it's not because too much money has been printed, but exactly because there is not enough money in circulation. It's not a monetary inflation, it's inflation created by scarcity, related to production halts (cost-push inflation https://en.wikipedia.org/wiki/Cost-push_inflation https://en.wikipedia.org/wiki/Cost-push_inflation). While all kinds of inflation have the same symptoms, it's not true that all kinds inflation has the same causes. And also the cure, it should be the right cure. Printing less money right now would be a huge mistake. But central bankers knows his very well.
  - ur-whale 5y ago
    > This kind of inflation we are witnessing, it's not because too much money has been printed, but exactly because there is not enough money in circulation. Oh wow. Krugman, leave that body!
  - hpoe 5y ago
    This only is true if you accept that additional money gets equally shared; however additional money benefits those with assets the most, whereas those with fewer assets (the middle and lower class) are punished in inflation as they are dependent upon income which often does not change in response to inflation. Or in other words, if I have multiple properties, stocks, investements etc, inflation is good for me because those things increase in value; however if the primary source of capital I have is a paycheck I get each week that I then have to immediately spend on housing, food, groceries, gas etc, inflation hurts me because my boss isn't going to raise my pay, meanwhile everything has gotten more expensive in the meantime, and if my boss does eventually give me a COL increase that will have lagged to the point the rest of the economy has already caught up with it. Pretending that inflation is good for debtors is like pretending that economically speaking we are all spherical cows in an airless frictionless vacuum.
    - mywittyname 5y ago
      Wages are rising fastest for low- and middle-income Americans. So they are benefiting from inflationary pressure. And to be quit honest, the elephant in the room that no one wants to address is that low and middle income people leaving their jobs for better ones are a contributor of the inflation we are seeing. The USA built an economy around cheap goods produced through exploitation both abroad and domestically. And these people are finally realizing that they can do better. The government cut off the inflow of immigrants who would replace these people in dangerous, low paying factory jobs, like meat packing.
- HideousKojima 5y ago
  Lead isn't a bad investment either.
  - namelessoracle 5y ago
    Given the mass buyouts of bullets going on around the country lots of people seem to be agreeing with this statement.
- lucozade 5y ago
  You might be right but I doubt it. There's been QE of various forms for the last 12-13 years without this happening. But in the last 12 month energy prices have jumped 25% in the US. That's going to have both a direct and indirect impact on CPI inflation. There is still likely to be some underlying inflation, not attributable to energy prices, but it's only going to be a couple of percent. Now if your argument is that the energy price rise is a direct consequence of QE, I don't see the link. And it would need to explain why energy prices have gone ballistic everywhere else too. But there may be a link I'm not aware of.
themanmaran 5y ago
The article was only a couple sentences. For a little bit more context (and breakdown of categories) check out the bls.gov report: https://www.bls.gov/opub/ted/2021/consumer-price-index-rose-5-3-percent-over-the-year-ending-august-2021.htm https://www.bls.gov/opub/ted/2021/consumer-price-index-rose-...
- kpierce 5y ago
  Thanks for posting the url. You start looking at the numbers on a sub level and its not as shocking. 12 month change. Gasoline (all types) 42.7% - Huge dip when the pandemic happened now its back to pre covid prices. Natural gas (piped) 21.1% - Same issue. Used cars and trucks 31.9% - New cars are being made because of a ship shortage. Meats, poultry, fish, and eggs 8.0% - a labor problem because its hard to get that many people to work in spaces like that and not get sick.
  - gibsonf1 5y ago
    Adding trillions to the money supply, of course, has no impact whatsoever?
    - martinko 5y ago
      Economists would argue that the 'printed' money is actually reserves at the central bank, and thus has no impact on price levels. I myself am less certain about the overall dynamics.
    - whimsicalism 5y ago
      People understand that inflation is a function of both money supply and velocity right? Well I guess no, as almost every comment on this thread seems to have no idea. https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V
      - wbsss4412 5y ago
        Money supply, velocity, and GDP growth* Just wanted to add, if all else is held equal amount those factors, growth in gdp, without and subsequent changes in the money supply or velocity, would lead to deflation.
reacharavindh 5y ago
Who would have thought printing Trillions of US dollars for pandemic relief would circulate more money in the market and lead to inflation?! Not saying a government shouldn't provide relief during a pandemic, just stating that it sounded obvious to me rather than alarming.
- tmaly 5y ago
  The printing is part of it, but not all of it. The commercial credit that amplifies the money in circulation is a major factor. This is itself driven by the amount of money available to leverage against with fractional lending.
- raydev 5y ago
  Don't you have to eliminate supply chain issues before you can confidently assert "printing trillions of US dollars for pandemic relief" is the primary cause?
- AnimalMuppet 5y ago
  As you say, they created a bunch of money. But also, we have less stuff (because when all those people who weren't working, they weren't doing whatever they normally did, and so there's missing output in the economy). So, more money and less stuff, and what do you know, we have inflation. This is my complete lack of surprise. But, if we stop creating more extra money, and if people can return to work, then it should be transitory. I don't see reason why we should expect 5% inflation every year going forward.
- nerdponx 5y ago
  My somewhat-uneducated opinion has been that this was not due to pandemic relief, but due to long-term inflation pressure that the economy stopped being able to absorb as a result of the pandemic, and/or wasn't being measured (because it was being reflected in real estate, commodities, and securities).
- ThunderSizzle 5y ago
  It probably wouldn't have been as bad if the time before it and time after it is similarly inflated. If it was a one-off 2T expense, it probably wouldn't be as noticeable as the every growing hockey stick of Keynesian economics (funding expensive mandatory social programs).
seibelj 5y ago
Hopefully this will finally show that Paul Krugman is a hack. At this point do the exact opposite of everything he says. https://www.nytimes.com/2021/09/10/opinion/transitory-inflation-covid-consumer-prices.html https://www.nytimes.com/2021/09/10/opinion/transitory-inflat... https://www.nytimes.com/2021/06/21/opinion/inflation-economy-biden-fed.html https://www.nytimes.com/2021/06/21/opinion/inflation-economy...
- boredumb 5y ago
  "By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s." He's shown himself to be a hack for decades.
  - asah 5y ago
    The backstory gets even worse for Krugman, as he pathetically tried to respond to this: https://www.snopes.com/fact-check/paul-krugman-internets-effect-economy/ https://www.snopes.com/fact-check/paul-krugman-internets-eff...
  - huskyperv 5y ago
    But he's right? Look at labor productivity since the 90s and let me know if you see a significant increase
- deleted 5y ago
  [deleted]
- thowaway1238431 5y ago
  krugman best described as hair pulling wildman
- asah 5y ago
  2c: 1. yes, inflation has spiked first due to stimulus and now to supply chain disruption, also triggered by the pandemic changing consumption patterns faster than suppliers could adapt. These will hopefully subside if COVID doesn't get worse e.g. vaccines/therapies stay ahead of the inevitable new variants. 2. yes, "transitory" is meaningless if it continues long enough. Specifically, the scary part about inflation is when market participants raise prices expecting future inflation, crushing consumers who can't capture higher wages at the same pace. IMHO we're not quite there yet, and prices are tumbling when supply-demand has returned to equilibrium, e.g. lumber. 3. anybody who pontificates as much as Krugman is bound to make lots of mistakes. IMHO the issue is with the publisher's need to create exciting headlines, i.e. that's on us for listening to newspaper columnists (I've largely stopped). Hit rates go up when you can choose your battles and sit on your hands the rest of the time. Less excusable to me are the guys who can sit on their hands but still put their feet in their mouths, e.g. Dimon, Buffett, etc. One of these days, the masses will wake up and realize that these old emperors aren't wearing clothes. (e.g. look at Buffett's 10 year return...) kind thoughts welcome.
hpoe 5y ago
So I recently had a realization that the money the US government spends has absolutely no relation to the money the government receives they can spend whatever they want in any quantity they want. The only barrier is inflation; however that instead means that taxes at the federal level have nothing to do with income or revenue but only inflation control. So the IRS should be the Internal Inflation Control Service. I am still working on the full implications of that understanding but it has definitely changed the way I look at things. EDIT: Updated to make clear I am discussing the US government, not governments in general. EDIT EDIT: To make clear I think this is a bad thing, it is a lever that the more powerful in society have the ability to pull, in order to move wealth from the lower class to themselves as inflation is generally only positive for the asset owning class.
- xxpor 5y ago
  For anyone trying to google: this is modern monetary theory.
  - sharklazer 5y ago
    AKA, “wishful thinking”.
- syshum 5y ago
  Your Realization is call MMT, it is a terrible theory of economics and will likely be the downfall of the US Dollar and other Fiat Currencies if it continues to become more popular
- Jensson 5y ago
  That only applies to the US, most countries has to balance their budget.
  - tut-urut-utut 5y ago
    Not really. Most of the countries run a budget with a huge deficit or debt. USA is not even in the top 10 when you look at the debt by GDP ratio. https://worldpopulationreview.com/countries/countries-by-national-debt https://worldpopulationreview.com/countries/countries-by-nat... EDIT: Just so clarify, first list on the linked page is irrelevant, scroll down to the list of countries ordered by debt to GDP ratio.
newsclues 5y ago
War in spring will unite Americans
- Covzire 5y ago
  You're getting downvoted but people might want to pay attention. I've never seen so much anger boiling under the surface. What the Biden administration is doing is nothing short of shocking, it's like every action they take is calculated to be the worst possible and least likeable action at that moment, e.g. mandates, worst possible way to leave afghanistan, completely ignoring border, trying to spend 3.5T in the face of extreme inflation, weaponizing DOJ/FBI against parents, etc.
  - spywaregorilla 5y ago
    > I've never seen so much anger boiling under the surface. Didn't check the news much last year huh?
  - asah 5y ago
    sigh, you're getting downvoted but you're right - and don't forget "Build Back Better" while the pandemic is far from over. Even if one agrees with the Biden administration decisions, the execution and messaging is unquestionably messy. I fear time has run out to save the Democrats in the midterms, which means more Congressional inaction, more polarizing executive actions and a 2024 anyone-but-Biden election outcome.
  - thowaway1122337 5y ago
    the folks that run these websites arent helping. hn and any of these organizations gaslighting legitimate concerns are complicit in the anger buildup hn is actively censoring posts
  - colinmhayes 5y ago
    Biden has been tougher on the border than Trump. He's seperating kids left and right, same number of asylum seekers let in.
  - greedo 5y ago
Hokusai 5y ago
Eurozone is at 3.4. But as inflation is the result of pandemic related production halts, the BCE is asking too wait for the shock to pass before taking measures that may weak the economy.
- jerf 5y ago
  There is this weird idea I can't wrap my head around that is very popular that if you explain why something is happening, that means it is somehow not happening. This has to be one of the most clear cases of this phenomenon I've seen. Inflation is rising prices [1]. There is no requirement in the definition of inflation that it just be ambiently "happening" for no reason. Inflation always has some reason or other. That doesn't mean it's not happening. If the prices are going up because of government insolvency, it's inflation. If prices are going up because aliens are ordering all stores at raygunpoint to raise prices, it's inflation. If there's a global pandemic and everyone response with massive economic interventions and the result is rising prices, it's inflation. If prices rise this month, but we think that the reasons are probably transitory and they'll go back down next month, that's still inflation, simply followed by deflation next month. If prices rise because of second-order effects of interest rates being dropped to zero by the central bank, that's inflation. If the prices rise because the moon is in the seventh house and Jupiter has aligned with Mars, that's inflation. It's fine and valuable to ask about the reasons why inflation is occurring, but the answer does not add or diminish it in the slightest. They're not waiting for the "shock to pass", they're trying to make sure you don't find out something that you are going to use to decide they're not doing a good job. This is purely political, not economic. [1]: And whatever other details you like. I'm not too worried about exactly which definition you plug into this post, it holds regardless for any sensible definition.
  - jjk166 5y ago
    No one is saying inflation is not happening, they're saying hold off on taking action to address this particular type of inflation. It's like if you have a tumor, but it's not cancerous, then there is no reason to prescribe anti-cancer medication. Of course it's still a tumor, but understanding why that tumor exists determines whether and how you deal with it.
newaccount2021 5y ago
For the last six months, anyone mentioning inflation on HN was furiously downvoted by midwits who parroted the "baseline", "transitory" talking points. Does HN finally accept that inflation is actually here?
whoevercares 5y ago
I thought China’s cheap goods are the reason why US inflation rate remains sane over the years and enabled US to keep doing QE
- Retric 5y ago
  Inflation is about more than just the total amount of money. Roughly if you double the worlds population, goods, and money then the same amount of money buys the same amount of goods. However, imports only represent a fraction of overall spending. It’s really increasing productivity that’s been keeping inflation low.
  - whoevercares 5y ago
    > increasing productivity thanks for the highly productive Chinese people
    - Retric 5y ago
      Per capita GDP says Chinese people aren’t that productive. China is an economic powerhouse because it’s got 1,400 million people. US ranks 15th by per capita GDP(PPP), Hong Kong would be 19th, and China 100th. China is still recovering from some horrific mismanagement by the CCP, but it’s got a long way to go.
- bell-cot 5y ago
  You mean all those Chinese goods that are (at best) sitting & rotting in a huge fleet of container ships, parked off the U.S. West coast, waiting to be unloaded "eventually"?
  - whoevercares 5y ago
    Are you serious? I mean the entire supply chain
- eunos 5y ago
  Yeah until Chinese wage went relatively high + trade war started + US stubbornly refused to remove tariffs.
thowaway1238431 5y ago
if you believe inflation is only 5.4% i'll sell ya a bridge in brooklyn
sleepysysadmin 5y ago
https://tradingeconomics.com/united-states/inflation-cpi https://tradingeconomics.com/united-states/inflation-cpi For 2020 they never hit target of 2%, they are deciding to run inflation hot by leaving stimulus and interest rates low. The idea is to more or less bring everything back to normal target. The problem: https://tradingeconomics.com/united-states/money-supply-m2 https://tradingeconomics.com/united-states/money-supply-m2 There's about 40% locked in. The fed thinks they have this under control but they certainly do not.
- whimsicalism 5y ago
  Love when the y-axis starts at 18500.
bojangleslover 5y ago
Anecdotally I have loads of friends buying all kinds of stuff with their insane pandemic checks These comments are far too verbose for a phenomenon this simple: print money, people buy stuff, it gets more expensive
- nonameiguess 5y ago
  The actual issue here is the Fed helicopter dumping into asset markets dwarfed stimulus checks to individuals. That is why it makes no sense to blame it on stimulus checks. The CARES Act allocated $560 billion in individual relief checks. The Fed asset purchases for 2020 is the $3.4 trillion number. That's more than 6 times as much.
- ur-whale 5y ago
  > for a phenomenon this simple While what you describe might be one factor contributing to higher inflation, it certainly isn't the only one. Supply chain pipeline bubbles are likely another. Unbridled dollar printing and massive govt. debt probably contributes as well. The US quickly losing ground as a superpower thereby undermining the status of the USD as a reserve currency probably a factor. etc ...
  - sjg007 5y ago
    There is no way the euro or the yuan will take over anytime soon.
    - ur-whale 5y ago
      > There is no way the euro or the yuan will take over anytime soon. Who said anything about taking over? A world without a reserve currency will be a much better place to live.
- tuckerpo 5y ago
  >buying all kinds of stuff with their insane pandemic checks When is this meme going to stop? How is a couple of $1200 checks over the course of 6 months enough to let people buy every home on the market all of the sudden?
ur-whale 5y ago
> U.S. inflation rate rises to 13-year high of 5.4 Time to go long BTC (has been the case every day for the last 10 years, as a matter of fact).
- johnebgd 5y ago
  The Tether fraud has inflated BTC far more than 5.4% in the last year.
  - ur-whale 5y ago
    > The Tether fraud has inflated BTC far more than 5.4% in the last year. Tether is a concern. What happens to BTC when (not if) it blows up is unclear, there is a whole spectrum of opinion on the topic. It will certainly create huge ripples in the BTCUSD curve. I personally believe Tether's implosion will be a very good thing for Bitcoin if you have a long term horizon. With regard to "inflating BTC", I'm not sure I understand why it's a bad thing.
- blantonl 5y ago
  So what you are essentially saying is, regardless of inflation, we should be long BTC?
  - ur-whale 5y ago
    Take a look at BTCUSD over the 2011-2021 period and make your own call.
    - Ekaros 5y ago
      Took one years ago and it didn't make sense back then, it still doesn't make sense. The utility and value provided is so marginal... But I don't know anything so. Market can be illogical for long time.
mcs5280 5y ago
Time to change the basket of goods again so we can hide the true inflation rate.
everdrive 5y ago
What is the best financial strategy in the case of inflation? Invest money so you don't have it sitting in a bank account? Spend it on big ticket items as they may hold their value better than the cash? Simply try to reduce costs?
- moondistance 5y ago
  There are many views on this and it is important to form your own opinion. From personal study and conversations with other investors: (1) stocks that correlate with inflation (e.g. some banks and utilities, inflation-adjusted REITs), (2) companies with high-growth prospects (e.g. late-stage yet still privately-held companies) - these are much higher risk, but worth putting a small percentage here over a long time horizon.
- whimsicalism 5y ago
  I don't think there is a best strategy. Equities do well in mildly inflationary environments, but when everyone is talking about inflation is when the Fed is most likely to make contractionary signaling, causing equities to drop. I would focus on just investing in ETFs and not trying to time the market.
- koonsolo 5y ago
  Bitcoin ;)
- airstrike 5y ago
  The simplest answer is buying TIPS https://www.treasurydirect.gov/indiv/products/prod_tips_glance.htm https://www.treasurydirect.gov/indiv/products/prod_tips_glan...
  - SilasX 5y ago
    At this point, wouldn't they have already priced in the inflation? that is, you have to pay more for the right to those inflation-adjusted interest rates.
    - 5y ago
Workaccount2 5y ago
My uncertainty comes from not knowing whether the technicians servicing the machine of the economy actually have the understanding and ability to always be able to fix it. I don't know if they are working on a diesel motor, complex but fully serviceable, or if they are working on a black box, doing ritualistic tapping and prodding that seems to usually correlate with outputs.
- merpnderp 5y ago
  If they knew what they were doing, they wouldn't be shocked that we're headed for stagflation after a series of failed predictions about the inflation being short term and the supply chain fixing itself in months rather than years.
  - deleted 5y ago
    [deleted]
thiago_fm 5y ago
I'm not surprised. I wonder how many folks really buy into FEDs argument that this is temporary, that's why they won't change the unmaintainable interest rates the US has been keeping artificially low. We'll have another year to come, of even higher inflation and some people will still be talking about "supply chain" problems created 2 years ago. Just watch. I'd take any bet I can afford about this. FED knows that if it hikes up 0.5% interest rates a few times, markets will melt, unemployment to 40%+ and a big civil war will happen. Except a few US companies that can really make money without much debt(like tech companies), almost all of the rest are walking zombies. So many suburban cities in America are 100% bankrupt being kept alive by policies which should be temporary, such as this Biden's infrastructure package. You can hide some dust under the carpet only up to a certain point. Citizens let politicians do it until it's out of control. I don't believe it's a mistake solely done by politicians and the FED, but rather, the average american citizen consuming and owning shit to a unmaintainable degree.
- myfavoritedog 5y ago
  The people who believe the new inflation lies from the Fed are a subset of the people who believed the previous round of inflation lies from the Fed.
- whimsicalism 5y ago
  > FED knows that if it hikes up 0.5% interest rates a few times, markets will melt, unemployment to 40%+ and a big civil war will happen. The media is harming people's perceptions of reality, and I feel like this has really accelerated in the last decade or two. It's worrying.
tharne 5y ago
The money printer works great until it doesn't
baby-yoda 5y ago
one thought ive had for a while (and this isn't a totally fleshed out thought, would like to hear opinions) is we are in for whipsaw inflation-deflation for the next couple of years and we are all along for the ride. the fed does have some levers to pull but not with much magnitude, especially with interest rates where they are. I believe there were signs of a deflationary environment up until about 18 months ago, then we had velocity drop to 0. tons of money was added to make up for the decreased velocity. we've had some signs of inflation for sure, some exacerbated by supply issues. but much of the money put into the system is collecting in pockets of unproductive asset classes - sitting in bank accounts, paying off debts(?), getting off shored, NFT and crypto. there is no "multiplicative" effect on the economy with this new money added and so its effect will wear off quickly. stimulus etc. filters through and collects in certain pockets/areas, individuals who realize these profits then shift to unproductive classes. the fed, having few tools, knows they need interest rates. so next month they start raising through the end of 2024, which will further the whipsaw as housing prices decrease and capital dries up. a spending bill might be approved which will trickle some money back in but largely as boomers continue leaving the workforce, younger people straddle the sideline of the workforce (due to debt and/or low wages), declining birth rate, etc. these various contractions are all conducive to a deflationary environment, so we will be in a state of fighting the tide for a couple of years. meanwhile, higher education keeps going up and with federally backed student loans the cycle continues. the shift to electric cars will increase vehicle purchase prices substantially. if the rest of the CPI basket keeps trickling up, where does this end up in a couple of years? EDIT - this is ignoring geopolitical issues for now. of course that certainly can have a massive effect on things and we are not in a vacuum.
lumost 5y ago
With the way the US measures inflation, inflation only rises when import prices go up or wages for manufacturing/service workers go up. These are two intentional policy goals for the last two administrations, why would we not expect inflation to remain high until automation improves?
simonh 5y ago
There are multiple factors driving this. Yes QE and welfare checks are driving consumer spending, mainly on durable goods, but there are some compounding factors. One is that commodity prices crashed last year in some important categories. As these prices recover that translates into a bump in inflation now. Energy prices are also shooting up. Another is that there's an ongoing supply crisis for key inputs. Microchips is an obvious one we read about constantly. I'm sure most of you have read about container ships queueing up at ports, so supply lines are choked at the moment. There's a lorry driver shortage here in Europe as well. So commodity and energy prices up, wages are also up and there's a labour shortage, consumer spending up and supply down equals inflation. Frankly having endured well over 5% inflation for almost the entire first half of my life I'm not panicking. A lot of these effects are short to medium term. The pandemic was always going to have economic repercussions and if it's just a year or two of inflation we will have to take the hit, cushioned by those welfare cheques and increased household savings through the pandemic. The pain was always going to come in one form or another.
StatsAreFun 5y ago
For those that do not believe the consumer prices are that bad or have increased that much, take a look at this historical graph from the official BLS.gov website[0]. Over the last 10 years the Consumer Price Index (CPI) has been holding steady at around 2%. This year we've doubled that. How about going back 21 years? Nope, the CPI still fluctuates around 2% give or take. The last time we saw a consumer price index value this high or higher was 30 years ago! I was a teenager the last time we had a CPI this high so for all of my adult life it has been a fairly consistent metric to factor into my household budgeting. Now I'm forced to make conscious decisions on how to prioritize my family's spending. To me personally, this is a big issue. So, while I appreciate the perspective people have that try to look at the bright side of these numbers, we must admit - regardless of one's political leaning or optimistic outlook - consumer prices have risen to the highest amounts in three decades. [0] https://data.bls.gov/timeseries/CUUR0000SA0L1E?output_view=pct_12mths https://data.bls.gov/timeseries/CUUR0000SA0L1E?output_view=p...
- wil421 5y ago
  How much of this is due to supply chain issues? Your linked graph already went down a bit. My butcher and managers at my grocery store blame their suppliers staffing issues due to Covid. Pork went way up early on due to Covid. What happens once more companies enforce vaccination policies?
  - whimsicalism 5y ago
    To me, the evidence is that much of the inflation remains due to supply chain issues. If you look at things like shelter, which shouldn't be impacted by supply chain, the prices are up - but still substantially below what they would be based on the pre-pandemic trend.
    - deleted 5y ago
      [deleted]
  - paulmd 5y ago
    At the end of the day, there are two underlying problems, I think. One is that the supply chain and shipping world is just completely bottlenecked and screwed up, some of it is COVID related disruptions (airlines not flying for a long time, shippers/dock workers not working, etc), some is residual shocks from the Ever Given (which pushed a massive "bubble" into the normal flow of containers/etc - which is creating weird paradoxical effects all across the supply chain as it suddenly becomes very important or not important at all to hustle on specific parts of the chain), etc. The other is that we just killed 700k people in the US alone, a disproportionate number of whom were "frontline" workers - the people at your grocery store and fast food places. Yeah a lot were seniors but of the ones who weren't, a ton of them were frontline workers. And that's just creating a massive labor shortage. In a sense this is also a preview of what the "send 'em home" policies certain political groups push for would look like. Vaccination policies are another log on that fire but frankly I don't think it's the grocery store workers who are the ones digging in their heels about getting vaccinated, it's the karens who are their customers. I think it's a comparatively small effect compared to the above two, but it's still yet another compounding effect. The supply chain was very "just in time" and disruptions to that supply chain can have surprisingly long-term effects before the ripples finally smoothed out - even if COVID had disappeared you are probably talking "at least several years" to return to normal, in the global shipping chain, and in certain long-leadtime supply chains like electronics. And really we are not even past the part where ripples are still getting created, due to the general labor shortages. Again though, we tell workers to have a 6 month supply of all expenses just in case "something unexpected" happens, and yet these JIT policies have been the darling of the business world. This is the downside, something big happens and they don't have any slack in their production chains. The companies that planned ahead and had a "6 month emergency supply" of computer chips aren't having problems as bad as the companies who were living paycheck-to-paycheck (or supplytruck-to-supplytruck).
phreeza 5y ago
I've been meaning to start collecting data on stuff that I actually buy on a regular basis in order to try to put together a kind of personal CPI. Maybe a good time to start doing it now.

214 points by awnird 5y ago

Printing free money has consequences. This is entirely expected with that causation. It will get worse. Hold value in assets, not money. Property, precious metals, art, whatever isn’t cash until the money printing stops.

quotemstr 5y ago
> Printing free money has consequences Yet the story we heard over and over from "experts" was that for some complicated theoretical reason exploding the money supply wouldn't cause inflation --- and then, after inflation became impossible to just ignore, that the inflation was due to complicated "supply chain hiccup" and would be "transitory". Whatever. Common sense is a real thing that exists. Expertise doesn't make someone correct: it just makes him knowledgeable. An expert under pressure to arrive at a false conclusion (often for political reasons) will use that knowledge to bamboozle you. The general public should think more critically and reflect on why they allowed motivated economic experts to tell them blatant (and not just in hindsight) lies about the consequences of running the money printer.
- xadhominemx 5y ago
  The spike in energy and commodity costs has way more to do with supply side dynamics. Upstream suppliers have been hesitant to add capacity because they can’t tell if the spike in demand is sustainable or just a snapback post-lockdown. And OPEC in particular is pressing their advantage when no bank wants to fund frackers that have over invested and then wiped out 3 or 4 times now. We are seeing this in many industries. Inflation hawks/ideologues have called 15 out of the past 0 hyperinflationary cycles and this one will be no different.
- nickthemagicman 5y ago
  "Trust the experts" has been the motto going around for a while now. It makes it easy to outsource your own critical thinking by letting the "experts" do it. The experts should just be one data point not THE SOURCE OF ULTIMATE TRUTH.
  - jpgvm 5y ago
    If you aren't a doctor your "own critical thinking" will have little bearing on the correct treatment or prevention of a disease/illness/injury, doubly so for complex ailments for viruses, cancers and genetic diseases. Pretty much the same goes for civil engineering, particle physics and any other highly trained field that requires vast quantities of knowledge to even intuit probable outcomes. Why is economics any different? I don't believe it is, I would say economics falls into a similar bucket as weather science where there are always large unknowns that make broad predictions imprecise but that doesn't invalidate their expertise and ignoring it is definitely foolish. Experts are experts for a reason. If you could intuit all difficult problems as a layman we would have already advanced science far beyond where we currently stand.
    - quotemstr 5y ago
      Skepticism of medical practice isn't a stupid Steve-Jobs-like trust in woo over science. It's getting multiple opinions, reading the underlying papers, asking "does this explanation make sense?", and checking for obvious mistakes --- as medicine, like any other human endeavor, is full of human error. Plenty of people have found cures for their medical problems only after they kept doggedly pressing medical people for things that made sense and actually worked for them. Something didn't seem right to them, and they pulled and pulled at threads to find out what it was. You don't need a medical degree to do that: you just need a brain. It's gravely concerning to see hostility directed at people who tell others to think for themselves, question experts, and adopt a general attitude of informed skepticism. Too many people get genuinely offended when you indicate that you're going to do your own thinking and not just follow "experts". They bring out cliches like "experts are experts for a reason" and "look at this one guy who did something stupid" and neglect, or even suppress, the idea that we at all, each and every one of us, scientists of our lives and competent to make our own decisions and form our own opinions.
- bojangleslover 5y ago
  The same experts who leave education and real estate, two things everybody wants, off the CPI
  - mikeyouse 5y ago
    What? Both are included; https://www.bls.gov/cpi/factsheets/college-tuition.htm https://www.bls.gov/cpi/factsheets/college-tuition.htm https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...
- Spooky23 5y ago
  > The general public should think more critically and reflect on why they allowed motivated economic experts to tell them blatant (and not just in hindsight) lies about the consequences of running the money printer. The reality of not taking action has consequences. The opening of the money floodgates in the 80s blunted the pain of the late 60s and 70s. The war economy of 2002- likewise dulled the lows.
- titzer 5y ago
  > motivated economic experts Pretty much all economics that you just casually hear about is going to be economics intentionally put in service of furthering the system of rich and powerful elites. It's just more propaganda pushed at you and has absolutely no relation to what is good for society, the average person, the longevity of our civilization, or the environment. It is, in short, sophisticated bullshit to let rich people keep getting richer and live like the leeches they are.
- goodpoint 5y ago
  If you are referring to economists, the "experts" are not experts. Knowledge matters and is important, otherwise we go down the path of novax and flat earth crowds.
  - thowaway1122337 5y ago
    like novax and flat earth are equivalent gaslighter
- bell-cot 5y ago
  That public seems happy to be lied to, on all sorts of subjects, by politicians & salesmen & etc. Why should "the economy" and "economics experts" be special cases?
newaccount2021 5y ago
No, 100%, once inflation is undeniable, the Fed will be pressured to deflate by raising interest rates (and the "taper" talk is exactly the beginning of this and is expected before year's end). The asset bubble already happened, if you missed it by now, its too late to join.
raelmiu 5y ago
Preach.
hn_throwaway_99 5y ago
People love to say that, but it's actually supply slide shocks that are usually the primary culprit in inflation. The fed has been "helicoptering" money for years, but it has only been this year, when there have been real and substantial breakdowns in the supply chain and labor markets, than inflation spiked so much. Was the same with OPEC in the 70s, Zimbabwe, Weimar Germany - in all those cases there was a major destruction or restriction of supply capacity, not just money printing.
- nickik 5y ago
  This is mostly wrong. Weimar Germany for example was actually doing well economically before they decided to print huge amounts of money for their foreign policy and that was for foreign policy reasons. In 2009 inflation actually collapsed for example and that was a supply side collapse far bigger then this year. > The fed has been "helicoptering" money for years They have also enacted major counter measures and the pure amount is no longer really a good description of policy. Around 2009 or 2010 they started paying interest on reserves. The CB has a number of tools.
  - MR4D 5y ago
    You’re right - “helicoptering” is no longer accurate - “airlifting” might be more appropriate. Remember, the Fed is buying $120,000,000,000 of bonds per month. That’s well beyond a helicopter’s capability!
    - nickik 5y ago
      It doesn't matter what the reserve is when the central bank has the power to prevent the movement of reserves in other ways. This is part of the complexity in modern central banking that people don't seem to understand. Many of the things you might have learn in school about how central banks operate are no longer the case. If cash actually flows depends on many factors.
  - ItsMonkk 5y ago
    Weimar Germany was a short squeeze on gold caused by the war debt. Germany printed money to buy gold, but the more they printed, the more gold cost. This was predicted by Keynes ahead of time.
kome 5y ago
This kind of inflation we are witnessing, it's not because too much money has been printed, but exactly because there is not enough money in circulation. It's not a monetary inflation, it's inflation created by scarcity, related to production halts (cost-push inflation https://en.wikipedia.org/wiki/Cost-push_inflation https://en.wikipedia.org/wiki/Cost-push_inflation). While all kinds of inflation have the same symptoms, it's not true that all kinds inflation has the same causes. And also the cure, it should be the right cure. Printing less money right now would be a huge mistake. But central bankers knows his very well.
- ur-whale 5y ago
  > This kind of inflation we are witnessing, it's not because too much money has been printed, but exactly because there is not enough money in circulation. Oh wow. Krugman, leave that body!
- hpoe 5y ago
  This only is true if you accept that additional money gets equally shared; however additional money benefits those with assets the most, whereas those with fewer assets (the middle and lower class) are punished in inflation as they are dependent upon income which often does not change in response to inflation. Or in other words, if I have multiple properties, stocks, investements etc, inflation is good for me because those things increase in value; however if the primary source of capital I have is a paycheck I get each week that I then have to immediately spend on housing, food, groceries, gas etc, inflation hurts me because my boss isn't going to raise my pay, meanwhile everything has gotten more expensive in the meantime, and if my boss does eventually give me a COL increase that will have lagged to the point the rest of the economy has already caught up with it. Pretending that inflation is good for debtors is like pretending that economically speaking we are all spherical cows in an airless frictionless vacuum.
  - mywittyname 5y ago
    Wages are rising fastest for low- and middle-income Americans. So they are benefiting from inflationary pressure. And to be quit honest, the elephant in the room that no one wants to address is that low and middle income people leaving their jobs for better ones are a contributor of the inflation we are seeing. The USA built an economy around cheap goods produced through exploitation both abroad and domestically. And these people are finally realizing that they can do better. The government cut off the inflow of immigrants who would replace these people in dangerous, low paying factory jobs, like meat packing.
HideousKojima 5y ago
Lead isn't a bad investment either.
- namelessoracle 5y ago
  Given the mass buyouts of bullets going on around the country lots of people seem to be agreeing with this statement.
lucozade 5y ago
You might be right but I doubt it. There's been QE of various forms for the last 12-13 years without this happening. But in the last 12 month energy prices have jumped 25% in the US. That's going to have both a direct and indirect impact on CPI inflation. There is still likely to be some underlying inflation, not attributable to energy prices, but it's only going to be a couple of percent. Now if your argument is that the energy price rise is a direct consequence of QE, I don't see the link. And it would need to explain why energy prices have gone ballistic everywhere else too. But there may be a link I'm not aware of.

themanmaran 5y ago

The article was only a couple sentences. For a little bit more context (and breakdown of categories) check out the bls.gov report: https://www.bls.gov/opub/ted/2021/consumer-price-index-rose-5-3-percent-over-the-year-ending-august-2021.htm https://www.bls.gov/opub/ted/2021/consumer-price-index-rose-...

kpierce 5y ago
Thanks for posting the url. You start looking at the numbers on a sub level and its not as shocking. 12 month change. Gasoline (all types) 42.7% - Huge dip when the pandemic happened now its back to pre covid prices. Natural gas (piped) 21.1% - Same issue. Used cars and trucks 31.9% - New cars are being made because of a ship shortage. Meats, poultry, fish, and eggs 8.0% - a labor problem because its hard to get that many people to work in spaces like that and not get sick.
- gibsonf1 5y ago
  Adding trillions to the money supply, of course, has no impact whatsoever?
  - martinko 5y ago
    Economists would argue that the 'printed' money is actually reserves at the central bank, and thus has no impact on price levels. I myself am less certain about the overall dynamics.
  - whimsicalism 5y ago
    People understand that inflation is a function of both money supply and velocity right? Well I guess no, as almost every comment on this thread seems to have no idea. https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V
    - wbsss4412 5y ago
      Money supply, velocity, and GDP growth* Just wanted to add, if all else is held equal amount those factors, growth in gdp, without and subsequent changes in the money supply or velocity, would lead to deflation.

reacharavindh 5y ago

Who would have thought printing Trillions of US dollars for pandemic relief would circulate more money in the market and lead to inflation?! Not saying a government shouldn't provide relief during a pandemic, just stating that it sounded obvious to me rather than alarming.

tmaly 5y ago
The printing is part of it, but not all of it. The commercial credit that amplifies the money in circulation is a major factor. This is itself driven by the amount of money available to leverage against with fractional lending.
raydev 5y ago
Don't you have to eliminate supply chain issues before you can confidently assert "printing trillions of US dollars for pandemic relief" is the primary cause?
AnimalMuppet 5y ago
As you say, they created a bunch of money. But also, we have less stuff (because when all those people who weren't working, they weren't doing whatever they normally did, and so there's missing output in the economy). So, more money and less stuff, and what do you know, we have inflation. This is my complete lack of surprise. But, if we stop creating more extra money, and if people can return to work, then it should be transitory. I don't see reason why we should expect 5% inflation every year going forward.
nerdponx 5y ago
My somewhat-uneducated opinion has been that this was not due to pandemic relief, but due to long-term inflation pressure that the economy stopped being able to absorb as a result of the pandemic, and/or wasn't being measured (because it was being reflected in real estate, commodities, and securities).
ThunderSizzle 5y ago
It probably wouldn't have been as bad if the time before it and time after it is similarly inflated. If it was a one-off 2T expense, it probably wouldn't be as noticeable as the every growing hockey stick of Keynesian economics (funding expensive mandatory social programs).

seibelj 5y ago

Hopefully this will finally show that Paul Krugman is a hack. At this point do the exact opposite of everything he says. https://www.nytimes.com/2021/09/10/opinion/transitory-inflation-covid-consumer-prices.html https://www.nytimes.com/2021/09/10/opinion/transitory-inflat... https://www.nytimes.com/2021/06/21/opinion/inflation-economy-biden-fed.html https://www.nytimes.com/2021/06/21/opinion/inflation-economy...

boredumb 5y ago
"By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s." He's shown himself to be a hack for decades.
- asah 5y ago
  The backstory gets even worse for Krugman, as he pathetically tried to respond to this: https://www.snopes.com/fact-check/paul-krugman-internets-effect-economy/ https://www.snopes.com/fact-check/paul-krugman-internets-eff...
- huskyperv 5y ago
  But he's right? Look at labor productivity since the 90s and let me know if you see a significant increase
deleted 5y ago
[deleted]
thowaway1238431 5y ago
krugman best described as hair pulling wildman
asah 5y ago
2c: 1. yes, inflation has spiked first due to stimulus and now to supply chain disruption, also triggered by the pandemic changing consumption patterns faster than suppliers could adapt. These will hopefully subside if COVID doesn't get worse e.g. vaccines/therapies stay ahead of the inevitable new variants. 2. yes, "transitory" is meaningless if it continues long enough. Specifically, the scary part about inflation is when market participants raise prices expecting future inflation, crushing consumers who can't capture higher wages at the same pace. IMHO we're not quite there yet, and prices are tumbling when supply-demand has returned to equilibrium, e.g. lumber. 3. anybody who pontificates as much as Krugman is bound to make lots of mistakes. IMHO the issue is with the publisher's need to create exciting headlines, i.e. that's on us for listening to newspaper columnists (I've largely stopped). Hit rates go up when you can choose your battles and sit on your hands the rest of the time. Less excusable to me are the guys who can sit on their hands but still put their feet in their mouths, e.g. Dimon, Buffett, etc. One of these days, the masses will wake up and realize that these old emperors aren't wearing clothes. (e.g. look at Buffett's 10 year return...) kind thoughts welcome.

hpoe 5y ago

So I recently had a realization that the money the US government spends has absolutely no relation to the money the government receives they can spend whatever they want in any quantity they want. The only barrier is inflation; however that instead means that taxes at the federal level have nothing to do with income or revenue but only inflation control. So the IRS should be the Internal Inflation Control Service. I am still working on the full implications of that understanding but it has definitely changed the way I look at things. EDIT: Updated to make clear I am discussing the US government, not governments in general. EDIT EDIT: To make clear I think this is a bad thing, it is a lever that the more powerful in society have the ability to pull, in order to move wealth from the lower class to themselves as inflation is generally only positive for the asset owning class.

xxpor 5y ago
For anyone trying to google: this is modern monetary theory.
- sharklazer 5y ago
  AKA, “wishful thinking”.
syshum 5y ago
Your Realization is call MMT, it is a terrible theory of economics and will likely be the downfall of the US Dollar and other Fiat Currencies if it continues to become more popular
Jensson 5y ago
That only applies to the US, most countries has to balance their budget.
- tut-urut-utut 5y ago
  Not really. Most of the countries run a budget with a huge deficit or debt. USA is not even in the top 10 when you look at the debt by GDP ratio. https://worldpopulationreview.com/countries/countries-by-national-debt https://worldpopulationreview.com/countries/countries-by-nat... EDIT: Just so clarify, first list on the linked page is irrelevant, scroll down to the list of countries ordered by debt to GDP ratio.

newsclues 5y ago

War in spring will unite Americans

Covzire 5y ago
You're getting downvoted but people might want to pay attention. I've never seen so much anger boiling under the surface. What the Biden administration is doing is nothing short of shocking, it's like every action they take is calculated to be the worst possible and least likeable action at that moment, e.g. mandates, worst possible way to leave afghanistan, completely ignoring border, trying to spend 3.5T in the face of extreme inflation, weaponizing DOJ/FBI against parents, etc.
- spywaregorilla 5y ago
  > I've never seen so much anger boiling under the surface. Didn't check the news much last year huh?
- asah 5y ago
  sigh, you're getting downvoted but you're right - and don't forget "Build Back Better" while the pandemic is far from over. Even if one agrees with the Biden administration decisions, the execution and messaging is unquestionably messy. I fear time has run out to save the Democrats in the midterms, which means more Congressional inaction, more polarizing executive actions and a 2024 anyone-but-Biden election outcome.
- thowaway1122337 5y ago
  the folks that run these websites arent helping. hn and any of these organizations gaslighting legitimate concerns are complicit in the anger buildup hn is actively censoring posts
- colinmhayes 5y ago
  Biden has been tougher on the border than Trump. He's seperating kids left and right, same number of asylum seekers let in.
- greedo 5y ago

Hokusai 5y ago

Eurozone is at 3.4. But as inflation is the result of pandemic related production halts, the BCE is asking too wait for the shock to pass before taking measures that may weak the economy.

jerf 5y ago
There is this weird idea I can't wrap my head around that is very popular that if you explain why something is happening, that means it is somehow not happening. This has to be one of the most clear cases of this phenomenon I've seen. Inflation is rising prices [1]. There is no requirement in the definition of inflation that it just be ambiently "happening" for no reason. Inflation always has some reason or other. That doesn't mean it's not happening. If the prices are going up because of government insolvency, it's inflation. If prices are going up because aliens are ordering all stores at raygunpoint to raise prices, it's inflation. If there's a global pandemic and everyone response with massive economic interventions and the result is rising prices, it's inflation. If prices rise this month, but we think that the reasons are probably transitory and they'll go back down next month, that's still inflation, simply followed by deflation next month. If prices rise because of second-order effects of interest rates being dropped to zero by the central bank, that's inflation. If the prices rise because the moon is in the seventh house and Jupiter has aligned with Mars, that's inflation. It's fine and valuable to ask about the reasons why inflation is occurring, but the answer does not add or diminish it in the slightest. They're not waiting for the "shock to pass", they're trying to make sure you don't find out something that you are going to use to decide they're not doing a good job. This is purely political, not economic. [1]: And whatever other details you like. I'm not too worried about exactly which definition you plug into this post, it holds regardless for any sensible definition.
- jjk166 5y ago
  No one is saying inflation is not happening, they're saying hold off on taking action to address this particular type of inflation. It's like if you have a tumor, but it's not cancerous, then there is no reason to prescribe anti-cancer medication. Of course it's still a tumor, but understanding why that tumor exists determines whether and how you deal with it.

newaccount2021 5y ago

For the last six months, anyone mentioning inflation on HN was furiously downvoted by midwits who parroted the "baseline", "transitory" talking points. Does HN finally accept that inflation is actually here?

whoevercares 5y ago

I thought China’s cheap goods are the reason why US inflation rate remains sane over the years and enabled US to keep doing QE

Retric 5y ago
Inflation is about more than just the total amount of money. Roughly if you double the worlds population, goods, and money then the same amount of money buys the same amount of goods. However, imports only represent a fraction of overall spending. It’s really increasing productivity that’s been keeping inflation low.
- whoevercares 5y ago
  > increasing productivity thanks for the highly productive Chinese people
  - Retric 5y ago
    Per capita GDP says Chinese people aren’t that productive. China is an economic powerhouse because it’s got 1,400 million people. US ranks 15th by per capita GDP(PPP), Hong Kong would be 19th, and China 100th. China is still recovering from some horrific mismanagement by the CCP, but it’s got a long way to go.
bell-cot 5y ago
You mean all those Chinese goods that are (at best) sitting & rotting in a huge fleet of container ships, parked off the U.S. West coast, waiting to be unloaded "eventually"?
- whoevercares 5y ago
  Are you serious? I mean the entire supply chain
eunos 5y ago
Yeah until Chinese wage went relatively high + trade war started + US stubbornly refused to remove tariffs.

thowaway1238431 5y ago

if you believe inflation is only 5.4% i'll sell ya a bridge in brooklyn

sleepysysadmin 5y ago

https://tradingeconomics.com/united-states/inflation-cpi https://tradingeconomics.com/united-states/inflation-cpi For 2020 they never hit target of 2%, they are deciding to run inflation hot by leaving stimulus and interest rates low. The idea is to more or less bring everything back to normal target. The problem: https://tradingeconomics.com/united-states/money-supply-m2 https://tradingeconomics.com/united-states/money-supply-m2 There's about 40% locked in. The fed thinks they have this under control but they certainly do not.

whimsicalism 5y ago
Love when the y-axis starts at 18500.

bojangleslover 5y ago

Anecdotally I have loads of friends buying all kinds of stuff with their insane pandemic checks These comments are far too verbose for a phenomenon this simple: print money, people buy stuff, it gets more expensive

nonameiguess 5y ago
The actual issue here is the Fed helicopter dumping into asset markets dwarfed stimulus checks to individuals. That is why it makes no sense to blame it on stimulus checks. The CARES Act allocated $560 billion in individual relief checks. The Fed asset purchases for 2020 is the $3.4 trillion number. That's more than 6 times as much.
ur-whale 5y ago
> for a phenomenon this simple While what you describe might be one factor contributing to higher inflation, it certainly isn't the only one. Supply chain pipeline bubbles are likely another. Unbridled dollar printing and massive govt. debt probably contributes as well. The US quickly losing ground as a superpower thereby undermining the status of the USD as a reserve currency probably a factor. etc ...
- sjg007 5y ago
  There is no way the euro or the yuan will take over anytime soon.
  - ur-whale 5y ago
    > There is no way the euro or the yuan will take over anytime soon. Who said anything about taking over? A world without a reserve currency will be a much better place to live.
tuckerpo 5y ago
>buying all kinds of stuff with their insane pandemic checks When is this meme going to stop? How is a couple of $1200 checks over the course of 6 months enough to let people buy every home on the market all of the sudden?

ur-whale 5y ago

> U.S. inflation rate rises to 13-year high of 5.4 Time to go long BTC (has been the case every day for the last 10 years, as a matter of fact).

johnebgd 5y ago
The Tether fraud has inflated BTC far more than 5.4% in the last year.
- ur-whale 5y ago
  > The Tether fraud has inflated BTC far more than 5.4% in the last year. Tether is a concern. What happens to BTC when (not if) it blows up is unclear, there is a whole spectrum of opinion on the topic. It will certainly create huge ripples in the BTCUSD curve. I personally believe Tether's implosion will be a very good thing for Bitcoin if you have a long term horizon. With regard to "inflating BTC", I'm not sure I understand why it's a bad thing.
blantonl 5y ago
So what you are essentially saying is, regardless of inflation, we should be long BTC?
- ur-whale 5y ago
  Take a look at BTCUSD over the 2011-2021 period and make your own call.
  - Ekaros 5y ago
    Took one years ago and it didn't make sense back then, it still doesn't make sense. The utility and value provided is so marginal... But I don't know anything so. Market can be illogical for long time.

mcs5280 5y ago

Time to change the basket of goods again so we can hide the true inflation rate.

everdrive 5y ago

What is the best financial strategy in the case of inflation? Invest money so you don't have it sitting in a bank account? Spend it on big ticket items as they may hold their value better than the cash? Simply try to reduce costs?

moondistance 5y ago
There are many views on this and it is important to form your own opinion. From personal study and conversations with other investors: (1) stocks that correlate with inflation (e.g. some banks and utilities, inflation-adjusted REITs), (2) companies with high-growth prospects (e.g. late-stage yet still privately-held companies) - these are much higher risk, but worth putting a small percentage here over a long time horizon.
whimsicalism 5y ago
I don't think there is a best strategy. Equities do well in mildly inflationary environments, but when everyone is talking about inflation is when the Fed is most likely to make contractionary signaling, causing equities to drop. I would focus on just investing in ETFs and not trying to time the market.
koonsolo 5y ago
Bitcoin ;)
airstrike 5y ago
The simplest answer is buying TIPS https://www.treasurydirect.gov/indiv/products/prod_tips_glance.htm https://www.treasurydirect.gov/indiv/products/prod_tips_glan...
- SilasX 5y ago
  At this point, wouldn't they have already priced in the inflation? that is, you have to pay more for the right to those inflation-adjusted interest rates.
  - 5y ago

Workaccount2 5y ago

My uncertainty comes from not knowing whether the technicians servicing the machine of the economy actually have the understanding and ability to always be able to fix it. I don't know if they are working on a diesel motor, complex but fully serviceable, or if they are working on a black box, doing ritualistic tapping and prodding that seems to usually correlate with outputs.

merpnderp 5y ago
If they knew what they were doing, they wouldn't be shocked that we're headed for stagflation after a series of failed predictions about the inflation being short term and the supply chain fixing itself in months rather than years.
- deleted 5y ago
  [deleted]

thiago_fm 5y ago

I'm not surprised. I wonder how many folks really buy into FEDs argument that this is temporary, that's why they won't change the unmaintainable interest rates the US has been keeping artificially low. We'll have another year to come, of even higher inflation and some people will still be talking about "supply chain" problems created 2 years ago. Just watch. I'd take any bet I can afford about this. FED knows that if it hikes up 0.5% interest rates a few times, markets will melt, unemployment to 40%+ and a big civil war will happen. Except a few US companies that can really make money without much debt(like tech companies), almost all of the rest are walking zombies. So many suburban cities in America are 100% bankrupt being kept alive by policies which should be temporary, such as this Biden's infrastructure package. You can hide some dust under the carpet only up to a certain point. Citizens let politicians do it until it's out of control. I don't believe it's a mistake solely done by politicians and the FED, but rather, the average american citizen consuming and owning shit to a unmaintainable degree.

myfavoritedog 5y ago
The people who believe the new inflation lies from the Fed are a subset of the people who believed the previous round of inflation lies from the Fed.
whimsicalism 5y ago
> FED knows that if it hikes up 0.5% interest rates a few times, markets will melt, unemployment to 40%+ and a big civil war will happen. The media is harming people's perceptions of reality, and I feel like this has really accelerated in the last decade or two. It's worrying.

tharne 5y ago

The money printer works great until it doesn't

baby-yoda 5y ago

one thought ive had for a while (and this isn't a totally fleshed out thought, would like to hear opinions) is we are in for whipsaw inflation-deflation for the next couple of years and we are all along for the ride. the fed does have some levers to pull but not with much magnitude, especially with interest rates where they are. I believe there were signs of a deflationary environment up until about 18 months ago, then we had velocity drop to 0. tons of money was added to make up for the decreased velocity. we've had some signs of inflation for sure, some exacerbated by supply issues. but much of the money put into the system is collecting in pockets of unproductive asset classes - sitting in bank accounts, paying off debts(?), getting off shored, NFT and crypto. there is no "multiplicative" effect on the economy with this new money added and so its effect will wear off quickly. stimulus etc. filters through and collects in certain pockets/areas, individuals who realize these profits then shift to unproductive classes. the fed, having few tools, knows they need interest rates. so next month they start raising through the end of 2024, which will further the whipsaw as housing prices decrease and capital dries up. a spending bill might be approved which will trickle some money back in but largely as boomers continue leaving the workforce, younger people straddle the sideline of the workforce (due to debt and/or low wages), declining birth rate, etc. these various contractions are all conducive to a deflationary environment, so we will be in a state of fighting the tide for a couple of years. meanwhile, higher education keeps going up and with federally backed student loans the cycle continues. the shift to electric cars will increase vehicle purchase prices substantially. if the rest of the CPI basket keeps trickling up, where does this end up in a couple of years? EDIT - this is ignoring geopolitical issues for now. of course that certainly can have a massive effect on things and we are not in a vacuum.

lumost 5y ago

With the way the US measures inflation, inflation only rises when import prices go up or wages for manufacturing/service workers go up. These are two intentional policy goals for the last two administrations, why would we not expect inflation to remain high until automation improves?

simonh 5y ago

There are multiple factors driving this. Yes QE and welfare checks are driving consumer spending, mainly on durable goods, but there are some compounding factors. One is that commodity prices crashed last year in some important categories. As these prices recover that translates into a bump in inflation now. Energy prices are also shooting up. Another is that there's an ongoing supply crisis for key inputs. Microchips is an obvious one we read about constantly. I'm sure most of you have read about container ships queueing up at ports, so supply lines are choked at the moment. There's a lorry driver shortage here in Europe as well. So commodity and energy prices up, wages are also up and there's a labour shortage, consumer spending up and supply down equals inflation. Frankly having endured well over 5% inflation for almost the entire first half of my life I'm not panicking. A lot of these effects are short to medium term. The pandemic was always going to have economic repercussions and if it's just a year or two of inflation we will have to take the hit, cushioned by those welfare cheques and increased household savings through the pandemic. The pain was always going to come in one form or another.

StatsAreFun 5y ago

For those that do not believe the consumer prices are that bad or have increased that much, take a look at this historical graph from the official BLS.gov website[0]. Over the last 10 years the Consumer Price Index (CPI) has been holding steady at around 2%. This year we've doubled that. How about going back 21 years? Nope, the CPI still fluctuates around 2% give or take. The last time we saw a consumer price index value this high or higher was 30 years ago! I was a teenager the last time we had a CPI this high so for all of my adult life it has been a fairly consistent metric to factor into my household budgeting. Now I'm forced to make conscious decisions on how to prioritize my family's spending. To me personally, this is a big issue. So, while I appreciate the perspective people have that try to look at the bright side of these numbers, we must admit - regardless of one's political leaning or optimistic outlook - consumer prices have risen to the highest amounts in three decades. [0] https://data.bls.gov/timeseries/CUUR0000SA0L1E?output_view=pct_12mths https://data.bls.gov/timeseries/CUUR0000SA0L1E?output_view=p...

wil421 5y ago
How much of this is due to supply chain issues? Your linked graph already went down a bit. My butcher and managers at my grocery store blame their suppliers staffing issues due to Covid. Pork went way up early on due to Covid. What happens once more companies enforce vaccination policies?
- whimsicalism 5y ago
  To me, the evidence is that much of the inflation remains due to supply chain issues. If you look at things like shelter, which shouldn't be impacted by supply chain, the prices are up - but still substantially below what they would be based on the pre-pandemic trend.
  - deleted 5y ago
    [deleted]
- paulmd 5y ago
  At the end of the day, there are two underlying problems, I think. One is that the supply chain and shipping world is just completely bottlenecked and screwed up, some of it is COVID related disruptions (airlines not flying for a long time, shippers/dock workers not working, etc), some is residual shocks from the Ever Given (which pushed a massive "bubble" into the normal flow of containers/etc - which is creating weird paradoxical effects all across the supply chain as it suddenly becomes very important or not important at all to hustle on specific parts of the chain), etc. The other is that we just killed 700k people in the US alone, a disproportionate number of whom were "frontline" workers - the people at your grocery store and fast food places. Yeah a lot were seniors but of the ones who weren't, a ton of them were frontline workers. And that's just creating a massive labor shortage. In a sense this is also a preview of what the "send 'em home" policies certain political groups push for would look like. Vaccination policies are another log on that fire but frankly I don't think it's the grocery store workers who are the ones digging in their heels about getting vaccinated, it's the karens who are their customers. I think it's a comparatively small effect compared to the above two, but it's still yet another compounding effect. The supply chain was very "just in time" and disruptions to that supply chain can have surprisingly long-term effects before the ripples finally smoothed out - even if COVID had disappeared you are probably talking "at least several years" to return to normal, in the global shipping chain, and in certain long-leadtime supply chains like electronics. And really we are not even past the part where ripples are still getting created, due to the general labor shortages. Again though, we tell workers to have a 6 month supply of all expenses just in case "something unexpected" happens, and yet these JIT policies have been the darling of the business world. This is the downside, something big happens and they don't have any slack in their production chains. The companies that planned ahead and had a "6 month emergency supply" of computer chips aren't having problems as bad as the companies who were living paycheck-to-paycheck (or supplytruck-to-supplytruck).

phreeza 5y ago

I've been meaning to start collecting data on stuff that I actually buy on a regular basis in order to try to put together a kind of personal CPI. Maybe a good time to start doing it now.