9 ms·

I guess I still don't buy this being very serious inflation. Food finally costing as much as it did in 2011 just doesn't sound very inflation-y, in context. Th

I guess I still don't buy this being very serious inflation. Food finally costing as much as it did in 2011 just doesn't sound very inflation-y, in context. The price index from 2009 to 2011 was a similarly substantial jump (actually a slightly larger one) than 2019 to 2021, and didn't even require global supply chain and labor madness. But many narratives seem to be "this is world changing inflation", and not "we're seeing food increases that are just as bad as they were in 2009-2011" or something a little less hyperbolic. For that matter, it seems like prices are doing considerably better than that increase, given extenuating factors that will eventually be normalized. Yet I don't recall nearly as much doomsaying back then, with the exception of some geopolitical concerns that it may have kickstarted (the Arab Spring). (And dairy, cereals, and sugar are still at lower prices than they were in 2011) Generally I find it very funny that people are using the exact same graphs (though often with different starting points) to show that "inflation is definitely happening" (eg, lots of bitcoiners) and "here is proof that prices have been flat for a decade, and are only finally starting to surpass the prices of 10 years ago" (eg, taleb).

toomanydoubts 5y ago
Maybe try coming to Brazil, living on a BRL paycheck, where people are BUYING bones with DECAYED MEAT because it's more profitable to the food industry to export the actual food instead of selling it on the local market because the FED is exporting the USA inflation to poorer countries. Then, maybe, you will buy it's serious inflation.
ak_111 5y ago
A major difference with 2009 imo (actually which you alluded to) is inflation expectations going up or inflation getting “embedded” in public’s psychology. That means people start factoring it into their decision most importantly salary negotiations. It feels inflation talk is cutting through to the public much more than 2009 (am I right in this, those who were around back then?). More objectively more “serious” folks seem to flag it up as a major risk than in 2009, even some who were major supporters of 2009 QE (CEOs, Larry “secular stagnation” Summers, El-Erian) Long term this might have greater impact on prices than covid induced supply shortages. At the very least it creates second order dynamics that are hard to predict.
- deleted 5y ago
  [deleted]
- nostrademons 5y ago
  Also note that in 2009 there was a substantial minority of (generally well-educated) people that were saying "deflation, then hyperinflation". I didn't fully understand their reasoning at the time - I was like "How do you get the hyperinflation?" - but it seems like that's exactly the script the world will follow.
  - mountainb 5y ago
    The key was really what the banks would do with excess reserves. If regulators and the Fed had followed Krugman type advice, they would have encouraged or pushed the banks to increase lending again on those massive reserves. Instead they encouraged the banks to sit on the reserves and so that they could pass extreme 'stress tests.' The current situation is like a permanent stress test combined with the already passed COVID relief bills encouraging aggressive lending. So they are basically following the dovish nostrum and we are getting the consequences that were warned about. It's a bit of a red herring to say that the stalled super-spending bills will push inflation off a cliff. That gun has already been fired. You would have to roll back the banking stuff in the emergency relief bills and raise rates to, uh, stuff the bullet back in the gun. The super-spending bills won't pass, but honestly both parties have an interest in obscuring their collective responsibility for the runaway inflation. Another thing that isn't mentioned much outside of FX circles is that the USD is sharply down versus the Yuan. Typically China has been criticized for enthusiastically printing Yuan to improve their export competitiveness. Instead we have record imports from China combined with a substantially more expensive Yuan.
anm89 5y ago
Debt to GDP is 130% and structurally basically guaranteed to nominally increase over the next 10 years given the epic insolvency of social security and medicare. Anyway, imagine our current congress not running a deficit. It's never going to happen. But the record is pretty clear, there are a limited ways out of this situation. 1) Default on your debt : The US is never going to do this. It would be insane given the global position of the dollar and the fact that the fed can always buy treasuries to finance debt 2) Run persistently high inflation: This is how the US managed it's debt after WW2 : Real rates were around -15% for the better part of the decade. And at the end bond holders were screwed and the country was solvent. 3) Hyper inflate : basically off the table for the dollar given the huge structural demand for dollars and also going back to the point that the Fed doesn't want to short term implode all global capital markets. 4) Pull a japan and have no growth for a third of a century. The easy choice is # 2. We have to have inflation. The supply chain stuff is just a detail. CPI for energy is 25% percent right now. I've seen a figure for housing sales prices at around 17. Spy is up 33% year on year. Bitcoin is up I think about 600 yoy. The inflation writing is on the wall. https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm https://www.bls.gov/charts/consumer-price-index/consumer-pri...
- j7ake 5y ago
  Some of the options here assume that one can dictate what will happen in the future in a top-down manner. "Pulling a Japan" and "Hyperinflating" are not choices that bureaucrats can dictate will or will not happen.
- Retric 5y ago
  Inflation isn’t relative to any one commodity you need to look at everything from Big Mac’s and steel to street drugs. Using the normal inflation measurements gives you a number around 5%. Which is all of 2% above the FED’s target. It’s a point of concern but no where near the double digit numbers people are talking about. As to energy costs, those always fluctuate. Oil is at 81$ today and it dipped under 20$ in 2020, except in 2008 it hit 140$ even ignoring inflation.
  - 5y ago
chiefalchemist 5y ago
In the USA poverty is fairly significant. Those living just above that line, also very significant. To that add those in the "paycheque to paycheque" category. That's bad enough. Now to that add (coming up on) 2 yrs of Covid terror and even a small price increases, in the context of no clear vision of better days ahead, and the result is plenty of stress and suffering. Logically, you're correct. Emotionally, it's a different story for plenty of those in the USA.
- emodendroket 5y ago
  Surely slamming the brakes on the economy so that we can reduce inflation is going to hit those people worse.
  - leppr 5y ago
    Because poor people have their networth in assets? No, the lower class depends on salary from employment, which hasn't recovered[1]. What the Fed interventions did to the economy is inflate assets, that's it. Real GDP, productivity and employment have declined. "Slamming the brakes on the economy" i.e. raising rates would allow the stock market and other asset markets to deflate, which would proportionally affect the upper classes more. Lower classes would enjoy reduced food, gas and rent prices, while not seeing meaningful net worth reduction. Of course this is precisely the reason this won't happen. Nobody whose voice matters benefit from the inequality gap being reduced to pre-QE levels. [1]: https://tradingeconomics.com/united-states/employment-rate https://tradingeconomics.com/united-states/employment-rate
    - emodendroket 5y ago
      Poor people are dependent on wages, which would go away if people started getting laid off.
epistasis 5y ago
I think it's pretty clear that most inflation talk right now is just about political ideology. Maybe economic ideology. Some people are just sure that hyperinflation is around the corner, and desperate to find hints of it whatever they can, seemingly sure that 3% CPI means we will see hyperinflation in a few days.
- reducesuffering 5y ago
  US CPI has been approximately 5.4% for 5 months. That kind of sustained inflation hasn’t been seen in over multiple decades.
hajile 5y ago
The UN reported back in April 2020 that lockdowns would cause over 130,000,000 people to starve. That's close to half of the US population. Most of countries in South America pay an average of $1-3 per hour. Bangladesh pay as little as $0.09 per hour and Sudan pays a mere $0.04 per hour. Dozens of poor, African and Asian countries pay less than $0.30 per hour. https://en.wikipedia.org/wiki/List_of_countries_by_minimum_wage https://en.wikipedia.org/wiki/List_of_countries_by_minimum_w... When international food prices go up, the "poor" in the US become inconvenienced. Elsewhere across the world, hundreds of millions starve.
- freewilly1040 5y ago
  Have those predictions come to pass?
  - ekianjo 5y ago
    Ever heard of something called the Arab Spring?
  - hajile 5y ago
    Yes More precisely, they say 118M extra people in 2020 which is 12M less than projected, but that's small comfort to the hundred-million people who can't get enough to eat. https://www.worldbank.org/en/topic/agriculture/brief/food-security-and-covid-19 https://www.worldbank.org/en/topic/agriculture/brief/food-se...
    - danans 5y ago
      That's not all due to the pandemic, according to your own link: > Hunger was trending upward even before the COVID-19 pandemic, which exacerbated existing effects from extreme climate events, conflict, and other shocks to economic opportunities.
      - hajile 5y ago
        COVID death toll across the entire world is only around 5M. Only a tiny fraction of that 118M is needed to make COVID look like nothing in comparison.
DantesKite 5y ago
The price of coffee has been the cheapest I’ve ever seen at my store.
mensetmanusman 5y ago
Consider we might be in a bubble: https://www.reuters.com/world/higher-food-prices-help-fuel-40-jump-global-hunger-un-agency-2021-07-08/ https://www.reuters.com/world/higher-food-prices-help-fuel-4... Experts predicted that there might be more hunger deaths from the pandemic than from Covid. Will be interesting to see what happens.
emodendroket 5y ago
As ever, people have the answers ready to go and crowbar events to them over and over.
juanani 5y ago
Easy to be in denial when it doesn't affect you richies. Dont see the need to let everyone else know how hard you clutch the pearls.

toomanydoubts 5y ago

Maybe try coming to Brazil, living on a BRL paycheck, where people are BUYING bones with DECAYED MEAT because it's more profitable to the food industry to export the actual food instead of selling it on the local market because the FED is exporting the USA inflation to poorer countries. Then, maybe, you will buy it's serious inflation.

ak_111 5y ago

A major difference with 2009 imo (actually which you alluded to) is inflation expectations going up or inflation getting “embedded” in public’s psychology. That means people start factoring it into their decision most importantly salary negotiations. It feels inflation talk is cutting through to the public much more than 2009 (am I right in this, those who were around back then?). More objectively more “serious” folks seem to flag it up as a major risk than in 2009, even some who were major supporters of 2009 QE (CEOs, Larry “secular stagnation” Summers, El-Erian) Long term this might have greater impact on prices than covid induced supply shortages. At the very least it creates second order dynamics that are hard to predict.

deleted 5y ago
[deleted]
nostrademons 5y ago
Also note that in 2009 there was a substantial minority of (generally well-educated) people that were saying "deflation, then hyperinflation". I didn't fully understand their reasoning at the time - I was like "How do you get the hyperinflation?" - but it seems like that's exactly the script the world will follow.
- mountainb 5y ago
  The key was really what the banks would do with excess reserves. If regulators and the Fed had followed Krugman type advice, they would have encouraged or pushed the banks to increase lending again on those massive reserves. Instead they encouraged the banks to sit on the reserves and so that they could pass extreme 'stress tests.' The current situation is like a permanent stress test combined with the already passed COVID relief bills encouraging aggressive lending. So they are basically following the dovish nostrum and we are getting the consequences that were warned about. It's a bit of a red herring to say that the stalled super-spending bills will push inflation off a cliff. That gun has already been fired. You would have to roll back the banking stuff in the emergency relief bills and raise rates to, uh, stuff the bullet back in the gun. The super-spending bills won't pass, but honestly both parties have an interest in obscuring their collective responsibility for the runaway inflation. Another thing that isn't mentioned much outside of FX circles is that the USD is sharply down versus the Yuan. Typically China has been criticized for enthusiastically printing Yuan to improve their export competitiveness. Instead we have record imports from China combined with a substantially more expensive Yuan.

anm89 5y ago

Debt to GDP is 130% and structurally basically guaranteed to nominally increase over the next 10 years given the epic insolvency of social security and medicare. Anyway, imagine our current congress not running a deficit. It's never going to happen. But the record is pretty clear, there are a limited ways out of this situation. 1) Default on your debt : The US is never going to do this. It would be insane given the global position of the dollar and the fact that the fed can always buy treasuries to finance debt 2) Run persistently high inflation: This is how the US managed it's debt after WW2 : Real rates were around -15% for the better part of the decade. And at the end bond holders were screwed and the country was solvent. 3) Hyper inflate : basically off the table for the dollar given the huge structural demand for dollars and also going back to the point that the Fed doesn't want to short term implode all global capital markets. 4) Pull a japan and have no growth for a third of a century. The easy choice is # 2. We have to have inflation. The supply chain stuff is just a detail. CPI for energy is 25% percent right now. I've seen a figure for housing sales prices at around 17. Spy is up 33% year on year. Bitcoin is up I think about 600 yoy. The inflation writing is on the wall. https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm https://www.bls.gov/charts/consumer-price-index/consumer-pri...

j7ake 5y ago
Some of the options here assume that one can dictate what will happen in the future in a top-down manner. "Pulling a Japan" and "Hyperinflating" are not choices that bureaucrats can dictate will or will not happen.
Retric 5y ago
Inflation isn’t relative to any one commodity you need to look at everything from Big Mac’s and steel to street drugs. Using the normal inflation measurements gives you a number around 5%. Which is all of 2% above the FED’s target. It’s a point of concern but no where near the double digit numbers people are talking about. As to energy costs, those always fluctuate. Oil is at 81$ today and it dipped under 20$ in 2020, except in 2008 it hit 140$ even ignoring inflation.
- 5y ago

chiefalchemist 5y ago

In the USA poverty is fairly significant. Those living just above that line, also very significant. To that add those in the "paycheque to paycheque" category. That's bad enough. Now to that add (coming up on) 2 yrs of Covid terror and even a small price increases, in the context of no clear vision of better days ahead, and the result is plenty of stress and suffering. Logically, you're correct. Emotionally, it's a different story for plenty of those in the USA.

emodendroket 5y ago
Surely slamming the brakes on the economy so that we can reduce inflation is going to hit those people worse.
- leppr 5y ago
  Because poor people have their networth in assets? No, the lower class depends on salary from employment, which hasn't recovered[1]. What the Fed interventions did to the economy is inflate assets, that's it. Real GDP, productivity and employment have declined. "Slamming the brakes on the economy" i.e. raising rates would allow the stock market and other asset markets to deflate, which would proportionally affect the upper classes more. Lower classes would enjoy reduced food, gas and rent prices, while not seeing meaningful net worth reduction. Of course this is precisely the reason this won't happen. Nobody whose voice matters benefit from the inequality gap being reduced to pre-QE levels. [1]: https://tradingeconomics.com/united-states/employment-rate https://tradingeconomics.com/united-states/employment-rate
  - emodendroket 5y ago
    Poor people are dependent on wages, which would go away if people started getting laid off.

epistasis 5y ago

I think it's pretty clear that most inflation talk right now is just about political ideology. Maybe economic ideology. Some people are just sure that hyperinflation is around the corner, and desperate to find hints of it whatever they can, seemingly sure that 3% CPI means we will see hyperinflation in a few days.

reducesuffering 5y ago
US CPI has been approximately 5.4% for 5 months. That kind of sustained inflation hasn’t been seen in over multiple decades.

hajile 5y ago

The UN reported back in April 2020 that lockdowns would cause over 130,000,000 people to starve. That's close to half of the US population. Most of countries in South America pay an average of $1-3 per hour. Bangladesh pay as little as $0.09 per hour and Sudan pays a mere $0.04 per hour. Dozens of poor, African and Asian countries pay less than $0.30 per hour. https://en.wikipedia.org/wiki/List_of_countries_by_minimum_wage https://en.wikipedia.org/wiki/List_of_countries_by_minimum_w... When international food prices go up, the "poor" in the US become inconvenienced. Elsewhere across the world, hundreds of millions starve.

freewilly1040 5y ago
Have those predictions come to pass?
- ekianjo 5y ago
  Ever heard of something called the Arab Spring?
- hajile 5y ago
  Yes More precisely, they say 118M extra people in 2020 which is 12M less than projected, but that's small comfort to the hundred-million people who can't get enough to eat. https://www.worldbank.org/en/topic/agriculture/brief/food-security-and-covid-19 https://www.worldbank.org/en/topic/agriculture/brief/food-se...
  - danans 5y ago
    That's not all due to the pandemic, according to your own link: > Hunger was trending upward even before the COVID-19 pandemic, which exacerbated existing effects from extreme climate events, conflict, and other shocks to economic opportunities.
    - hajile 5y ago
      COVID death toll across the entire world is only around 5M. Only a tiny fraction of that 118M is needed to make COVID look like nothing in comparison.

DantesKite 5y ago

The price of coffee has been the cheapest I’ve ever seen at my store.

mensetmanusman 5y ago

Consider we might be in a bubble: https://www.reuters.com/world/higher-food-prices-help-fuel-40-jump-global-hunger-un-agency-2021-07-08/ https://www.reuters.com/world/higher-food-prices-help-fuel-4... Experts predicted that there might be more hunger deaths from the pandemic than from Covid. Will be interesting to see what happens.

emodendroket 5y ago

As ever, people have the answers ready to go and crowbar events to them over and over.

juanani 5y ago

Easy to be in denial when it doesn't affect you richies. Dont see the need to let everyone else know how hard you clutch the pearls.