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Hey everyone - we need to chill out for a second. Stop buying the knee jerk reaction of the media trying to freak everyone out and get some good advertising do

Hey everyone - we need to chill out for a second. Stop buying the knee jerk reaction of the media trying to freak everyone out and get some good advertising dollars. This is going to take until after the new year maybe Q1-Q3 timeframe to see if it is transitory. Reminder: we had an unprecedented global supply collapse followed by shutdowns and border closures for more than a year combined with historic levels of fast moving monetary growth during that time. We now have a situation of incredible levels of built up demand, a labor shortage and supply chain issues. Not to mention significant amount of illness and deaths as a result of a pandemic. There were bound to be second and third order effects. The system needs some time to adjust.

kerng 5y ago
You miss the key point on why this is happening and will continue to get significantly worse. What happens when the number of dollars approximately doubles in 2 years as it happened? Do you think prices stay the same and everything is just 50% off? Reality is that the current number is off by reality quite a bit, real number has to be much higher. It's just math and the worst part... it can't be just reversed.
- dubcanada 5y ago
  I have no idea what you are saying. Also what is "just math" and why can't it be reversed? Inflation can go down, it's not a purely up percentage, you can have negative inflation. What do you mean by "number of dollars approximately doubles in 2"?
  - hartator 5y ago
    > What do you mean by "number of dollars approximately doubles in 2"? I think OP was talking about monetary inflation. We nearly double the money supply so it should translate to a nearly double price inflation.
    - dlp211 5y ago
      That is not how inflation works.
      - hartator 5y ago
        All thing being equal. 2x monetary supply should translate to 2x price inflation. It’s literally how inflation work. The reason we don’t have that’s crazy inflation is not everything is equal. Mostly at natural the economy should deflate right now.
  - abeppu 5y ago
    You can have negative inflation, but don't central banks work really hard to avoid that because (the theory goes) deflation will kill spending?
    - dlp211 5y ago
      Yes, and what's your point?
    - jjk166 5y ago
      Pretty big difference between "we want to but we can't" and "we can but we don't want to"
- boringg 5y ago
  We haven't doubled the money supply (not even close). The amount of misinformation in this conversation in the general public speaks to the lack of understanding of our monetary systems.
  - throwawaygh 5y ago
    It's not a lack of understanding. There are multiple incredibly strong propaganda machines, both political (R) and business (crypto), pushing this narrative.
  - kerng 5y ago
    So how much has the money supply increased/decreased according to your sources?
    - srj 5y ago
      You're the one who made the assertion - curious on your sources. If you're simply looking at fiscal stimulus spending that's a pretty naive view of economics.
      - kerng 5y ago
        https://tradingeconomics.com/united-states/money-supply-m0 https://tradingeconomics.com/united-states/money-supply-m0 Look at 5 year view.
        jjk166 5y ago
        Look at the 25 year view. 2014-2019 was an anomaly where us GDP grew 22% while the money supply contracted by 25%, we are currently back to the straight line we've been on since 2008.
- blagie 5y ago
  I'm not sure that's the worst part. I predicted about 2x inflation as a best-case outcome a year ago. Worst-case outcome would have been serious structural damage, in terms of business bankruptcies, lost jobs, lost mortgages, etc. Unless we get into a hyperinflationary cycle, we came out pretty well, economically. Our public health response, on the other hand, was and continues to be a disaster.
- boringg 5y ago
  FWIW: Narrow money - (cash, deposits, savings account) over $40 trillion of USD. $90 Trillion in broad money. $1.3 quadrillion including investments, crypto, derivatives.
- wbsss4412 5y ago
  Setting aside my other issues with this analysis, this is just flat out incorrect: > it can’t just be reversed I don’t know where you’ve gotten this idea from. The fed can destroy money just the same as it can create it.
  - kerng 5y ago
    That's an interesting point, has that ever been done?
    - wbsss4412 5y ago
      The fed was in the process of lowering its balance sheet pre pandemic. You only have to look back to 2019. [1] [1] https://www.investopedia.com/the-fed-continues-to-reduce-its-balance-sheet-4628158 https://www.investopedia.com/the-fed-continues-to-reduce-its...
      - deleted 5y ago
        [deleted]
- mywittyname 5y ago
  > What happens when the number of dollars approximately doubles in 2 years as it happened? Do you think countries that don't use the USD will remain unaffected? People keep blaming this on the fed "printing money", but that logic only holds water when just the USA is affected. Everyone is experiencing inflation; it's a global phenomenon. Some countries have it even worse than the USA because their local production is getting redirected to the USA, where even higher prices will be paid. In two years, things will very likely cool down globally.
  - option_greek 5y ago
    The money fed prints doesn't stay in USA. It floods the entire globe trying to find the maximum return it can. That is the reason all stock markets everywhere are at record highs and commodities are continuing to push upward. As more economies are getting heated, many have started raising their own interest rates to reduce inflation.
    - mywittyname 5y ago
      At some point, we need to accept that The Fed is not God of the World Economy. They can have a major impact on the country's economy, and they can influence foreign markets to a degree, but they are not responsible for everything. They just don't have that kind of power. If commodity inflation is caused by an over abundance of USD, then there would be a whole host of side effects from this. One of which, is as I said, price inflation localized to the USA. The second would be a weakening of USD relative to most other strong currencies. So let's look at that: USD : Euro - Slightly weaker relative to 2020, but overall, right around the average strength over the past ten years. USD : GBP - Same as the Euro. USD : CAD|SGD|AUD - Weaker than 2019, but much stronger than the 10 year average. USD : JPY|INR - Very strong USD : CNY - much weaker than 2019, better than 2018, right about at the 10 year average. It's there, but only slightly. And only after 2-3 years of crazy strengthening.
      - option_greek 5y ago
        The USD vs other currencies cannot be compared to USD vs commodities which paint a more transparent picture because no one wants their own currency to be stronger than USD due to export competitiveness getting effected. So whenever USD goes down, they buy more USD with their own currency to keep the peg contained in a range. I know all are supposedly free floats central banks do buy and sell to contain volatility. So the thing that needs to be watched is not the ratio of currency but the USD denominated forex levels which as per my understanding have raised across the board as capital leaves US shoes to these countries. I don't have data to back it up but at least in non tourism dependent economies it is the case.
- anonymouse008 5y ago
  > Reality is that the current number is off by reality quite a bit, real number has to be much higher. It's just math and the worst part... it can't be just reversed. I am now starting to wonder if the unrealized gains tax is the 'reversal' and the interdemensional checkmate on hidden wealth.
  - WarOnPrivacy 5y ago
    Are you recommending the world spend a bit of it's hoarded wealth, to allow less money to be printed? You're a monster.
    - ignasheahy 5y ago
      Are you saying rich and powerful have grandpa checking bank accounts and just refuse to spend it? They are owning real estate, land, companies, resources - that's where their wealth it. In high inflation scenario current wealth gap will look like good old times... Slight inflation is good, but high inflation will be troubling to a lot of regular people.
starkd 5y ago
All you have to do is look at the Fed balance sheet to get an inkling of what's going on. They are monetizing the debt. Inflation is a very simple concept to understand. It's too many dollars facing too few goods. I understand no one wants a panic, but you also don't want to bury your head in the sand.
- boringg 5y ago
  I think my original point is that this isn't something to panic over much like the public narrative is trying to make hay of. I am also not saying bury your head in the sand. Watch and see and don't get caught up in the hype.
- wbsss4412 5y ago
  6% inflation is nothing to panic over. People equate the fed not hitting their 2% target with hyperinflation and it’s absolutely maddening to see the level of discourse drop to astounding lows when this happens.
  - starkd 5y ago
    It doesn't have to reach hyperinflation to have a seriously disabling influence. People look ahead for potential impediments to being able to get the goods they need. Hopefully, it won't amount to inflation, but historically, hyperinflation always tends to come out of nowhere. It's very hard to control once it gets going.
    - option_greek 5y ago
      Not even as difficult as that. As the prices rise with a regular periodicity, people stock up more goods with expectation that in future their money will buy them less. Which causes more price increases and corresponding increase in stocking. Obviously 6% won't do that but at higher levels its the complex dynamics driving inflation than good old supply demand balance. And don't think that exports will solve hyper inflation because at that point other countries will also expect devaluation in currency which becomes a self fulfilling prophecy. Again not applicable to dollar and USA for the moment but at higher inflation levels anything is possible.
deleted 5y ago
[deleted]
zzleeper 5y ago
Even if it's transitory, what's the reason to keep injecting cash _today_ via buying agency mbs and other securities?
- adam_arthur 5y ago
  Because Powell wants to get reappointed. It really has to be that. There's no other logical/sane justification for it. Fed is monetizing govt deficit spending and artificially suppressing long term rates to support asset prices to make things look good in the short term. On a risk adjusted basis, it's obviously awful policy.
  - mywittyname 5y ago
    Powell should have never been appointed. The only reason he was is that Yellen was recommending a raising of interest rates in 2018 and the sitting president was worry about the optics of that going into reelection. In comes Powell, the man willing to kick that can down the road. Raising interest rates was the right move in 2018. It's just that the economic benefits of doing such takes a few years to pay off.
hindsightbias 5y ago
Lumber is cheap for anyone who can build their own home. Home Depot as packed this weekend.
- boringg 5y ago
  It finally came back down in price for the retailers? I've been waiting for the retailers to lower their prices after they paid off the costs of the original surge in wholesale lumber. And then the wholesale price of lumber came right back to earth but the retailers still had to cover their costs of acquisition.
felistoria 5y ago
It would be nice if America had factories that produced things rather than having to import all of our crap from China. Maybe then there wouldn't be 100+ ships waiting to be unloaded in LA.
- gilbetron 5y ago
  We still manufacture like crazy: https://www.stlouisfed.org/on-the-economy/2017/april/us-manufacturing-really-declining https://www.stlouisfed.org/on-the-economy/2017/april/us-manu...
dominotw 5y ago
> This is going to take until after the new year maybe Q1-Q3 timeframe to see if it is transitory. Is there any logic behind this timeline prediction?

kerng 5y ago

You miss the key point on why this is happening and will continue to get significantly worse. What happens when the number of dollars approximately doubles in 2 years as it happened? Do you think prices stay the same and everything is just 50% off? Reality is that the current number is off by reality quite a bit, real number has to be much higher. It's just math and the worst part... it can't be just reversed.

dubcanada 5y ago
I have no idea what you are saying. Also what is "just math" and why can't it be reversed? Inflation can go down, it's not a purely up percentage, you can have negative inflation. What do you mean by "number of dollars approximately doubles in 2"?
- hartator 5y ago
  > What do you mean by "number of dollars approximately doubles in 2"? I think OP was talking about monetary inflation. We nearly double the money supply so it should translate to a nearly double price inflation.
  - dlp211 5y ago
    That is not how inflation works.
    - hartator 5y ago
      All thing being equal. 2x monetary supply should translate to 2x price inflation. It’s literally how inflation work. The reason we don’t have that’s crazy inflation is not everything is equal. Mostly at natural the economy should deflate right now.
- abeppu 5y ago
  You can have negative inflation, but don't central banks work really hard to avoid that because (the theory goes) deflation will kill spending?
  - dlp211 5y ago
    Yes, and what's your point?
  - jjk166 5y ago
    Pretty big difference between "we want to but we can't" and "we can but we don't want to"
boringg 5y ago
We haven't doubled the money supply (not even close). The amount of misinformation in this conversation in the general public speaks to the lack of understanding of our monetary systems.
- throwawaygh 5y ago
  It's not a lack of understanding. There are multiple incredibly strong propaganda machines, both political (R) and business (crypto), pushing this narrative.
- kerng 5y ago
  So how much has the money supply increased/decreased according to your sources?
  - srj 5y ago
    You're the one who made the assertion - curious on your sources. If you're simply looking at fiscal stimulus spending that's a pretty naive view of economics.
    - kerng 5y ago
      https://tradingeconomics.com/united-states/money-supply-m0 https://tradingeconomics.com/united-states/money-supply-m0 Look at 5 year view.
      - jjk166 5y ago
        Look at the 25 year view. 2014-2019 was an anomaly where us GDP grew 22% while the money supply contracted by 25%, we are currently back to the straight line we've been on since 2008.
blagie 5y ago
I'm not sure that's the worst part. I predicted about 2x inflation as a best-case outcome a year ago. Worst-case outcome would have been serious structural damage, in terms of business bankruptcies, lost jobs, lost mortgages, etc. Unless we get into a hyperinflationary cycle, we came out pretty well, economically. Our public health response, on the other hand, was and continues to be a disaster.
boringg 5y ago
FWIW: Narrow money - (cash, deposits, savings account) over $40 trillion of USD. $90 Trillion in broad money. $1.3 quadrillion including investments, crypto, derivatives.
wbsss4412 5y ago
Setting aside my other issues with this analysis, this is just flat out incorrect: > it can’t just be reversed I don’t know where you’ve gotten this idea from. The fed can destroy money just the same as it can create it.
- kerng 5y ago
  That's an interesting point, has that ever been done?
  - wbsss4412 5y ago
    The fed was in the process of lowering its balance sheet pre pandemic. You only have to look back to 2019. [1] [1] https://www.investopedia.com/the-fed-continues-to-reduce-its-balance-sheet-4628158 https://www.investopedia.com/the-fed-continues-to-reduce-its...
    - deleted 5y ago
      [deleted]
mywittyname 5y ago
> What happens when the number of dollars approximately doubles in 2 years as it happened? Do you think countries that don't use the USD will remain unaffected? People keep blaming this on the fed "printing money", but that logic only holds water when just the USA is affected. Everyone is experiencing inflation; it's a global phenomenon. Some countries have it even worse than the USA because their local production is getting redirected to the USA, where even higher prices will be paid. In two years, things will very likely cool down globally.
- option_greek 5y ago
  The money fed prints doesn't stay in USA. It floods the entire globe trying to find the maximum return it can. That is the reason all stock markets everywhere are at record highs and commodities are continuing to push upward. As more economies are getting heated, many have started raising their own interest rates to reduce inflation.
  - mywittyname 5y ago
    At some point, we need to accept that The Fed is not God of the World Economy. They can have a major impact on the country's economy, and they can influence foreign markets to a degree, but they are not responsible for everything. They just don't have that kind of power. If commodity inflation is caused by an over abundance of USD, then there would be a whole host of side effects from this. One of which, is as I said, price inflation localized to the USA. The second would be a weakening of USD relative to most other strong currencies. So let's look at that: USD : Euro - Slightly weaker relative to 2020, but overall, right around the average strength over the past ten years. USD : GBP - Same as the Euro. USD : CAD|SGD|AUD - Weaker than 2019, but much stronger than the 10 year average. USD : JPY|INR - Very strong USD : CNY - much weaker than 2019, better than 2018, right about at the 10 year average. It's there, but only slightly. And only after 2-3 years of crazy strengthening.
    - option_greek 5y ago
      The USD vs other currencies cannot be compared to USD vs commodities which paint a more transparent picture because no one wants their own currency to be stronger than USD due to export competitiveness getting effected. So whenever USD goes down, they buy more USD with their own currency to keep the peg contained in a range. I know all are supposedly free floats central banks do buy and sell to contain volatility. So the thing that needs to be watched is not the ratio of currency but the USD denominated forex levels which as per my understanding have raised across the board as capital leaves US shoes to these countries. I don't have data to back it up but at least in non tourism dependent economies it is the case.
anonymouse008 5y ago
> Reality is that the current number is off by reality quite a bit, real number has to be much higher. It's just math and the worst part... it can't be just reversed. I am now starting to wonder if the unrealized gains tax is the 'reversal' and the interdemensional checkmate on hidden wealth.
- WarOnPrivacy 5y ago
  Are you recommending the world spend a bit of it's hoarded wealth, to allow less money to be printed? You're a monster.
  - ignasheahy 5y ago
    Are you saying rich and powerful have grandpa checking bank accounts and just refuse to spend it? They are owning real estate, land, companies, resources - that's where their wealth it. In high inflation scenario current wealth gap will look like good old times... Slight inflation is good, but high inflation will be troubling to a lot of regular people.

starkd 5y ago

All you have to do is look at the Fed balance sheet to get an inkling of what's going on. They are monetizing the debt. Inflation is a very simple concept to understand. It's too many dollars facing too few goods. I understand no one wants a panic, but you also don't want to bury your head in the sand.

boringg 5y ago
I think my original point is that this isn't something to panic over much like the public narrative is trying to make hay of. I am also not saying bury your head in the sand. Watch and see and don't get caught up in the hype.
wbsss4412 5y ago
6% inflation is nothing to panic over. People equate the fed not hitting their 2% target with hyperinflation and it’s absolutely maddening to see the level of discourse drop to astounding lows when this happens.
- starkd 5y ago
  It doesn't have to reach hyperinflation to have a seriously disabling influence. People look ahead for potential impediments to being able to get the goods they need. Hopefully, it won't amount to inflation, but historically, hyperinflation always tends to come out of nowhere. It's very hard to control once it gets going.
  - option_greek 5y ago
    Not even as difficult as that. As the prices rise with a regular periodicity, people stock up more goods with expectation that in future their money will buy them less. Which causes more price increases and corresponding increase in stocking. Obviously 6% won't do that but at higher levels its the complex dynamics driving inflation than good old supply demand balance. And don't think that exports will solve hyper inflation because at that point other countries will also expect devaluation in currency which becomes a self fulfilling prophecy. Again not applicable to dollar and USA for the moment but at higher inflation levels anything is possible.

deleted 5y ago

[deleted]

zzleeper 5y ago

Even if it's transitory, what's the reason to keep injecting cash _today_ via buying agency mbs and other securities?

adam_arthur 5y ago
Because Powell wants to get reappointed. It really has to be that. There's no other logical/sane justification for it. Fed is monetizing govt deficit spending and artificially suppressing long term rates to support asset prices to make things look good in the short term. On a risk adjusted basis, it's obviously awful policy.
- mywittyname 5y ago
  Powell should have never been appointed. The only reason he was is that Yellen was recommending a raising of interest rates in 2018 and the sitting president was worry about the optics of that going into reelection. In comes Powell, the man willing to kick that can down the road. Raising interest rates was the right move in 2018. It's just that the economic benefits of doing such takes a few years to pay off.

hindsightbias 5y ago

Lumber is cheap for anyone who can build their own home. Home Depot as packed this weekend.

boringg 5y ago
It finally came back down in price for the retailers? I've been waiting for the retailers to lower their prices after they paid off the costs of the original surge in wholesale lumber. And then the wholesale price of lumber came right back to earth but the retailers still had to cover their costs of acquisition.

felistoria 5y ago

It would be nice if America had factories that produced things rather than having to import all of our crap from China. Maybe then there wouldn't be 100+ ships waiting to be unloaded in LA.

gilbetron 5y ago
We still manufacture like crazy: https://www.stlouisfed.org/on-the-economy/2017/april/us-manufacturing-really-declining https://www.stlouisfed.org/on-the-economy/2017/april/us-manu...

dominotw 5y ago

> This is going to take until after the new year maybe Q1-Q3 timeframe to see if it is transitory. Is there any logic behind this timeline prediction?