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I'm curious how much is also being fueled by the current markets. The US economy had a large amount of rocket fuel dumped into it repeatedly. Asset prices surge

I'm curious how much is also being fueled by the current markets. The US economy had a large amount of rocket fuel dumped into it repeatedly. Asset prices surged, but with the increase in business costs, perhaps businesses found customers more willing to pay because of said asset increases, thus enabling this trend to continue because demand still outstrips supply? In a climate where interest rates are challenging to increase and the market can't be allowed to decline, it feels to someone uninformed like myself that it would naturally be felt instead through inflation. The question is how high prices will go, what the warning signs of hyper inflation are, and whether we are at risk of that. Economically, rapidly devaluing the dollar seems like it would be a major strategic win for other nations seeking to unseat the dollar as the global reserve currency. I'd love for someone more educated in these matters to tell me why all of this is wrong.

simonh 5y ago
It's a mixed picture, as always. Inflation is up across the world, even in countries and regions that didn't see the kinds of stimulus the US used. However inflation in the US is higher than in developed countries that didn't use as much stimulus. So not all the blame can be laid on US policy, but some of it can. Whether the difference is actually going to cause significant extra pain, or whether the extra stimulus will help the US ride out the pandemic better, is up in the air at the moment IMHO.
- xapata 5y ago
  Calling it blame implies that inflation is bad. Inflation is not intrinsically bad. It's bad to the extent it creates friction in the economy. Currently, the US economy is growing very well. One might anticipate that inflation will eventually drag down economic growth, but that's far from certain. Japan proved that low inflation doesn't cause high growth, and many recent periods in the US had both low inflation and low growth. In contrast, the inflation today appears to be caused by supply trouble. Alleviating supply pressure is great motivation for innovation and efficiency improvements. Much better economic activity than simply cutting costs and trying to capture market share in a low growth market.
  - simonh 5y ago
    I'd expect supply trouble to affect more than just the USA, but the US is experiencing more inflation than other countries also hit by supply constraints.
    - xapata 5y ago
      > the US is experiencing more inflation than other countries also hit by supply constraints. How much more? I've read the opposite. There's probably some imprecision in "the same rate" so I'm willing to believe both are true.
  - ThunderSizzle 5y ago
    Inflation is a tax on the middle class for the sin of trying to save money instead of being an indebted consumer. I would disagree that inflation isn't intrinsically bad. At least the type of inflation modern monetary theory has provided in the past several decades.
    - mindslight 5y ago
      > At least the type of inflation modern monetary theory has provided in the past several decades I wouldn't characterize the past several decades as modern monetary theory. Rather they were traditional post Bretton Woods monetary policy of monetary creation primarily through the financial industry. I believe that MMT will actually help control overall inflation - the government printing money and injecting it places besides the financial industry will create quicker consumer price inflation, which will stop the Fed from continuing to create asset inflation by lowering rates.
    - thehappypm 5y ago
      It’s kind of a tax on the middle class, but the middle class also has mortgages (it’s kind of the defining quality of being middle class, without one you’re way more likely to be lower class) and with high inflation + mortgage, your debts are shrinking faster than your assets.
- jyounker 5y ago
  In the sources that I've seen, the difference in interest rates between the US and other developed countries seem to be off by a more-or-less constant difference. This difference seems to hold historically. This suggests that the differences are largely influenced by differences in measurement between countries, or by other pre-existing policies. (I'm far more partial to the idea of divergent measurements, because I'd have expect prices to become wildly different over time, but that doesn't seem to have happened.)
fuzzfactor 5y ago
Inflation is not just prices going up, or "cost of living" increases, those are artifacts of inflation. Even though price increases can trigger a bit of inflationary pressure, OTOH related or unrelated price increases can become a true result of inflation also. Inflation is the value of your currency going down (relative to some thing(s) possesing features of universal craving).
- dragonwriter 5y ago
  > Inflation is not just prices going up That is literally the definition of inflation.

simonh 5y ago

It's a mixed picture, as always. Inflation is up across the world, even in countries and regions that didn't see the kinds of stimulus the US used. However inflation in the US is higher than in developed countries that didn't use as much stimulus. So not all the blame can be laid on US policy, but some of it can. Whether the difference is actually going to cause significant extra pain, or whether the extra stimulus will help the US ride out the pandemic better, is up in the air at the moment IMHO.

xapata 5y ago
Calling it blame implies that inflation is bad. Inflation is not intrinsically bad. It's bad to the extent it creates friction in the economy. Currently, the US economy is growing very well. One might anticipate that inflation will eventually drag down economic growth, but that's far from certain. Japan proved that low inflation doesn't cause high growth, and many recent periods in the US had both low inflation and low growth. In contrast, the inflation today appears to be caused by supply trouble. Alleviating supply pressure is great motivation for innovation and efficiency improvements. Much better economic activity than simply cutting costs and trying to capture market share in a low growth market.
- simonh 5y ago
  I'd expect supply trouble to affect more than just the USA, but the US is experiencing more inflation than other countries also hit by supply constraints.
  - xapata 5y ago
    > the US is experiencing more inflation than other countries also hit by supply constraints. How much more? I've read the opposite. There's probably some imprecision in "the same rate" so I'm willing to believe both are true.
- ThunderSizzle 5y ago
  Inflation is a tax on the middle class for the sin of trying to save money instead of being an indebted consumer. I would disagree that inflation isn't intrinsically bad. At least the type of inflation modern monetary theory has provided in the past several decades.
  - mindslight 5y ago
    > At least the type of inflation modern monetary theory has provided in the past several decades I wouldn't characterize the past several decades as modern monetary theory. Rather they were traditional post Bretton Woods monetary policy of monetary creation primarily through the financial industry. I believe that MMT will actually help control overall inflation - the government printing money and injecting it places besides the financial industry will create quicker consumer price inflation, which will stop the Fed from continuing to create asset inflation by lowering rates.
  - thehappypm 5y ago
    It’s kind of a tax on the middle class, but the middle class also has mortgages (it’s kind of the defining quality of being middle class, without one you’re way more likely to be lower class) and with high inflation + mortgage, your debts are shrinking faster than your assets.
jyounker 5y ago
In the sources that I've seen, the difference in interest rates between the US and other developed countries seem to be off by a more-or-less constant difference. This difference seems to hold historically. This suggests that the differences are largely influenced by differences in measurement between countries, or by other pre-existing policies. (I'm far more partial to the idea of divergent measurements, because I'd have expect prices to become wildly different over time, but that doesn't seem to have happened.)

fuzzfactor 5y ago

Inflation is not just prices going up, or "cost of living" increases, those are artifacts of inflation. Even though price increases can trigger a bit of inflationary pressure, OTOH related or unrelated price increases can become a true result of inflation also. Inflation is the value of your currency going down (relative to some thing(s) possesing features of universal craving).

dragonwriter 5y ago
> Inflation is not just prices going up That is literally the definition of inflation.