5 ms·

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 infl

by 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.
    - landemva 5y ago
      And when you go to sell your house after the price triples, you get taxed on alleged gains. But the gains basically kept up with the ramp in energy prices and other necessary commodities. So you kept pace with the baseline while you get taxed as if you are 3x richer.
  - xapata 5y ago
    Since wages are a component of inflation, it doesn't change middle class purchasing power. It only affects the middle class to the extent they are creditors, and then only if inflation is a surprise. Peer-to-peer lending isn't a big market, yet.
  - 5y ago
- landemva 5y ago
  Inflation, or decline in purchasing power of the currency, is bad for savers and those who rely on fixed incomes. It is also bad for deeply indebted governments when they try to roll over their debt instead of actually paying it down.
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.)

by simonh 5y ago

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.
  - landemva 5y ago
    And when you go to sell your house after the price triples, you get taxed on alleged gains. But the gains basically kept up with the ramp in energy prices and other necessary commodities. So you kept pace with the baseline while you get taxed as if you are 3x richer.
- xapata 5y ago
  Since wages are a component of inflation, it doesn't change middle class purchasing power. It only affects the middle class to the extent they are creditors, and then only if inflation is a surprise. Peer-to-peer lending isn't a big market, yet.
- 5y ago
landemva 5y ago
Inflation, or decline in purchasing power of the currency, is bad for savers and those who rely on fixed incomes. It is also bad for deeply indebted governments when they try to roll over their debt instead of actually paying it down.

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.)