6 ms·

This is clearly a result of the monetary base expanding at unprecedented levels due to covid (~40% in 2 years). Around $12 trillion was allocated for covid meas

by bko 5y ago

This is clearly a result of the monetary base expanding at unprecedented levels due to covid (~40% in 2 years). Around $12 trillion was allocated for covid measures and around $10 trillion disbursed. About half was legislative (income support, state local funding, loans) and another half was Fed mostly benefiting banks (asset purchases and liquidity measures). So far we've seen crazy asset inflation (weird the market is up 30% from pre-covid levels). But now we're seeing consumer price inflation. I'm afraid it's not like normal times where you can just "slow down" the economy by tweaking interest rates. You will need to do drastic measures to sop up the trillions in newly generated dollars. https://www.covidmoneytracker.org/ https://www.covidmoneytracker.org/

rwj 5y ago
Yes, clearly, because Covid hasn't disrupted anything else. /s I suspect that the causes are more complicated.
- bko 5y ago
  My belief is that printing trillions of dollars and growing the money supply by 40% in a short period of time has impacted asset prices, and now consumer prices. If covid impacted other things (i.e. business), why are all asset prices up well above pre-covid levels. The impact of the money printing outweighs any other covid impacts. Nothing covid related should tell us that Manhattan real estate should be above pre-covid levels w/ work from home, lockdowns and overall decrease in quality of life. It's the money supply
  - deleted 5y ago
    [deleted]
- jquery 5y ago
  Armchair financiers on HN are always full of energy. Considering what we were threatened with at the beginning of the COVID-19 pandemic (total economic meltdown), 7.5% inflation is downright relaxing.
  - skdlllaaa 5y ago
    > 7.5% inflation is downright relaxing COVID didn't cause inflation. Helicopter money did. My liquid net worth almost doubled in the middle of a crisis and my inflation hedge (my house) is worth twice what I bought it for. The average blue collar person doesn't have the benefits we do and can't play the game. 7.5% "inflation" (if you want to call CPI that) is panic inducing for basically anyone else.
    - jcadam 5y ago
      I've taken the amount of cash held in my savings account down to very little and am pushing my usual savings budget into stocks, silver, and crypto. Holding USD seems.... ill-advised.
  - jbay808 5y ago
    It would be easier to dismiss online commenters as "armchair" if the experts at the wheel, with all the data, the models, and the PhDs at their command, were making more accurate predictions than them.
    - redisman 5y ago
      The consensus seems to be that “it’s transitory” still. I’ll believe it when I see it
      - jbay808 5y ago
        I think that consensus is very fractured, but setting that aside -- has the "it's transitory" consensus made any concrete predictions? Have they been holding up so far? I just look at housing prices as the input to a low pass filter with a 10-year pole, whose output is shelter costs, and I see the input is up tens of percent and the output is up 4ish percent, and that is enough to tell me we'll have a major inflation driver for ten years. Larry Summers says the same thing, so I'm pretty confident in my own predictions.
- skdlllaaa 5y ago
  You might be able to escape with saying 2020 COVID was a true disaster. In 2021, the government (local and federal) used vaccines as a kudgel to create partisan politics around the logistics industry. Ports were shut down (for no reason), and truckers who didn't want to meet vaccine requirements were barred from entry to major ports such as in California. In 2020 and 2021 helicopter money designed to help people ended up having a second order effect of making people less likely to work. Even if you made the desired "15 dollars an hour" the left asks for as a "fair wage" for burger flipping you still would make more money being on pandemic assistance. Moreover, California law in particular has strange environmental regulations that further reduced the availability of trucks. Your average truck is worth a small townhome and you can't just sell it and buy a 2012+ model on a whim. Indeed, the problem like usual is government interventionism through helicopter money and the manipulation of rates to protect the petrodollar in a crisis. It's not complicated, because like usual the finger can be pointed squarely at the fed and congress. We could've been heading back to normal in 2021 with or without vaccine rates being 99.9%. But the nanny state does not believe in personal responsibility (and neither do their constituents) and so here we are. This was compounded by the incessant bleeting of climate pearl clutchers that further reduced the availability of logistical firepower that could've bailed us out.
InTheArena 5y ago
We've been pumping money into the economy with no regard to long term inflation since the Obama administration. We've gotten so use to it, we've even started to come up with financial theroies that debt spending a increasing monetary supply doesn't matter - print what you need. Modern monetary theory ain't. Ask the Romans, the Spanish and the Germans how well that worked for them.
- noisefridge 5y ago
  I'm not an expert on MMT, nor a proponent. I don't have a sufficiently informed opinion to say whether it's good or bad. But, I think what the US government is doing isn't MMT. MMT proponents seem to be arguing that creating money is good if and only if you ensure it is spent on the right things - like infrastructure. Then you can get net wins for the economy. According to MMT it's bad if you, for instance, create a situation where institutions, investors, and giant companies have an unlimited supply of dollars that never lose value.
  - cjbgkagh 5y ago
    I've read up on MMT because it's politically important. The US govt is doing half of MMT (~0% interest rates), the problem is that the other half is somehow worse. Reducing aggregate demand via discretionary interest rates to kill the demand from the gray market(i.e. non green-market). A savings account where individuals and businesses are forced to hold cash until inflation goes down. I.e. confiscation by proxy - by the time you're allowed to spend the money it will be worth much less.
- voisin 5y ago
  > We've been pumping money into the economy with no regard to long term inflation since the Obama administration. Correct, and _even_ in this context, the printing in the last two years is shocking. Everyone points to the slow down in the velocity of money as justification, but look at what has happened as long as the fed has been tracking money supply and velocity of money - no matter what time period, once velocity picks back up the fed _never_ decreases the money supply in response. The printer didn’t come with a shredder.
arcticbull 5y ago
> This is clearly a result of the monetary base expanding at unprecedented levels due to covid (~40% in 2 years). Or, it's because supply chain disruptions have caused shortages, and there's more demand post-reopening chasing a smaller base of supply. Japan more than tripled its money supply since 1990 and CPI remained dead-ass flat for thirty years. It's not sufficient to say that an increase in the money supply necessarily leads to an increase in prices. [1, 2] > So far we've seen crazy asset inflation (weird the market is up 30% from pre-covid levels). Repeat after me: an increase in the price of assets is not necessarily asset inflation. If each quantity of asset buys you more CPI basket (i.e. returns outpace inflation) then it's an ROI. A real dollar return. The NASDAQ [5] and S&P 500 [6] P/E ratios are actually roughly in line with historical averages, give or take. Check again. There was a correction recently. Take Google, for instance. Going into end of 2019, it was trading at $1500/share. Today, $2780. That's 1.85X higher! Crazy right? Well, check their revenues. [3] Just over 1.6X higher (and that's an annual histogram). Google has been trading at the same P/S ratio since 2010, give or take. [4] Big Tech is reporting some of the best quarterly performance in the history of the world - certainly since the Dutch East India Company, anyways. Thanks to the COVID response, we very narrowly escaped another lost decade. [7] A few months of inflation means nothing in the long run. [1] https://fred.stlouisfed.org/series/JPNCPIALLMINMEI https://fred.stlouisfed.org/series/JPNCPIALLMINMEI [2] https://tradingeconomics.com/japan/money-supply-m2 https://tradingeconomics.com/japan/money-supply-m2 [3] https://www.statista.com/statistics/266206/googles-annual-global-revenue/ https://www.statista.com/statistics/266206/googles-annual-gl... [4] https://ycharts.com/companies/GOOG/ps_ratio https://ycharts.com/companies/GOOG/ps_ratio [5] https://www.macrotrends.net/stocks/charts/NDAQ/nasdaq/pe-ratio https://www.macrotrends.net/stocks/charts/NDAQ/nasdaq/pe-rat... [6] https://www.multpl.com/s-p-500-pe-ratio/table/by-year https://www.multpl.com/s-p-500-pe-ratio/table/by-year [7] https://voxeu.org/article/tale-three-depressions https://voxeu.org/article/tale-three-depressions
- bko 5y ago
  > Or, it's because supply chain disruptions have caused shortages, and there's more demand post-reopening chasing a smaller base of supply. Here's a thought. Supply chain shortages mean people are buying less and obviously some prices are sticky. For instance, I can't buy a new car regardless of price. The price takes a while to adjust wand when "supply chain" clears up, I'll just be able to buy my car at a higher price, further driving inflation. Repeating "supply chain" is not a counter argument. > Japan more than tripled its money supply since 1990 and CPI remained dead-ass flat for thirty years. It's not sufficient to say that an increase in the money supply necessarily leads to an increase in prices. [1, 2] While it is true that not every money supply increase has led to inflation, almost all high inflationary periods coincided with the money supply growing. > The NASDAQ [5] and S&P 500 [6] P/E ratios are actually roughly in line with historical averages, give or take. Check again. There was a correction recently. I think you need to check again. We're at 26 S&P. Last time it was this high was 2008. Time before then was briefly in 1890s (not a typo) > Thanks to the COVID response, we very narrowly escaped another lost decade. [7] A few months of inflation means nothing in the long run. It's not nothing to the pensioners that saw their wealth evaporate 7.5% in one year and likely more to come. Hopefully social security keeps up... https://www.multpl.com/s-p-500-pe-ratio https://www.multpl.com/s-p-500-pe-ratio

by bko 5y ago

rwj 5y ago

Yes, clearly, because Covid hasn't disrupted anything else. /s I suspect that the causes are more complicated.

bko 5y ago
My belief is that printing trillions of dollars and growing the money supply by 40% in a short period of time has impacted asset prices, and now consumer prices. If covid impacted other things (i.e. business), why are all asset prices up well above pre-covid levels. The impact of the money printing outweighs any other covid impacts. Nothing covid related should tell us that Manhattan real estate should be above pre-covid levels w/ work from home, lockdowns and overall decrease in quality of life. It's the money supply
- deleted 5y ago
  [deleted]
jquery 5y ago
Armchair financiers on HN are always full of energy. Considering what we were threatened with at the beginning of the COVID-19 pandemic (total economic meltdown), 7.5% inflation is downright relaxing.
- skdlllaaa 5y ago
  > 7.5% inflation is downright relaxing COVID didn't cause inflation. Helicopter money did. My liquid net worth almost doubled in the middle of a crisis and my inflation hedge (my house) is worth twice what I bought it for. The average blue collar person doesn't have the benefits we do and can't play the game. 7.5% "inflation" (if you want to call CPI that) is panic inducing for basically anyone else.
  - jcadam 5y ago
    I've taken the amount of cash held in my savings account down to very little and am pushing my usual savings budget into stocks, silver, and crypto. Holding USD seems.... ill-advised.
- jbay808 5y ago
  It would be easier to dismiss online commenters as "armchair" if the experts at the wheel, with all the data, the models, and the PhDs at their command, were making more accurate predictions than them.
  - redisman 5y ago
    The consensus seems to be that “it’s transitory” still. I’ll believe it when I see it
    - jbay808 5y ago
      I think that consensus is very fractured, but setting that aside -- has the "it's transitory" consensus made any concrete predictions? Have they been holding up so far? I just look at housing prices as the input to a low pass filter with a 10-year pole, whose output is shelter costs, and I see the input is up tens of percent and the output is up 4ish percent, and that is enough to tell me we'll have a major inflation driver for ten years. Larry Summers says the same thing, so I'm pretty confident in my own predictions.
skdlllaaa 5y ago
You might be able to escape with saying 2020 COVID was a true disaster. In 2021, the government (local and federal) used vaccines as a kudgel to create partisan politics around the logistics industry. Ports were shut down (for no reason), and truckers who didn't want to meet vaccine requirements were barred from entry to major ports such as in California. In 2020 and 2021 helicopter money designed to help people ended up having a second order effect of making people less likely to work. Even if you made the desired "15 dollars an hour" the left asks for as a "fair wage" for burger flipping you still would make more money being on pandemic assistance. Moreover, California law in particular has strange environmental regulations that further reduced the availability of trucks. Your average truck is worth a small townhome and you can't just sell it and buy a 2012+ model on a whim. Indeed, the problem like usual is government interventionism through helicopter money and the manipulation of rates to protect the petrodollar in a crisis. It's not complicated, because like usual the finger can be pointed squarely at the fed and congress. We could've been heading back to normal in 2021 with or without vaccine rates being 99.9%. But the nanny state does not believe in personal responsibility (and neither do their constituents) and so here we are. This was compounded by the incessant bleeting of climate pearl clutchers that further reduced the availability of logistical firepower that could've bailed us out.

InTheArena 5y ago

We've been pumping money into the economy with no regard to long term inflation since the Obama administration. We've gotten so use to it, we've even started to come up with financial theroies that debt spending a increasing monetary supply doesn't matter - print what you need. Modern monetary theory ain't. Ask the Romans, the Spanish and the Germans how well that worked for them.

noisefridge 5y ago
I'm not an expert on MMT, nor a proponent. I don't have a sufficiently informed opinion to say whether it's good or bad. But, I think what the US government is doing isn't MMT. MMT proponents seem to be arguing that creating money is good if and only if you ensure it is spent on the right things - like infrastructure. Then you can get net wins for the economy. According to MMT it's bad if you, for instance, create a situation where institutions, investors, and giant companies have an unlimited supply of dollars that never lose value.
- cjbgkagh 5y ago
  I've read up on MMT because it's politically important. The US govt is doing half of MMT (~0% interest rates), the problem is that the other half is somehow worse. Reducing aggregate demand via discretionary interest rates to kill the demand from the gray market(i.e. non green-market). A savings account where individuals and businesses are forced to hold cash until inflation goes down. I.e. confiscation by proxy - by the time you're allowed to spend the money it will be worth much less.
voisin 5y ago
> We've been pumping money into the economy with no regard to long term inflation since the Obama administration. Correct, and _even_ in this context, the printing in the last two years is shocking. Everyone points to the slow down in the velocity of money as justification, but look at what has happened as long as the fed has been tracking money supply and velocity of money - no matter what time period, once velocity picks back up the fed _never_ decreases the money supply in response. The printer didn’t come with a shredder.

arcticbull 5y ago

> This is clearly a result of the monetary base expanding at unprecedented levels due to covid (~40% in 2 years). Or, it's because supply chain disruptions have caused shortages, and there's more demand post-reopening chasing a smaller base of supply. Japan more than tripled its money supply since 1990 and CPI remained dead-ass flat for thirty years. It's not sufficient to say that an increase in the money supply necessarily leads to an increase in prices. [1, 2] > So far we've seen crazy asset inflation (weird the market is up 30% from pre-covid levels). Repeat after me: an increase in the price of assets is not necessarily asset inflation. If each quantity of asset buys you more CPI basket (i.e. returns outpace inflation) then it's an ROI. A real dollar return. The NASDAQ [5] and S&P 500 [6] P/E ratios are actually roughly in line with historical averages, give or take. Check again. There was a correction recently. Take Google, for instance. Going into end of 2019, it was trading at $1500/share. Today, $2780. That's 1.85X higher! Crazy right? Well, check their revenues. [3] Just over 1.6X higher (and that's an annual histogram). Google has been trading at the same P/S ratio since 2010, give or take. [4] Big Tech is reporting some of the best quarterly performance in the history of the world - certainly since the Dutch East India Company, anyways. Thanks to the COVID response, we very narrowly escaped another lost decade. [7] A few months of inflation means nothing in the long run. [1] https://fred.stlouisfed.org/series/JPNCPIALLMINMEI https://fred.stlouisfed.org/series/JPNCPIALLMINMEI [2] https://tradingeconomics.com/japan/money-supply-m2 https://tradingeconomics.com/japan/money-supply-m2 [3] https://www.statista.com/statistics/266206/googles-annual-global-revenue/ https://www.statista.com/statistics/266206/googles-annual-gl... [4] https://ycharts.com/companies/GOOG/ps_ratio https://ycharts.com/companies/GOOG/ps_ratio [5] https://www.macrotrends.net/stocks/charts/NDAQ/nasdaq/pe-ratio https://www.macrotrends.net/stocks/charts/NDAQ/nasdaq/pe-rat... [6] https://www.multpl.com/s-p-500-pe-ratio/table/by-year https://www.multpl.com/s-p-500-pe-ratio/table/by-year [7] https://voxeu.org/article/tale-three-depressions https://voxeu.org/article/tale-three-depressions

bko 5y ago
> Or, it's because supply chain disruptions have caused shortages, and there's more demand post-reopening chasing a smaller base of supply. Here's a thought. Supply chain shortages mean people are buying less and obviously some prices are sticky. For instance, I can't buy a new car regardless of price. The price takes a while to adjust wand when "supply chain" clears up, I'll just be able to buy my car at a higher price, further driving inflation. Repeating "supply chain" is not a counter argument. > Japan more than tripled its money supply since 1990 and CPI remained dead-ass flat for thirty years. It's not sufficient to say that an increase in the money supply necessarily leads to an increase in prices. [1, 2] While it is true that not every money supply increase has led to inflation, almost all high inflationary periods coincided with the money supply growing. > The NASDAQ [5] and S&P 500 [6] P/E ratios are actually roughly in line with historical averages, give or take. Check again. There was a correction recently. I think you need to check again. We're at 26 S&P. Last time it was this high was 2008. Time before then was briefly in 1890s (not a typo) > Thanks to the COVID response, we very narrowly escaped another lost decade. [7] A few months of inflation means nothing in the long run. It's not nothing to the pensioners that saw their wealth evaporate 7.5% in one year and likely more to come. Hopefully social security keeps up... https://www.multpl.com/s-p-500-pe-ratio https://www.multpl.com/s-p-500-pe-ratio