8 ms·

Rampant inflation is a problem. The inflation seen now in many places is not quite there. 7% is higher than we would like, but if the alternative is to have shr

Rampant inflation is a problem. The inflation seen now in many places is not quite there. 7% is higher than we would like, but if the alternative is to have shrinking GDP and massive unemployment, I would rather have some inflation. In the US at least, a lot of the raise in the US CPI is due to rising energy costs (predicted months ago due to cold winter in Asia), used and new cars (the infamous chip shortages), and food. Rising food costs is a problem, but it is not a catastrophic problem. The US federal government could subsidize farmers that grow real vegetables, not just corn and soybeans. This would bring down the cost of real food and probably allow people to eat healthier.

xyzzyz 5y ago
> The US federal government could subsidize farmers that grow real vegetables, not just corn and soybeans. You can’t subsist on “real vegetables”. Vegetables form important supplement to the diet, but they are not basis of it, nor they ever been (people used to eat much more grain and much less meat and vegetables than they do now). Governments are subsidizing staples, because it is by far most effective way to ensure food security.
- sirspacey 5y ago
  Having been a recipient of those programs “staples” are not what is being subsidized. The largest “food” producers are, like General Mills and Coca Cola. I could get soda but not fresh fruits or vegetables for my kids. We somehow have to keep discussing what real nutrition for children looks like and the impact it has on their ability to become productive citizens. It’s really not that much of a mystery anymore, plenty of reproducible studies have been done, but our systems are still not designed to achieve it. Yes, it makes a massive difference what the goals of food security are.
NovemberWhiskey 5y ago
>The US federal government could subsidize farmers that grow real vegetables, not just corn and soybeans. I mean they could also just stop subsidizing corn production quite so much; that would probably be preferable to providing a larger subsidy to grow other things.
- BitwiseFool 5y ago
  I wonder how much of an impact the Iowa Caucuses have on our government being so darn corn farmer friendly.
  - samwisedum 5y ago
    It's shocking that we subsidize farmers at all. If we want people to afford food, we could just give that money to the people.
    - reducesuffering 5y ago
      It's really not shocking. Those people could then possibly buy entirely imported food if it was cheaper and wipe out domestic agricultural. Ensuring domestic food production is geopolitics 101, above domestic energy production. A nation doesn't want its bellies depending on a foreign adversary. You aren't a sovereign nation then.
      - samwisedum 5y ago
        You're right. That said there are other ways to get around cheeper imported food. Why not raise the tariffs? I just generally find it surprising that the US subsidizes an industry. It feels against the countries ideals, and I think the subsidies decrease the industry's incentives for innovation.
        reducesuffering 5y ago
        That's going in the opposite direction with respect to where you would like food prices to be. It's the same final outcome you're concerned with about foreign production. Food is a bare necessity for a country's people and you want those prices as low as possible. Most places make a sales tax exception on groceries for this reason. People will allow dictators to seize power if it means they don't starve. But the same direction applies in less extreme situations. With US inflation already at 7.5%, good luck stopping food subsidies, adding food taxes (tariffs), and seeing food prices lurch another 30%. Current politicians would be voted out in a flash.
scottiebarnes 5y ago
> but if the alternative is to have shrinking GDP and massive unemployment, I would rather have some inflation. This is the general problem with central banking. Politicians and governments will ALWAYS take action to "save the economy", whether that is a small downturn or a big one. There's too much pressure to not use the magic money printer. Short term election cycles incentivize everyone to just fix the problem as fast as we can, future consequences be damned. You can get away with it in the short term, but over a long enough time horizon, you start to run out of bullets, as all the real value has already been plundered. The US Federal debt is currently $30 trillion USD. This is never getting balanced, ever. There's only one possible eventual outcome with this system.
- JackFr 5y ago
  > The US Federal debt is currently $30 trillion USD. This is never getting balanced, ever. There's only one possible eventual outcome with this system. The US debt to GDP ratio is currently slightly higher than it was at the end of WWII. It is significantly lower than that of Japan, who has a debt to GDP ration similar to those the UK ran during portions of the 19th century. There are very good reasons for governments should be prudent in their spending and high levels of debt are to be avoided. But no, it will never be balanced, the national debt is permanent and exists by design. > There's only one possible eventual outcome with this system. I don't think that's true, and I'm really not even sure what you're ominously hining at.
  - foolinaround 5y ago
    > the national debt is permanent and exists by design. Can you pls point me to something about its design?
    - tharne 5y ago
      If you read history books covering the time just before and after the American revolution, there was a lot of discussion of this topic at the time. A lot of the founder fathers, most notably Alexander Hamilton, believed a national debt was a good thing for the country. The belief is/was that by carrying a substantial debt, you give the bank and financial institutions skin the game and make their success tied to the success of the country. In the modern era it also gives individuals and other types of institutions a stake in the country's success. When people take about the U.S. national debt, much of the conversation goes to China and how much money we owe them. We owe them a lot, however, the biggest holders of U.S. debt are individual Americans with their 401ks and things like pension funds and university endowments.
trhway 5y ago
> 7% is higher than we would like, but if the alternative is to have shrinking GDP and massive unemployment, I would rather have some inflation. The alternative is to have typical 2-3% of inflation and correspondingly the typical 2-3% of GDP growth with healthy labor market. The 7% inflation does get you that 7% GDP growth we're seeing and red hot labor market, yet it is just a temporary effect, like a shot of stimulant, which will soon produce a very heavy hangover.
- jaymicha 5y ago
  I'm not sure this is true - the base case seems to be the Eurozone, the countries of which intervened in their economies enough to forestall a depression, but not to the extent that the US did. Eurozone inflation is just a notch above 5%, unemployment rate right about 7%. In the US it's 7% and 4% respectively. In effect, the US traded a ~2% rise in yearly inflation for a ~3% reduction in unemployment. Reasonable people can disagree on whether that was a good trade, but to say that we could have just "skipped" all the COVID disruptions and maintained low inflation, low unemployment and typical GDP growth strikes me as fantasy land. There wasn't any magical economic policy prescription that would make everything "normal".
  - trhway 5y ago
    If such trade worked then the whole world would have already been practicing it for many decades. Yet what we know from the last 100 years of such attempts is that there is the sweet spot of 2-3% inflation, and deviation from it into either direction is punished.
  - 01100011 5y ago
    Is there a reason you think US money printing, which increases the supply of the world's main currency, is not the cause of at least some non-US inflation? The suppression of interest rates in the US means it is cheaper to borrow loans in USD right? Those loans are available to foreigners as well. The asset price bubble is international at this point, and with it, the wealth effect leading to sustained levels of demand which would be absent if adequate pricing signals were still allowed to be effective.
sfblah 5y ago
I think the bigger problem is that people stop being able to price anything in a reasonable way. Should companies be valued at 1x revenue? 2x? 10x? 437x? How do you decide if the value of the thing you're using as the denominator changes wildly. The downside of this is, instead of people working to create productive things, effort instead shifts to gambling and gaming the system. Witness what's happened all over our economy. It's like a cancer devouring everything: Robin Hood, GameStop, Crypto. You name it and it's turned into a casino. How does any of that increase human wealth?
flavius29663 5y ago
Economists were saying some time ago on NRP that inflation becomes a vicious circle when it encourages/forces employees to demand higher wages "because everything is more expensive", which in turns makes everything more expensive, because wages are higher now. I think we are already there, everyone is jumping ship to get a higher wage right now, rampant inflation is here to stay
- diob 5y ago
  This seems like an alarmist take, the truth is wages haven't been going up much and yet inflation was occurring regardless. What caused inflation then? Why do folks only ever worry about inflation when it comes to increasing the bottom wages?
  - rhacker 5y ago
    They haven't? All I have been hearing for the last 2 years are minimum wage going to 15, and now 18 is the next target.
    - flavius29663 5y ago
      Minimum wage is de-facto 15, with Amazon offering at least that everywhere. Now we see additional requests for increase. This will never stop. The problem is not with the minimum wage amount, it's with helping people getting off of that, minimum wage should be a temporary stopgap in a person's life. Living on minimum wage sucks hard, no matter the amount. If you increase it, you will only have more people living on minimum wage, struggling to make ends meet. At 7.25, a person doing 20 was fine. Now at 15, a person doing 20 is struggling.
      - diob 5y ago
        This isn't even true statistically: https://www.statista.com/statistics/238997/minimum-wage-by-us-state/ https://www.statista.com/statistics/238997/minimum-wage-by-u... Minimum wage isn't what is driving inflation. It's insane to me that folks think inflation will happen if we increase wages, when it happens regardless of that. It has more to do with the crazy subsidies / handouts we give to the top 1%.

xyzzyz 5y ago

> The US federal government could subsidize farmers that grow real vegetables, not just corn and soybeans. You can’t subsist on “real vegetables”. Vegetables form important supplement to the diet, but they are not basis of it, nor they ever been (people used to eat much more grain and much less meat and vegetables than they do now). Governments are subsidizing staples, because it is by far most effective way to ensure food security.

sirspacey 5y ago
Having been a recipient of those programs “staples” are not what is being subsidized. The largest “food” producers are, like General Mills and Coca Cola. I could get soda but not fresh fruits or vegetables for my kids. We somehow have to keep discussing what real nutrition for children looks like and the impact it has on their ability to become productive citizens. It’s really not that much of a mystery anymore, plenty of reproducible studies have been done, but our systems are still not designed to achieve it. Yes, it makes a massive difference what the goals of food security are.

NovemberWhiskey 5y ago

>The US federal government could subsidize farmers that grow real vegetables, not just corn and soybeans. I mean they could also just stop subsidizing corn production quite so much; that would probably be preferable to providing a larger subsidy to grow other things.

BitwiseFool 5y ago
I wonder how much of an impact the Iowa Caucuses have on our government being so darn corn farmer friendly.
- samwisedum 5y ago
  It's shocking that we subsidize farmers at all. If we want people to afford food, we could just give that money to the people.
  - reducesuffering 5y ago
    It's really not shocking. Those people could then possibly buy entirely imported food if it was cheaper and wipe out domestic agricultural. Ensuring domestic food production is geopolitics 101, above domestic energy production. A nation doesn't want its bellies depending on a foreign adversary. You aren't a sovereign nation then.
    - samwisedum 5y ago
      You're right. That said there are other ways to get around cheeper imported food. Why not raise the tariffs? I just generally find it surprising that the US subsidizes an industry. It feels against the countries ideals, and I think the subsidies decrease the industry's incentives for innovation.
      - reducesuffering 5y ago
        That's going in the opposite direction with respect to where you would like food prices to be. It's the same final outcome you're concerned with about foreign production. Food is a bare necessity for a country's people and you want those prices as low as possible. Most places make a sales tax exception on groceries for this reason. People will allow dictators to seize power if it means they don't starve. But the same direction applies in less extreme situations. With US inflation already at 7.5%, good luck stopping food subsidies, adding food taxes (tariffs), and seeing food prices lurch another 30%. Current politicians would be voted out in a flash.

scottiebarnes 5y ago

> but if the alternative is to have shrinking GDP and massive unemployment, I would rather have some inflation. This is the general problem with central banking. Politicians and governments will ALWAYS take action to "save the economy", whether that is a small downturn or a big one. There's too much pressure to not use the magic money printer. Short term election cycles incentivize everyone to just fix the problem as fast as we can, future consequences be damned. You can get away with it in the short term, but over a long enough time horizon, you start to run out of bullets, as all the real value has already been plundered. The US Federal debt is currently $30 trillion USD. This is never getting balanced, ever. There's only one possible eventual outcome with this system.

JackFr 5y ago
> The US Federal debt is currently $30 trillion USD. This is never getting balanced, ever. There's only one possible eventual outcome with this system. The US debt to GDP ratio is currently slightly higher than it was at the end of WWII. It is significantly lower than that of Japan, who has a debt to GDP ration similar to those the UK ran during portions of the 19th century. There are very good reasons for governments should be prudent in their spending and high levels of debt are to be avoided. But no, it will never be balanced, the national debt is permanent and exists by design. > There's only one possible eventual outcome with this system. I don't think that's true, and I'm really not even sure what you're ominously hining at.
- foolinaround 5y ago
  > the national debt is permanent and exists by design. Can you pls point me to something about its design?
  - tharne 5y ago
    If you read history books covering the time just before and after the American revolution, there was a lot of discussion of this topic at the time. A lot of the founder fathers, most notably Alexander Hamilton, believed a national debt was a good thing for the country. The belief is/was that by carrying a substantial debt, you give the bank and financial institutions skin the game and make their success tied to the success of the country. In the modern era it also gives individuals and other types of institutions a stake in the country's success. When people take about the U.S. national debt, much of the conversation goes to China and how much money we owe them. We owe them a lot, however, the biggest holders of U.S. debt are individual Americans with their 401ks and things like pension funds and university endowments.

trhway 5y ago

> 7% is higher than we would like, but if the alternative is to have shrinking GDP and massive unemployment, I would rather have some inflation. The alternative is to have typical 2-3% of inflation and correspondingly the typical 2-3% of GDP growth with healthy labor market. The 7% inflation does get you that 7% GDP growth we're seeing and red hot labor market, yet it is just a temporary effect, like a shot of stimulant, which will soon produce a very heavy hangover.

jaymicha 5y ago
I'm not sure this is true - the base case seems to be the Eurozone, the countries of which intervened in their economies enough to forestall a depression, but not to the extent that the US did. Eurozone inflation is just a notch above 5%, unemployment rate right about 7%. In the US it's 7% and 4% respectively. In effect, the US traded a ~2% rise in yearly inflation for a ~3% reduction in unemployment. Reasonable people can disagree on whether that was a good trade, but to say that we could have just "skipped" all the COVID disruptions and maintained low inflation, low unemployment and typical GDP growth strikes me as fantasy land. There wasn't any magical economic policy prescription that would make everything "normal".
- trhway 5y ago
  If such trade worked then the whole world would have already been practicing it for many decades. Yet what we know from the last 100 years of such attempts is that there is the sweet spot of 2-3% inflation, and deviation from it into either direction is punished.
- 01100011 5y ago
  Is there a reason you think US money printing, which increases the supply of the world's main currency, is not the cause of at least some non-US inflation? The suppression of interest rates in the US means it is cheaper to borrow loans in USD right? Those loans are available to foreigners as well. The asset price bubble is international at this point, and with it, the wealth effect leading to sustained levels of demand which would be absent if adequate pricing signals were still allowed to be effective.

sfblah 5y ago

I think the bigger problem is that people stop being able to price anything in a reasonable way. Should companies be valued at 1x revenue? 2x? 10x? 437x? How do you decide if the value of the thing you're using as the denominator changes wildly. The downside of this is, instead of people working to create productive things, effort instead shifts to gambling and gaming the system. Witness what's happened all over our economy. It's like a cancer devouring everything: Robin Hood, GameStop, Crypto. You name it and it's turned into a casino. How does any of that increase human wealth?

flavius29663 5y ago

Economists were saying some time ago on NRP that inflation becomes a vicious circle when it encourages/forces employees to demand higher wages "because everything is more expensive", which in turns makes everything more expensive, because wages are higher now. I think we are already there, everyone is jumping ship to get a higher wage right now, rampant inflation is here to stay

diob 5y ago
This seems like an alarmist take, the truth is wages haven't been going up much and yet inflation was occurring regardless. What caused inflation then? Why do folks only ever worry about inflation when it comes to increasing the bottom wages?
- rhacker 5y ago
  They haven't? All I have been hearing for the last 2 years are minimum wage going to 15, and now 18 is the next target.
  - flavius29663 5y ago
    Minimum wage is de-facto 15, with Amazon offering at least that everywhere. Now we see additional requests for increase. This will never stop. The problem is not with the minimum wage amount, it's with helping people getting off of that, minimum wage should be a temporary stopgap in a person's life. Living on minimum wage sucks hard, no matter the amount. If you increase it, you will only have more people living on minimum wage, struggling to make ends meet. At 7.25, a person doing 20 was fine. Now at 15, a person doing 20 is struggling.
    - diob 5y ago
      This isn't even true statistically: https://www.statista.com/statistics/238997/minimum-wage-by-us-state/ https://www.statista.com/statistics/238997/minimum-wage-by-u... Minimum wage isn't what is driving inflation. It's insane to me that folks think inflation will happen if we increase wages, when it happens regardless of that. It has more to do with the crazy subsidies / handouts we give to the top 1%.