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This does not match observations. The government has been in deficit spending for a long time without much inflation. There's something different about recent g

by 8note 5y ago

This does not match observations. The government has been in deficit spending for a long time without much inflation. There's something different about recent government spending(that it gives money to poor people), and the inflationary response by property owners is class warfare. Greedy responses by the rich arent things that have to happen, they're things allowed to happen by a broken market. Proper competition would limit this

TearsInTheRain 5y ago
> The government has been in deficit spending for a long time without much inflation There was still inflation due to the deficit spending. Just because inflation was low doesnt mean it wouldnt have been lower without the deficit spending
- 8note 5y ago
  I'm not saying there isn't a component, but you could not predict the current inflation rate based on continued deficit spending
  - bko 5y ago
    A lot of people predicted it. It's not a novel concept that if you increase the money supply by 25% in one year, you risk seeing a rise in prices. We saw this first on asset prices. During the most uncertain and scariest time of the pandemic where we had no idea if the world was going to end, the stock market rose significantly above pre-covid levels. Later on many, including myself, thought there was a good chance it'll spread to consumer prices. I wrote a whole series about this starting on April 2, 2021 The fed should have predicted this as its pretty textbook economics. But they won't be held to account and working class people will pay the price through higher prices and lower wages. Then the remedy will be higher interest rates and a risk of higher unemployment and economic stagnation, [0] https://mleverything.substack.com/p/where-did-the-12-trillion-of-covid-c39?s=w https://mleverything.substack.com/p/where-did-the-12-trillio...
    - bryanlarsen 5y ago
      And economists have predicted 8 of the last 3 recessions. I'm sorry, I've been hearing inflation predictions for 40 years now. You can only cry wolf so many times. Was there anybody who said we wouldn't get inflation in 2008 but would in 2021? If so I'll listen to them. The Fed has caused many recessions in the last 40 years because they prematurely raised interest rates because they were scared of the inflation boogeyman. I believe the Fed is doing a fabulous job threading the needle between inflation and recession in a very challenging, no right answer environment.
missedthecue 5y ago
An annual deficit of say $200 billion and an annual deficit of $2-$3 trillion are very different things. We saw the latter in the past few years.
anm89 5y ago
Government spending on deficit doesn't have to cause inflation immediately. it just is likely to cause inflation eventually. For example Debt to GDP was low and interest rates were high throughout most of the last 40 years so it mostly didn't cause inflation, it caused us to move towards higher debt to GDP and lower rates. But that game eventually plays out and the system requires the stimulus to avoid a deleveraging event but you don't have rates to dig into or GDP to borrow against. But just saying we did it a bunch and it didn't have that effect last time I think really misinterprets the situation
faeriechangling 5y ago
They were deficit spending in times of actual economic growth, not times of economic contraction. At some point the rubber has to hit the road when people have more money and less stuff.
refurb 5y ago
The government has been in deficit spending for a long time without much inflation. And the mortgage industry handed out mortgages without checking if they can be repaid for a long time before the 2008 crash. Markets don't respond instantaneously. And this was exactly what was predicted with QE after 2008 - inflation would happen and the government wouldn't have the discipline to pull back quickly enough.
- nemothekid 5y ago
  But inflation didn't happen. Inflation was negative in 2009, and was much lower for the 5 years after 2009, than before 2009.
  - refurb 5y ago
    Time lag. The inflation now is due to all the cumulative increase in money supply.
  - bko 5y ago
    In 2008 there was a financial crises and a drop in demand. A lot of people lost their jobs. Unemployment was around 10% so price levels dropped. Also it depends on how you measure inflation. Technological progress leads prices down over time. So money printing eats up all the gains from technological progress and then some on top of that. If there was no deficit spending or money printing we would see prices go down every year, because why wouldn't they? Every year we get better and more productive. Economists have convinced themselves that lower prices are a bad thing and politicians use it as cover to print money and spend
deleted 5y ago
[deleted]
Kerbonut 5y ago
I’m no economist but I’m fairly certain the recent inflation is the fallout from this https://wallstreetonparade.com/2022/01/these-charts-are-the-smoking-guns-in-the-feds-2019-2020-emergency-repo-loan-bailouts/ https://wallstreetonparade.com/2022/01/these-charts-are-the-...
bko 5y ago
> There's something different about recent government spending It could be scale. It's double what its been at its peak in 2008 and for two years straight now. > (that it gives money to poor people), 12 trillion was allocated, less than half of which went to legislative programs like income support and direct payments. More than half went to things like asset repurchases, liquidity measures, lending facilities, etc. Relatively little spending was "money to poor people" [0] https://datalab.usaspending.gov/americas-finance-guide/deficit/trends/ https://datalab.usaspending.gov/americas-finance-guide/defic... [1] https://www.covidmoneytracker.org/ https://www.covidmoneytracker.org/
s1artibartfast 5y ago
Giving money to poor people is what drives inflation of common goods. If everyone has more money to spend, goods like meat will go up as more people want to buy it. This is simple supply and demand. Deficit spending does not always produce this because it doesn't always put extra cash in peoples pockets to spend.
metacritic12 5y ago
Incorrect -- the US treasury did not spend nearly this much (as a percent of GDP) until recently: https://fred.stlouisfed.org/series/FYFSGDA188S https://fred.stlouisfed.org/series/FYFSGDA188S

by 8note 5y ago

TearsInTheRain 5y ago

> The government has been in deficit spending for a long time without much inflation There was still inflation due to the deficit spending. Just because inflation was low doesnt mean it wouldnt have been lower without the deficit spending

8note 5y ago
I'm not saying there isn't a component, but you could not predict the current inflation rate based on continued deficit spending
- bko 5y ago
  A lot of people predicted it. It's not a novel concept that if you increase the money supply by 25% in one year, you risk seeing a rise in prices. We saw this first on asset prices. During the most uncertain and scariest time of the pandemic where we had no idea if the world was going to end, the stock market rose significantly above pre-covid levels. Later on many, including myself, thought there was a good chance it'll spread to consumer prices. I wrote a whole series about this starting on April 2, 2021 The fed should have predicted this as its pretty textbook economics. But they won't be held to account and working class people will pay the price through higher prices and lower wages. Then the remedy will be higher interest rates and a risk of higher unemployment and economic stagnation, [0] https://mleverything.substack.com/p/where-did-the-12-trillion-of-covid-c39?s=w https://mleverything.substack.com/p/where-did-the-12-trillio...
  - bryanlarsen 5y ago
    And economists have predicted 8 of the last 3 recessions. I'm sorry, I've been hearing inflation predictions for 40 years now. You can only cry wolf so many times. Was there anybody who said we wouldn't get inflation in 2008 but would in 2021? If so I'll listen to them. The Fed has caused many recessions in the last 40 years because they prematurely raised interest rates because they were scared of the inflation boogeyman. I believe the Fed is doing a fabulous job threading the needle between inflation and recession in a very challenging, no right answer environment.

missedthecue 5y ago

An annual deficit of say $200 billion and an annual deficit of $2-$3 trillion are very different things. We saw the latter in the past few years.

anm89 5y ago

Government spending on deficit doesn't have to cause inflation immediately. it just is likely to cause inflation eventually. For example Debt to GDP was low and interest rates were high throughout most of the last 40 years so it mostly didn't cause inflation, it caused us to move towards higher debt to GDP and lower rates. But that game eventually plays out and the system requires the stimulus to avoid a deleveraging event but you don't have rates to dig into or GDP to borrow against. But just saying we did it a bunch and it didn't have that effect last time I think really misinterprets the situation

faeriechangling 5y ago

They were deficit spending in times of actual economic growth, not times of economic contraction. At some point the rubber has to hit the road when people have more money and less stuff.

refurb 5y ago

The government has been in deficit spending for a long time without much inflation. And the mortgage industry handed out mortgages without checking if they can be repaid for a long time before the 2008 crash. Markets don't respond instantaneously. And this was exactly what was predicted with QE after 2008 - inflation would happen and the government wouldn't have the discipline to pull back quickly enough.

nemothekid 5y ago
But inflation didn't happen. Inflation was negative in 2009, and was much lower for the 5 years after 2009, than before 2009.
- refurb 5y ago
  Time lag. The inflation now is due to all the cumulative increase in money supply.
- bko 5y ago
  In 2008 there was a financial crises and a drop in demand. A lot of people lost their jobs. Unemployment was around 10% so price levels dropped. Also it depends on how you measure inflation. Technological progress leads prices down over time. So money printing eats up all the gains from technological progress and then some on top of that. If there was no deficit spending or money printing we would see prices go down every year, because why wouldn't they? Every year we get better and more productive. Economists have convinced themselves that lower prices are a bad thing and politicians use it as cover to print money and spend

deleted 5y ago

[deleted]

Kerbonut 5y ago

I’m no economist but I’m fairly certain the recent inflation is the fallout from this https://wallstreetonparade.com/2022/01/these-charts-are-the-smoking-guns-in-the-feds-2019-2020-emergency-repo-loan-bailouts/ https://wallstreetonparade.com/2022/01/these-charts-are-the-...

bko 5y ago

> There's something different about recent government spending It could be scale. It's double what its been at its peak in 2008 and for two years straight now. > (that it gives money to poor people), 12 trillion was allocated, less than half of which went to legislative programs like income support and direct payments. More than half went to things like asset repurchases, liquidity measures, lending facilities, etc. Relatively little spending was "money to poor people" [0] https://datalab.usaspending.gov/americas-finance-guide/deficit/trends/ https://datalab.usaspending.gov/americas-finance-guide/defic... [1] https://www.covidmoneytracker.org/ https://www.covidmoneytracker.org/

s1artibartfast 5y ago

Giving money to poor people is what drives inflation of common goods. If everyone has more money to spend, goods like meat will go up as more people want to buy it. This is simple supply and demand. Deficit spending does not always produce this because it doesn't always put extra cash in peoples pockets to spend.

metacritic12 5y ago

Incorrect -- the US treasury did not spend nearly this much (as a percent of GDP) until recently: https://fred.stlouisfed.org/series/FYFSGDA188S https://fred.stlouisfed.org/series/FYFSGDA188S