7 ms·

"if you don't include food, energy, housing, or healthcare prices, inflation isn't that bad!"

JumpCrisscross 5y ago
> don't include food, energy, housing, or healthcare prices Straw man. Core inflation includes housing and healthcare. If one can’t understand why food and energy inflation aren’t cleanly a monetary phenomenon in the midst of Russia, an energy exporter, invading Ukraine, a food exporter, I’m not sure how to help.
- abnry 5y ago
  Inflation was occuring before the Ukraine invasion.
  - JumpCrisscross 5y ago
    > inflation was occuring before the Ukraine invasion A hypothesis perfectly corroborated by core PCE, the metric OP criticised [1]. [1] https://news.ycombinator.com/item?id=31003409 https://news.ycombinator.com/item?id=31003409
  - lalaland1125 5y ago
    Correct, but the Ukraine invasion caused a distinct spike. You can see this in how March is an outlier in the data (37% of the energy commodity inflation for the entire year in a single month)
- spoonjim 5y ago
  Why does it matter to actual people what the cause is? If you’re poor and gas costs $7 you’re fucked, regardless of whose fault it is.
  - dragonwriter 5y ago
    > Why does it matter to actual people what the cause is? Because we live in a representative democracy and policy responses are likely to be a significant electoral issue.
    - ThunderSizzle 5y ago
      If people wanted to vote to keep peace and a stable economy, they probably wouldn't have voted for Biden. Supposedly a majority voted for this and are now complaining about what they voted for. Maybe they didn't vote for this and voter fraud really did happen...
  - jahnu 5y ago
    One reason why it matters is so you can make predictions and plan accordingly. If it is because of a short term shock or a medium term problem or a long term global configuration change then your response to $7 gas will likely be radically different.
    - seanp2k2 5y ago
      I guess… If it’s a short-term problem and you’re living paycheck to paycheck, you’re screwed now but might be OKish in the future. If it’s a long-term problem and you’re living paycheck to paycheck you’re screwed for longer. Honestly, what’s the play here for someone who doesn’t own any significant assets and barely makes enough to pay bills each month? That’s what I read as OP’s point.
      - prepend 5y ago
        One thing is paying a gas bill. In my state, I can lock in a price for 6,12,18, etc months. Or I can pay month to month. If I’m living paycheck to paycheck and my current term runs up, I would go month to month if this is a short term spike since prices should recover soon. But if it’s long -term, I should go ahead and lock in now because it won’t get better. There are tons of those examples. Even people with no assets and just living month to month can use this information. Obviously, billionaires are impacted more, but people might literally be trying to figure out if they just skip meat for a month (short term) or buy a bicycle (long term).
  - kleiba 5y ago
    $7? Puh! Last week it was up to $9 over in Germany.
    - seattle_spring 5y ago
      ... in Germany, a country with actual usable and comprehensive public transit alternatives.
      - xyzzyz 5y ago
        The public transit alternatives in Germany are just as expensive. Take a train in Germany and see for yourself.
        seattle_spring 5y ago
        The point is that you have the option. Most people in the US do not. I also find it hard to believe that a bus / train pass costs as much as car ownership fwiw
        xyzzyz 5y ago
        Total cost of ownership of a car will likely be higher (especially if it’s a nicer car, and you use it in places where you need to pay for parking), but public transit and cars are not exactly equivalent products. Public transit can be very cheap and convenient for some use cases: for example, if you live close to a stop, your destination is close to a stop, there is straight transit line between the two places, it runs frequently and has few stops on the way, and you usually travel by yourself. If all of the above is satisfied, it will likely to be more cost effective and similarly convenient to use public transit. However, for many other standard use cases, public transit is by nature very inconvenient compared to cars: for example, if you visit grandma with your small kids on a regular basis, grandma lives in a small town, getting to which on public transit from your home requires 2 transfers, and is only reasonably possible twice a day at very particular times. In that scenario, which, by the way, is (in some form) extremely common for most people who aren’t single professionals living in big city, public transit is just a non starter, even in Germany. Since the latter scenario is, as I point out, rather common, most people own a car anyway. At that point, you’re already paying the total cost of ownership just to use it on routes where public transit is extremely inconvenient. This changes your calculation on routes where public transit actually is pretty convenient: sure, public transit on that route might win with total cost ownership of the car, but once you already have a car, fixed costs are already sunk, so public transit is now competing with marginal costs, and it might very well then lose. For this reason, even in countries with good public transit, it is largely a domain of students, young singles, and retirees, and working people with families overwhelmingly own and use cars.
  - lottin 5y ago
    Are you still talking about inflation? Inflation is change in nominal prices, it doesn't affect the cost of living.
    - xyzzyz 5y ago
      As it turns out, people are paid in nominal dollars, not real ones, and what happens id the nominal prices go up, while wages stay stagnant in nominal terms, so they fall in real terms.
      - lottin 5y ago
        Prices can only go up if there is buying pressure, which means an increase in disposable income must precede the increase in prices.
        xyzzyz 5y ago
        Yes, printing a whole lot of new money tends to do that. As it happens, though, wage workers are not the first one who get a hold of that new paper. It does, in a way, trickle down to them. It’s only after the prices go up, and competitors start offering higher wages, they get any leverage to get a raise in their current job. This means that and wages will, on the whole, lag after inflation.
        lottin 5y ago
        That's not how monetary policy works. The "new paper" that is "printed" by the central bank is traded for a financial asset, typically a bond. The counterparty which previously had a bond, now has cash. It's unclear how the counterparty can take advantage of this situation at the expense of everybody else (which is what you suggest is happening).
    - anm89 5y ago
      Out of all the arguments I'm seeing on here, this feels particularly bad faith. Throughout my maybe decade and a half in the macro world I've never heard anyone even attempt to make this argument. Inflation clearly affects cost of living because wages are stickier than prices. You don't walk into work every monday morning and get your wages increased by CPI.
  - shagie 5y ago
    The question is how do you fix it? If you don't understand the cause for it, then attempts to fix the not-cause may cause more or bigger problems in other parts of the economy. This is in part complicated because there isn't necessarily one cause. If it was caused simply because the supply chain shock from different spending habits of consumers from the pandemic, then that would sort itself out as the supply chain adapts to the different habits - going from just in time to just in case in many places. If it was caused by an increase in energy prices, then increasing supply (and importantly, having the existing energy reserves be used). (and so on) The other side to this is the managing expectations. If you know that you can't fix it by just adding more oil to the market, then that data can be used to manage the expectations for all parts of the economy. "No, this isn't going to get better for some time" is a valid answer.
- garydevenay 5y ago
  Energy and food based inflation was already a huge problem before Russia's invasion of Ukraine. There is no monetary phenomenon. It's clear as day on the Fed's balance sheet the reason for inflation. https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren... If one can't understand why the value of their money goes down as the government buys trillions of dollars of their own debt with non-existent money, I'm not sure how to help.
  - testesttest 5y ago
    But, see, your analysis doesn't inspire confidence in the economy which is bad for the economy. We need a different explanation. Ya know like "transitory inflation". Dam, used that, I guess Ukraine.
  - thrwyoilarticle 5y ago
    "If you don't include war, other countries, or a shipping crisis, all inflation is due to the fed!"
    - Forgeties79 5y ago
      I am going to need to borrow this as a retort because frankly it's a very fair response to the parroted line above, which I keep hearing variations of.
  - ChrisLomont 5y ago
    >It's clear as day on the Fed's balance sheet the reason for inflation Yet there was not this inflation during the Fed balance sheet runup in 2008-2018...... So maybe your simple claim is not what is the cause. More likely is that in 2008, the balance sheet was loans to banks (paid back), whereas in 2019+, the increase was from money being handed to people? In fact, your total assets graph is misleading. Look at the same graph, under the selected liabilities breakdown - the monetary base has been steady, with no inflation for most of it. The big recent increase is in purchase of Treasuries, which is the money the govt gave to the people to help them through the COVID caused downturn. This is a good use of money, and of course giving people money with no gain in production will lead to inflation, but it's not the Fed at fault - it's elected officials voting for free money.
- orra 5y ago
  > Core inflation includes housing and healthcare. Interesting, not in Europe. The UK produces a separate CPIH index. CPIH is CPI, additionally factoring in Owner Occupiers’ Housing Costs.
  - danuker 5y ago
    Neither in the US: https://blog.firstam.com/economics/housing-inflation-is-not-what-you-think-it-is https://blog.firstam.com/economics/housing-inflation-is-not-... > Instead, the BLS uses an owner’s equivalent rent (OER). The BLS estimates the OER by asking homeowners how much they could charge to rent their home.
- stjohnswarts 5y ago
  Shouldn't core inflation include everythign that "regular people" need to keep food on the table and a roof over their head and a basic existence (health care)?
  - JumpCrisscross 5y ago
    > Shouldn't core inflation include everythign that "regular people" need to keep food on the table and a roof over their head and a basic existence That’s headline inflation. It’s politically relevant. If you're running for Congress or the President of the United States, this is the one that gets you in and out of office. Core inflation is monetarily and thus more financially relevant. It singles out what central banks can strategically respond to. (You don’t want to raise rates because an energy exporter invaded a food exporter; rates aren’t the problem.)
- jgod 5y ago
  It's not a strawman, it's watered down by being averaged with things like software prices and flatscreen TVs going down.
- dannyw 5y ago
  Unless you somehow don't eat and don't use energy, you can't call your bank and say "because Russia, rebate my account".
- coolso 5y ago
  This desperate “it’s Russia’s fault!” angle being pushed by the establishment right now is not convincing anyone with more than two brain cells. We all saw and experienced the massive inflation and supply chain issues longggg before that war started and there’s mountains of data that shows that to be the case.
- anm89 5y ago
  It's crazy how Russia invading Ukraine in March was really spiking food prices in January.
sam0x17 5y ago
furthermore, if you're a house-owning boomer who bought their first house for $25k and it is now worth $1m+, inflation can be seen as quite good
- onlyrealcuzzo 5y ago
  I'm not sure why this is downvoted. Maybe the boomer bashing? Anyone in leveraged debt is going to do well in inflation.
  - anm89 5y ago
    Anyone in leveraged debt with a negative real rate* Regardless of inflation, if you are taking out 30% pay day loans you aren't winning.
  - sam0x17 5y ago
    These days the word "boomer" triggers anyone older than elder millennials, and somehow it's furthermore become a bit politicized. Most people also don't know that Generation X or the Silent Generation exist, and many don't know which one they are, other than "boomer=old/bad". It's become a bit of a slur, and that's not what I intended.
    - deleted 5y ago
      [deleted]
nebula8804 5y ago
So what you are telling me is that if you own your home, drive an electric car, grow at least some of your own food and try not to get injured you can pretty much beat the system? Thats the dream!
noelsusman 5y ago
Oddly enough healthcare has actually experienced some of the lowest inflation of any category over the last year.

> don't include food, energy, housing, or healthcare prices Straw man. Core inflation includes housing and healthcare. If one can’t understand why food and energy inflation aren’t cleanly a monetary phenomenon in the midst of Russia, an energy exporter, invading Ukraine, a food exporter, I’m not sure how to help.

abnry 5y ago
Inflation was occuring before the Ukraine invasion.
- JumpCrisscross 5y ago
  > inflation was occuring before the Ukraine invasion A hypothesis perfectly corroborated by core PCE, the metric OP criticised [1]. [1] https://news.ycombinator.com/item?id=31003409 https://news.ycombinator.com/item?id=31003409
- lalaland1125 5y ago
  Correct, but the Ukraine invasion caused a distinct spike. You can see this in how March is an outlier in the data (37% of the energy commodity inflation for the entire year in a single month)
spoonjim 5y ago
Why does it matter to actual people what the cause is? If you’re poor and gas costs $7 you’re fucked, regardless of whose fault it is.
- dragonwriter 5y ago
  > Why does it matter to actual people what the cause is? Because we live in a representative democracy and policy responses are likely to be a significant electoral issue.
  - ThunderSizzle 5y ago
    If people wanted to vote to keep peace and a stable economy, they probably wouldn't have voted for Biden. Supposedly a majority voted for this and are now complaining about what they voted for. Maybe they didn't vote for this and voter fraud really did happen...
- jahnu 5y ago
  One reason why it matters is so you can make predictions and plan accordingly. If it is because of a short term shock or a medium term problem or a long term global configuration change then your response to $7 gas will likely be radically different.
  - seanp2k2 5y ago
    I guess… If it’s a short-term problem and you’re living paycheck to paycheck, you’re screwed now but might be OKish in the future. If it’s a long-term problem and you’re living paycheck to paycheck you’re screwed for longer. Honestly, what’s the play here for someone who doesn’t own any significant assets and barely makes enough to pay bills each month? That’s what I read as OP’s point.
    - prepend 5y ago
      One thing is paying a gas bill. In my state, I can lock in a price for 6,12,18, etc months. Or I can pay month to month. If I’m living paycheck to paycheck and my current term runs up, I would go month to month if this is a short term spike since prices should recover soon. But if it’s long -term, I should go ahead and lock in now because it won’t get better. There are tons of those examples. Even people with no assets and just living month to month can use this information. Obviously, billionaires are impacted more, but people might literally be trying to figure out if they just skip meat for a month (short term) or buy a bicycle (long term).
- kleiba 5y ago
  $7? Puh! Last week it was up to $9 over in Germany.
  - seattle_spring 5y ago
    ... in Germany, a country with actual usable and comprehensive public transit alternatives.
    - xyzzyz 5y ago
      The public transit alternatives in Germany are just as expensive. Take a train in Germany and see for yourself.
      - seattle_spring 5y ago
        The point is that you have the option. Most people in the US do not. I also find it hard to believe that a bus / train pass costs as much as car ownership fwiw
        xyzzyz 5y ago
        Total cost of ownership of a car will likely be higher (especially if it’s a nicer car, and you use it in places where you need to pay for parking), but public transit and cars are not exactly equivalent products. Public transit can be very cheap and convenient for some use cases: for example, if you live close to a stop, your destination is close to a stop, there is straight transit line between the two places, it runs frequently and has few stops on the way, and you usually travel by yourself. If all of the above is satisfied, it will likely to be more cost effective and similarly convenient to use public transit. However, for many other standard use cases, public transit is by nature very inconvenient compared to cars: for example, if you visit grandma with your small kids on a regular basis, grandma lives in a small town, getting to which on public transit from your home requires 2 transfers, and is only reasonably possible twice a day at very particular times. In that scenario, which, by the way, is (in some form) extremely common for most people who aren’t single professionals living in big city, public transit is just a non starter, even in Germany. Since the latter scenario is, as I point out, rather common, most people own a car anyway. At that point, you’re already paying the total cost of ownership just to use it on routes where public transit is extremely inconvenient. This changes your calculation on routes where public transit actually is pretty convenient: sure, public transit on that route might win with total cost ownership of the car, but once you already have a car, fixed costs are already sunk, so public transit is now competing with marginal costs, and it might very well then lose. For this reason, even in countries with good public transit, it is largely a domain of students, young singles, and retirees, and working people with families overwhelmingly own and use cars.
- lottin 5y ago
  Are you still talking about inflation? Inflation is change in nominal prices, it doesn't affect the cost of living.
  - xyzzyz 5y ago
    As it turns out, people are paid in nominal dollars, not real ones, and what happens id the nominal prices go up, while wages stay stagnant in nominal terms, so they fall in real terms.
    - lottin 5y ago
      Prices can only go up if there is buying pressure, which means an increase in disposable income must precede the increase in prices.
      - xyzzyz 5y ago
        Yes, printing a whole lot of new money tends to do that. As it happens, though, wage workers are not the first one who get a hold of that new paper. It does, in a way, trickle down to them. It’s only after the prices go up, and competitors start offering higher wages, they get any leverage to get a raise in their current job. This means that and wages will, on the whole, lag after inflation.
        lottin 5y ago
        That's not how monetary policy works. The "new paper" that is "printed" by the central bank is traded for a financial asset, typically a bond. The counterparty which previously had a bond, now has cash. It's unclear how the counterparty can take advantage of this situation at the expense of everybody else (which is what you suggest is happening).
  - anm89 5y ago
    Out of all the arguments I'm seeing on here, this feels particularly bad faith. Throughout my maybe decade and a half in the macro world I've never heard anyone even attempt to make this argument. Inflation clearly affects cost of living because wages are stickier than prices. You don't walk into work every monday morning and get your wages increased by CPI.
- shagie 5y ago
  The question is how do you fix it? If you don't understand the cause for it, then attempts to fix the not-cause may cause more or bigger problems in other parts of the economy. This is in part complicated because there isn't necessarily one cause. If it was caused simply because the supply chain shock from different spending habits of consumers from the pandemic, then that would sort itself out as the supply chain adapts to the different habits - going from just in time to just in case in many places. If it was caused by an increase in energy prices, then increasing supply (and importantly, having the existing energy reserves be used). (and so on) The other side to this is the managing expectations. If you know that you can't fix it by just adding more oil to the market, then that data can be used to manage the expectations for all parts of the economy. "No, this isn't going to get better for some time" is a valid answer.
garydevenay 5y ago
Energy and food based inflation was already a huge problem before Russia's invasion of Ukraine. There is no monetary phenomenon. It's clear as day on the Fed's balance sheet the reason for inflation. https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren... If one can't understand why the value of their money goes down as the government buys trillions of dollars of their own debt with non-existent money, I'm not sure how to help.
- testesttest 5y ago
  But, see, your analysis doesn't inspire confidence in the economy which is bad for the economy. We need a different explanation. Ya know like "transitory inflation". Dam, used that, I guess Ukraine.
- thrwyoilarticle 5y ago
  "If you don't include war, other countries, or a shipping crisis, all inflation is due to the fed!"
  - Forgeties79 5y ago
    I am going to need to borrow this as a retort because frankly it's a very fair response to the parroted line above, which I keep hearing variations of.
- ChrisLomont 5y ago
  >It's clear as day on the Fed's balance sheet the reason for inflation Yet there was not this inflation during the Fed balance sheet runup in 2008-2018...... So maybe your simple claim is not what is the cause. More likely is that in 2008, the balance sheet was loans to banks (paid back), whereas in 2019+, the increase was from money being handed to people? In fact, your total assets graph is misleading. Look at the same graph, under the selected liabilities breakdown - the monetary base has been steady, with no inflation for most of it. The big recent increase is in purchase of Treasuries, which is the money the govt gave to the people to help them through the COVID caused downturn. This is a good use of money, and of course giving people money with no gain in production will lead to inflation, but it's not the Fed at fault - it's elected officials voting for free money.
orra 5y ago
> Core inflation includes housing and healthcare. Interesting, not in Europe. The UK produces a separate CPIH index. CPIH is CPI, additionally factoring in Owner Occupiers’ Housing Costs.
- danuker 5y ago
  Neither in the US: https://blog.firstam.com/economics/housing-inflation-is-not-what-you-think-it-is https://blog.firstam.com/economics/housing-inflation-is-not-... > Instead, the BLS uses an owner’s equivalent rent (OER). The BLS estimates the OER by asking homeowners how much they could charge to rent their home.
stjohnswarts 5y ago
Shouldn't core inflation include everythign that "regular people" need to keep food on the table and a roof over their head and a basic existence (health care)?
- JumpCrisscross 5y ago
  > Shouldn't core inflation include everythign that "regular people" need to keep food on the table and a roof over their head and a basic existence That’s headline inflation. It’s politically relevant. If you're running for Congress or the President of the United States, this is the one that gets you in and out of office. Core inflation is monetarily and thus more financially relevant. It singles out what central banks can strategically respond to. (You don’t want to raise rates because an energy exporter invaded a food exporter; rates aren’t the problem.)
jgod 5y ago
It's not a strawman, it's watered down by being averaged with things like software prices and flatscreen TVs going down.
dannyw 5y ago
Unless you somehow don't eat and don't use energy, you can't call your bank and say "because Russia, rebate my account".
coolso 5y ago
This desperate “it’s Russia’s fault!” angle being pushed by the establishment right now is not convincing anyone with more than two brain cells. We all saw and experienced the massive inflation and supply chain issues longggg before that war started and there’s mountains of data that shows that to be the case.
anm89 5y ago
It's crazy how Russia invading Ukraine in March was really spiking food prices in January.

sam0x17 5y ago

furthermore, if you're a house-owning boomer who bought their first house for $25k and it is now worth $1m+, inflation can be seen as quite good

onlyrealcuzzo 5y ago
I'm not sure why this is downvoted. Maybe the boomer bashing? Anyone in leveraged debt is going to do well in inflation.
- anm89 5y ago
  Anyone in leveraged debt with a negative real rate* Regardless of inflation, if you are taking out 30% pay day loans you aren't winning.
- sam0x17 5y ago
  These days the word "boomer" triggers anyone older than elder millennials, and somehow it's furthermore become a bit politicized. Most people also don't know that Generation X or the Silent Generation exist, and many don't know which one they are, other than "boomer=old/bad". It's become a bit of a slur, and that's not what I intended.
  - deleted 5y ago
    [deleted]

nebula8804 5y ago

So what you are telling me is that if you own your home, drive an electric car, grow at least some of your own food and try not to get injured you can pretty much beat the system? Thats the dream!

noelsusman 5y ago

Oddly enough healthcare has actually experienced some of the lowest inflation of any category over the last year.