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But if the inflation is not due to overconsumption in the US, but about global problems with supply side issues on the front and China in lockdown not helping a

But if the inflation is not due to overconsumption in the US, but about global problems with supply side issues on the front and China in lockdown not helping at all, how does it make sense to cause a housing crash? I certainly think the fed should stop to build the bubble, but it should also not go all in and crash everything.

unnamed76ri 4y ago
Inflation’s main cause is printing trillions of dollars in unbacked currency. The Trump admin and now the Biden admin are very fond of doing so for the sake of short term political advantage.
- kmonsen 4y ago
  Why does Norway that didn't print money have similar inflation in that case?
JumpCrisscross 4y ago
> how does it make sense to cause a housing crash? Less housing demand presumably means less home construction and renovation, which eases the strain on supply-chain limited resources. Lower home prices also reduce the amount of equity sellers, or HELOC borrowers, can spend on NFTs or whatever [1]. [1] https://en.wikipedia.org/wiki/Wealth_effect https://en.wikipedia.org/wiki/Wealth_effect
camnora 4y ago
I think the idea is that the Fed is trying to tamper demand by softening the economy. Lower demand will inevitably help prices. It doesn't help much though if we get a "rough landing" and people can't afford food/housing because they're out of a job.
- kmonsen 4y ago
  It is not true that lower (local) demand will inevitably lower prices. For example if Costa Rica lower oil demand to almost 0 by saying only 1/1000 people could buy gas from now on it would not change the local gas price at all. If anything it could go more up as the fixed costs in infrastructure would be more expensive for each unit sold.
anm89 4y ago
You can kill inflation with demand side strategies, even if the root cause of the recent changes in inflation are supply side. Imagine an ad infinitum example. Let's say the price of gas goes to $1M a gallon. The fed then somehow removes every dollar from the economy. The price of gas is still going to be approaching zero when denominated in dollars after demand is forced to zero(in reality the price of gas would just change to be denominated in physical violence in this mad max scenario but that's an aside)
- kmonsen 4y ago
  Only if you are the only country in the world (or bigger than the rest combined). That being said all of the central banks are doing the same so maybe it works that way. If someone want they can get a free lunch, no need to increase the rate but everyone else lowers inflation for them.
  - anm89 4y ago
    You are refuting the details of my self admittedly absurd example. The point is, you can kill supply fueled inflation with demand side polices. Any country can do this within the scope of transactions denominated in the currency they control
    - kmonsen 4y ago
      Sure, but the effectiveness will be less if the "problem" is global. If the US has 50% of the worlds demand for some good, and only the US fights inflation, then the effectiveness of the measures taken will only be 50%. So for the US maybe that is still possible, but if you are Costa Rica that becomes meaningless.

unnamed76ri 4y ago

Inflation’s main cause is printing trillions of dollars in unbacked currency. The Trump admin and now the Biden admin are very fond of doing so for the sake of short term political advantage.

kmonsen 4y ago
Why does Norway that didn't print money have similar inflation in that case?

JumpCrisscross 4y ago

> how does it make sense to cause a housing crash? Less housing demand presumably means less home construction and renovation, which eases the strain on supply-chain limited resources. Lower home prices also reduce the amount of equity sellers, or HELOC borrowers, can spend on NFTs or whatever [1]. [1] https://en.wikipedia.org/wiki/Wealth_effect https://en.wikipedia.org/wiki/Wealth_effect

camnora 4y ago

I think the idea is that the Fed is trying to tamper demand by softening the economy. Lower demand will inevitably help prices. It doesn't help much though if we get a "rough landing" and people can't afford food/housing because they're out of a job.

kmonsen 4y ago
It is not true that lower (local) demand will inevitably lower prices. For example if Costa Rica lower oil demand to almost 0 by saying only 1/1000 people could buy gas from now on it would not change the local gas price at all. If anything it could go more up as the fixed costs in infrastructure would be more expensive for each unit sold.

anm89 4y ago

You can kill inflation with demand side strategies, even if the root cause of the recent changes in inflation are supply side. Imagine an ad infinitum example. Let's say the price of gas goes to $1M a gallon. The fed then somehow removes every dollar from the economy. The price of gas is still going to be approaching zero when denominated in dollars after demand is forced to zero(in reality the price of gas would just change to be denominated in physical violence in this mad max scenario but that's an aside)

kmonsen 4y ago
Only if you are the only country in the world (or bigger than the rest combined). That being said all of the central banks are doing the same so maybe it works that way. If someone want they can get a free lunch, no need to increase the rate but everyone else lowers inflation for them.
- anm89 4y ago
  You are refuting the details of my self admittedly absurd example. The point is, you can kill supply fueled inflation with demand side polices. Any country can do this within the scope of transactions denominated in the currency they control
  - kmonsen 4y ago
    Sure, but the effectiveness will be less if the "problem" is global. If the US has 50% of the worlds demand for some good, and only the US fights inflation, then the effectiveness of the measures taken will only be 50%. So for the US maybe that is still possible, but if you are Costa Rica that becomes meaningless.