6 ms·

You are comparing treasury rates a bond will pay out over the next 10 years with inflation over the last year. This is apples and oranges.

freediver 4y ago
You are right, inflation may get worse ;)
- riku_iki 4y ago
  there should be factors which drive it. For last year such factors are: - increased min wage - supply chain disruptions - China lockdowns: less goods on the market -> higher prices - increased price on commodities and energy All of this already included into current good prices, so there should be something more to push farther inflation.
  - nostrademons 4y ago
    The supply chain disruptions get worse as the China lockdowns and commodity prices make their way through the economy. When you have a supply shock on raw inputs, it takes time for that to make its way through the economy. Businesses along the way keep inventory, they've locked in forward contracts, they can eat the cost increases to avoid losing market share until they're sure the price increases are persistent. But eventually they realize that everyone else in the industry is facing similar price increases and they'll go out of business if they don't, so they raise their prices too. This eventually propagates down the supply chain as inventory runs out and new contracts are negotiated. The price increases of late 2021 were triggered by the initial shock of March 2020. The Ukraine war & China lockdown shocks of early 2022 aren't going to be seen until about 2024. By the time businesses have adapted to this round of shocks, we may be dealing with new shocks like a war in Europe or the retirement of baby boomers.
    - riku_iki 4y ago
      > The price increases of late 2021 were triggered by the initial shock of March 2020 It was the biggest shock: panic lockdowns across the world, not just initial. Chances are that supply chains have been adapted, and current localized lockdowns in China will not make significant damage. But we will see.
  - Infernal 4y ago
    Genuinely curious why the increasing money supply is not on this list.
    - riku_iki 4y ago
      Because it is not clear to me. Fed was aggressively printing starting 2008, and we didn't observe much inflation, meaning those money didn't go to real economy, but went to some big investment speculations and real estate.
nostrademons 4y ago
Assuming you're expecting inflation to moderate over 10 years. I think people who expect we're going to go back to pre-pandemic supply chains are vastly underestimating the difficulty of bringing a complex system like the economy up from a cold start. In my experience with complex systems that are much less complex than the economy (merely a few hundred million lines of code), it can't be done. You have to incrementally build a new system and then cut over parts of old system as their replacements start to function better than the old degraded experience. This'll likely take a decade or two. Expect it to be a good decade for startups as changing relative prices make new business models viable against soaring existing prices. It's going to be very bad for consumers and for incumbents, though.
- newaccount2021 4y ago
- jqgatsby 4y ago
  your point cannot be overstated. my biggest fears around the pandemic shutdowns came from my own experience managing production systems, and I think our policymakers were frighteningly naive as to what it meant to shut down the economy. and here we are.
  - fddhjjj 4y ago
    Is your sense that the pandemic shutdowns have left us with supply issues? It seems to me the economy is delivering all it ever did and more. https://fred.stlouisfed.org/series/PCES https://fred.stlouisfed.org/series/PCES https://fred.stlouisfed.org/series/PCEDG https://fred.stlouisfed.org/series/PCEDG https://fred.stlouisfed.org/series/PCEC96 https://fred.stlouisfed.org/series/PCEC96
- tenpies 4y ago
  I don't think there's even going back to pre-pandemic supply chains solely because how the West's cancel culture effectively ended globalization when Russia invaded Ukraine. There will be no global supply chain any more. Any country with a brain now knows they have to be completely independent of the West in every aspect. Sovereign assets must be within their borders. Currency reserves? Held at domestic banks as much as possible. Even within the West there needs to be some level of distrust because history shows that there are no perpetual alliances. We are going to have several hundred supply chains that often don't interact, even if it would make economic sense for them to do so. This is tremendously inflationary and it's only just begun.
shrimpx 4y ago
There isn’t any scenario right now that makes it attractive to lock your money for 10+ years into 3% yields.

freediver 4y ago

You are right, inflation may get worse ;)

riku_iki 4y ago
there should be factors which drive it. For last year such factors are: - increased min wage - supply chain disruptions - China lockdowns: less goods on the market -> higher prices - increased price on commodities and energy All of this already included into current good prices, so there should be something more to push farther inflation.
- nostrademons 4y ago
  The supply chain disruptions get worse as the China lockdowns and commodity prices make their way through the economy. When you have a supply shock on raw inputs, it takes time for that to make its way through the economy. Businesses along the way keep inventory, they've locked in forward contracts, they can eat the cost increases to avoid losing market share until they're sure the price increases are persistent. But eventually they realize that everyone else in the industry is facing similar price increases and they'll go out of business if they don't, so they raise their prices too. This eventually propagates down the supply chain as inventory runs out and new contracts are negotiated. The price increases of late 2021 were triggered by the initial shock of March 2020. The Ukraine war & China lockdown shocks of early 2022 aren't going to be seen until about 2024. By the time businesses have adapted to this round of shocks, we may be dealing with new shocks like a war in Europe or the retirement of baby boomers.
  - riku_iki 4y ago
    > The price increases of late 2021 were triggered by the initial shock of March 2020 It was the biggest shock: panic lockdowns across the world, not just initial. Chances are that supply chains have been adapted, and current localized lockdowns in China will not make significant damage. But we will see.
- Infernal 4y ago
  Genuinely curious why the increasing money supply is not on this list.
  - riku_iki 4y ago
    Because it is not clear to me. Fed was aggressively printing starting 2008, and we didn't observe much inflation, meaning those money didn't go to real economy, but went to some big investment speculations and real estate.

nostrademons 4y ago

Assuming you're expecting inflation to moderate over 10 years. I think people who expect we're going to go back to pre-pandemic supply chains are vastly underestimating the difficulty of bringing a complex system like the economy up from a cold start. In my experience with complex systems that are much less complex than the economy (merely a few hundred million lines of code), it can't be done. You have to incrementally build a new system and then cut over parts of old system as their replacements start to function better than the old degraded experience. This'll likely take a decade or two. Expect it to be a good decade for startups as changing relative prices make new business models viable against soaring existing prices. It's going to be very bad for consumers and for incumbents, though.

newaccount2021 4y ago
jqgatsby 4y ago
your point cannot be overstated. my biggest fears around the pandemic shutdowns came from my own experience managing production systems, and I think our policymakers were frighteningly naive as to what it meant to shut down the economy. and here we are.
- fddhjjj 4y ago
  Is your sense that the pandemic shutdowns have left us with supply issues? It seems to me the economy is delivering all it ever did and more. https://fred.stlouisfed.org/series/PCES https://fred.stlouisfed.org/series/PCES https://fred.stlouisfed.org/series/PCEDG https://fred.stlouisfed.org/series/PCEDG https://fred.stlouisfed.org/series/PCEC96 https://fred.stlouisfed.org/series/PCEC96
tenpies 4y ago
I don't think there's even going back to pre-pandemic supply chains solely because how the West's cancel culture effectively ended globalization when Russia invaded Ukraine. There will be no global supply chain any more. Any country with a brain now knows they have to be completely independent of the West in every aspect. Sovereign assets must be within their borders. Currency reserves? Held at domestic banks as much as possible. Even within the West there needs to be some level of distrust because history shows that there are no perpetual alliances. We are going to have several hundred supply chains that often don't interact, even if it would make economic sense for them to do so. This is tremendously inflationary and it's only just begun.

shrimpx 4y ago

There isn’t any scenario right now that makes it attractive to lock your money for 10+ years into 3% yields.