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Wasn't the lack of inflation driven by countervailing deflation from moving supply chains into lower cost regions like Eastern Europe and China? It's been a goo

Wasn't the lack of inflation driven by countervailing deflation from moving supply chains into lower cost regions like Eastern Europe and China? It's been a good 30 year run but that chicken is now coming home to roost.

hardwaresofton 4y ago
That sounds like reasonable analysis, but I do want to point out I was thinking much shorter term -- like literally in the last 3 years and this situation specifically. I do agree You're right that we are probably seeing the effects of globalization policy though, but I can't say I've thought much about that long of a time frame.
- hodgesrm 4y ago
  Understood. There's a certainly a difference between short term effects such as interest rates driving currency exchange rates vs. secular trends that depress currencies permanently. It seems as if some of the latter are becoming visible in a very short timeframe. The US has not experienced this kind of rapid shift since WW II.
pharmakom 4y ago
Yes. Also technological improvements have kept costs down (and hence prices) in some sectors, such as consumer electronics. Mass onshoring will likely drive higher prices. Cathie Wood thinks that more technological improvements are coming to counter-act this, and might even cause deflation. Most commentators are unconvinced.
refurb 4y ago
The lack of inflation was literally the lack of use of the "extra money". When the fed started buying assets and giving "new money", a lot of banks held onto that money instead of using it. The fed paid interest on holdings at the federal reserve bank. It took a while for banks to extend themselves based on capital like they did prior to 2008. Once they did, the full extend of the "new money" drove inflation.
nagestri 4y ago
I would say more precisely it was a major variable in our ability to have huge economic growth, huge money printing all while having low inflation and a very low volatility in the amount of inflation. Of course, anything in this domain is going to have many dimensions but exporting our inflation was a major variable. It is tough being mid 40s and realizing my entire adult life was a golden age that is gone forever.

hardwaresofton 4y ago

That sounds like reasonable analysis, but I do want to point out I was thinking much shorter term -- like literally in the last 3 years and this situation specifically. I do agree You're right that we are probably seeing the effects of globalization policy though, but I can't say I've thought much about that long of a time frame.

hodgesrm 4y ago
Understood. There's a certainly a difference between short term effects such as interest rates driving currency exchange rates vs. secular trends that depress currencies permanently. It seems as if some of the latter are becoming visible in a very short timeframe. The US has not experienced this kind of rapid shift since WW II.

pharmakom 4y ago

Yes. Also technological improvements have kept costs down (and hence prices) in some sectors, such as consumer electronics. Mass onshoring will likely drive higher prices. Cathie Wood thinks that more technological improvements are coming to counter-act this, and might even cause deflation. Most commentators are unconvinced.

refurb 4y ago

The lack of inflation was literally the lack of use of the "extra money". When the fed started buying assets and giving "new money", a lot of banks held onto that money instead of using it. The fed paid interest on holdings at the federal reserve bank. It took a while for banks to extend themselves based on capital like they did prior to 2008. Once they did, the full extend of the "new money" drove inflation.

nagestri 4y ago

I would say more precisely it was a major variable in our ability to have huge economic growth, huge money printing all while having low inflation and a very low volatility in the amount of inflation. Of course, anything in this domain is going to have many dimensions but exporting our inflation was a major variable. It is tough being mid 40s and realizing my entire adult life was a golden age that is gone forever.