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U.S. inflation reached a new four-decade high of 8.6% in May

106 points by ra7 4y ago

throwawaymanbot 4y ago
mariojv 4y ago
Anyone have opinions on how long this inflation spike will last, or what the peak will be? I seriously thought we had maybe peaked earlier this year, and it looks like the peak so far was in March for core inflation excluding food and energy. However, maybe high energy prices will feed back into other consumer prices eventually, triggering more inflation. The producer price index (PPI) is still really wild, so maybe consumer inflation really hasn't caught up yet: https://fred.stlouisfed.org/graph/?g=QpsI https://fred.stlouisfed.org/graph/?g=QpsI If you compare that to the 70s or 80s, it vastly exceeds what happened back then. PPI in 2008 was pretty high though too and didn't lead to 70s/80s style inflation, maybe because of lower demand. I suppose the tightening of monetary policy might help, but other factors (war in Ukraine, supply chain issues) will not change as a result of monetary policy. edit: CPI graph over time showing CPI minus food/energy https://fred.stlouisfed.org/graph/?g=i6u6 https://fred.stlouisfed.org/graph/?g=i6u6
- TMWNN 4y ago
  >Anyone have opinions on how long this inflation spike will last, or what the peak will be? Sorry, Mr. Biden. You'll have to look elsewhere for economics advice.
- voisin 4y ago
  It’ll last until money supply tightens.
  - readthenotes1 4y ago
    And more gasoline is produced.
    - voisin 4y ago
      Everyone likes to blame the Russia-Ukraine conflict but inflation was spiking prior to supply issues. That war is a convenient scapegoat for politicians and bureaucrats who don’t want to take credit for profligate spending and loose policy for decades.
      - JohnDeHope 4y ago
        "for decades" I think this is important. Dumb political finger pointing is meaningless here. This issue has nothing to do with Democrats, or Republicans, or liberals, or conservatives, or this administration, or the previous one, or the previous six.
      - mc32 4y ago
        Russia is a convenient excuse. It's not the reason. They cancel the XL and other pipelines but pressure KSA to produce more. The whitehouse has even admitted they are using this situation to push their stated agenda of transitioning to more renewables (noble, but not consequence free). They want to eat their cake and have it too. Reality does not work that way.
        kombucha13 4y ago
        Blaming the xl pipeline cancelation is silly.
        s1artibartfast 4y ago
        Energy prices have been going up much faster than inflation long before anything with Russia. Part is increase in cost of fossil fuels more expensive Renewables, and removing cheap coal. I'll add you to our projected savings from Renewables have not kicked in. This isn't a good or bad judgement just the facts on the ground
        kombucha13 4y ago
        Let me ask you, what was the type oil being pushed through that pipeline and where was that oil destined for and what was the max throughout of the pipeline? I suggest you look it up. If you look closely, you'll realize the XL pipeline would've actually caused an increase in crude prices in the Midwest and most of the oil was destined for export. KXL was a bad deal for Americans. It certainly wouldn't have led to an increase in energy security.
- seibelj 4y ago
  They can't raise interest rates quickly because it would nuke the easy-money economy (i.e. the entire economy) that has become addicted to low rates. They have to slowly raise them to keep stuff from falling apart. The ruling party also doesn't want to get hurt worse than they already are, and a stagflation recession would clobber them. So easy money and high inflation will remain for at least another year.
  - voisin 4y ago
    > They can't raise interest rates quickly because it would nuke the easy-money economy (i.e. the entire economy) that has become addicted to low rates. This is exactly why the easy-money economy should never have been allowed to occur and persist for so long.
    - refurb 4y ago
      The amazing thing is many were predicting this back in 2008. If anyone wants to listen to a prescient conversation about the feds actions post-2008 and inflation today, take a listen to this podcast. It was recorded in 2009. https://www.econtalk.org/meltzer-on-inflation/ https://www.econtalk.org/meltzer-on-inflation/ It’s an interview with Prof Meltzer from Carnegie Mellon who has done extensive research on the federal reserve system and who wrote the de facto official history of the reserve going back to its creation. Cliff notes (all future tense): - As a result of the 2008 crisis the fed expanded the money supply to a degree never seen before - Rather than drive inflation, the “new money’s” effect will be muted due to skittish banks who will decide to just take the funds and hold as cash/treasuries (maintaining strong reserves) until more positive economic indicators emerge (this process could be paused by the bank if economic sentiment turned negative); this was actually seen at least in consumer spending - it was flat for years beyond the massive expansion in money supply - Once economic forecasts turn more optimistic, the money will be deployed (through bank lending) into investments and assets leading to inflation in those prices first - Eventually the excess supply will spill over into consumer lending and consumer spending in the classic indicators of inflation like CPI - However the fed will be under immense political pressure to not drive the “fragile” economy into a recession (Covid anyone?) so any tightening will be far too late and inflation will overshoot targets by a huge margin - Similar to the 70’s, until strong monetary contraction is brought in, inflation will run very hot despite other efforts to control it Pretty accurate so far.
- 88913527 4y ago
  Depends on factors we can't predict. Increasing the cost of capital should ease the inflation. But will that happen fast enough is a decision for policymakers.
- ren_engineer 4y ago
  it will last much longer and will get worse, because everything is dependent on energy to be created/transported. There's also the fact that many retailers admitted to eating losses to try and keep customers happy assuming that inflation would be "transitory", pretty soon many of these retailers will be forced to raise prices to reflect reality
  - s1artibartfast 4y ago
    If Energy prices are driving it we are in for a long haul. Electricity costs in California is up 50% in the last five years. Efforts to on Shore manufacturing will drive it up higher https://www.paloaltoonline.com/blogs/p/2022/03/06/when-will-our-electricity-rates-go-down https://www.paloaltoonline.com/blogs/p/2022/03/06/when-will-...
    - hedora 4y ago
      Our solar array is providing electricity for $0.06-$0.13 per kWh, assuming 30 year depreciation. Over half that cost was for a beefy grid tied battery. (We average over one power outage per month in my area. PG&E sucks more than usual here.). Also, because we overprovisioned for storms, we basically get two EVs worth of overproduced electricity at that price. Miles driven from that electricity is cheaper than the gasoline equivalent too. Solar panel prices did go up a bit in the last few months, but that's because the commerce department inadvertently created a shortage while enforcing the China tarrifs. On the other hand, I was at the car dealer yesterday, and got to compare used EV prices from January and today. Yikes!
    - everybodyknows 4y ago
      > UC Berkeley economist Meredith Fowlie recommends that the fixed-charge be larger for higher-income households, as shown below. This idea was popular among the speakers ... So perhaps we'll soon be sending a copy of our tax returns along with our power bill for the month of May. Such a policy might anyway help wealthier people empathize with the humiliation of the poor, who are already being coerced to explain their financial circumstances to the power company: > lower-income households (CARE and FERA customers)
- refurb 4y ago
  It took close to a decade ('74 - '84) last time inflation was rampant. That said, a lot of things were tried before Volcker came in under Reagan and shrank the money supply aggressively, even through a subsequent recession. Nixon tried wage controls, price controls, changing energy policy, etc. It resulted in stagflation - poor economic growth despite high inflation.
  - anonuser123456 4y ago
    Volcker was appointed by Carter, not Reagan.
    - Kon-Peki 4y ago
      Reagan stacked the Fed with loyalists and forced Volcker to resign.
      - refurb 4y ago
        How does the President “force” someone to resign when they are in charge of selecting the person for that role?
        kaesar14 4y ago
        The Fed Chair cannot be removed by the President once installed. He was pressured by other means.
        refurb 4y ago
        They have to be renominated every 4 year term. He served out his 2nd term and was not renominated. Not arguing that it wasn’t political, it clearly is even based on the Biden nomination.
    - refurb 4y ago
      He was first appointed to the treasury by Nixon in ‘73 and was instrumental in ending the gold standard. Then appointed by Carter in ‘79 to the Federal Reserve. But most of his interest rate tightening happened under Reagan with a peak tightening in ‘81 with fed funds rate at 20%.
- 100xdang 4y ago
  This is the new baseline, you won't see inflation lower than this long-term until the system completely collapses under its own weight. The only thing keeping things running is cheap money and there will need to be more of it. Any "solution" that looks like austerity will result in destabilizing unrest. In the USA, Republicans will campaign on inflation but make money as cheap as ever as soon as they have control, because it's the only way to keep things afloat. I think this situation is trash, but deflation is much, much worse than inflation. We don't need to revisit 1929, upper middle class will just have to live with dilution of assets if they want a functioning society.
  - sfe22 4y ago
    Deflation being much much worse is a nice joke. You telling me that if gas and food and rent lowered in price over time, I will be worse off? Stuff are supposed to become cheaper as technology advances yet we only either get high or low price increases, all to fund the rich in the government.
    - scotuswroteus 4y ago
      'Stuff' should be plural, I agree
      - sfe22 4y ago
        Felt off, but went with it. Looks like I made a new friend too xD.
    - rufus_foreman 4y ago
      >> You telling me that if gas and food and rent lowered in price over time, I will be worse off? If you have debt, you will be worse off. Wages get lowered over time, too. Imagine your salary gets cut year after year but your mortgage, car payment, and student loan payment all stay the same. That's deflation. In the same way that unexpected inflation is good for borrowers (since they get to pay back a loan with cheaper money) unexpected deflation is bad for borrowers (since they have to pay back a loan with more expensive money).
- foxyv 4y ago
  You can generally expect US inflation figures to track pretty closely to oil prices. Especially since most of our interstate freight is diesel trucks and nearly every market is dependent on oil in one way or another. I would expect oil to stay high for a while as the international market becomes accustomed to the loss of Russia as a producer. OPEC is in the unique position of producing more oil at a high price. In addition, the Biden administration is not friendly to exploring new oil resources and fracking. I would expect inflation and high fuel prices to be a standard feature of life for the next 3 years unless we reduce demand drastically.
- fnordpiglet 4y ago
  Global shipping has improved recently (from $10300 in September 2021 to $7600 in May 2022) and demand has cooled to the extent stores are starting to run clearance sales because of excess inventory. Gasoline prices will drop as suppliers ramp production to capture the revenue opportunities. Supply chain snarls will resolve with time. All of this will be deflationary. We are recovering from a global natural disaster and things are still broken. I think it’s very difficult to apply steady state reasoning in these sorts of situations. But I don’t see any structural reason things won’t return to more or less 2019 status quo. Concerns about inflation and deflation IMO are most important if they’re a structural feature. Periods of inflation and deflation as the system corrects itself are transitory and while impactful on our day to day lives don’t necessarily portend long term economic crisis.
silksowed 4y ago
economy has so many crazy forces acting all at once. truly a marvel to watch as I have always had a natural curiosity in economics
0daystock 4y ago
That's what happens and will keep happening when you print enough fiat currency to finance WW3 and beyond.
Proven 4y ago
TurkishPoptart 4y ago
This administration is a failure.
- AnimalMuppet 4y ago
  Perhaps it is. This doesn't show it, though. We have inflation from (at least) one of two causes. First, all the money created to keep the economy from falling apart during the Covid semi-shutdown. Well, who did that? Biden? Yes, and also Trump. I literally got checks in the mail with Trump's signature on them. So blaming this on Biden seems rather unfair. The other reason for inflation is the economic blockade of Russia, specifically Russian oil. That's 100% on Biden, but it's also the right thing to do. That's not failure, that's leadership. There's not all that much I agree with Biden on, but I agree with his handling of the Russia/Ukraine situation.
  - joemazerino 4y ago
    The economy should have failed during the 2020 crisis. That's the point. Government intervention not only prolongs the pain but inevitability increases it as it tries to save.
    - mountainriver 4y ago
      Sorry that’s just not true, government intervention can absolutely break the economy out of equity traps when a recession hits. If people are scared to lend/spend money it’s a self fulfilling prophecy, and can make things much worse
      - effingwewt 4y ago
        I disagree. Not only did the intervention help no one but the banks, but when they were bailed out with taxpayer money, they were refusing loans to the point they were sued over it. While using the same funds to pay obscene CEO bonuses. We stopped having a free market at that moment, and we've seen things go right back to the same exact spot only worse. Our entire financial system is bullshit now, it's one huge moral hazard.
TurkishPoptart 4y ago
All-time high for U.S. inflation All-time high for gas prices ($6/gal in Seattle!) All-time high for food prices Needless to say, elections in November are going to be VERY interesting.
- zaccusl 4y ago
  Why? If Republicans control congress what will be different? Is the US going to be the only country in the world to get inflation under control? Is the GOP that good? What are their solutions (serious question)? Because all I here is "CRT bad" and "don't say gay". I never hear anything proposed to solve any of this.
  - TingPing 4y ago
    None of that matters. "current situation bad = vote different color" for some.
    - TurkishPoptart 4y ago
      Also it bears mentioning that the president's brain is actively melting, and yet our VP is so undesirable and unlikeable that I don't want anything unfortunate to happen to Biden, or for him to get 25th amendment'd. All I can do is vote for the opposition, and by God this is the first time I'm voting Republican/Independent/Conservative.
      - spolsky0 4y ago
  - commandlinefan 4y ago
    > If Republicans control congress what will be different? Um, well, a lot will be different, but nothing with regards to gas prices or inflation. And this is coming from somebody with a passionate bordering on maniacal hate for democrats.
greenyoda 4y ago
Archive with full text of article: https://archive.ph/UFKVM https://archive.ph/UFKVM
pbuzbee 4y ago
Does anyone have any financial advice on how to handle extended periods of inflation? What about if it turns into stagflation?
- adam_arthur 4y ago
  The tricky thing is that the right action really depends on whether the Fed is serious about tackling inflation. Buying assets is a terrible hedge, if those assets are valued for 0% rate env, and we're entering a 5%+ rate env. Housing and 100x sales tech stocks are a great example My view is that the Fed is serious, and we'll run up to ~4% 10y and suffer a recession that kills off inflation. Hold cash until the discount rate peaks, then buy bonds. Wait for recession fears to peak, then buy equities. 4% 10y is a safe buy level imo, but entirely possible that we go even higher, or suffer recession/disinflation before then. Energy inflation is likely here to stay though
jinpa_zangpo 4y ago
Inflation is caused by growth in the money supply. It will end when this growth is restricted. Controlling inflation is not some unknown black art. If socialist Venezuela can solve its inflation problem (and it has) so can the United States.
ramblingsnake 4y ago
If gas a year ago was around $3/gal and it is $6+/gal now, then it has doubled (100%) not 8%!!
mancerayder 4y ago
What an incredible lesson for us. At least, for me. First, I was cocky about assets in securities and crypto. I kept a lot of cash, at the time it was 1/3, and the advice was, "What are you doing, cash is trash, man." Let's just say that now that cash ratio is more like 1/2 and increasing, while the cash hasn't increased. Brutal stock market beating and it's continuing to bleed. I observed a major difference in opinion, in the last two years, between private economists / market researchers, and academic economists. I trusted the academic economists, who told us that inflation was transitory, so on and so forth, "blah blah blah velocity of money is what matters, blah blah blah, you should ignore those who say that we're printing too much, blah blah blah a broken clock always strikes twice." The market people were right: the housing forecasters, the real estate people and the wealth advisors who manage money and put out research reports -- they were all correct. The academic economists mostly seemed to side with the Fed and were Incorrect. "But Russia.." no, this started before Russia. It's obvious to me today that an economy is comprised of goods and services; when we locked down the economy in the U.S., well de-facto, we locked out businesses, we handed out checks and we did stimulus package after stimulus package (Trump and then Biden, you can't partisan this), that we were giving money out while the goods and services produced were decreasing. Thus the ratio of money (which we printed) to goods and services is out of wack, hence, inflation. I've been pushed to the fiscal conservative end of things, at least a bit more. A Democrat my whole life, it's clear the Keynesian vision is nutty as is the conversation around "corporate greed." I saw in slow motion how the Covid lockdowns enriched the likes of Amazon, and how low interest rates enriched the rich, how it's contributed to a nation of renters (corporate real estate investors used this money to buy out huge swathes of Atlanta, Phoenix and so forth to rent out homes to people who were trying to buy them). Perhaps the Austrian School folks have a point about macro interference in the economy. It's clear I was greedy. I thought about, but did not, sell high-flying stock gains (400% in some cases on non-meme, and 50+% on crypo), because "time in the market is better than timing the market" and I wanted to wait at least a year at a minimum. God how wrong that is. In retrospect I should have captured the gains better, instead of watching it drop at the end of last year and waiting for it to inevitably come back up. It's clear that I'm not as comfortable financially as I thought. Living (like many of you) in a very HCOL area, since my assets were going through the roof I spent and didn't save. Now, I can't even save; I have plenty of savings, since I'm old, so I'm not paycheck-to-mouth, but I'm essentially working all day long and shoveling money into the pockets of my landlord and a lot of other nonsense. It's clear I should have bought a property, any property, and I almost did, when the interest rates were at 2.5%. Summary for me personally, very subjectively: seize the moment, don't overthink, don't dilly dally, while Fate passes you by.

106 points by ra7 4y ago

Anyone have opinions on how long this inflation spike will last, or what the peak will be? I seriously thought we had maybe peaked earlier this year, and it looks like the peak so far was in March for core inflation excluding food and energy. However, maybe high energy prices will feed back into other consumer prices eventually, triggering more inflation. The producer price index (PPI) is still really wild, so maybe consumer inflation really hasn't caught up yet: https://fred.stlouisfed.org/graph/?g=QpsI https://fred.stlouisfed.org/graph/?g=QpsI If you compare that to the 70s or 80s, it vastly exceeds what happened back then. PPI in 2008 was pretty high though too and didn't lead to 70s/80s style inflation, maybe because of lower demand. I suppose the tightening of monetary policy might help, but other factors (war in Ukraine, supply chain issues) will not change as a result of monetary policy. edit: CPI graph over time showing CPI minus food/energy https://fred.stlouisfed.org/graph/?g=i6u6 https://fred.stlouisfed.org/graph/?g=i6u6

TMWNN 4y ago
>Anyone have opinions on how long this inflation spike will last, or what the peak will be? Sorry, Mr. Biden. You'll have to look elsewhere for economics advice.
voisin 4y ago
It’ll last until money supply tightens.
- readthenotes1 4y ago
  And more gasoline is produced.
  - voisin 4y ago
    Everyone likes to blame the Russia-Ukraine conflict but inflation was spiking prior to supply issues. That war is a convenient scapegoat for politicians and bureaucrats who don’t want to take credit for profligate spending and loose policy for decades.
    - JohnDeHope 4y ago
      "for decades" I think this is important. Dumb political finger pointing is meaningless here. This issue has nothing to do with Democrats, or Republicans, or liberals, or conservatives, or this administration, or the previous one, or the previous six.
    - mc32 4y ago
      Russia is a convenient excuse. It's not the reason. They cancel the XL and other pipelines but pressure KSA to produce more. The whitehouse has even admitted they are using this situation to push their stated agenda of transitioning to more renewables (noble, but not consequence free). They want to eat their cake and have it too. Reality does not work that way.
      - kombucha13 4y ago
        Blaming the xl pipeline cancelation is silly.
      - s1artibartfast 4y ago
        Energy prices have been going up much faster than inflation long before anything with Russia. Part is increase in cost of fossil fuels more expensive Renewables, and removing cheap coal. I'll add you to our projected savings from Renewables have not kicked in. This isn't a good or bad judgement just the facts on the ground
      - kombucha13 4y ago
        Let me ask you, what was the type oil being pushed through that pipeline and where was that oil destined for and what was the max throughout of the pipeline? I suggest you look it up. If you look closely, you'll realize the XL pipeline would've actually caused an increase in crude prices in the Midwest and most of the oil was destined for export. KXL was a bad deal for Americans. It certainly wouldn't have led to an increase in energy security.
seibelj 4y ago
They can't raise interest rates quickly because it would nuke the easy-money economy (i.e. the entire economy) that has become addicted to low rates. They have to slowly raise them to keep stuff from falling apart. The ruling party also doesn't want to get hurt worse than they already are, and a stagflation recession would clobber them. So easy money and high inflation will remain for at least another year.
- voisin 4y ago
  > They can't raise interest rates quickly because it would nuke the easy-money economy (i.e. the entire economy) that has become addicted to low rates. This is exactly why the easy-money economy should never have been allowed to occur and persist for so long.
  - refurb 4y ago
    The amazing thing is many were predicting this back in 2008. If anyone wants to listen to a prescient conversation about the feds actions post-2008 and inflation today, take a listen to this podcast. It was recorded in 2009. https://www.econtalk.org/meltzer-on-inflation/ https://www.econtalk.org/meltzer-on-inflation/ It’s an interview with Prof Meltzer from Carnegie Mellon who has done extensive research on the federal reserve system and who wrote the de facto official history of the reserve going back to its creation. Cliff notes (all future tense): - As a result of the 2008 crisis the fed expanded the money supply to a degree never seen before - Rather than drive inflation, the “new money’s” effect will be muted due to skittish banks who will decide to just take the funds and hold as cash/treasuries (maintaining strong reserves) until more positive economic indicators emerge (this process could be paused by the bank if economic sentiment turned negative); this was actually seen at least in consumer spending - it was flat for years beyond the massive expansion in money supply - Once economic forecasts turn more optimistic, the money will be deployed (through bank lending) into investments and assets leading to inflation in those prices first - Eventually the excess supply will spill over into consumer lending and consumer spending in the classic indicators of inflation like CPI - However the fed will be under immense political pressure to not drive the “fragile” economy into a recession (Covid anyone?) so any tightening will be far too late and inflation will overshoot targets by a huge margin - Similar to the 70’s, until strong monetary contraction is brought in, inflation will run very hot despite other efforts to control it Pretty accurate so far.
88913527 4y ago
Depends on factors we can't predict. Increasing the cost of capital should ease the inflation. But will that happen fast enough is a decision for policymakers.
ren_engineer 4y ago
it will last much longer and will get worse, because everything is dependent on energy to be created/transported. There's also the fact that many retailers admitted to eating losses to try and keep customers happy assuming that inflation would be "transitory", pretty soon many of these retailers will be forced to raise prices to reflect reality
- s1artibartfast 4y ago
  If Energy prices are driving it we are in for a long haul. Electricity costs in California is up 50% in the last five years. Efforts to on Shore manufacturing will drive it up higher https://www.paloaltoonline.com/blogs/p/2022/03/06/when-will-our-electricity-rates-go-down https://www.paloaltoonline.com/blogs/p/2022/03/06/when-will-...
  - hedora 4y ago
    Our solar array is providing electricity for $0.06-$0.13 per kWh, assuming 30 year depreciation. Over half that cost was for a beefy grid tied battery. (We average over one power outage per month in my area. PG&E sucks more than usual here.). Also, because we overprovisioned for storms, we basically get two EVs worth of overproduced electricity at that price. Miles driven from that electricity is cheaper than the gasoline equivalent too. Solar panel prices did go up a bit in the last few months, but that's because the commerce department inadvertently created a shortage while enforcing the China tarrifs. On the other hand, I was at the car dealer yesterday, and got to compare used EV prices from January and today. Yikes!
  - everybodyknows 4y ago
    > UC Berkeley economist Meredith Fowlie recommends that the fixed-charge be larger for higher-income households, as shown below. This idea was popular among the speakers ... So perhaps we'll soon be sending a copy of our tax returns along with our power bill for the month of May. Such a policy might anyway help wealthier people empathize with the humiliation of the poor, who are already being coerced to explain their financial circumstances to the power company: > lower-income households (CARE and FERA customers)
refurb 4y ago
It took close to a decade ('74 - '84) last time inflation was rampant. That said, a lot of things were tried before Volcker came in under Reagan and shrank the money supply aggressively, even through a subsequent recession. Nixon tried wage controls, price controls, changing energy policy, etc. It resulted in stagflation - poor economic growth despite high inflation.
- anonuser123456 4y ago
  Volcker was appointed by Carter, not Reagan.
  - Kon-Peki 4y ago
    Reagan stacked the Fed with loyalists and forced Volcker to resign.
    - refurb 4y ago
      How does the President “force” someone to resign when they are in charge of selecting the person for that role?
      - kaesar14 4y ago
        The Fed Chair cannot be removed by the President once installed. He was pressured by other means.
        refurb 4y ago
        They have to be renominated every 4 year term. He served out his 2nd term and was not renominated. Not arguing that it wasn’t political, it clearly is even based on the Biden nomination.
  - refurb 4y ago
    He was first appointed to the treasury by Nixon in ‘73 and was instrumental in ending the gold standard. Then appointed by Carter in ‘79 to the Federal Reserve. But most of his interest rate tightening happened under Reagan with a peak tightening in ‘81 with fed funds rate at 20%.
100xdang 4y ago
This is the new baseline, you won't see inflation lower than this long-term until the system completely collapses under its own weight. The only thing keeping things running is cheap money and there will need to be more of it. Any "solution" that looks like austerity will result in destabilizing unrest. In the USA, Republicans will campaign on inflation but make money as cheap as ever as soon as they have control, because it's the only way to keep things afloat. I think this situation is trash, but deflation is much, much worse than inflation. We don't need to revisit 1929, upper middle class will just have to live with dilution of assets if they want a functioning society.
- sfe22 4y ago
  Deflation being much much worse is a nice joke. You telling me that if gas and food and rent lowered in price over time, I will be worse off? Stuff are supposed to become cheaper as technology advances yet we only either get high or low price increases, all to fund the rich in the government.
  - scotuswroteus 4y ago
    'Stuff' should be plural, I agree
    - sfe22 4y ago
      Felt off, but went with it. Looks like I made a new friend too xD.
  - rufus_foreman 4y ago
    >> You telling me that if gas and food and rent lowered in price over time, I will be worse off? If you have debt, you will be worse off. Wages get lowered over time, too. Imagine your salary gets cut year after year but your mortgage, car payment, and student loan payment all stay the same. That's deflation. In the same way that unexpected inflation is good for borrowers (since they get to pay back a loan with cheaper money) unexpected deflation is bad for borrowers (since they have to pay back a loan with more expensive money).
foxyv 4y ago
You can generally expect US inflation figures to track pretty closely to oil prices. Especially since most of our interstate freight is diesel trucks and nearly every market is dependent on oil in one way or another. I would expect oil to stay high for a while as the international market becomes accustomed to the loss of Russia as a producer. OPEC is in the unique position of producing more oil at a high price. In addition, the Biden administration is not friendly to exploring new oil resources and fracking. I would expect inflation and high fuel prices to be a standard feature of life for the next 3 years unless we reduce demand drastically.
fnordpiglet 4y ago
Global shipping has improved recently (from $10300 in September 2021 to $7600 in May 2022) and demand has cooled to the extent stores are starting to run clearance sales because of excess inventory. Gasoline prices will drop as suppliers ramp production to capture the revenue opportunities. Supply chain snarls will resolve with time. All of this will be deflationary. We are recovering from a global natural disaster and things are still broken. I think it’s very difficult to apply steady state reasoning in these sorts of situations. But I don’t see any structural reason things won’t return to more or less 2019 status quo. Concerns about inflation and deflation IMO are most important if they’re a structural feature. Periods of inflation and deflation as the system corrects itself are transitory and while impactful on our day to day lives don’t necessarily portend long term economic crisis.

silksowed 4y ago

economy has so many crazy forces acting all at once. truly a marvel to watch as I have always had a natural curiosity in economics

0daystock 4y ago

That's what happens and will keep happening when you print enough fiat currency to finance WW3 and beyond.

Proven 4y ago

TurkishPoptart 4y ago

This administration is a failure.

AnimalMuppet 4y ago
Perhaps it is. This doesn't show it, though. We have inflation from (at least) one of two causes. First, all the money created to keep the economy from falling apart during the Covid semi-shutdown. Well, who did that? Biden? Yes, and also Trump. I literally got checks in the mail with Trump's signature on them. So blaming this on Biden seems rather unfair. The other reason for inflation is the economic blockade of Russia, specifically Russian oil. That's 100% on Biden, but it's also the right thing to do. That's not failure, that's leadership. There's not all that much I agree with Biden on, but I agree with his handling of the Russia/Ukraine situation.
- joemazerino 4y ago
  The economy should have failed during the 2020 crisis. That's the point. Government intervention not only prolongs the pain but inevitability increases it as it tries to save.
  - mountainriver 4y ago
    Sorry that’s just not true, government intervention can absolutely break the economy out of equity traps when a recession hits. If people are scared to lend/spend money it’s a self fulfilling prophecy, and can make things much worse
    - effingwewt 4y ago
      I disagree. Not only did the intervention help no one but the banks, but when they were bailed out with taxpayer money, they were refusing loans to the point they were sued over it. While using the same funds to pay obscene CEO bonuses. We stopped having a free market at that moment, and we've seen things go right back to the same exact spot only worse. Our entire financial system is bullshit now, it's one huge moral hazard.

TurkishPoptart 4y ago

All-time high for U.S. inflation All-time high for gas prices ($6/gal in Seattle!) All-time high for food prices Needless to say, elections in November are going to be VERY interesting.

zaccusl 4y ago
Why? If Republicans control congress what will be different? Is the US going to be the only country in the world to get inflation under control? Is the GOP that good? What are their solutions (serious question)? Because all I here is "CRT bad" and "don't say gay". I never hear anything proposed to solve any of this.
- TingPing 4y ago
  None of that matters. "current situation bad = vote different color" for some.
  - TurkishPoptart 4y ago
    Also it bears mentioning that the president's brain is actively melting, and yet our VP is so undesirable and unlikeable that I don't want anything unfortunate to happen to Biden, or for him to get 25th amendment'd. All I can do is vote for the opposition, and by God this is the first time I'm voting Republican/Independent/Conservative.
    - spolsky0 4y ago
- commandlinefan 4y ago
  > If Republicans control congress what will be different? Um, well, a lot will be different, but nothing with regards to gas prices or inflation. And this is coming from somebody with a passionate bordering on maniacal hate for democrats.

greenyoda 4y ago

Archive with full text of article: https://archive.ph/UFKVM https://archive.ph/UFKVM

pbuzbee 4y ago

Does anyone have any financial advice on how to handle extended periods of inflation? What about if it turns into stagflation?

adam_arthur 4y ago
The tricky thing is that the right action really depends on whether the Fed is serious about tackling inflation. Buying assets is a terrible hedge, if those assets are valued for 0% rate env, and we're entering a 5%+ rate env. Housing and 100x sales tech stocks are a great example My view is that the Fed is serious, and we'll run up to ~4% 10y and suffer a recession that kills off inflation. Hold cash until the discount rate peaks, then buy bonds. Wait for recession fears to peak, then buy equities. 4% 10y is a safe buy level imo, but entirely possible that we go even higher, or suffer recession/disinflation before then. Energy inflation is likely here to stay though

jinpa_zangpo 4y ago

Inflation is caused by growth in the money supply. It will end when this growth is restricted. Controlling inflation is not some unknown black art. If socialist Venezuela can solve its inflation problem (and it has) so can the United States.

ramblingsnake 4y ago

If gas a year ago was around $3/gal and it is $6+/gal now, then it has doubled (100%) not 8%!!

mancerayder 4y ago

What an incredible lesson for us. At least, for me. First, I was cocky about assets in securities and crypto. I kept a lot of cash, at the time it was 1/3, and the advice was, "What are you doing, cash is trash, man." Let's just say that now that cash ratio is more like 1/2 and increasing, while the cash hasn't increased. Brutal stock market beating and it's continuing to bleed. I observed a major difference in opinion, in the last two years, between private economists / market researchers, and academic economists. I trusted the academic economists, who told us that inflation was transitory, so on and so forth, "blah blah blah velocity of money is what matters, blah blah blah, you should ignore those who say that we're printing too much, blah blah blah a broken clock always strikes twice." The market people were right: the housing forecasters, the real estate people and the wealth advisors who manage money and put out research reports -- they were all correct. The academic economists mostly seemed to side with the Fed and were Incorrect. "But Russia.." no, this started before Russia. It's obvious to me today that an economy is comprised of goods and services; when we locked down the economy in the U.S., well de-facto, we locked out businesses, we handed out checks and we did stimulus package after stimulus package (Trump and then Biden, you can't partisan this), that we were giving money out while the goods and services produced were decreasing. Thus the ratio of money (which we printed) to goods and services is out of wack, hence, inflation. I've been pushed to the fiscal conservative end of things, at least a bit more. A Democrat my whole life, it's clear the Keynesian vision is nutty as is the conversation around "corporate greed." I saw in slow motion how the Covid lockdowns enriched the likes of Amazon, and how low interest rates enriched the rich, how it's contributed to a nation of renters (corporate real estate investors used this money to buy out huge swathes of Atlanta, Phoenix and so forth to rent out homes to people who were trying to buy them). Perhaps the Austrian School folks have a point about macro interference in the economy. It's clear I was greedy. I thought about, but did not, sell high-flying stock gains (400% in some cases on non-meme, and 50+% on crypo), because "time in the market is better than timing the market" and I wanted to wait at least a year at a minimum. God how wrong that is. In retrospect I should have captured the gains better, instead of watching it drop at the end of last year and waiting for it to inevitably come back up. It's clear that I'm not as comfortable financially as I thought. Living (like many of you) in a very HCOL area, since my assets were going through the roof I spent and didn't save. Now, I can't even save; I have plenty of savings, since I'm old, so I'm not paycheck-to-mouth, but I'm essentially working all day long and shoveling money into the pockets of my landlord and a lot of other nonsense. It's clear I should have bought a property, any property, and I almost did, when the interest rates were at 2.5%. Summary for me personally, very subjectively: seize the moment, don't overthink, don't dilly dally, while Fate passes you by.