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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 lo

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.
    - JohnDeHope 4y ago
      This is a nitpick, but profligate spending cannot create inflation. If I have a million dollars, and I spend a million dollars, that doesn't create inflation. Even if I spent the million dollars on stupid NFT cat gifs. I got the money from somewhere and I spent it, and sent it back out. No net inflation. The inflation comes from the printing and spending of new money.
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.

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.
  - JohnDeHope 4y ago
    This is a nitpick, but profligate spending cannot create inflation. If I have a million dollars, and I spend a million dollars, that doesn't create inflation. Even if I spent the million dollars on stupid NFT cat gifs. I got the money from somewhere and I spent it, and sent it back out. No net inflation. The inflation comes from the printing and spending of new money.

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.