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I doubt this is monetary inflation. It's price inflation due to a supply crunch brought on by the pandemic shutdowns (whose effect was delayed) and the Russian

by api 4y ago

I doubt this is monetary inflation. It's price inflation due to a supply crunch brought on by the pandemic shutdowns (whose effect was delayed) and the Russian invasion of Ukraine. Then throw in other factors like housing undersupply in developed countries, continuing depletion of "easy" oil, and Chinese threats against Taiwan. Gold tends to be (but is not guaranteed to be) a hedge against monetary inflation but not against supply crunch driven inflation. Prices are going up because prices are actually going up.

deleted 4y ago
[deleted]
Barrera 4y ago
Define "monetary inflation" and how to measure it. It would also be helpful if you could point to a metric that allows one to distinguish "monetary inflation" from some other kind.
- JumpCrisscross 4y ago
  > Define "monetary inflation" and how to measure it Core PCE jumping [1]. Core is elevated. But between that and headline is a lot of energy price volatility. [1] https://www.bea.gov/data/personal-consumption-expenditures-price-index-excluding-food-and-energy https://www.bea.gov/data/personal-consumption-expenditures-p...
  - Barrera 4y ago
    Why would that be a measure of "monetary inflation." Shouldn't such a metric actually measure, you know, money?
    - JumpCrisscross 4y ago
      > Why would that be a measure of "monetary inflation” The price of money is contained in the interest rate. There are loads of models for turning credit spreads and duration curves into a Fed-neutral level, but I have my doubts. We have no metric for the part of inflation caused by monetary policy. If we did, central banking would be solved. Instead, we have various measures that include some confounding variables and exclude others. Core PCE excludes most volatile, non-monetary contributors to prices. If core PCE spikes, it’s hard to argue the cause isn’t systemic and widespread, i.e. monetary or something with similar breadth. CPI spiking, on the other hand, has more explanations which must be rejected before we can conclude monetary origins.
deltarholamda 4y ago
>It's price inflation due to a supply crunch brought on by the pandemic shutdowns (whose effect was delayed) and the Russian invasion of Ukraine. Pandemic, probably yes. Ukraine? Probably not. The supply problem is over-optimized supply chains, which means "we build everything in China, and they're not producing." I just got a time estimate of 52 weeks for a 1200A distribution panel, and things like breakers >600A have similar restrictions. All of this compounds up and down the chain. But luckily, a lot of suits on Wall Street are making tons of money, so everything will be fine, right?
- nickles 4y ago
  > But luckily, a lot of suits on Wall Street are making tons of money, so everything will be fine, right? Look at risk assets, and consider whether that supports your assertion.
  - CRConrad 4y ago
    I read that retrospectively, as: ~ But luckily, a lot of suits on Wall Street are making tons of money forcing the global economy into this put-all-your-eggs-in-the-Chinese-manufacturing-basket strategy, so never mind any potential risks to the larger global economy outside Wall Street in the second or third decade of the twenty-first century; those suits on Wall Street are making tons of money and that's the main thing, so everything will be fine, right? And sure, it was -- for a while. And for those suits on Wall Street, it probably still is: They've made their [m|b]illions. (Not sure what you mean by "risk assets", but I do know this: If they're really risks, you and I will probably be on the hook for them, rather than those suits on Wall Street.)
nickles 4y ago
Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output. -- Milton Friedman > I doubt this is monetary inflation. It's price inflation due to a supply crunch brought on by the pandemic shutdowns Take a look at M2 money supply [0]. Pumping huge amounts of fiscal stimulus into the global economy caused this. Inflation has been driven by poor policy decisions. > Then throw in other factors like housing undersupply in developed countries There has been a housing stock shortage for over a decade, that's not new, so it's hard to argue that's a proximate cause [1]. > continuing depletion of "easy" oil There's plenty of oil available [2]. New technology (hydraulic fracturing, horizontal drilling, etc.) allows for accessing reserves that were too expensive previously. There has been structural underinvestment in O&G thanks to misguided green/ESG policy. > Chinese threats against Taiwan How does this drive inflation? If anything, China has reduced inflationary pressures by decimating economic activity with Covid lockdowns. > Gold tends to be (but is not guaranteed to be) a hedge against monetary inflation Gold has been a great hedge against inflation in the long run. When measured in gold, a soldier today earns a similar salary to a Roman soldier 2000 years ago [3]. However, gold is not a good hedge against inflation in the short term. When inflation goes up, interest rates go up. When interest rates go up, the opportunity cost of owning gold increases. It should be noted that interest rates have steadily declined throughout history. [0] https://fred.stlouisfed.org/series/M2REAL https://fred.stlouisfed.org/series/M2REAL [1] https://smile.amazon.com/Shut-Out-Shortage-Recession-University/dp/1538122146 https://smile.amazon.com/Shut-Out-Shortage-Recession-Univers... [2] https://bettermeetsreality.com/how-much-oil-is-left-in-the-world-when-will-we-run-out/ https://bettermeetsreality.com/how-much-oil-is-left-in-the-w... [3] https://www.mining.com/what-a-roman-centurions-pay-says-about-gold/ https://www.mining.com/what-a-roman-centurions-pay-says-abou...
ihalip 4y ago
The Russian invasion isn't what caused inflation. I don't believe in the "Putin's price hike" because inflation was already picking up speed in Q2 2021, well before the invasion.
- epistasis 4y ago
  It's likely that there are a multitude of causes each contributing a bit. Many many different areas are experiencing "perfect storms" to cause huge disruptions and shortages: https://www.bloomberg.com/news/articles/2022-07-11/thirteen-perfect-storms-that-are-sweeping-the-world-right-now https://www.bloomberg.com/news/articles/2022-07-11/thirteen-...

by api 4y ago

deleted 4y ago

[deleted]

Barrera 4y ago

Define "monetary inflation" and how to measure it. It would also be helpful if you could point to a metric that allows one to distinguish "monetary inflation" from some other kind.

JumpCrisscross 4y ago
> Define "monetary inflation" and how to measure it Core PCE jumping [1]. Core is elevated. But between that and headline is a lot of energy price volatility. [1] https://www.bea.gov/data/personal-consumption-expenditures-price-index-excluding-food-and-energy https://www.bea.gov/data/personal-consumption-expenditures-p...
- Barrera 4y ago
  Why would that be a measure of "monetary inflation." Shouldn't such a metric actually measure, you know, money?
  - JumpCrisscross 4y ago
    > Why would that be a measure of "monetary inflation” The price of money is contained in the interest rate. There are loads of models for turning credit spreads and duration curves into a Fed-neutral level, but I have my doubts. We have no metric for the part of inflation caused by monetary policy. If we did, central banking would be solved. Instead, we have various measures that include some confounding variables and exclude others. Core PCE excludes most volatile, non-monetary contributors to prices. If core PCE spikes, it’s hard to argue the cause isn’t systemic and widespread, i.e. monetary or something with similar breadth. CPI spiking, on the other hand, has more explanations which must be rejected before we can conclude monetary origins.

deltarholamda 4y ago

>It's price inflation due to a supply crunch brought on by the pandemic shutdowns (whose effect was delayed) and the Russian invasion of Ukraine. Pandemic, probably yes. Ukraine? Probably not. The supply problem is over-optimized supply chains, which means "we build everything in China, and they're not producing." I just got a time estimate of 52 weeks for a 1200A distribution panel, and things like breakers >600A have similar restrictions. All of this compounds up and down the chain. But luckily, a lot of suits on Wall Street are making tons of money, so everything will be fine, right?

nickles 4y ago
> But luckily, a lot of suits on Wall Street are making tons of money, so everything will be fine, right? Look at risk assets, and consider whether that supports your assertion.
- CRConrad 4y ago
  I read that retrospectively, as: ~ But luckily, a lot of suits on Wall Street are making tons of money forcing the global economy into this put-all-your-eggs-in-the-Chinese-manufacturing-basket strategy, so never mind any potential risks to the larger global economy outside Wall Street in the second or third decade of the twenty-first century; those suits on Wall Street are making tons of money and that's the main thing, so everything will be fine, right? And sure, it was -- for a while. And for those suits on Wall Street, it probably still is: They've made their [m|b]illions. (Not sure what you mean by "risk assets", but I do know this: If they're really risks, you and I will probably be on the hook for them, rather than those suits on Wall Street.)

nickles 4y ago

Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output. -- Milton Friedman > I doubt this is monetary inflation. It's price inflation due to a supply crunch brought on by the pandemic shutdowns Take a look at M2 money supply [0]. Pumping huge amounts of fiscal stimulus into the global economy caused this. Inflation has been driven by poor policy decisions. > Then throw in other factors like housing undersupply in developed countries There has been a housing stock shortage for over a decade, that's not new, so it's hard to argue that's a proximate cause [1]. > continuing depletion of "easy" oil There's plenty of oil available [2]. New technology (hydraulic fracturing, horizontal drilling, etc.) allows for accessing reserves that were too expensive previously. There has been structural underinvestment in O&G thanks to misguided green/ESG policy. > Chinese threats against Taiwan How does this drive inflation? If anything, China has reduced inflationary pressures by decimating economic activity with Covid lockdowns. > Gold tends to be (but is not guaranteed to be) a hedge against monetary inflation Gold has been a great hedge against inflation in the long run. When measured in gold, a soldier today earns a similar salary to a Roman soldier 2000 years ago [3]. However, gold is not a good hedge against inflation in the short term. When inflation goes up, interest rates go up. When interest rates go up, the opportunity cost of owning gold increases. It should be noted that interest rates have steadily declined throughout history. [0] https://fred.stlouisfed.org/series/M2REAL https://fred.stlouisfed.org/series/M2REAL [1] https://smile.amazon.com/Shut-Out-Shortage-Recession-University/dp/1538122146 https://smile.amazon.com/Shut-Out-Shortage-Recession-Univers... [2] https://bettermeetsreality.com/how-much-oil-is-left-in-the-world-when-will-we-run-out/ https://bettermeetsreality.com/how-much-oil-is-left-in-the-w... [3] https://www.mining.com/what-a-roman-centurions-pay-says-about-gold/ https://www.mining.com/what-a-roman-centurions-pay-says-abou...

ihalip 4y ago

The Russian invasion isn't what caused inflation. I don't believe in the "Putin's price hike" because inflation was already picking up speed in Q2 2021, well before the invasion.

epistasis 4y ago
It's likely that there are a multitude of causes each contributing a bit. Many many different areas are experiencing "perfect storms" to cause huge disruptions and shortages: https://www.bloomberg.com/news/articles/2022-07-11/thirteen-perfect-storms-that-are-sweeping-the-world-right-now https://www.bloomberg.com/news/articles/2022-07-11/thirteen-...