9 ms·

How Not to Fight Inflation

36 points by mmq 4y ago

mercy_dude 4y ago
Lol this is Newyorker. They are poster child fanboy of Bernanke-Yellen-Powell club who brought this mess on to us. This article does not bring up the key issue that we have had in last 15yrs post GFC - motivation of having endless QE. At some point everyone knew there would be repercussions but everyone looked the other way and was like “trust the fed” or “don’t fight the Fed”. Just kicking the can down the road. Well now Fed has its hands tied. It can’t raise rates too fast or the economy craters. The other option is let the inflation run hot.
- frgtpsswrdlame 4y ago
  Did you read it? They explicitly do talk about Quantitative Easing following 2008...
  - mercy_dude 4y ago
    Yes, where did the mention the culprits- Bernanke/Yellen/Powell. I still can’t fathom why they kept buying bonds even as far out as they did. They could have easily raise the rates in 2011, they didn’t. For example, why did the Fed went out of their way last year calling it transitory?
    - meltyness 4y ago
      Likely due to the doctrine that talking about "a cluster and time period of negative sentiment and contracting investment" is capable of being the impetus for "a cluster and time period of negative sentiment and contracting investment"
  - iso1631 4y ago
    The internet believes the main driver of inflation is "money printing" in the US, and nothing to do with the post covid supply squeeze or the current energy crisis The correct solution to avoid being at the wim of such friendly countries as Russia, Saudi, and China would be for Japan, Europe, the US, to massively invest in increasing internal free (renewable) energy sources, and diversifying strategic imports like silicon chips. From 2015-2017 in the US renewable production increased from 558TWh to 710TWh, a 13% increase per year. Staying at that rate for the next 5 years would have put US renewable at 1,300TWh today or 31% - 500TWh more than today, leaving 500TWh of gas and oil to be used elsewhere and reducing the power of Russia and Saudi over the global economy. By 2030 the US would have hit 3,500TWh, up to wards 100% of current electric generation, and by 2040 at the latest to include the extra electric load from things like battery cars. But instead the US didn't.
    - mercy_dude 4y ago
      I am not disagreeing the supply side squeeze but this has been happening since 2020. If you look at container flow stat it is clear as early as 2021 we had severe clogging issues. The problem was the narrative back then from Fed was that this is all transitory. They didn’t act.
      - SkyMarshal 4y ago
        If the problem was a supply side squeeze, the Fed has no mandate or tools for that. They couldn’t act. That’s on the govt and private sector to solve.
        mercy_dude 4y ago
        That’s not true. You can reduce household demands by raising the rates which is what they are trying to do now. But the challenge is now the inflation has outpaced them and Fed has missed the mark by quite a bit. Heck they are now taking about raising rate by 100 basis point. A year ago this was unthinkable when meme stocks were on the fly. But you can’t raise the rates fast and not cause spiral in for example liquidity or repo market. Point is Fed has done a lot of damage. In a functioning democracy, Fed chair would be summoned by congress and Fed would be held responsible for not keeping its dual mandate - price stability (which inflation is causing wreckage) and unemployment ( from an impending recession). If a Fed agency can’t keep its mandate, it’s time to look at its validity. But of course our elected leaders won’t. They love nothing but delegating to unelected agencies full of so called experts so they don’t have to make hard choices/decisions and bear the consequences from voters. So they just shield themselves with experts.
        SkyMarshal 4y ago
        > That’s not true. You can reduce household demands by raising the rates which is what they are trying to do now. That changes demand, not supply, as you astutely observe. Fed has no tools for supply, by design. That's why they've pushing back on the US govt recently, talking publicly about how current inflation is 30% due to demand (oversupply of money, low interest rates) and 50% due to supply constraints (food, energy, and Asian supply chain slowdowns). They're telling the US govt that solving inflation will require govt and private sector solutions to the supply problems. The Fed has no tools for those.
- whoomp12342 4y ago
  fed will raise rates. CPI is STILL on an upward trajectory.
- bryanlarsen 4y ago
  A stopped clock is right twice a day. People have been screaming about QE for 15 years and about government deficits for the last 50. So it seems fairly bloody obvious that the unique things about today's economy are caused by the blindingly obvious unique issues in today's economy like supply shocks rather than the things that are the same as they are when we didn't have problems. The only things that have a strong correlation with recessions are rising interest rates and balanced budgets. So maybe we should stop doing the things that are known to cause recession? Debt is money and that an economy needs money to function. And if an economy is growing, it needs more money, which means either more personal or more corporate or more government borrowing.
  - asah 4y ago
    I don't have a problem with debt if it's spent on R&D. But we pay one person to dig ditches and another to fill them, and say "see we created two jobs!" and both guys vote for that politician.
    - SkyMarshal 4y ago
      We don’t really pay one person to dig ditches and another to fill them. Is there something more concrete and real that you’re concerned about?
      - asah 4y ago
        We pay a food company to feed a person calories they don't need so they develop diabetes etc which we pay doctor to cure, insurance company to adjudicate and drug company to medicate. We build roads and buildings and cars designed to require excessive maintenance and then wear out early, e.g. cheap uncoated metals. We develop JavaScript frameworks, rando databases, hipster languages etc and educate/certify people in them, write millions of LOC then replace them a few years later. This is shallow innovation and it's a crazy amount of make-work. There's an alternative, which is to ask whether something EVEN HAS A CHANCE of being relevant in 10 years. Experimentation and risk-taking is fine, hamster-wheeling and "bullshit jobs" are a waste of life and destroy the earth, for little benefit.
- Aunche 4y ago
  The problem isn't the Fed. The problem is that elected politicians use the majority of their bandwidth to bribe and advertise to voters, and dedicate relatively little time to actually improving the nation in ways that aren't obviously visible. You can't fix the government deficit, poor regulation, or inefficient government spending with exceptional monetary policy.
frgtpsswrdlame 4y ago
Are excess reserves related to these large amounts in overnight repos I keep hearing about? If so, how do you pull that money out of the system so it returns to being responsive.
petilon 4y ago
Here's another way NOT to fight inflation: https://katv.com/news/nation-world/14-states-approve-stimulus-checks-as-inflation-continues-to-rise-california-georgia-brian-kemp-colorado-delaware-hawaii-idaho-illinois-indiana-covid-biden-university-of-miami-pandemic-gas-prices-tax-rebate https://katv.com/news/nation-world/14-states-approve-stimulu... To help citizens deal with inflation, 14 states are giving them free money. Giving people free money is what caused inflation.
- Ygg2 4y ago
  Aren't other non-US states also in inflation?
  - mpyne 4y ago
    Yes, but didn't many of them also engage in some level of stimulus spending due to the impact of COVID on the ability to work? And even without, if it is true that Americans are trying to point all the world's supply chains to feed their increasing demand for stuff, that's still going to affect prices in the rest of the world, by leaving people in the rest of the world competing for a lower supply of stuff (since more of it is being ducted to the U.S.). Unless suppliers are able to increase production to fill the overall higher demand, that is, but that just gets us back into supply chain issues caused by higher demand as a possible cause for inflation.
- autoexec 4y ago
  > To help citizens deal with inflation, 14 states are giving them free money. Giving people free money is what caused inflation. Yeah no. Not even a little. I know there's a narrative that Americans are just sitting on huge piles of cash and have too much money and it's tanking the economy, but it's pure bullshit. Pandemic stimulus money probably did play some role, but that would be the corporate welfare, not the money that went into the hands of regular Americans who lost their jobs and couldn't work forcing them to live off of saving, or go into debt just to survive, or the 20 million Americans who just months ago were at risk of ending up on the streets. (https://www.cbsnews.com/news/eviction-19-million-americans-risk-moratorium-coronavirus/ https://www.cbsnews.com/news/eviction-19-million-americans-r...). The idea that these people "just have too much money" is beyond absurd. The pandemic (which still rages) was a huge financial blow to a lot of people who are even now absolutely in need of aid. The pittance that most Americans got from Trump wasn't enough to cover their rent during the time they were unable to work. The checks that came from Biden were not enough for them to claw out of the financial hole covid dug either. Out of desperation and a deep longing for normalcy after years of suffering and going without some of the little things that make life worthwhile there is now a lot of demand that the supply chain can't support, and a lot of companies profiteering and price gouging. That can't entirely be blamed for inflation either, but it has more to do with the problems we see today than a couple 1k checks going to poor people did, and arguing that people who are genuinely struggling shouldn't get the help they need today in order to try and save the bank accounts of obscenely rich people "struggling" in this economy is sick.
roenxi 4y ago
I worry that people are trying to set up the financial equivalent of a perpetual motion machine; ever more complicated band-aids trying to overcome the fundamental problem that the economy is a signalling device of what is physically possible in the real world. Frankly I don't think the groundwork has been done to really figure out what the root issue is here. There are so many candidates - the handouts, the years of government-shutting-down-the-economy through COVID, the financial crisis that was looming in late 2019 that got obscured by the pandemic, a possibly peak-oil related energy crisis, war in the wake of all the other problems. But there are a lot of political shenanigans in the banking sector to keep the status-quo, and the status quo was shown to be "incompetents are in charge" in around 2008. So it is unlikely that they are up the the challenges that the world is facing.
- bombcar 4y ago
  I suspect we're setting ourselves up for a situation similar to what happened with wildfire management - just like the firefighters of yore had many tools to fight fires with, we have many tools to fight "economic fires" - the danger being that after awhile the brush builds up so much that when a fire finally overcomes your ability to fight it, it burns brightly and forever. Just like fires destroy, they also clean - and economic downturns do similar things, thinning out the companies that have no excuse continuing and strengthening the remainder. Since economic policy is now dedicated to keeping the companies going vs keeping everyone housed and fed, those companies can survive the downturn and end up "too big to fail". There's also perhaps something to be said about more and more of the "economy" being optional spending of various sorts.
  - imtringued 4y ago
    >I suspect we're setting ourselves up for a situation similar to what happened with wildfire management That is complete nonsense. Permanent money is always in disequilibrium, by avoiding interventions that result in temporary equilibrium you basically just get stuck with opportunity costs. You should rather question why we have modelled money to be permanently in disequilibrium so that it constantly requires interventions to keep it alive until its inevitable collapse. Permanent money is guaranteed to collapse because of its structural disregard of the real economy so the best you can do is keep it alive as much as possible, liquidationism just shortens the lifespan of your permanent money system. Isn't it quite ironic that permanent money systems don't last very long? It is particularly amusing that everyone thinks that permanent money collapses because of government meddling when it collapses on its own just fine. The best part is that people keep repeating the permanent money experiment over and over again over the last two thousand years and they all reached the same conclusion: it doesn't work in the end but we will do it again Isn't it ironic that money that abandons permanence can essentially last forever?
netfortius 4y ago
Best way to fight inflation in the US? Buying Euros.
- Aunche 4y ago
  1 Euro is roughly 1 USD now. The Yen is also relatively weaker now, despite Japan having lower inflation. The only major currency that's risen against the dollar is the Russian ruble, which has been heavily manipulated.
  - baq 4y ago
    Russia can’t spend its dollars. They would very much like to buy stuff and in the process counter the one way flow of money, but mostly can’t and have to resort to black markets. Of course there’s manipulation, but it isn’t the whole story.
  - neverrroot 4y ago
    Manipulated in what ways? By whom? Countries such as India happily purchasing energy from RU?
    - Aunche 4y ago
      Currency controls. In short, it's much easier to convert dollars into rubles than rubles into dollars.
- m348e912 4y ago
  Not if Europe and the Euro self-destructs before the US/USD does. If you're going the currency hedging route, at least diversify across multiple geopolitical regions.
- collegeburner 4y ago
  ahh yes the falling euro that will probably fall even lower, what could go wrong? srsly the ECB is going to have a lot of trouble keeping the euro stable and their "new instrument" or whatever they're going to use to maintain liquidity is still going to cause a lot of inflation and continue to damage the german economy (the productive one) to support the leech countries (greece, spain, italy, others)
eftychis 4y ago
The money printing argument a lot of people make for inflation implies that a) all that money made it into people’s hands and saving accounts and not as debt to companies which a cursory look at saving rates and excessive reserves of banks during that period or now is incorrect. Banks are not just going to donate money around when the Fed gives it to them — they are going to direct them towards let us say housing assets — the entities buying your bids out with cash. Also recall when looking money supplies that the M1 definition simply changed. We have an energy problem — we could barely keep up with energy demand growth pre pandemic and now it’s 1970 all over again. Also all the comparative advantage impact — that is the advantage in production of having eg Argentina focus on agriculture and exports which reduce overall prices requires predictable demand and solid transportation/shipping. Both as you can guess were “nuked” the last year and for the next couple of years at least. The Fed can do nothing about any of these topics. Even if you have 3 billions if there are no pears in the market you are not going to eat pears. But people have to eat and commute and travel and live. Companies got to function. Thus, inelastic demand. Thus, inflation. The Fed’s job is to keep its cool. It is political and it shouldn’t but it is what it is. Don’t expect anything they do to be different than TSA at the airport. Good luck to all of us.
photochemsyn 4y ago
I wonder if the New Yorker's writers and editors believe what they're saying, or are they just reading off the approved talking points? > "Well, under the circumstances, if it’s really inflation, monetary policy has to come in. This is a very difficult period for all central banks, because energy prices will continue to remain high for years because we are trying to change from fossil fuels to renewables." A central factor behind high US energy prices in the USA are the facts that crude oil exports were opened up in 2015 after being banned since 1975 or so, and there were several major oil refinery closures right after that, and on top of all that, there's a big natural gas export push. In corporate media today there's an almost complete ban on discussing trade policy, cross-border capital flows, and the effect of exports and imports on domestic prices (vaguely referred to as supply chain problems at best). Regardless it should be blatantly obvious that if you reduce domestic supply while demand is rebounding post-Covid, there's going to be a price spike. Fossil fuel corporations like Exxon and Chevron have seen about a 40% spike in share value since December 2021, and trying to blame it all on the war in Ukraine doesn't make a ton of sense. A quick fix would be a cap on exports, but our bought-and-paid-for politicians would never dream of upsetting their Wall Street masters by doing so.
- unicornmama 4y ago
  A cap on exports would screw your European allies and trigger an unpredictable and negative sun cascade of trade retaliations.
- gruez 4y ago
  >Fossil fuel corporations like Exxon and Chevron have seen about a 40% spike in share value since December 2021, and trying to blame it all on the war in Ukraine doesn't make a ton of sense Why doesn't it make sense? Did oil companies suddenly get more greedy? Did some favorable legislation get enacted?
  - muro 4y ago
    In Europe, they did get more greedy. There has been some noise about legislating them, but so far nothing has happened.
2022whoknew2 4y ago
Inflation and this chart https://fred.stlouisfed.org/series/M1SL https://fred.stlouisfed.org/series/M1SL
frellus 4y ago
The Fed will keep raising rates, but the reserve requirements for banks is at 0% since 2020, which means even people put money into savings, the bank can loan 100% of their deposits out. Oversimplified example: So if I deposit $100, and the bank loans my money to someone who buys a car, and then the car company workers deposit their paychecks of, lets say, $100 in turn is re-lent out.. how is this not printing money and creating a deck of cards? (for the record, Japan's banking reserve requirement is 0% as well. As the article points out, no one is borrowing, but here companies and consumers are swimming in debt)
- imtringued 4y ago
  >.. how is this not printing money and creating a deck of cards? The liabilities cancel out the assets, the system is symmetrical and balanced. Money printing implies asset without liability and that is almost guaranteed to cause inflation. It is also not what is happening right now. If people want to save more money, companies have to borrow more money into existence, how is this supposed to cause inflation? As I said, the system is balanced.
5350-uiop-1130 4y ago
it kind of annoys me that a recession, in a reductionist view is basically Blackrock stock portfolio not going up for two quarters...and for this everyone has to suffer.
Proven 4y ago

36 points by mmq 4y ago

Lol this is Newyorker. They are poster child fanboy of Bernanke-Yellen-Powell club who brought this mess on to us. This article does not bring up the key issue that we have had in last 15yrs post GFC - motivation of having endless QE. At some point everyone knew there would be repercussions but everyone looked the other way and was like “trust the fed” or “don’t fight the Fed”. Just kicking the can down the road. Well now Fed has its hands tied. It can’t raise rates too fast or the economy craters. The other option is let the inflation run hot.

frgtpsswrdlame 4y ago
Did you read it? They explicitly do talk about Quantitative Easing following 2008...
- mercy_dude 4y ago
  Yes, where did the mention the culprits- Bernanke/Yellen/Powell. I still can’t fathom why they kept buying bonds even as far out as they did. They could have easily raise the rates in 2011, they didn’t. For example, why did the Fed went out of their way last year calling it transitory?
  - meltyness 4y ago
    Likely due to the doctrine that talking about "a cluster and time period of negative sentiment and contracting investment" is capable of being the impetus for "a cluster and time period of negative sentiment and contracting investment"
- iso1631 4y ago
  The internet believes the main driver of inflation is "money printing" in the US, and nothing to do with the post covid supply squeeze or the current energy crisis The correct solution to avoid being at the wim of such friendly countries as Russia, Saudi, and China would be for Japan, Europe, the US, to massively invest in increasing internal free (renewable) energy sources, and diversifying strategic imports like silicon chips. From 2015-2017 in the US renewable production increased from 558TWh to 710TWh, a 13% increase per year. Staying at that rate for the next 5 years would have put US renewable at 1,300TWh today or 31% - 500TWh more than today, leaving 500TWh of gas and oil to be used elsewhere and reducing the power of Russia and Saudi over the global economy. By 2030 the US would have hit 3,500TWh, up to wards 100% of current electric generation, and by 2040 at the latest to include the extra electric load from things like battery cars. But instead the US didn't.
  - mercy_dude 4y ago
    I am not disagreeing the supply side squeeze but this has been happening since 2020. If you look at container flow stat it is clear as early as 2021 we had severe clogging issues. The problem was the narrative back then from Fed was that this is all transitory. They didn’t act.
    - SkyMarshal 4y ago
      If the problem was a supply side squeeze, the Fed has no mandate or tools for that. They couldn’t act. That’s on the govt and private sector to solve.
      - mercy_dude 4y ago
        That’s not true. You can reduce household demands by raising the rates which is what they are trying to do now. But the challenge is now the inflation has outpaced them and Fed has missed the mark by quite a bit. Heck they are now taking about raising rate by 100 basis point. A year ago this was unthinkable when meme stocks were on the fly. But you can’t raise the rates fast and not cause spiral in for example liquidity or repo market. Point is Fed has done a lot of damage. In a functioning democracy, Fed chair would be summoned by congress and Fed would be held responsible for not keeping its dual mandate - price stability (which inflation is causing wreckage) and unemployment ( from an impending recession). If a Fed agency can’t keep its mandate, it’s time to look at its validity. But of course our elected leaders won’t. They love nothing but delegating to unelected agencies full of so called experts so they don’t have to make hard choices/decisions and bear the consequences from voters. So they just shield themselves with experts.
        SkyMarshal 4y ago
        > That’s not true. You can reduce household demands by raising the rates which is what they are trying to do now. That changes demand, not supply, as you astutely observe. Fed has no tools for supply, by design. That's why they've pushing back on the US govt recently, talking publicly about how current inflation is 30% due to demand (oversupply of money, low interest rates) and 50% due to supply constraints (food, energy, and Asian supply chain slowdowns). They're telling the US govt that solving inflation will require govt and private sector solutions to the supply problems. The Fed has no tools for those.
whoomp12342 4y ago
fed will raise rates. CPI is STILL on an upward trajectory.
bryanlarsen 4y ago
A stopped clock is right twice a day. People have been screaming about QE for 15 years and about government deficits for the last 50. So it seems fairly bloody obvious that the unique things about today's economy are caused by the blindingly obvious unique issues in today's economy like supply shocks rather than the things that are the same as they are when we didn't have problems. The only things that have a strong correlation with recessions are rising interest rates and balanced budgets. So maybe we should stop doing the things that are known to cause recession? Debt is money and that an economy needs money to function. And if an economy is growing, it needs more money, which means either more personal or more corporate or more government borrowing.
- asah 4y ago
  I don't have a problem with debt if it's spent on R&D. But we pay one person to dig ditches and another to fill them, and say "see we created two jobs!" and both guys vote for that politician.
  - SkyMarshal 4y ago
    We don’t really pay one person to dig ditches and another to fill them. Is there something more concrete and real that you’re concerned about?
    - asah 4y ago
      We pay a food company to feed a person calories they don't need so they develop diabetes etc which we pay doctor to cure, insurance company to adjudicate and drug company to medicate. We build roads and buildings and cars designed to require excessive maintenance and then wear out early, e.g. cheap uncoated metals. We develop JavaScript frameworks, rando databases, hipster languages etc and educate/certify people in them, write millions of LOC then replace them a few years later. This is shallow innovation and it's a crazy amount of make-work. There's an alternative, which is to ask whether something EVEN HAS A CHANCE of being relevant in 10 years. Experimentation and risk-taking is fine, hamster-wheeling and "bullshit jobs" are a waste of life and destroy the earth, for little benefit.
Aunche 4y ago
The problem isn't the Fed. The problem is that elected politicians use the majority of their bandwidth to bribe and advertise to voters, and dedicate relatively little time to actually improving the nation in ways that aren't obviously visible. You can't fix the government deficit, poor regulation, or inefficient government spending with exceptional monetary policy.

frgtpsswrdlame 4y ago

Are excess reserves related to these large amounts in overnight repos I keep hearing about? If so, how do you pull that money out of the system so it returns to being responsive.

petilon 4y ago

Here's another way NOT to fight inflation: https://katv.com/news/nation-world/14-states-approve-stimulus-checks-as-inflation-continues-to-rise-california-georgia-brian-kemp-colorado-delaware-hawaii-idaho-illinois-indiana-covid-biden-university-of-miami-pandemic-gas-prices-tax-rebate https://katv.com/news/nation-world/14-states-approve-stimulu... To help citizens deal with inflation, 14 states are giving them free money. Giving people free money is what caused inflation.

Ygg2 4y ago
Aren't other non-US states also in inflation?
- mpyne 4y ago
  Yes, but didn't many of them also engage in some level of stimulus spending due to the impact of COVID on the ability to work? And even without, if it is true that Americans are trying to point all the world's supply chains to feed their increasing demand for stuff, that's still going to affect prices in the rest of the world, by leaving people in the rest of the world competing for a lower supply of stuff (since more of it is being ducted to the U.S.). Unless suppliers are able to increase production to fill the overall higher demand, that is, but that just gets us back into supply chain issues caused by higher demand as a possible cause for inflation.
autoexec 4y ago
> To help citizens deal with inflation, 14 states are giving them free money. Giving people free money is what caused inflation. Yeah no. Not even a little. I know there's a narrative that Americans are just sitting on huge piles of cash and have too much money and it's tanking the economy, but it's pure bullshit. Pandemic stimulus money probably did play some role, but that would be the corporate welfare, not the money that went into the hands of regular Americans who lost their jobs and couldn't work forcing them to live off of saving, or go into debt just to survive, or the 20 million Americans who just months ago were at risk of ending up on the streets. (https://www.cbsnews.com/news/eviction-19-million-americans-risk-moratorium-coronavirus/ https://www.cbsnews.com/news/eviction-19-million-americans-r...). The idea that these people "just have too much money" is beyond absurd. The pandemic (which still rages) was a huge financial blow to a lot of people who are even now absolutely in need of aid. The pittance that most Americans got from Trump wasn't enough to cover their rent during the time they were unable to work. The checks that came from Biden were not enough for them to claw out of the financial hole covid dug either. Out of desperation and a deep longing for normalcy after years of suffering and going without some of the little things that make life worthwhile there is now a lot of demand that the supply chain can't support, and a lot of companies profiteering and price gouging. That can't entirely be blamed for inflation either, but it has more to do with the problems we see today than a couple 1k checks going to poor people did, and arguing that people who are genuinely struggling shouldn't get the help they need today in order to try and save the bank accounts of obscenely rich people "struggling" in this economy is sick.

roenxi 4y ago

I worry that people are trying to set up the financial equivalent of a perpetual motion machine; ever more complicated band-aids trying to overcome the fundamental problem that the economy is a signalling device of what is physically possible in the real world. Frankly I don't think the groundwork has been done to really figure out what the root issue is here. There are so many candidates - the handouts, the years of government-shutting-down-the-economy through COVID, the financial crisis that was looming in late 2019 that got obscured by the pandemic, a possibly peak-oil related energy crisis, war in the wake of all the other problems. But there are a lot of political shenanigans in the banking sector to keep the status-quo, and the status quo was shown to be "incompetents are in charge" in around 2008. So it is unlikely that they are up the the challenges that the world is facing.

bombcar 4y ago
I suspect we're setting ourselves up for a situation similar to what happened with wildfire management - just like the firefighters of yore had many tools to fight fires with, we have many tools to fight "economic fires" - the danger being that after awhile the brush builds up so much that when a fire finally overcomes your ability to fight it, it burns brightly and forever. Just like fires destroy, they also clean - and economic downturns do similar things, thinning out the companies that have no excuse continuing and strengthening the remainder. Since economic policy is now dedicated to keeping the companies going vs keeping everyone housed and fed, those companies can survive the downturn and end up "too big to fail". There's also perhaps something to be said about more and more of the "economy" being optional spending of various sorts.
- imtringued 4y ago
  >I suspect we're setting ourselves up for a situation similar to what happened with wildfire management That is complete nonsense. Permanent money is always in disequilibrium, by avoiding interventions that result in temporary equilibrium you basically just get stuck with opportunity costs. You should rather question why we have modelled money to be permanently in disequilibrium so that it constantly requires interventions to keep it alive until its inevitable collapse. Permanent money is guaranteed to collapse because of its structural disregard of the real economy so the best you can do is keep it alive as much as possible, liquidationism just shortens the lifespan of your permanent money system. Isn't it quite ironic that permanent money systems don't last very long? It is particularly amusing that everyone thinks that permanent money collapses because of government meddling when it collapses on its own just fine. The best part is that people keep repeating the permanent money experiment over and over again over the last two thousand years and they all reached the same conclusion: it doesn't work in the end but we will do it again Isn't it ironic that money that abandons permanence can essentially last forever?

netfortius 4y ago

Best way to fight inflation in the US? Buying Euros.

Aunche 4y ago
1 Euro is roughly 1 USD now. The Yen is also relatively weaker now, despite Japan having lower inflation. The only major currency that's risen against the dollar is the Russian ruble, which has been heavily manipulated.
- baq 4y ago
  Russia can’t spend its dollars. They would very much like to buy stuff and in the process counter the one way flow of money, but mostly can’t and have to resort to black markets. Of course there’s manipulation, but it isn’t the whole story.
- neverrroot 4y ago
  Manipulated in what ways? By whom? Countries such as India happily purchasing energy from RU?
  - Aunche 4y ago
    Currency controls. In short, it's much easier to convert dollars into rubles than rubles into dollars.
m348e912 4y ago
Not if Europe and the Euro self-destructs before the US/USD does. If you're going the currency hedging route, at least diversify across multiple geopolitical regions.
collegeburner 4y ago
ahh yes the falling euro that will probably fall even lower, what could go wrong? srsly the ECB is going to have a lot of trouble keeping the euro stable and their "new instrument" or whatever they're going to use to maintain liquidity is still going to cause a lot of inflation and continue to damage the german economy (the productive one) to support the leech countries (greece, spain, italy, others)

eftychis 4y ago

The money printing argument a lot of people make for inflation implies that a) all that money made it into people’s hands and saving accounts and not as debt to companies which a cursory look at saving rates and excessive reserves of banks during that period or now is incorrect. Banks are not just going to donate money around when the Fed gives it to them — they are going to direct them towards let us say housing assets — the entities buying your bids out with cash. Also recall when looking money supplies that the M1 definition simply changed. We have an energy problem — we could barely keep up with energy demand growth pre pandemic and now it’s 1970 all over again. Also all the comparative advantage impact — that is the advantage in production of having eg Argentina focus on agriculture and exports which reduce overall prices requires predictable demand and solid transportation/shipping. Both as you can guess were “nuked” the last year and for the next couple of years at least. The Fed can do nothing about any of these topics. Even if you have 3 billions if there are no pears in the market you are not going to eat pears. But people have to eat and commute and travel and live. Companies got to function. Thus, inelastic demand. Thus, inflation. The Fed’s job is to keep its cool. It is political and it shouldn’t but it is what it is. Don’t expect anything they do to be different than TSA at the airport. Good luck to all of us.

photochemsyn 4y ago

I wonder if the New Yorker's writers and editors believe what they're saying, or are they just reading off the approved talking points? > "Well, under the circumstances, if it’s really inflation, monetary policy has to come in. This is a very difficult period for all central banks, because energy prices will continue to remain high for years because we are trying to change from fossil fuels to renewables." A central factor behind high US energy prices in the USA are the facts that crude oil exports were opened up in 2015 after being banned since 1975 or so, and there were several major oil refinery closures right after that, and on top of all that, there's a big natural gas export push. In corporate media today there's an almost complete ban on discussing trade policy, cross-border capital flows, and the effect of exports and imports on domestic prices (vaguely referred to as supply chain problems at best). Regardless it should be blatantly obvious that if you reduce domestic supply while demand is rebounding post-Covid, there's going to be a price spike. Fossil fuel corporations like Exxon and Chevron have seen about a 40% spike in share value since December 2021, and trying to blame it all on the war in Ukraine doesn't make a ton of sense. A quick fix would be a cap on exports, but our bought-and-paid-for politicians would never dream of upsetting their Wall Street masters by doing so.

unicornmama 4y ago
A cap on exports would screw your European allies and trigger an unpredictable and negative sun cascade of trade retaliations.
gruez 4y ago
>Fossil fuel corporations like Exxon and Chevron have seen about a 40% spike in share value since December 2021, and trying to blame it all on the war in Ukraine doesn't make a ton of sense Why doesn't it make sense? Did oil companies suddenly get more greedy? Did some favorable legislation get enacted?
- muro 4y ago
  In Europe, they did get more greedy. There has been some noise about legislating them, but so far nothing has happened.

2022whoknew2 4y ago

Inflation and this chart https://fred.stlouisfed.org/series/M1SL https://fred.stlouisfed.org/series/M1SL

frellus 4y ago

The Fed will keep raising rates, but the reserve requirements for banks is at 0% since 2020, which means even people put money into savings, the bank can loan 100% of their deposits out. Oversimplified example: So if I deposit $100, and the bank loans my money to someone who buys a car, and then the car company workers deposit their paychecks of, lets say, $100 in turn is re-lent out.. how is this not printing money and creating a deck of cards? (for the record, Japan's banking reserve requirement is 0% as well. As the article points out, no one is borrowing, but here companies and consumers are swimming in debt)

imtringued 4y ago
>.. how is this not printing money and creating a deck of cards? The liabilities cancel out the assets, the system is symmetrical and balanced. Money printing implies asset without liability and that is almost guaranteed to cause inflation. It is also not what is happening right now. If people want to save more money, companies have to borrow more money into existence, how is this supposed to cause inflation? As I said, the system is balanced.

5350-uiop-1130 4y ago

it kind of annoys me that a recession, in a reductionist view is basically Blackrock stock portfolio not going up for two quarters...and for this everyone has to suffer.

Proven 4y ago