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I'm skeptical that interest rate hikes will curb inflation. I'm even skeptical that a recession will curb inflation. We have significant shortages of so many

I'm skeptical that interest rate hikes will curb inflation. I'm even skeptical that a recession will curb inflation. We have significant shortages of so many products and services that people rely on and the only way I see the situation improving is if supplies increase, maybe dramatically. It's too difficult to curb demand for things like food and housing if the population is growing. Those are things we just need to make more of. And I don't think raising interest rates is going to spur housing starts or investment in production capabilities.

seibelj 4y ago
It's almost like you are encouraging supply side economics... aka... trickle down We need to massively cut corporate taxes, investment taxes, regulations, and all manner of things to increase supply. The government has been attacking business for so long we are in quite the hole.
- waythenewsgoes 4y ago
  This doesn't work, when we tried this most recently all it did was increase stock buybacks by large corps. It's just effectively a wealth transfer to those already at the top of the food chain.
  - bronco21016 4y ago
    This exactly. Look at airlines. They lit tens of billions on fire in stock buy backs rather than pouring it into their businesses from 2015-2020. Who got the first corporate handouts when COVID decimated travel? Individual actors will act in their best interest according to the incentive structure in place.
    - landemva 4y ago
      USA handouts of money to airlines and foreign cruise ship operators was disgusting. Americans are soft and didn't do anything about it.
- CoffeeCollector 4y ago
  You are getting down voted for telling the truth. Every inflation discussion starts with the supply side economics or companies raising taxes, but inflation only happens in reality because of government spending, borrowing, and deficit spending.
  - sandworm101 4y ago
    Inflation happens too in markets without governments. Government therefore cannot be the one cause.
    - CoffeeCollector 4y ago
      What markets exist outside of government authority? No, black and gray markets don’t count because the increased money supplies created by governments will affect the overall amount of money chasing goods in any market.
  - d4mi3n 4y ago
    > but inflation only happens in reality because of government spending, borrowing, and deficit spending. This is incorrect. Note that governments around the world are also experiencing record levels of inflation and each has their own fiscal policy. Inflation is an aggregate economic effect driven by a variety of factors—including but by no means limited to government spending. Other things that contribute to inflation: 1. Supply shortages 2. Cost of living 3. Abundance of capital (low interest rates, high wages, etc) 4. Speculation Basically anything that contributes to groups of people assigning a higher value to the same set of goods or services. Supply is the most immediately noticeable cause and COVID has disrupted supply chains for some time. It is entirely unsurprising we've seen inflation as a result. Government policy has certainly played a part, but blaming everything on government spending is misleading in that ignores the larger realities of inflation beyond the borders of any nation state.
    - CoffeeCollector 4y ago
      Most of your ‘refutation’ is dishonest, Keynesian, MMT nonsense. Fiat doesn’t get introduced unless printed or borrowed by the government. Full stop. Companies raising prices is not inflation and conflating that with government monetary policy is outright disinformation.
- mint2 4y ago
  Err quite the opposite, recently corporate profits are at highs because part of the inflation has been price gouging. and they can do that because of lax regulations around mergers among other things
  - seibelj 4y ago
    I'm a huge fan of so-called "price gouging". Without the ability to increase prices the shelves would be bare. This is what happens in all countries with price controls. You say price gouging, I say protecting society from itself.
    - trashtester 4y ago
      There are three alternativies when supply is short: 1) Increase prices until demand matches supply. 2) Price controls, usually leading to empty shelves. 3) Rationing. 1 is preferrable in 99% of cases. 2 is always the worst. 3 is needed during extraordinary times, such as when a country is in an all-out war.
      - 8note 4y ago
        1 is rationing too, just rationing to prioritize the wealthy. The more modern versions ration based on other things, like how to combat ticket scalping, bands release tickets through alternative means
        trashtester 4y ago
        1 is the capitalist way while 3 is the socialist way to distribute goods. The first works best under normal market condition, as it encourages economic growth, while the latter works better under special conditions where the scarcity is severe, unavoidable and caused by temporary factors (such as a war).
    - mint2 4y ago
      There isn’t a shortage of many items that have had large price increases like oreos. There is no shortage on a lot of items but the companies see opportunity to raise prices at will in the current climate simply because they can
- JamesBarney 4y ago
  I think we should cut corporate taxes to match the rest of the world, but decreasing taxes will make inflation worse not better.
- richbell 4y ago
  > We need to massively cut corporate taxes, investment taxes, regulations, and all manner of things to increase supply. Supply is low due to a global pandemic disrupting trade (and far too many companies relying on 'just-in-time' logistics). "Massively [cutting] corporate taxes" won't do anything but bolster already soaring corporate profits. A significant amount of that money won't go back into the local economy. It also won't go to improving infrastructure, processes, employee salaries or anything that can improve resiliency or longevity; they've been penny-pinching for decades, and this is the result of it. Furthermore, 'inflation' of many necessities like grocery, gas, and rent is obviously driven by blatant profiteering.
  - TurkishPoptart 4y ago
    How is the "pandemic" still disrupting trade? Wouldn't it be more accurate to say "governments' response to pandemic"? I.e. Shanghai's continued inhumane lockdowns by the CCP for political reasons.
- badtoro 4y ago
  Judging from the downvotes you get the level of understanding of 101 economics among the HN audience remains precariously low :-)
  - richbell 4y ago
    Or people simply disagree with it. Economics is a Social Science and largely based on opinion, not fundamental properties of the universe. Racism is defined in many academic circles as "prejudice plus power". Are people 'wrong' if they disagree and think it ought to be defined differently?
  - kelnos 4y ago
    How would slashing corporate taxes fix inflation? Corporate taxation encourages companies to reinvest into their own businesses: hiring more people, increased capex, etc. Cutting taxes just causes companies to either hoard cash, or return capital to shareholders through dividends or stock buybacks. Neither of these things helps the economy, or helps the average person; it's just wealth transfer from all taxpayers, to elites. Check out what airlines did in the last half of the last decade. Check out what kinds of companies benefited most from the COVID-related handouts, and see what they did with that money.
- ClumsyPilot 4y ago
  > We need to massively cut corporate taxes Why would we ever, ever need to cut corporate taxes? If a company re-invensts in equipment, it's workforce, research, or anything at all, they pay no tax. Tax is only applied when they transfer the money to shareholders. How will enabling corporations to transfer more money to already wealthy shareholders help the economy?
ParksNet 4y ago
Easiest way to increase labor supply is to immediately increase the retirement age to 70. Welfare and retirement systems across the West are insolvent at current settings anyway.
- pm90 4y ago
  No. Easiest by far is to relax immigration restrictions.
  - throwaway5959 4y ago
    Do both.
  - throw_m239339 4y ago
    > No. Easiest by far is to relax immigration restrictions. Easiest way to make citizens of a country vote for anti-immigration parties is to significantly increase immigration.
    - pm90 4y ago
      Regrettably, This is what does tend to happen. But its also a failure of society because immigrants are easy targets for scoring political points, despite it being repeatedly shown how beneficial immigration has been to Western econonomies.
      - boppo1 4y ago
        Can you support that last claim? Might have been good for the S&P, but I'm not so certain the average joe off the street has seen said benefits. I could swear I recently saw a stat that locally born men in the US have only shared in like 3% of new job growth for the last decade or something like that.
        pm90 4y ago
        Income inequality is a separate (albeit related) problem from economic growth. Immigration generates more value, the fact that most of this value is captured by elites needs to be fixed with appropriate actions (higher taxation on the extremely rich etc).
chromaton 4y ago
Prices on raw materials like aluminum, copper, and lumber have been dropping for a little while now.
- 01100011 4y ago
  That could just be bullwhip effects and we'll settle out to overall price increases. I believe that's what is happening with lumber. The overall trend is up, even though the prices came back down from the big highs.
mjr00 4y ago
> It's too difficult to curb demand for things like food and housing if the population is growing. It's also difficult (impossible) to curb demand for housing if housing is far and away the best investment you can possibly make, both in the short, medium, and long-term. Unfortunately, so many people in the west have their net worth tied up in their homes that policies directly targeting property values is political suicide. The best case scenario at this point for our future society is interest rate hikes causing a housing crash, then while prices are in the dumpster, put in legislation that prohibits the behaviours that have contributed to this cycle of housing mania: AirBNB/individual landlords, corporate investment in housing a la BlackRock, etc.
- pbk1 4y ago
  > if housing is far and away the best investment you can possibly make, both in the short, medium, and long-term. citation needed? genuinely curious - are there studies about long-term returns from housing vs. other asset classes (namely public equities)?
  - bradfa 4y ago
    Local to me, real estate investment really only works if you're a landlord and the rent is your income. Buying then selling or flipping homes has not historically been a profitable endeavor. If you timed things just right for COVID, maybe you made a good return, but otherwise in history prices have been rather stable and increasing only similar to inflation for decades. Surely there are markets where flipping houses is extremely profitable, but it's not all markets.
  - saurik 4y ago
    I did a Google search for "long-term returns from housing vs. other asset classes" (purposefully using exactly what you typed here to show how easy this is) and found a ton of references showing this is an overly-strong (and even somewhat "debated") claim but (as far as I am concerned) right enough for a discussion forum (and remember a lot of people aren't in a good mental position to own stocks but have to live somewhere anyway and so might as well own a house). https://seekingalpha.com/article/4242070-in-long-run-house-wins https://seekingalpha.com/article/4242070-in-long-run-house-w... > This mix of comparable returns (Finding 1) with lower volatility (Finding 2) leads to one of the research's most puzzling, but fascinating, discoveries: over the very long run (circa the last century), housing earned a superior risk-adjusted return than equities. Sharpe ratios for the asset summarise this fact; note too that the pattern is consistent across countries.
Analemma_ 4y ago
> I'm skeptical that interest rate hikes will curb inflation. I'm even skeptical that a recession will curb inflation. They won't, but the Fed has to do them anyway. That's the nasty situation we're in: current inflation is mainly being caused by supply shortfalls, which can't be fixed by interest rates short of massive demand destruction with a recession, but if the Fed doesn't do anything we could transition to a regime where the inflation is expectations-driven instead. That's the really bad kind of inflation which becomes self-reinforcing and hard to stop without completely Volckering the economy. There are no easy answers here, but doing it is better than not doing it.
- MrMan 4y ago
  they most likely will, if carried far enough
throwaway4good 4y ago
The Russians curbed inflation at the start of the war quite effectively ... by raising interest rates to 20%.
- JumpCrisscross 4y ago
  > by raising interest rates to 20% And confiscating hard currency and implementing capital controls.
  - throwaway4good 4y ago
    I think we (the west) did that ...
    - JumpCrisscross 4y ago
      > we (the west) did that Some countries implemented capital controls in the crisis. Some haircut depositors, which is akin to (but still quite distinct from) seizure. Neither happened in America.
- ClumsyPilot 4y ago
  Russia has stopped imports of many vital goods and industrial machinery, and the economy will likely seize up at one point after spare parts for machinery, etc. runs out
  - tcmart14 4y ago
    I think it depends. Talking with a friend in St Petersberg, last we talked about it was a few months ago so things can change, they are scrambling to bootstrap companies and industries. If they can successfully do that, it may not seize up. But here is the other side of that equation. Trying to stand up something like shops to machine parts in rapid fashion is going to end up with, yea they have parts, but they are low quality. So it may not completely grind to a halt, but it will still be crippling. Now they could completely fail at bootstrapping those things, which yes, it will definitely grind to a halt. But any day now for the past 60-70 years Cuba was supposed to grind to a halt and well, they are still chugging a long. Maybe with lawn mower engines in their cars, but they still manage to get to point a from point b without walking.
matwood 4y ago
> I'm skeptical that interest rate hikes will curb inflation. I'm even skeptical that a recession will curb inflation. Or rates will eventually cause demand destruction to the current levels of supply - which we have seen a bit of. But you're right, this was definitely not the typical inflation event. If inflation is defined as too much money chasing too few goods, supply chain issues from covid absolutely led to an acute too few goods situation. And a war, leading to sanctions on Russia certainly didn't help the energy supply.
snarf21 4y ago
I feel like until we catch up on covid demand, there will be short supply and inflation on the shortages. But let's not forget that the oil companies are price gouging now as punishment against growing green technology. This greatly increases the transportation cost of all goods and their components and can put upward pressure on wages to meet workers higher bills. I agree that raising interest rates will slow inflation but not curb it.
- vinay_ys 4y ago
  Oil prices being high is a good thing for acceleration of renewable/green tech. Also, oil prices are a functional geo-politics.
JamesBarney 4y ago
Interest rates definitely can curb inflation. See Volker recession.
jerf 4y ago
I've seen some people speculating that you could see a very complex mix of inflation and deflation, where things that everybody needs to buy would inflate (food, energy), and the optional things that people can cut out of their budget (expensive cars, boats, proportional to the ability of people to do without, do less, or defer purchases) could see heavy deflation. This wouldn't be good for the economy at all, of course.
- SilasX 4y ago
  There was a funny incident in 2011 when a Fed president claimed inflation was low because drops in the latter category canceled increases in the former, prompting heckles of "I can't eat an iPad": https://news.yahoo.com/news/blogs/lookout/fed-official-heckled-t-eat-ipad-20110311-122230-439.html https://news.yahoo.com/news/blogs/lookout/fed-official-heckl...
cm2187 4y ago
The shortage of housing and population growth have been around for 20 years and the fear until a year ago was deflation not inflation. Don't think that's what is driving inflation. Money printing is what caused the initial rise in prices. But we aren’t printing money anymore, so that would be a one off. Super tight labor market is what will create the self-fulfiling cycle of prices up => higher wages => prices up. I think the Fed is trying to create unemployment, so that it breaks the ability to demand higher wages, and stops the cycle. It’s a ugly process that the fed should have started a year ago. The conspiracy theorist in me thinks Powell’s decision might have been influenced by the fact that his mandate was up for renewal by the Biden administration, who didn’t want to hear about inflation risk and tighter monetary policy at the time.
- OGWhales 4y ago
  > Super tight labor market is what will create the self-fulfiling cycle of prices up => higher wages => prices up. I think the Fed is trying to create unemployment, so that it breaks the ability to demand higher wages, and stops the cycle. This is the current view of most people I talk to but I’m skeptical that rising wages is the cause here given what prices we are seeing rise the fastest. If rising wages were the cause, I’d expect to see a different mix than what we are seeing. For example, costs of groceries are rising faster than going out to eat even though eating out requires lots of labor. There are lots of these examples, but to me the prices that are rising don’t seem to line up with past examples of wage fueled inflation. It seems supply is still an important issue and a lot of the supply constrained resources are going to be difficult to suppress demand for. I’m worried about this narrative that inflation goes into some unstoppable cycle and the only way to stop it is to intentionally cause a recession. If rising wages isn’t the main cause it will take a lot of damage to successfully curb inflation, but people will justify the suffering as necessary to prevent a greater evil. I don’t think there is great evidence that inflation leads to some unstoppable cycle. The only historical examples of hyperinflation are ones that were caused by deep underlying issues in a country’s economic viability or cases where a country owed an extraordinary amount of debt in a currency they did not control. Yet somehow it seems many are under the impression that we are doomed to the same fate despite sharing none of those same characteristics. This believe will be used to justify killing labor power, which means the burden is on the lower rungs of society yet again. A shame, especially since we haven’t seen strong labor power in quite a long time and were just starting to.
laweijfmvo 4y ago
Probably just my pet peeve, but everyone conflates inflation with CPI. We've had the ridiculous inflation starting in 2008 (and doubling down in 2020), now we're seeing the CPI. Why this matters (just my theory): previously all that new money went to banks, the stock market, VC, etc., not so much directly to consumers. So we saw the stock market explode, but not so much for the price of eggs. Now we have supply chain shortages and people itching to spend, so we're seeing CPI explode. Raising interest rates won't help now (again, my theory), because they do nothing to discourage consumers from spending, other than maybe to slow housing or other purchases requiring loans. In fact, I can't get a better return from current interest rates (actually I can still get approximately 0) than prices continue to rise, so I'm incentivized to keep spending. The Fed needs to convince people to start saving/investing (stop spending), otherwise nothing will change (for the better...)
- JumpCrisscross 4y ago
  > everyone conflates inflation with CPI. We've had the ridiculous inflation starting in 2008 (and doubling down in 2020) You may be confusing money supply with inflation. Inflation measures price levels. We haven’t had “ridiculous inflation” since 2008. (In the early parts of the crisis we actually deflated.) CPI is a good measure of inflation, albeit one among many.
  - OGWhales 4y ago
    I believe they are talking about asset inflation as opposed to price inflation. ZIRP era and QE did lead to some substantial asset inflation but was not considered to be problematic to many at the time.
  - ClumsyPilot 4y ago
    we had crazy asset inflation, which is what he is probably talking about.
  - boppo1 4y ago
    That stock market bull run from 2008 with crazy all-time-high P/E ratios? That's inflation. We just don't include security prices in CPI because it's not politically expedient to let the poors know they're getting priced out of having a meaningful stake in the economy.
paulpauper 4y ago
If prices rise 8% yoy and then 2% the next year, the stated inflation rate is 2% even though the 8% is locked in. So there is both higher price levels yet low inflation. Weird how inflation works.
- JumpCrisscross 4y ago
  > the stated inflation rate is 2% even though the 8% is locked in This is how numbers work? Also, the statistic is a price index. Inflation is calculated off those indices. And most contracts considering inflation link to price levels, not their deltas. To the degree there is fuckery it’s in how the media reports inflation. One or two arcane statistics are taken as a barometer of reality in every state, for every product, across income levels.
- kelnos 4y ago
  That 8% will continue to show up on historical charts of inflation over time, and if you ask the question what is $1000 in 2015 dollars, today, the calculation will include the 8% inflation experienced over the past year. Inflation is a measure of year-over-year price increases. How else would you measure it?
highwaylights 4y ago
> if the population is growing It isn’t.
- kingrazor 4y ago
  Population growth, in the US at least, has not yet hit negative: https://www.census.gov/library/stories/2021/12/us-population-grew-in-2021-slowest-rate-since-founding-of-the-nation.html https://www.census.gov/library/stories/2021/12/us-population...
huijzer 4y ago
> It's too difficult to curb demand for things like food and housing if the population is growing Currently population might look like it's growing but in fact things are going the opposite way since most countries have much fewer young people than before which yields also fewer young people in the future, according to Peter Zeihan.

seibelj 4y ago

It's almost like you are encouraging supply side economics... aka... trickle down We need to massively cut corporate taxes, investment taxes, regulations, and all manner of things to increase supply. The government has been attacking business for so long we are in quite the hole.

waythenewsgoes 4y ago
This doesn't work, when we tried this most recently all it did was increase stock buybacks by large corps. It's just effectively a wealth transfer to those already at the top of the food chain.
- bronco21016 4y ago
  This exactly. Look at airlines. They lit tens of billions on fire in stock buy backs rather than pouring it into their businesses from 2015-2020. Who got the first corporate handouts when COVID decimated travel? Individual actors will act in their best interest according to the incentive structure in place.
  - landemva 4y ago
    USA handouts of money to airlines and foreign cruise ship operators was disgusting. Americans are soft and didn't do anything about it.
CoffeeCollector 4y ago
You are getting down voted for telling the truth. Every inflation discussion starts with the supply side economics or companies raising taxes, but inflation only happens in reality because of government spending, borrowing, and deficit spending.
- sandworm101 4y ago
  Inflation happens too in markets without governments. Government therefore cannot be the one cause.
  - CoffeeCollector 4y ago
    What markets exist outside of government authority? No, black and gray markets don’t count because the increased money supplies created by governments will affect the overall amount of money chasing goods in any market.
- d4mi3n 4y ago
  > but inflation only happens in reality because of government spending, borrowing, and deficit spending. This is incorrect. Note that governments around the world are also experiencing record levels of inflation and each has their own fiscal policy. Inflation is an aggregate economic effect driven by a variety of factors—including but by no means limited to government spending. Other things that contribute to inflation: 1. Supply shortages 2. Cost of living 3. Abundance of capital (low interest rates, high wages, etc) 4. Speculation Basically anything that contributes to groups of people assigning a higher value to the same set of goods or services. Supply is the most immediately noticeable cause and COVID has disrupted supply chains for some time. It is entirely unsurprising we've seen inflation as a result. Government policy has certainly played a part, but blaming everything on government spending is misleading in that ignores the larger realities of inflation beyond the borders of any nation state.
  - CoffeeCollector 4y ago
    Most of your ‘refutation’ is dishonest, Keynesian, MMT nonsense. Fiat doesn’t get introduced unless printed or borrowed by the government. Full stop. Companies raising prices is not inflation and conflating that with government monetary policy is outright disinformation.
mint2 4y ago
Err quite the opposite, recently corporate profits are at highs because part of the inflation has been price gouging. and they can do that because of lax regulations around mergers among other things
- seibelj 4y ago
  I'm a huge fan of so-called "price gouging". Without the ability to increase prices the shelves would be bare. This is what happens in all countries with price controls. You say price gouging, I say protecting society from itself.
  - trashtester 4y ago
    There are three alternativies when supply is short: 1) Increase prices until demand matches supply. 2) Price controls, usually leading to empty shelves. 3) Rationing. 1 is preferrable in 99% of cases. 2 is always the worst. 3 is needed during extraordinary times, such as when a country is in an all-out war.
    - 8note 4y ago
      1 is rationing too, just rationing to prioritize the wealthy. The more modern versions ration based on other things, like how to combat ticket scalping, bands release tickets through alternative means
      - trashtester 4y ago
        1 is the capitalist way while 3 is the socialist way to distribute goods. The first works best under normal market condition, as it encourages economic growth, while the latter works better under special conditions where the scarcity is severe, unavoidable and caused by temporary factors (such as a war).
  - mint2 4y ago
    There isn’t a shortage of many items that have had large price increases like oreos. There is no shortage on a lot of items but the companies see opportunity to raise prices at will in the current climate simply because they can
JamesBarney 4y ago
I think we should cut corporate taxes to match the rest of the world, but decreasing taxes will make inflation worse not better.
richbell 4y ago
> We need to massively cut corporate taxes, investment taxes, regulations, and all manner of things to increase supply. Supply is low due to a global pandemic disrupting trade (and far too many companies relying on 'just-in-time' logistics). "Massively [cutting] corporate taxes" won't do anything but bolster already soaring corporate profits. A significant amount of that money won't go back into the local economy. It also won't go to improving infrastructure, processes, employee salaries or anything that can improve resiliency or longevity; they've been penny-pinching for decades, and this is the result of it. Furthermore, 'inflation' of many necessities like grocery, gas, and rent is obviously driven by blatant profiteering.
- TurkishPoptart 4y ago
  How is the "pandemic" still disrupting trade? Wouldn't it be more accurate to say "governments' response to pandemic"? I.e. Shanghai's continued inhumane lockdowns by the CCP for political reasons.
badtoro 4y ago
Judging from the downvotes you get the level of understanding of 101 economics among the HN audience remains precariously low :-)
- richbell 4y ago
  Or people simply disagree with it. Economics is a Social Science and largely based on opinion, not fundamental properties of the universe. Racism is defined in many academic circles as "prejudice plus power". Are people 'wrong' if they disagree and think it ought to be defined differently?
- kelnos 4y ago
  How would slashing corporate taxes fix inflation? Corporate taxation encourages companies to reinvest into their own businesses: hiring more people, increased capex, etc. Cutting taxes just causes companies to either hoard cash, or return capital to shareholders through dividends or stock buybacks. Neither of these things helps the economy, or helps the average person; it's just wealth transfer from all taxpayers, to elites. Check out what airlines did in the last half of the last decade. Check out what kinds of companies benefited most from the COVID-related handouts, and see what they did with that money.
ClumsyPilot 4y ago
> We need to massively cut corporate taxes Why would we ever, ever need to cut corporate taxes? If a company re-invensts in equipment, it's workforce, research, or anything at all, they pay no tax. Tax is only applied when they transfer the money to shareholders. How will enabling corporations to transfer more money to already wealthy shareholders help the economy?

ParksNet 4y ago

Easiest way to increase labor supply is to immediately increase the retirement age to 70. Welfare and retirement systems across the West are insolvent at current settings anyway.

pm90 4y ago
No. Easiest by far is to relax immigration restrictions.
- throwaway5959 4y ago
  Do both.
- throw_m239339 4y ago
  > No. Easiest by far is to relax immigration restrictions. Easiest way to make citizens of a country vote for anti-immigration parties is to significantly increase immigration.
  - pm90 4y ago
    Regrettably, This is what does tend to happen. But its also a failure of society because immigrants are easy targets for scoring political points, despite it being repeatedly shown how beneficial immigration has been to Western econonomies.
    - boppo1 4y ago
      Can you support that last claim? Might have been good for the S&P, but I'm not so certain the average joe off the street has seen said benefits. I could swear I recently saw a stat that locally born men in the US have only shared in like 3% of new job growth for the last decade or something like that.
      - pm90 4y ago
        Income inequality is a separate (albeit related) problem from economic growth. Immigration generates more value, the fact that most of this value is captured by elites needs to be fixed with appropriate actions (higher taxation on the extremely rich etc).

chromaton 4y ago

Prices on raw materials like aluminum, copper, and lumber have been dropping for a little while now.

01100011 4y ago
That could just be bullwhip effects and we'll settle out to overall price increases. I believe that's what is happening with lumber. The overall trend is up, even though the prices came back down from the big highs.

mjr00 4y ago

> It's too difficult to curb demand for things like food and housing if the population is growing. It's also difficult (impossible) to curb demand for housing if housing is far and away the best investment you can possibly make, both in the short, medium, and long-term. Unfortunately, so many people in the west have their net worth tied up in their homes that policies directly targeting property values is political suicide. The best case scenario at this point for our future society is interest rate hikes causing a housing crash, then while prices are in the dumpster, put in legislation that prohibits the behaviours that have contributed to this cycle of housing mania: AirBNB/individual landlords, corporate investment in housing a la BlackRock, etc.

pbk1 4y ago
> if housing is far and away the best investment you can possibly make, both in the short, medium, and long-term. citation needed? genuinely curious - are there studies about long-term returns from housing vs. other asset classes (namely public equities)?
- bradfa 4y ago
  Local to me, real estate investment really only works if you're a landlord and the rent is your income. Buying then selling or flipping homes has not historically been a profitable endeavor. If you timed things just right for COVID, maybe you made a good return, but otherwise in history prices have been rather stable and increasing only similar to inflation for decades. Surely there are markets where flipping houses is extremely profitable, but it's not all markets.
- saurik 4y ago
  I did a Google search for "long-term returns from housing vs. other asset classes" (purposefully using exactly what you typed here to show how easy this is) and found a ton of references showing this is an overly-strong (and even somewhat "debated") claim but (as far as I am concerned) right enough for a discussion forum (and remember a lot of people aren't in a good mental position to own stocks but have to live somewhere anyway and so might as well own a house). https://seekingalpha.com/article/4242070-in-long-run-house-wins https://seekingalpha.com/article/4242070-in-long-run-house-w... > This mix of comparable returns (Finding 1) with lower volatility (Finding 2) leads to one of the research's most puzzling, but fascinating, discoveries: over the very long run (circa the last century), housing earned a superior risk-adjusted return than equities. Sharpe ratios for the asset summarise this fact; note too that the pattern is consistent across countries.

Analemma_ 4y ago

> I'm skeptical that interest rate hikes will curb inflation. I'm even skeptical that a recession will curb inflation. They won't, but the Fed has to do them anyway. That's the nasty situation we're in: current inflation is mainly being caused by supply shortfalls, which can't be fixed by interest rates short of massive demand destruction with a recession, but if the Fed doesn't do anything we could transition to a regime where the inflation is expectations-driven instead. That's the really bad kind of inflation which becomes self-reinforcing and hard to stop without completely Volckering the economy. There are no easy answers here, but doing it is better than not doing it.

MrMan 4y ago
they most likely will, if carried far enough

throwaway4good 4y ago

The Russians curbed inflation at the start of the war quite effectively ... by raising interest rates to 20%.

JumpCrisscross 4y ago
> by raising interest rates to 20% And confiscating hard currency and implementing capital controls.
- throwaway4good 4y ago
  I think we (the west) did that ...
  - JumpCrisscross 4y ago
    > we (the west) did that Some countries implemented capital controls in the crisis. Some haircut depositors, which is akin to (but still quite distinct from) seizure. Neither happened in America.
ClumsyPilot 4y ago
Russia has stopped imports of many vital goods and industrial machinery, and the economy will likely seize up at one point after spare parts for machinery, etc. runs out
- tcmart14 4y ago
  I think it depends. Talking with a friend in St Petersberg, last we talked about it was a few months ago so things can change, they are scrambling to bootstrap companies and industries. If they can successfully do that, it may not seize up. But here is the other side of that equation. Trying to stand up something like shops to machine parts in rapid fashion is going to end up with, yea they have parts, but they are low quality. So it may not completely grind to a halt, but it will still be crippling. Now they could completely fail at bootstrapping those things, which yes, it will definitely grind to a halt. But any day now for the past 60-70 years Cuba was supposed to grind to a halt and well, they are still chugging a long. Maybe with lawn mower engines in their cars, but they still manage to get to point a from point b without walking.

matwood 4y ago

> I'm skeptical that interest rate hikes will curb inflation. I'm even skeptical that a recession will curb inflation. Or rates will eventually cause demand destruction to the current levels of supply - which we have seen a bit of. But you're right, this was definitely not the typical inflation event. If inflation is defined as too much money chasing too few goods, supply chain issues from covid absolutely led to an acute too few goods situation. And a war, leading to sanctions on Russia certainly didn't help the energy supply.

snarf21 4y ago

I feel like until we catch up on covid demand, there will be short supply and inflation on the shortages. But let's not forget that the oil companies are price gouging now as punishment against growing green technology. This greatly increases the transportation cost of all goods and their components and can put upward pressure on wages to meet workers higher bills. I agree that raising interest rates will slow inflation but not curb it.

vinay_ys 4y ago
Oil prices being high is a good thing for acceleration of renewable/green tech. Also, oil prices are a functional geo-politics.

JamesBarney 4y ago

Interest rates definitely can curb inflation. See Volker recession.

jerf 4y ago

I've seen some people speculating that you could see a very complex mix of inflation and deflation, where things that everybody needs to buy would inflate (food, energy), and the optional things that people can cut out of their budget (expensive cars, boats, proportional to the ability of people to do without, do less, or defer purchases) could see heavy deflation. This wouldn't be good for the economy at all, of course.

SilasX 4y ago
There was a funny incident in 2011 when a Fed president claimed inflation was low because drops in the latter category canceled increases in the former, prompting heckles of "I can't eat an iPad": https://news.yahoo.com/news/blogs/lookout/fed-official-heckled-t-eat-ipad-20110311-122230-439.html https://news.yahoo.com/news/blogs/lookout/fed-official-heckl...

cm2187 4y ago

The shortage of housing and population growth have been around for 20 years and the fear until a year ago was deflation not inflation. Don't think that's what is driving inflation. Money printing is what caused the initial rise in prices. But we aren’t printing money anymore, so that would be a one off. Super tight labor market is what will create the self-fulfiling cycle of prices up => higher wages => prices up. I think the Fed is trying to create unemployment, so that it breaks the ability to demand higher wages, and stops the cycle. It’s a ugly process that the fed should have started a year ago. The conspiracy theorist in me thinks Powell’s decision might have been influenced by the fact that his mandate was up for renewal by the Biden administration, who didn’t want to hear about inflation risk and tighter monetary policy at the time.

OGWhales 4y ago
> Super tight labor market is what will create the self-fulfiling cycle of prices up => higher wages => prices up. I think the Fed is trying to create unemployment, so that it breaks the ability to demand higher wages, and stops the cycle. This is the current view of most people I talk to but I’m skeptical that rising wages is the cause here given what prices we are seeing rise the fastest. If rising wages were the cause, I’d expect to see a different mix than what we are seeing. For example, costs of groceries are rising faster than going out to eat even though eating out requires lots of labor. There are lots of these examples, but to me the prices that are rising don’t seem to line up with past examples of wage fueled inflation. It seems supply is still an important issue and a lot of the supply constrained resources are going to be difficult to suppress demand for. I’m worried about this narrative that inflation goes into some unstoppable cycle and the only way to stop it is to intentionally cause a recession. If rising wages isn’t the main cause it will take a lot of damage to successfully curb inflation, but people will justify the suffering as necessary to prevent a greater evil. I don’t think there is great evidence that inflation leads to some unstoppable cycle. The only historical examples of hyperinflation are ones that were caused by deep underlying issues in a country’s economic viability or cases where a country owed an extraordinary amount of debt in a currency they did not control. Yet somehow it seems many are under the impression that we are doomed to the same fate despite sharing none of those same characteristics. This believe will be used to justify killing labor power, which means the burden is on the lower rungs of society yet again. A shame, especially since we haven’t seen strong labor power in quite a long time and were just starting to.

laweijfmvo 4y ago

Probably just my pet peeve, but everyone conflates inflation with CPI. We've had the ridiculous inflation starting in 2008 (and doubling down in 2020), now we're seeing the CPI. Why this matters (just my theory): previously all that new money went to banks, the stock market, VC, etc., not so much directly to consumers. So we saw the stock market explode, but not so much for the price of eggs. Now we have supply chain shortages and people itching to spend, so we're seeing CPI explode. Raising interest rates won't help now (again, my theory), because they do nothing to discourage consumers from spending, other than maybe to slow housing or other purchases requiring loans. In fact, I can't get a better return from current interest rates (actually I can still get approximately 0) than prices continue to rise, so I'm incentivized to keep spending. The Fed needs to convince people to start saving/investing (stop spending), otherwise nothing will change (for the better...)

JumpCrisscross 4y ago
> everyone conflates inflation with CPI. We've had the ridiculous inflation starting in 2008 (and doubling down in 2020) You may be confusing money supply with inflation. Inflation measures price levels. We haven’t had “ridiculous inflation” since 2008. (In the early parts of the crisis we actually deflated.) CPI is a good measure of inflation, albeit one among many.
- OGWhales 4y ago
  I believe they are talking about asset inflation as opposed to price inflation. ZIRP era and QE did lead to some substantial asset inflation but was not considered to be problematic to many at the time.
- ClumsyPilot 4y ago
  we had crazy asset inflation, which is what he is probably talking about.
- boppo1 4y ago
  That stock market bull run from 2008 with crazy all-time-high P/E ratios? That's inflation. We just don't include security prices in CPI because it's not politically expedient to let the poors know they're getting priced out of having a meaningful stake in the economy.

paulpauper 4y ago

If prices rise 8% yoy and then 2% the next year, the stated inflation rate is 2% even though the 8% is locked in. So there is both higher price levels yet low inflation. Weird how inflation works.

JumpCrisscross 4y ago
> the stated inflation rate is 2% even though the 8% is locked in This is how numbers work? Also, the statistic is a price index. Inflation is calculated off those indices. And most contracts considering inflation link to price levels, not their deltas. To the degree there is fuckery it’s in how the media reports inflation. One or two arcane statistics are taken as a barometer of reality in every state, for every product, across income levels.
kelnos 4y ago
That 8% will continue to show up on historical charts of inflation over time, and if you ask the question what is $1000 in 2015 dollars, today, the calculation will include the 8% inflation experienced over the past year. Inflation is a measure of year-over-year price increases. How else would you measure it?

highwaylights 4y ago

> if the population is growing It isn’t.

kingrazor 4y ago
Population growth, in the US at least, has not yet hit negative: https://www.census.gov/library/stories/2021/12/us-population-grew-in-2021-slowest-rate-since-founding-of-the-nation.html https://www.census.gov/library/stories/2021/12/us-population...

huijzer 4y ago

> It's too difficult to curb demand for things like food and housing if the population is growing Currently population might look like it's growing but in fact things are going the opposite way since most countries have much fewer young people than before which yields also fewer young people in the future, according to Peter Zeihan.