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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'r

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.
  - JumpCrisscross 4y ago
    > stock market bull run from 2008 with crazy all-time-high P/E ratios? That's inflation. No, it isn’t. Your original comment [1] decries people misusing words. Inflation is a measure of real economy price levels. That’s what it means. We have other words for prices of financial assets: indices. You want to talk about multiple expansion, risk premium compression and easy money in finance. That is fine! Lots of people are intelligently doing so! But they go further by discussing concepts, not muddied nomenclature. > don't include security prices in CPI because it's not politically expedient to let the poors know they're getting priced out Or because someone saying inflation is fine because while the price of bread doubled the stock market halved would get shot. [1] https://news.ycombinator.com/item?id=32254910 https://news.ycombinator.com/item?id=32254910
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icedchai 4y ago
Asset inflation is certainly a thing. If people weren't convinced by the stock market's rise from the end of the financial crisis (~2009) through ~2019 to save and invest, what would convince them?

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.
- JumpCrisscross 4y ago
  > stock market bull run from 2008 with crazy all-time-high P/E ratios? That's inflation. No, it isn’t. Your original comment [1] decries people misusing words. Inflation is a measure of real economy price levels. That’s what it means. We have other words for prices of financial assets: indices. You want to talk about multiple expansion, risk premium compression and easy money in finance. That is fine! Lots of people are intelligently doing so! But they go further by discussing concepts, not muddied nomenclature. > don't include security prices in CPI because it's not politically expedient to let the poors know they're getting priced out Or because someone saying inflation is fine because while the price of bread doubled the stock market halved would get shot. [1] https://news.ycombinator.com/item?id=32254910 https://news.ycombinator.com/item?id=32254910

deleted 4y ago

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icedchai 4y ago

Asset inflation is certainly a thing. If people weren't convinced by the stock market's rise from the end of the financial crisis (~2009) through ~2019 to save and invest, what would convince them?