4 ms·

One thing about inflation is that it will never go back down. Best case scenario is it stops growing.

by RC_ITR 4y ago

meragrin_ 4y ago
This is the one thing which pisses me off when corporate brass justify not adjusting pay because "inflation is just transitory".
werdnapk 4y ago
Deflation can occur; it's rare, but it's not a never scenario.
- RC_ITR 4y ago
  It has never occurred for more than a few months in The past 50 years and has never returned to a new equilibrium below where it was. This is also a data resolution problem. Sure we measure in months, but is that a reasonable resolution? Why not days? Years? Etc.
jonnycomputer 4y ago
Of course it goes down. Take a look at this chart, expand to 10y or max; inflation was about -0.75% in early 2020. In fact, it went into negative territory many times in the last decade. Prices go down during recessions, particularly. https://tradingeconomics.com/united-states/inflation-rate-mom https://tradingeconomics.com/united-states/inflation-rate-mo... OTOH, the Fed has goal of maintaining a 2% inflation target; so in the long run you can expect it to go up. For many many years before the pandemic, it failed to achieve that goal. Inflation was too low; which means job growth, wage growth, and gdp was below potential.
- honkkong420 4y ago
  But our unemployment rates were so low in 2019, how could they have been lower with higher inflation?
  - celtain 4y ago
    We have seen unemployment fall slightly below 2019 levels, but the more significant result of greater demand stimulation would have been reaching those levels of unemployment much faster, rather than taking a decade to recover from the great recession.
    - honkkong420 4y ago
      That seems to be entirely explained by labor force participation. Note the skyrocketing amounts of people with more than one job
  - jonnycomputer 4y ago
    high employment and higher inflation can go hand in hand, actually, just high unemployment and deflation can (in a recession).
    - honkkong420 4y ago
      Yeah that’s my point, inflation rates don’t really influence unemployment rates except at the margin
- RC_ITR 4y ago
  Prices are an index and very rarely is the index not at an ath. Even in The periods you mentioned, the index was only off ath for a month or 3 and that’s mostly noise from Energy prices, so no it never reached a new equilibrium below where it was (that would be disastrous) https://fred.stlouisfed.org/graph/fredgraph.png?g=SF8B https://fred.stlouisfed.org/graph/fredgraph.png?g=SF8B
sangnoir 4y ago
Do you mean prices, perhaps? Inflation is a derivative and can go down to zero with prices being unchanged
- RC_ITR 4y ago
  Do you mean the inflation rate?

One thing about inflation is that it will never go back down. Best case scenario is it stops growing.

by RC_ITR 4y ago

One thing about inflation is that it will never go back down. Best case scenario is it stops growing.

This is the one thing which pisses me off when corporate brass justify not adjusting pay because "inflation is just transitory".

werdnapk 4y ago

Deflation can occur; it's rare, but it's not a never scenario.

RC_ITR 4y ago
It has never occurred for more than a few months in The past 50 years and has never returned to a new equilibrium below where it was. This is also a data resolution problem. Sure we measure in months, but is that a reasonable resolution? Why not days? Years? Etc.

jonnycomputer 4y ago

Of course it goes down. Take a look at this chart, expand to 10y or max; inflation was about -0.75% in early 2020. In fact, it went into negative territory many times in the last decade. Prices go down during recessions, particularly. https://tradingeconomics.com/united-states/inflation-rate-mom https://tradingeconomics.com/united-states/inflation-rate-mo... OTOH, the Fed has goal of maintaining a 2% inflation target; so in the long run you can expect it to go up. For many many years before the pandemic, it failed to achieve that goal. Inflation was too low; which means job growth, wage growth, and gdp was below potential.

honkkong420 4y ago
But our unemployment rates were so low in 2019, how could they have been lower with higher inflation?
- celtain 4y ago
  We have seen unemployment fall slightly below 2019 levels, but the more significant result of greater demand stimulation would have been reaching those levels of unemployment much faster, rather than taking a decade to recover from the great recession.
  - honkkong420 4y ago
    That seems to be entirely explained by labor force participation. Note the skyrocketing amounts of people with more than one job
- jonnycomputer 4y ago
  high employment and higher inflation can go hand in hand, actually, just high unemployment and deflation can (in a recession).
  - honkkong420 4y ago
    Yeah that’s my point, inflation rates don’t really influence unemployment rates except at the margin
RC_ITR 4y ago
Prices are an index and very rarely is the index not at an ath. Even in The periods you mentioned, the index was only off ath for a month or 3 and that’s mostly noise from Energy prices, so no it never reached a new equilibrium below where it was (that would be disastrous) https://fred.stlouisfed.org/graph/fredgraph.png?g=SF8B https://fred.stlouisfed.org/graph/fredgraph.png?g=SF8B

sangnoir 4y ago

Do you mean prices, perhaps? Inflation is a derivative and can go down to zero with prices being unchanged

RC_ITR 4y ago
Do you mean the inflation rate?