3 ms·

You know high inflation makes it worse to be poor right? Especially core inflation.

by ch4s3 4y ago

dragontamer 4y ago
Everything is bad for the poor though. Rising rates fixes inflation, but reduces employment. As it turns out, unemployment is bad for the poor. Lowering rates improves employment, but comes with inflation risks. As it turns out, the poor also hate inflation. Screwed if you do, screwed if you don't. Dual mandate says that the Fed aims for as good employment as possible, while also aiming at a targeted 2% to 3% inflation rate. > Especially core inflation. EDIT: My understanding is that core-inflation isn't about "good or bad for people", its about "good or bad for statisticians". Food/Oil prices move too quickly and are therefore bad measurements. Too noisy. If food prices go up or down 10%, is it because the economy is bad? Or is it because of a terrible storm that wiped out a chunk of crops somewhere? Ignoring food means we ignore these volatility / storm / disease issues. Oil is similar. A war started in Europe, and lo-and-behold, oil prices went crazy, both upwards and downwards. There's no amount of economic policy you can do to predict a war.
- ch4s3 4y ago
  I'm referring to core inflation because it shows upward trend across all prices, which means people without much disposable income will feel the pinch everywhere. High inflation also erodes savings, making it hard to get out of poverty, particularly the generational type. Unemployment is obviously a problem, but the labor market is super tight right now. There's room to fight inflation without a big dip in employment.
  - dragontamer 4y ago
    > I'm referring to core inflation because it shows upward trend across all prices Hmm. I think you're mistaken. "CPI" is across all prices. "Core-CPI" is across most prices (ignores energy and food). Turns out that poor people use electricity and eat food, at least in America. Upon first glance, it would seem that "CPI" is a better measurement. The issue, as I stated earlier, is that energy/food prices swing wildly in ways completely unrelated to economics. (Look: war in Ukraine... Food prices and Oil prices in peril. Its not "unimportant", its just unpredictable and unrelated to greater economic issues) We ignore energy/food not because they're "unimportant", but because they're too volatile to draw conclusions from. Even without wars, there's famine, hurricanes, storms, disease, swarms, locusts, etc. etc. which wreck food/energy prices. Even with a perfectly balanced economy in a peaceful world, Mother Nature would still wreck us in an unpredictable fashion.
    - ch4s3 4y ago
      > We ignore energy/food not because they're "unimportant", but because they're too volatile to draw conclusions from Yes, that's exactly what I'm referring to. I mean that looking at the core number gives a better picture of the trend.
- lucumo 4y ago
  > EDIT: My understanding is that core-inflation isn't about "good or bad for people", its about "good or bad for statisticians". Bad for making decisions. If there's too much noise in a signal you can't steer the ship. If you do try to take action on noisy data, there's a big chance that you'll over- or understeer, especially when effects are slow to be seen.
- eli_gottlieb 4y ago
  >There's no amount of economic policy you can do to predict a war. You can't predict a war, but you can secure your supplies of basic commodities against it, preferably by producing them domestically.
  - dragontamer 4y ago
    US production of energy (coal, natural gas, and even petroleum) is almost entirely domestic. The entirety of this year's fluctuations isn't because "we don't have oil/energy", but because global oil/energy prices were changing. In fact, USA exports more energy than we import. So the higher price of energy is "good" for the US economy, as our companies obtain higher profits. Nonetheless, it still means higher prices at the gas pump and other inflationary measures. -------- Just having a domestic base of energy didn't do jack diddly squat for oil prices. Oil prices will rise and fall with geopolitical reasons. Now USA has a domestic energy source, which gives us a leg up compared to say, Germany, who was relying upon natural gas from a country to their East. But this has to do with supply of energy more so than price. Energy prices are also floating upon the weather. La Nina this year will give us a mild winter, meaning Europe won't need as much natural gas... which counter-acts the war somewhat. We're lucky that Mother Nature smiles upon us this year...
bdw5204 4y ago
Inflation isn't inherently bad for the poor. If you have debts and inflation is above the (fixed) interest rate on your debts, you're coming out ahead. The downside of inflation is wages and cost of living adjustments often don't keep pace with inflation because government statistics are rigged to understate the real rate of inflation and many things aren't even indexed to inflation. For example, the minimum wage has been $7.15 an hour in the US for about 15 years. Wage growth not keeping pace with inflation is, as far as inflation hawks are concerned, a feature not a bug as it increases public support for inflation hawk policies.

You know high inflation makes it worse to be poor right? Especially core inflation.

by ch4s3 4y ago

You know high inflation makes it worse to be poor right? Especially core inflation.

Everything is bad for the poor though. Rising rates fixes inflation, but reduces employment. As it turns out, unemployment is bad for the poor. Lowering rates improves employment, but comes with inflation risks. As it turns out, the poor also hate inflation. Screwed if you do, screwed if you don't. Dual mandate says that the Fed aims for as good employment as possible, while also aiming at a targeted 2% to 3% inflation rate. > Especially core inflation. EDIT: My understanding is that core-inflation isn't about "good or bad for people", its about "good or bad for statisticians". Food/Oil prices move too quickly and are therefore bad measurements. Too noisy. If food prices go up or down 10%, is it because the economy is bad? Or is it because of a terrible storm that wiped out a chunk of crops somewhere? Ignoring food means we ignore these volatility / storm / disease issues. Oil is similar. A war started in Europe, and lo-and-behold, oil prices went crazy, both upwards and downwards. There's no amount of economic policy you can do to predict a war.

ch4s3 4y ago
I'm referring to core inflation because it shows upward trend across all prices, which means people without much disposable income will feel the pinch everywhere. High inflation also erodes savings, making it hard to get out of poverty, particularly the generational type. Unemployment is obviously a problem, but the labor market is super tight right now. There's room to fight inflation without a big dip in employment.
- dragontamer 4y ago
  > I'm referring to core inflation because it shows upward trend across all prices Hmm. I think you're mistaken. "CPI" is across all prices. "Core-CPI" is across most prices (ignores energy and food). Turns out that poor people use electricity and eat food, at least in America. Upon first glance, it would seem that "CPI" is a better measurement. The issue, as I stated earlier, is that energy/food prices swing wildly in ways completely unrelated to economics. (Look: war in Ukraine... Food prices and Oil prices in peril. Its not "unimportant", its just unpredictable and unrelated to greater economic issues) We ignore energy/food not because they're "unimportant", but because they're too volatile to draw conclusions from. Even without wars, there's famine, hurricanes, storms, disease, swarms, locusts, etc. etc. which wreck food/energy prices. Even with a perfectly balanced economy in a peaceful world, Mother Nature would still wreck us in an unpredictable fashion.
  - ch4s3 4y ago
    > We ignore energy/food not because they're "unimportant", but because they're too volatile to draw conclusions from Yes, that's exactly what I'm referring to. I mean that looking at the core number gives a better picture of the trend.
lucumo 4y ago
> EDIT: My understanding is that core-inflation isn't about "good or bad for people", its about "good or bad for statisticians". Bad for making decisions. If there's too much noise in a signal you can't steer the ship. If you do try to take action on noisy data, there's a big chance that you'll over- or understeer, especially when effects are slow to be seen.
eli_gottlieb 4y ago
>There's no amount of economic policy you can do to predict a war. You can't predict a war, but you can secure your supplies of basic commodities against it, preferably by producing them domestically.
- dragontamer 4y ago
  US production of energy (coal, natural gas, and even petroleum) is almost entirely domestic. The entirety of this year's fluctuations isn't because "we don't have oil/energy", but because global oil/energy prices were changing. In fact, USA exports more energy than we import. So the higher price of energy is "good" for the US economy, as our companies obtain higher profits. Nonetheless, it still means higher prices at the gas pump and other inflationary measures. -------- Just having a domestic base of energy didn't do jack diddly squat for oil prices. Oil prices will rise and fall with geopolitical reasons. Now USA has a domestic energy source, which gives us a leg up compared to say, Germany, who was relying upon natural gas from a country to their East. But this has to do with supply of energy more so than price. Energy prices are also floating upon the weather. La Nina this year will give us a mild winter, meaning Europe won't need as much natural gas... which counter-acts the war somewhat. We're lucky that Mother Nature smiles upon us this year...

bdw5204 4y ago

Inflation isn't inherently bad for the poor. If you have debts and inflation is above the (fixed) interest rate on your debts, you're coming out ahead. The downside of inflation is wages and cost of living adjustments often don't keep pace with inflation because government statistics are rigged to understate the real rate of inflation and many things aren't even indexed to inflation. For example, the minimum wage has been $7.15 an hour in the US for about 15 years. Wage growth not keeping pace with inflation is, as far as inflation hawks are concerned, a feature not a bug as it increases public support for inflation hawk policies.