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The economy has also grown drastically since then. The dollar has also become much stronger relative to nearly every other currency since then. It doesn't appe

The economy has also grown drastically since then. The dollar has also become much stronger relative to nearly every other currency since then. It doesn't appear that the Fed needs to wind down much, if any, of that liquidity at all, since it seems it's been absorbed perfectly by the global economy. What we are seeing is the Fed deliberately causing the economy to contract below its capabilities in an attempt to slow down the growth of prices, which is NOT caused by monetary reasons, but since the Fed only has control over monetary levers that's what they're using. Classic case of everything looking like a nail if all you have is a hammer. If energy prices go back down to more "normal" levels, I suspect the Fed will be forced to inject more money into the system again, to rev up the US economy, and weaken the hyper strong dollar to protect people in developing countries from starving.

soperj 4y ago
> since it seems it's been absorbed perfectly by the global economy. So that's why we're getting 8-9% inflation rates? Because of the perfect absorption?
- belltaco 4y ago
  Part of it is oil and gas supply going down because of war and since producing anything requires energy, prices are going to go up regardless of the money supply.
  - hutzlibu 4y ago
    Yeah but it does not look like the war is going away anytime soon. In case you missed it, russia partly mobilised today. So parent seems right refuting this claim: > since it seems it's been absorbed perfectly by the global economy.
  - soperj 4y ago
    Inflation was 8.5% before the war started, it's now at 8.3%. I don't think your premise holds.
  - slowhand09 4y ago
    Uh no. Oil and gas supply went down due to presidential mandates. Biden's “pause” on federal oil and gas leasing and drilling permits. And any new permits that might be approved on public lands had royalties increased from 12.5% to 18.75%. A 6.25% increase on production.
    - SideQuark 4y ago
      You can look at oil prices when the war started and see the jump. There was no such jump at any announcement of Biden. The evidence is clear and easily checked.
- behaveEc0n00 4y ago
  Greed seems to explain it easily enough. The macro-economy is solely for the wealthy and when they need a billion or more to see a return on a billion or more, shrinkflation and price increases go up; hard to make a billion back on long time scales at 2010 prices. I’m not saying they intentionally operate on that philosophy. I’m saying reliance on data trends means they prioritize responding to data regardless of the externalities to the masses. Only the rich can afford assets so assets are priced for the rich.
  - gamegoblin 4y ago
    Are periods of low inflation thus caused by elites being less greedy?
    - behaveEc0n00 4y ago
      Yes. Powell is on record saying he wants the public to save and not trade on the market. He wants bonds to go up. He wants salaries to stop going up. If everyone is flush in assets from having cash to spend it fucks up the game for establishment elites. He’s keeping the public out of the way of elites. Banks are raising savings account rates to keep cash stashed. VCs are scaling back. Prices on say, homes will crash, rates will be too high for average people, elites build property management portfolios and expand their rent seeking. The recent era of spread the wealth has been put on pause while the asset class shores up public agency that was getting away from it by creating too many elites. If everyone is an elite the current elites have no power. That’s the simple game they’re playing, leveraging technical indirection to obfuscate.
      - alexb_ 4y ago
        That's not how any of this works. Yes, the fed sometimes wants the economy to slow. This is not because of some global conspiracy to make poor people poor, it's because if they don't now they are putting it off to be much, much worse in the future. It's letting off steam so you don't explode. Interest rates rise to try and combat inflation because if you don't it leaves people starving. Rates should have gone up years ago, but a stubborn fed kept putting it off (and COVID didn't help either). The Fed does not benefit from everyone being poor. And I'm someone who thinks cynically all the time, check my post history, but this is just uninformed.
- arcticbull 4y ago
  Inflation is not the change in size of the money supply. Inflation the broad-based change of purchasing power of the dollar by proxy of a basket of goods and services. This is a function of many, many things - cultural norms, commodity prices, labor supply, fiscal policy, supply chain efficiency, interest rates and yes, to a degree, monetary base.
  - jtbayly 4y ago
    It’s complicated, therefore supply doesn’t matter for money, only demand? I think you’ll need to do a better job convincing me than that.
    - arcticbull 4y ago
      I'm not convincing you of anything, I'm sharing that your definition of inflation is not the definition generally accepted. Money supply growth is not inflation. Inflation is a broad-based reduction in purchasing power caused by any number of things. By definition. Here's why. A 50% sales tax would be inflationary without changing the money supply. Conversely, a trillion dollar coin minted and put into a vault wouldn't have any inflationary effect whatsoever because placing it into the vault has a commensurate reduction in velocity. The idea that 'more money' necessarily immediately means each unit is worth less doesn't stand up to any scrutiny and many counterexamples exist all over the world - and at home. Just look at Japan's monetary base expansion since the 90s [1], while inflation was dead flat zero [2]. Your model is too simplistic which is why it is not generally accepted. [1] https://fred.stlouisfed.org/series/MYAGM2JPM189S https://fred.stlouisfed.org/series/MYAGM2JPM189S [2] https://fred.stlouisfed.org/series/JPNCPIALLMINMEI https://fred.stlouisfed.org/series/JPNCPIALLMINMEI
      - jtbayly 4y ago
        Nobody is claiming that inflation is only caused by printing money. You’re straw-manning. What we’re saying is that everybody knows supply and demand affects money, also. And if you’d like examples of hyperinflation from over-supply of money, you can just look around.
- oldgradstudent 4y ago
  > So that's why we're getting 8-9% inflation rates? Because of the perfect absorption? Not to mention the massive asset price inflation.
ecommerceguy 4y ago
You say "relative to nearly every other currency since then", I say "race to the bottom". To each their own.
- colinmhayes 4y ago
  Having a strong currency isn't necessarily a good thing. It makes it much harder to export goods and services.
  - baremetal 4y ago
    What does america export? Agricultural products. People have to eat. Agricultural products have pricing power, especially in the current global environment. Food, beverage and feed: $133 billion. ... Crude oil, fuel and other petroleum products: $109 billion. ... Civilian aircraft and aircraft engines: $99 billion. ... Auto parts, engines and car tires: $86 billion. ... Industrial machines: $57 billion.
    - NovemberWhiskey 4y ago
      Services: ~$700 billion.
      - baremetal 4y ago
        yeah services are gonna take a hit.
onlyrealcuzzo 4y ago
> I suspect the Fed will be forced to inject more money into the system again, to rev up the US economy, and weaken the hyper strong dollar to protect people in developing countries from starving. Although a noble cause, the Fed's goal isn't to protect people in developing countries from starving. I don't see why this would impact their decisions at all. Foreign countries defaulting because of the difference in currency valuations could cause the US economy to go into a recession - which is something the Fed does care about...
crisdux 4y ago
> The economy has also grown drastically since then. No it hasn't. Real GDP: Q4 2019 19.20 Trillion Q2 2022 19.69 Trillion > It doesn't appear that the Fed needs to wind down much, if any, of that liquidity at all, since it seems it's been absorbed perfectly by the global economy. This comment is extremely misleading. For starters, I don't know how you can say that. It's obvious it wasn't absorbed perfectly because we experienced bubbles in many markets. And those bubbles have caused harm to large groups of people. For example; crypto, equities, housing, etc. Let's just dive into housing. We have a system that has disproportionately enriched incumbent homeowners at the expense of new entrants. 2 years ago: 30-yr mortgage rate was 2.87% & median existing home price in the US was $310k. Today: 30-yr mortgage rate is 6.02% & median home price is $390k. Increase in monthly payments from $1,029 to $1,872. This is regressive and has exacerbated inequality. The magnitude of this will be lasting. Real wages have not kept pace. I also suspect the fed will reverse course but that's because the American (and the rest of the American led global) system now expect it. Our markets are dysfunctional and depend on this centralized control. It would take too much time and pain to return markets to their natural pricing.
- taylodl 4y ago
  Your GDP figures are misleading also. Your comparison of Q4 2019 GDP and Q2 2022 GDP doesn't reflect the fact that the measuring stick, the USD, has grown considerably in that timeframe. The USD has been increasing in value and the GDP has increased as measured in USD in that timeframe. The OP's point was the inflation being experienced today isn't primarily due to monetary policy issues but actual supply contraction and the Fed's response of using monetary policy to resolve a supply issue is having several negative consequences, such as making the housing crisis worse as you point out.
- ponow 4y ago
  What would it take to have "natural pricing"? Short of radical proposals like going back to the gold standard or switching to crypto, what way could the Fed operate that would allow "natural pricing"? What if the Fed targeted 0% inflation, instead of 2%? I realize that inflation has many definitions, but I got the impression that they're reasonably correlated over long periods of time. With a zero-percent inflation target, what consequences would we expect? I think we would need higher interest rates on average, for starters. This would temper the housing problem. It would also reduce total debt, and total debt increases are associated with financial instability.
JackFr 4y ago
> which is NOT caused by monetary reasons You simply cannot say that with any certainty. A rise in price level is always precipitated by too much money chasing too few goods. No one would argue that global energy and wheat prices are a supply side shock, but to say that a stimulus package of unprecedented size injected into a largely healthy economy has no effect on prices is ludicrous.
wstuartcl 4y ago
I think you are conflating a stronger dollar against the wrong cause. The strong dollar is here because of the interest rate hikes and global market insecurities -- it is lower risk and higher base interest to plant yourself on USD right now. Its the side effect for trying to temper inflation but not directly related to the buydown of Fed monies in market nor is it related to GDP growth at all (we are flat).

soperj 4y ago

> since it seems it's been absorbed perfectly by the global economy. So that's why we're getting 8-9% inflation rates? Because of the perfect absorption?

belltaco 4y ago
Part of it is oil and gas supply going down because of war and since producing anything requires energy, prices are going to go up regardless of the money supply.
- hutzlibu 4y ago
  Yeah but it does not look like the war is going away anytime soon. In case you missed it, russia partly mobilised today. So parent seems right refuting this claim: > since it seems it's been absorbed perfectly by the global economy.
- soperj 4y ago
  Inflation was 8.5% before the war started, it's now at 8.3%. I don't think your premise holds.
- slowhand09 4y ago
  Uh no. Oil and gas supply went down due to presidential mandates. Biden's “pause” on federal oil and gas leasing and drilling permits. And any new permits that might be approved on public lands had royalties increased from 12.5% to 18.75%. A 6.25% increase on production.
  - SideQuark 4y ago
    You can look at oil prices when the war started and see the jump. There was no such jump at any announcement of Biden. The evidence is clear and easily checked.
behaveEc0n00 4y ago
Greed seems to explain it easily enough. The macro-economy is solely for the wealthy and when they need a billion or more to see a return on a billion or more, shrinkflation and price increases go up; hard to make a billion back on long time scales at 2010 prices. I’m not saying they intentionally operate on that philosophy. I’m saying reliance on data trends means they prioritize responding to data regardless of the externalities to the masses. Only the rich can afford assets so assets are priced for the rich.
- gamegoblin 4y ago
  Are periods of low inflation thus caused by elites being less greedy?
  - behaveEc0n00 4y ago
    Yes. Powell is on record saying he wants the public to save and not trade on the market. He wants bonds to go up. He wants salaries to stop going up. If everyone is flush in assets from having cash to spend it fucks up the game for establishment elites. He’s keeping the public out of the way of elites. Banks are raising savings account rates to keep cash stashed. VCs are scaling back. Prices on say, homes will crash, rates will be too high for average people, elites build property management portfolios and expand their rent seeking. The recent era of spread the wealth has been put on pause while the asset class shores up public agency that was getting away from it by creating too many elites. If everyone is an elite the current elites have no power. That’s the simple game they’re playing, leveraging technical indirection to obfuscate.
    - alexb_ 4y ago
      That's not how any of this works. Yes, the fed sometimes wants the economy to slow. This is not because of some global conspiracy to make poor people poor, it's because if they don't now they are putting it off to be much, much worse in the future. It's letting off steam so you don't explode. Interest rates rise to try and combat inflation because if you don't it leaves people starving. Rates should have gone up years ago, but a stubborn fed kept putting it off (and COVID didn't help either). The Fed does not benefit from everyone being poor. And I'm someone who thinks cynically all the time, check my post history, but this is just uninformed.
arcticbull 4y ago
Inflation is not the change in size of the money supply. Inflation the broad-based change of purchasing power of the dollar by proxy of a basket of goods and services. This is a function of many, many things - cultural norms, commodity prices, labor supply, fiscal policy, supply chain efficiency, interest rates and yes, to a degree, monetary base.
- jtbayly 4y ago
  It’s complicated, therefore supply doesn’t matter for money, only demand? I think you’ll need to do a better job convincing me than that.
  - arcticbull 4y ago
    I'm not convincing you of anything, I'm sharing that your definition of inflation is not the definition generally accepted. Money supply growth is not inflation. Inflation is a broad-based reduction in purchasing power caused by any number of things. By definition. Here's why. A 50% sales tax would be inflationary without changing the money supply. Conversely, a trillion dollar coin minted and put into a vault wouldn't have any inflationary effect whatsoever because placing it into the vault has a commensurate reduction in velocity. The idea that 'more money' necessarily immediately means each unit is worth less doesn't stand up to any scrutiny and many counterexamples exist all over the world - and at home. Just look at Japan's monetary base expansion since the 90s [1], while inflation was dead flat zero [2]. Your model is too simplistic which is why it is not generally accepted. [1] https://fred.stlouisfed.org/series/MYAGM2JPM189S https://fred.stlouisfed.org/series/MYAGM2JPM189S [2] https://fred.stlouisfed.org/series/JPNCPIALLMINMEI https://fred.stlouisfed.org/series/JPNCPIALLMINMEI
    - jtbayly 4y ago
      Nobody is claiming that inflation is only caused by printing money. You’re straw-manning. What we’re saying is that everybody knows supply and demand affects money, also. And if you’d like examples of hyperinflation from over-supply of money, you can just look around.
oldgradstudent 4y ago
> So that's why we're getting 8-9% inflation rates? Because of the perfect absorption? Not to mention the massive asset price inflation.

ecommerceguy 4y ago

You say "relative to nearly every other currency since then", I say "race to the bottom". To each their own.

colinmhayes 4y ago
Having a strong currency isn't necessarily a good thing. It makes it much harder to export goods and services.
- baremetal 4y ago
  What does america export? Agricultural products. People have to eat. Agricultural products have pricing power, especially in the current global environment. Food, beverage and feed: $133 billion. ... Crude oil, fuel and other petroleum products: $109 billion. ... Civilian aircraft and aircraft engines: $99 billion. ... Auto parts, engines and car tires: $86 billion. ... Industrial machines: $57 billion.
  - NovemberWhiskey 4y ago
    Services: ~$700 billion.
    - baremetal 4y ago
      yeah services are gonna take a hit.

onlyrealcuzzo 4y ago

> I suspect the Fed will be forced to inject more money into the system again, to rev up the US economy, and weaken the hyper strong dollar to protect people in developing countries from starving. Although a noble cause, the Fed's goal isn't to protect people in developing countries from starving. I don't see why this would impact their decisions at all. Foreign countries defaulting because of the difference in currency valuations could cause the US economy to go into a recession - which is something the Fed does care about...

crisdux 4y ago

> The economy has also grown drastically since then. No it hasn't. Real GDP: Q4 2019 19.20 Trillion Q2 2022 19.69 Trillion > It doesn't appear that the Fed needs to wind down much, if any, of that liquidity at all, since it seems it's been absorbed perfectly by the global economy. This comment is extremely misleading. For starters, I don't know how you can say that. It's obvious it wasn't absorbed perfectly because we experienced bubbles in many markets. And those bubbles have caused harm to large groups of people. For example; crypto, equities, housing, etc. Let's just dive into housing. We have a system that has disproportionately enriched incumbent homeowners at the expense of new entrants. 2 years ago: 30-yr mortgage rate was 2.87% & median existing home price in the US was $310k. Today: 30-yr mortgage rate is 6.02% & median home price is $390k. Increase in monthly payments from $1,029 to $1,872. This is regressive and has exacerbated inequality. The magnitude of this will be lasting. Real wages have not kept pace. I also suspect the fed will reverse course but that's because the American (and the rest of the American led global) system now expect it. Our markets are dysfunctional and depend on this centralized control. It would take too much time and pain to return markets to their natural pricing.

taylodl 4y ago
Your GDP figures are misleading also. Your comparison of Q4 2019 GDP and Q2 2022 GDP doesn't reflect the fact that the measuring stick, the USD, has grown considerably in that timeframe. The USD has been increasing in value and the GDP has increased as measured in USD in that timeframe. The OP's point was the inflation being experienced today isn't primarily due to monetary policy issues but actual supply contraction and the Fed's response of using monetary policy to resolve a supply issue is having several negative consequences, such as making the housing crisis worse as you point out.
ponow 4y ago
What would it take to have "natural pricing"? Short of radical proposals like going back to the gold standard or switching to crypto, what way could the Fed operate that would allow "natural pricing"? What if the Fed targeted 0% inflation, instead of 2%? I realize that inflation has many definitions, but I got the impression that they're reasonably correlated over long periods of time. With a zero-percent inflation target, what consequences would we expect? I think we would need higher interest rates on average, for starters. This would temper the housing problem. It would also reduce total debt, and total debt increases are associated with financial instability.

JackFr 4y ago

> which is NOT caused by monetary reasons You simply cannot say that with any certainty. A rise in price level is always precipitated by too much money chasing too few goods. No one would argue that global energy and wheat prices are a supply side shock, but to say that a stimulus package of unprecedented size injected into a largely healthy economy has no effect on prices is ludicrous.

wstuartcl 4y ago

I think you are conflating a stronger dollar against the wrong cause. The strong dollar is here because of the interest rate hikes and global market insecurities -- it is lower risk and higher base interest to plant yourself on USD right now. Its the side effect for trying to temper inflation but not directly related to the buydown of Fed monies in market nor is it related to GDP growth at all (we are flat).