4 ms·

Inflation is high because demand exceeds supply. You have to reduce demand to match the available supply. Interest rates are the main tool to do that. This is

Inflation is high because demand exceeds supply. You have to reduce demand to match the available supply. Interest rates are the main tool to do that. This is true even if the ultimate cause is supply chain issues.

alooPotato 4y ago
Why not help with supply issues too?
- slaw 4y ago
  Another name for supply chain issue is China's zero Covid policy. How do you think US government can help with it?
  - nilsbunger 4y ago
    It’s not only china zero covid policy. For example , there’s a huge worker shortage in industries like airlines and hospitality. That’s a supply shortage too.
- nilsbunger 4y ago
  We should do everything we can to fix supply issues. The sooner we do, the better. But in the meantime , demand has to adjust. Either we do it via monetary policy and any other levers, or inflation will do the job for us.
marcosdumay 4y ago
There isn't a simple, first-order relation between the monetary and the real economies. The only thing that exists is an absurdly complex web of small second or higher order interactions.
- nilsbunger 4y ago
  It’s pretty tightly linked. Lots of loans don’t happen when interest rates go up. On the consumer side , car loans, mortgages , etc. on the biz side, capital loans and lines of credit. All of this significantly reduces purchases and money in our pockets, thus putting downward pressure on gdp and demand.
  - marcosdumay 4y ago
    > Inflation is high because demand exceeds supply. That's the part that is wrong. It's wrong by definition, because demand and supply are the same thing. It's also wrong because inflation is an unrelated phenomenon. Raising interest rates does normally (not always) reduce the economic output. Nobody is disagreeing on this.
    - the_optimist 4y ago
      Marginal demand > marginal supply, so price is bid up. This is not even 101 stuff.
PaulDavisThe1st 4y ago
Inflation is high because corporations have increased consumer prices well above their own increases in costs. There's just as much evidence for this claim as "inflation is demand > supply" or "inflation is M2".
- pitaj 4y ago
  The "corporations are just greedy" thing makes zero sense. If it's just greed, then why have they just recently started? It's not like they all got together and decided to raise prices.
  - deepsquirrelnet 4y ago
    If you are unwilling to let your stock price fall, but your company is unable to increase revenue due to supply chain constraints, then what else is left? Maybe I’m missing something, but it seems to me that the stock market hasn’t been catastrophic, only because of rising prices. The people who will suffer most are those who can’t get on that raft. So it might ultimately be raising the bar on the middle class.
  - PaulDavisThe1st 4y ago
    I answered this elsewhere in these comments: https://news.ycombinator.com/item?id=32973663 https://news.ycombinator.com/item?id=32973663
  - daniel-cussen 4y ago
    Right so a few years's previous it was more about expanding market-share with lower prices. Then they saw employee's not getting their lives ruined when they got fired, like not getting the phone calls from that employee begging for his job back at half the wage, meaning they got told "I quit" way more, in great part because of Trump's unique $1500 check. That was what did it. Allowed a cascade of savings that freed many people. So then they could buy bulk their needs, then they could buy the toy their child truly desired as an iconic gift of their childhood and that wasn't that expensive but made them much more pleasant and resilient (this happened to me with Magic The Gathering), or like a much-needed fix for the car that was always breaking down. That shit. Bosses hate that shit. Fucking hate it, why else would they tell you it's good and not pay any raises ever if they actually wanted you to buy it? Tell you to drink tap water instead of water from bottles, when for every quart of tap water you need to drink a gallon of bottled water. Need. Not an "impulse", not a "craving", need, drinking brine makes you thirsty, it's brine, salty peanuts at the bar so you buy a "refreshing" drink. That's a confession. Advertisements say "Coca-Cola is refreshing". Confession of guilt right on the fucking billboard. Nothing can be more refreshing than pure water, or I'm sorry purified water, like Coca-Cola uses, "purified". Tap water could be purified. It never is. Bottled water is always purified, all of it, 100%. Or nobody will buy it twice! Even the bottled water that is said to come from tap water is in fact--it's true--tap water, but literally always gets filtered for fluorine, that they don't tell you. And it makes sense, refreshing, fresh, tap water, not fresh. Bottles and cans, fresh. Fresh water. Salt water. Brine. It's not relevant the percentage nobody cares, it's different all the time and if you measure it and try to tell anybody they accuse you of accusing them of conspiracy. Question is, is it salty yes or no? Yes. Is Coca-Cola refreshing? How could it be? What could you add to water to make it more refreshing than mountain streams? Literally nothing (well dextrose like I just served up, most refreshing drink bar none, but nobody sells that anywhere). You can't add anything to water to make it refreshing, you must remove something, and if there is nothing to remove, you have no business. That means you're fired. So you gotta eliminate the competition, the ultimate competition for like 20% of America's spending, some crazy amount, so put something salty in the tap water. Saving up for the future, smart spending, man. Bosses hate that fucking shit. Prefer employees in terrible debt, behind on rent, rape extortion literally. That's the engine of the American economy, the ultimate power. Fedex's president complained about this, said when the checks went out suddenly people couldn't do backbreaking labor. Literally backbreaking now and then--Amazon was accused of this too, the reason for unionization was despite the money being good they broke backs in a week, they were squandering crazy amounts of wealth, $5000000 in treatment that doesn't even work, all to save $5 of labor costs. Bezos, the negative quadrillionaire. So when they saw employee's not bending their backbone satisfyingly (and there's bosses who actually look out for you, not the previous two but there are, there are) they realized they would get asked for a raise. So as soon as inflation (raises) was predicted, they wanted to outdo and preempt it with higher prices. Like it was an opportunity. And in addition, as collusion, to cause the Fed to raise interest rates meaning debt becomes crazily more expensive, and really also the raising interest rates means "you can get away with anything in the workplace", it's a signal to the whole system.
daniel-cussen 4y ago
Demand can't exceed supply, they're both functions of price and quantity. They always meet, but nobody ever says "demand meets supply." They meet through black markets if need be, with prison labor if need be, with crime torture murder lobotomy (heh) you name it but they meet.
dragonwriter 4y ago
> Inflation is high Current inflation has been about 0 in the last two monthly reports. The headline 12-month trailing figure is still high because “12-month trailing”.

alooPotato 4y ago

Why not help with supply issues too?

slaw 4y ago
Another name for supply chain issue is China's zero Covid policy. How do you think US government can help with it?
- nilsbunger 4y ago
  It’s not only china zero covid policy. For example , there’s a huge worker shortage in industries like airlines and hospitality. That’s a supply shortage too.
nilsbunger 4y ago
We should do everything we can to fix supply issues. The sooner we do, the better. But in the meantime , demand has to adjust. Either we do it via monetary policy and any other levers, or inflation will do the job for us.

marcosdumay 4y ago

There isn't a simple, first-order relation between the monetary and the real economies. The only thing that exists is an absurdly complex web of small second or higher order interactions.

nilsbunger 4y ago
It’s pretty tightly linked. Lots of loans don’t happen when interest rates go up. On the consumer side , car loans, mortgages , etc. on the biz side, capital loans and lines of credit. All of this significantly reduces purchases and money in our pockets, thus putting downward pressure on gdp and demand.
- marcosdumay 4y ago
  > Inflation is high because demand exceeds supply. That's the part that is wrong. It's wrong by definition, because demand and supply are the same thing. It's also wrong because inflation is an unrelated phenomenon. Raising interest rates does normally (not always) reduce the economic output. Nobody is disagreeing on this.
  - the_optimist 4y ago
    Marginal demand > marginal supply, so price is bid up. This is not even 101 stuff.

PaulDavisThe1st 4y ago

Inflation is high because corporations have increased consumer prices well above their own increases in costs. There's just as much evidence for this claim as "inflation is demand > supply" or "inflation is M2".

pitaj 4y ago
The "corporations are just greedy" thing makes zero sense. If it's just greed, then why have they just recently started? It's not like they all got together and decided to raise prices.
- deepsquirrelnet 4y ago
  If you are unwilling to let your stock price fall, but your company is unable to increase revenue due to supply chain constraints, then what else is left? Maybe I’m missing something, but it seems to me that the stock market hasn’t been catastrophic, only because of rising prices. The people who will suffer most are those who can’t get on that raft. So it might ultimately be raising the bar on the middle class.
- PaulDavisThe1st 4y ago
  I answered this elsewhere in these comments: https://news.ycombinator.com/item?id=32973663 https://news.ycombinator.com/item?id=32973663
- daniel-cussen 4y ago
  Right so a few years's previous it was more about expanding market-share with lower prices. Then they saw employee's not getting their lives ruined when they got fired, like not getting the phone calls from that employee begging for his job back at half the wage, meaning they got told "I quit" way more, in great part because of Trump's unique $1500 check. That was what did it. Allowed a cascade of savings that freed many people. So then they could buy bulk their needs, then they could buy the toy their child truly desired as an iconic gift of their childhood and that wasn't that expensive but made them much more pleasant and resilient (this happened to me with Magic The Gathering), or like a much-needed fix for the car that was always breaking down. That shit. Bosses hate that shit. Fucking hate it, why else would they tell you it's good and not pay any raises ever if they actually wanted you to buy it? Tell you to drink tap water instead of water from bottles, when for every quart of tap water you need to drink a gallon of bottled water. Need. Not an "impulse", not a "craving", need, drinking brine makes you thirsty, it's brine, salty peanuts at the bar so you buy a "refreshing" drink. That's a confession. Advertisements say "Coca-Cola is refreshing". Confession of guilt right on the fucking billboard. Nothing can be more refreshing than pure water, or I'm sorry purified water, like Coca-Cola uses, "purified". Tap water could be purified. It never is. Bottled water is always purified, all of it, 100%. Or nobody will buy it twice! Even the bottled water that is said to come from tap water is in fact--it's true--tap water, but literally always gets filtered for fluorine, that they don't tell you. And it makes sense, refreshing, fresh, tap water, not fresh. Bottles and cans, fresh. Fresh water. Salt water. Brine. It's not relevant the percentage nobody cares, it's different all the time and if you measure it and try to tell anybody they accuse you of accusing them of conspiracy. Question is, is it salty yes or no? Yes. Is Coca-Cola refreshing? How could it be? What could you add to water to make it more refreshing than mountain streams? Literally nothing (well dextrose like I just served up, most refreshing drink bar none, but nobody sells that anywhere). You can't add anything to water to make it refreshing, you must remove something, and if there is nothing to remove, you have no business. That means you're fired. So you gotta eliminate the competition, the ultimate competition for like 20% of America's spending, some crazy amount, so put something salty in the tap water. Saving up for the future, smart spending, man. Bosses hate that fucking shit. Prefer employees in terrible debt, behind on rent, rape extortion literally. That's the engine of the American economy, the ultimate power. Fedex's president complained about this, said when the checks went out suddenly people couldn't do backbreaking labor. Literally backbreaking now and then--Amazon was accused of this too, the reason for unionization was despite the money being good they broke backs in a week, they were squandering crazy amounts of wealth, $5000000 in treatment that doesn't even work, all to save $5 of labor costs. Bezos, the negative quadrillionaire. So when they saw employee's not bending their backbone satisfyingly (and there's bosses who actually look out for you, not the previous two but there are, there are) they realized they would get asked for a raise. So as soon as inflation (raises) was predicted, they wanted to outdo and preempt it with higher prices. Like it was an opportunity. And in addition, as collusion, to cause the Fed to raise interest rates meaning debt becomes crazily more expensive, and really also the raising interest rates means "you can get away with anything in the workplace", it's a signal to the whole system.

daniel-cussen 4y ago

Demand can't exceed supply, they're both functions of price and quantity. They always meet, but nobody ever says "demand meets supply." They meet through black markets if need be, with prison labor if need be, with crime torture murder lobotomy (heh) you name it but they meet.

dragonwriter 4y ago

> Inflation is high Current inflation has been about 0 in the last two monthly reports. The headline 12-month trailing figure is still high because “12-month trailing”.