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Interesting, but just seems the Fed and other key actors are in a damned-if-you-do-damned-if-you-don't phase and there's no way out. The Fed being afraid to do

Interesting, but just seems the Fed and other key actors are in a damned-if-you-do-damned-if-you-don't phase and there's no way out. The Fed being afraid to do whats necessary (and the fact that Wall St. will cry and have a meltdown if the apple cart is flipped) doesn't help. The fact that wage growth has stagnated for like 30 years (at least in the US) and markets became used to outsized profits doesn't help either. This inflation issue is entirely a making of our own shortsightedness.

sprash 4y ago
> This inflation issue is entirely a making of our own shortsightedness. Yes, central banks printing money relentlessly for more than a decade has nothing to with it. We the people are to blame!
- generj 4y ago
  Broadly speaking we the people cheered for and demanded cheap money. Baby steps towards raising rates (during massive boom years) were decried by the markets, by politicians (an particular an ex-President) and by the populace generally who are not well informed on what central banks do. The central banks should have raised rates anyways - but let’s not pretend like everyone wouldn’t have hated them for causing a recession or even just a slow down in growth by doing so.
  - prottog 4y ago
    > let’s not pretend like everyone wouldn’t have hated them The whole point of the nominal independence of the Fed from the political process is that they would be able to take unpopular decisions that may hurt in the short term but will further their dual mandate (maximum employment and price stability) in the medium and long term. Seeing as they cannot do that, and these days are venturing further away from their mandate by assuming the mantle of fighting climate change as well as racial inequity, we might as well do away with it entirely. It's not like the financial history of this country hasn't been replete with one crisis after another even after the advent of the Fed, and one dollar at the time of the creation of the Fed is worth about $30 now, so prices have only been stable for a strange definition of price stability. (For comparison, the Swiss franc inflated about 10x in a similar time period.)
  - NickC25 4y ago
    >Broadly speaking we the people cheered for and demanded cheap money. Exactly! We saw what cheap money did to rebound the economy after the 2008 crash - it created the largest bull run we've ever seen. Politicians, hoping to keep their jobs (and make sure their trading accounts grew), said "yeah, we'll keep things right as they are" because they didn't want to be the ones that caused a cool down which would in turn cost them their jobs (and insider information).
- DoingIsLearning 4y ago
  OK so putting the sarcasm aside can anyone with a bit of know how on monetary policy actually explain why all the media keeps pointing at Covid and fertilizers and Ukranian war rather than the QE since 2008? Is this central banks diverting attention or is the parent comment overly simplifying this?
  - pm90 4y ago
    Would we have had a recession without Covid or the War? It seems pretty unlikely from what we know. Covid wrecked supply chains and the War wrecked energy + food prices. So the Fed has to step in to try and clamp on demand rather than letting the world economy grow organically to meet it.
    - cronix 4y ago
      Covid wrecked no supply chains. The overblown human reaction to it did. Oil prices were on the rise well before the Ukraine invasion.
    - NickC25 4y ago
      I have a feeling that the answer is yes - because economics is kind of cyclical. We can't have a boom without the inevitable bust, so to speak. Plus, keeping interest rates unrealistically low for over a decade just to please the highest echelons of financial power (under the bullshit guise that lower interest rates == more jobs) does nothing more than pause the natural economic cycle and, honestly, it just makes the bust that much more inevitable and dangerous.
  - comte7092 4y ago
    Your hunch is correct. The constant cry of “money printing!!!!” Is an oversimplification. It’s not totally wrong mind you, but as we all know, prices are set by supply and demand. An obvious example that I think a lot of people can easily connect with is the fact that globalization has been deflationary (it’s driven prices down), and that isn’t a monetary phenomenon. As someone sympathetic to MMT, the solution in my opinion has less to do with the fed, Congress needs to tighten fiscal policy.
  - 4y ago
- ransom1538 4y ago
  Loans. Having the central banks print cash is a great way to steal money. You just take on huge amounts of debt, pump trillions of generated cash into the system. Then the suckers (old people, working class) have their saved dollars devalued without any ability to earn interest. The corporations,rich, etc, then just watch as their debt value decreases over time [tomorrows dollars are worth less and less, and so is your debt]. The corps keep charging higher and higher prices - sucking up those sweet sweet future value dollars, while only owing yesterdays cash.
libraryatnight 4y ago
Short-term greed is the driver of that shortsightedness again and again.
- kelseyfrog 4y ago
  I'd call any system that is driven by the worst incentives and perpetually results in crises outcomes broken, but maybe I'm biased.
lotsofpulp 4y ago
>and the fact that Wall St. will cry and have a meltdown if the apple cart is flipped Does Wall St include people directly invested in equity and debt markets via 401k/IRA/defined benefit (DB) pensions/etc and indirectly via being taxpayers of jurisdictions that have taken on those DB pension liabilities?
- trgn 4y ago
  Lol yeah. The apple cart has already flipped. The "rich" are seeing their balance sheet completely melt down right now, and may even get worse still. People get what they want, and it's still not good. In this case, triumph of labor, high wage growth, low employment, and rentiers scurrying to eek out any kind of gain.
  - tome 4y ago
    > low employment Do you mean low unemployment?
    - trgn 4y ago
      derp yes. thanks
- fnordpiglet 4y ago
  Or anyone buying a home, or working for a company that uses debt to bridge cash flow, or anyone who uses infrastructure like roads. What I’m curious about is what component of inflation is the fact even with shipping rates dropped a ton they’re still twice what they were pre pandemic and fuel costs, which drives a marginal cost of any physical good, being so high? Maybe it’s a war disrupting energy prices and food? Inflation is caused when demand is higher than supply can meet. Given the worlds ability to produce JIT it feels implausible that supply can’t meet demand if inflation were just left alone. I don’t know that making everyone poorer to reduce demand is the right answer. Maybe just let inflation happen for a while and keep capital cheap so we can invest rapidly in expanding supply?
  - 4y ago
rcpt 4y ago
> The Fed being afraid to do whats necessary What are you referring to here? I understand the Fed can only raise rates and stop buying things. Rates are going up and they're reducing their balance sheets. I'd like them to stop backing mortgages completely but I don't think that's what they want to do anyway.
- NickC25 4y ago
  Raising rates to an appropriate level, keeping them there and firmly resisting Wall St's pressures to lower them. Somehow, people have been conditioned to believe that low interest rates == economic growth and that high, or reasonable interest rates (say, 5-10%) means a recession.....which is absurd if you think about it. The cost of a bank loan or mortgage isn't, nor shouldn't be, the bellwether for effectively measuring the state or health of a given country's economy. If a business has a need for an employee, that business will still have that need regardless if rates are 0.1%, 5%, 10% or 50%. Businesses of all sizes will just need to front more of their own money to grow, rather than using the bank's money to grow.

sprash 4y ago

> This inflation issue is entirely a making of our own shortsightedness. Yes, central banks printing money relentlessly for more than a decade has nothing to with it. We the people are to blame!

generj 4y ago
Broadly speaking we the people cheered for and demanded cheap money. Baby steps towards raising rates (during massive boom years) were decried by the markets, by politicians (an particular an ex-President) and by the populace generally who are not well informed on what central banks do. The central banks should have raised rates anyways - but let’s not pretend like everyone wouldn’t have hated them for causing a recession or even just a slow down in growth by doing so.
- prottog 4y ago
  > let’s not pretend like everyone wouldn’t have hated them The whole point of the nominal independence of the Fed from the political process is that they would be able to take unpopular decisions that may hurt in the short term but will further their dual mandate (maximum employment and price stability) in the medium and long term. Seeing as they cannot do that, and these days are venturing further away from their mandate by assuming the mantle of fighting climate change as well as racial inequity, we might as well do away with it entirely. It's not like the financial history of this country hasn't been replete with one crisis after another even after the advent of the Fed, and one dollar at the time of the creation of the Fed is worth about $30 now, so prices have only been stable for a strange definition of price stability. (For comparison, the Swiss franc inflated about 10x in a similar time period.)
- NickC25 4y ago
  >Broadly speaking we the people cheered for and demanded cheap money. Exactly! We saw what cheap money did to rebound the economy after the 2008 crash - it created the largest bull run we've ever seen. Politicians, hoping to keep their jobs (and make sure their trading accounts grew), said "yeah, we'll keep things right as they are" because they didn't want to be the ones that caused a cool down which would in turn cost them their jobs (and insider information).
DoingIsLearning 4y ago
OK so putting the sarcasm aside can anyone with a bit of know how on monetary policy actually explain why all the media keeps pointing at Covid and fertilizers and Ukranian war rather than the QE since 2008? Is this central banks diverting attention or is the parent comment overly simplifying this?
- pm90 4y ago
  Would we have had a recession without Covid or the War? It seems pretty unlikely from what we know. Covid wrecked supply chains and the War wrecked energy + food prices. So the Fed has to step in to try and clamp on demand rather than letting the world economy grow organically to meet it.
  - cronix 4y ago
    Covid wrecked no supply chains. The overblown human reaction to it did. Oil prices were on the rise well before the Ukraine invasion.
  - NickC25 4y ago
    I have a feeling that the answer is yes - because economics is kind of cyclical. We can't have a boom without the inevitable bust, so to speak. Plus, keeping interest rates unrealistically low for over a decade just to please the highest echelons of financial power (under the bullshit guise that lower interest rates == more jobs) does nothing more than pause the natural economic cycle and, honestly, it just makes the bust that much more inevitable and dangerous.
- comte7092 4y ago
  Your hunch is correct. The constant cry of “money printing!!!!” Is an oversimplification. It’s not totally wrong mind you, but as we all know, prices are set by supply and demand. An obvious example that I think a lot of people can easily connect with is the fact that globalization has been deflationary (it’s driven prices down), and that isn’t a monetary phenomenon. As someone sympathetic to MMT, the solution in my opinion has less to do with the fed, Congress needs to tighten fiscal policy.
- 4y ago
ransom1538 4y ago
Loans. Having the central banks print cash is a great way to steal money. You just take on huge amounts of debt, pump trillions of generated cash into the system. Then the suckers (old people, working class) have their saved dollars devalued without any ability to earn interest. The corporations,rich, etc, then just watch as their debt value decreases over time [tomorrows dollars are worth less and less, and so is your debt]. The corps keep charging higher and higher prices - sucking up those sweet sweet future value dollars, while only owing yesterdays cash.

libraryatnight 4y ago

Short-term greed is the driver of that shortsightedness again and again.

kelseyfrog 4y ago
I'd call any system that is driven by the worst incentives and perpetually results in crises outcomes broken, but maybe I'm biased.

lotsofpulp 4y ago

>and the fact that Wall St. will cry and have a meltdown if the apple cart is flipped Does Wall St include people directly invested in equity and debt markets via 401k/IRA/defined benefit (DB) pensions/etc and indirectly via being taxpayers of jurisdictions that have taken on those DB pension liabilities?

trgn 4y ago
Lol yeah. The apple cart has already flipped. The "rich" are seeing their balance sheet completely melt down right now, and may even get worse still. People get what they want, and it's still not good. In this case, triumph of labor, high wage growth, low employment, and rentiers scurrying to eek out any kind of gain.
- tome 4y ago
  > low employment Do you mean low unemployment?
  - trgn 4y ago
    derp yes. thanks
fnordpiglet 4y ago
Or anyone buying a home, or working for a company that uses debt to bridge cash flow, or anyone who uses infrastructure like roads. What I’m curious about is what component of inflation is the fact even with shipping rates dropped a ton they’re still twice what they were pre pandemic and fuel costs, which drives a marginal cost of any physical good, being so high? Maybe it’s a war disrupting energy prices and food? Inflation is caused when demand is higher than supply can meet. Given the worlds ability to produce JIT it feels implausible that supply can’t meet demand if inflation were just left alone. I don’t know that making everyone poorer to reduce demand is the right answer. Maybe just let inflation happen for a while and keep capital cheap so we can invest rapidly in expanding supply?
- 4y ago

rcpt 4y ago

> The Fed being afraid to do whats necessary What are you referring to here? I understand the Fed can only raise rates and stop buying things. Rates are going up and they're reducing their balance sheets. I'd like them to stop backing mortgages completely but I don't think that's what they want to do anyway.

NickC25 4y ago
Raising rates to an appropriate level, keeping them there and firmly resisting Wall St's pressures to lower them. Somehow, people have been conditioned to believe that low interest rates == economic growth and that high, or reasonable interest rates (say, 5-10%) means a recession.....which is absurd if you think about it. The cost of a bank loan or mortgage isn't, nor shouldn't be, the bellwether for effectively measuring the state or health of a given country's economy. If a business has a need for an employee, that business will still have that need regardless if rates are 0.1%, 5%, 10% or 50%. Businesses of all sizes will just need to front more of their own money to grow, rather than using the bank's money to grow.