7 ms·

“Inflation in the US has cooled for a seventh month in a row, but prices continue to rise far more quickly than is considered healthy.” How should one interpre

“Inflation in the US has cooled for a seventh month in a row, but prices continue to rise far more quickly than is considered healthy.” How should one interpret this? The overall inflation rate is going down, but inflation is still too high? I am a layman. What is the solution? More rate hikes? If borrowing costs are already so high (to buy a house for instance), then why isn’t inflation coming down even more and faster? Does it mean buyers still have too much cash or are too willing to borrow or risk even with high rates? Disclaimer: wrote this post with help chatgpt.

dragontamer 4y ago
"Prices are too high" is the problem people care about. "Inflation is still high" means the 1st derivative is still too high, and that prices will continue to go higher. "Inflation has cooled" means the 2nd derivative is negative. The 2nd derivative being low is a necessity to lower inflation (1st derivative).
- gautamdivgi 4y ago
  The question I have is that even with the 1st derivative at 0 (ie no inflation), the prices will still be too high. I believe prices won’t drop.
  - Am4TIfIsER0ppos 4y ago
    That's because the government wants to steal your money through inflation.
    - rileymat2 4y ago
      This is an interesting statement, obviously, cash assets suffer inflation, but is this where money is to be stole? If prices are going up, and I have goods or stock in companies that sell goods benefiting increased price, has anything really been stolen? I would think that intentional inflation is a signal to spend faster, holding money is bad. Nothing to do with theft.
      - yucky 4y ago
        The issue isn't that those well enough off to hold significant stock in those companies are suffering. It's the people who don't have shares and 2nd homes to liquidate.
        rileymat2 4y ago
        But the poor typically are not cash rich either and have debt, debt that is better serviced with increased wages that inflation can bring. Of course it is all predicated on wages/inflation in step which does not seem to be true.
      - thunky 4y ago
        > where money is to be stole I think the big one is at the large scale: government reducing it's debt burden by devaluing the currency that is used to repay their creditors. But even on the small scale it seems like they win: Let's say you have 100k in a HYSA that yields 5%. And the inflation rate is 10%. Not too far from current numbers. After 1 year, your real (inflation-adjusted) return is -5%, so you've lost 5k of spending power. But then, at tax time, you have to write a check to the govt to pay taxes on your 5k "gain".
        rileymat2 4y ago
        Not to be too theoretical, but aren't we the government? It is not some other entity, it is reducing our own debt burden that we owe collectively (presuming you are American). If anything the most angry should be foreign holders of American currency.
        Am4TIfIsER0ppos 4y ago
        Hah. Aren't americans always complaining about how monied interests control the outcome of their elections? As for europe there's different electoral shenanigans like holding a referendum then ignoring the result or taking more than 500 days to form a government after a national election because the stupid system doesn't deliver a clear winner.
  - oneoff786 4y ago
    That is correct. Your beliefs are also irrelevant here. If prices were dropping, inflation would be default be negative. That is, deflation.
sa46 4y ago
Fun historical quote: > In the fall of 1972 President Nixon announced that the rate of increase of inflation was decreasing. This was the first time a sitting president used the third derivative to advance his case for reelection. https://www.ams.org/notices/199610/page2.pdf https://www.ams.org/notices/199610/page2.pdf
oneoff786 4y ago
Inflation is the rate of change. If inflation is positive prices are rising. Inflation can be declining (second derivative) but still positive. Right now inflation over a 12 month period is higher than the historical norm of about 2%, but is falling. For individual months it’s been mostly normal levels. Largely a nothing story.
- birdymcbird 4y ago
  Make perfect sense. Thank you
codekansas 4y ago
Some level of inflation is good because it encourages investment, too high or too unpredictable is distortionary. Here are some explanations from the Jamaican central bank, in the form of Reggae songs: https://news.sky.com/video/jamaican-bank-releases-reggae-song-on-inflation-12058864 https://news.sky.com/video/jamaican-bank-releases-reggae-son... https://www.npr.org/2019/02/08/692823677/how-jamaica-found-a-creative-solution-to-an-age-old-problem-for-central-bankers https://www.npr.org/2019/02/08/692823677/how-jamaica-found-a... https://www.youtube.com/watch?v=ieRq4P1-yqY https://www.youtube.com/watch?v=ieRq4P1-yqY

dragontamer 4y ago

"Prices are too high" is the problem people care about. "Inflation is still high" means the 1st derivative is still too high, and that prices will continue to go higher. "Inflation has cooled" means the 2nd derivative is negative. The 2nd derivative being low is a necessity to lower inflation (1st derivative).

gautamdivgi 4y ago
The question I have is that even with the 1st derivative at 0 (ie no inflation), the prices will still be too high. I believe prices won’t drop.
- Am4TIfIsER0ppos 4y ago
  That's because the government wants to steal your money through inflation.
  - rileymat2 4y ago
    This is an interesting statement, obviously, cash assets suffer inflation, but is this where money is to be stole? If prices are going up, and I have goods or stock in companies that sell goods benefiting increased price, has anything really been stolen? I would think that intentional inflation is a signal to spend faster, holding money is bad. Nothing to do with theft.
    - yucky 4y ago
      The issue isn't that those well enough off to hold significant stock in those companies are suffering. It's the people who don't have shares and 2nd homes to liquidate.
      - rileymat2 4y ago
        But the poor typically are not cash rich either and have debt, debt that is better serviced with increased wages that inflation can bring. Of course it is all predicated on wages/inflation in step which does not seem to be true.
    - thunky 4y ago
      > where money is to be stole I think the big one is at the large scale: government reducing it's debt burden by devaluing the currency that is used to repay their creditors. But even on the small scale it seems like they win: Let's say you have 100k in a HYSA that yields 5%. And the inflation rate is 10%. Not too far from current numbers. After 1 year, your real (inflation-adjusted) return is -5%, so you've lost 5k of spending power. But then, at tax time, you have to write a check to the govt to pay taxes on your 5k "gain".
      - rileymat2 4y ago
        Not to be too theoretical, but aren't we the government? It is not some other entity, it is reducing our own debt burden that we owe collectively (presuming you are American). If anything the most angry should be foreign holders of American currency.
        Am4TIfIsER0ppos 4y ago
        Hah. Aren't americans always complaining about how monied interests control the outcome of their elections? As for europe there's different electoral shenanigans like holding a referendum then ignoring the result or taking more than 500 days to form a government after a national election because the stupid system doesn't deliver a clear winner.
- oneoff786 4y ago
  That is correct. Your beliefs are also irrelevant here. If prices were dropping, inflation would be default be negative. That is, deflation.

sa46 4y ago

Fun historical quote: > In the fall of 1972 President Nixon announced that the rate of increase of inflation was decreasing. This was the first time a sitting president used the third derivative to advance his case for reelection. https://www.ams.org/notices/199610/page2.pdf https://www.ams.org/notices/199610/page2.pdf

oneoff786 4y ago

Inflation is the rate of change. If inflation is positive prices are rising. Inflation can be declining (second derivative) but still positive. Right now inflation over a 12 month period is higher than the historical norm of about 2%, but is falling. For individual months it’s been mostly normal levels. Largely a nothing story.

birdymcbird 4y ago
Make perfect sense. Thank you

codekansas 4y ago

Some level of inflation is good because it encourages investment, too high or too unpredictable is distortionary. Here are some explanations from the Jamaican central bank, in the form of Reggae songs: https://news.sky.com/video/jamaican-bank-releases-reggae-song-on-inflation-12058864 https://news.sky.com/video/jamaican-bank-releases-reggae-son... https://www.npr.org/2019/02/08/692823677/how-jamaica-found-a-creative-solution-to-an-age-old-problem-for-central-bankers https://www.npr.org/2019/02/08/692823677/how-jamaica-found-a... https://www.youtube.com/watch?v=ieRq4P1-yqY https://www.youtube.com/watch?v=ieRq4P1-yqY