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As long as the regular Joe doesn’t get extra money to spend, inflation will be check. Banks won’t go buy eggs anytime soon. We had close to 0% interest rates f

• cudgy 4y ago
  How does this explain food increases? Everyone decided to eat twice as much food because their student loan payments were paused?
• rqtwteye 4y ago
  I don’t really understand the inflation situation. When house prices shot up, heath care costs shot up, education costs shot up there was no inflation. But when the little guys got some money, suddenly we call it inflation. I don’t really get it.
  • fosk 4y ago
    When you give to 300+ million people extra cash to spend, you have inflation, yes. I am not arguing that “before” it was better for the “little guys”, I am just making an observation. You can affect the economy with fiscal policy (what our politicians/government does) and monetary policy (the central bank). Turns out monetary policy didn’t cause inflation to rise as much, as the previous 13 years demonstrate, but it was caused by liberal fiscal policy after Covid (all those points that I mentioned + supply chain bottlenecks). The fact that our government blames the Fed is just scapegoating. They messed up big time, and acted quickly in such a way that they were not able to coordinate properly (rates should have gone up in light of liberal fiscal policies being implemented). These two entities don’t work and collaborate well together, and hindsight is 20/20.
    • lumost 4y ago
      This is severely dismissing the economic distortion of monetary stimulus. We’ve effectively been printing money into wealthy individuals assets. Increasing wealth inequality has tangible negative effects on the economy and effectively functions as a reverse tax.
      • fosk 4y ago
        > Increasing wealth inequality has tangible negative effects on the economy and effectively functions as a reverse tax. I am not sure I understand what you are trying to say. Inflation either spikes up because of increased of demand, or lack of supply. In our case, both have happened: * Increased demand because free money is hitting the bank accounts of almost everyone. * Decreased supply because of supply chain bottlenecks, when every vendor canceled their orders in anticipation of a lack of demand (which never happened, with Covid), and then all of a sudden had to place again the same orders. Since every vendor practiced Just-In-Time order of all parts, the sudden demand (or - to put it in other words - the "lack of demand" which never happened) put them in a though spot where everyone was re-ordering the same parts again, but factories had to start with a fresh order queue. This is not a "wealthy people problem", this is a "everyone is creating demand" problem. Wealthy people cannot create inflation in common goods because they are both outnumbered by regular folks, and because there is not too many of them anyways. How many eggs can a wealthy family purchase anyways? The demand of wealthy people is otherwise focused on goods that are not affecting the rest of the pyramid (does anybody care if yachts are price inflated because too many wealthy people buy them?). Easy access to money caused inflation along with a supply chain bottleneck, the easy money that caused inflation was not ~2-3% loans that were accessible for 13 years prior to Covid, it was PPP loans, stimulus checks, and student loan pause, which all combined was given to pretty much the entire population of the US. Next thing you know, inflation is up. I am not saying that people didn't deserve handouts for a very unique and though time in the history of their lives (Covid), I am just making an observation with the benefit of hindsight.
        • lumost 4y ago
          My argument is that the last 13 years of low interest rates produced a distorted economy where wealthy individuals gained more wealth without making profits, and those without assets saw their incomes and living standards stagnate. Low-interest rates produced companies like Uber, and socialized losses for bank failures. Low-interest rates meant TSLA became the most valuable company in the world while turning a loss. When you print money, Its unsurprising that those closest to the money printer will accumulate the most money.
  • colpabar 4y ago
    It’s okay. I doubt anyone in this thread does either. Thank god the good guys have the presidency or else all this not inflations and not bank bailouts might have been a bigger deal, am I right?
    • hedora 4y ago
      I’m not sure what point you are trying to make. Are you upset that only democratic presidents (like George W Bush) bail out banks in financial crises, or that only democrats (like Donald Trump) engage in inflationary policies like keep interest rates artificially low and encouraging deficit spending during strong economic times? The bank bailouts, in particular, were done with broad bipartisan support.
  • pclmulqdq 4y ago
    It's because of what they count in the CPI. Staple foods, education, and housing aren't counted, and healthcare counts once a year.
    • pton_xd 4y ago
      Energy isn't included either. Kind of amazing they can get away with publishing an inflation stat that excludes every core household expenditure category.
      • fdr 4y ago
        there's no getting away with anything. The inflation stat "everyone" uses is preferred by economists because it is not as noisy, i.e. it has better temporal auto-correlation. However, there are all-inclusive metrics as well, and in fact those are used to compute the I-bond yield. https://www.bls.gov/news.release/cpi.t01.htm https://www.bls.gov/news.release/cpi.t01.htm
        • pclmulqdq 4y ago
          A more cynical take on this is that the remaining goods in the basket often have "adjustments" that can be made - for example, most technology gets discounted because the new version is faster (in top-line performance) than the old version. That adjustment process allows them to create a lower-noise metric, with the side effect of also creating an inflation narrative that is convenient (unless things are well and truly out of control, like they are now).
          • fdr 4y ago
            You could say that, but then you have to explain why all my commodity investments seem so terrible. This is mostly a joke, as I don't trade commodities; however, if BLS is juking the stats year over year with some agenda or other, basic inputs should have a steeper nominal trend line than they do, noisy as it is.
          • SilasX 4y ago
• prasadjoglekar 4y ago
  Inflation was there all along in asset prices - why else have home values gone up disproportionately relative to average Joe's income? What the Fed is doing with this move is patching the balloon and preventing a deflation. That is, bank has a run on deposits because people want their money back; bank is out of liquid cash; bank sells bonds/MBS that have mark-to-market less than par thus realizing losses. The downstream consequence that we didn't see with SVB was the bank starting to call unsecured loans, and pull back on lines of credit etc. Which should in turn have triggered the turning in of the leased Lambos and Audis....
  • fosk 4y ago
    Housing prices were going up because of supply/demand and not necessarily because of systemic high inflation. By the way just with regular <2% YoY inflation, a $1m home in 2005 was worth $1.3m+ in 2019 (before covid and the current inflation spike), and that is with regular inflation. Because homes cost a lot of money to begin with, the compounding effects of “healthy” inflation is going to be noticeable, and that doesn’t even factor in the low supply in the market.
    • wesapien 4y ago
      All the people that only saw the city for work/employment now don't have to live there. That was huge. Now we wait what's going to happen to all these office real estate. The office doesn't need to go away but not everyone has to have one these days.
    • lazide 4y ago
      Demand was increasing because money was very easy to get.
      • arcticbull 4y ago
        Then why didn't it happen in Japan? Same easy money, no increase in house prices. It's not the interest rates, it's the zoning rules. [1, 2] [1] https://fred.stlouisfed.org/series/JPNCPIHOUAINMEI https://fred.stlouisfed.org/series/JPNCPIHOUAINMEI [2] https://fred.stlouisfed.org/series/INTDSRJPM193N https://fred.stlouisfed.org/series/INTDSRJPM193N
• nimbius 4y ago
  Suspending educational loan payments is tapping the brakes on what is largely a trillion dollars of absolutely unsustainable debt Joe biden himself lobbied for and now lives in constant low key fear of. Stimulus checks were a feature of George w bush's presidency too during the great collapse of 2008. The past 13 years of qe put so much cash into the supply side that inflation was inevitable as all the governors for responsible corporate income basically evaporated with free money. The governments hamfisted bailout loan of about a dozen major conglomerates while ignoring small business during covid was probably the real torch that lit the powderkeg.
  • hedora 4y ago
    I still don’t understand why student loans are not forgivable during bankruptcy proceedings. It is a recent change, and pretty clearly in violation of the thirteenth amendment: “Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.” since there are legal implications if you default (including legal liability, wage garnishment, loss of social security benefits, and revocation of professional licenses). This is similar to indentured servitude, which is a form of involuntary servitude.
    • zeroonetwothree 4y ago
      Because if they were no one would give out student loans. Also it’s pretty offensive to equate paying back debt to indentured servitude.
      • 8note 4y ago
        Surely the government would keep giving them, with some proff that somebody actually wants to complete a useful degree. I think in the future, those student debt punishments will be looked on in a similar way to indentured servitude. At best, forced to work (though for an indefinite, likely forever time period) for whoever gave the loan, and at worst, much worse. Debts are risky, and should occasionally be discharged with bankruptcy. Zero risk loans make zero interest
• somewhereoutth 4y ago
  Almost by definition, inflation is caused only by expanding the money supply. Zero rates and QE expanded the money supply to be keep economies on life support after the GFC and Covid. However this led to asset bubbles more than high street inflation as the extra money flowed first to the already wealthy. Resource miss-allocation due to the miss pricing of time/risk has now likely manifested itself in lower productivity and so higher prices for goods and services too. Of course, helicopter money (debt cancellation, Covid relief), will also increase the money supply, but at least it will flow first to the most needy. If the price of eggs goes up because more people can actually afford to eat them, I'm not sure that is a bad thing.
• 7speter 4y ago
  Egg prices are up mostly because of a shortage caused by avian flu.
  • mrcode007 4y ago
    You’re not even close to being right. https://modernfarmer.com/2023/01/record-breaking-egg-profits-prompt-accusation-of-price-gouging/ https://modernfarmer.com/2023/01/record-breaking-egg-profits...
    • zeroonetwothree 4y ago
      Sounds like an unbiased and reliable source
      • mrcode007 4y ago
        https://www.ft.com/content/151cb429-d024-4d5c-9edf-5b4a2b104a66 https://www.ft.com/content/151cb429-d024-4d5c-9edf-5b4a2b104... How about this one ? https://scholarworks.umass.edu/cgi/viewcontent.cgi?article=1348&context=econ_workingpaper https://scholarworks.umass.edu/cgi/viewcontent.cgi?article=1... As unbiased as it can be. Hopefully you can stomach the direct quotes from the companies themselves.
        • creato 4y ago
          As long as there aren't any eggs going unsold, this is irrelevant to the price of eggs. If anything, the opposite is happening: sporadically there are limits on how many eggs one customer can buy in my grocery store.
          • mrcode007 4y ago
            Companies are deliberately limiting supply now as part of revenue management. Growing revenue can be simplistically thought of as maximizing a function of units sold * price per unit. You can decrease numbers sold and increase the price or the converse; 2 units * $10 or 10 units * $2. There is mounting evidence across countries and continents that this is what’s been going on. https://archive.is/1EbGX https://archive.is/1EbGX
• 88913527 4y ago
  Banks don't buy eggs, but they do buy mortgage-backed securities. The focus on eggs is a red herring. Eggs are what, 0.15% of a middle class household's monthly budget, and housing is at least >30%? I would have much less objection to this policy if it didn't have real negative impacts on median working Americans. Having a long term residence is a bedrock to stability.
• thedougd 4y ago
  You don’t think all the refinance cash out money contributed to inflation? You couldn’t find a trade with free time in the second half of 2020, 2021, and 2022.
• light_hue_1 4y ago
  This doesn't even pass the smell test. > It’s not the Fed that caused inflation, it is: > > * Suspending school debt (extra income) School debt repayments are about $100B per year ($0.1T). > * Injecting real cash into the economy (stimulus checks and PPP loans to small businesses) $800B in stimulus checks. PPP was about $800B as well. So we're talking $1.6T over 3 years, $0.5T/year. The US economy is $23T. Let's put $0.5T/year in perspective: social security payments are now $1.3T/year and defense spending is $0.8T/year. You're trying to argue that a 2% GDP increase in spending is the main cause of significant inflation? That's nonsense.
  • fosk 4y ago
    Defense spending doesn't contribute not even a little bit to how inflation (CPI) is being calculated, because the DoD is spending money on stuff that doesn't affect the general population. Unless everyone is trying to buy an F22, of course, and that finds its way into the CPI. Not every expense is the same when it comes to the cost of general goods and services.
    • light_hue_1 4y ago
      > Defense spending doesn't contribute not even a little bit to how inflation (CPI) is being calculated, because the DoD is spending money on stuff that doesn't affect the general population. Unless everyone is trying to buy an F22, of course, and that finds its way into the CPI. That's completely wrong. When the government spends on defense that money is not put into a large pit somewhere at Lockheed HQ and then lit on fire. It is spent on wages, on buying things from other contractors, etc. It ends up in people's pockets just like stimulus checks do. There's no difference. This is Econ 101 stuff. You're seriously misleading people in this thread about how CPI, inflation, and the economy as a whole works.
      • fosk 4y ago
        Defense spending more than doubled from 2000 to 2019, from ~320B to ~730B, while inflation grew on average 2.10% per year during the same time period. It is true that defense money gets redistributed across the population and into the economy, but that has always been the case and inflation was in check. The fact that you are insinuating that this has anything to do with the current inflation problem is misleading. In 2023 we are dealing with the fallback of Covid fiscal policies, not defense spending.
• StrangeATractor 4y ago
  > * Injecting real cash into the economy (stimulus checks and PPP loans to small businesses) That's kind of hard to believe when inflation went up worldwide.
  • fosk 4y ago
    The US is the largest market for almost any vendor, so more demand in the US will drive lack of supply elsewhere. That plus...the supply chain bottlenecks were real, and affect the whole world. Supply chain was the focus of the Fed until late 2021 when they realized they couldn't wait for the supply chain to fix itself anymore, and they started to lower demand by increasing the interest rates. The ECB followed the course. The fact that we focused so much on lowering US demand in 2022-2023 by increasing interest rates, should not distract us from the fact that supply chain bottlenecks are the real issue we are trying to fix (by lowering demand, most of which spiked up because of fiscal policy after Covid), which is a global problem. Jerome Powell was not wrong in saying that inflation was transitory, he was just too optimistic on the time it would take to heal the supply chain.
• spaceman_2020 4y ago
  The inflation was in valuations of everything from homes to equities to startups. You don’t get to value WeWork at 40B unless interest rates are 0%
• deleted 4y ago
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