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What most people don't realize about this covid-related inflation is that it was a different beast... it wasn't due to excess demand, it was due to restricted s

by dmn322 4y ago

What most people don't realize about this covid-related inflation is that it was a different beast... it wasn't due to excess demand, it was due to restricted supply. The fed using interest rates to beat inflation down could make sense when unemployment is at 2% in a normal economy, but when we're still experiencing global supply chain issues, you don't raise the rates. That's not the right way to beat inflation. Suppliers need loans to keep their doors open and expand capacity again. Raising the interest rates restricts access to these loans, and the shortages just stick around longer. Of course the people running the show know that, but they're using the excuse to raise rates to consolidate their share of the economy even though they know what will happen. The other thing that was driving the inflation was rich people using the PPP loans to speculate. If the goal was really just to control inflation, the fed rate isn't the only way. They could also have made the tax rate more progressive like it was in the 50s and 60s. But of course they haven't gone there in a long time.

JKCalhoun 4y ago
Maybe what's needed is a rejiggering of the supply chains instead. Shorter chains. i.e. bring back the local supply that we sold overseas decades ago. Obviously the fed can't make that change, but I was reacting to your implication that we just need to get back to where we were before Covid. I feel we were already losing altitude before Covid, the overhead airbags had already deployed. And just to further derail the conversation, was it really Covid itself that caused the supply chain disruption? Perhaps I could be convinced that somehow Covid got us into the current mess but I guess it would still follow then that if a Covid-like pandemic could take out the global economy for (checks watch) 3 years and counting, the problem still ultimately comes down to a dependency on an obviously fragile supply chain.
- dmn322 4y ago
  I'm fine with that, but that rejiggering takes liquidity. Trying to rejigger without loans being available is just going to end up being de-jiggering. If we want to control inflation, that's fine, raise taxes
xmcqdpt2 4y ago
The frustrating thing with the inflation crisis is that a lot of it is an emotional response to eg food prices. This is totally valid! Vital goods going up in price is scary! Wages also have been going up, maybe not as fast as the price of some goods, but still pretty fast. The issue is that people are very quick to internalize a rise in wages (I did this! I changed jobs, got better at my current job, got promoted etc.) and externalize a rise in costs (gov spending is the reason eggs are expensive!) when really the two things are very connected. People are pushing their representatives to tackle inflation without thinking for a second that this might mean they'll get fired or take a paycut. All the gains they've made since 2020 are personal wins, all the inflation is due to government spending.
- carlosjobim 4y ago
  Blaming wages for inflation is a misconception. Wages are always the last to increase with inflation - because the purpose of inflation is to exploit more resources from those who actually work and earn wages.
  - xmcqdpt2 4y ago
    I'm not blaming wages for inflation. Just noting that inflation is also responsible for a large proportion of many peoples raises and promotions etc. The government tackling inflation is going to repress wages.

by dmn322 4y ago

JKCalhoun 4y ago

Maybe what's needed is a rejiggering of the supply chains instead. Shorter chains. i.e. bring back the local supply that we sold overseas decades ago. Obviously the fed can't make that change, but I was reacting to your implication that we just need to get back to where we were before Covid. I feel we were already losing altitude before Covid, the overhead airbags had already deployed. And just to further derail the conversation, was it really Covid itself that caused the supply chain disruption? Perhaps I could be convinced that somehow Covid got us into the current mess but I guess it would still follow then that if a Covid-like pandemic could take out the global economy for (checks watch) 3 years and counting, the problem still ultimately comes down to a dependency on an obviously fragile supply chain.

dmn322 4y ago
I'm fine with that, but that rejiggering takes liquidity. Trying to rejigger without loans being available is just going to end up being de-jiggering. If we want to control inflation, that's fine, raise taxes

xmcqdpt2 4y ago

The frustrating thing with the inflation crisis is that a lot of it is an emotional response to eg food prices. This is totally valid! Vital goods going up in price is scary! Wages also have been going up, maybe not as fast as the price of some goods, but still pretty fast. The issue is that people are very quick to internalize a rise in wages (I did this! I changed jobs, got better at my current job, got promoted etc.) and externalize a rise in costs (gov spending is the reason eggs are expensive!) when really the two things are very connected. People are pushing their representatives to tackle inflation without thinking for a second that this might mean they'll get fired or take a paycut. All the gains they've made since 2020 are personal wins, all the inflation is due to government spending.

carlosjobim 4y ago
Blaming wages for inflation is a misconception. Wages are always the last to increase with inflation - because the purpose of inflation is to exploit more resources from those who actually work and earn wages.
- xmcqdpt2 4y ago
  I'm not blaming wages for inflation. Just noting that inflation is also responsible for a large proportion of many peoples raises and promotions etc. The government tackling inflation is going to repress wages.