6 ms·

The inflation rate has come down significantly from a huge spike in 2022. Seems like we are making progress.

by fourteenfour 2y ago

fourside 2y ago
Also, what’s the end game? Current rates are not that bad relative to historical rates.
- jldugger 2y ago
  The end game is the fed delivering on their sub 2% promise. Anything less would cede their credibility, which they will need in future crises.
  - doctoboggan 2y ago
    I believe its no longer "sub" and now their mandate is just maintaining close to 2%
    - jldugger 2y ago
      I know that the fed (Powell?) has been suggesting that 2% should be a long term average, but I took that largely to forgive their performance thus far. If they want credibility in the market long-term, they'll have to demonstrate they can return below 2% before lowering rates.
  - baq 2y ago
    Not happening without a recession.
    - bediger4000 2y ago
      We heard that all through 2021-22 (or thereabouts) and it didn't happen. Why would it happen now?
      - baq 2y ago
        Exactly my point! :) ...but if it does happen, inflation will come down, too.
  - mindslight 2y ago
    Going right back to ZIRP will cede the Fed's credibility. Primary monetary creation needs to be done by the Treasury spending money for deliberate productive purposes, rather than given away as cheap undirected loans to banks so they can continue pumping up leveraged asset bubbles.
    - jldugger 2y ago
      > Going right back to ZIRP Sub 2 percent inflation, not sub 2 percent real interest rates.
  - WalterBright 2y ago
    The fed doesn't cause inflation, nor can the fed cure it. They can only react to it.
- wakawaka28 2y ago
  The way inflation is measured has radically changed over time. You can't realistically compare current numbers to those in the 70s. The same redefinition issue affects unemployment data. The only people I know trying to do apples-to-apples comparisons are the guys running https://www.shadowstats.com https://www.shadowstats.com
DidYaWipe 2y ago
By what measure? Not to mention that reducing inflation isn't going to roll back the massive price increases that have hurt consumers on staple items. This is what happens when you have monopolies and oligopolies doing what they please (after getting massive handouts in the form of tax cuts from Trump... surely with more on the way). The interest-rate hikes have failed; and yet here we are, waving our hands as if helpless.
- skywhopper 2y ago
  The measure is the inflation rate. Prices are not going to drop much or at all but income has also risen.
  - DidYaWipe 2y ago
    Inflation rate of what? Inflation can be measured against different "market baskets." Consider this huge defect in the commonly-cited one: "Core inflation is the change in the costs of goods and services but does not include those from the food and energy sectors. Food and energy prices are exempt from this calculation because their prices can be too volatile or fluctuate wildly." - https://www.investopedia.com/terms/c/coreinflation.asp https://www.investopedia.com/terms/c/coreinflation.asp And yet the cost of food is probably the most often-cited one in any news story about inflation... unless the winner is the other statistically-omitted one, fuel.
    - throw0101d 2y ago
      > Consider this huge defect in the commonly-cited one: There are multiple types of CPI because they measure different things, and they each have pluses and minuses. The reason why Core CPI is useful is illustrated by the orange and blue lines in the first graph: * https://www.economicshelp.org/blog/2587/inflation/difference-between-cpi-and-core-cpi/ https://www.economicshelp.org/blog/2587/inflation/difference... Good luck trying to policy with the orange (non-Core, which has food and energy) line. Or the red line in Chart 1 of: * https://www.frbsf.org/research-and-insights/publications/doctor-econ/2004/10/core-inflation-headline/ https://www.frbsf.org/research-and-insights/publications/doc... Food and energy are heavily dependent on commodity prices, which can swing widely: one month the Fed would be cutting by 3% and the very next month raising by 4% if they followed non-Core CPI (versus PCE). The Bank of Canada, who sets rates in Canada based on StatCan data, looks are three different CPI measures: * https://www.bankofcanada.ca/rates/indicators/capacity-and-inflation-pressures/inflation/ https://www.bankofcanada.ca/rates/indicators/capacity-and-in... * https://www.statcan.gc.ca/en/statistical-programs/document/2301_D63_T9_V2 https://www.statcan.gc.ca/en/statistical-programs/document/2...
WalterBright 2y ago
The deficit has come down, too. https://epicforamerica.org/the-economy/is-inflation-the-result-of-excessive-deficit-spending/ https://epicforamerica.org/the-economy/is-inflation-the-resu...
- kasey_junk 2y ago
  Can you state your hypothesis more explicitly? Because a trivial reading of the numbers show the inflation rate coming down (a lot) while the deficit has gone up.
  - WalterBright 2y ago
    See the link. The deficit has come down, and then the inflation came down. Figures 1A and 2. https://epicforamerica.org/the-economy/is-inflation-the-result-of-excessive-deficit-spending/ https://epicforamerica.org/the-economy/is-inflation-the-resu...
    - kasey_junk 2y ago
      If you graph economic progress on top of all this isn't it just saying that governments spend more when economic shocks happen? Other countries are pretty instructive as well. For instance Germany had inflation during a period when they had a budget surplus (for over a decade prior to 2019).
      - Jtsummers 2y ago
        > isn't it just saying that governments spend more when economic shocks happen? And that the revenue may be lower. Look at 2008 and 2009. Major increases in unemployment which also resulted in reduced revenue. Which created a double whammy, spending increased because the social safety net did what it was supposed to do (carry people through tougher times) and revenue dropped because there were fewer people paying taxes and many people reduced spending (beyond just those who lost their jobs). Then the deficit drops while the employment rate increases and revenues increases while spending again decreases commensurately.

The inflation rate has come down significantly from a huge spike in 2022. Seems like we are making progress.

fourside 2y ago

Also, what’s the end game? Current rates are not that bad relative to historical rates.

jldugger 2y ago
The end game is the fed delivering on their sub 2% promise. Anything less would cede their credibility, which they will need in future crises.
- doctoboggan 2y ago
  I believe its no longer "sub" and now their mandate is just maintaining close to 2%
  - jldugger 2y ago
    I know that the fed (Powell?) has been suggesting that 2% should be a long term average, but I took that largely to forgive their performance thus far. If they want credibility in the market long-term, they'll have to demonstrate they can return below 2% before lowering rates.
- baq 2y ago
  Not happening without a recession.
  - bediger4000 2y ago
    We heard that all through 2021-22 (or thereabouts) and it didn't happen. Why would it happen now?
    - baq 2y ago
      Exactly my point! :) ...but if it does happen, inflation will come down, too.
- mindslight 2y ago
  Going right back to ZIRP will cede the Fed's credibility. Primary monetary creation needs to be done by the Treasury spending money for deliberate productive purposes, rather than given away as cheap undirected loans to banks so they can continue pumping up leveraged asset bubbles.
  - jldugger 2y ago
    > Going right back to ZIRP Sub 2 percent inflation, not sub 2 percent real interest rates.
- WalterBright 2y ago
  The fed doesn't cause inflation, nor can the fed cure it. They can only react to it.
wakawaka28 2y ago
The way inflation is measured has radically changed over time. You can't realistically compare current numbers to those in the 70s. The same redefinition issue affects unemployment data. The only people I know trying to do apples-to-apples comparisons are the guys running https://www.shadowstats.com https://www.shadowstats.com

DidYaWipe 2y ago

By what measure? Not to mention that reducing inflation isn't going to roll back the massive price increases that have hurt consumers on staple items. This is what happens when you have monopolies and oligopolies doing what they please (after getting massive handouts in the form of tax cuts from Trump... surely with more on the way). The interest-rate hikes have failed; and yet here we are, waving our hands as if helpless.

skywhopper 2y ago
The measure is the inflation rate. Prices are not going to drop much or at all but income has also risen.
- DidYaWipe 2y ago
  Inflation rate of what? Inflation can be measured against different "market baskets." Consider this huge defect in the commonly-cited one: "Core inflation is the change in the costs of goods and services but does not include those from the food and energy sectors. Food and energy prices are exempt from this calculation because their prices can be too volatile or fluctuate wildly." - https://www.investopedia.com/terms/c/coreinflation.asp https://www.investopedia.com/terms/c/coreinflation.asp And yet the cost of food is probably the most often-cited one in any news story about inflation... unless the winner is the other statistically-omitted one, fuel.
  - throw0101d 2y ago
    > Consider this huge defect in the commonly-cited one: There are multiple types of CPI because they measure different things, and they each have pluses and minuses. The reason why Core CPI is useful is illustrated by the orange and blue lines in the first graph: * https://www.economicshelp.org/blog/2587/inflation/difference-between-cpi-and-core-cpi/ https://www.economicshelp.org/blog/2587/inflation/difference... Good luck trying to policy with the orange (non-Core, which has food and energy) line. Or the red line in Chart 1 of: * https://www.frbsf.org/research-and-insights/publications/doctor-econ/2004/10/core-inflation-headline/ https://www.frbsf.org/research-and-insights/publications/doc... Food and energy are heavily dependent on commodity prices, which can swing widely: one month the Fed would be cutting by 3% and the very next month raising by 4% if they followed non-Core CPI (versus PCE). The Bank of Canada, who sets rates in Canada based on StatCan data, looks are three different CPI measures: * https://www.bankofcanada.ca/rates/indicators/capacity-and-inflation-pressures/inflation/ https://www.bankofcanada.ca/rates/indicators/capacity-and-in... * https://www.statcan.gc.ca/en/statistical-programs/document/2301_D63_T9_V2 https://www.statcan.gc.ca/en/statistical-programs/document/2...

WalterBright 2y ago

The deficit has come down, too. https://epicforamerica.org/the-economy/is-inflation-the-result-of-excessive-deficit-spending/ https://epicforamerica.org/the-economy/is-inflation-the-resu...

kasey_junk 2y ago
Can you state your hypothesis more explicitly? Because a trivial reading of the numbers show the inflation rate coming down (a lot) while the deficit has gone up.
- WalterBright 2y ago
  See the link. The deficit has come down, and then the inflation came down. Figures 1A and 2. https://epicforamerica.org/the-economy/is-inflation-the-result-of-excessive-deficit-spending/ https://epicforamerica.org/the-economy/is-inflation-the-resu...
  - kasey_junk 2y ago
    If you graph economic progress on top of all this isn't it just saying that governments spend more when economic shocks happen? Other countries are pretty instructive as well. For instance Germany had inflation during a period when they had a budget surplus (for over a decade prior to 2019).
    - Jtsummers 2y ago
      > isn't it just saying that governments spend more when economic shocks happen? And that the revenue may be lower. Look at 2008 and 2009. Major increases in unemployment which also resulted in reduced revenue. Which created a double whammy, spending increased because the social safety net did what it was supposed to do (carry people through tougher times) and revenue dropped because there were fewer people paying taxes and many people reduced spending (beyond just those who lost their jobs). Then the deficit drops while the employment rate increases and revenues increases while spending again decreases commensurately.