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Author Topic: where is inflation headed?  (Read 5950 times)

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« Reply #25 on: March 03, 2022, 14:17 »
0
I guess inflation at eurozone will be 2 digit at the end of 2022 - so 10% or more. Cant imagine its going under 5%.
Everything ist getting more expensive and everything is harder to get. Prices for used cars are rising because there are not enough new cars. My aunt bought a used car 2 years ago and now she is getting more money for her car than she paid 2 years ago. Food ist getting more expensive month after month. There is no end in ricing prices.


however, those who think inflation will continue to rise for next few years (and are not on a fixed income) should be buying cars/houses on credit & repay in deflated currency


« Reply #26 on: March 03, 2022, 14:21 »
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Fair enough. I read the OP as being concerned about price increases but maybe they meant they were concerned about money supply? Anyway, good night.

No, the OP was concerned about total price increases....

first, thanks to those who have contributed thoughtful posts.

my OP was to suggest that this was NOT inflation as normally defined and was more due to special circumstances, mostly due to covid, so as covid receds(?) we should not expect continued inflation.

« Reply #27 on: March 03, 2022, 14:25 »
0
...
I really don't think its a historical thing, either. The differences are still relevant today.  But as I said, we could debate this for ever. Economics is pretty much a theoretical subject anyway....

perhaps, but those theories have major consequences in the real world, especially when decisions are made by officials who are not economists -- eg, what sort of stimulus (if any) should be used in response to the debacle of 2008-9, is any business 'too big to fail', etc

« Reply #28 on: March 03, 2022, 14:49 »
+1
...
I really don't think its a historical thing, either. The differences are still relevant today.  But as I said, we could debate this for ever. Economics is pretty much a theoretical subject anyway....

perhaps, but those theories have major consequences in the real world, especially when decisions are made by officials who are not economists -- eg, what sort of stimulus (if any) should be used in response to the debacle of 2008-9, is any business 'too big to fail', etc

This is explaining where today's inflation is coming from:

SVH

« Reply #29 on: March 03, 2022, 15:21 »
+3
...
I really don't think its a historical thing, either. The differences are still relevant today.  But as I said, we could debate this for ever. Economics is pretty much a theoretical subject anyway....

perhaps, but those theories have major consequences in the real world, especially when decisions are made by officials who are not economists -- eg, what sort of stimulus (if any) should be used in response to the debacle of 2008-9, is any business 'too big to fail', etc

This is explaining where today's inflation is coming from:


It's the Fed who controls and manipulates money supply. Not the politicians. Politicians only spend money and lend for it with approval of congress. So if the lending is a problem, I thought Biden asked for a record of a budget in his presidency for the "build back better"-plan. So you cannot link fed's decisions with presidency. There is no link.

« Reply #30 on: March 03, 2022, 15:35 »
+1
...
I really don't think its a historical thing, either. The differences are still relevant today.  But as I said, we could debate this for ever. Economics is pretty much a theoretical subject anyway....

perhaps, but those theories have major consequences in the real world, especially when decisions are made by officials who are not economists -- eg, what sort of stimulus (if any) should be used in response to the debacle of 2008-9, is any business 'too big to fail', etc

This is explaining where today's inflation is coming from:


It's the Fed who controls and manipulates money supply. Not the politicians. Politicians only spend money and lend for it with approval of congress. So if the lending is a problem, I thought Biden asked for a record of a budget in his presidency for the "build back better"-plan. So you cannot link fed's decisions with presidency. There is no link.

Ooh, yeah! Of course, there is. The chairman of the Fed is a political POTUS appointee. He is as "independent" as the SCOTUS justices who are almost always voting along the party lines.

The first 6 billion Covid plan (driving that initial 2020 spike) had 2 components: 3 billion from the Fed and 3 billion from the stimulus, including those checks he proudly put his signature on, for everybody to appreciate his "generosity". Both components are nothing else than hot-air money or "money printing".

Now it's pay-back time.

Besides Biden's build-back-better bill is dead, killed by Joe Manchin. So there's nothing coming from that, yet.

But if it will ever pass, then yes, I agree that it will generate inflation.
« Last Edit: March 03, 2022, 15:51 by Zero Talent »

SVH

« Reply #31 on: March 03, 2022, 15:50 »
0
The first 6 billion Covid plan (driving that initial 2020 spike) had 2 components: 3 billion from the Fed and 3 billion from the stimulus, and those checks he proudly put his signature on, for everybody to appreciate his "generosity".

Now it's pay-back time.

Besides Biden's build-back-better plan is dead, killed by Joe Manchin. So there's nothing coming from that, yet.

But if it will ever pass, then yes, I agree that it will generate inflation.

The build-back-better plan was originally at 3.5 trillion dollars. So if the stimulus package of Trump was just 3 billion that's a factor thousand! Actually a drop in the ocean if Biden's plan had gone ahead. So lucky then it didn't, because if you would take that amount, with your reasoning, inflation would go where it has never been before, right?

But actually Trump had a 900 billion stimulus package which was topped by Biden in March 2021 with $1.9 trillion coronavirus relief package. Over two times as much, that is.

Edit: I forgot about the CARES act which costed 2.2 trillion dollars as well. But I am sure Biden will surpass that pretty soon :) But heck what do I care. I don't live in the states.
« Last Edit: March 03, 2022, 15:58 by SVH »

« Reply #32 on: March 03, 2022, 15:57 »
+1
The first 6 billion Covid plan (driving that initial 2020 spike) had 2 components: 3 billion from the Fed and 3 billion from the stimulus, and those checks he proudly put his signature on, for everybody to appreciate his "generosity".

Now it's pay-back time.

Besides Biden's build-back-better plan is dead, killed by Joe Manchin. So there's nothing coming from that, yet.

But if it will ever pass, then yes, I agree that it will generate inflation.

The build-back-better plan was originally at 3.5 trillion dollars. So if the stimulus package of Trump was just 3 billion that's a factor thousand! Actually a drop in the ocean if Biden's plan had gone ahead. So lucky then it didn't, because if you would take that amount, with your reasoning, inflation would go where it has never been before, right?

But actually Trump had a 900 billion stimulus package which was topped by Biden in March 2021 with $1.9 trillion coronavirus relief package. Over two times as much, that is.

Oops, sorry, my mistake! Good catch!

The initial Trump bailout was 6 trillion indeed! That's what I meant to say.

An emergency stimulus package to bail out the US economy amid the coronavirus pandemic will total $6 trillion a quarter of the entire countrys GDP, the White House said Tuesday.

The graph I posted above doesn't lie.
This is also when The US has reached the highest debt to GDP ratio ever. Higher than after WWII! Imagine that!

Edit: you don't live in The USA, but printing dollars out of hot air, is surely impacting the world economy.
In a way, the rest of the world suffers even more, since The USA only has to print money to pay (a part of) its international debts. The dollar is still the preferred currency in international trade, so "printing" dollars is a modern way to make others pay an old fashion tribute.
« Last Edit: March 03, 2022, 16:40 by Zero Talent »

SVH

« Reply #33 on: March 03, 2022, 16:15 »
0
Here you can see what president spends what. And also the income and deficit change compared to the GDP.

https://www.presidency.ucsb.edu/statistics/data/federal-budget-receipts-and-outlays

« Reply #34 on: March 03, 2022, 16:30 »
+1
Here you can see what president spends what. And also the income and deficit change compared to the GDP.

https://www.presidency.ucsb.edu/statistics/data/federal-budget-receipts-and-outlays

Interesting. Yes, you can also see there, that Trump had a higher deficit, as % of GDP, than any other president after WWII.
This is the most serious root cause of today's inflation (without saying that the Biden administration is innocent)
« Last Edit: March 03, 2022, 16:40 by Zero Talent »

« Reply #35 on: March 04, 2022, 03:24 »
+1
Fair enough. I read the OP as being concerned about price increases but maybe they meant they were concerned about money supply? Anyway, good night.

No, the OP was concerned about total price increases....

first, thanks to those who have contributed thoughtful posts.

my OP was to suggest that this was NOT inflation as normally defined and was more due to special circumstances, mostly due to covid, so as covid receds(?) we should not expect continued inflation.
Its like the inflation of the seventies. There was a temporary oil price shock to trigger inflation.
Everybody thought inflation will be temporary, but ist wasn't. People got accustomed that money is loosing value. This caused a low saving ratio to keep infbion at a high level. At the end of the seventies there has been 1% inflation - per month.
Paul Volcker fighten Inflation with 21% interest rate of the Fed successful. The Fed will rise interest rate this year to fight high inflation again. The ECB can't rise interest rate because of high debt of eurozone countries like Italy.
This means that longer ECB wait to rise interest rate that higher it will be when the ECB is forced to rise interest rate.
This will be very bad times for debtors. Get rid of all debt now, don't make new one. Debt will kill you in a few years if they are to high.
« Last Edit: March 04, 2022, 03:28 by ttart »

« Reply #36 on: March 04, 2022, 04:38 »
+1
Agree broadly with the gist of what has been said. There is a huge spike in prices, which could be long term in itself, because of supply chain issues coupled with opportunistic corporate greed. Containers can cost up to 10X what they did pre pandemic to ship and shipping companies are making profits in months that used to take them decades, I dont have the figures to hand but they are insane. Just because a lot of these things were triggered by the pandemic doesn't mean they will ever return to where they were previous to it.

Also, the Fed had already broken the economy from 2008-2014 by creating shed loads of money. This has led to HUGE asset inflation (look at the stock and housing markets) thanks to how that money was distributed coupled with very low interest rates. It went straight to the top who have desperately been looking for ever more risky ways to spend it. Price inflation in the previous decade has largely not happened outside of this, which has been a mystery to many analysts. Christopher Leonard is very good on this stuff.

The 2020 cheques will likely have more of a direct impact; but who knows in this new world and who can disentangle that from all the other crazy unprecedented stuff both in the way markets have been run and with world events ouside of that? As I mentioned people have been swearing hyperinflation was going to happen any second now for over decade at this point. We live in interesting times.

EDIT: forgot to mention Trump's tax cuts for the richest Americans, which love it or loath it also contributes to both asset inflation and higher inflation generally (one way of bringing down inflation is higher taxes).
« Last Edit: March 05, 2022, 05:05 by Justanotherphotographer »

« Reply #37 on: March 04, 2022, 08:36 »
0

Its like the inflation of the seventies. There was a temporary oil price shock to trigger inflation.
Everybody thought inflation will be temporary, but ist wasn't. People got accustomed that money is loosing value. This caused a low saving ratio to keep infbion at a high level. At the end of the seventies there has been 1% inflation - per month.
Paul Volcker fighten Inflation with 21% interest rate of the Fed successful. The Fed will rise interest rate this year to fight high inflation again. .

No. This is is incorrect. The Great Inflation of the 70s was not triggered by the oil price, but by the excessive "money printing", as it always was and is.

 The origins of the Great Inflation were policies that allowed for an excessive growth in the supply of moneyFederal Reserve policies.
...
one critical and erroneous assumption to the implementation of stabilization policy of the 1960s and 1970s was that there existed a stable, exploitable relationship between unemployment and inflation. Specifically, it was generally believed that permanently lower rates of unemployment could be bought with modestly higher rates of inflation.

https://www.federalreservehistory.org/essays/great-inflation
« Last Edit: March 04, 2022, 08:46 by Zero Talent »

« Reply #38 on: March 04, 2022, 14:41 »
+1
Here you can see what president spends what. And also the income and deficit change compared to the GDP.

https://www.presidency.ucsb.edu/statistics/data/federal-budget-receipts-and-outlays

Interesting. Yes, you can also see there, that Trump had a higher deficit, as % of GDP, than any other president after WWII.
This is the most serious root cause of today's inflation (without saying that the Biden administration is innocent)

that's been the case with every republican president in last 60 years - they rail against spending by democrats, then have massive spending themselves without a means to pay for it (unlike biden's plans, which are trillions over 10 YEARS, not the single year of the stimuli, and paid for w increased taxes)  and, of course, republicans recklessly cut taxes for the rich, decreasing income

« Reply #39 on: March 04, 2022, 15:02 »
0

Its like the inflation of the seventies. There was a temporary oil price shock to trigger inflation.
Everybody thought inflation will be temporary, but ist wasn't. People got accustomed that money is loosing value. This caused a low saving ratio to keep infbion at a high level. At the end of the seventies there has been 1% inflation - per month.
Paul Volcker fighten Inflation with 21% interest rate of the Fed successful. The Fed will rise interest rate this year to fight high inflation again. .

No. This is is incorrect. The Great Inflation of the 70s was not triggered by the oil price, but by the excessive "money printing", as it always was and is.

 The origins of the Great Inflation were policies that allowed for an excessive growth in the supply of moneyFederal Reserve policies.
...
one critical and erroneous assumption to the implementation of stabilization policy of the 1960s and 1970s was that there existed a stable, exploitable relationship between unemployment and inflation. Specifically, it was generally believed that permanently lower rates of unemployment could be bought with modestly higher rates of inflation.

https://www.federalreservehistory.org/essays/great-inflation

hard to believe now, but CD in the early 80s were paying 15%+ interest over short term

« Reply #40 on: March 04, 2022, 15:23 »
0
..
This will be very bad times for debtors. Get rid of all debt now, don't make new one. Debt will kill you in a few years if they are to high.

exactly the opposite - as long as your income is indexed to inflation, you'll pay current debt with cheaper future dollars


If wages increase with inflation, and if the borrower already owed money before the inflation occurred, the inflation benefits the borrower. This is because the borrower still owes the same amount of money, but now they more money in their paycheck to pay off the debt. This results in less interest for the lender if the borrower uses the extra money to pay off their debt early.

When a business borrows money, the cash it receives now will be paid back with cash it earns later. A basic rule of inflation is that it causes the value of a currency to decline over time. In other words, cash now is worth more than cash in the future. Thus, inflation lets debtors pay lenders back with money that is worth less than it was when they originally borrowed it.


https://www.investopedia.com/ask/answers/111414/does-inflation-favor-lenders-or-borrowers.asp


otoh, betting on low inflation can work for adjustable-rate mortgages (ARM) which typically start at lower rate than fixed rate mortgages. (with increased inflation the ARM would balloon). in 1983 we took a calculated risk that inflation would stabilize at 3% (hence little rise in interest rates) with an ARM 4-5 points lower than fixed rate. my calculation was if we made it thru 3-4 years at continued low rate, we'd pay off enough of the principal to come out ahead even if inflation later drove the interest rate up (yearly rate increase was also capped, unlike many ARM) - we paid off a 30 yr mortgage in 15 yrs

« Reply #41 on: March 04, 2022, 16:24 »
0
Why is Thijs 's profile greyed out?

« Reply #42 on: March 04, 2022, 16:27 »
0
Here you can see what president spends what. And also the income and deficit change compared to the GDP.

https://www.presidency.ucsb.edu/statistics/data/federal-budget-receipts-and-outlays

Interesting. Yes, you can also see there, that Trump had a higher deficit, as % of GDP, than any other president after WWII.
This is the most serious root cause of today's inflation (without saying that the Biden administration is innocent)

that's been the case with every republican president in last 60 years - they rail against spending by democrats, then have massive spending themselves without a means to pay for it (unlike biden's plans, which are trillions over 10 YEARS, not the single year of the stimuli, and paid for w increased taxes)  and, of course, republicans recklessly cut taxes for the rich, decreasing income

Clinton was the only one who ended up with a surplus, during the past 50+ years, while Trump had the biggest post-WWII deficit to GDP, also because the GOP left him unchecked.
« Last Edit: March 04, 2022, 16:51 by Zero Talent »

SVH

« Reply #43 on: March 05, 2022, 04:28 »
+1
Clinton was the only one who ended up with a surplus, during the past 50+ years, while Trump had the biggest post-WWII deficit to GDP, also because the GOP left him unchecked.
That's not completely fair. In the first two years of his presidency it was actually pretty average. And then came COVID. I thought the democrats even wanted to spend more then he did on the COVID measures. But I do agree that will all the moneyprinting the pain has only been forwarded. And it has added to the immense debt bubble companies and governments have been growing the last few decades, world wide. It has to blow up sometime. Maybe it has started already with Ukraine as a catalyst.

Brasilnut

  • Author Brutally Honest Guide to Microstock & Blog

« Reply #44 on: March 06, 2022, 09:56 »
0
Gas/petrol prices in Madrid yesterday....1 year ago gasoline was around EUR 1.10/litre.

« Reply #45 on: March 07, 2022, 00:22 »
0
Where is inflation headed?
Up
The war in Europe is going to drive it even higher.

« Reply #46 on: March 07, 2022, 07:59 »
+2
Gas/petrol prices in Madrid yesterday....1 year ago gasoline was around EUR 1.10/litre.
...and compared to the current prices in Germany that's actually cheap.  :'(

« Reply #47 on: March 07, 2022, 11:31 »
0
Diesel is near 2 Euros now :-(

« Reply #48 on: March 08, 2022, 19:05 »
+1
Wow, and I always taught the term "inflation" was used to describe something that was ... "inflated" !!!

I would make the difference between inflation and the normal price rises, caused by high demand or resource scarcity.

When the oil price is rising because of high demand during an economic boom, that's not inflation. When the oil price is rising because of scarcity (e.g. less Russian oil), that's not inflation.
Even when the prices are rising more globally, because of workforce scarcity (e.g. during the pandemic), that's just normal fluctuation, not inflation.

Inflation happens when the governments are running out of money, and they have to cover their costs and commitments through one form or another of "money printing".
Inflation takes time to manifest itself. It takes time for the "new" money to be passed from the national bank to commercial banks, then to big companies, then to smaller companies and employees, and ultimately to prices. And maybe only after that to those who rely on inflation-adjusted incomes.

The higher an organization is in this inflation chain, the more it benefits, because they get their hands on the "new" money before the prices had time to catch up with the money surplus.

In the USA, both the Trump and Biden administrations "printed" money like there was no end. Trump even more than Biden (so far). So what we see now is the consequence of that governmental spending spree, e.g. "real" inflation, on top of normal higher prices driven by scarcity of specific products and productive workforce.

We may recover from the "normal" component, but the money surplus is here to stay.

Uncle Pete

  • Great Place by a Great Lake - My Home Port
« Reply #49 on: March 14, 2022, 11:05 »
0
Just took a trip. We're still just under $4 a gallon locally. I saw $4.69 in IL. They have some higher taxes. That was closer to Chicago. Out a little, down to $4.49.

Just popped up on the Bing home page:

Inflation, meanwhile, is on the rise faster than at any point in over 30 years. That's according to the Consumer Price Index, which the US Bureau of Labor Statistics uses to monitor inflation.

Rising labor costs and ingredients prices, combined with soaring demand and a shipping crisis, are among the many reasons for the ongoing inflation issues.

I guess it's really inflation? There's also some trickery for packaging, again, this isn't new, but watch your contents on packages, bottles and boxes.

A bag of Doritos has five fewer chips than it used to, the company told Quartz. "Inflation is hitting everyone. We took just a little bit out of the bag so we can give you the same price and you can keep enjoying your chips," a Frito-Lay representative said.

Other ubiquitous consumer products have fallen victim to "shrinkflation,". Bounty has cut three sheets from each roll of paper towels, and a box of Wheat Thins now has 28 fewer crackers.

32oz bottles of Gatorade have been replaced with a 28 oz version at the same price. The company says not to worry, we'll still offer the larger bottles if you like that size better.

I want to point out that when I was in college a box of Triscuits was 14oz, and then they dropped to 13oz. Now they are just 8,5oz. But the problem is solved... they now offer a more expensive "Family Size" box that's 12.5 oz.  ::) Wheat thins have suffered the similar downsizing to keep prices appearing lower, when all we really get is less product for our money.

Yeah, getting older means saying, "I remember when a Hershey Bar was THIS BIG (hold out hands) and it only cost a dime!"  ;D

(NYT) Beginning Monday, a 10‐cent Hershey chocolate bar will still be a 10‐cent Hershey chocolate bar, but its size and weight will be smaller.

That was the word yesterday from the Hershey Foods Corporation, which devised this strategy following approval by the Price Commission of an increase in prices on 14 products manufactured by its chocolate and confectionery division. The company announced from its headquarters in Hershey, Pa., that its milk chocolate bar would shrink in size by 8.35 per cent. The bar, which weighed 1.375 ounces in 1972, will be reduced to 1,260 ounces.

Other chocolate items will increase in price by from 5 per cent to 10 per cent.


Did you know that the price of a Hershey bar was five cents from 1921 until 1969, when the price doubled to 10 cents? (which means when I was a kid I could still buy a Nickel Candy Bar)  You can probably find a 1.45 oz Hershey bar if you try, usually singles are 99 cents.

Maybe the world economics should be measured by the size and price of a chocolate bar?  ;)

Most articles took the time to Blame Biden of course. One of the risk vs reward parts of being the President, You get credit for anything good that happens and get blamed for anything bad, even if you really aren't the cause.


 

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