US inflation will likely drop below 5% by the end of the year, EU even lower.

this cycle is different since it's so covid related - as we return to normal, accrued savings are causing a rise demand vs supply for goods.  plus, the US Fed will be raising interest rates over the next few months

the big unknown is how Russia's invasion will affect oil prices worldwide, and food prices in less developed countries (Ukraine & Russia are large exporters of wheat, corn (19%)& sunflower oil (80%))
https://www.nytimes.com/2022/03/01/opinion/what-the-war-in-ukraine-means-for-the-worlds-food-supply.html

Only 1 percent of all corn grown in this country is eaten by humans. The rest is No. 2 yellow field corn, which is indigestible to humans and used in animal feed, food supplements and ethanol. but the use of ethanol for gasoline means edible corn is not grown, which could help with worldwide food shortages.

Inflation will rise dramatically, at least in Europe, because of energy prices. And certainly when Putin is fed up with european sanctions and will turn of the gas tap. These higher energy prices will effect other products because manufacturers use energy to produce their products. And that's besides the stoppage of products coming from Russia and Ukraine leading to scarcety.

Probably most European governments will welcome the inflation because they have taken on an incredible amount of debt, as well as the ECB, because of the expenses of the corona measures and the loss of tax income by it. So evaporation of debt which otherwise would take generations to repay might be very welcome, if they have also refinanced with low interest rates, by now, for the mid term.

So I don't know where you get your forecasts from regarding inflation but I'm pretty sure it will sore way above that. The US might have a smaller problem because they are not so exposed to both problems.

This not true at all. Inflation is the decline of the purchasing power of a currency for any reason and is measured most often by the increase of an average price level of a basket of selected goods. That�s all it is. It's cause is another matter.

This not true at all. Inflation is the decline of the purchasing power of a currency for any reason and is measured most often by the increase of an average price level of a basket of selected goods. That�s all it is. It's cause is another matter.

Yes, you are right with one observation. Many who are commenting on inflation do not realise that inflation is referring to a sustained increase in the general price level (as distinct from normal fluctuations).

As I said, the labor shortage caused by the pandemic is temporary and we will recover from it. That's not inflation.
The surge of the oil price caused by the scarcity of Russian oil is temporary, therefore not inflation. Likewise, the price increase for rooms in beach resort hotels during the summer is temporary, therefore not inflation.

The economists' consensus is that inflation is caused by "the growth in the money supply, alongside increased velocity of money".
Besides, many have also "inflated" its meaning by using terms like "oil price inflation", "house price inflation", etc instead of just "price increase".

Quote from: Justanotherphotographer on March 02, 2022, 06:25

This not true at all. Inflation is the decline of the purchasing power of a currency for any reason and is measured most often by the increase of an average price level of a basket of selected goods. That�s all it is. It's cause is another matter.

Yes, you are right with one observation. Many who are commenting on inflation do not realise that inflation is referring to a sustained increase in the general price level (as distinct from normal fluctuations).

As I said, the labor shortage caused by the pandemic is temporary and we will recover from it. That's not inflation.
The surge of the oil price caused by the scarcity of Russian oil is temporary, therefore not inflation. Likewise, the price increase for rooms in beach resort hotels during the summer is temporary, therefore not inflation.

The economists' consensus is that inflation is caused by "the growth in the money supply, alongside increased velocity of money".
Besides, many have also "inflated" its meaning by using terms like "oil price inflation", "house price inflation", etc instead of just "price increase".

The reason doesn't matter. A country's inflation is tracked and reported. Even if that is, for example, 1%.
Inflation can also arise if a country borrows too much. See https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_Republic
Before burglars stole my old coins, I had old German banknotes of over a million marks.

A country would rather have a small inflation than a deflation. High inflation not, of course.

Quote from: thijsdegraaf on March 02, 2022, 13:56

The reason doesn't matter. A country's inflation is tracked and reported. Even if that is, for example, 1%.
Inflation can also arise if a country borrows too much. See https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_Republic
Before burglars stole my old coins, I had old German banknotes of over a million marks.

A country would rather have a small inflation than a deflation. High inflation not, of course.

Yes Thijs, borrowing followed by printing money to pay the debt.
This is also mentioned in the article you quoted:
The debt problem was exacerbated by printing money without any economic resources to back it

Printing money (all kinds) and the inflation it generates, is a hidden form of taxation.

So the reason doesn't matter, because there is no other reason. Everything else is just supply-demand fluctuation.
The two factors may overlap, like these days, but the total price increase is not only caused by inflation. Only a part (an important one) is.

But politicians like to blame someone else for the additional hidden tax required to pay their excessive expenses.

Inflation is inflation whatever the cause. Hot is hot. it could be because of the sun, but also because I ran really hard. 
I know that these two causes are close to each other.
Our house prices are rising way too fast. One reason is that too little has been built. Another cause is that rich people, foreign companies buy them up to rent out, driving prices up even further. There are still a few causes. But it also causes inflation to us.

Quote from: thijsdegraaf on March 02, 2022, 14:41

Quote from: Zero Talent on March 02, 2022, 14:09

Quote from: thijsdegraaf on March 02, 2022, 13:56

The reason doesn't matter. A country's inflation is tracked and reported. Even if that is, for example, 1%.
Inflation can also arise if a country borrows too much. See https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_Republic
Before burglars stole my old coins, I had old German banknotes of over a million marks.

A country would rather have a small inflation than a deflation. High inflation not, of course.

Yes Thijs, borrowing followed by printing money to pay the debt.
This is also mentioned in the article you quoted:
The debt problem was exacerbated by printing money without any economic resources to back it

Printing money (all kinds) and the inflation it generates, is a hidden form of taxation.

So the reason doesn't matter, because there is no other reason. Everything else is just supply-demand fluctuation.
The two factors may overlap, like these days, but the total price increase is not only caused by inflation. Only a part (an important one) is.

But politicians like to blame someone else for the additional hidden tax required to pay their excessive expenses.

Inflation is inflation whatever the cause. Hot is hot. it could be because of the sun, but also because I ran really hard. 
I know that these two causes are close to each other.
Our house prices are rising way too fast. One reason is that too little has been built. Another cause is that rich people, foreign companies buy them up to rent out, driving prices up even further. There are still a few causes. But it also causes inflation to us.

No really, Thijs. Inflation is not the same as price rise.
As mentioned before, only a global and sustained price rise is inflation.
When the price is rising during the summer on your beach hotel, that's because of supply-demand, not inflation.
So that price is hot, but it's not inflation hot. It will fall back during the cold winter.
It's not a sustained price rise.

And yes, the home prices are going up because of the billions of stimulus checks thrown to the market in 2020 and 2021.
That's the perfect example of inflationary "money printing".

If the home prices are rising because of shortages, that's not inflation, because the money needed to pay a higher price for a home, must be taken from something else. So the global prices are not going up if the money mass remains constant on the market.

I bought my first house fifty years ago for 40 thousand guilders is 20 thousand euros. I am now buying a shed for that. 

Quote from: thijsdegraaf on March 02, 2022, 15:18

I bought my first house fifty years ago for 40 thousand guilders is 20 thousand euros. I am now buying a shed for that. 

I know. That's because there was a lot of money "printing" business going on, during all those 50 years.

 

 

I couldn't resist getting in on this discussion, and I just want to say that from my background in accounting and economics, I agree more with Zero's definition or rather his 'distinctions'.

Without getting into the complexities too much, I quickly found an article that sums up the differences between price increases and inflation:

https://www.clevelandfed.org/en/newsroom-and-events/publications/economic-commentary/economic-commentary-archives/2008-economic-commentaries/ec-20080601-rising-relative-prices-or-inflation-why-knowing-the-difference-matters.aspx

Note these paragraphs:

"Inflation Is a Misused Word

Inflation is one of the most misused words in economics. As economist Michael Bryan carefully explained a few years back, the word originally described currency and money, not prices. It referred to a rise in the amount of paper currency in circulation relative to the precious metal (or money) that backed it. Later, the term referred to the amount of money in circulation relative to the amount actually needed for trade. Today, however, people typically use the word to refer a rise in some set of prices or even in a single price, with no necessary connection to money at all. So now we have countless types of inflation: oil-price inflation, healthcare inflation, wage inflation. The unfortunate outcome of this evolution is that the public no longer distinguishes between two very different types of price pressure.

Strictly speaking, inflation refers only to a drop in the purchasing power of money that results when a central bank creates more money than its public wants to hold. Inflation manifests itself as a rise in all prices and wages�not just some subset of prices. People, of course, use money to conduct their day-to-day transactions, and their demand for money generally expands as the economy grows. If the public�s demand for money grows at, say, 3 percent per year, but the central bank creates money at 5 percent per year, then all prices and wages will eventually rise at 2 percent per year. Prices will keep climbing as long as the disparity between the supply and demand for money continues."

The subject of economics in itself is a very complex subject, and it can be debated until the cows come home.

But just quoting some quick google references, ie "Inflation is the decline of the purchasing power of a currency for any reason and is measured most often by the increase of an average price level of a basket of selected goods." by JustaPhotographer, is not really enough to fully understand the subject. (yes, I saw that one too. )

Whether this is important or not to the whole discussion, I don't know, but I thought I would just throw it into the ring, so to speak.

 

I have to somewhat apologise. I have spent a while reading up on the history of the world inflation and it does seem that in the mid-nineteenth and at the turn of the twentieth century it was primarily used in the way you define it. I wasn�t aware of that history.

I was going on what I had been taught at the end of the twentieth century and the way I have always seen it discussed in recent decades (�Will Increasing Money Supply Cause Inflation�, �Will Growth in Government Debt Cause Inflation� etc.) which sounds nonsensical when you start from the older definition.

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.

I will use the theory that a picture is worth 1,000 words (maybe more in inflationary times?)



A 100-trillion-dollar Zim note is worth 40 U.S. cents. But on the bright side, I could work Microstock and be a Trillionaire in Zimbabwe? As it is, I'm only a Millionaire.

That's inflation.

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

...
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

Quote from: cascoly on March 03, 2022, 14:25

Quote from: Annie on March 03, 2022, 07:01

...
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.

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.

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

Quote from: Zero Talent on March 03, 2022, 08:01

Quote from: Justanotherphotographer on March 03, 2022, 07:12

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.

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 money�Federal 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

Quote from: t�tar�t� on March 04, 2022, 03:24

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 money�Federal 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

Why is Thijs 's profile greyed out?

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.

Where is inflation headed?
Up
The war in Europe is going to drive it even higher.

Diesel is near 2 Euros now :-(

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!" 

(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.

I think the cheapest gas within 40 miles of here is 5.439 / gal. (California) Nowhere near Euro prices, but a lot if you drive a big truck and commute 100 miles a day (I don't). Painful as it is for me, I think gas should be expensive because of all the external costs, I just wish the $ didn't go to the oil companies and the petro states.

It does seem that prices are all on the rise here except for stock photos and electronics (those might get more expensive, but also better so an equivalent device might be a lot cheaper if you can find one).

Yeah, nowhere near this Dutch price.

Nothing beats Zero.