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Author Topic: where is inflation headed?  (Read 5951 times)

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« on: March 01, 2022, 15:39 »
+1
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.


SVH

« Reply #1 on: March 01, 2022, 15:53 »
+1
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.

« Reply #2 on: March 01, 2022, 17:18 »
+1
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.
« Last Edit: March 01, 2022, 17:29 by Zero Talent »

« Reply #3 on: March 02, 2022, 06:25 »
+4
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. Thats all it is. It's cause is another matter.

« Reply #4 on: March 02, 2022, 06:26 »
+1
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.
Sorry this is what I was replying to

« Reply #5 on: March 02, 2022, 08:11 »
+2
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. Thats 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".
« Last Edit: March 02, 2022, 09:44 by Zero Talent »

« Reply #6 on: March 02, 2022, 08:43 »
+1
?

thijsdegraaf

« Reply #7 on: March 02, 2022, 13:56 »
+2
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. Thats 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.
« Last Edit: March 02, 2022, 14:04 by thijsdegraaf »

« Reply #8 on: March 02, 2022, 14:09 »
0
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.
« Last Edit: March 02, 2022, 14:28 by Zero Talent »

thijsdegraaf

« Reply #9 on: March 02, 2022, 14:41 »
+2
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.  ;D
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.

« Reply #10 on: March 02, 2022, 15:06 »
0
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.  ;D
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.
« Last Edit: March 02, 2022, 15:31 by Zero Talent »

thijsdegraaf

« Reply #11 on: March 02, 2022, 15:18 »
+2
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.  ;D
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.  ;)

« Reply #12 on: March 02, 2022, 15:20 »
0

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.

thijsdegraaf

« Reply #13 on: March 02, 2022, 15:22 »
+1

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.

 ;D

« Reply #14 on: March 02, 2022, 15:38 »
+1
.
« Last Edit: March 02, 2022, 22:54 by Zero Talent »

« Reply #15 on: March 03, 2022, 01:35 »
0
 ::)

« Reply #16 on: March 03, 2022, 03:28 »
+1
How we even have a discussion of economics or fiscal policy when we not prepared to grasp the foundational definitions. A basic introductory course in economics covers this stuff. 

When analysing causes for inflation what are (all subcategories for inflation, not separate things by the way) Cost-Push Inflation, Demand-Pull Inflation, Fiscal Policy Inflation.

When calculating inflation rate as measured by the CPI or PPI how is inflation caused by "money printing" disentangled from other causes prior to the rate being published. Spoiler, it isnt, that is all done post hoc via analysis of the figures for inflation.

I was going to say it's a fallacy of the single cause, but its not even that. You are actually labelling a possible or partial cause as the effect, so a category error maybe?

« Reply #17 on: March 03, 2022, 05:14 »
+2
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:

Quote
"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 wagesnot 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 publics 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.

 
« Last Edit: March 03, 2022, 05:18 by Annie »

« Reply #18 on: March 03, 2022, 06:06 »
0
Honestly I think you had to dig pretty hard to find that definition and even that article explains the term is no longer commonly used in what it claims is its original definition. That includes by financial institutions, economists and certainly by the public at large.

Rather than digging around for 14 year old articles heres how the Bank of England defines it:

https://www.bankofengland.co.uk/knowledgebank/what-is-inflation

And the US Government:

https://www.dol.gov/general/topic/statistics/inflation

https://www.federalreserve.gov/faqs/economy_14419.htm

« Reply #19 on: March 03, 2022, 06:51 »
+1
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 wasnt 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.


« Reply #20 on: March 03, 2022, 07:01 »
+1
I guess my degree is out of date then. (lol - just kidding) And no, its not from Cleveland, its from RMIT in Australia. So maybe thats the problem ???  ;) (just kidding again)

But I remember having to write a short thesis on the differences between Price Increases and Inflation. And there's a lot more to it than those short sentences we see everywhere, and on those sites you linked. And more in line with what Zero was saying.

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.

Anyway, I'm going to bed. I'm tired and its been a long day for me. I'll leave it up to the rest of you guys to work it out.  :)
« Last Edit: March 03, 2022, 07:08 by Annie »

« Reply #21 on: March 03, 2022, 07:12 »
0
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.

« Reply #22 on: March 03, 2022, 08:01 »
+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.

And yes, an important cause is the artificial abundance of money (i.e. inflation).

Anyway, I'm afraid that it's unfair to be happy with the money falling from the skies as stimulus checks, and then be unhappy when the natural market forces are taking all back (and more), through inflation. Because it happens all the time.

Remember, excessive money printing is a hidden tax.
Politicians like the take credit for the checks, but not for their consequences.
In other words,  "After me, comes the flood".
One president even put his signature on them, and now, together with his party, they are exclusively blaming his successor (who is also guilty of the same, but to a lesser extent, so far) for the predictable effect of his "generosity".

« Last Edit: March 03, 2022, 10:49 by Zero Talent »

Uncle Pete

  • Great Place by a Great Lake - My Home Port
« Reply #23 on: March 03, 2022, 12:16 »
+1
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.

« Reply #24 on: March 03, 2022, 13:19 »
+2
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.

« 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 »
0
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.

« Reply #50 on: March 14, 2022, 12:18 »
0
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).

« Reply #51 on: March 14, 2022, 12:41 »
+1
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.
 ;D


« Reply #52 on: March 14, 2022, 13:14 »
+1
Seattle area prices are nearer to $5/gal (about $1.30/l) - but WA gas tax is one of the highest in US (CA is highest)

of course, none of these are close to EU prices.  i support higher gas taxes, as long as there's support for lower incomes


 

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