The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.
Is there an unconventional currency (to contrast your statement) that comes with either inherent value or trustless system? I'm genuinely curious what you meant.
Fiat currencies are not ideal but are the best known currency tool to date.
I commonly hear that blockchain-based currencies can be a good replacement for fiat currencies. But current examples of blockchain-currencies are either company-sponsored or community-based. This again puts a big weight on a single actor. I'd rather trust the admin of money to a government than a company or a community of anonymous economists/technologists.
Finally, the ability go debase (I assume you mean devaluating) a currency is (arguably) a desirable characteristic. During crises, responsibly devaluating a currency can help a country's economy.
> Fiat currencies are not ideal but are the best known currency tool to date.
By what metric?
>Finally, the ability go debase (I assume you mean devaluating) a currency is (arguably) a desirable characteristic. During crises, responsibly devaluating a currency can help a country's economy.
I'm skeptical that any benefit this brings outweighs the catastrophic damage it causes when misused. E.g. Weimar Germany, Zimbabwe.
As described in the article, we are living in a period known as the Great Moderation, a previously unforeseen time of financial stability, low unemployment, and lack of Major depressions. Bringing up autocratic developing countries isn't a great counterexample to the level of welfare we've been privy to in the developed world.
Finally, the ability go debase (I assume you mean devaluating) a currency is (arguably) a desirable characteristic. During crises, responsibly devaluating a currency can help a country's economy.
I've always seen this argument. But is there an example from the last 50 years when this actually worked?
> We began this public review in early 2019 to assess the monetary policy strategy, tools, and communications that would best foster achievement of our congressionally assigned goals of maximum employment and price stability over the years ahead in service to the American people.
As an American who knows nothing about monitor policy or the process by which it is developed, just how much public comment from an average American was considered or even put forward? Could someone comment on that aspect?
That sentence scored 27 on the 'Gunning Fog Scale Level'. Anything above 20 is considered "very difficult" to understand.
Based on this, i think one of the main issues is the 'average american' wouldn't be able to successfully interact with a body that expresses itself in such an obfuscated manner.
I'll go as far as saying the obfuscation is utterly deliberate.
We're talking about the Federal Reserve, not McDonald's. Given the far-reaching repercussions of their policies, it makes absolute sense that they would be extremely explicit in their grammar. While they use big words and it's a long sentence, nothing there is obfuscated.
The premise of your argument is that explicitness comes at the expense of additional complexity. I believe this premise may be flawed.
Let's rewrite it from:
> We began this public review in early 2019 to assess the monetary policy strategy, tools, and communications that would best foster achievement of our congressionally assigned goals of maximum employment and price stability over the years ahead in service to the American people.
To:
"""
We began this public review in early 2019. The goal was to assess items relating to monetary policy ("Monetary Policy" has to do with the creation and management of money at a national level).
Those monetary policy items under review were the:
- strategy.
- tools.
- communications.
The goals of the policy review, which were assigned by congress, were:
- maximum employment.
- price stability going forward, for years to come, in service to the American people.
"""
I believe nothing has been lost from the original text, and that this is far easier to read and understand.
Who do you think the target audience is? You seem to think that the target audience should be people on HN, or people who read less well even than us. That's not the actual audience. It's bankers.
Yeah this is nothing compared to an intro to econometrics textbook. It's not written for laymen to intake but to be processed by experts and commented on from there. It's important it's specific and precise language, not concise.
An important pillar of the review was the Fed Listens initiative. Fourteen Fed Listens events held around the country in 2019 engaged a wide range of organizations—employee groups and union members, small business owners, residents of low- and moderate-income communities, workforce development organizations and community colleges, retirees, and others—to hear about how monetary policy affects peoples’ daily lives and livelihoods. A fifteenth event was held in May 2020 to hear about the effects of the COVID-19 pandemic on communities around the United States. These events provided valuable feedback on monetary policy. Information about each of the events is provided below. The box on the right contains links to a report on the Fed Listens initiative and to one of the events, a flagship research conference held in June 2019.”
I think hacker news users tend to be cynical of the federal reserve and the mechanism of zero interest rate and the apparent money printing. For this catastrophic event however, Federal response has been pretty appropriate.
1.) in consideration of American citizens whose vast majority have student loan, credit card loan, or home loan, and was suffering from them, the zeroing of interest is appropriate here. (Also the administration’s postponement of loan repayment) And the Main Street was crying for it. That means the fed did listen to the American people. Folks have to remember that a lot of industries were decimated here.
2.) in the face of attacks from COVID - and in a sense the Chinese government, with their withholding policies on the deadliness of the virus, withholding of masks and medical supplies, and some Scientific theories say, the actual Manufacturing of the virus. And also attacks from the US internal unrests and rioting - and in some ways, attacks from democratic mayors and governors against the president, in letting the protests go unabated - the response from fed has been very appropriate.
And even if the majority of the American people didn’t notice the attacks and voiced it, the federal reserve surely did
Yea, this one goes from 0 to 100 real quick. The first half is a valid-ish argument, then the second is just an exponentially growing web of conspiracy theories...
> The unemployment rate hovered near 50-year lows for roughly 2 years, well below most estimates of its sustainable level. And the unemployment rate captures only part of the story. Having declined significantly in the five years following the crisis, the labor force participation rate flattened out and began rising even though the aging of the population suggested that it should keep falling.
The entire press release is worth a read, but I want to specifically call out the above quote. I think looking into these two statistics can form the basis for useful discussion.
Unemployment rate being "below estimated sustainable levels" has multiple interpretations, some charitable, some less so. One is that the current economy is better at allocating people to their jobs. This isn't a theory, just a hypothesis. Gig economy work, increases in highly skilled workers (Who traditionally have had lower unemployment than less-educated cohorts [0]) might be drivers that could reduce the friction of getting a job for contemporary workers.
To add another possible hypothesis, it could be that people are just hedging. If a large enough cohort of people feel unsafe or want to adjust their job risk profile, they might choose to commit to employment prior to a downturn. If people are hedging, we might even see a decrease in real wage as people value the (weak, but albeit better than nothing) insurance they get instead of being valued entirely by their market rate wage.
The labor force participation component, frankly, I'm confused on. The Bureau of Labor statics release clearly shows labor participation has been and is still falling (Covid blip aside, 5 year time window irrespective) [1]. Their footnote calls out the 25-54 year old bracket, which is apparently participating more. I can see why they say that the labor force participation rising is unexpected, I certainly don't see it.
To advance a different thesis, it is entirely possible that as people retire, a less than whole percent of their roles are being filled by people in this younger cohort, who can now more easily participate due to less labor being available for existing companies. This would align more with the BLS and Federal Reserve numbers, as we have, by percentage, more aged individuals (Who are the primary non-participants) in addition to growth in a cohort who we would expect to fill those rolls moving forward.
Are you paying 0% on your mortgage? If not then the Fed has room to lower rates. Joking aside I'd expect the Fed, and former Fed officials, to continue floating this idea into the public discourse over the next 6-18 months. The move into the corporate bond market is a start. QE is not limited treasuries, it is just the most efficent point to start with because all debt is marked off that, or was...
Mortgage interest rates are close to yearly inflation. Soon it’ll be free money to own Realestate, even if it’s not cash flow positive.
We could see a huge run up of property values as people shift to taking advantage of real estate leverage and tax advantages coupled with literally free money.
Some markets are artificially limited. In Texas you can only mortgage, by law, somewhere around $600k. Beyond that you have to get a “jumbo” loan that is at a higher interest rate. Curious to see if that limit gets conveniently repealed.
Conforming loans are subsidized by the US federal government because the US federal government buys them and so funding for them is basically limitless.
Maybe they should go back to prior practice where the Fed never set a formal target. From 2012:
> The Federal Reserve took the historic step on Wednesday of setting an inflation target, a victory for Chairman Ben Bernanke that brings the Fed in line with many of the world’s other major central banks.
I can't find any good references to the debate concerning explicit vs implicit inflation targeting, as opposed to inflation targeting more generally. But here's what Greenspan had to say 2005:
> To date, we have chosen not to formulate explicit inflation targets, in part, out of concern that they could inhibit the effective pursuit of our goal.
One of the arguments against inflation targeting, whether implicit or explicit, is that it invites asset bubbles--financial markets know that so long as the CPI[1] doesn't budge, they can go wild. But that's a somewhat different debate.
I think the basic argument against explicit targeting is that it hinders the Feds flexibility. With implicit targeting there's a degree of uncertainty and so markets arguably respond better to abrupt or unexpected changes; whereas with explicit targeting the Fed has to be more careful and gentle because markets will more heavily leverage against that fixed number.
[1] Or whatever measure they use; I don't know if it's CPI specifically.
As a general point I wouldn't quote Greenspan on just about anything after the GFC
> One of the arguments against inflation targeting, whether implicit or explicit, is that it invites asset bubbles--financial markets know that so long as the CPI[1] doesn't budge, they can go wild. But that's a somewhat different debate.
Basel III introduced a 'discretionary counter-cyclical buffer' on capital requirements to enable central banks to better manage asset bubbles, while still focusing on price stability with the cash rate.
> I think the basic argument against explicit targeting is that it hinders the Feds flexibility. With implicit targeting there's a degree of uncertainty and so markets arguably respond better to abrupt or unexpected changes; whereas with explicit targeting the Fed has to be more careful and gentle because markets will more heavily leverage against that fixed number.
Central banks strive to keep inflation at the target band on average, over the long term. It doesn't stop them from taking quick and decisive action in a crisis. A cursory study of the bank's actions (under Bernanke) at the outset of the GFC will affirm this.
That "underperformance" is part of why the Fed feels comfortable with this approach. There is room for the Fed to now accept >2% inflation, because it is saying that the average over a period of years/decades will be 2%.
I think the fed's own graph is the picture worth a thousand words. Don't forget that this is the M1 money supply, which will be expanded by about 8.5x by fractional reserve banking.
I understand M1 includes the most liquid portions of the money supply in circulation. When the Fed "prints" money I don't think they are talking about physical money.
"The money supply measures reflect the different degrees of liquidity—or spendability—that different types of money have. The narrowest measure, M1, is restricted to the most liquid forms of money; it consists of currency in the hands of the public; travelers checks; demand deposits, and other deposits against which checks can be written. M2 includes M1, plus savings accounts, time deposits of under $100,000, and balances in retail money market mutual funds."
The money is physical in the sense that people are able to extract value from it. It is given to a bank to loan out, essentially for free, and they are able to keep the interest.
So if you're a bank you basically are given free money by the government.
> which will be expanded by about 8.5x by fractional reserve banking.
Didn't they remove all reserve requirements back on March 15? I thought a 0 requirement would cause a bigger than 8.5X multiple with enough time (all else equal).
>Our new statement explicitly acknowledges the challenges posed by the proximity of interest rates to the effective lower bound. By reducing our scope to support the economy by cutting interest rates, the lower bound increases downward risks to employment and inflation. To counter these risks, we are prepared to use our full range of tools to support the economy.
What other tools do they have besides setting interest rates? They keep alluding to these tools but do not explicitly say what they are. Should we expect another round of quantitative easing?
“Other tools” has previously meant quantitative easing (Newspeak for buying assets with printed money), flash loans, and swap lines. The Fed has been mentioning they want the power to buy stocks:
We should I think take note that the head of the Fed is a Trump appointee, and Trump's definition of a "good economy" is one with a booming stock market.
Which is something that pumping $3 trillion into M2 will certainly achieve.
I think it’s very unfair to paint trump in that light. Stock market is the main focus for any president, but that’s because companies on the stock market employed A TON of PEOPLE. Of course there are companies who lay-off while stocks go vertical, but in general, stock prices rise allow companies to raise capital and hire more workers.
Also, this administration has been very active in getting money into the hands of the consumers directly. And also trying to shift work away from China back to the states
You're having things backwards, and I don't know where to start educating you, so I won't. Just remember some good rules of thumb: stock market isn't economy, allowing hiring workers isn't the same as hiring workers, US government is quite able to pursue conflicting goals at the same time.
While I think it is unfair to downvote someone just for offering their point of view but I do disagree with your point of view.
Trump got elected because of the working class who typically don’t see the light of increasing stock market. May be they should and may be having some kind of mandatory 401k match the administration was proposing at some point would help them but by and large they don’t.
China is one area I think he has been more consistent with. But the market largely doesn’t benefit from that. That’s why market cheered when the trade deal was signed and now Wall St is largely behind Biden camp hoping the status quo persists. If anything stock market wants to see rising China and stable relationships even though it might hurt long term bottom line and jobs here in US.
Don't you think you might be viewing this through an excessively partisan lens? Before Jerome Powell was the Fed Chair, he was a 5 year veteran of the Fed Board of Governors, having been nominated by Barack Obama. His appointment was approved in votes that included the vast majority of Democrats.
Are his dovish views all that different from his predecessors, Janet Yellen or "Helicopter Ben" Bernanke?
You seem to be insinuating that he is an undeserving lackey, something like a Betsy DeVos. But I just don't see the evidence for that.
Possibly, but let me put that another way. Something like this has never happened to a systemically import currency before in the history of reserve currencies of the world - the US dollar since Bretton Woods, Sterling roughly the hundred years before that.
The quality essentially required of a reserve currency being that it doesn't do this.
Definitely popcorn time - also don't own long date low interest rate bonds time. Which would be most of them. Oops.
Normally the US Fed has the following four tools at their disposal: the discount rate, reserve requirements, open market operations, and interest on reserves.
But now due to a very florid interpretation of the CARES Act [0], the US Fed has decided it is legal to buy both corporate debt and stocks[1].
This helps explain why the market is on such a bull run. The Fed has said they will be bailing out 401ks. The republicans (who would normally abhor this type of fiscal overreach) are delighted and the democrats don't know enough to read the writing on the wall.
To be fair, the Fed is going to bail out social security as well when they buy Treasuries to replenish the SS trust fund gap. The path to an attempted soft landing is inflating away the constraints the economy is encountering. We’re going to print, not repay, our way out of this.
Nominally you can do whatever you want, that it solves anything is another question. And in fact, they've been printing money for over a decade and things have only gotten worse. The Enron balance sheet could handle a lot too.
I think one key consideration is optics. Printing our way out satiates the power base of the population, even if it does cause longer term damage. Swallowing a bitter pill now causes immediate unrest, which is why we’ve a souses this for 12yrs running now.
I am sincerely asking here... as long as the US dollar remains the majority reserve currency won't the US be able to successfully print its way out and basically ignore the balance sheet? If you think the US could experience repercussions while being the majority reserve currency what are the plausible scenario(s) that that would manifest itself?
I agree with your statements about the non government sector and other items; however, I still don't follow your line of argumentation.
My understanding of why the US can print money without regard for consequences is because there are always "buyers" for US dollars, b/c countries need US Dollars to carry out business (e.g. China in order to maintain their export driven economy or the fact that the USD is used as the standard unit of currency in international markets for commodities such as gold and petroleum). Yes, there are technically other currencies that are part of the foreign exchange reserves, but none as prevalent as the USD.
As I understand it, this demand for US dollars is what allows USD to remain the dominant reserve currency and why when the US prints money it does not result in catastrophic inflation. If a country like Argentina tries to do what the US does it won't work out, because there is no demand for Argentinian dollars.
The conclusion I'm left with is that the balance sheet is largely irrelevant until the demand for US Dollar decreases. The real question in my mind is exactly what would cause that to occur? Most everything I read is that the network effect of the USD causes everyone to continue to use it, but perhaps something like a war between the US and China might be a precipitating event to decreased demand?
> The conclusion I'm left with is that the balance sheet is largely irrelevant until the demand for US Dollar decreases.
I agree if I change this to: the conclusion I'm left with is that the balance sheet is largely irrelevant (towards any inflationary terms) until the demand for US Dollar denominated debt decreases and is followed by increasing money supply without the increase in debt (government $ denom, corporate $ denom, and individual $ denom on net) and without increasing derivatives notional outstanding on that debt.
> The real question in my mind is exactly what would cause that to occur?
When intl banks get more comfortable with issuing debt (secured and unsecured) in non USD terms, I then would expect demand for USD fall as well so long the US maintains a trade deficit.
With the sunset of LIBOR in 2021, I expect things to pick up more on this front (Not everyone thinks SOFR is sufficient or lacks collateral to participate to the degree they currently need), though that's not stopping banks and OTC market making entities in various derivatives that extend credit in some form, including the use of cryptocurrencies.
A big problem with EM's is a lack of acceptable collateral backing the debt (arguably, this is the issue with the current global monetary system), investors wouldn't mind argentinian debt if they could have those debts backed by sufficient collateral in the event of default (sans the IMF bailout assumption of course, though some creditors continue to get hosed every time the default).
One thing that could cause this loss of faith to occur is if the Chinese are successful with making their new E-currency a medium of exchange for Americans.
My understanding is that the modern monetary theorists have an argument as to why this hyperinflation won't happen in a country with monetary sovereignty. (All the famous historical examples of hyperinflation involve countries that do not control their own currency.)
Damned if I can find a good basic text explaining the MMT argument. Naked Capitalism makes some great allusions but seems like you need to already be on their team to understand their arguments.
Seems pretty important to understand this stuff as we are all modern monetary theorists now whether we like it or not.
Have you ever held a $100 note in your hand? If you have you have necessarily caused $100 of "debt" to the nation - because you haven't immediately spent it as soon as you received it.
If you'd spent it, it would be taxed as it moves and would rapidly become a $20, then a $10 and so on.
There are lots of reasons why you, and everybody else doing the same, hasn't spent that $100 yet.
What everybody gets excited about and calls "debt" is essentially the world's working capital.
The MMT view shift is straightforward. Stop calling it "debt", and call it what it is on the other side of the balance sheet "savings" or "assets". Then all becomes clear.
"My understanding of why the US can print money without regard for consequences is because there are always "buyers" for US dollars"
That's the usual view.
It isn't correct.
The US "prints" money because foreign US dollar earners don't spend all they earn. They "save". Which takes the dollars out of circulation.
And they do that largely because they end up on the asset side of some bank somewhere who then discounts them into the local currency.
That process locks the dollars (or dollar financial asset like a Treasury) in place. To get rid of the dollars they have to get rid of the local currency too.
All you can do is offset the net non-government savings (which includes foreigners. They are little different in the MMT view). Any more and you get inflation.
Argentina not only can do it, that is exactly what they do do as a necessary function of the way a banking system works. Balance sheets expand and contract through the day.
Again to the extent that there is excess saving in ARS, the government sector could offset that by simply hiring the resulting unemployed and paying them.
That there is unemployed tells you that there is excess saving. As Warren Mosler would say "if there are unemployed then we are overtaxed for the size of government we have".
Nothing but a debt trap. Exchanging long term debt that yields for reserves that yield IOER and stay on bank balance sheets and enter the economy slower and slower the more they do it.
Increasing money supply != printing money to get out of debt.
As a countries population and prosperity grow, increasing money supply is expected. The US does not in large quantities print inflationary dollars, they print borrowed dollars. This is a subtle difference, but it is has profound implications. When the borrowed dollars are paid back, the money can be destroyed. Inflationary dollars by definition do not carry this trait.
I'm asking what the process of creating a borrowed dollar is versus the process of creating an inflationary dollar? Is there some financial instrument that the dollar is backed by that enables it to be paid back?
The Fed takes collateral, usually treasuries or bonds, and then gives dollars, these are borrowed dollars, backed by an asset. They carry an interest rate and will be paid back to the Fed. Once a dollar is paid back, the borrowed dollar is destroyed.
Inflationary dollars, which the US generally does not use this a lot, are dollars that the Fed would print and then give away. One way this is done is by paying interest on reserves, but this is not really a significant amount of money. In fact, I'd argue that we don't have enough inflationary dollars right now.
If the US was printing to pay back our debt; we don't do this, we borrow more, hence the increasing national debt, and also the reason that people keep giving the US money; we would see consumer inflationary effects. If the Fed just printed money and sent checks to people, again we'd see consumer inflationary effects. We generally don't do these things, instead we either borrow money or we take collateral and provide loans.
This doesn't mean that there aren't other effects in the economy by creating cheap borrowed money, but day-to-day hyper-inflation is not it.
How will these borrowed dollars be paid back short of real non-BS US economic expansion, which as I understand it is not presently occurring? If they are not actually paid back but just kicked down the road, are they still effectively borrowed, or are they effectively inflationary?
Not trying to troll, just trying to get a handle on the basics here.
So you make a good point. Yes, borrowed dollars CAN become inflationary. We will see this when PPP loans become grants. There are however, also deflationary effects happening at the same time due to the current pandemic...so which will dominate is hard to tell right now.
We are also experiencing supply and demand shocks, so we are experiencing higher prices in certain goods, but this is not inflation, we would expect that prices would return to normal when the constraint of the virus is removed.
I have a hypothesis that modern supply chains combined with weak labor make consumer inflation basically a thing of the past and we worry far too much about inflation that won't materialize in our normally operating global economy.
Luckily, until the world gives up the USD as reserve currency we might float it. Inflation spread over 3-4 billion spenders won't hit as hard as 400 million but it will definitely hit eventually...
The action of central banks setting interest rates is an artificial market intervention that necessarily suppresses others asset prices by making risk free assets available that pay free money to banks and financial institutions.
Once the central bank hits zero, asset prices return to their market clearing prices as participants chase yield
Not necessarily. So far it seems like the FED has gotten a lot better at preventing recessions / depressions. That might take some risk out of the market and cause valuations to go up given that risk is less.
Probably a little of both, but it is an interesting time in economics for sure.
We are all commenting on an internet forum run by a company whose entire purpose is to funnel money captured from the (predicted and actual) sale of valuable assets into the economy in the form of more new companies.
I will be K shaped, the rich get richer, pension people will be able to "enjoy" there pension and the poor wont be able to afford rent. Since big corps and funds will invest in housing to "save" money.
Since when are republicans for sane financing of anything? I thought that was just bullshit because it nearly always results in increased spending and cuts to services. They clearly just use this to con their base.
But the base doesn’t seem to want fiscal conservatism either, so the only ones who really fell for it were Democrats who took the Republicans’ position seriously, and the conservative intellectual movement pushing the policy.
Yeah cause it's all those red cities and states that are demanding we bail out their pensions using Covid as an excuse for the fiscal implosions they've been warned about for decades.
At the national level, both sides tend to claim one ideal and ignore it whenever they get into office in order to pay back their base - Republicans give tax breaks to the already-wealthy, Democrats tend to rain cash down on academia, school unions, legal industry, etc.
At the state and locality level, it's generally the rule that more conservative states and counties are in better fiscal shape, and that's with typically far lower taxes.
> At the state and locality level, it's generally the rule that more conservative states and counties are in better fiscal shape, and that's with typically far lower taxes.
Only because the federal government redistributes wealth from coastal states to interior ones.
They don’t have anything material, because the whole notion of controlling an economy with debt and unemployment demonstrably doesn’t work.
That’s why we are where we are.
This idea sprung up in the 1960s and took hold in the 1970s because some people couldn’t answer the inflation question that was a result of the failure of Bretton Woods and the oil shock.
We’re about the see another paradigm shift away from Central Banks as Wizard of Oz.
Hence the rise in interest in Modern Money Theory which puts the central bank Debt toy away and concentrates on what actually matters - ensuring everybody has an opportunity to contribute and gets an income from doing that.
> the gains began to be shared more widely across society. The Black and Hispanic unemployment rates reached record lows, and the differentials between these rates and the white unemployment rate narrowed to their lowest levels on record.
I didn't know this, and it runs against the "growing wealth inequality" narrative. Or maybe it's possible that wealth inequality is increasingly driven by factors other than race.
I feel that the media narrative is race is what drives inequity, but it certainly feels more like race is just a convenient scapegoat. In the end, it's all about concentration of power.
I guess that any kind of bail-out (of stocks, or banks, or owners of real estate, or whatever) will inevitably help to sustain and increase concentration of power. If nature took its course, then control of whatever aspect of the world crashed would diffuse across a new set of owners as it rebuilds.
Employment rate, not wealth inequality. And if most white people are employed, then you'd expect that most of the employment gains (i.e. increases in percent who are employed) would be in groups that were largely unemployed to before.
Yes, and conversely, during recessions, the poor get it worse. If you look at black poverty rates for the last ~60 years, it has declined overall, from ~55% to ~20%. But you can see every recession or economic dip in the graph as a bump in poverty rate.
>it runs against the "growing wealth inequality" narrative
There are two things happening at the same time. The bottom is doing a little better than they were (lower poverty rate, lower unemployment, education gains, and even income improvement). At the same time, the top is doing amazing. So you get two different narratives that are both true.
There is growing inequality.
The bottom is doing better.
You shouldn't ignore either one. If you fixate too much on inequality, you can push the bottom back down (everyone has nothing is very equal). If you ignore the inequality, society starts to crack.
> the differentials between these rates and the white unemployment rate narrowed to their lowest levels on record
Which means that wealth inequality (difference between top and bottom) is NOT increasing, but is decreasing. This contradicts your claim that the top is getting ahead and increasing the gap to the bottom.
So yes, it does run against the "growing wealth inequality" narrative.
Employment and wealth are related, but still separate things. It is orthogonal to the "growing wealth inequality" narrative, not in contradiction. Lowering the gap in unemployment may or may not reduce the wealth gap.
You’re interpreting too strong of a relationship between employment and inequality as if they were inverses of each other. Assume the rate at which top earners are accumulating wealth exceeds the rate of wealth accumulation for the poor. This presents a scenario in which employment is increasing but so is inequality, because low-earners are not realizing gains at the same, or faster, rate than top-earners.
There are a number of reasons they are not contradictory.. but the most simplistic would work like this:
Day 1: John has $10 and Joe has $100
Day 5: John has $11 and Joe has $250
Day 100: John has $15 and Joe has $1000
They certainly both have more than before, but one of them is much better off (especially if there is some form of inflation in play).
Also, blue collar wages have been largely stagnant or declining when measured against inflation (a very important point) since ~1980 while conversely white collar job incomes have been ballooning against the same measure. In particular, Executive compensation is utterly off the charts comparatively. When tax discount structures that vastly favor investment income over real wages is taken into account, the gains become even more stark (that is, the amount of income that can be retained v must be spent or is taxed).
I know this is counterintuitive but in order to spur growth, and encourage the right type of risk taking which is how you end up with innovations, I believe you need to have interest rates above a certain threshold. Indefinite ZIRP discourages risk taking and encourages financial growth arrangements.
Can you elaborate on this? ZIRP encourages people to seek riskier investments, which presumably means to spur growth. Low risk financial arrangements are exactly what suffers.
Based on my limited observation as a layman, it seems to encourage reckless investments in ideas that seemingly don't work. How many more 100 million quid bike rental schemes does the world need?
But that’s not people going to “financial arrangements.” ZIRP does encourage over reckless investment in ventures with low chance of working out, I am just saying it’s different.
The recent huge rise in the stock market suggests it is a sign of inflation to come. I've been noticing a lot of big price increases at the supermarket.
All those trillions of dollars are going to show up somewhere.
Inflation happens when people decide to spend and the supply isn't there to support it, but there's nothing inevitable about discretionary spending. In some countries in some crises, people react by spending more (panic buying) but in the US, typical behavior in uncertain times seems to be to spend less. (After stocking up on groceries and toilet paper.)
Although, I have read articles that certain real estate markets seem to be hot?
> Inflation happens when people decide to spend and the supply isn't there to support it
This is what happens in case of “market equilibrium in perfect competiton”, not IRL because supply is almost unlimited in practice for the US for manufactured goods (because most things are imported, and paid in USD).
In practice, inflation happens when retailers decide to raise their prices! It can either be because they must do it (because international currency price variation for instance, or oil market price) or because they see an opportunity to make profits by doing so.
It should be obvious to anyone paying attention during the early days of the pandemic that supply is not unlimited in the short run. Many supply chains are optimized for efficiency assuming that demand will follow projections. If consumers change behavior all at once, it causes immediate shortages.
Imports aren't magic. You will at least have to wait for cargo ships to cross the ocean (unless air freight makes sense). For mask manufacturing there were lots of other bottlenecks.
Of course in the longer run (months or years), things are different, but it still takes time to ramp up, and how long it will take isn't something you can answer in the abstract, using armchair reasoning.
All you say is true, but you are talking about an extreme event in the order of magnitude of a war. But inflation has happened all the time in history and isn't caused by such events.
If you look at two hundred years of US history, you won't explain inflation back shortage of supply.
Inflation is an average across many prices. Individual prices do often go up and down all the time due to changes in supply, in lots of different markets. An everyday example is that fruit is cheaper in season. Also, oil prices are certainly affected by changes in the supply of oil, for example when OPEC gets it together to agree to cut supply, or when the cartel fails and they start selling more oil again.
History is complicated with lots of different effects, but saying that supply has nothing to do with price changes means you aren't paying attention.
> in everyday example is that fruit is cheaper in season
You know that inflation is seasonally adjusted right?
> Also, oil prices are certainly affected by changes in the supply of oil […] but saying that supply has nothing to do with price changes
Ok fair, my sentence was a bit unclear, but I was reacting to this:
> Inflation happens when people decide to spend and the supply isn't there to support it
So what I meant when I said ”you won't explain inflation with [there was a typo here btw] shortage of supply” was more precisely: “inflation is almost never caused by fixed supply + increasing demand” (which was the initial point I was responding to)
Okay. When I said that inflation happens when people want to spend and supply isn't there to support it, that could also be due to a collapse in supply, and high inflation does seem to be associated with that, for example in Venezuela and in countries suffering under trade sanctions.
But I'm not sure I want to defend any particular theory of what usually causes inflation. My main point was that inflation (rising average prices) doesn't seem to be inevitable with increased money supply, as simple theories will have it.
I don't know if you want to continue talking, but I'm curious about something: you seem to be pretty certain you know what has usually caused inflation in US history, but you haven't said what what you think about that?
after hyperinflation finally hits, as the Ron Paulite fringe has been predicting for over 20 years, i hope they put Trump's big beautiful tremendous mug on the $1 trillion dollar bill.
i look forward to 2035 and warming myself up by burning trash bags full of trumpbux in an oil drum underneath an empty freeway overpass.
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[ 2.5 ms ] story [ 174 ms ] threadI commonly hear that blockchain-based currencies can be a good replacement for fiat currencies. But current examples of blockchain-currencies are either company-sponsored or community-based. This again puts a big weight on a single actor. I'd rather trust the admin of money to a government than a company or a community of anonymous economists/technologists.
Finally, the ability go debase (I assume you mean devaluating) a currency is (arguably) a desirable characteristic. During crises, responsibly devaluating a currency can help a country's economy.
By what metric?
>Finally, the ability go debase (I assume you mean devaluating) a currency is (arguably) a desirable characteristic. During crises, responsibly devaluating a currency can help a country's economy.
I'm skeptical that any benefit this brings outweighs the catastrophic damage it causes when misused. E.g. Weimar Germany, Zimbabwe.
I've always seen this argument. But is there an example from the last 50 years when this actually worked?
As an American who knows nothing about monitor policy or the process by which it is developed, just how much public comment from an average American was considered or even put forward? Could someone comment on that aspect?
Based on this, i think one of the main issues is the 'average american' wouldn't be able to successfully interact with a body that expresses itself in such an obfuscated manner.
I'll go as far as saying the obfuscation is utterly deliberate.
Let's rewrite it from:
> We began this public review in early 2019 to assess the monetary policy strategy, tools, and communications that would best foster achievement of our congressionally assigned goals of maximum employment and price stability over the years ahead in service to the American people.
To:
"""
We began this public review in early 2019. The goal was to assess items relating to monetary policy ("Monetary Policy" has to do with the creation and management of money at a national level).
Those monetary policy items under review were the:
- strategy.
- tools.
- communications.
The goals of the policy review, which were assigned by congress, were:
- maximum employment.
- price stability going forward, for years to come, in service to the American people.
"""
I believe nothing has been lost from the original text, and that this is far easier to read and understand.
...as you have found, this is not true.
An important pillar of the review was the Fed Listens initiative. Fourteen Fed Listens events held around the country in 2019 engaged a wide range of organizations—employee groups and union members, small business owners, residents of low- and moderate-income communities, workforce development organizations and community colleges, retirees, and others—to hear about how monetary policy affects peoples’ daily lives and livelihoods. A fifteenth event was held in May 2020 to hear about the effects of the COVID-19 pandemic on communities around the United States. These events provided valuable feedback on monetary policy. Information about each of the events is provided below. The box on the right contains links to a report on the Fed Listens initiative and to one of the events, a flagship research conference held in June 2019.”
You can google for the link.
1.) in consideration of American citizens whose vast majority have student loan, credit card loan, or home loan, and was suffering from them, the zeroing of interest is appropriate here. (Also the administration’s postponement of loan repayment) And the Main Street was crying for it. That means the fed did listen to the American people. Folks have to remember that a lot of industries were decimated here.
2.) in the face of attacks from COVID - and in a sense the Chinese government, with their withholding policies on the deadliness of the virus, withholding of masks and medical supplies, and some Scientific theories say, the actual Manufacturing of the virus. And also attacks from the US internal unrests and rioting - and in some ways, attacks from democratic mayors and governors against the president, in letting the protests go unabated - the response from fed has been very appropriate.
And even if the majority of the American people didn’t notice the attacks and voiced it, the federal reserve surely did
The entire press release is worth a read, but I want to specifically call out the above quote. I think looking into these two statistics can form the basis for useful discussion.
Unemployment rate being "below estimated sustainable levels" has multiple interpretations, some charitable, some less so. One is that the current economy is better at allocating people to their jobs. This isn't a theory, just a hypothesis. Gig economy work, increases in highly skilled workers (Who traditionally have had lower unemployment than less-educated cohorts [0]) might be drivers that could reduce the friction of getting a job for contemporary workers.
To add another possible hypothesis, it could be that people are just hedging. If a large enough cohort of people feel unsafe or want to adjust their job risk profile, they might choose to commit to employment prior to a downturn. If people are hedging, we might even see a decrease in real wage as people value the (weak, but albeit better than nothing) insurance they get instead of being valued entirely by their market rate wage.
The labor force participation component, frankly, I'm confused on. The Bureau of Labor statics release clearly shows labor participation has been and is still falling (Covid blip aside, 5 year time window irrespective) [1]. Their footnote calls out the 25-54 year old bracket, which is apparently participating more. I can see why they say that the labor force participation rising is unexpected, I certainly don't see it.
To advance a different thesis, it is entirely possible that as people retire, a less than whole percent of their roles are being filled by people in this younger cohort, who can now more easily participate due to less labor being available for existing companies. This would align more with the BLS and Federal Reserve numbers, as we have, by percentage, more aged individuals (Who are the primary non-participants) in addition to growth in a cohort who we would expect to fill those rolls moving forward.
[0] https://www.bls.gov/charts/employment-situation/unemployment...
[1] https://www.bls.gov/charts/employment-situation/civilian-lab...
I guess the rest boils down to "don't panic, we're not getting crazy here."
* they are not reducing interest rates further below their current levels (although no mention of raising them anytime soon)
* they are going to use "other tools" to stimulate the economy (QE?)
We could see a huge run up of property values as people shift to taking advantage of real estate leverage and tax advantages coupled with literally free money.
What you may be referring to are the parameters of a "conforming" home mortgage loan.
https://en.wikipedia.org/wiki/Conforming_loan
Conforming loans are subsidized by the US federal government because the US federal government buys them and so funding for them is basically limitless.
Mortgage rates for conforming loans are a few points higher than fed rate. That’s cause the government owns the actual loan.
> The Federal Reserve took the historic step on Wednesday of setting an inflation target, a victory for Chairman Ben Bernanke that brings the Fed in line with many of the world’s other major central banks.
Source: https://www.reuters.com/article/us-usa-fed-inflation-target-...
Has Bernanke issued a mea culpa, yet?
> To date, we have chosen not to formulate explicit inflation targets, in part, out of concern that they could inhibit the effective pursuit of our goal.
https://www.federalreserve.gov/boarddocs/speeches/2005/20050...
And in 2001:
> A specific numerical inflation target would represent an unhelpful and false precision
https://www.nytimes.com/2001/10/12/business/greenspan-reject...
One of the arguments against inflation targeting, whether implicit or explicit, is that it invites asset bubbles--financial markets know that so long as the CPI[1] doesn't budge, they can go wild. But that's a somewhat different debate.
I think the basic argument against explicit targeting is that it hinders the Feds flexibility. With implicit targeting there's a degree of uncertainty and so markets arguably respond better to abrupt or unexpected changes; whereas with explicit targeting the Fed has to be more careful and gentle because markets will more heavily leverage against that fixed number.
[1] Or whatever measure they use; I don't know if it's CPI specifically.
> One of the arguments against inflation targeting, whether implicit or explicit, is that it invites asset bubbles--financial markets know that so long as the CPI[1] doesn't budge, they can go wild. But that's a somewhat different debate.
Basel III introduced a 'discretionary counter-cyclical buffer' on capital requirements to enable central banks to better manage asset bubbles, while still focusing on price stability with the cash rate.
> I think the basic argument against explicit targeting is that it hinders the Feds flexibility. With implicit targeting there's a degree of uncertainty and so markets arguably respond better to abrupt or unexpected changes; whereas with explicit targeting the Fed has to be more careful and gentle because markets will more heavily leverage against that fixed number.
Central banks strive to keep inflation at the target band on average, over the long term. It doesn't stop them from taking quick and decisive action in a crisis. A cursory study of the bank's actions (under Bernanke) at the outset of the GFC will affirm this.
https://en.wikipedia.org/wiki/Basel_III#Capital_requirements
https://fred.stlouisfed.org/series/M1REAL
Can someone explain what this graph tells us?
From the Fed itself:
https://www.newyorkfed.org/aboutthefed/fedpoint/fed49.html
So if you're a bank you basically are given free money by the government.
Didn't they remove all reserve requirements back on March 15? I thought a 0 requirement would cause a bigger than 8.5X multiple with enough time (all else equal).
What other tools do they have besides setting interest rates? They keep alluding to these tools but do not explicitly say what they are. Should we expect another round of quantitative easing?
https://www.cnbc.com/2020/04/06/yellen-says-the-fed-doesnt-n...
Which is something that pumping $3 trillion into M2 will certainly achieve.
https://fred.stlouisfed.org/series/M2
What else it will achieve is another matter entirely
Also, this administration has been very active in getting money into the hands of the consumers directly. And also trying to shift work away from China back to the states
And welcome to Hacker News.
Trump got elected because of the working class who typically don’t see the light of increasing stock market. May be they should and may be having some kind of mandatory 401k match the administration was proposing at some point would help them but by and large they don’t.
China is one area I think he has been more consistent with. But the market largely doesn’t benefit from that. That’s why market cheered when the trade deal was signed and now Wall St is largely behind Biden camp hoping the status quo persists. If anything stock market wants to see rising China and stable relationships even though it might hurt long term bottom line and jobs here in US.
Are his dovish views all that different from his predecessors, Janet Yellen or "Helicopter Ben" Bernanke?
You seem to be insinuating that he is an undeserving lackey, something like a Betsy DeVos. But I just don't see the evidence for that.
The quality essentially required of a reserve currency being that it doesn't do this.
Definitely popcorn time - also don't own long date low interest rate bonds time. Which would be most of them. Oops.
It's a place that requires economic as well as poetic expertise.
But now due to a very florid interpretation of the CARES Act [0], the US Fed has decided it is legal to buy both corporate debt and stocks[1].
This helps explain why the market is on such a bull run. The Fed has said they will be bailing out 401ks. The republicans (who would normally abhor this type of fiscal overreach) are delighted and the democrats don't know enough to read the writing on the wall.
[0] https://www.bloomberg.com/opinion/articles/2020-06-18/fed-se... [1] https://www.forbes.com/sites/kevincoldiron/2020/07/18/the-fe...
Try to, we're going to try to print our way out of it.
https://fred.stlouisfed.org/series/M2
All floating currencies can do the same.
The issue is that the non government sector tends to hoard money rather than spending it.
The left want to confiscate those savings. The right try to mask them by pushing more and more people into debt.
The other option is that you realise net savings are largely inert in aggregate and essentially act like a tax.
Then you just accommodate them
My understanding of why the US can print money without regard for consequences is because there are always "buyers" for US dollars, b/c countries need US Dollars to carry out business (e.g. China in order to maintain their export driven economy or the fact that the USD is used as the standard unit of currency in international markets for commodities such as gold and petroleum). Yes, there are technically other currencies that are part of the foreign exchange reserves, but none as prevalent as the USD.
As I understand it, this demand for US dollars is what allows USD to remain the dominant reserve currency and why when the US prints money it does not result in catastrophic inflation. If a country like Argentina tries to do what the US does it won't work out, because there is no demand for Argentinian dollars.
The conclusion I'm left with is that the balance sheet is largely irrelevant until the demand for US Dollar decreases. The real question in my mind is exactly what would cause that to occur? Most everything I read is that the network effect of the USD causes everyone to continue to use it, but perhaps something like a war between the US and China might be a precipitating event to decreased demand?
I agree if I change this to: the conclusion I'm left with is that the balance sheet is largely irrelevant (towards any inflationary terms) until the demand for US Dollar denominated debt decreases and is followed by increasing money supply without the increase in debt (government $ denom, corporate $ denom, and individual $ denom on net) and without increasing derivatives notional outstanding on that debt.
> The real question in my mind is exactly what would cause that to occur?
When intl banks get more comfortable with issuing debt (secured and unsecured) in non USD terms, I then would expect demand for USD fall as well so long the US maintains a trade deficit.
With the sunset of LIBOR in 2021, I expect things to pick up more on this front (Not everyone thinks SOFR is sufficient or lacks collateral to participate to the degree they currently need), though that's not stopping banks and OTC market making entities in various derivatives that extend credit in some form, including the use of cryptocurrencies.
A big problem with EM's is a lack of acceptable collateral backing the debt (arguably, this is the issue with the current global monetary system), investors wouldn't mind argentinian debt if they could have those debts backed by sufficient collateral in the event of default (sans the IMF bailout assumption of course, though some creditors continue to get hosed every time the default).
My understanding is that the modern monetary theorists have an argument as to why this hyperinflation won't happen in a country with monetary sovereignty. (All the famous historical examples of hyperinflation involve countries that do not control their own currency.)
Damned if I can find a good basic text explaining the MMT argument. Naked Capitalism makes some great allusions but seems like you need to already be on their team to understand their arguments.
Seems pretty important to understand this stuff as we are all modern monetary theorists now whether we like it or not.
Have you ever held a $100 note in your hand? If you have you have necessarily caused $100 of "debt" to the nation - because you haven't immediately spent it as soon as you received it.
If you'd spent it, it would be taxed as it moves and would rapidly become a $20, then a $10 and so on.
There are lots of reasons why you, and everybody else doing the same, hasn't spent that $100 yet.
What everybody gets excited about and calls "debt" is essentially the world's working capital.
The MMT view shift is straightforward. Stop calling it "debt", and call it what it is on the other side of the balance sheet "savings" or "assets". Then all becomes clear.
That's the usual view.
It isn't correct.
The US "prints" money because foreign US dollar earners don't spend all they earn. They "save". Which takes the dollars out of circulation.
And they do that largely because they end up on the asset side of some bank somewhere who then discounts them into the local currency.
That process locks the dollars (or dollar financial asset like a Treasury) in place. To get rid of the dollars they have to get rid of the local currency too.
All you can do is offset the net non-government savings (which includes foreigners. They are little different in the MMT view). Any more and you get inflation.
Argentina not only can do it, that is exactly what they do do as a necessary function of the way a banking system works. Balance sheets expand and contract through the day.
Again to the extent that there is excess saving in ARS, the government sector could offset that by simply hiring the resulting unemployed and paying them.
That there is unemployed tells you that there is excess saving. As Warren Mosler would say "if there are unemployed then we are overtaxed for the size of government we have".
https://fred.stlouisfed.org/series/M2V
As a countries population and prosperity grow, increasing money supply is expected. The US does not in large quantities print inflationary dollars, they print borrowed dollars. This is a subtle difference, but it is has profound implications. When the borrowed dollars are paid back, the money can be destroyed. Inflationary dollars by definition do not carry this trait.
Inflationary dollars, which the US generally does not use this a lot, are dollars that the Fed would print and then give away. One way this is done is by paying interest on reserves, but this is not really a significant amount of money. In fact, I'd argue that we don't have enough inflationary dollars right now.
If the US was printing to pay back our debt; we don't do this, we borrow more, hence the increasing national debt, and also the reason that people keep giving the US money; we would see consumer inflationary effects. If the Fed just printed money and sent checks to people, again we'd see consumer inflationary effects. We generally don't do these things, instead we either borrow money or we take collateral and provide loans.
This doesn't mean that there aren't other effects in the economy by creating cheap borrowed money, but day-to-day hyper-inflation is not it.
Not trying to troll, just trying to get a handle on the basics here.
We are also experiencing supply and demand shocks, so we are experiencing higher prices in certain goods, but this is not inflation, we would expect that prices would return to normal when the constraint of the virus is removed.
I have a hypothesis that modern supply chains combined with weak labor make consumer inflation basically a thing of the past and we worry far too much about inflation that won't materialize in our normally operating global economy.
What are you suggesting exactly here? That the Fed is hell-bent on inducing general inflation, even at the cost of skyrocketing asset values?
Once the central bank hits zero, asset prices return to their market clearing prices as participants chase yield
Probably a little of both, but it is an interesting time in economics for sure.
By the 10 %? By the people entering pension?
I will be K shaped, the rich get richer, pension people will be able to "enjoy" there pension and the poor wont be able to afford rent. Since big corps and funds will invest in housing to "save" money.
At the national level, both sides tend to claim one ideal and ignore it whenever they get into office in order to pay back their base - Republicans give tax breaks to the already-wealthy, Democrats tend to rain cash down on academia, school unions, legal industry, etc.
At the state and locality level, it's generally the rule that more conservative states and counties are in better fiscal shape, and that's with typically far lower taxes.
Only because the federal government redistributes wealth from coastal states to interior ones.
https://www.forbes.com/sites/shaharziv/2020/05/12/blue-state...
That’s why we are where we are.
This idea sprung up in the 1960s and took hold in the 1970s because some people couldn’t answer the inflation question that was a result of the failure of Bretton Woods and the oil shock.
We’re about the see another paradigm shift away from Central Banks as Wizard of Oz.
Hence the rise in interest in Modern Money Theory which puts the central bank Debt toy away and concentrates on what actually matters - ensuring everybody has an opportunity to contribute and gets an income from doing that.
I didn't know this, and it runs against the "growing wealth inequality" narrative. Or maybe it's possible that wealth inequality is increasingly driven by factors other than race.
"In earlier decades when the Phillips curve was steeper, inflation tended to rise noticeably in response to a strengthening labor market"
It doesn't really matter much to the market if people are employed or not. Purchasing power is not vested in the people with a W-2.
There are two things happening at the same time. The bottom is doing a little better than they were (lower poverty rate, lower unemployment, education gains, and even income improvement). At the same time, the top is doing amazing. So you get two different narratives that are both true.
There is growing inequality.
The bottom is doing better.
You shouldn't ignore either one. If you fixate too much on inequality, you can push the bottom back down (everyone has nothing is very equal). If you ignore the inequality, society starts to crack.
The rich are getting richer and the poor are getting richer.
Arguing about what emotionally charged wording to use to describe it is not a discussion about facts though.
> the differentials between these rates and the white unemployment rate narrowed to their lowest levels on record
Which means that wealth inequality (difference between top and bottom) is NOT increasing, but is decreasing. This contradicts your claim that the top is getting ahead and increasing the gap to the bottom.
So yes, it does run against the "growing wealth inequality" narrative.
Day 1: John has $10 and Joe has $100
Day 5: John has $11 and Joe has $250
Day 100: John has $15 and Joe has $1000
They certainly both have more than before, but one of them is much better off (especially if there is some form of inflation in play).
Also, blue collar wages have been largely stagnant or declining when measured against inflation (a very important point) since ~1980 while conversely white collar job incomes have been ballooning against the same measure. In particular, Executive compensation is utterly off the charts comparatively. When tax discount structures that vastly favor investment income over real wages is taken into account, the gains become even more stark (that is, the amount of income that can be retained v must be spent or is taxed).
Now their message is "Keeping low interest rates and doing QE is okay because prices are only a little unstable."
https://nplusonemag.com/issue-34/reviews/other-peoples-blood...
All those trillions of dollars are going to show up somewhere.
https://www.bls.gov/news.release/cpi.nr0.htm
Inflation happens when people decide to spend and the supply isn't there to support it, but there's nothing inevitable about discretionary spending. In some countries in some crises, people react by spending more (panic buying) but in the US, typical behavior in uncertain times seems to be to spend less. (After stocking up on groceries and toilet paper.)
Although, I have read articles that certain real estate markets seem to be hot?
This is what happens in case of “market equilibrium in perfect competiton”, not IRL because supply is almost unlimited in practice for the US for manufactured goods (because most things are imported, and paid in USD).
In practice, inflation happens when retailers decide to raise their prices! It can either be because they must do it (because international currency price variation for instance, or oil market price) or because they see an opportunity to make profits by doing so.
Imports aren't magic. You will at least have to wait for cargo ships to cross the ocean (unless air freight makes sense). For mask manufacturing there were lots of other bottlenecks.
Of course in the longer run (months or years), things are different, but it still takes time to ramp up, and how long it will take isn't something you can answer in the abstract, using armchair reasoning.
If you look at two hundred years of US history, you won't explain inflation back shortage of supply.
History is complicated with lots of different effects, but saying that supply has nothing to do with price changes means you aren't paying attention.
You know that inflation is seasonally adjusted right?
> Also, oil prices are certainly affected by changes in the supply of oil […] but saying that supply has nothing to do with price changes
Ok fair, my sentence was a bit unclear, but I was reacting to this:
> Inflation happens when people decide to spend and the supply isn't there to support it
So what I meant when I said ”you won't explain inflation with [there was a typo here btw] shortage of supply” was more precisely: “inflation is almost never caused by fixed supply + increasing demand” (which was the initial point I was responding to)
But I'm not sure I want to defend any particular theory of what usually causes inflation. My main point was that inflation (rising average prices) doesn't seem to be inevitable with increased money supply, as simple theories will have it.
I don't know if you want to continue talking, but I'm curious about something: you seem to be pretty certain you know what has usually caused inflation in US history, but you haven't said what what you think about that?
i look forward to 2035 and warming myself up by burning trash bags full of trumpbux in an oil drum underneath an empty freeway overpass.