Fuel[1] accounted for a substantial portion of the overall lift, we've actually come in under expected inflation which is why you're seeing markets up today.
Gasoline, unleaded regular - +48.8% (+20.1% over last month)
Inflation was steadily rising before Russia invaded Ukraine.
Also a US President who is antithetical to the oil/lng industry will drive up the price of oil through the futures market. Demand is still high, Biden has constrained supply, forcing futures prices to go up. Trump was bullish on oil/lng, with the same demand and increased supply, prices went down.
> it calls the Saudi king and reminds him that he wants to increase oil production if he prefers himself untoppled
America no longer supports the House of Saud. It tolerates it. But were it to face a serious threat, apart from a Wahhabi fundamentalist, the U.S. would be unlikely to intervene. Riyadh knows this, which is why those calls aren’t very useful.
That said, the President does have dials. They are drilling permits and import restrictions.
>They are drilling permits and import restrictions.
I'll focus just on the first half: Less than 10% of oil drilling happens on Federal land, and there are thousands of unused permits available.
Which isn't to say that these thousands of permits could be drilled on tomorrow - they are subject to environmental impact studies, lawsuits from locals for dozens of reasons, supply chain issues around equipment, etc.
Which is a long way of saying: This particular dial is very indirect, at best.
The fact that Obama/Biden worked with Republicans to lift the ban on crude oil exports in 2015 is a major factor in the rise of gasoline and diesel prices, along with the closure of several major domestic refineries since then.
Additionally, there's the push to expand LNG exports to Europe.
Both of these are major factors in the price rise. I personally don't really care about this as I don't own a car, and this will push new buyers towards EVs, but the media silence on this is kind of instructive - corporate media is owned by the same investors profiting off the high energy prices, so there's no incentive for honest reporting, not if you want to keep your media job anyway.
The oil companies have been a bit slow to increase production on some of their existing, approved, active leases because why should they? They are making incredible profits right now and are buying back billions of their own stock.
Seems to me if they wanted to increase production a lot they would decrease the stock buy backs and instead increase future revenue by increasing current and near future production.
The market is “up” mostly because the USD is down, not because real values are rising.
USD value is going to be hit extremely hard as it loses reserve currency status. The days of the petrodollar have come to an end. It will be a typical “closing the barn doors after the horses have bolted” response which will only make things worse.
This is actively happening now, the big holders are just trying to do it quietly to get out as much as possible before the US tries to shut it down and USD fully tanks.
As this happens the market valuations will appear to rise in nominal values. If you value the market in gallons of unleaded or dozens of eggs however you will see a different story. There’s only so many years the politicians can claim it’s a “supply shock”.
The U.S. dollar index, “an index (or measure) of the value of the United States dollar relative to a basket of foreign currencies” [1].
> How do you square it with a chart of USD value versus an asset which has held consistent value for millennia?
Gold has appreciated relative to the dollar since its 2016 low.
Granted, it took until 2020 for gold to regain its ca. 2013 price. That doesn’t translate into any information about inflation in that interval. Nor about U.S. export/import balances or the dollar’s strength. Unless you’re in the gold business, gold prices are a facile measure of anything economically useful.
> dollar relative to a foreign currency is very different metric than value of a dollar relative to a real asset
Agreed. Which is why we have different words for each.
Saying “USD is down” unambiguously means the former. Inflation unambiguously means the latter. Saying inflation is up in response to an article about inflation being up is tautological. So, in the spirit of Hacker News, I assumed they weren’t being flippant but were instead factually wrong.
It's not unambiguous. In fact when people say the dollar loses value over time they are almost always talking about local currency only, not in relative to foreign currency terms.
"USD is down" is only implied to be about foreign currencies in a trading/finance context
> when people say the dollar loses value over time they are almost always talking about local currency only
"Dollar loses value" and "USD is down" are different words. The former is ambiguous. The latter is unambiguous. Particularly in response to an article about inflation. Again, "USD is down" is, given the context, either inane or wrong. I'd prefer to be wrong than stupid.
The comment was relative to why the market was up. The point is, in real terms the market is not in fact “up”. The market is repricing based on future expectations of the real value of the USD.
The terms “real” and “nominal” make it abundantly clear that I’m not talking about USD versus other currencies. Why are other currencies even part of the discussion? I can only guess because it was an easy retort to “disprove” my statement and derail the discussion.
The meaning should be clear enough from the context of my full comment. I’d rather hear feedback and discussion on that, than debating something I wasn’t even trying to claim (e.g. whether other currencies are rising or falling faster than the USD).
Countries are beginning to do real volumes of energy trade outside of the USD. Countries are also questioning the level of USD reserves they want to be holding with the Fed. This structural decrease in the demand for US dollars will have a very lasting impact that will become clear over the next decade. This is a tidal change which was a long time coming, but I think the weaponization of the USD and SWIFT thru never-before-seen sanctions have pushed it over the edge.
It doesn’t help to be reaching this point with debt levels at 140% GDP and deficit to GDP over 10%…
Because demand for dollars has been so consistently high in modern history, we usually think of inflation in terms of the US economy being too “hot” or because we’ve printed too many dollars. It can be bizarre to think about changing “demand” for a currency, because, who doesn’t want more money? The light bulb is understanding there are many options for storing value, and demand for one option versus another shifts through a combination of present utility and future expectations.
I believe that the structural reasons driving inflation this year and for the next decade have shifted entirely into something the US has never seen before, and it’s very interesting to consider where it will lead. The war and COVID are confounding variables which I believe some people use to try to ignore the new reality.
A weak USD relative to other currencies isn’t an entirely terrible thing. It leads to massive re-domestication of production for one thing, as imports become too expensive. But that depends as much on how quickly other countries devalue their currency.
In the near term the biggest hit from debasement of the local currency is to anyone with liquid savings, or anyone who has stagnant wages (e.g. once yearly wage increases become insufficient to not lose significant purchasing power).
> Why are other currencies even part of the discussion?
Referring to dollars by their ISO currency code is an FX convention. Given the article you're commenting on is about inflation being up, which is a more direct way of saying dollars have lost value vis-à-vis real assets, most people assumed you were (a) using the convention correctly and (b) not re-stating the headline.
> a market graph going back to 1880 in a discussion about how the market is reacting to news today?
Centuries and decades (your graph) are similarly useless in evaluating intraday reactions. These data are widely available [1]. American equities are up, in real terms, for almost any reasonable time interval.
Pricing the S&P 500 in gold is a convoluted way of looking at it, but for purposes of discussion, even that chart shows a 2022 decline followed by a recent rally. All up from the last few years. At par with 2006, which sounds dismal, until one consider the chart shows the S&P 500's price, not total return. The S&P 500 currently spits out a 1.45% dividend yield [2].
Someone who bought the S&P 500 in 2006, a terrible year, is unambiguously better off than someone who bought gold. In nominal terms. In real terms. In gold-priced terms.
This is clever. One can vary the value of "good" to fit any asset. Taken in good faith, I'm curious about the suit discounts I missed between 2013 and 2016, when gold lost value (relative to the dollar).
> value of gold is invariant
Axiomatic arguments work for anything. Bagel is invariant. All price relative to bagel. One breakfast sandwich always costs one bagel.
It’s not supposed to be cute, but actually a useful historical fact. To be well clothed in any moment in human history would take the currency equivalent of roughly an ounce of gold. Since gold has been actual currency many times throughout human history (and is again in Russia as of a few weeks ago) it’s more useful than, for example, pricing in bagels.
Also note that while the value of the dollar in real terms can vary minute to minute and swing percentage points day-to-day and many percentage points year to year, retail pricing will take time to catch up due to the length of the supply chain and the cost of repricing. Retail pricing is “sticky”.
Keep in mind that over the last 100 years the US dollar has lost ~95% of its real value. It will most certainly do so again, and my opinion is that it won’t take nearly as long the next time around.
Gold has not held consistent value for millennia. Take anything that you buy, housing, food, oil, and price it in gold, then do the same for the USD. See which is a more stable way to price goods.
Gold is terrible for stability, which is why booms and busts were more common and longer before every single country learned that and dropped gold standards.
We haven’t had oil long enough to do the exercise.
In 500 B.C. in Babylonia apparently an ounce of gold would buy you 350 loaves of bread. It’s roughly the same today.
Augustus paid his centurions about 40 ounces of gold a year in 0 B.C. Today the median wage is about the same.
I don’t disagree about the booms and busts, I’m not saying that a gold standard is a solution.
The fact that pricing in gold is stable over millennia even within an order of magnitude is pretty cool. Certainly no fiat currency could say the same even on a 100 year scale.
>Certainly no fiat currency could say the same even on a 100 year scale.
No one holds fiat for 100 years, so it's a silly thing to worry about. No one hold currency even 25 years, so again, irrelevant. Fiat is designed to make pricing predictable and smooth out the booms and busts that gold causes. It's designed to be slightly inflationary to avoid deflationary spirals. Fiat has been the most stable economic basis in history. There never was a goal that a loaf of bread is $1 usd for eternity. There is a goal that inflation targets around 2%, and the resulting stability under this system allows loans to have lower interest, for businesses to make longer term financial plans, and for solid expansion of economies.
Another way to think of it over those timespans, is gold is simply a terrible thing to hold also. If you're claiming holding gold for 10,000 years breaks even, it's a terrible thing to hold. You might as well hold water or dirt. If gold is worth the same now as 100 years ago, you should have sold it immediately and invested into productive assets, such as Dow Jones index (which over the past 100 years returned 132 times the initial investment).
Since no one holds currency for long term investments, and for likely centuries decent investments have returned vastly more than gold, there is nearly zero use for gold. The love of gold is simply voodoo.
Currency is more stable for buying and selling and pricing over any range people hold currency. If you want an investment that has return, pick nearly anything except gold.
What do you mean? Perhaps you’re looking at the change (inevitably decrease) in the value of fiat currencies, not the change in the purchasing power of an ounce of gold.
The purchasing power of an ounce of gold in terms of real goods that can be obtained is remarkably consistent over human history, taking into account productivity increases which make everything actually easier to produce (rather than making gold or fiat currencies more “valuable”).
This is a characteristic of gold in particular (above all other commodities), due to a number of factors related to its density/portability, longevity, malleability, and the consistent rate over history at which it’s been extractable from the earth. It’s a rather peculiar if not spectacular equilibrium.
It’s a nice benefit that it’s also rather pretty, and interesting to consider to what degree that matters.
I mean, if you look at history, the perceived value of a lump of gold has changed a lot over time. Even if you assume that recent price differences are due to wild swings in the value of currency (apparently a dollar was worth twice as much in 2000 as in 1990), the claim that the value of gold has been consistent over millennia is just not true.
The way I know this was because of the giant laugh that my historian wife gave when I showed her your comment.
Sure. "Gold has been an expensive commodity for a very large amount of human history, and few commodities have this property" and "has held consistent value for millennia" are very different claims.
The reason why market prices look so high is because it’s priced in US dollars, and US dollars aren’t worth what they used to be.
The reason why markets go up when the Fed seems completely unconcerned or helpless to stop the worst inflation in decades, is because people are betting that this trend will continue.
If you re-price the market in another unit of measure, like “ounces of gold”, you will get an entirely different picture.
> If you re-price the market in another unit of measure, like “ounces of gold”, you will get an entirely different picture.
If you price the dollar in terms of ounces of gold, then you would think that the dollar is worth more than it was in September of 2011, and you would think that the dollar is worth more now than it was in August of 2020. While gold is stable over the long term e.g. centuries, its price can be quite erratic over the short term.
You can price it in barrels of oil, silver, copper, a collection of other currencies, bitcoin, median house price and get a different answer each time.
> The reason why markets go up when the Fed seems completely unconcerned or helpless to stop the worst inflation in decades, is because people are betting that this trend will continue.
It's a global phenomenon. We've got less production of goods and commodities because of covid and just as much if not more demand. So supply down, demand even or even up. What do you expect to happen?
While the USD has problems, other currencies seem even worse at the moment.
There is not some other fiat currency at the moment that is better than the USD. Things that people think are hedges BTC(Ponzi scheme), Gold(volatile) don't always work well.
“Real price of gold” is an interesting concept, probably showing a statistical quirk of backtracing CPI than anything useful though? I’d have to study how it was calculated.
Yes, your graph at the end showing SPY in gold falling below the 200 day MA is exactly what I was talking about.
I absolutely agree gold is volatile in the short term and not some magical replacement for fiat currency nor an absolute indicator of the level of inflation in an economy.
Sometimes however it’s important to figure out if the “platform” you’re taking your measurement from isn’t actually what’s moving, rather than the thing you’re trying to measure. If you’re going to step outside of the fiat viewpoint, gold is where I’d usually start.
Maybe a VIX-adjusted price of gold or something like that could be useful to smooth it out.
> “Real price of gold” is an interesting concept, probably showing a statistical quirk of backtracing CPI than anything useful though? I’d have to study how it was calculated.
I agree it's interesting. I'm invested in Gold, so I'm basically betting that it's going to go up. Instinctively, I'm looking for the best disconfirming evidence.
> If you’re going to step outside of the fiat viewpoint, gold is where I’d usually start.
> Maybe a VIX-adjusted price of gold or something like that could be useful to smooth it out.
yeah, I'm not really sure what the best way to look at it is. I believe Adam Smith used minimum price of labor, but that's distorted as a signal by minimum wage laws. I find the big mac index to be useful-ish. idk, perhaps something like median cost of an hour of labor per big mac, is a measure of prosperity.
Due to Covid many of us probably drive a lot less (working from home) so gasoline prices are not a big deal. However people in service sector jobs are likely affected by fuel costs.
Do you have any stats on this? As I have read (casually) trucking has been 60-80% of consumer goods delivery (end-to-end), and only in the last 3-5 years has rail started picking up long haul freight, as shipping dry goods like coal has become less lucrative.
this really is a "let them eat cake" sort of attitude.
its really shocking just how far detached most HNers are from logistics that is hidden. literally the comfort we enjoy is run by people who don't work from home, who are most impacted by prices.
The drastically increasing cost of rent, even in areas with lots of land, good Internet, an very few building restrictions has a much higher impact for most people then the price of gas.
I was referring to White House advise on dealing with gas prices.
For rent. Oh I’m feeling that myself. Finally got the point of, let’s move prices are insane. Nothing in a safe area that’s affordable for 50 miles. Minimal in high crime areas.
A house near me that is slightly less then mine just sold for 100k+ more than typical for this area. Nothing special about it or my house, good Internet, lots of empty land, little building restrictions, no HOA.
Hmm, CPI rose to 8.5% instead of the 8.4% estimate. Not sure where you are getting "under expected" from. Also, inflation isn't necessarily bad for markets. What markets don't like is if the fed has to respond.
They are probably referring to core inflation... also fuel contributed massively to inflation in March, which was expected, but not expected to stay high forever.
Of course, but the highest contributor was shelter/housing. Also if they are referring to core it's kind of important to make that distinction. It's not good to be loose with terminology around this just to make an argument stronger than it really is.
YoY which everyone knew was going to be high. Core month to month shows inflation is slowing.
I think a lot of people have this doom fantasy of runaway inflation in the US, but it's likely to slow down quicker than people realize. Monetary supply is tightening (mortgage rates touching 5% now), and the supply chain is slowly getting back to normal. Heck, even gas prices have reversed where I am.
I agree it may be slowing, but that's not what the parent asserted. I was just pointing out a mistake in their post. No where did they state "core" (unless it has been edited).
It’s a weirdly predictable phenomenon around American inflation discussions. Has it always been this way? Is it renewed interest in gold bugging or people sour about crypto losses?
I have no idea. But it does seem to coincide with the booming interest in cryptocurrencies. I suspect crypto is many people's first introduction to basic economics and finance. Crypto has a very Hayekian / Libertarian bent, so I think it makes sense that this hyperinflation fear is so common 'round these parts.
The perception of inflation slowing on a month to month basis is an illusion caused by the release of oil from the us strategic reserve [1].
Just like QE is good as a short term solution to economic problems releasing strategic oil reserves to push down inflation (as it relates to oil) is a short-term fix that will likely exacerbated the problem in the medium to long term.
Release from the strategic reserve is more PR/leverage/signal than anything. First, it takes time to actually do the release. Second, 180M barrels is nothing when then US uses ~20M barrels/day.
So it's more of a signal that the US is about to start swinging a bigger stick to get oil production up, than it is an illusion.
I’m sorry but I disagree. Do you have an explanation for why the increased price of gasoline won’t just infect prices for all the goods and services which depend on it?
Any business which needs to move people or goods over the road, or runs equipment/vehicles on gas is going to be affected. Not to mention the fact that consumers will have less disposable income to spend on things. And businesses may have to pay their workers more to account for that loss of disposable income.
> Do you have an explanation for why the increased price of gasoline won’t just infect prices for all the goods and services which depend on it?
The price of gas is known to be volatile, it has gone up in the past without bringing the entire economy along with it, and also has gone down many times without making everything cheaper. The prices of retail goods don’t adjust instantaneously, and gas may well be below what it is now by this time next year. The price of gas might be a small minority fraction of the cost of producing most retail goods as well, so there’s no reason to assume that consumers will tolerate compensatory price hikes that blame gas while the price is falling.
This is the reason that the US Department of Labor excludes the price of gas as one of the core indicators of inflation, because the price of gas does not always reflect inflation, and frequently changes for other reasons independent of inflation.
Today's US gas price is about $4/gal [0], about 15% up on 2011[1], or about 1% per year.
That doesn't sound like rampant inflation, it does sound like a market correction.
Now in reality gas prices globally is high because of Ukraine and Russia, which hides the massive gas deflation over the last decade, but if 2011 businesses could afford gas at $3.50, I'm not sure why 2022 businesses can't afford it at $4. Wages are up about 30% in the same time period (well by 2020) [2]
Usually if official statistics and what you see are misaligned, its the official statistics that are wrong.
What's your general impression regarding price levels in the US? How much has your grocery bill gone up? How about rent? What about restaurant bills? Services like haircuts? Whats your credit card bill look like, excluding gasoline?
Personally I have seen prices go up well above 10%. Inflation metrics are complicated and there is a huge incentive to keep the official numbers down as they affect trillions in spending in terms of social security and other numbers tied to official inflation.
To put this number in context, Congress gave themselves a 21% increase in House office budgets to account for inflation
Right, that's what I said. For office budgets. I didn't say it was for them. I got the numbers from that exact website. It's not "officially tied to inflation" but obviously if you increase budgets its due to higher costs.
> but obviously if you increase budgets its due to higher costs
That isn't remotely obvious and in this case is very obviously not true. This is a chronically underfunded program that Democrats have been lobbying to increase for years. AOC, for instance, has been pushing for this since she first entered Congress, well before any inflation showed up.
It's entirely disingenuous to point to a budget increase in a single extremely-small Congressional staff program and paint it as evidence of broad-based inflation.
>It's entirely disingenuous to point to a budget increase in a single extremely-small Congressional staff program and paint it as evidence of broad-based inflation.
Maybe, but it's a perfectly valid data point. Congressional staffers are struggling because, in the D.C. area, costs are rising very quickly, and the low-paid staffers are having trouble paying bills because of it.
It's not disingenuous to suggest this is a signal. Also, Democrats are always lobbying for an increase in all budgets. They got this one through because they were going to lose staff who can't make the job work because of rising living costs. I.e., inflation.
>It's not disingenuous to suggest this is a signal.
So would it disingenuous to point out Xbox prices dropped significantly recently then claim it as evidence there is no inflation?
Using such simple, single data points is disingenuous when there is ample broad based data to point to instead. Ask why he picked something with a 21% increase instead of something with a 4% increase, then you understand why it's disingenuous.
That is the problem with anecdotes versus broad and properly computed inflation.
Across the board? At least 25%, 50% in some sectors like foods.
They keep, and some people on HN, keep calling it a conspiracy when you mention actual inflation is a lot higher than reported, my question is what is this crowd's reasoning? Are they so well off that they are not able to see the rapid rise in prices because they use maids to do the grocery shopping?
Why is it a conspiracy to suggest actual inflation is far above and beyond what is reported by the Feds, who are stuck between a rock and a hard place when it comes to controlling the money markets now?
If they raise rates to match actual inflation they are going to cause the asset bubble to burst. If they don't raise rates than they are going to find hyperinflation that will certainly damage USD's "exorbitant privilege"
> Why is it a conspiracy to suggest actual inflation is far above and beyond what is reported by the Feds
The conspiracy is that it’s treated as a conspiracy. Local inflation varies wildly [1]. In official statistics. And inflation is personal, dependent on your basket of goods and services. There is no market evidence that inflation is endemic, but the market is frequently wrong.
> so well off that they are not able to see the rapid rise in prices
Many on this forum have equity holdings and/or in-demand jobs. Those make one somewhat inflation tolerant.
> Many on this forum have equity holdings and/or in-demand jobs. Those make one somewhat inflation tolerant.
Yeah I’m genuinely shocked that people seem so upset about inflation. Then again I couldn’t tell you if the gas price down the road begins with a 3, a 4, or a 5.
> They keep, and some people on HN, keep calling it a conspiracy when you mention actual inflation is a lot higher than reported, my question is what is this crowd's reasoning?
I wouldn't call it a conspiracy, but throwing out random number like "25-50%" because you noticed your one specific grocery bill is more expensive also isn't an argument I'm going to give much credence to.
The government is actually very transparent about how they calculate inflation and what goes into it, so if you're going to argue that they're bullshitting you need to argue one of:
1. The basket that they use to calculate the price index isn't a good representation of most people.
2. They're fibbing on specific prices.
3. The "smoothing" they always do can hide some of the recent acute inflation.
If you want to make any of those arguments, with data, great! Please go ahead. I've certainly seen plenty of good arguments related to points 1 and 3, not so much point 2. Otherwise, it's fine to say you notice things you buy seem a lot more expensive, but that's not an argument that the Fed is somehow fudging the numbers.
It doesn't matter what you were referencing. As it's said a million times on HN, throwing out anecdotes is not data. If you have an problem with any of the specifics of how the CPI are calculated, then make it.
Here's a comparison of CPI based on how it is calculated now with how it was calculated in the 1990s and 1980s. [0] There's a pretty clear trend here. Maybe the current calculation is more accurate. But I doubt it. Looks like suppression to me.
Here's a website that compares CPI today with the way it was calculated in the 1990s and 1980s. Suffice to say, it appears the government is trying to suppress CPI over time. [0]
The only way your grocery bill is up 50% is if you only eat used cars and gasoline.
Official stats say grocery store items are up 10%, which is roughly line with my experience. It can vary a lot from item to item so it really depends on your diet. White bread is up 6% while wheat bread is up 9%. Meats are up 15% while fresh veggies are up 6%.
> Usually if official statistics and what you see are misaligned, its the official statistics that are wrong.
"What you see" is literally what's being measured, though. Typical prices for typical commodities grew less than expected. The outlier is one particular commodity (petroleum) which is experiencing an external shock.
Sanctions on Russia are poorly explained as "inflation", obviously.
> Personally I have seen prices go up well above 10%.
On what? Does that not match up with the data in the report? If so, document it! You'll be internet famous, if nothing else.
> Personally I have seen prices go up well above 10%.
For what goods/services? Have you been tracking the same goods/services over the past year to make this analysis?
> Inflation metrics are complicated and there is a huge incentive to keep the official numbers down as they affect trillions in spending in terms of social security and other numbers tied to official inflation.
You haven't provided anything aside from personal anecdote (without any actual data to support it). Your understanding is built entirely on your own experience, the official numbers are built on a transparent basket of goods that is meant to represent the entire country.
For me, housing costs (most people's largest expense) hasn't changed in 3 years because I have a 30-year mortgage. Does that mean that the 5% CPU measure of housing expenses is false? Of course not.
Going with your experiences over soundly collected data is a very risky move prone to bias and discrimination (only noticing what affects people like you).
Data, when reported by a reputable organization, is going to be substantially more predictive.
Reputability is not equally subjective (though it is somewhat subjective), it is based on past performance and current utilization through a trust network.
If an institution has a history of providing a certain quality of service, and is successfully used to make highly consequential decisions, it is objectively more reputable than an institution with neither of those things.
Aggregating individual opinion (sometimes) has a washing-out effect on bias, which makes it valuable as a tool to push towards objectivity. [0]
This is why I much prefer to follow guidance from institutions over individuals. There's also a "stewardship" in institutions that seems effective in countering other forms of bias (but not all).
Of course there's a whole lot of bias left over that doesn't make this a fire-and-forget strategy, but comparatively it seems closer to objectivity than to just trust one's eyes alone, which has effectively zero systemic corrections for bias.
[0] - You may know about this already, but I think of it like crowds singing, and if you'll afford me a bit of metaphorical license, here's a better explanation of how that works than what I could write: https://physics.stackexchange.com/questions/382429/in-concer...
>Usually if official statistics and what you see are misaligned, its the official statistics that are wrong.
See, I think the opposite. If your numbers differ from the US gov. official ones, you're either doing something wrong, or measuring a different thing.
The BLS in particular aims for consistency in reporting. They ask people what they bought, and for how much, then they go around collecting real world pricing information about products.
No other entity is putting that much work and effort into collecting pricing information. So anyone reporting different numbers is less accurate than the official BLS ones.
Even people who complain that they under-report "real" inflation use BLS numbers, but they change the weights on the various categories such that categories experiencing the highest inflation are also weight the highest.
>Usually if official statistics and what you see are misaligned, its the official statistics that are wrong.
Nope, a few people's unmeasured selection bias is no where near as accurate as a professional methodology done like the official numbers.
>there is a huge incentive to keep the official numbers down
Also false. If the numbers were gamed, there would be significant arbitrage employed in markets to extract value from the lie. There are ample papers analyzing this, and no one has found a way to do it, since the numbers are the best possible.
Also the numbers are done in many places, from Goldman Sachs, to the Billion Prices project at MIT, to the Bureau of labor and Statistics, and so on.
If you really think the numbers are gamed, do this experiment (I have, it's easy to do, and then you'll never claim the numbers are gamed again since you methodically checked them).
Take BLS listed inflation for a decent period of time, say 20-30 years. Make a basket of goodssplit by how most people buy: energy, housing, food, eneterainment, etc.
Pick a list of goods, say same sized apartments, houses, foods, etc.
Look at prices now. Write them down. Hide that list so you don't cheat.
Look at ads from the beginning of the period. Get prices.
Compute.
Now add say 1% to BLS annual inflation numbers, and compute.
Viola! BLS and rest are very accurate. People's unmeasured selection bias beliefs are not.
> What's your general impression regarding price levels in the US? How much has your grocery bill gone up?
My grocery bill isn't in a vacuum. Does anyone buy the same basket of groceries constantly? My career has been on a steady rise and my lifestyle has inflated.
> How about rent?
It's up a TON in many LCOL places - but in many of the most expensive places, it's gone up less in the last 3 years than normal (and in some places down). Either way - 67% of people are homeowners, and their payments went DOWN a lot because the Fed allowed everyone to refinance at historically low levels.
> What about restaurant bills? Services like haircuts?
My anecdata is that I'm shocked so far none of this has gone up. I do expect it HAS to go up probably 10-20-50% eventually / soon. But I haven't seen it happen yet.
> Whats your credit card bill look like, excluding gasoline?
> How much has your grocery bill gone up? What about restaurant bills?
What's interesting is although fast food prices have went up, it doesn't seem like casual dining chains have gone up. So even though steak prices have doubled at the grocery store, they've stayed the same at the chain steakhouses.
The highest end chain place I eat at is Chipotle, but I have noticed several increases in local restaurants. One we go to regularly went up 25% mid-late 2021, and recently went up another 33% on our normal order. Which I guess I should be glad about because most other ones have shut down.
The core inflation tells you that this is more than a fluke in energy prices.
I would say it is due to loose monetary and fiscal policies (duh).
Maybe we are in for a 70es rerun; and the 70es inflation spiral didn't really end until Paul Volker, Thatcher, and Reagan changed the economic policies.
Also stopping the inflation spiral helped bankrupt the Soviets who were a great benifitter of the rising commodity prices ... just a hint.
Yes majority of the inflation is caused by a lack of supply due to covid (lots of things shut down, from microchip manufacturers to international shipping to lumber mills to refineries and produciton hasn't ramped up), and of course crude oil prices increasing.
If you don't think this has any affect on inflation Ive got a bridge to sell you.
I agree. What the fed missed here when they originally said transitory was just how long it would take the supply chain to recover. Places in China are still doing zero-covid style lockdowns causing further shocks to supply around the globe. Throw in a war that drove energy prices up, and you have quite a number of existential factors that could quickly go in the other direction.
You'd think that, but data-driven economists were finding low correlations for this kind of (rational) thing specifically for the modern US dollar, which is confusing. Super great PlanetMoney/freakonomics episode on inflation ~last year. If I remember right, this broken state goes back to at least the Obama years, maybe closer to Clinton.
It's a weird state to be in. The rational thing becomes to continue (leverage) the weird situation -- the market expects continued regular high spend for whatever regular big thing of the month/year -- and the irresponsible thing becomes any deviations that risk rocking the boat (ex: risk EU style rallying on austerity becoming a self-fulling prophecy). A lot on inflation concern is triggering FUD loops (sporadic supply chain hits vs YoY spirals), so when we know the market treats USD differently to beginwith, accepting the FUD (by policies that assumes the USD is a weaker currency) is kind of the worst thing policy makers can do. Likewise, most non-US countries rely on USD stability, so probably same thing for their policy makers.
Tried to find -- this was sometime 2020 / early 2021, and from a variety of sources (academic + gov), and pretty sure done by Freakonomics bc it was so weird. Interesting bc casts doubt on basically any expert wrt modern USD vs other currencies.
But if inflation is so high because we made way too many dollars (compared to Europe not making way too many euros), why has the dollar been strengthening against the euro?
Not saying you're clearly wrong, just that there are dynamics that I, at least, am not understanding.
More than that, not only Euro. Currencies in emerging markets and places more disassociated with the U.S. hasn't seen their currencies strengthen in the past year or two against the Dollar too. FWIW, even Bitcoins hasn't strengthen against the dollar in the past year while we are having the inflation.
Covid measures left a whole lot of people working from home, inefficiently, or inefficiently working on location (less customers, higher costs). The efficiency loss is also being paid for partially by rising prices, inflation. Same salary, less work output for it.
We'd need a wide survey. Whatever the HN crowd in aggregate thinks, it's not representative of the whole population who had to work at home, splitting their attention between homeschooling kids and other distractions and work.
I’ve yet to meet anyone who wasn’t more productive after switching to WfH, HN or otherwise. That seems to be the case for my colleagues as well. If you have some data or experiences that show otherwise, feel free to share them.
Lots of people want it to be true. I feel for those who can't admit how far they've fallen behind due to social disconnection or not being able to trade ideas with colleagues. I wish there were more solid studies done. Many use self-estimated productivity. Some seem to simply be pro-remote work, i.e have that as an agenda. That's fine as an interest of course but doesn't answer the question in terms of forcing everyone, for those it's not a good fit.
My workplace is post-remote now. We're back to fulltime in the office. I'm super happy for all the random interaction, problem solving together and coffee breaks. The social interaction enables us to work better in the team.
The best policy was not the topic of the comment but it's probably to let those who want and like remote work to do it.
> I'm super happy for all the random interaction, problem solving together and coffee breaks. The social interaction enables us to work better in the team.
Ah yes, the pervasive disruptive social din of an office. Unstructured, random and disruptive interactions. How anyone achieves optimal focus and gets into the zone when in an office is beyond me.
I mean, I'm probably less productive. But I'd still take it. I think my effective work hours have halved, but my effective productivity has dropped maybe 10-20%, as I've basically become far more aggressive about doing what matters and not the other bullshit that is maybe 'productive', but has no real value (i.e., write only documentation, synchronous communication sessions over things that don't really matter such as the exact wording of some bit of high level guidance, etc).
So my -efficiency- is higher. Total work productivity, sure, taken a hit.
I've yet to meet more than a handful of person who says they are more productive WFH that actually are. Even then when digging into it most of them will admit their productivity increase came as the expense of team velocity.
"Team velocity" is just a measure of the teams overall performance. I'm a senior software engineer on my team so a large part of my work is not coding but work that helps the team function: code reviews, mentoring juniors, design discussion, adhoc and planned pair programing, triaging issues that are escalated to engineering from the customer support team, etc. The closest I ever get to sales is maybe joining a call as a technical expert if they need more expertise (or assurances on a big contract deal) than the sale tech expert on our product can provide.
Most of these things really are harder to do remote. I could honestly see how you'd be more productive and have stats to prove it if the vast majority of your responsibilities were just code.
Think of your work output as a vector. It has a magnitude - how much work you can get done in say a quarter. It also has a direction - what is the project you're working on, and does that line up in an economically productive way?
The reason we have corporations and management is to get all those vectors to line up in a certain direction. They're like magnets, aligning the productivity vectors of each IC so they don't compete with each other and instead contribute to a common goal. Almost every IC is less productive in terms of magnitude when working in a big corporation, but because there are thousands of them, the overall product becomes very hard to compete with.
WFH effectively reduces the magnetic force on each employee. Their productivity magnitude increases - they get more individual work done per unit time. But their alignment suffers. It's harder to identify when two IC's work is not going to line up perfectly, and harder to catch problems and complications early, and harder to set a direction in the first place.
And that's where WFH is going to suffer. As long as people can basically continue on the same direction they were going pre-pandemic, it's an improvement. But as soon as a direction shift becomes needed, corporations that have gone all-WFH are going to quickly find that the reason they're a corporation has gone away. They won't be able to adapt and chart a new course, and their employees will all quit and join new startups that are already pointed in the right direction.
I'm more productive at home, and I'm a man with two kids under ten. My wife works odd hours and must commute, so I'm in charge of before and after school care.
Kids playing happily with their toys or reading quietly are considerably less distracting and disruptive then any open concept office that I've suffered in the past. Unlike many adult coworkers I've had, my kids respect me enough to let me focus.
So the state takes care of your kids for most of your work day.
Congratulations— you’ve won the lottery by living in one of the few places in the US that has a functioning public school system (or else you’re going the private route, which means you don’t need t congrats to know you’ve won the lottery).
> you’ve won the lottery by living in one of the few places in the US that has a functioning public school system
Are you seriously claiming that's there exists significant portions of the USA where children don't have access to school? That's absurd.
I'm Canadian, my kids go to public school. In fact, we're walking there right now; a privilege I wouldn't have if I had to be in a car, commuting to an office at this moment.
Also much more productive here. After school activities a few times a week helps and mix of friends or alone time. Not losing 2 hours+ to commuting can do nothing but help productivity and family availability.
While there are many jobs that could be done more efficiently from home (massively biased towards knowledge work) there are plenty of jobs which are less effective from home.
If you recall "ping-gate" entire underground lines were shutdown in the UK due to people working jobs that can't be done remotely.
My passport took forever to get renewed during the very first lockdown due to disruption to a fairly manual process that required handling of physical things (eg a passport)
During the pandemic, my ballet instructor switched from teaching in-person classes to teaching online classes.
Although they saved money on studio rental and travel, they ended up teaching far fewer students - despite starting out with an established group of regular students, and charging much less than an in-person class would cost.
Wasn't Volker nominated by Carter? And based on the premise that Volker would be doing what Volker did? Does Reagan deserve the praise there? Only mentioning because the Volker nomination was such a good move that I want to make sure the right person gets credit.
I feel like Biden has been surprisingly willing to do "the right thing" in spite of political fallout. Like leaving Afghanistan, even though it led to the Taliban regaining control.
Biden delaying and screwing up Trump's plan to pull out of Afghanistan that was already in progress and getting Americans killed, leaving millions/billions of dollars of equipment, and sacrificing people who helped our soldiers to the Taliban is "the right thing"?
Trump never pulled out of Afghanistan, just talked about doing it and "made plans" that he handed to his successor to execute.
Just like Obama, really.
Biden actually did it, and paid the political price. There was never going to be any way to withdraw without horrific consequences. Which is why neither Obama or Trump actually did it.
And Reagan got all the credit - supposedly he tricked the Russians into thinking the Star Wars program actually worked and that was why they went bankrupt.
Things have obviously changed - but the basics are still there: inflation comes from monetary and fiscal expansion - once the spiral picks up - commodities lead the way - and that’s the Russians.
Volcker raised rates to almost 20% to break inflation in the 70s. But that's when debt was low and we were able to service it. Now that debt is high, how much can the Fed actually increase rates? Are they out of options?
The hypothesis that Volker killed inflation has been discredited. Inflation in the 80's, like today, was supply side from reliance on oil for energy. When natural gas replaced oil for energy production in the US, inflation came down.
Yeah I'll concede this. Job numbers are often similar. They jump a lot month to month. Unless there is some crazy spike that you just can't ignore, it's better to use a trendline.
That's how you know you are talking about a first-world country. My dear home country had an official (likely underreported) inflation rate of 5.5% in March alone.
This headline may be "wrong" in your eyes but this is the way that inflation is universally reported. Even finance centric news sites such as Bloomberg or WSJ report inflation in this way. It is universally understood to mean year ending.
You're just not right. Saying prices rose 8.5% in March means prices rose 8.5% in March, not in the year ending in march. Reputable journalists say inflation rose to 8.5% in march, which isn't the same as saying prices rose 8.5% at all. I really don't think this is petty at all. Saying prices rose 8.5% in a month is incredibly misleading.
My comment isn't that the wording is right. It's that there is no ambiguity on what is actually being reported. This "issue" only exists in the mind of grammar warriors on message boards.
> don't include food, energy, housing, or healthcare prices
Straw man. Core inflation includes housing and healthcare.
If one can’t understand why food and energy inflation aren’t cleanly a monetary phenomenon in the midst of Russia, an energy exporter, invading Ukraine, a food exporter, I’m not sure how to help.
Correct, but the Ukraine invasion caused a distinct spike. You can see this in how March is an outlier in the data (37% of the energy commodity inflation for the entire year in a single month)
If people wanted to vote to keep peace and a stable economy, they probably wouldn't have voted for Biden.
Supposedly a majority voted for this and are now complaining about what they voted for. Maybe they didn't vote for this and voter fraud really did happen...
One reason why it matters is so you can make predictions and plan accordingly. If it is because of a short term shock or a medium term problem or a long term global configuration change then your response to $7 gas will likely be radically different.
I guess…
If it’s a short-term problem and you’re living paycheck to paycheck, you’re screwed now but might be OKish in the future.
If it’s a long-term problem and you’re living paycheck to paycheck you’re screwed for longer.
Honestly, what’s the play here for someone who doesn’t own any significant assets and barely makes enough to pay bills each month? That’s what I read as OP’s point.
One thing is paying a gas bill. In my state, I can lock in a price for 6,12,18, etc months. Or I can pay month to month.
If I’m living paycheck to paycheck and my current term runs up, I would go month to month if this is a short term spike since prices should recover soon. But if it’s long -term, I should go ahead and lock in now because it won’t get better.
There are tons of those examples. Even people with no assets and just living month to month can use this information. Obviously, billionaires are impacted more, but people might literally be trying to figure out if they just skip meat for a month (short term) or buy a bicycle (long term).
Total cost of ownership of a car will likely be higher (especially if it’s a nicer car, and you use it in places where you need to pay for parking), but public transit and cars are not exactly equivalent products.
Public transit can be very cheap and convenient for some use cases: for example, if you live close to a stop, your destination is close to a stop, there is straight transit line between the two places, it runs frequently and has few stops on the way, and you usually travel by yourself. If all of the above is satisfied, it will likely to be more cost effective and similarly convenient to use public transit. However, for many other standard use cases, public transit is by nature very inconvenient compared to cars: for example, if you visit grandma with your small kids on a regular basis, grandma lives in a small town, getting to which on public transit from your home requires 2 transfers, and is only reasonably possible twice a day at very particular times. In that scenario, which, by the way, is (in some form) extremely common for most people who aren’t single professionals living in big city, public transit is just a non starter, even in Germany.
Since the latter scenario is, as I point out, rather common, most people own a car anyway. At that point, you’re already paying the total cost of ownership just to use it on routes where public transit is extremely inconvenient. This changes your calculation on routes where public transit actually is pretty convenient: sure, public transit on that route might win with total cost ownership of the car, but once you already have a car, fixed costs are already sunk, so public transit is now competing with marginal costs, and it might very well then lose.
For this reason, even in countries with good public transit, it is largely a domain of students, young singles, and retirees, and working people with families overwhelmingly own and use cars.
Boston, MA -> Philadelphia, PA (511km):
By car: 5h15
By Amtrak (this Monday): $311 for business on Acela, 4h54
By Amtrak (next Monday): $119 for coach on NR, 5h50
Munich Hbf -> Berlin Hbf (582km):
By car: 5h23
By DB (this Monday): 195eur for 1st class on ICE, 4h34
By DB (next Monday): 68eur for 2nd class on ICE Sprinter, 3h57 OR 48eur for 2nd class on ICE, 4h34
And Munich - Berlin is one of the worst DB connections. And DB is one of the most expensive systems in Europe.
Must have changed since I last looked into this. I remember that German trains used to be about as expensive as driving. I guess I need to update my knowledge: if you book in advance, German intercity trains are pretty cost competitive with single occupancy vehicles. Sadly, this means that if I lived in Germany, it would be much cheaper for my family to drive everywhere.
FWIW, the travel times you post are not instructive, because you are not going to drive from Hbf to Hbf. Getting to the station, waiting for a train, and getting from the station to the final destination will increase travel length substantially. At the same time, not having to drive into city center (where Hbfs are) will decrease drive times.
Should make you wonder how much other outdated/incorrect information you unknowingly spread in the same fashion.
> Sadly, this means that if I lived in Germany, it would be much cheaper for my family to drive everywhere.
Only if you don’t factor in massive discounts for children (who ride for free until they’re 15) or even small groups of people. Eg. the Bayern-Ticket - can’t really beat a day trip to an alpine lake town for 32eur total (for a couple with young children, and no need to book in advance).
Oh, And don’t forget about that 25% Bahncard discount that pretty much pays for itself after taking two train trips in a year.
> FWIW, the travel times you post are not instructive, because you are not going to drive from Hbf to Hbf.
Ending up in the centre next to a main station is actually one of the biggest benefits over flying or driving in my experience. Maybe it’s just the way I plan my trips, but I almost always end up wanting to be in the centre of wherever I’m going to, anyway.
As it turns out, people are paid in nominal dollars, not real ones, and what happens id the nominal prices go up, while wages stay stagnant in nominal terms, so they fall in real terms.
Yes, printing a whole lot of new money tends to do that. As it happens, though, wage workers are not the first one who get a hold of that new paper. It does, in a way, trickle down to them. It’s only after the prices go up, and competitors start offering higher wages, they get any leverage to get a raise in their current job. This means that and wages will, on the whole, lag after inflation.
That's not how monetary policy works. The "new paper" that is "printed" by the central bank is traded for a financial asset, typically a bond. The counterparty which previously had a bond, now has cash. It's unclear how the counterparty can take advantage of this situation at the expense of everybody else (which is what you suggest is happening).
Out of all the arguments I'm seeing on here, this feels particularly bad faith. Throughout my maybe decade and a half in the macro world I've never heard anyone even attempt to make this argument.
Inflation clearly affects cost of living because wages are stickier than prices. You don't walk into work every monday morning and get your wages increased by CPI.
If you think prices are going up with a corresponding increase in disposable income, you need to explain how this is possible at all. I don't think it's impossible, but it certainly is incompatible with an often-cited theory of inflation.
I don't even understand what you are trying to say.
> If you think prices are going up
I don't think prices are going up. I factually know prices are going up. We keep track of this data
> you need to explain how this is possible at all.
sure. Let's say I have a grocery store. I pull off the price sticker from last week and put a new one on this week. I don't even understand how this is a question.
You can argue the root causes all you want but just writing the words "there is no inflation" isn't an argument.
Sorry about the confusion, I meant to say "if you think prices are going up without a corresponding increase in disposable income", not "if you think prices are going up with a corresponding increase in disposable income".
If you don't understand the cause for it, then attempts to fix the not-cause may cause more or bigger problems in other parts of the economy.
This is in part complicated because there isn't necessarily one cause.
If it was caused simply because the supply chain shock from different spending habits of consumers from the pandemic, then that would sort itself out as the supply chain adapts to the different habits - going from just in time to just in case in many places.
If it was caused by an increase in energy prices, then increasing supply (and importantly, having the existing energy reserves be used).
(and so on)
The other side to this is the managing expectations. If you know that you can't fix it by just adding more oil to the market, then that data can be used to manage the expectations for all parts of the economy. "No, this isn't going to get better for some time" is a valid answer.
If one can't understand why the value of their money goes down as the government buys trillions of dollars of their own debt with non-existent money, I'm not sure how to help.
But, see, your analysis doesn't inspire confidence in the economy which is bad for the economy. We need a different explanation. Ya know like "transitory inflation". Dam, used that, I guess Ukraine.
I am going to need to borrow this as a retort because frankly it's a very fair response to the parroted line above, which I keep hearing variations of.
>It's clear as day on the Fed's balance sheet the reason for inflation
Yet there was not this inflation during the Fed balance sheet runup in 2008-2018......
So maybe your simple claim is not what is the cause. More likely is that in 2008, the balance sheet was loans to banks (paid back), whereas in 2019+, the increase was from money being handed to people?
In fact, your total assets graph is misleading. Look at the same graph, under the selected liabilities breakdown - the monetary base has been steady, with no inflation for most of it. The big recent increase is in purchase of Treasuries, which is the money the govt gave to the people to help them through the COVID caused downturn. This is a good use of money, and of course giving people money with no gain in production will lead to inflation, but it's not the Fed at fault - it's elected officials voting for free money.
> Yet there was not this inflation during the Fed balance sheet runup in 2008-2018......
Could you think of something which happened in 2008 which might have impacted the velocity of money in the global economy, despite the aforementioned QE? QE works great following a recession. For quite a number of years later, in turns out. But not forever. At some point the economy recovers and continuing to pour gasoline on it stimulates it beyond the target inflation zone.
> Could you think of something which happened in 2008 which might have impacted the velocity of money in the global economy
You and the comment you’re responding to agree on the Fed’s balance sheet being insufficient per se to explain core or non-core PCE. It's a complicated phenomenon.
> More likely is that in 2008, the balance sheet was loans to banks (paid back), whereas in 2019+, the increase was from money being handed to people?
Unsurprisingly, the lion's share of that money handed out for covid relief wasn't given to people. It was corporations that, once again, walked away with most of it. Going back even further, the 2016 tax bill also provisioned way more money to corporations compared to the time-limited-bone they threw at people.
While its fair to say handing out money can cause inflation, lets not kid ourselves about who is really getting that money.
>the lion's share of that money handed out for covid relief wasn't given to people.
Wrong [1]. 1.8T directly to people, 1.7T to businesses. I'd not call that a lion's share.
>It was corporations that, once again, walked away with most of it.
And a significant part of that was to pay, you guessed it, people :)
Of the 1.7T to businesses, 835B went to paycheck protection program (i.e., people wages) , 85B to a delay (not handout) of employer payroll tax (so this will be paid back by the businesses), and a significant number of loans, not handouts, that have to be paid back.
And keeping companies alive, i.e., jobs available, has vastly better long term economic value than simply giving it to people, since at some point those people will really like having a job for a continued income.
Tell me again of the 1.8T given to people, how much was loans that have to be paid back? And what is that ratio for the business side?
> Yet there was not this inflation during the Fed balance sheet runup in 2008-2018......
Asset prices are prices, they're just not part of the CPI.
The early part of the inflation fed almost entirely into financial assets. Take a look at the absolutely INSANE multiple expansion of the S&P 500 for this time period, as well as the INSANE monotonically decreasing yield curve in literally every kind of debt security.
>Take a look at the absolutely INSANE multiple expansion of the S&P 500 for this time period
Fed added 3.5T in balance sheet over this time. S&P 500 market cap went from $12T to $23T (and this is not counting all the other market caps from other stocks and exchanges not in S&P 500). It's not unreasonable that investment market caps have increased tens of trillions over this time.
So it's pretty hard to claim the Fed injected this money into the stock market. It's much more likely that as the world is changing some companies are viewed as increasing in value due to the products and services being more valuable than before.
Many people on HN seem really unfamiliar with the concept/importance of monetary velocity. Given that price level * output = Money * Velocity, you would think you might want to look at a chart of velocity before blaming the price level on the balance sheet.
Afaik Monetarists like Friedman assume that velocity is a constant, but this trickles down to most gold bugs I meet not even knowing the inflation equation.
> Instead, the BLS uses an owner’s equivalent rent (OER). The BLS estimates the OER by asking homeowners how much they could charge to rent their home.
Shouldn't core inflation include everythign that "regular people" need to keep food on the table and a roof over their head and a basic existence (health care)?
> Shouldn't core inflation include everythign that "regular people" need to keep food on the table and a roof over their head and a basic existence
That’s headline inflation. It’s politically relevant. If you're running for Congress or the President of the United States, this is the one that gets you in and out of office.
Core inflation is monetarily and thus more financially relevant. It singles out what central banks can strategically respond to. (You don’t want to raise rates because an energy exporter invaded a food exporter; rates aren’t the problem.)
This desperate “it’s Russia’s fault!” angle being pushed by the establishment right now is not convincing anyone with more than two brain cells. We all saw and experienced the massive inflation and supply chain issues longggg before that war started and there’s mountains of data that shows that to be the case.
These days the word "boomer" triggers anyone older than elder millennials, and somehow it's furthermore become a bit politicized. Most people also don't know that Generation X or the Silent Generation exist, and many don't know which one they are, other than "boomer=old/bad". It's become a bit of a slur, and that's not what I intended.
So what you are telling me is that if you own your home, drive an electric car, grow at least some of your own food and try not to get injured you can pretty much beat the system? Thats the dream!
TBH, I'm pretty surprised that core inflation seems to have not grown as much as expected. That's actually very good news, given that core inflation is lifted by fuel prices (since increased fuel prices influence prices across the economy).
This... seems like a good news story?
Obviously the Russian invasion of Ukraine has royally messed up fuel and food prices, but that's a specific shock that's independent of larger macroeconomic issues.
Some news outlets falsify their inflation reporting as a matter of course. Consumer prices obviously did not rise 8.5% in March, they rose 8.5% over the preceding twelve months ending in March.
This is a serious issue mostly fueled by rising energy prices. I wish our politicians could think of better solutions than what's going to be proposed like expanding ethanol use in gasoline, when it will actually make matters worse. See tweet https://mobile.twitter.com/SarahTaber_bww/status/15113297700...
Any reason Biden can't use the war time production act to force American oil producers to up production (which is still short sighted) instead of making matters worse?
The current administration does not want to relieve the pressure. They are against oil/lng. They openly oppose the industry and want everyone to be driving electric cars and have windmills powering everything.
Good? I mean, has nothing been learned from the oil crisis in the 70s? If you don't want your economy held hostage, electrify it and use clean energy domestically produced to power it. The US has had ~50 years to plan for this.
Make carbon more expensive and rebate that to folks by income (carbon tax). Push people away from fossil fuels, and then you won't be held hostage by fossil producers in the future. Cheap oil isn't a right.
Couldn't the people who own the windmills just as easily hold the country hostage as you put it? Who do you think is paying to build and operate these things?
I would be curious if you could point to a foreign offshore wind farm connected to the US grid. I've never heard of this. Presumably they're all within US controlled territorial water.
They literally could not, because they're within US legal jurisdiction (being physically in the US), emergency powers can be used when life or liberty at threatened to keep them operating while the disputes are resolved likely through the courts.
One of the great things about electricity is that its sources are highly substitutable - the end uses don't care whether their energy comes from wind, solar, hydro, nuclear, natural gas, etc.
Also, the inherent intermittency of wind and solar makes it even harder for generators to hold the market hostage, as they don't control the timing when they generate power. To curtail energy supply would be to undermine the economics of the capital investments into these projects, as it would be missed revenue.
That same reasoning applies to the current large oil companies who aren't really doing everything they can to increase production because doing so would bring them a lower rate of profit.
I wish that was the case but their entire approach to war in Ukraine triggering a European energy crisis is selling American LNG to them. And they've been begging American oil companies to pump more oil
Limiting the production of oil in any sense is going to increase the price. Biden has said no more drilling on public land and imposed new regulations on pollution.
Here we can see the price of oil futures going back a few years. We can see they start an upward trend once Biden gets into office. and long before the Ukraine conflict.
There are two parts of this, what Biden has done, and what people fear he might do.
There is a trade off between using goods now, and using them later. The higher the return for using them later, the higher the return for using them now has to be in order to justify consuming it.
If Biden says, no more drilling on public land, you are right, that would not impact supply immediately, but it would impact the expected supply and price of oil in the future. Which means that in order for the oil to be consumed now, the price has to be higher.
If you add to that the expected regulations to come in the future, further restricting or taxing fossil fuel use, it pushes this even higher.
So because it is expected that the price of oil will be more expensive in the future, both because of what Biden has done already, and because of what he has promised to do, then the price of oil has to increase now. Do you understand what I'm trying to convey?
FURTHER EXPLANATION
Let's say you have 10 barrels of oil to sell. You can sell those barrels now for $100 dollars, or you can sell them in a year for $200 dollars.
The more the price of oil in the future increases, so too does your incentive to wait to sell.
In response to this, the price of oil has to increase in the present, to compete with the prices promised in the future.
So if the future price rises to $250, the present price might increase to $130 in order to incentivize producers to sell now, rather than wait for higher returns in the future.
What Biden has done is send signals that in the future, the supply of oil will be lower, and the price higher, which incentivizes producers to wait for those higher returns, which as a result increases the prices now, in order to compete.
Tough to say because Biden is also pushing policy to curb demand and EVs are rising rapidly. I'm not sure if markets have fully absorbed the world of falling supply and falling demand. Or if they actually believe demand will fall appreciably in the near future.
Yup hard to say. Thankfully citizens are seeing the reality of his anti-American policies and will make their displeasure felt at the polls this November.
Without endorsing all that is Trump, what I did like about his tenure is that I had more money in my pocket to make decisions for myself. Whether that be buying more energy efficient appliances or perhaps an EV. Now I have less money, appliances are more expensive, and we're being told "don't like the price at the pump, just buy an EV lol".
As a person Trump was a shitshow. Had he listened to feedback from his advisors and I dare say the general public he would still be in office. His policies which include foreign relations, immigration, energy and monetary though were pro American and good for the USA as a whole.
He told Germany and other NATO leaders that dependence on Russian oil was a major threat to their economies. He told them they should focus on other avenues. But they didn't listen. He was tough on Russia.
He wasn't advising Germany to divest from Russia because it would strengthen NATO. He was saying NATO was corrupted because of Russian oil and therefore was worthless. This is based on the same fallacious perspective that Putin employs. Namely that NATO exists to be Russia's adversary. NATO exists for the defense of politically-aligned democracies against aggressors. Russia is only the enemy of NATO because they choose to be. Trump's behavior towards Ukraine was not only grotesquely unethical and breach of his Constitutional obligations but seriously weakened their position when it came to resisting Russia.
Based on all his public statements and all the insider accounts from both career civil servants and even his own political appointees, Trump never bothered to understand the subtlety of NATO or really any other policy. Just read what Fiona Hill and John Bolton among others have to say. He wanted out of NATO. He respected the word of Putin, he hated Ukraine and it was 100% personal. He refused to press Putin on election interference when he met him in Finland, but withheld Congressionally appropriated aid to Ukraine unless they did him a favor to help his own electoral fortunes.
The 2% defense spending target was negotiated by Obama and agreed by NATO members before Trump took office. Trump took that cue and railed that America was paying for NATO as though it were a dues-based organization. When he went to Brussels to push for compliance, he raised the prospect of 4% as a new spending target even when the US was tracking to drop below 3%. While he may have achieved a policy victory here and there it was only ever by coincidence. I've not seen any indication has understands or even cares about any policy whatsoever and only says things that get him attention.
That's nonsense. The president doesn't even set monetary policy. Monetary policy is explicitly designed to be apolitical yet it didn't stop him from threatening the fed chair with retaliation if he didn't set negative rates. Thankfully Powell ignored him or inflation would be substantially worse.
More money in the pockets of already affluent people doesn't spur much new consumption. Only policies that put energy efficiency in the hands of everyone are going to make a dent.
This is extremely reductionist. It's like saying untying a balloon doesn't cause it to deflate, the deflation is caused by the random motion and collisions of the air molecules.
Completely wrong. When covid hit and the lock downs started, oil demand took a nose dive, and shortly afterward producers reduced output because of the lack of demand. The reduction in demand was more than the entire oil production of the united states: 15m barrels per day.
During the recovery, consumer demand increased at a faster rate than the production increase... leading to rising prices. It continues to be higher than world production. Right now, demand is back to pre-pandemic levels, but production is still a few million barrels (per day) short.
Production is limited by the choice of the oil and gas companies. There are plenty of sites available for extraction, but they are not being exploited because producers have been burned multiple times investing into a short-term spike in prices. If prices remain elevated for a while, they will start to drill.
The US oil production COVID low was 9.7m bpd.. we're currently at 11.4m bpd. We're already the #1 producer in the world. If you added the current global shortfall, it would put us way past record levels. Your belief that the US alone can make up this shortfall is entirely based on speculation and the belief of unlimited US production.
Again, the COVID dip was larger than the entire US production. It's silly to believe a global problem can be solved entirely by the US.
And the issue with OPS analysis is that he wants to blame biden, when his own chart clearly shows prices rising since the COVID dip... something that happened before he was elected. This has nothing to do with politics.
BREAKING Stocks rebound on hope inflation is peaking, Nasdaq adds 1%
On top of the defaults with China now looking like it won't be able to avoid Russia's fait down the line, with no end in inflation (prices keep going up across the board), with Shenzen and Shanghai in indefinite lockdown impacting supply chains, with BRICS + OPEC signaling they want alternative to USD + crypto/stablecoins impacting financial markets.
That's because most of retail and individual investors had puts or shorted the market. The institutional traders are not going to give up their profits so easily and stock always moves to crush the retailers
> most of retail and individual investors had puts or shorted the market
Most retail investors absolutely do not own puts nor are they net short the market.
The actual situation over the past few months seems to be the exact opposite of what you mention. It would seem that institutional investors have been using their retail facing market commentators to urge the public to "buy the dip" while the institutional smart money is selling every uptick:
They make up some correlation to sell a daily stock news update. They have no idea why it went up. It hasn’t even recovered from yesterday. Day to day movement means nothing most of the time and the stock market is detached from how the average American experiences the economy anyway.
Rule of thumb: if an equity market move is ever less than 1.5% in either direction, the headlines about why it happened are completely made up. Financial news has to assign a narrative even when there is none.
I've favorited this comment but why 1.5%? Why not 2 or 3%? I guess that is a big enough move to suggest some shift in fundamentals or some major event in FANG
I tried to be intentionally conservative, but I agree there’s an argument for it to be higher. As someone who watches markets a decent amount, 3% seems far more likely to be in clear reaction to some event, or a continuation of a recent major trend.
To be clear I’m referring to the whole market, not a move in a single stock.
I remember a sushi restaurant near my had purchased stacks of tablets, hoping them + digital menu would replace their paper menus. This was long before the pandemic.
I’m not sure of the specific reason, but they ditched those tablets a few months later.
I have been to restaurants where you see the menu using a QR code and also place an order and pay over the website. I do not like this because, first it seems like its more self serve and there's no service really except bringing the food from the kitchen and I am still expected to pay the same 10-20% tip and second, I am afraid we are perhaps headed towards restaurant analytics, impressions/views for menu items etc, and perhaps the online retailer behavior of not being able to pay without adding a card on file and all the dark UX patterns that come with it.
> headed towards restaurant analytics, impressions/views for menu items etc
Isn't all this already captured today? Restaurants can very easily keep track of what most people are ordering, what dishes are being sent back, etc.
I understand it would become easier to collect this data, but I'd be surprised if most (decent) restaurants don't already track popular dishes, table turnaround, etc.
Well, do a lot more than just see if a dish sells well or gets sent back more. I meant head deeper down that rabbit hole. To quickly think of a few things, building customer profiles, personalized menus, personalized menu item combo pricing, variable and surge pricing perhaps so busy hours cost more etc etc.
Yes I've been thinking more and more recently about how personalization means fewer shared experiences.
It becomes much harder to remain a cohesive group when everyone is getting their personalized version of a thing.
I don't think there's much value in this for something as small as a restaurant where menus are always limited enough that personalization wouldn't impact what is on the menu (maybe just how its presented to you).
Personalized pricing (combo or otherwise), surge pricing etc for restaurants seems just unlikely IMO. But I can see why some might think otherwise.
I am super grateful for QR codes to see a menu and pay my bill, but I will not dine at any establishment that makes having an special app/account a requirement.
I saw paper menus disappearing before inflation started going up. I took it as a Covid measure - no physical menus that needed to be disinfected after each customer used them.
Quite a lot of people are starting to say that measuring inflation with a single number is like measuring the temperature of the whole US with a single number - "today the temperature in US is 81 F".
It’s wrong because there’s a freak snowstorm in Seattle and it’s 39°F there right now and it’s 81°F in Kansas City. So the average temp between those two place is 60°F which tells us nothing useful about either place.
Sure, but prices are up everywhere for most goods. Are prices actually down for anything significant right now? So using the weather analogy, it is hot everywhere in the US.
Over longer time the US average temp is useful, it tells us something about the climate, not the weather. Maybe that analogy kinda works for the economy.
Which is potentially useful if the aggregate is weighted appropriately and whatever insights respect the implications of using an aggregate. It's even more useful with the additional information that temperatures in the US tend to be highly correlated between areas.
Some useful insights if you have enough data points would be where in the year you are, which season it is, if it might be an El Nino or la Nina year, and over the long term if there are any secular trends like global warming...
People live in one place and only care about the weather at that place. Whereas consumers need products from all sectors of the economy, so an aggregate inflation indicator makes sense.
Sure, it's not perfect, since every household spends their money differently, but everyone needs food, housing, energy, etc.
I think it’s an apt metaphor. If you lived in a big city in the 2010s, you’ve probably read years worth of headlines about low inflation, all while experiencing a rapidly inflating cost of living.
CPI is like climate news, not weather news, and should be understood as much.
The point is that GDP is a measure of how much the economy in the US grows or contracts, just as CPI is a measure of how much prices in the US grow or contract. You shouldn't view GDP as a personal indicator of economic growth, just like CPI isn't an analysis of costs on your personal spending. Treating it as such feels like distorting the purpose of the measure to suit a narrative.
It has limitations in its ability to measure that, it can simultaneously be the best measure that we have, in the absence of a better one, doesn't mean its good or a helpful indication, and as we both agree it’s not a good indication of any individual persons experience
> It has limitations in its ability to measure that
Nobody has denies this, so why is it a talking point?
> as we both agree it’s not a good indication of any individual persons experience
Which is why I use it for what it is instead of complaining about it not being something else. Any one individual is influenced by their own bias and experience, which creates an entirely different problem.
> If GDP goes up 5%, but you only get a 3% raise does that make GDP a bad measure of the economy?
let's stick with the basics. this was the whole conversation, a leading question that pretends to be a thought exercise that suggests in some other scenario that GDP is a good measure. no more, no less. I think we've gone over everything now.
I didn't see where you developed the bulletproof case that GDP was a bad measure. If you've proven that at some point, I'm happy to adjust my understanding. In lieu of that, I'll go with the economic experts who regularly study, use, and rely on GDP for real world analysis.
> you're the only one that had to read it twice, we talked about it now, good talk.
The lack of punctuation and choice of verb tense made it difficult to understand, no need for the condescending tone.
I like the analogy. Recent inflation hasn't hit my household as hard while its crippling for others. We work from home and rarely drive far when we do leave the house. We eat frugally and cook almost all our own meals. Finally we own our home and are locked in at our mortgage rate. Inflation has been hammering energy, food and housing costs. We've felt some of the food increases but the rest, not really.
Meanwhile imagine a family that rents their home, commutes long distances to work and has growing kids. They are probably drowning. Comparing these cases feels a lot like averaging together the temperatures of Seattle and Houston.
I'm wondering if these people are suggesting a completely different approach, or if they are just starting to realize that BLS publishes a huge number of inflation measures [1]:
> Price indexes are available for the U.S., the four Census regions, nine Census divisions, two size of city classes, eight cross-classifications of regions and size-classes, and for 23 local areas. Indexes are available for major groups of consumer expenditures (food and beverages, housing, apparel, transportation, medical care, recreation, education and communications, and other goods and services), for items within each group, and for special categories, such as services.
Those people don’t understand how the CPI is calculated. A basket of goods is used to project what an average person would spend on goods and services. Do people in New York spend more on the same basket? Of course! But the percentage change is fairly uniform in a connected economy like the US. The measurement is intended to calculate the macro effect of inflation; not Bob’s impact, who lives in Ohio, owns three cats, and exclusively eats tuna from a can.
An analogy is the BMI. This is intended as a population metric, but is often used by the individual. It’s less useful for the individual, but still actually pretty useful. If your BMI is above 30, you’re probably unhealthy. You might be a pro wrestler with huge muscles, but you probably aren’t.
It’s an interview with Prof Meltzer from Carnegie Mellon who has done extensive research on the federal reserve system.
Cliff notes:
- As a result of the 2008 crisis the fed expanded the money supply to a degree never seen before
- Rather than drive inflation, the “new money’s” effect was muted due to skittish banks who would decide to just take the funds and hold as cash/treasuries (maintaining strong reserves) until more positive economic indicators emerged (this process could be paused if economic sentiment turned negative)
- Once economic forecasts turn more optimistic, the money will be deployed (through lending) into investments and assets leading to inflation in those prices
- Eventually the excess supply will spill over into consumer spending in the classic indicators of inflation like CPI
- However the fed will be under immense political pressure to not drive the “fragile” economy into a recession so any tightening will be far too late and inflation will overshoot targets by a large degree.
- Similar to the 70’s, until strong monetary contraction is brought in, inflation will run very hot despite other efforts to control it
And yet people on hacker news or other high income forums seems to say "Just buy a EV".
It's the "Let them Eat Cake" of 2022. Poor people driving economy boxes and living in a 4th floor walkup apartment with 3 roommates aren't buying an EV... even if the savings are better long term.
It's the "Buy a better pair of boots they'll last longer".
And yet - people seem oblivious - like Marie Antoinette that the poor class can't simply upgrade to solar and use an EV and avoid the gas prices which hit their bottom line pay every week in the form of higher prices and higher costs to travel.
Who cares about bread when it costs so much to drive to the gas station? Let them get an EV
> Poor people driving economy boxes and living in a 4th floor walkup apartment with 3 roommates
People living in 4+ story apartment buildings have extensive options for transit that don't involve driving their personal "economy box" around. And to the extent they do, the "poor class" in the USA continues to pay lower prices for gas than any other industrial democracy, including in places like Australia and Canada with comparable per-capita driving statistics.
That argument seems like a canard. Yes, higher gas prices suck. They suck rather less than land wars in Europe though, so... what's the option here? I know there's a partisan angle there that says something about fracking, but needless to say short term inflation isn't well treated by half decade infrastructure projects. Gas is going up because Russia invaded Ukraine, and there's nothing anyone in the west can do about that right now regardless of whether they drive an EV or not.
(Won't lie though, that I'm totally loving the Tesla right now.)
I lived in an apartment in suburban Atlanta that was 4 stories in a county with no public transit whatsoever. Plenty of places in the U.S. have little or no public transit in the US but also have the density to support apartment buildings.
That's not "plenty", that's Fayette county[1]. It's very much an outlier, just like current fuel prices. The overwhelming majority of urban poor can (and do!) get by just fine without personal vehicles.
I have to say this debate is just exhausting. People just don't want to accomodate any solutions beyond "We Must Have Cheap Gas For Our Trucks In Perpetuity". I mean... that's just not the world we live in. And the rest of us (including and especially the urban poor!) have been looking at alternatives for decades.
[1] Here's Georgia's helpful site. Indeed Atlanta transit is sort of a mess, but it's there and it does work. No doubt you didn't take the bus when you lived there, but you almost certainly had options you weren't aware of. https://www.gatransit.org/page/TransitNearMe
I was in Henry County, GA, which has a lot of poor areas (including where I was living) with no MARTA in place. It's been over a decade since I lived there, but I'm not sure what's in place now.
Plenty of people live in in multi-story walk-up units in small and medium sized New England cities that have mediocre (if any) public transit that becomes nonexistent if you have to commute for work.
I think you'll find "plenty" of people in Worcester and Springfield and New London take that "mediocre (if any)" public transit every day. You didn't ride those buses, because you chose to have a car. Lots of people choose to have cars. People who have cars and don't take public transit nor prioritize transit policy, then complain about fuel price effects on the people who public transit is aimed at, are precisely the problem I was talking about.
“we can take advantage of the next generation of electric vehicles [so] that a typical driver will save about $80 a month from not having to pay gas at the pump.”
> It's the "Let them Eat Cake" of 2022. Poor people driving economy boxes and living in a 4th floor walkup apartment with 3 roommates aren't buying an EV... even if the savings are better long term.
The people living in these situations likely rely on public transportation and don't even have an economy box. Gas prices will still hit their bottom line as transport costs rise for food and other goods.
It depends on the level of poverty we're talking about. A decently large percentage of undocumented migrants from Central America own cars, for example.
I love this phrase, it's so deliciously orwellian. In other news, home invasions are down over 90% YoY. Sharp increase in undocumented roommates though.
That's certainly not true. Maybe in New York or DC. But there are lots of cities in this country that lack basic public transportation. Even in Philadelphia where we have a pretty good network of routes, a astounding number of people commute out of the city via car to work.
That people are arguing only implies you are bourgeoisie, and feel the need to explain how these poor people are really effected by X and Y and Z. I have people on my team where their weekly bill for travel to work has doubled in the last two years. It hits peoples bottom line quite clearly.
I think that we can agree that both groups exist, no?
I know people who don't own a car and share an apartment with others, and I also know people who struggle to keep their vehicles road-worthy. The latter usually have fewer room mates, though.
Here are the weightings of CPI [1]. It's not quite that simple (eg there are seasonal adjustments) but it's a good rough estimate. You'll note that Shelter (Housing) is 32% and Energy is 7%. Two key events YoY:
1. We went from Covid discounts in housing to a corection and a surge in the other direction. Housing is certainly a problem but the impact on inflation is slightly exaggerated because of that swing; and
2. A war started in Ukraine and this allowed energy companies to arbitrarily raise prices for massive profits that have little to do with actual or potential supply issues.
Housing takes a long time to turn around. I honestly think we need to start punitively taxing property held by corporations (including LLCs), foreign-owned property and illegal hotels (ie AirBnB) as these are restricting access to a necessity for no real benefit.
As for energy, as much as many in the US in particular like to blame this on Biden. It's worldwide. The real problem though is profiteering by oil companies. It maddens me when I see governments suspending taxes to reduce the hit but somehow the energy companies can't take a hit? They're making absolute record profits. But no one even speaks about that.
Where Biden is responsible is in the same way every US president is, regardless of party. And that is in promoting a reckless foreign policy and dangling NATO membership to Ukraine to keep it aligned with the West when it was (and is) never going to happen for exactly the reasons we're seeing now. Of course, Russia is to blame for a completely unjustifable and horrific invasion and everything that comes from that but both of these things can be true at the same time.
Put it this way: you park your car in a crappy part of town and leave your Macbook on the hood and there's a good chance it'll be stolen. Sure the thief is responsible but you also could've taken more care. And no, that's not victim-blaming.
Taxing those land/dwelling holding corporations just creates a pass-through situation where the end-user ends up footing the cost of those taxes. It ultimately just raises prices even more.
The best fix (and proper one) is for states/feds to step in, override zoning, and start mass construction of new multi-family housing.
> Taxing those land/dwelling holding corporations just creates a pass-through situation
Rental prices are almost completely demand based because supply is completely inelastic in the short run and only barely elastic in the medium/long run. Landlords are already charging as much as the market will bear, they can't just unilaterally raise prices, people will move and they won't fill their units.
There are plenty of housing substitutes. A cheaper town/neighborhood, roommates, less bedrooms. As people leave more expensive areas those areas are forced to lower rent back to where it was.
>"Consumer prices rose 8.5% in March, slightly hotter than expected and the highest since 1981"
The qualifier "slightly hotter than expected" reeks of media manipulation. 'Spin' at best, 'propaganda' at worst. It seems obvious to me that the reporters are trying to dampen or downplay this obviously negative news. Whereas this exact same news could be harped on and used like a weapon against the policy of the current administration. But don't worry, this was "expected" and only slightly worse than our central planners predicted. Keep calm and carry on.
Nonsense. 8.5% is literally slightly hotter than the expected 8.4%. From yesterday's Axios:
> Details: Analysts surveyed by FactSet expect the release to show 8.4% inflation over the last year. That would be the highest inflation rate since December 1981. The rate was 7.9% for the year that ended in February.
From this morning (6am) Morning Brew:
> Good morning. Today’s consumer price index reading is expected to show that March prices surged 8.4% over last year. You know who’s not contributing to inflation? The Brew. Today, we’re launching a revamped referral program with cheaper “prices” on swag items…that were already free to begin with.
So the NEWS of the release is that it was 8.5% instead of 8.4%. That's why they pointed it out. Everything else was already priced in by markets.
This is a weird comment. "Expected" doesn't mean it's good. It was expected because March already happened and forecasters had a pretty good idea of what the retrospective measure would be based on their own measurements.
Open question: won't inflation lead to mechanically higher stock prices, specially if it's demand driven?
Say we give duplicate the amount of money in the economy(M1 M2 etc) and prices immediately double. Won't that also double firm revenue, profits, dividends, and thus firm value in nominal terms?
Thus, if stock prices and home prices are +10% in nominal terms, with inflation close to 10%, doesn't this mean they are just breaking even?
Prices don't immediately double. My layman's understanding is that it heavily depends on where you put the new doubled money in the economy, and it's resulting velocity. If you give it to banks they might park it in assets, increasing their prices, but then the money "stops" moving through the economy and doesn't have a large effect on things like food prices for instance. If you give it to people who need to make rent now, then they probably spend it immediately, often to people who also spend it soon, and it has a higher velocity and broadly affects prices before being absorbed into a slower moving asset like a bond or long term stock holding.
It depends on the underlying valuation of the stock, and the industry sector.
Stocks for retail/commodities/food/oil... will generally keep up with high inflation, since these industries have low margins and profits track closely to prices. There will even be some speculation, so it might pop in these environments, only to come down when clarity returns.
Growth stock will be obliterated in high inflation environment, because they're valued for future profits, which will be worth less because money is worth less.
Business services, entertainment, ... kind of wavers in between.
>Open question: won't inflation lead to mechanically higher stock prices, specially if it's demand driven?
Mechanically higher not-USD things. Crypto, stocks, real estate, gold.
>Say we give duplicate the amount of money in the economy(M1 M2 etc) and prices immediately double. Won't that also double firm revenue, profits, dividends, and thus firm value in nominal terms?
It wont evenly distribute amongst crypto, stocks, real estate, gold, etc
>Thus, if stock prices and home prices are +10% in nominal terms, with inflation close to 10%, doesn't this mean they are just breaking even?
Oh ya, like you have to compare inflation to GDP to interest rates.
If GDP was 15% and inflation was 10% and interest rates are 10%. Those are some big numbers but not really a giant problem or anything. Social mobility would be fantastic in those numbers.
Reality: GDP is 6.9 with previous of 2.3, inflation 8.5%, and interest rates are 0.5%. YTD S&P500 is -6.75% while 1y is 7.3%
In reality the GDP figure is fake, temporary boost that wont be able to hold on.
In short, yes. Inflation is an increase in the price level, and as such it only affects nominal prices, not relative prices. So the price of goods and services in relation to the price of your work (i.e. your salary) remains constant. Nothing becomes more expensive/cheaper in real terms, as a result of inflation. Although in practice this isn't entirely true.
> won't inflation lead to mechanically higher stock prices, specially if it's demand driven?
Yes, to a point. Stocks are priced in nominal dollars because revenues are earned and dividends paid in nominal dollars. Endemic inflation screws with an economy, however. That reduces its productivity. First real returns falter. Then investors abandon the market.
> Open question: won't inflation lead to mechanically higher stock prices, specially if it's demand driven?
this has been answered already but I want to add something that wasn't mentioned: if you are thinking about it now, the market thought about it months before you and it's probably already baked in the current price.
so don't expect a 10% increase in 1 year on spy even if everything goes up 10%. that 10% was grabbed by the better informed the moment the money printers were turned on.
A major reason gasoline, diesel and natural gas prices are spiking is the push to export more fossil fuels from the USA by the oil/gas industry. This was facilitated by the 2015 decision to eliminate the ban on crude oil exports, which Obama/Biden and Republicans backed. It's simple supply and demand: reduce domestic supply by increasing exports to jack up domestic prices and increase profits. Around the same time at least one major domestic refinery was also closed, adding to the domestic supply restriction.
There is some effort to get the ban re-instated as of 2021:
> "Khanna drafted a letter to the White House Monday signed by nine Democrats urging the administration to block the export of U.S. oil, which has been allowed since 2015 when Congress lifted a 40-year-old ban on the practice. Since then, U.S. exports have regularly surpassed 3 million barrels a day, more than the production of major OPEC members such as Kuwait and Iran."
different compositions. what we call "oil" actually ranges through so many configurations you might as well think of it the same way we think of juice. sulfur and other impurities can change the game dramatically.
it's also the reason Alberta's tar sands have few importers, because not everyone is capable of refining it (which leads to Canada having to export it, and import foreign oil).
there are refineries in the US that only work effectively on Russian oil -- and I'm sure there's similar issues elsewhere in the world. they can probably adapt but it's not as uniform as we'd think.
> "The refineries do not rely on Russian oil equally. Nearly 60 percent of Russian crude imported to Washington went to the Tesoro/Marathon Anacortes refinery, and another 29 percent went to the BP Ferndale refinery. Russian crude made up almost 7 percent of all crude refined at the Tesoro/Marathon Anacortes refinery from 2009 through 2021."
Getting oil from Bakken or Pennsylvania would likely be expensive, and also refineries are optimized to process specific grades/types of crude oil. The best solution would be for the US government to prioritize the transition to renewables in Oregon and Washington.
Honestly, this was just my gut and I've felt prices were artificially low for the past decade or so - maybe because of globalization and offshore manufacturing, and things are really just catching up to what they're actually worth. You can elect a guy that will "decouple" from China and trash international trade deals...but don't expect low prices 4 years later...
I agree. I think the prices we see now are probably more "correct", and things were just very cheap in the past. But I also think that there's some inflation going on from pent-up savings. Flights, credit card points, hotels, etc. coupled with corporations raising prices to offset losses in 2020-2021. I'm also curious about a race condition with wages and prices. Forget the tech wages because those are probably propping up equity markets and housing markets, but day-to-day stuff where someone was making $15/hour and now they're making $20/hour or more with that change happening over the course of a year and for millions, well, they can afford the higher prices... I'd love to read something more educated on that topic though. I have an intuition (race condition or at least partial race condition) but I haven't studied the specific economics of that. I always assumed you'd get inflation but not corresponding wage increases. I guess if the west is able to prop up currencies, it's fine? Kind of like living in Iceland except everywhere.
For example, I live in Ohio. Can someone explain to me why I would expect a swordfish steak or tuna steak or salmon to be cheap whatsoever? And that's still not pricing in offsets needed from c02 emissions. Chicken on the other hand? Yea that should be very cheap and very fresh.
We need more local suppliers. Grow a victory garden. Last season we had so many onions. I wish I could have had a neighborhood farmer's market. But rules. Regulations. Etc.
>For example, I live in Ohio. Can someone explain to me why I would expect a swordfish steak or tuna steak or salmon to be cheap whatsoever? And that's still not pricing in offsets needed from c02 emissions. Chicken on the other hand? Yea that should be very cheap and very fresh.
Because global interconnected economy. The same business processes that figure out how to distribute all sorts of widgets to warehouses and supply house shelves and parts departments all over the country are being used to send a steady stream of approximately the amount of swordfish to Cleveland that people in Cleveland buy. It doesn't really cost any more to ship it to Cleveland than it does NYC. It's just a giant customization problem. Thanks to modern communications technology the dozen swordfish steaks that you and eleven other people will buy this week get to your supermarket.
In the US whenever I traveled during the past decade it felt like consumer goods were much more expensive, CAD, AUD, EUR, purchases all felt more expensive. I wonder if part of this is just the weakening of the dollar as the result of US economic policy over the last twenty years.
I agree. To see the process of prices deflating happen on a small timeline, look to Japan. After Japan realized their cost of doing business was going to rise due to aging, their markets crashed in the 90s. In response they poured epic levels of investment into mobilizing offshore workers and completely recovered. The lesson the world took away was "money isn't real, maybe we should take on more debt".
Ironically here in the US the party of "trash international trade to increase local workers' bargaining power" is also the party of "keep retirement age the same at all costs and maintain fixed income QOL".
As we see globalization unwind from international policy and as working populations age (China peaked @ ~1 billion workers, and is declining), we are guaranteed to see prices rise as workers can demand much, much more (to the dismay of those on fixed income).
I think it'll be interesting to see this unholy coupling tear apart.
Our stuff was being made in China, until many of our supply chains were severed due to Covid, leading to Chinese defaults, shortages, and an increased cost of doing business. Now a certain amount of stuff simply isn't getting made at all.
The question at play is will they recover to 2019 levels? Will China be able to deal with the defaults of businesses who provided key nodes in the supply chain while juggling their 0-covid strategy? What will happen to the cost of doing business when China loses 20% of its workers over the next decade or so due to aging?
I've been a broken record about this but I highly recommend The Great Demographic Reversal. It provides a high level view of the forces at play in our world and is a real eye opener.
caycep said prices were artificially low but that's not quite right - prices were as low as they deserved to be because China had workers and we were able to make deals to mobilize them. In the coming decades I'm not convinced we will have that luxury.
The best cure for inflation is to increase taxes. This removes money from the economy, and can be targeted towards the areas of the economy with too much money.
Raising interest rates paid to the Fed are another way of removing money from the economy, but are a broader brush, although the Fed is a much better steward than Congress. Increased interest rates cause stock market declines, so they also tend to act as a wealth tax.
Cutting spending is another way, but it's slow acting. It's more of "don't make things worse" than attacking the core problem of "too much money".
So if you hear somebody screaming about inflation, ask them if they support increased taxes.
So if the money I have is worth less, your response is to take away more of my money? Yeah, that may work to stop inflation. It may have a few other consequences, though...
All inflation cures are painful. The standard cure is recession and high unemployment. Increasing taxes on the rich is much less painful. Better to take a little bit of your money away than to lose your job.
Or you can learn to live with the inflation.
Rock and a hard place is the standard expression for the situation we're in.
I scream about inflation and I do not support increased taxes. The US government is wildly inefficient with the tax dollars I already give them. Until they can show some discretion I'll tell them to kick rocks whenever there's a tax increase on the ballot.
Believe it or not those are not the only options. Plus the government isn't going to just take the money out of circulation so it won't really fix anything.
The proof is easy, look at the times the US has had balanced budgets and then look for recessions following a year or so later. Works all the way back to Andrew Jackson's time.
As for stopping printing money, the Fed did that last summer.
It doesn't work against transitory, sectoral inflation, no. But HN consensus and the top comment here insist that the inflation is general and permanent.
It doesn't. The OP is confusing MMT where monetary policy is controlled through fiscal policy; and the current state of affairs where they are separate. Collecting more taxes will raise prices, lower your purchasing ability and help the government carry on in reckless spending.
Tax collection pays the interest on the debt. Higher taxes means more debt load.
The government, like any modern public company, does not care about profit. They operate to maximize cash flow. Income is from taxes, but most cash flow comes from debt leveraged on that income. More income, more debt. Less income, less debt.
Meat prices are up close to 30% for me in NYC since January. I am aware meat prices don’t dictate inflation numbers but I’m really having a hard time believing any official estimates at this point. The actual Covid numbers over the past ~1.5 months (use imagination) look extremely “smoothed downwards” as well, not that they were ever accurate (although certainly the US was one of few countries willing to or capable of providing public numbers). The underrated thing about Trump was his administration wasn’t capable of hiding their incompetence.
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[ 3.0 ms ] story [ 454 ms ] threadGasoline, unleaded regular - +48.8% (+20.1% over last month)
[1]https://www.bls.gov/news.release/cpi.nr0.htm
i called the bottom on oil during the worst of the pandemic but did nothing about it :(
EDIT: i also sold apple at $10/share, i am not good at trading hah
Also a US President who is antithetical to the oil/lng industry will drive up the price of oil through the futures market. Demand is still high, Biden has constrained supply, forcing futures prices to go up. Trump was bullish on oil/lng, with the same demand and increased supply, prices went down.
America no longer supports the House of Saud. It tolerates it. But were it to face a serious threat, apart from a Wahhabi fundamentalist, the U.S. would be unlikely to intervene. Riyadh knows this, which is why those calls aren’t very useful.
That said, the President does have dials. They are drilling permits and import restrictions.
I'll focus just on the first half: Less than 10% of oil drilling happens on Federal land, and there are thousands of unused permits available.
Which isn't to say that these thousands of permits could be drilled on tomorrow - they are subject to environmental impact studies, lawsuits from locals for dozens of reasons, supply chain issues around equipment, etc.
Which is a long way of saying: This particular dial is very indirect, at best.
Additionally, there's the push to expand LNG exports to Europe.
Both of these are major factors in the price rise. I personally don't really care about this as I don't own a car, and this will push new buyers towards EVs, but the media silence on this is kind of instructive - corporate media is owned by the same investors profiting off the high energy prices, so there's no incentive for honest reporting, not if you want to keep your media job anyway.
Seems to me if they wanted to increase production a lot they would decrease the stock buy backs and instead increase future revenue by increasing current and near future production.
USD value is going to be hit extremely hard as it loses reserve currency status. The days of the petrodollar have come to an end. It will be a typical “closing the barn doors after the horses have bolted” response which will only make things worse.
This is actively happening now, the big holders are just trying to do it quietly to get out as much as possible before the US tries to shut it down and USD fully tanks.
As this happens the market valuations will appear to rise in nominal values. If you value the market in gallons of unleaded or dozens of eggs however you will see a different story. There’s only so many years the politicians can claim it’s a “supply shock”.
The dollar is approaching a 3-year high [1]. It is up close to 9% over the past year.
[1] https://www.wsj.com/market-data/quotes/index/DXY/
https://www.kitco.com/charts/popup/au1825nyb.html
The U.S. dollar index, “an index (or measure) of the value of the United States dollar relative to a basket of foreign currencies” [1].
> How do you square it with a chart of USD value versus an asset which has held consistent value for millennia?
Gold has appreciated relative to the dollar since its 2016 low.
Granted, it took until 2020 for gold to regain its ca. 2013 price. That doesn’t translate into any information about inflation in that interval. Nor about U.S. export/import balances or the dollar’s strength. Unless you’re in the gold business, gold prices are a facile measure of anything economically useful.
[1] https://en.m.wikipedia.org/wiki/U.S._Dollar_Index
If foreign currency has 20% inflation, and US has 10%, the dollar index will go up. But the USD still lost value in absolute terms
Agreed. Which is why we have different words for each.
Saying “USD is down” unambiguously means the former. Inflation unambiguously means the latter. Saying inflation is up in response to an article about inflation being up is tautological. So, in the spirit of Hacker News, I assumed they weren’t being flippant but were instead factually wrong.
"USD is down" is only implied to be about foreign currencies in a trading/finance context
"Dollar loses value" and "USD is down" are different words. The former is ambiguous. The latter is unambiguous. Particularly in response to an article about inflation. Again, "USD is down" is, given the context, either inane or wrong. I'd prefer to be wrong than stupid.
The terms “real” and “nominal” make it abundantly clear that I’m not talking about USD versus other currencies. Why are other currencies even part of the discussion? I can only guess because it was an easy retort to “disprove” my statement and derail the discussion.
The meaning should be clear enough from the context of my full comment. I’d rather hear feedback and discussion on that, than debating something I wasn’t even trying to claim (e.g. whether other currencies are rising or falling faster than the USD).
Countries are beginning to do real volumes of energy trade outside of the USD. Countries are also questioning the level of USD reserves they want to be holding with the Fed. This structural decrease in the demand for US dollars will have a very lasting impact that will become clear over the next decade. This is a tidal change which was a long time coming, but I think the weaponization of the USD and SWIFT thru never-before-seen sanctions have pushed it over the edge.
It doesn’t help to be reaching this point with debt levels at 140% GDP and deficit to GDP over 10%…
Because demand for dollars has been so consistently high in modern history, we usually think of inflation in terms of the US economy being too “hot” or because we’ve printed too many dollars. It can be bizarre to think about changing “demand” for a currency, because, who doesn’t want more money? The light bulb is understanding there are many options for storing value, and demand for one option versus another shifts through a combination of present utility and future expectations.
I believe that the structural reasons driving inflation this year and for the next decade have shifted entirely into something the US has never seen before, and it’s very interesting to consider where it will lead. The war and COVID are confounding variables which I believe some people use to try to ignore the new reality.
A weak USD relative to other currencies isn’t an entirely terrible thing. It leads to massive re-domestication of production for one thing, as imports become too expensive. But that depends as much on how quickly other countries devalue their currency.
In the near term the biggest hit from debasement of the local currency is to anyone with liquid savings, or anyone who has stagnant wages (e.g. once yearly wage increases become insufficient to not lose significant purchasing power).
This is false [1].
> Why are other currencies even part of the discussion?
Referring to dollars by their ISO currency code is an FX convention. Given the article you're commenting on is about inflation being up, which is a more direct way of saying dollars have lost value vis-à-vis real assets, most people assumed you were (a) using the convention correctly and (b) not re-stating the headline.
[1] https://www.multpl.com/inflation-adjusted-s-p-500
Maybe try this one:
http://pricedingold.com/charts/SP500-2006.pdf
It’s ok though, I give up on productive discussion today. You can “win”.
Centuries and decades (your graph) are similarly useless in evaluating intraday reactions. These data are widely available [1]. American equities are up, in real terms, for almost any reasonable time interval.
Pricing the S&P 500 in gold is a convoluted way of looking at it, but for purposes of discussion, even that chart shows a 2022 decline followed by a recent rally. All up from the last few years. At par with 2006, which sounds dismal, until one consider the chart shows the S&P 500's price, not total return. The S&P 500 currently spits out a 1.45% dividend yield [2].
Someone who bought the S&P 500 in 2006, a terrible year, is unambiguously better off than someone who bought gold. In nominal terms. In real terms. In gold-priced terms.
[1] https://data.nasdaq.com/data/MULTPL/SP500_INFLADJ_YEAR-sp-50...
[2] https://www.slickcharts.com/sp500/yield
Which is why it's compared to a basket of currencies instead of a single one.
The USD, Yuan, Yen, Euro, GBP, and Rupee cover like 70% of the world's GDP. Maybe throw in the CHF because it's stable.
The dollar index can strengthen while cost of bread doubles in USD terms.
If every government agreed to print 2x the money supply overnight, dollar index remains the same but cost of everything will double (at equilibrium)
A good suit always costs 1 ounce of gold, since there were suits and gold.
This is clever. One can vary the value of "good" to fit any asset. Taken in good faith, I'm curious about the suit discounts I missed between 2013 and 2016, when gold lost value (relative to the dollar).
> value of gold is invariant
Axiomatic arguments work for anything. Bagel is invariant. All price relative to bagel. One breakfast sandwich always costs one bagel.
Also note that while the value of the dollar in real terms can vary minute to minute and swing percentage points day-to-day and many percentage points year to year, retail pricing will take time to catch up due to the length of the supply chain and the cost of repricing. Retail pricing is “sticky”.
Keep in mind that over the last 100 years the US dollar has lost ~95% of its real value. It will most certainly do so again, and my opinion is that it won’t take nearly as long the next time around.
Gold is terrible for stability, which is why booms and busts were more common and longer before every single country learned that and dropped gold standards.
In 500 B.C. in Babylonia apparently an ounce of gold would buy you 350 loaves of bread. It’s roughly the same today.
Augustus paid his centurions about 40 ounces of gold a year in 0 B.C. Today the median wage is about the same.
I don’t disagree about the booms and busts, I’m not saying that a gold standard is a solution.
The fact that pricing in gold is stable over millennia even within an order of magnitude is pretty cool. Certainly no fiat currency could say the same even on a 100 year scale.
No one holds fiat for 100 years, so it's a silly thing to worry about. No one hold currency even 25 years, so again, irrelevant. Fiat is designed to make pricing predictable and smooth out the booms and busts that gold causes. It's designed to be slightly inflationary to avoid deflationary spirals. Fiat has been the most stable economic basis in history. There never was a goal that a loaf of bread is $1 usd for eternity. There is a goal that inflation targets around 2%, and the resulting stability under this system allows loans to have lower interest, for businesses to make longer term financial plans, and for solid expansion of economies.
Another way to think of it over those timespans, is gold is simply a terrible thing to hold also. If you're claiming holding gold for 10,000 years breaks even, it's a terrible thing to hold. You might as well hold water or dirt. If gold is worth the same now as 100 years ago, you should have sold it immediately and invested into productive assets, such as Dow Jones index (which over the past 100 years returned 132 times the initial investment).
Since no one holds currency for long term investments, and for likely centuries decent investments have returned vastly more than gold, there is nearly zero use for gold. The love of gold is simply voodoo.
Currency is more stable for buying and selling and pricing over any range people hold currency. If you want an investment that has return, pick nearly anything except gold.
The purchasing power of an ounce of gold in terms of real goods that can be obtained is remarkably consistent over human history, taking into account productivity increases which make everything actually easier to produce (rather than making gold or fiat currencies more “valuable”).
This is a characteristic of gold in particular (above all other commodities), due to a number of factors related to its density/portability, longevity, malleability, and the consistent rate over history at which it’s been extractable from the earth. It’s a rather peculiar if not spectacular equilibrium.
It’s a nice benefit that it’s also rather pretty, and interesting to consider to what degree that matters.
The way I know this was because of the giant laugh that my historian wife gave when I showed her your comment.
Do the exercise in terms of housing/lodging, loaves of bread, nice attire, annual median wages, etc…
The reason why market prices look so high is because it’s priced in US dollars, and US dollars aren’t worth what they used to be.
The reason why markets go up when the Fed seems completely unconcerned or helpless to stop the worst inflation in decades, is because people are betting that this trend will continue.
If you re-price the market in another unit of measure, like “ounces of gold”, you will get an entirely different picture.
If you price the dollar in terms of ounces of gold, then you would think that the dollar is worth more than it was in September of 2011, and you would think that the dollar is worth more now than it was in August of 2020. While gold is stable over the long term e.g. centuries, its price can be quite erratic over the short term.
You can price it in barrels of oil, silver, copper, a collection of other currencies, bitcoin, median house price and get a different answer each time.
> The reason why markets go up when the Fed seems completely unconcerned or helpless to stop the worst inflation in decades, is because people are betting that this trend will continue.
It's a global phenomenon. We've got less production of goods and commodities because of covid and just as much if not more demand. So supply down, demand even or even up. What do you expect to happen?
While the USD has problems, other currencies seem even worse at the moment.
There is not some other fiat currency at the moment that is better than the USD. Things that people think are hedges BTC(Ponzi scheme), Gold(volatile) don't always work well.
e.g. here is real(inflation adjusted) gold prices. https://blogger.googleusercontent.com/img/a/AVvXsEiyWSImAdvN...
it doesn't look all that cheap at the moment.
> If you re-price the market in another unit of measure, like “ounces of gold”, you will get an entirely different picture.
Like this? https://schrts.co/pAKzMCFc
Yes, your graph at the end showing SPY in gold falling below the 200 day MA is exactly what I was talking about.
I absolutely agree gold is volatile in the short term and not some magical replacement for fiat currency nor an absolute indicator of the level of inflation in an economy.
Sometimes however it’s important to figure out if the “platform” you’re taking your measurement from isn’t actually what’s moving, rather than the thing you’re trying to measure. If you’re going to step outside of the fiat viewpoint, gold is where I’d usually start.
Maybe a VIX-adjusted price of gold or something like that could be useful to smooth it out.
I agree it's interesting. I'm invested in Gold, so I'm basically betting that it's going to go up. Instinctively, I'm looking for the best disconfirming evidence.
Here's where I got the chart. http://scottgrannis.blogspot.com/2022/03/inflation-net-worth...
> If you’re going to step outside of the fiat viewpoint, gold is where I’d usually start. > Maybe a VIX-adjusted price of gold or something like that could be useful to smooth it out.
yeah, I'm not really sure what the best way to look at it is. I believe Adam Smith used minimum price of labor, but that's distorted as a signal by minimum wage laws. I find the big mac index to be useful-ish. idk, perhaps something like median cost of an hour of labor per big mac, is a measure of prosperity.
Our passenger rail is depressingly subpar.
More like last 50-100mi.
Where's your "local" intermodal yard?
its really shocking just how far detached most HNers are from logistics that is hidden. literally the comfort we enjoy is run by people who don't work from home, who are most impacted by prices.
For rent. Oh I’m feeling that myself. Finally got the point of, let’s move prices are insane. Nothing in a safe area that’s affordable for 50 miles. Minimal in high crime areas.
It honestly doesn't make much sense to me.
I think a lot of people have this doom fantasy of runaway inflation in the US, but it's likely to slow down quicker than people realize. Monetary supply is tightening (mortgage rates touching 5% now), and the supply chain is slowly getting back to normal. Heck, even gas prices have reversed where I am.
Europe is having to restructure it's economy to deal with reduced energy and materials inputs from aggressor nations.
We still face a massive shortage of workers, particularly in logistics.
I suspect we will see inflation remain steady or even increase later this year, barring a recession.
It’s a weirdly predictable phenomenon around American inflation discussions. Has it always been this way? Is it renewed interest in gold bugging or people sour about crypto losses?
Just like QE is good as a short term solution to economic problems releasing strategic oil reserves to push down inflation (as it relates to oil) is a short-term fix that will likely exacerbated the problem in the medium to long term.
[1] https://www.reuters.com/business/energy/us-strategic-oil-sal...
So it's more of a signal that the US is about to start swinging a bigger stick to get oil production up, than it is an illusion.
I’m sorry but I disagree. Do you have an explanation for why the increased price of gasoline won’t just infect prices for all the goods and services which depend on it?
Any business which needs to move people or goods over the road, or runs equipment/vehicles on gas is going to be affected. Not to mention the fact that consumers will have less disposable income to spend on things. And businesses may have to pay their workers more to account for that loss of disposable income.
Edit: see “wage price spiral”
It will, but the price of oil has already dropped substantially from the recent peak, and probably will continue to do so.
The price of gas is known to be volatile, it has gone up in the past without bringing the entire economy along with it, and also has gone down many times without making everything cheaper. The prices of retail goods don’t adjust instantaneously, and gas may well be below what it is now by this time next year. The price of gas might be a small minority fraction of the cost of producing most retail goods as well, so there’s no reason to assume that consumers will tolerate compensatory price hikes that blame gas while the price is falling.
This is the reason that the US Department of Labor excludes the price of gas as one of the core indicators of inflation, because the price of gas does not always reflect inflation, and frequently changes for other reasons independent of inflation.
That doesn't sound like rampant inflation, it does sound like a market correction.
Now in reality gas prices globally is high because of Ukraine and Russia, which hides the massive gas deflation over the last decade, but if 2011 businesses could afford gas at $3.50, I'm not sure why 2022 businesses can't afford it at $4. Wages are up about 30% in the same time period (well by 2020) [2]
[0] https://gasprices.aaa.com/
[1] https://business.time.com/2011/12/20/2011-is-priciest-year-e...
[2] https://www.ssa.gov/oact/cola/awidevelop.html
What's your general impression regarding price levels in the US? How much has your grocery bill gone up? How about rent? What about restaurant bills? Services like haircuts? Whats your credit card bill look like, excluding gasoline?
Personally I have seen prices go up well above 10%. Inflation metrics are complicated and there is a huge incentive to keep the official numbers down as they affect trillions in spending in terms of social security and other numbers tied to official inflation.
To put this number in context, Congress gave themselves a 21% increase in House office budgets to account for inflation
For staffers. Not members of Congress [1]. Never officially tied to inflation.
[1] https://www.factcheck.org/2022/03/spending-bill-includes-pay...
That isn't remotely obvious and in this case is very obviously not true. This is a chronically underfunded program that Democrats have been lobbying to increase for years. AOC, for instance, has been pushing for this since she first entered Congress, well before any inflation showed up.
It's entirely disingenuous to point to a budget increase in a single extremely-small Congressional staff program and paint it as evidence of broad-based inflation.
Maybe, but it's a perfectly valid data point. Congressional staffers are struggling because, in the D.C. area, costs are rising very quickly, and the low-paid staffers are having trouble paying bills because of it.
It's not disingenuous to suggest this is a signal. Also, Democrats are always lobbying for an increase in all budgets. They got this one through because they were going to lose staff who can't make the job work because of rising living costs. I.e., inflation.
So would it disingenuous to point out Xbox prices dropped significantly recently then claim it as evidence there is no inflation?
Using such simple, single data points is disingenuous when there is ample broad based data to point to instead. Ask why he picked something with a 21% increase instead of something with a 4% increase, then you understand why it's disingenuous.
That is the problem with anecdotes versus broad and properly computed inflation.
They keep, and some people on HN, keep calling it a conspiracy when you mention actual inflation is a lot higher than reported, my question is what is this crowd's reasoning? Are they so well off that they are not able to see the rapid rise in prices because they use maids to do the grocery shopping?
Why is it a conspiracy to suggest actual inflation is far above and beyond what is reported by the Feds, who are stuck between a rock and a hard place when it comes to controlling the money markets now?
If they raise rates to match actual inflation they are going to cause the asset bubble to burst. If they don't raise rates than they are going to find hyperinflation that will certainly damage USD's "exorbitant privilege"
The conspiracy is that it’s treated as a conspiracy. Local inflation varies wildly [1]. In official statistics. And inflation is personal, dependent on your basket of goods and services. There is no market evidence that inflation is endemic, but the market is frequently wrong.
> so well off that they are not able to see the rapid rise in prices
Many on this forum have equity holdings and/or in-demand jobs. Those make one somewhat inflation tolerant.
[1] https://www.bls.gov/charts/consumer-price-index/consumer-pri...
Yeah I’m genuinely shocked that people seem so upset about inflation. Then again I couldn’t tell you if the gas price down the road begins with a 3, a 4, or a 5.
I wouldn't call it a conspiracy, but throwing out random number like "25-50%" because you noticed your one specific grocery bill is more expensive also isn't an argument I'm going to give much credence to.
The government is actually very transparent about how they calculate inflation and what goes into it, so if you're going to argue that they're bullshitting you need to argue one of:
1. The basket that they use to calculate the price index isn't a good representation of most people.
2. They're fibbing on specific prices.
3. The "smoothing" they always do can hide some of the recent acute inflation.
If you want to make any of those arguments, with data, great! Please go ahead. I've certainly seen plenty of good arguments related to points 1 and 3, not so much point 2. Otherwise, it's fine to say you notice things you buy seem a lot more expensive, but that's not an argument that the Fed is somehow fudging the numbers.
[0]: http://www.shadowstats.com/alternate_data/inflation-charts
Zillow rent index up 17%, CPI rent index up 5%
CPI calculates rent by asking people how much they are currently paying for rent or how much do they think it would cost to rent their place.
That's OER, which is computed separately from rent.
[0]: http://www.shadowstats.com/alternate_data/inflation-charts
Official stats say grocery store items are up 10%, which is roughly line with my experience. It can vary a lot from item to item so it really depends on your diet. White bread is up 6% while wheat bread is up 9%. Meats are up 15% while fresh veggies are up 6%.
"What you see" is literally what's being measured, though. Typical prices for typical commodities grew less than expected. The outlier is one particular commodity (petroleum) which is experiencing an external shock.
Sanctions on Russia are poorly explained as "inflation", obviously.
> Personally I have seen prices go up well above 10%.
On what? Does that not match up with the data in the report? If so, document it! You'll be internet famous, if nothing else.
For what goods/services? Have you been tracking the same goods/services over the past year to make this analysis?
> Inflation metrics are complicated and there is a huge incentive to keep the official numbers down as they affect trillions in spending in terms of social security and other numbers tied to official inflation.
You haven't provided anything aside from personal anecdote (without any actual data to support it). Your understanding is built entirely on your own experience, the official numbers are built on a transparent basket of goods that is meant to represent the entire country.
For me, housing costs (most people's largest expense) hasn't changed in 3 years because I have a 30-year mortgage. Does that mean that the 5% CPU measure of housing expenses is false? Of course not.
Data, when reported by a reputable organization, is going to be substantially more predictive.
Incentives are another interesting factor to consider.
If an institution has a history of providing a certain quality of service, and is successfully used to make highly consequential decisions, it is objectively more reputable than an institution with neither of those things.
Reputability is the aggregate of individual opinion, which is the definition of subjectivity.
More likely there is a continuum, and more reputable places have more objective (and hence less subjective) output than less reputable places.
"The Bureau of Labor Statistics is a reputable institution"
"A triangle has three sides"
"Governments, politicians and their bureaucrats are trustworthy"
"Two parallel lines will never meet"
http://steve-patterson.com/deduction-induction-and-axioms/
This is why I much prefer to follow guidance from institutions over individuals. There's also a "stewardship" in institutions that seems effective in countering other forms of bias (but not all).
Of course there's a whole lot of bias left over that doesn't make this a fire-and-forget strategy, but comparatively it seems closer to objectivity than to just trust one's eyes alone, which has effectively zero systemic corrections for bias.
[0] - You may know about this already, but I think of it like crowds singing, and if you'll afford me a bit of metaphorical license, here's a better explanation of how that works than what I could write: https://physics.stackexchange.com/questions/382429/in-concer...
See, I think the opposite. If your numbers differ from the US gov. official ones, you're either doing something wrong, or measuring a different thing.
The BLS in particular aims for consistency in reporting. They ask people what they bought, and for how much, then they go around collecting real world pricing information about products.
No other entity is putting that much work and effort into collecting pricing information. So anyone reporting different numbers is less accurate than the official BLS ones.
Even people who complain that they under-report "real" inflation use BLS numbers, but they change the weights on the various categories such that categories experiencing the highest inflation are also weight the highest.
Nope, a few people's unmeasured selection bias is no where near as accurate as a professional methodology done like the official numbers.
>there is a huge incentive to keep the official numbers down
Also false. If the numbers were gamed, there would be significant arbitrage employed in markets to extract value from the lie. There are ample papers analyzing this, and no one has found a way to do it, since the numbers are the best possible.
Also the numbers are done in many places, from Goldman Sachs, to the Billion Prices project at MIT, to the Bureau of labor and Statistics, and so on.
If you really think the numbers are gamed, do this experiment (I have, it's easy to do, and then you'll never claim the numbers are gamed again since you methodically checked them).
Take BLS listed inflation for a decent period of time, say 20-30 years. Make a basket of goodssplit by how most people buy: energy, housing, food, eneterainment, etc.
Pick a list of goods, say same sized apartments, houses, foods, etc.
Look at prices now. Write them down. Hide that list so you don't cheat.
Look at ads from the beginning of the period. Get prices.
Compute.
Now add say 1% to BLS annual inflation numbers, and compute.
Viola! BLS and rest are very accurate. People's unmeasured selection bias beliefs are not.
This is QAnon tier logic. “All my friends voted for Trump, therefore the vote count was fabricated!”
My grocery bill isn't in a vacuum. Does anyone buy the same basket of groceries constantly? My career has been on a steady rise and my lifestyle has inflated.
> How about rent?
It's up a TON in many LCOL places - but in many of the most expensive places, it's gone up less in the last 3 years than normal (and in some places down). Either way - 67% of people are homeowners, and their payments went DOWN a lot because the Fed allowed everyone to refinance at historically low levels.
> What about restaurant bills? Services like haircuts?
My anecdata is that I'm shocked so far none of this has gone up. I do expect it HAS to go up probably 10-20-50% eventually / soon. But I haven't seen it happen yet.
> Whats your credit card bill look like, excluding gasoline?
Again - who's credit card bill is in a vacuum?
What's interesting is although fast food prices have went up, it doesn't seem like casual dining chains have gone up. So even though steak prices have doubled at the grocery store, they've stayed the same at the chain steakhouses.
> Headline CPI in March rose by 8.5% *from a year ago*
Another notable piece:
> core inflation appeared to be ebbing, rising 0.3% for the month, less than the 0.5% estimate
which matches the other commenter mentioning that the gas prices were a massive contributor to this.
I would say it is due to loose monetary and fiscal policies (duh).
Maybe we are in for a 70es rerun; and the 70es inflation spiral didn't really end until Paul Volker, Thatcher, and Reagan changed the economic policies.
Also stopping the inflation spiral helped bankrupt the Soviets who were a great benifitter of the rising commodity prices ... just a hint.
If you don't think this has any affect on inflation Ive got a bridge to sell you.
It's a weird state to be in. The rational thing becomes to continue (leverage) the weird situation -- the market expects continued regular high spend for whatever regular big thing of the month/year -- and the irresponsible thing becomes any deviations that risk rocking the boat (ex: risk EU style rallying on austerity becoming a self-fulling prophecy). A lot on inflation concern is triggering FUD loops (sporadic supply chain hits vs YoY spirals), so when we know the market treats USD differently to beginwith, accepting the FUD (by policies that assumes the USD is a weaker currency) is kind of the worst thing policy makers can do. Likewise, most non-US countries rely on USD stability, so probably same thing for their policy makers.
I'd hate to be the one making these calls.
Can you share these data-driven economist findings?
Not saying you're clearly wrong, just that there are dynamics that I, at least, am not understanding.
Only commodities.
It is not. It looks like the author of the tweet cherry-picked some inflation components but overall it looks equally bad.
See https://ec.europa.eu/eurostat/documents/2995521/14442438/2-0...
Can you explain what you mean by that? I think many of us would argue that we’re more efficient now in WfH situations.
My workplace is post-remote now. We're back to fulltime in the office. I'm super happy for all the random interaction, problem solving together and coffee breaks. The social interaction enables us to work better in the team.
The best policy was not the topic of the comment but it's probably to let those who want and like remote work to do it.
Ah yes, the pervasive disruptive social din of an office. Unstructured, random and disruptive interactions. How anyone achieves optimal focus and gets into the zone when in an office is beyond me.
So my -efficiency- is higher. Total work productivity, sure, taken a hit.
Team velocity? What do people who say this do all day? Are you in sales?
Most of these things really are harder to do remote. I could honestly see how you'd be more productive and have stats to prove it if the vast majority of your responsibilities were just code.
Think of your work output as a vector. It has a magnitude - how much work you can get done in say a quarter. It also has a direction - what is the project you're working on, and does that line up in an economically productive way?
The reason we have corporations and management is to get all those vectors to line up in a certain direction. They're like magnets, aligning the productivity vectors of each IC so they don't compete with each other and instead contribute to a common goal. Almost every IC is less productive in terms of magnitude when working in a big corporation, but because there are thousands of them, the overall product becomes very hard to compete with.
WFH effectively reduces the magnetic force on each employee. Their productivity magnitude increases - they get more individual work done per unit time. But their alignment suffers. It's harder to identify when two IC's work is not going to line up perfectly, and harder to catch problems and complications early, and harder to set a direction in the first place.
And that's where WFH is going to suffer. As long as people can basically continue on the same direction they were going pre-pandemic, it's an improvement. But as soon as a direction shift becomes needed, corporations that have gone all-WFH are going to quickly find that the reason they're a corporation has gone away. They won't be able to adapt and chart a new course, and their employees will all quit and join new startups that are already pointed in the right direction.
Kids playing happily with their toys or reading quietly are considerably less distracting and disruptive then any open concept office that I've suffered in the past. Unlike many adult coworkers I've had, my kids respect me enough to let me focus.
Congratulations— you’ve won the lottery by living in one of the few places in the US that has a functioning public school system (or else you’re going the private route, which means you don’t need t congrats to know you’ve won the lottery).
Are you seriously claiming that's there exists significant portions of the USA where children don't have access to school? That's absurd.
I'm Canadian, my kids go to public school. In fact, we're walking there right now; a privilege I wouldn't have if I had to be in a car, commuting to an office at this moment.
“functioning” appears to be a gateway for infinite malleability in meaning.
If you recall "ping-gate" entire underground lines were shutdown in the UK due to people working jobs that can't be done remotely.
My passport took forever to get renewed during the very first lockdown due to disruption to a fairly manual process that required handling of physical things (eg a passport)
Although they saved money on studio rental and travel, they ended up teaching far fewer students - despite starting out with an established group of regular students, and charging much less than an in-person class would cost.
Where are these statements coming from?
Here's a summary of revenue/share for the S&P 500 (from Standard & Poor's data): https://www.multpl.com/s-p-500-sales/table/by-year
This time around, who wants to be Carter? Somehow I suspect we will be short of volunteers. Neoliberal propaganda shot itself in the foot. Oops.
Just like Obama, really.
Biden actually did it, and paid the political price. There was never going to be any way to withdraw without horrific consequences. Which is why neither Obama or Trump actually did it.
Volker was brought in by Carter.
And Reagan got all the credit - supposedly he tricked the Russians into thinking the Star Wars program actually worked and that was why they went bankrupt.
Things have obviously changed - but the basics are still there: inflation comes from monetary and fiscal expansion - once the spiral picks up - commodities lead the way - and that’s the Russians.
I think everyone agrees they can't raise rates to 20% without causing catastrophic side effects.
I think everyone also agrees they don't need to raise rates that high.
Highly subjective.
search for "Volker" http://bilbo.economicoutlook.net/blog/?p=7591
It’s an amazing turnaround from the unisonic voice of “it’s transitory”, ‘printer go brrrrrrt’ is a conspiracy, don’t you worry…
The standard way to formulate YoY changes is what GP said, or "Consumer prices rose 8.5% in the year ending in March".
The MoM change for March is a hefty 1.2% in its own right.
Straw man. Core inflation includes housing and healthcare.
If one can’t understand why food and energy inflation aren’t cleanly a monetary phenomenon in the midst of Russia, an energy exporter, invading Ukraine, a food exporter, I’m not sure how to help.
A hypothesis perfectly corroborated by core PCE, the metric OP criticised [1].
[1] https://news.ycombinator.com/item?id=31003409
Because we live in a representative democracy and policy responses are likely to be a significant electoral issue.
Supposedly a majority voted for this and are now complaining about what they voted for. Maybe they didn't vote for this and voter fraud really did happen...
If it’s a long-term problem and you’re living paycheck to paycheck you’re screwed for longer.
Honestly, what’s the play here for someone who doesn’t own any significant assets and barely makes enough to pay bills each month? That’s what I read as OP’s point.
If I’m living paycheck to paycheck and my current term runs up, I would go month to month if this is a short term spike since prices should recover soon. But if it’s long -term, I should go ahead and lock in now because it won’t get better.
There are tons of those examples. Even people with no assets and just living month to month can use this information. Obviously, billionaires are impacted more, but people might literally be trying to figure out if they just skip meat for a month (short term) or buy a bicycle (long term).
I also find it hard to believe that a bus / train pass costs as much as car ownership fwiw
Public transit can be very cheap and convenient for some use cases: for example, if you live close to a stop, your destination is close to a stop, there is straight transit line between the two places, it runs frequently and has few stops on the way, and you usually travel by yourself. If all of the above is satisfied, it will likely to be more cost effective and similarly convenient to use public transit. However, for many other standard use cases, public transit is by nature very inconvenient compared to cars: for example, if you visit grandma with your small kids on a regular basis, grandma lives in a small town, getting to which on public transit from your home requires 2 transfers, and is only reasonably possible twice a day at very particular times. In that scenario, which, by the way, is (in some form) extremely common for most people who aren’t single professionals living in big city, public transit is just a non starter, even in Germany.
Since the latter scenario is, as I point out, rather common, most people own a car anyway. At that point, you’re already paying the total cost of ownership just to use it on routes where public transit is extremely inconvenient. This changes your calculation on routes where public transit actually is pretty convenient: sure, public transit on that route might win with total cost ownership of the car, but once you already have a car, fixed costs are already sunk, so public transit is now competing with marginal costs, and it might very well then lose.
For this reason, even in countries with good public transit, it is largely a domain of students, young singles, and retirees, and working people with families overwhelmingly own and use cars.
FWIW, the travel times you post are not instructive, because you are not going to drive from Hbf to Hbf. Getting to the station, waiting for a train, and getting from the station to the final destination will increase travel length substantially. At the same time, not having to drive into city center (where Hbfs are) will decrease drive times.
Should make you wonder how much other outdated/incorrect information you unknowingly spread in the same fashion.
> Sadly, this means that if I lived in Germany, it would be much cheaper for my family to drive everywhere.
Only if you don’t factor in massive discounts for children (who ride for free until they’re 15) or even small groups of people. Eg. the Bayern-Ticket - can’t really beat a day trip to an alpine lake town for 32eur total (for a couple with young children, and no need to book in advance).
Oh, And don’t forget about that 25% Bahncard discount that pretty much pays for itself after taking two train trips in a year.
> FWIW, the travel times you post are not instructive, because you are not going to drive from Hbf to Hbf.
Ending up in the centre next to a main station is actually one of the biggest benefits over flying or driving in my experience. Maybe it’s just the way I plan my trips, but I almost always end up wanting to be in the centre of wherever I’m going to, anyway.
Inflation clearly affects cost of living because wages are stickier than prices. You don't walk into work every monday morning and get your wages increased by CPI.
> If you think prices are going up
I don't think prices are going up. I factually know prices are going up. We keep track of this data
> you need to explain how this is possible at all.
sure. Let's say I have a grocery store. I pull off the price sticker from last week and put a new one on this week. I don't even understand how this is a question.
You can argue the root causes all you want but just writing the words "there is no inflation" isn't an argument.
If you don't understand the cause for it, then attempts to fix the not-cause may cause more or bigger problems in other parts of the economy.
This is in part complicated because there isn't necessarily one cause.
If it was caused simply because the supply chain shock from different spending habits of consumers from the pandemic, then that would sort itself out as the supply chain adapts to the different habits - going from just in time to just in case in many places.
If it was caused by an increase in energy prices, then increasing supply (and importantly, having the existing energy reserves be used).
(and so on)
The other side to this is the managing expectations. If you know that you can't fix it by just adding more oil to the market, then that data can be used to manage the expectations for all parts of the economy. "No, this isn't going to get better for some time" is a valid answer.
There is no monetary phenomenon. It's clear as day on the Fed's balance sheet the reason for inflation. https://www.federalreserve.gov/monetarypolicy/bst_recenttren...
If one can't understand why the value of their money goes down as the government buys trillions of dollars of their own debt with non-existent money, I'm not sure how to help.
Yet there was not this inflation during the Fed balance sheet runup in 2008-2018......
So maybe your simple claim is not what is the cause. More likely is that in 2008, the balance sheet was loans to banks (paid back), whereas in 2019+, the increase was from money being handed to people?
In fact, your total assets graph is misleading. Look at the same graph, under the selected liabilities breakdown - the monetary base has been steady, with no inflation for most of it. The big recent increase is in purchase of Treasuries, which is the money the govt gave to the people to help them through the COVID caused downturn. This is a good use of money, and of course giving people money with no gain in production will lead to inflation, but it's not the Fed at fault - it's elected officials voting for free money.
Could you think of something which happened in 2008 which might have impacted the velocity of money in the global economy, despite the aforementioned QE? QE works great following a recession. For quite a number of years later, in turns out. But not forever. At some point the economy recovers and continuing to pour gasoline on it stimulates it beyond the target inflation zone.
You and the comment you’re responding to agree on the Fed’s balance sheet being insufficient per se to explain core or non-core PCE. It's a complicated phenomenon.
Unsurprisingly, the lion's share of that money handed out for covid relief wasn't given to people. It was corporations that, once again, walked away with most of it. Going back even further, the 2016 tax bill also provisioned way more money to corporations compared to the time-limited-bone they threw at people.
While its fair to say handing out money can cause inflation, lets not kid ourselves about who is really getting that money.
https://theintercept.com/2020/12/04/covid-irs-corporation-ta...
https://www.washingtonpost.com/graphics/2020/business/corona...
https://www.forbes.com/sites/christianweller/2019/05/30/the-...
https://www.nytimes.com/2018/01/16/us/politics/banks-are-big...
Wrong [1]. 1.8T directly to people, 1.7T to businesses. I'd not call that a lion's share.
>It was corporations that, once again, walked away with most of it.
And a significant part of that was to pay, you guessed it, people :)
Of the 1.7T to businesses, 835B went to paycheck protection program (i.e., people wages) , 85B to a delay (not handout) of employer payroll tax (so this will be paid back by the businesses), and a significant number of loans, not handouts, that have to be paid back.
And keeping companies alive, i.e., jobs available, has vastly better long term economic value than simply giving it to people, since at some point those people will really like having a job for a continued income.
Tell me again of the 1.8T given to people, how much was loans that have to be paid back? And what is that ratio for the business side?
[1] https://www.nytimes.com/interactive/2022/03/11/us/how-covid-...
Asset prices are prices, they're just not part of the CPI.
The early part of the inflation fed almost entirely into financial assets. Take a look at the absolutely INSANE multiple expansion of the S&P 500 for this time period, as well as the INSANE monotonically decreasing yield curve in literally every kind of debt security.
Fed added 3.5T in balance sheet over this time. S&P 500 market cap went from $12T to $23T (and this is not counting all the other market caps from other stocks and exchanges not in S&P 500). It's not unreasonable that investment market caps have increased tens of trillions over this time.
So it's pretty hard to claim the Fed injected this money into the stock market. It's much more likely that as the world is changing some companies are viewed as increasing in value due to the products and services being more valuable than before.
Energy commodities are up 48% this year, but 37% of that increase was over the last month.
Didn't we all go through that period early in the pandemic where spot oil prices briefly went negative?
Weren't "bullwhip effect" articles regularly making the rounds on HN or did I dream that all?
Interesting, not in Europe. The UK produces a separate CPIH index. CPIH is CPI, additionally factoring in Owner Occupiers’ Housing Costs.
> Instead, the BLS uses an owner’s equivalent rent (OER). The BLS estimates the OER by asking homeowners how much they could charge to rent their home.
That’s headline inflation. It’s politically relevant. If you're running for Congress or the President of the United States, this is the one that gets you in and out of office.
Core inflation is monetarily and thus more financially relevant. It singles out what central banks can strategically respond to. (You don’t want to raise rates because an energy exporter invaded a food exporter; rates aren’t the problem.)
Anyone in leveraged debt is going to do well in inflation.
How do you figure? YoY is the best way to measure these things since there's seasonal changes that happen month to month.
This... seems like a good news story?
Obviously the Russian invasion of Ukraine has royally messed up fuel and food prices, but that's a specific shock that's independent of larger macroeconomic issues.
https://www.bls.gov/news.release/cpi.nr0.htm
Any reason Biden can't use the war time production act to force American oil producers to up production (which is still short sighted) instead of making matters worse?
Make carbon more expensive and rebate that to folks by income (carbon tax). Push people away from fossil fuels, and then you won't be held hostage by fossil producers in the future. Cheap oil isn't a right.
It’s easier to enforce American political will on a wind farm in Texas than a pump in Saudi/Siberia.
A lot of windmill farms are popping up offshore, however.
https://foreignpolicy.com/2020/06/25/texas-chinese-wind-farm...
https://www.politico.eu/article/chinese-wind-farm-investment...
Also, the inherent intermittency of wind and solar makes it even harder for generators to hold the market hostage, as they don't control the timing when they generate power. To curtail energy supply would be to undermine the economics of the capital investments into these projects, as it would be missed revenue.
https://www.marketwatch.com/investing/future/crude%20oil%20-...
Here we can see the price of oil futures going back a few years. We can see they start an upward trend once Biden gets into office. and long before the Ukraine conflict.
There are two parts of this, what Biden has done, and what people fear he might do.
There is a trade off between using goods now, and using them later. The higher the return for using them later, the higher the return for using them now has to be in order to justify consuming it.
If Biden says, no more drilling on public land, you are right, that would not impact supply immediately, but it would impact the expected supply and price of oil in the future. Which means that in order for the oil to be consumed now, the price has to be higher.
If you add to that the expected regulations to come in the future, further restricting or taxing fossil fuel use, it pushes this even higher.
So because it is expected that the price of oil will be more expensive in the future, both because of what Biden has done already, and because of what he has promised to do, then the price of oil has to increase now. Do you understand what I'm trying to convey?
FURTHER EXPLANATION
Let's say you have 10 barrels of oil to sell. You can sell those barrels now for $100 dollars, or you can sell them in a year for $200 dollars.
The more the price of oil in the future increases, so too does your incentive to wait to sell.
In response to this, the price of oil has to increase in the present, to compete with the prices promised in the future.
So if the future price rises to $250, the present price might increase to $130 in order to incentivize producers to sell now, rather than wait for higher returns in the future.
What Biden has done is send signals that in the future, the supply of oil will be lower, and the price higher, which incentivizes producers to wait for those higher returns, which as a result increases the prices now, in order to compete.
He told Germany and other NATO leaders that dependence on Russian oil was a major threat to their economies. He told them they should focus on other avenues. But they didn't listen. He was tough on Russia.
He wasn't advising Germany to divest from Russia because it would strengthen NATO. He was saying NATO was corrupted because of Russian oil and therefore was worthless. This is based on the same fallacious perspective that Putin employs. Namely that NATO exists to be Russia's adversary. NATO exists for the defense of politically-aligned democracies against aggressors. Russia is only the enemy of NATO because they choose to be. Trump's behavior towards Ukraine was not only grotesquely unethical and breach of his Constitutional obligations but seriously weakened their position when it came to resisting Russia.
https://breakingdefense.com/2020/10/trump-admin-sets-allied-...
I at the time thought that was a very wise strategy. Recent events have proven that true.
The 2% defense spending target was negotiated by Obama and agreed by NATO members before Trump took office. Trump took that cue and railed that America was paying for NATO as though it were a dues-based organization. When he went to Brussels to push for compliance, he raised the prospect of 4% as a new spending target even when the US was tracking to drop below 3%. While he may have achieved a policy victory here and there it was only ever by coincidence. I've not seen any indication has understands or even cares about any policy whatsoever and only says things that get him attention.
https://www.nytimes.com/2018/07/12/opinion/editorials/trump-...
https://www.cnbc.com/2018/07/11/obama-and-bush-also-pressed-...
That's a fallacy. If you limit the production, then you have less oil. The fact that the price increase is due to competing, individual, interests.
If you limit the production, limit the demand too. Doing it with the price is the worst possible way to do it because speculation turns on...
During the recovery, consumer demand increased at a faster rate than the production increase... leading to rising prices. It continues to be higher than world production. Right now, demand is back to pre-pandemic levels, but production is still a few million barrels (per day) short.
You can see that clearly in the first chart on this page: https://www.eia.gov/outlooks/steo/report/global_oil.php
That fits perfectly with what OP said. If the production wasn't limited, there would be more production.
Again, the COVID dip was larger than the entire US production. It's silly to believe a global problem can be solved entirely by the US.
And the issue with OPS analysis is that he wants to blame biden, when his own chart clearly shows prices rising since the COVID dip... something that happened before he was elected. This has nothing to do with politics.
We are headed for unprecedented market deflation.
Most retail investors absolutely do not own puts nor are they net short the market.
The actual situation over the past few months seems to be the exact opposite of what you mention. It would seem that institutional investors have been using their retail facing market commentators to urge the public to "buy the dip" while the institutional smart money is selling every uptick:
- https://www.zerohedge.com/markets/jpmorgans-resident-permabu...
- https://www.zerohedge.com/markets/pain-trade-remains-higher-...
To be clear I’m referring to the whole market, not a move in a single stock.
I’m not sure of the specific reason, but they ditched those tablets a few months later.
Isn't all this already captured today? Restaurants can very easily keep track of what most people are ordering, what dishes are being sent back, etc.
I understand it would become easier to collect this data, but I'd be surprised if most (decent) restaurants don't already track popular dishes, table turnaround, etc.
Yes I've been thinking more and more recently about how personalization means fewer shared experiences.
It becomes much harder to remain a cohesive group when everyone is getting their personalized version of a thing.
I don't think there's much value in this for something as small as a restaurant where menus are always limited enough that personalization wouldn't impact what is on the menu (maybe just how its presented to you).
Personalized pricing (combo or otherwise), surge pricing etc for restaurants seems just unlikely IMO. But I can see why some might think otherwise.
Some useful insights if you have enough data points would be where in the year you are, which season it is, if it might be an El Nino or la Nina year, and over the long term if there are any secular trends like global warming...
People live in one place and only care about the weather at that place. Whereas consumers need products from all sectors of the economy, so an aggregate inflation indicator makes sense.
Sure, it's not perfect, since every household spends their money differently, but everyone needs food, housing, energy, etc.
CPI is like climate news, not weather news, and should be understood as much.
Edit: Reread and understand now...
The point is that GDP is a measure of how much the economy in the US grows or contracts, just as CPI is a measure of how much prices in the US grow or contract. You shouldn't view GDP as a personal indicator of economic growth, just like CPI isn't an analysis of costs on your personal spending. Treating it as such feels like distorting the purpose of the measure to suit a narrative.
Nobody has denies this, so why is it a talking point?
> as we both agree it’s not a good indication of any individual persons experience
Which is why I use it for what it is instead of complaining about it not being something else. Any one individual is influenced by their own bias and experience, which creates an entirely different problem.
let's stick with the basics. this was the whole conversation, a leading question that pretends to be a thought exercise that suggests in some other scenario that GDP is a good measure. no more, no less. I think we've gone over everything now.
> you're the only one that had to read it twice, we talked about it now, good talk.
The lack of punctuation and choice of verb tense made it difficult to understand, no need for the condescending tone.
Meanwhile imagine a family that rents their home, commutes long distances to work and has growing kids. They are probably drowning. Comparing these cases feels a lot like averaging together the temperatures of Seattle and Houston.
Who? What are their credentials? What improved measure have they created?
> Price indexes are available for the U.S., the four Census regions, nine Census divisions, two size of city classes, eight cross-classifications of regions and size-classes, and for 23 local areas. Indexes are available for major groups of consumer expenditures (food and beverages, housing, apparel, transportation, medical care, recreation, education and communications, and other goods and services), for items within each group, and for special categories, such as services.
[1] https://www.bls.gov/cpi/overview.htm
An analogy is the BMI. This is intended as a population metric, but is often used by the individual. It’s less useful for the individual, but still actually pretty useful. If your BMI is above 30, you’re probably unhealthy. You might be a pro wrestler with huge muscles, but you probably aren’t.
It was recorded in 2009.
https://www.econtalk.org/meltzer-on-inflation/
It’s an interview with Prof Meltzer from Carnegie Mellon who has done extensive research on the federal reserve system.
Cliff notes:
- As a result of the 2008 crisis the fed expanded the money supply to a degree never seen before
- Rather than drive inflation, the “new money’s” effect was muted due to skittish banks who would decide to just take the funds and hold as cash/treasuries (maintaining strong reserves) until more positive economic indicators emerged (this process could be paused if economic sentiment turned negative)
- Once economic forecasts turn more optimistic, the money will be deployed (through lending) into investments and assets leading to inflation in those prices
- Eventually the excess supply will spill over into consumer spending in the classic indicators of inflation like CPI
- However the fed will be under immense political pressure to not drive the “fragile” economy into a recession so any tightening will be far too late and inflation will overshoot targets by a large degree.
- Similar to the 70’s, until strong monetary contraction is brought in, inflation will run very hot despite other efforts to control it
Pretty accurate so far.
It's the "Let them Eat Cake" of 2022. Poor people driving economy boxes and living in a 4th floor walkup apartment with 3 roommates aren't buying an EV... even if the savings are better long term.
It's the "Buy a better pair of boots they'll last longer".
And yet - people seem oblivious - like Marie Antoinette that the poor class can't simply upgrade to solar and use an EV and avoid the gas prices which hit their bottom line pay every week in the form of higher prices and higher costs to travel.
Who cares about bread when it costs so much to drive to the gas station? Let them get an EV
Try forgoing expensive medical bills.
Try not eating.
You only need some organs.
https://www.youtube.com/watch?v=9ssNtIvD5sc
People living in 4+ story apartment buildings have extensive options for transit that don't involve driving their personal "economy box" around. And to the extent they do, the "poor class" in the USA continues to pay lower prices for gas than any other industrial democracy, including in places like Australia and Canada with comparable per-capita driving statistics.
That argument seems like a canard. Yes, higher gas prices suck. They suck rather less than land wars in Europe though, so... what's the option here? I know there's a partisan angle there that says something about fracking, but needless to say short term inflation isn't well treated by half decade infrastructure projects. Gas is going up because Russia invaded Ukraine, and there's nothing anyone in the west can do about that right now regardless of whether they drive an EV or not.
(Won't lie though, that I'm totally loving the Tesla right now.)
I have to say this debate is just exhausting. People just don't want to accomodate any solutions beyond "We Must Have Cheap Gas For Our Trucks In Perpetuity". I mean... that's just not the world we live in. And the rest of us (including and especially the urban poor!) have been looking at alternatives for decades.
[1] Here's Georgia's helpful site. Indeed Atlanta transit is sort of a mess, but it's there and it does work. No doubt you didn't take the bus when you lived there, but you almost certainly had options you weren't aware of. https://www.gatransit.org/page/TransitNearMe
- President Joe Biden, March 31, 2022
The people living in these situations likely rely on public transportation and don't even have an economy box. Gas prices will still hit their bottom line as transport costs rise for food and other goods.
I love this phrase, it's so deliciously orwellian. In other news, home invasions are down over 90% YoY. Sharp increase in undocumented roommates though.
That people are arguing only implies you are bourgeoisie, and feel the need to explain how these poor people are really effected by X and Y and Z. I have people on my team where their weekly bill for travel to work has doubled in the last two years. It hits peoples bottom line quite clearly.
I know people who don't own a car and share an apartment with others, and I also know people who struggle to keep their vehicles road-worthy. The latter usually have fewer room mates, though.
1. We went from Covid discounts in housing to a corection and a surge in the other direction. Housing is certainly a problem but the impact on inflation is slightly exaggerated because of that swing; and
2. A war started in Ukraine and this allowed energy companies to arbitrarily raise prices for massive profits that have little to do with actual or potential supply issues.
Housing takes a long time to turn around. I honestly think we need to start punitively taxing property held by corporations (including LLCs), foreign-owned property and illegal hotels (ie AirBnB) as these are restricting access to a necessity for no real benefit.
As for energy, as much as many in the US in particular like to blame this on Biden. It's worldwide. The real problem though is profiteering by oil companies. It maddens me when I see governments suspending taxes to reduce the hit but somehow the energy companies can't take a hit? They're making absolute record profits. But no one even speaks about that.
Where Biden is responsible is in the same way every US president is, regardless of party. And that is in promoting a reckless foreign policy and dangling NATO membership to Ukraine to keep it aligned with the West when it was (and is) never going to happen for exactly the reasons we're seeing now. Of course, Russia is to blame for a completely unjustifable and horrific invasion and everything that comes from that but both of these things can be true at the same time.
Put it this way: you park your car in a crappy part of town and leave your Macbook on the hood and there's a good chance it'll be stolen. Sure the thief is responsible but you also could've taken more care. And no, that's not victim-blaming.
[1]: https://www.pewresearch.org/fact-tank/2022/01/24/as-inflatio...
The best fix (and proper one) is for states/feds to step in, override zoning, and start mass construction of new multi-family housing.
Rental prices are almost completely demand based because supply is completely inelastic in the short run and only barely elastic in the medium/long run. Landlords are already charging as much as the market will bear, they can't just unilaterally raise prices, people will move and they won't fill their units.
Where will they move?
The qualifier "slightly hotter than expected" reeks of media manipulation. 'Spin' at best, 'propaganda' at worst. It seems obvious to me that the reporters are trying to dampen or downplay this obviously negative news. Whereas this exact same news could be harped on and used like a weapon against the policy of the current administration. But don't worry, this was "expected" and only slightly worse than our central planners predicted. Keep calm and carry on.
> Details: Analysts surveyed by FactSet expect the release to show 8.4% inflation over the last year. That would be the highest inflation rate since December 1981. The rate was 7.9% for the year that ended in February.
From this morning (6am) Morning Brew:
> Good morning. Today’s consumer price index reading is expected to show that March prices surged 8.4% over last year. You know who’s not contributing to inflation? The Brew. Today, we’re launching a revamped referral program with cheaper “prices” on swag items…that were already free to begin with.
So the NEWS of the release is that it was 8.5% instead of 8.4%. That's why they pointed it out. Everything else was already priced in by markets.
Say we give duplicate the amount of money in the economy(M1 M2 etc) and prices immediately double. Won't that also double firm revenue, profits, dividends, and thus firm value in nominal terms?
Thus, if stock prices and home prices are +10% in nominal terms, with inflation close to 10%, doesn't this mean they are just breaking even?
I'm reasonably certain that is the point of inflation, since everyone seems to measure economic health based off the stock market.
Stocks for retail/commodities/food/oil... will generally keep up with high inflation, since these industries have low margins and profits track closely to prices. There will even be some speculation, so it might pop in these environments, only to come down when clarity returns.
Growth stock will be obliterated in high inflation environment, because they're valued for future profits, which will be worth less because money is worth less.
Business services, entertainment, ... kind of wavers in between.
Mechanically higher not-USD things. Crypto, stocks, real estate, gold.
>Say we give duplicate the amount of money in the economy(M1 M2 etc) and prices immediately double. Won't that also double firm revenue, profits, dividends, and thus firm value in nominal terms?
It wont evenly distribute amongst crypto, stocks, real estate, gold, etc
>Thus, if stock prices and home prices are +10% in nominal terms, with inflation close to 10%, doesn't this mean they are just breaking even?
Oh ya, like you have to compare inflation to GDP to interest rates.
If GDP was 15% and inflation was 10% and interest rates are 10%. Those are some big numbers but not really a giant problem or anything. Social mobility would be fantastic in those numbers.
Reality: GDP is 6.9 with previous of 2.3, inflation 8.5%, and interest rates are 0.5%. YTD S&P500 is -6.75% while 1y is 7.3%
In reality the GDP figure is fake, temporary boost that wont be able to hold on.
Yes, to a point. Stocks are priced in nominal dollars because revenues are earned and dividends paid in nominal dollars. Endemic inflation screws with an economy, however. That reduces its productivity. First real returns falter. Then investors abandon the market.
this has been answered already but I want to add something that wasn't mentioned: if you are thinking about it now, the market thought about it months before you and it's probably already baked in the current price.
so don't expect a 10% increase in 1 year on spy even if everything goes up 10%. that 10% was grabbed by the better informed the moment the money printers were turned on.
There is some effort to get the ban re-instated as of 2021:
> "Khanna drafted a letter to the White House Monday signed by nine Democrats urging the administration to block the export of U.S. oil, which has been allowed since 2015 when Congress lifted a 40-year-old ban on the practice. Since then, U.S. exports have regularly surpassed 3 million barrels a day, more than the production of major OPEC members such as Kuwait and Iran."
https://financialpost.com/pmn/business-pmn/lawmaker-says-whi...
Certainly it's more cost effective to obtain it domestically than to import it from the other side of the world?
[1] https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=M...
it's also the reason Alberta's tar sands have few importers, because not everyone is capable of refining it (which leads to Canada having to export it, and import foreign oil).
there are refineries in the US that only work effectively on Russian oil -- and I'm sure there's similar issues elsewhere in the world. they can probably adapt but it's not as uniform as we'd think.
https://www.sightline.org/2022/03/04/pacific-northwest-state...
> "The refineries do not rely on Russian oil equally. Nearly 60 percent of Russian crude imported to Washington went to the Tesoro/Marathon Anacortes refinery, and another 29 percent went to the BP Ferndale refinery. Russian crude made up almost 7 percent of all crude refined at the Tesoro/Marathon Anacortes refinery from 2009 through 2021."
Getting oil from Bakken or Pennsylvania would likely be expensive, and also refineries are optimized to process specific grades/types of crude oil. The best solution would be for the US government to prioritize the transition to renewables in Oregon and Washington.
For example, I live in Ohio. Can someone explain to me why I would expect a swordfish steak or tuna steak or salmon to be cheap whatsoever? And that's still not pricing in offsets needed from c02 emissions. Chicken on the other hand? Yea that should be very cheap and very fresh.
We need more local suppliers. Grow a victory garden. Last season we had so many onions. I wish I could have had a neighborhood farmer's market. But rules. Regulations. Etc.
Because global interconnected economy. The same business processes that figure out how to distribute all sorts of widgets to warehouses and supply house shelves and parts departments all over the country are being used to send a steady stream of approximately the amount of swordfish to Cleveland that people in Cleveland buy. It doesn't really cost any more to ship it to Cleveland than it does NYC. It's just a giant customization problem. Thanks to modern communications technology the dozen swordfish steaks that you and eleven other people will buy this week get to your supermarket.
Ironically here in the US the party of "trash international trade to increase local workers' bargaining power" is also the party of "keep retirement age the same at all costs and maintain fixed income QOL".
As we see globalization unwind from international policy and as working populations age (China peaked @ ~1 billion workers, and is declining), we are guaranteed to see prices rise as workers can demand much, much more (to the dismay of those on fixed income).
I think it'll be interesting to see this unholy coupling tear apart.
Our stuff was being made in China, until many of our supply chains were severed due to Covid, leading to Chinese defaults, shortages, and an increased cost of doing business. Now a certain amount of stuff simply isn't getting made at all.
The question at play is will they recover to 2019 levels? Will China be able to deal with the defaults of businesses who provided key nodes in the supply chain while juggling their 0-covid strategy? What will happen to the cost of doing business when China loses 20% of its workers over the next decade or so due to aging?
I've been a broken record about this but I highly recommend The Great Demographic Reversal. It provides a high level view of the forces at play in our world and is a real eye opener.
caycep said prices were artificially low but that's not quite right - prices were as low as they deserved to be because China had workers and we were able to make deals to mobilize them. In the coming decades I'm not convinced we will have that luxury.
Raising interest rates paid to the Fed are another way of removing money from the economy, but are a broader brush, although the Fed is a much better steward than Congress. Increased interest rates cause stock market declines, so they also tend to act as a wealth tax.
Cutting spending is another way, but it's slow acting. It's more of "don't make things worse" than attacking the core problem of "too much money".
So if you hear somebody screaming about inflation, ask them if they support increased taxes.
Or you can learn to live with the inflation.
Rock and a hard place is the standard expression for the situation we're in.
Here are my assumptions:
1. Inflation is a function of monetary supply, the velocity of money, and available goods.
2. The rich contribute less to the velocity of money (since they tend to save or drive up asset prices) than the poor
As for stopping printing money, the Fed did that last summer.
Tax collection pays the interest on the debt. Higher taxes means more debt load.
The government, like any modern public company, does not care about profit. They operate to maximize cash flow. Income is from taxes, but most cash flow comes from debt leveraged on that income. More income, more debt. Less income, less debt.