“Inflation in the US has cooled for a seventh month in a row, but prices continue to rise far more quickly than is considered healthy.”
How should one interpret this? The overall inflation rate is going down, but inflation is still too high?
I am a layman. What is the solution? More rate hikes? If borrowing costs are already so high (to buy a house for instance), then why isn’t inflation coming down even more and faster? Does it mean buyers still have too much cash or are too willing to borrow or risk even with high rates?
Inflation is the rate of change. If inflation is positive prices are rising. Inflation can be declining (second derivative) but still positive.
Right now inflation over a 12 month period is higher than the historical norm of about 2%, but is falling. For individual months it’s been mostly normal levels.
This is an interesting statement, obviously, cash assets suffer inflation, but is this where money is to be stole?
If prices are going up, and I have goods or stock in companies that sell goods benefiting increased price, has anything really been stolen?
I would think that intentional inflation is a signal to spend faster, holding money is bad. Nothing to do with theft.
The issue isn't that those well enough off to hold significant stock in those companies are suffering. It's the people who don't have shares and 2nd homes to liquidate.
I think the big one is at the large scale: government reducing it's debt burden by devaluing the currency that is used to repay their creditors.
But even on the small scale it seems like they win:
Let's say you have 100k in a HYSA that yields 5%. And the inflation rate is 10%. Not too far from current numbers.
After 1 year, your real (inflation-adjusted) return is -5%, so you've lost 5k of spending power. But then, at tax time, you have to write a check to the govt to pay taxes on your 5k "gain".
Not to be too theoretical, but aren't we the government? It is not some other entity, it is reducing our own debt burden that we owe collectively (presuming you are American). If anything the most angry should be foreign holders of American currency.
Hah. Aren't americans always complaining about how monied interests control the outcome of their elections? As for europe there's different electoral shenanigans like holding a referendum then ignoring the result or taking more than 500 days to form a government after a national election because the stupid system doesn't deliver a clear winner.
If cash loses value due to inflation, where does it go? Now for old fashioned inflation that would be obvious: to the people who charge more for goods and services. But with current monetary shenanigans it isn't. You might be tempted to say the printers. Who are they? The central bank? Who controls that? The government? How does the government enforce anything? The threat of violence. Therefore stealing: government taking something of value by force or threat of force.
> In the fall of 1972 President Nixon announced that the rate of increase of inflation was decreasing. This was the first time a sitting president used the third derivative to advance his case for reelection.
I hate how the Fed’s reactions to inflation only affect the demand side (reduce number of people who can afford to participate in an overheated market) rather than the supply side (produce enough of housing/food/goods to lower prices)
No, but they can funnel money to investments towards increasing overall egg capacity. Which might not be "profitable" for a normal bank, but the Fed's performance is measured in domestic inflation, not shareholder profits.
It may be the case that we need to pay slightly higher prices year-round to maintain excess capacity for some things to reduce price spikes during major disruptors. This is very common for many food products, where governments around the world, including the US government, subsidize production which doesn't have a customer and the food usually has to get destroyed or find someone willing to pay "waste-stream" prices for the products to turn them into something marginally higher value for consumers.
The Agriculture department is responsible for eggs, corn and food.
The Department of Energy is responsible for oil, nuclear, and solar.
Housing and Urban development is responsible for housing.
The Fed is responsible for the stability of the dollar.
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If there is a specific field that's doing poorly, we focus on that. We're looking at the Fed because we think the general dollar is devaluing too quickly, which is absolutely the Feds job to fix.
They don't have a lever they can pull, it's true. But they do have a bully pulpit they could use to strongly advocate for changes which would improve the supply side.
Dear Mr president and members of congress. You have tasked us with controlling inflation. We’re doing what we can by raising interest rates. However, We can never control inflation while the cost of housing is unreasonable. I am tasking you with fast tracking structural changes in permitting and the creation of housing construction incentives. The target is an additional 1 million housing units. The rule changes should be broad and sweeping. Please reference the top 5 proven methods of facilitating rapid construction of housing.
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[ 5.0 ms ] story [ 69.1 ms ] threadHow should one interpret this? The overall inflation rate is going down, but inflation is still too high?
I am a layman. What is the solution? More rate hikes? If borrowing costs are already so high (to buy a house for instance), then why isn’t inflation coming down even more and faster? Does it mean buyers still have too much cash or are too willing to borrow or risk even with high rates?
Disclaimer: wrote this post with help chatgpt.
Right now inflation over a 12 month period is higher than the historical norm of about 2%, but is falling. For individual months it’s been mostly normal levels.
Largely a nothing story.
Here are some explanations from the Jamaican central bank, in the form of Reggae songs:
https://news.sky.com/video/jamaican-bank-releases-reggae-son...
https://www.npr.org/2019/02/08/692823677/how-jamaica-found-a...
https://www.youtube.com/watch?v=ieRq4P1-yqY
"Inflation is still high" means the 1st derivative is still too high, and that prices will continue to go higher.
"Inflation has cooled" means the 2nd derivative is negative. The 2nd derivative being low is a necessity to lower inflation (1st derivative).
I would think that intentional inflation is a signal to spend faster, holding money is bad. Nothing to do with theft.
Of course it is all predicated on wages/inflation in step which does not seem to be true.
I think the big one is at the large scale: government reducing it's debt burden by devaluing the currency that is used to repay their creditors.
But even on the small scale it seems like they win:
Let's say you have 100k in a HYSA that yields 5%. And the inflation rate is 10%. Not too far from current numbers.
After 1 year, your real (inflation-adjusted) return is -5%, so you've lost 5k of spending power. But then, at tax time, you have to write a check to the govt to pay taxes on your 5k "gain".
https://www.thebalancemoney.com/who-owns-the-u-s-national-de....
For example: think of the retiree who holds most of their nest egg in (nominal) treasury bonds.
Your beliefs are also irrelevant here. If prices were dropping, inflation would be default be negative. That is, deflation.
> In the fall of 1972 President Nixon announced that the rate of increase of inflation was decreasing. This was the first time a sitting president used the third derivative to advance his case for reelection.
https://www.ams.org/notices/199610/page2.pdf
It may be the case that we need to pay slightly higher prices year-round to maintain excess capacity for some things to reduce price spikes during major disruptors. This is very common for many food products, where governments around the world, including the US government, subsidize production which doesn't have a customer and the food usually has to get destroyed or find someone willing to pay "waste-stream" prices for the products to turn them into something marginally higher value for consumers.
Yeah, that's what we do when we have too much supply
Also, that's not the Feds job.
Yes, I'm lamenting that the Fed is "responsible" for inflation but only given the tools to attack one side of it.
The Agriculture department is responsible for eggs, corn and food.
The Department of Energy is responsible for oil, nuclear, and solar.
Housing and Urban development is responsible for housing.
The Fed is responsible for the stability of the dollar.
-------
If there is a specific field that's doing poorly, we focus on that. We're looking at the Fed because we think the general dollar is devaluing too quickly, which is absolutely the Feds job to fix.