Inflation is Through the Roof - Whats Biden Admin's First Priority? Stockholders, of course!

[Vic]

IMO Felix just told us that he is a retiree on a fixed income of (just?) under $50k/yr and with minimal assets except for probably a free and clear house in an underperforming market. Or at the very least, he is making a strong economic argument for such a person.

 

[FelixDeCat]

Creating dollars is inflation? Then explain this.

If anything there’s an inverse correlation for the most part. You have no idea what you’re talking about.

Regardless, make a prediction about inflation that if it doesn’t happen will cause you to admit being wrong.

You do know the difference between the Fed providing liquidity to markets, buying bonds and giving zero percent money to banks is not the same as the Fed putting those same trillions directly in consumer hands like the government has done, correct? Also many consumers paid down debt with the hand outs. Others felt it was enough to speculate in the stock market with the remaining majority used it to purchase new cars, guns, televisions and towards a down payment on home or fixing up their existing home.

Notice that big uptick in red at the end of the chart? I rest my case.

 

[FelixDeCat]

IMO Felix just told us that he is a retiree on a fixed income of (just?) under $50k/yr and with minimal assets except for probably a free and clear house in an underperforming market. Or at the very least, he is making a strong economic argument for such a person.

Regardless of my economic status, you have to admit there is truth to what I am saying.

 

[Vic]

Regardless of my economic status, you have to admit there is truth to what I am saying.

Truth only to a person in a similar financial situation. My own situation, in my late 40s and the prime of my career, makes me think that you're the socialist. And for good reason. You even said you want to increase my taxes.

 

[ivwshane]

Regardless of my economic status, you have to admit there is truth to what I am saying.

No there is zero truth to what you are saying which is why you had to resort to ridiculously outrageous numbers instead of relying on historical data.

You’d think that after forty years of failed economic policies you’d start doing just the most basic of fact checking but nope! It’s still all about your feels.

Here is a fun exercise that only you can do. Think about the times when government spending was the highest (late 30’s, 40’s, 80’s, etc) and then compare it to what the inflation rate was at the time. Next compare it to when government spending was at its lowest (I can’t think of any examples so you’ll have to research them), then see what the inflation rate was. Then report your findings.

 

[fskimospy]

You do know the difference between the Fed providing liquidity to markets, buying bonds and giving zero percent money to banks is not the same as the Fed putting those same trillions directly in consumer hands like the government has done, correct? Also many consumers paid down debt with the hand outs. Others felt it was enough to speculate in the stock market with the remaining majority used it to purchase new cars, guns, televisions and towards a down payment on home or fixing up their existing home.

Oh, so now printing money isn’t inflation?

Notice that big uptick in red at the end of the chart? I rest my case.

This is called cherry picking.

For the third time, what events could take place that would make you admit you are wrong?

 

[MrSquished]

For the third time, what events could take place that would make you admit you are wrong?

Basically if a Trumphumper was elected president and did the same shit, then he would admit he was wrong in order to show his subservience to maga

 

[FelixDeCat]

Truth only to a person in a similar financial situation. My own situation, in my late 40s and the prime of my career, makes me think that you're the socialist. And for good reason. You even said you want to increase my taxes.

Yes, it is rare that I ever call for tax increases. But since spending is so out of control society must pay the price for reckless fiscal irresponsibility over the last 20 years and culminating in endless stimulus of what will likely approach $10 trillion dollars using covid as cover.

Everyone on Earth knows governments around the world, especially America, will never repay all this debt. The solution to this debt monster is massive spending cuts and gigantic tax increases dedicated solely to debt repayment which will never happen. So we are doomed for currency cancellation and re-valuation.

This has happened in other countries like Mexico. If you had 1,000 pesos in your checking account you had only 1 "new peso" the next day (100,000 peso life savings is now 1,000 new pesos). Its handy way of repaying old debt. But there was civil chaos and riots over food and gas, not to mention a prime interest rate that surpassed 50%. The reason why that works is that debt is denominated in the "old" currency.

Unfortunately walking away from full debt repayment also makes you a poor and unreliable creditor who will have a hard time borrowing again (see Argentina).

 

[FelixDeCat]

Oh, so now printing money isn’t inflation?

This is called cherry picking.

For the third time, what events could take place that would make you admit you are wrong?

How can I be wrong? I am right for now. What you are saying is comparable to "you think its raining now but when the sun comes back out later will you admit you were wrong about the rain?"

Yes it is true that everything does eventually pass including inflation, but there is pain in the process. Even the famous inflation of the 70s and early 80s was only abated by a Prime Rate in the US that reached 20%. My parents purchased a home in 1980 with a 12.5% fixed rate mortgage. Gold famously hit $1,000 per ounce in 1980 before crashing back to a couple hundred bucks. I remember all this.

If you are trying to say that no measures will be needed to counter this bout of inflation (and who knows where and when prices will finally normalize for food, cars, gas and most especially housing), then that is fair argument to make. In fact, you are agreeing with Jay Powell.

But as I have said before measures like the Fed taking money out of the economy by tapering bond buying that artificially suppresses interest rates and eventually rate "normalization" to higher rates will be the medicine we need. The government also needs to balance its budget.

We cannot have zero rates and emergency measures (not to mention endless stimulus) without some serious consequences like massive inflation.

 

[fskimospy]

How can I be wrong? I am right for now. What you are saying is comparable to "you think its raining now but when the sun comes back out later will you admit you were wrong about the rain?"

No, you’re saying because it’s raining now there will be a flood. I’m saying there won’t be.

For the fourth time, can you make some sort of claim that will be falsifiable say, six months from now?

Yes it is true that everything does eventually pass including inflation, but there is pain in the process. Even the famous inflation of the 70s and early 80s was only abated by a Prime Rate in the US that reached 20%. My parents purchased a home in 1980 with a 12.5% fixed rate mortgage. Gold famously hit $1,000 per ounce in 1980 before crashing back to a couple hundred bucks. I remember all this.

If you are trying to say that no measures will be needed to counter this bout of inflation (and who knows where and when prices will finally normalize for food, cars, gas and most especially housing), then that is fair argument to make. In fact, you are agreeing with Jay Powell.

But as I have said before measures like the Fed taking money out of the economy by tapering bond buying that artificially suppresses interest rates and eventually rate "normalization" to higher rates will be the medicine we need. The government also needs to balance its budget.

We cannot have zero rates and emergency measures (not to mention endless stimulus) without some serious consequences like massive inflation.

Yes, I am saying no significant measures will be needed to contain inflation. They may raise rates some, but wherever they raise the rates to will be in line with the rate environment if the last 10 years.

The inflation we have seen this year is nothing significant and reflects a return to normal after the pandemic. If anything we WANT above average inflation for a while as the fed has a lot of inflation ground to make up to hit their target of 2% annually. Remember, modest inflation is good for the average American.

 

[ondma]

IMO, it is still too early to know how sustained inflation will be. However, the social security raise this year, (based on cpi and probably underestimating real inflation) will approach 6%. And that is based on the previous highest cpi, not the depressed values of the pandemic. So it seems obvious that there is some danger of too much inflation that has to be watched carefully. I think the stimulus was needed, but simply pumping money into the economy, without an increase in productivity, is a recipe for inflation. And for those who are trying to make it political, both Trump and Biden did it, so neither side should use it as an excuse to throw turds at the other.

 

[ivwshane]

IMO, it is still too early to know how sustained inflation will be. However, the social security raise this year, (based on cpi and probably underestimating real inflation) will approach 6%. And that is based on the previous highest cpi, not the depressed values of the pandemic. So it seems obvious that there is some danger of too much inflation that has to be watched carefully. I think the stimulus was needed, but simply pumping money into the economy, without an increase in productivity, is a recipe for inflation. And for those who are trying to make it political, both Trump and Biden did it, so neither side should use it as an excuse to throw turds at the other.

Since economists usually watch the overall trend of productivity when talking about inflation and not short term fluctuations, what makes you think that productivity won’t increase and has it not continued to increase overall?

 

[fskimospy]

IMO, it is still too early to know how sustained inflation will be. However, the social security raise this year, (based on cpi and probably underestimating real inflation) will approach 6%. And that is based on the previous highest cpi, not the depressed values of the pandemic. So it seems obvious that there is some danger of too much inflation that has to be watched carefully. I think the stimulus was needed, but simply pumping money into the economy, without an increase in productivity, is a recipe for inflation. And for those who are trying to make it political, both Trump and Biden did it, so neither side should use it as an excuse to throw turds at the other.

Where did you get the idea that core CPI is underestimating inflation? It seems nearly certain it is currently overestimating it. The single biggest driver is used cars, which have nothing to do with fiscal policy.

Also, if you’re saying CPI is going to be 6% higher than 2019 prices where are you getting this data from? This would require essentially doubling inflation from its current rate for the remainder of the year.

 

[fskimospy]

Also everyone should keep repeating to themselves the simple fact that higher than normal inflation for a while would be GOOD.

 

[IronWing]

Also everyone should keep repeating to themselves the simple fact that higher than normal inflation for a while would be GOOD.

Only if you are a grasshopper. If you're an ant, inflation sucks. And yes, the CPI has been understating inflation and inflating away federal obligations for decades.

 

[ondma]

Where did you get the idea that core CPI is underestimating inflation? It seems nearly certain it is currently overestimating it. The single biggest driver is used cars, which have nothing to do with fiscal policy.

Also, if you’re saying CPI is going to be 6% higher than 2019 prices where are you getting this data from? This would require essentially doubling inflation from its current rate for the remainder of the year.

5.5 % rise in cpi has been the estimate for a long time, now it is being predicted to be even higher, in the range of 6%. link They are predicting 5% raise or higher, but later in the article it states that the CPI rose 6.1% in the 12 months ending in June.
Maybe you should actually use your google fu instead of rejecting everything that does not fit with your agenda.

Temporarily the CPI-W may be overestimating the inflation rate, but historically it has underestimated it (as Iron Wing said) due to not including sufficient data for medical and education costs.

 

[fskimospy]

Only if you are a grasshopper. If you're an ant, inflation sucks.

Absolutely not! It’s the other way around. Inflation lowers the real value of debt and the average American is a net debtor. Therefore, inflation helps the average guy.

All data aside, ask yourself this. Why is it that rich people and the Republican Party constantly fight for higher interest rates in order to battle imaginary inflation? Because low inflation helps the rich.

And yes, the CPI has been understating inflation and inflating away federal obligations for decades.

Nonsense. If you want to make that argument then make it in a specific way that’s open to refutation.

 

[ondma]

Absolutely not! It’s the other way around. Inflation lowers the real value of debt and the average American is a net debtor. Therefore, inflation helps the average guy.

All data aside, ask yourself this. Why is it that rich people and the Republican Party constantly fight for higher interest rates in order to battle imaginary inflation? Because low inflation helps the rich.


Nonsense. If you want to make that argument then make it in a specific way that’s open to refutation.

Inflation may lower the value of debt, but it also lowers purchasing power, forcing those in debt to borrow and go even further in debt.

 

[fskimospy]

5.5 % rise in cpi has been the estimate for a long time, now it is being predicted to be even higher, in the range of 6%. link They are predicting 5% raise or higher, but later in the article it states that the CPI rose 6.1% in the 12 months ending in June. Maybe you should actually use your google fu instead of rejecting everything that does not fit with your agenda.

To be clear I asked you this because I knew what you said was wrong, not because I was genuinely curious, haha. The 12 months ending in June would be in comparison to pandemic depressed prices, not previous all time highs as you claimed.

Temporarily the CPI-W may be overestimating the inflation rate, but historically it has underestimated it due to not including sufficient data for medical and education costs.

So you’re taking that part of your post back too? If so then what’s even left of it?

 

[fskimospy]

Inflation may lower the value of debt, but it also lowers purchasing power, forcing those in debt to borrow and go even further in debt.

This is also false. As we are seeing today, inflation usually corresponds with rising wages as well so prices go up, your wages go up, but the amount you owe stays the same.

This is why it’s good for people in debt, and bad for people who own a lot of loans. This is also why rich people hate inflation.

 

[ondma]

To be clear I asked you this because I knew what you said was wrong, not because I was genuinely curious, haha. The 12 months ending in June would be in comparison to pandemic depressed prices, not previous all time highs as you claimed.


So you’re taking that part of your post back too? If so then what’s even left of it?

Here are the CPI figures for the last few years: (From the Federal Reserve Bank of Minneapolis)
2018 = 251.1
2019 = 255.7
2020 = 258.8
2021 = 271.4 (estimated, but the final number will probably be higher)

So you are just simply wrong (or deliberately mis stating the facts). The CPI continued to rise even during the pandemic. And the 5% (now probably higher) rate for 2021 is based on the highest previous yearly value, NOT some mythological depressed pandemic value. Of course anyone who knows how the Social Security raise is calculated knows this.

 

[ondma]

This is also false. As we are seeing today, inflation usually corresponds with rising wages as well so prices go up, your wages go up, but the amount you owe stays the same.

This is why it’s good for people in debt, and bad for people who own a lot of loans. This is also why rich people hate inflation.

Again, the recent labor shortage after the pandemic has pushed wages up (IMO temporarily), but traditionally, wages have gone up considerably more slowly than the inflation rate, so as I said, the person living paycheck to paycheck is losing purchasing power, being forced to go even further into debt (at a high interest rate), creating a viscous cycle of increasing debt, even though that may be ameliorated somewhat by inflation.

BTW, Inflation can also benefit the rich, by increasing the value of hard assets such as property.

 

[Leeea]

Inflation is not "through the roof" in my personal life.

It is weird:
labor went up, food went up, mortgage went way down in refinance, laundry went down (no longer paying covid overhead costs on special treatment), supply costs remain flat ( cl, acid, cleaning supplies, soaps, paper, etc are not climbing yet), financial costs remained the same, utilities remained flat, and transport remained flat for me. My biggest problem is linens are backordered (but the price has not increased).


For me, the only thing really driving an increase in cost is labor, and that is 10% increase in that category.
For me, the primary decrease in cost is mortgage, which monthly payment wise is down 30%.

 

[fskimospy]

Again, the recent labor shortage after the pandemic has pushed wages up (IMO temporarily), but traditionally, wages have gone up considerably more slowly than the inflation rate, so as I said, the person living paycheck to paycheck is losing purchasing power, being forced to go even further into debt (at a high interest rate), creating a viscous cycle of increasing debt, even though that may be ameliorated somewhat by inflation.

This is not true.

BTW, Inflation can also benefit the rich, by increasing the value of hard assets such as property.

Inflation CAN help the rich, but as they are generally net creditors it broadly does not. This is why the rich and the GOP fight against inflation.

I would be interested to know your thoughts about why if inflation benefits the rich and immiserates the poor that the GOP and the rich fight so hard against inflation. Is this just the one area where they are looking out for the average Joe?

 

[fskimospy]

Here are the CPI figures for the last few years: (From the Federal Reserve Bank of Minneapolis)
2018 = 251.1
2019 = 255.7
2020 = 258.8
2021 = 271.4 (estimated, but the final number will probably be higher)

So you are just simply wrong (or deliberately mis stating the facts). The CPI continued to rise even during the pandemic. And the 5% (now probably higher) rate for 2021 is based on the highest previous yearly value, NOT some mythological depressed pandemic value. Of course anyone who knows how the Social Security raise is calculated knows this.

I used your own figures! June is comparing to a pandemic depressed CPI. In addition, your own article repeatedly references the fact that a rebound from depressed pandemic figures is a big reason for it. Did you read it?