>A separate report from the department’s Bureau of Labor Statistics noted that the big monthly hike in consumer prices translated into negative real wages for workers. Real average hourly earnings fell 0.5% for the month, as a 0.3% increase in average hourly earnings was more than negated by the CPI increase.
Wow, multiple stimulus checks, unemployment benefits and employees still have no bargaining power? What is going to happen to wages once all those people come back to work? Wages are not going to grow...
Okay, this is a clear case of stagflation. Meaning inflation isn't driven by wages, which is generally where a conventional inflation spiral begins. It is driven by the inability to increase production of certain goods, primarily cars and the inability to import goods. Cutting stimulus or raising interest rates won't make this go away because the underlying reason isn't monetary at all. The $50 billion subsidies for semiconductors do make sense in this context (even if they are a net loss from a tax perspective) and they address the problem at its root.
No offense, but having lived through stagflation in the late 1970's, the current environment is nothing close to stagflation. And from a quantitative point of view, there is no decline in real GDP, thus it's not stagflation. It's like seeing a campfire and then warning that it's a clear case of a forest fire. Sure they're both fires (both inflation) but that's about it.
I think the greatest damage was done in the state of mind of regular workers. Nobody wants to work for cash that depreciates that fast. While passive asset holders are seeing gains exceeding normal wages for no work at all.
Watching bankers and policymakers ignore this, everybody is gambling to try to get into the unproductive game of sitting and waiting central banks to inflate their asset prices and retire as early as possible.
Inevitably, you end up with no workforce and learned helplessness, waiting for the government to step in and guarantee jobs/UBI in exchange for everything else you got.
> Wow, multiple stimulus checks, unemployment benefits and employees still have no bargaining power? What is going to happen to wages once all those people come back to work? Wages are not going to grow...
I live in a country that tried to ignore the problem but then came to the realization that you have to do stimulus checks (though they only sent money to the lower 10-25% tier of society).
I'd guess most countries did stimulus one way or the other; or avoided lockdown and relied less on the global economy (ie: Africa). Countries that will try to ignore it will probably collapse especially that the coronavirus is still on-going.
The Americans (and developed world) re ally did get off easy on this one. Less developed countries and those relying on Tourism did get ravaged.
I agree with your points but want to add that higher wages don't lead to high inflation directly. Higher spending does. If you have high wages and high savings it wouldn't lead to inflation in the same way that high wages and high spending would.
> Cutting stimulus or raising interest rates won't make this go away
I am going to disagree. The last round of stimulus by Biden the $1.9 trillion was completely unneeded and not smart. It really tipped the inflation scales. It was a political gesture as Biden wanted to appeal to his base early, but economically and financially a very poor decision and what may end up going down as the smoking gun.
> Inflation has been escalating due to several factors, including supply-chain bottlenecks, extraordinarily high demand as the Covid-19 pandemic eases and year-over-year comparisons to a time when the economy was struggling to reopen in the early months of the crisis.
While this isn't surprising, it does feel that this is largely due to supply chains still dragging behind and those with jobs having more discretionary income due to not spending on other things. It also wouldn't surprise me if businesses are taking liberty with bumping prices to claw back a bit of what was lost last year, and to put pressure on demand as they struggle bringing workers back into retail focused positions.
I think if we're still seeing these y-o-y figures by the end of the year, then we've got something far more serious on our hands.
I think we don't talk enough about income gaps when discussing pricing for supply-constrained products.
75th percentile households have at least twice the income as a median household. And the 90th percentile nearly doubles in income again.
25th percentile households have half the income as a median.
If you live in an average household, and you get into a bidding war with three other households, it's pretty likely that one of those households can afford to pay at least twice what you can. Bump that up to 10 households in competition, and it's likely that someone in that group can afford to pay at least four times as much as you can.
This isn't even getting into the fact that household spending doesn't scale with income, so a doubling of income often results in more than a doubling in disposable income.
Agreed, there will always be a lot of doom and gloomers predicting massive inflation but I think a lot of people just don't realize how much of our goods are dependent on international cheap labor (to keep prices low) and supply chains. That seems to me to be much more a factor at the moment than "money printing". We had a massive economic shock, it doesn't seem worrying to me that we'd have some rebound effects.
It's a scary top-line number, but it should be kept in mind that inflation last June was 0.6% [0], exceptionally low, as a side effect of the pandemic and quarantine.
So I think a lot of this supposed inflation is a transient effect of the statistics re-equilibrating after an extraordinary and unprecedented year of economic numbers in 2020.
One quick thought that just occurred to me is that we are pinning this "transitory" narrative on the idea that the situation will probably improve in the particular industries with currently exploding increases in inflation. E.g. used cars. But perhaps there will be a series of surprises where once the problem is solved in one industry, a new problem pops up in another industry. I.e. perhaps we get a series of rolling inflation explosions in different industries. E.g. I'm hearing a lot of macro investors going long on oil because they believe there is likely to be simultaneous increasing demand (China) and decreasing supply (ESG investors forcing oil companies to wind down). It seems like that could start to pick up steam once the used car situation is resolved.
It's entirely possible that we'll have a series of supply chain crises in the future, and nobody can rule that out. The question is whether blunt central bank interventions (raising interest rates, reducing the money supply) are the right solution to those problems. Typically the "do we need to worry about inflation?" question is actually (implicitly) a question about whether we need to change central bank policy.
used car and truck prices leaped 10.5%, accounting for more than one-third of all the price index’s gains
I read just this morning[1] that used car prices are trending down. The leading indicator there is wholesale dealer auctions, and the the average price dropped 10% in June. So I think this aspect of inflation is starting to get itself under control.
Used cars prices are turbofucked for a good 5-6 years. You can't just magically poof into existence all the cars that weren't produced in 2020, 2021, and beyond.
In 2009, new car production halved and it wasn't until 2015 that new car production finally matched the 2007 peak. Meaning the USA lost out on about 45 million cars which would have been produced during those six years. As a result, used car prices were elevated for quite a while. I bought two new cars in 2014 and a new 2014 model was priced at the same as a used 2012 model, and 2010 models were barely discounted.
The USA has a strong "used cars = better deals" culture. So people don't generally buy cheaper cars new, they buy more expensive used cars for a similar price. This has lead to a nearly complete removal of the cheap car segment, meaning that there very few cheap new cars that people can purchase. Which means we need a 3-4 years of good new car sales in order to start really driving down used car prices.
Weren't "everyone else" expecting rampant inflation since last year, when the fed started printing money? I guess if you make that prediction long enough it'll eventually come true.
Government agencies don’t predict inflation. The “expectation” mentioned is a survey of economists. No info on who they ask, and there’s no reason to think those surveyed have any special insight beyond their academic training.
As long as wages continue to rise, this is great news for the vast majority of Americans that are in debt. Congratulations, your mortgage and student loans aren’t as a big relative to your income.
But wages haven't risen. It's the exact reason why so many places are "struggling" to find people: the fucking people don't want to work at the same wage from 5 years ago.
Your purchasing power for the goods in the index changed by that much over a year. It didn't "just" happen. And you aren't necessarily affected to the tune of 5.4% - could be more or less depending on how you use your money.
If you keep all your money in cash, sure. That should be a surprise to no one. If you have real estate, stocks, other assets, you're doing fine. My stock account went up 20% just in the last 6 months.
It's not complicated, bank account for short term, stock index fund for long term. Short term crypto or stocks if you don't mind gambling and possibly not having the money when you need it.
Not that it is an unimportant question, but HN is not a finance forum. If you need advice about this, please consult a qualified professional instead of asking essentially random people on the internet.
We should make a measure, as a form of protest, of Actual Revenue Per Median Household.
How it would work is we'd take your typical, family household in the median (not the average to be less skewed by extreme results). We'd take the income, then subtract Income Tax, the median Property Tax, the median Sales Tax paid on all purchases that month, the median State Income Taxes paid, the cost of Tax Preparation software, and basically all other essentially-necessary government expenditures for the median American family and their lifestyle.
The result would be a percentage of how much tax ultimately is paid to the government every month. Then, we adjust it every month for inflation caused by government expenditure, which has effects similar to a tax on your savings.
The result of this measure, I expect, would grab headlines everywhere. I expect the actual percentage of money paid to the government every month or lost from inflation would shock people.
obligatory reminder that prices didn't increase 5.4% in june as the headline might suggest, the 5.4% figure is only year-over-year. The BLS summary describes it better:
>In June, the Consumer Price Index for All Urban Consumers rose 0.9 percent on a seasonally adjusted basis; rising 5.4 percent over the last 12 months, not seasonally adjusted.
>Used car and truck prices comprised about one-third of the total CPI increase, lending support to the notion that the rise in inflation could abate in coming months.
[+] [-] imtringued|4 years ago|reply
Wow, multiple stimulus checks, unemployment benefits and employees still have no bargaining power? What is going to happen to wages once all those people come back to work? Wages are not going to grow...
Okay, this is a clear case of stagflation. Meaning inflation isn't driven by wages, which is generally where a conventional inflation spiral begins. It is driven by the inability to increase production of certain goods, primarily cars and the inability to import goods. Cutting stimulus or raising interest rates won't make this go away because the underlying reason isn't monetary at all. The $50 billion subsidies for semiconductors do make sense in this context (even if they are a net loss from a tax perspective) and they address the problem at its root.
[+] [-] rmah|4 years ago|reply
[+] [-] vladimirralev|4 years ago|reply
Watching bankers and policymakers ignore this, everybody is gambling to try to get into the unproductive game of sitting and waiting central banks to inflate their asset prices and retire as early as possible.
Inevitably, you end up with no workforce and learned helplessness, waiting for the government to step in and guarantee jobs/UBI in exchange for everything else you got.
[+] [-] csomar|4 years ago|reply
I live in a country that tried to ignore the problem but then came to the realization that you have to do stimulus checks (though they only sent money to the lower 10-25% tier of society).
I'd guess most countries did stimulus one way or the other; or avoided lockdown and relied less on the global economy (ie: Africa). Countries that will try to ignore it will probably collapse especially that the coronavirus is still on-going.
The Americans (and developed world) re ally did get off easy on this one. Less developed countries and those relying on Tourism did get ravaged.
[+] [-] bravo22|4 years ago|reply
[+] [-] nodesocket|4 years ago|reply
I am going to disagree. The last round of stimulus by Biden the $1.9 trillion was completely unneeded and not smart. It really tipped the inflation scales. It was a political gesture as Biden wanted to appeal to his base early, but economically and financially a very poor decision and what may end up going down as the smoking gun.
[+] [-] polygotdomain|4 years ago|reply
While this isn't surprising, it does feel that this is largely due to supply chains still dragging behind and those with jobs having more discretionary income due to not spending on other things. It also wouldn't surprise me if businesses are taking liberty with bumping prices to claw back a bit of what was lost last year, and to put pressure on demand as they struggle bringing workers back into retail focused positions.
I think if we're still seeing these y-o-y figures by the end of the year, then we've got something far more serious on our hands.
[+] [-] mywittyname|4 years ago|reply
75th percentile households have at least twice the income as a median household. And the 90th percentile nearly doubles in income again.
25th percentile households have half the income as a median.
If you live in an average household, and you get into a bidding war with three other households, it's pretty likely that one of those households can afford to pay at least twice what you can. Bump that up to 10 households in competition, and it's likely that someone in that group can afford to pay at least four times as much as you can.
This isn't even getting into the fact that household spending doesn't scale with income, so a doubling of income often results in more than a doubling in disposable income.
[+] [-] lefrenchy|4 years ago|reply
[+] [-] blacksqr|4 years ago|reply
So I think a lot of this supposed inflation is a transient effect of the statistics re-equilibrating after an extraordinary and unprecedented year of economic numbers in 2020.
[0] https://www.usinflationcalculator.com/inflation/current-infl...
[+] [-] kaycebasques|4 years ago|reply
[+] [-] matthewdgreen|4 years ago|reply
[+] [-] drewg123|4 years ago|reply
I read just this morning[1] that used car prices are trending down. The leading indicator there is wholesale dealer auctions, and the the average price dropped 10% in June. So I think this aspect of inflation is starting to get itself under control.
[1]https://www.npr.org/2021/07/13/1014697915/inflation-is-still...
[+] [-] mywittyname|4 years ago|reply
Used cars prices are turbofucked for a good 5-6 years. You can't just magically poof into existence all the cars that weren't produced in 2020, 2021, and beyond.
In 2009, new car production halved and it wasn't until 2015 that new car production finally matched the 2007 peak. Meaning the USA lost out on about 45 million cars which would have been produced during those six years. As a result, used car prices were elevated for quite a while. I bought two new cars in 2014 and a new 2014 model was priced at the same as a used 2012 model, and 2010 models were barely discounted.
The USA has a strong "used cars = better deals" culture. So people don't generally buy cheaper cars new, they buy more expensive used cars for a similar price. This has lead to a nearly complete removal of the cheap car segment, meaning that there very few cheap new cars that people can purchase. Which means we need a 3-4 years of good new car sales in order to start really driving down used car prices.
[+] [-] tracedddd|4 years ago|reply
[+] [-] gruez|4 years ago|reply
[+] [-] skywhopper|4 years ago|reply
[+] [-] ChrisLTD|4 years ago|reply
[+] [-] JohnWhigham|4 years ago|reply
[+] [-] spamizbad|4 years ago|reply
[+] [-] gruez|4 years ago|reply
[+] [-] HPsquared|4 years ago|reply
[+] [-] jimbilly22|4 years ago|reply
[+] [-] anthonypasq|4 years ago|reply
[+] [-] deregulateMed|4 years ago|reply
Maybe it's not quite exactly like that, but I genuinely feel bad for anyone with USD.
[+] [-] jstx1|4 years ago|reply
[+] [-] jliptzin|4 years ago|reply
[+] [-] mywittyname|4 years ago|reply
[+] [-] azth|4 years ago|reply
Why just USD? Isn't everyone affected, including holders of Euro, GBP, etc.?
[+] [-] throwaway6734|4 years ago|reply
I don't.
[+] [-] silicon2401|4 years ago|reply
[+] [-] tedunangst|4 years ago|reply
[+] [-] JKCalhoun|4 years ago|reply
Warning, I am an internet rando and not an accountant.
[+] [-] anotherman554|4 years ago|reply
[+] [-] donatj|4 years ago|reply
[+] [-] aynyc|4 years ago|reply
1. Short term: instead of CD ladder, you can do TIPS ladder.
2. Long term: correctly allocated index based portfolio.
[+] [-] JohnWhigham|4 years ago|reply
[+] [-] JTbane|4 years ago|reply
Long term has always been stocks.
[+] [-] mastax|4 years ago|reply
[+] [-] WJW|4 years ago|reply
[+] [-] gjsman-1000|4 years ago|reply
How it would work is we'd take your typical, family household in the median (not the average to be less skewed by extreme results). We'd take the income, then subtract Income Tax, the median Property Tax, the median Sales Tax paid on all purchases that month, the median State Income Taxes paid, the cost of Tax Preparation software, and basically all other essentially-necessary government expenditures for the median American family and their lifestyle.
The result would be a percentage of how much tax ultimately is paid to the government every month. Then, we adjust it every month for inflation caused by government expenditure, which has effects similar to a tax on your savings.
The result of this measure, I expect, would grab headlines everywhere. I expect the actual percentage of money paid to the government every month or lost from inflation would shock people.
[+] [-] unknown|4 years ago|reply
[deleted]
[+] [-] gruez|4 years ago|reply
>In June, the Consumer Price Index for All Urban Consumers rose 0.9 percent on a seasonally adjusted basis; rising 5.4 percent over the last 12 months, not seasonally adjusted.
[+] [-] throwaway6734|4 years ago|reply
>Used car and truck prices comprised about one-third of the total CPI increase, lending support to the notion that the rise in inflation could abate in coming months.
[+] [-] mensetmanusman|4 years ago|reply
[+] [-] notsureaboutpg|4 years ago|reply
[deleted]
[+] [-] unknown|4 years ago|reply
[deleted]