There are multiple factors driving this. Yes QE and welfare checks are driving consumer spending, mainly on durable goods, but there are some compounding factors.
One is that commodity prices crashed last year in some important categories. As these prices recover that translates into a bump in inflation now. Energy prices are also shooting up. Another is that there's an ongoing supply crisis for key inputs. Microchips is an obvious one we read about constantly. I'm sure most of you have read about container ships queueing up at ports, so supply lines are choked at the moment. There's a lorry driver shortage here in Europe as well.
So commodity and energy prices up, wages are also up and there's a labour shortage, consumer spending up and supply down equals inflation.
Frankly having endured well over 5% inflation for almost the entire first half of my life I'm not panicking. A lot of these effects are short to medium term. The pandemic was always going to have economic repercussions and if it's just a year or two of inflation we will have to take the hit, cushioned by those welfare cheques and increased household savings through the pandemic. The pain was always going to come in one form or another.
For those that do not believe the consumer prices are that bad or have increased that much, take a look at this historical graph from the official BLS.gov website[0]. Over the last 10 years the Consumer Price Index (CPI) has been holding steady at around 2%. This year we've doubled that. How about going back 21 years? Nope, the CPI still fluctuates around 2% give or take. The last time we saw a consumer price index value this high or higher was 30 years ago!
I was a teenager the last time we had a CPI this high so for all of my adult life it has been a fairly consistent metric to factor into my household budgeting. Now I'm forced to make conscious decisions on how to prioritize my family's spending. To me personally, this is a big issue.
So, while I appreciate the perspective people have that try to look at the bright side of these numbers, we must admit - regardless of one's political leaning or optimistic outlook - consumer prices have risen to the highest amounts in three decades.
Anecdotally I have loads of friends buying all kinds of stuff with their insane pandemic checks
These comments are far too verbose for a phenomenon this simple: print money, people buy stuff, it gets more expensive
What is the best financial strategy in the case of inflation? Invest money so you don't have it sitting in a bank account? Spend it on big ticket items as they may hold their value better than the cash? Simply try to reduce costs?
For 2020 they never hit target of 2%, they are deciding to run inflation hot by leaving stimulus and interest rates low. The idea is to more or less bring everything back to normal target.
Eurozone is at 3.4. But as inflation is the result of pandemic related production halts, the BCE is asking too wait for the shock to pass before taking measures that may weak the economy.
There is this weird idea I can't wrap my head around that is very popular that if you explain why something is happening, that means it is somehow not happening.
This has to be one of the most clear cases of this phenomenon I've seen. Inflation is rising prices [1]. There is no requirement in the definition of inflation that it just be ambiently "happening" for no reason. Inflation always has some reason or other. That doesn't mean it's not happening. If the prices are going up because of government insolvency, it's inflation. If prices are going up because aliens are ordering all stores at raygunpoint to raise prices, it's inflation. If there's a global pandemic and everyone response with massive economic interventions and the result is rising prices, it's inflation. If prices rise this month, but we think that the reasons are probably transitory and they'll go back down next month, that's still inflation, simply followed by deflation next month. If prices rise because of second-order effects of interest rates being dropped to zero by the central bank, that's inflation. If the prices rise because the moon is in the seventh house and Jupiter has aligned with Mars, that's inflation.
It's fine and valuable to ask about the reasons why inflation is occurring, but the answer does not add or diminish it in the slightest.
They're not waiting for the "shock to pass", they're trying to make sure you don't find out something that you are going to use to decide they're not doing a good job. This is purely political, not economic.
[1]: And whatever other details you like. I'm not too worried about exactly which definition you plug into this post, it holds regardless for any sensible definition.
But as inflation is the result of pandemic related production halts
It would be nice if that was true, but it is unclear if it is. It looks like it accounts for some of the inflation, but whether it is 20% is 80% of it is unknown.
So I recently had a realization that the money the US government spends has absolutely no relation to the money the government receives they can spend whatever they want in any quantity they want.
The only barrier is inflation; however that instead means that taxes at the federal level have nothing to do with income or revenue but only inflation control. So the IRS should be the Internal Inflation Control Service.
I am still working on the full implications of that understanding but it has definitely changed the way I look at things.
EDIT: Updated to make clear I am discussing the US government, not governments in general.
EDIT EDIT: To make clear I think this is a bad thing, it is a lever that the more powerful in society have the ability to pull, in order to move wealth from the lower class to themselves as inflation is generally only positive for the asset owning class.
While an interesting perspective, this is inaccurate.
The US government has more leeway than most other countries in the world to spend higher amounts. There is a theory that has not been accepted by a majority of economists (Modern Monetary Theory) that governments can spend without impact.
The counter theory (which I prescribe to) is that the US government has more leeway to increase their debt burden higher than most countries as a function of being the global reserve currency (and having a long track record, federal reserve separated from political power and a mostly functioning democracy). That has given a bit more tolerance to their higher debt load as well economists have forever underestimated the end point at which that would create problems (also they misunderstood the benefits the US had accrued as a function of aforementioned features of the Union). We are still within the tolerable range. However this misstep by economist has created space for MMT to get traction amongst those who do not understand the economy but need a mechanism to finance their ideas. I believe it can work for a little while but it certainly gets closer to a dangerous situation.
Higher inflation (~>4%) just erodes the power of our dollar and increases costs throughout the supply chain.
The IRS has nothing to do with monetary supply, they only collect taxes on behalf of the people of the country. Monetary supply is controlled by the Federal Reserve and is completely separate.
Based on your comments about the IRS/monetary supply I believe this you should do a full read up on how our monetary system works (not being rude, just want educated conversation here and don't want you to fall victim to poor sources of information/conspiracy theories).
It is true that the US gov can print and spend whatever it wants, but that ability will only last as long as the dollar is the global reserve currency. Confidence can be broken very quickly.
So what happens when your currency is no longer a reserve currency? After all, currencies don't exist in a vacuum.
Are you not then highly constrained in your currency creation ability? I would think there might be disastrous implications for foreign trade, upon which the U.S. economy is extremely dependent.
Additionally, does this not imply a significant shift in private property rights (possibly to the degree of being unconstitutional)? MMT seems to imply near complete control of the economy of by a central authority.
Is there not a major problem with the timing and syncing of inflation (money creation) and deflation (via taxation)? The velocity of transactions and thus the velocity of inflation seems to be far, far greater than the velocity of tax transactions. What's more, our ability to measure inflation is very slow, incomplete, and politicized. There is also no consensus on how to do it. For evidence of this, just go look at the different published inflation numbers and dig into what does and does not get included and the measurement methodologies.
> So I recently had a realization that the money the government spends has absolutely no relation to the money the government receives
This might be true in the short run, or even over one lifetime that started in in the 1940s, but it may not true in the long run. Ray Dalio has some interesting thoughts on short and long term debt cycles and their relation to money.
In addition to inflation control, if you accept the classic story that “we tax so we can spend” is wrong (for the US at least, perhaps also to some degree for other currencies with monetary sovereignty) then I feel we need to consider that taxation and expenditure are tools of not just monetary but social policy.
For instance, how does taxation play a role in keeping the most productive people in society producing, motivated, and feeling like they’re getting fairly rewarded, without them say checking out for “less challenging” work or making enough to retire early?
I suspect at some level, consciously, intuitively, or perhaps just accidentally (and the US seems a bit exceptional here to e.g. Canada, UK, Australia, NZ) that housing policy is similarly supported by an idea that the productive middle class and upper working class are kept as active participants in society by some sort of debt-fuelled hedonic treadmill. From what I understand other sources of debt (student debt, new cars etc.) play a greater role in the US.
This is of course in addition to and balanced against all other monetary sinks / rents, e.g. utility bills, literal house rent, health costs etc.
And being a dynamic system, it’s hard to model outcomes, e.g. would cutting income taxes liberate workers to put a bit extra away and perhaps invest extra hours in overtime or a side gig, or would it just serve to give temporary wage pressure relief to companies who are already refusing to fairly pay workers while allowing easier wealth extraction by rent-seekers?
I find it a bit interesting we aren’t having more discussions about employment vs capital taxation, especially now that we’re seeing both escalating (rich getting richer) and broadening (a wider class of “rich” getting richer) inequality. I suspect historically there was little awareness/interest in your extremely wealthy growing their portfolios, but it becomes a bit more interesting when there’s eg a lottery around “the bank of Mum and Dad” or simply which specific year you were born (relative to eg the GFC) fuelling extremely different outcomes for people with otherwise similar backgrounds, capability, class, and contributions to society.
I think you're correct in the vacuous sense that money is fungible. Investors who purchased US treasures ("the debt") don't care whether they're getting taxpayer dollars or dollars that on paper exist because we minted a trillion dollar coin. They got dollars either way, and what they care about is how valuable those dollars are ("inflation")
But in this MMT world, tracking US debt is still valuable (think of it as a measure of how much money was printed, which correlates through some unknown economic function to inflation).
Either way, all the bad things that happen with printing money can be reframed as "bad because inflation" if you want them to. E.g. we print infinite money to pay off debts denominated in foreign currencies, which blows out the exchange rate and results in hyperinflation; yep, that's an inflation problem, check!
Debt is the backbone of society and post-feudal national power.
In this era in the US, inflation is the only meaningful form of taxation, as the ability of the national government to explicitly tax is essentially gone.
There's really one big variable and it's interest rates. In the 70s stagflation era, we had very high interest rates. Government debt came with a heavy dose of debt service. Currently rates are super low. We can accrue way more debt and still not be burdened with a lot of interest payments. Debt service as a percentage of GDP is about half of what it was in 1991 and trending downwards:
Your Realization is call MMT, it is a terrible theory of economics and will likely be the downfall of the US Dollar and other Fiat Currencies if it continues to become more popular
It's not that simple in the US. They currently have this thing where there's a legal limit on how much the federal government can borrow, and it takes an act of Congress to raise it. So there is also a political barrier to borrowing more money.
Nothing will change. He has been a charlatan for most of his career, writing article after article that turns out to be complete wrong, yet he still has a job (and a following?)
1. yes, inflation has spiked first due to stimulus and now to supply chain disruption, also triggered by the pandemic changing consumption patterns faster than suppliers could adapt. These will hopefully subside if COVID doesn't get worse e.g. vaccines/therapies stay ahead of the inevitable new variants.
2. yes, "transitory" is meaningless if it continues long enough. Specifically, the scary part about inflation is when market participants raise prices expecting future inflation, crushing consumers who can't capture higher wages at the same pace. IMHO we're not quite there yet, and prices are tumbling when supply-demand has returned to equilibrium, e.g. lumber.
3. anybody who pontificates as much as Krugman is bound to make lots of mistakes. IMHO the issue is with the publisher's need to create exciting headlines, i.e. that's on us for listening to newspaper columnists (I've largely stopped). Hit rates go up when you can choose your battles and sit on your hands the rest of the time. Less excusable to me are the guys who can sit on their hands but still put their feet in their mouths, e.g. Dimon, Buffett, etc. One of these days, the masses will wake up and realize that these old emperors aren't wearing clothes. (e.g. look at Buffett's 10 year return...)
How does this have baring on this article? Are you just out to try and take down Krugman? Are you targeting Krugman because he works at NYT? Feels like a bit of a hit from the right/libertarian wing here.
I will posit that almost every individual who makes future predictions on anything related to humanity is going to make some serious mistakes. That and our economy is beyond the capability for any people (or machines) on our planet to fully understand all the impacts maybe only the large flows. It's highly dynamic made up of many intelligent (and unintelligent) actors and national groups with sophisticated needs/wants.
Let's not try and take down economists for trying to help understand the economy when they clearly do understand it at a greater level then most people.
I also don't necessarily just put all my trust at the feet of any individual who says they know the future - thats a huge red flag.
My uncertainty comes from not knowing whether the technicians servicing the machine of the economy actually have the understanding and ability to always be able to fix it.
I don't know if they are working on a diesel motor, complex but fully serviceable, or if they are working on a black box, doing ritualistic tapping and prodding that seems to usually correlate with outputs.
I'm not surprised. I wonder how many folks really buy into FEDs argument that this is temporary, that's why they won't change the unmaintainable interest rates the US has been keeping artificially low.
We'll have another year to come, of even higher inflation and some people will still be talking about "supply chain" problems created 2 years ago. Just watch. I'd take any bet I can afford about this.
FED knows that if it hikes up 0.5% interest rates a few times, markets will melt, unemployment to 40%+ and a big civil war will happen.
Except a few US companies that can really make money without much debt(like tech companies), almost all of the rest are walking zombies. So many suburban cities in America are 100% bankrupt being kept alive by policies which should be temporary, such as this Biden's infrastructure package.
You can hide some dust under the carpet only up to a certain point. Citizens let politicians do it until it's out of control. I don't believe it's a mistake solely done by politicians and the FED, but rather, the average american citizen consuming and owning shit to a unmaintainable degree.
You mean all those Chinese goods that are (at best) sitting & rotting in a huge fleet of container ships, parked off the U.S. West coast, waiting to be unloaded "eventually"?
Inflation is about more than just the total amount of money. Roughly if you double the worlds population, goods, and money then the same amount of money buys the same amount of goods.
However, imports only represent a fraction of overall spending. It’s really increasing productivity that’s been keeping inflation low.
Printing free money has consequences. This is entirely expected with that causation. It will get worse. Hold value in assets, not money. Property, precious metals, art, whatever isn’t cash until the money printing stops.
I've been meaning to start collecting data on stuff that I actually buy on a regular basis in order to try to put together a kind of personal CPI. Maybe a good time to start doing it now.
one thought ive had for a while (and this isn't a totally fleshed out thought, would like to hear opinions) is we are in for whipsaw inflation-deflation for the next couple of years and we are all along for the ride. the fed does have some levers to pull but not with much magnitude, especially with interest rates where they are.
I believe there were signs of a deflationary environment up until about 18 months ago, then we had velocity drop to 0. tons of money was added to make up for the decreased velocity. we've had some signs of inflation for sure, some exacerbated by supply issues. but much of the money put into the system is collecting in pockets of unproductive asset classes - sitting in bank accounts, paying off debts(?), getting off shored, NFT and crypto. there is no "multiplicative" effect on the economy with this new money added and so its effect will wear off quickly. stimulus etc. filters through and collects in certain pockets/areas, individuals who realize these profits then shift to unproductive classes.
the fed, having few tools, knows they need interest rates. so next month they start raising through the end of 2024, which will further the whipsaw as housing prices decrease and capital dries up. a spending bill might be approved which will trickle some money back in but largely as boomers continue leaving the workforce, younger people straddle the sideline of the workforce (due to debt and/or low wages), declining birth rate, etc. these various contractions are all conducive to a deflationary environment, so we will be in a state of fighting the tide for a couple of years.
meanwhile, higher education keeps going up and with federally backed student loans the cycle continues. the shift to electric cars will increase vehicle purchase prices substantially. if the rest of the CPI basket keeps trickling up, where does this end up in a couple of years?
EDIT - this is ignoring geopolitical issues for now. of course that certainly can have a massive effect on things and we are not in a vacuum.
[+] [-] themanmaran|4 years ago|reply
For a little bit more context (and breakdown of categories) check out the bls.gov report:
https://www.bls.gov/opub/ted/2021/consumer-price-index-rose-...
[+] [-] kpierce|4 years ago|reply
Gasoline (all types) 42.7% - Huge dip when the pandemic happened now its back to pre covid prices.
Natural gas (piped) 21.1% - Same issue.
Used cars and trucks 31.9% - New cars are being made because of a ship shortage.
Meats, poultry, fish, and eggs 8.0% - a labor problem because its hard to get that many people to work in spaces like that and not get sick.
[+] [-] goodcanadian|4 years ago|reply
It has been updated. This is quite common with breaking news, to put up a placeholder with basic information while the article is being written.
[+] [-] simonh|4 years ago|reply
One is that commodity prices crashed last year in some important categories. As these prices recover that translates into a bump in inflation now. Energy prices are also shooting up. Another is that there's an ongoing supply crisis for key inputs. Microchips is an obvious one we read about constantly. I'm sure most of you have read about container ships queueing up at ports, so supply lines are choked at the moment. There's a lorry driver shortage here in Europe as well.
So commodity and energy prices up, wages are also up and there's a labour shortage, consumer spending up and supply down equals inflation.
Frankly having endured well over 5% inflation for almost the entire first half of my life I'm not panicking. A lot of these effects are short to medium term. The pandemic was always going to have economic repercussions and if it's just a year or two of inflation we will have to take the hit, cushioned by those welfare cheques and increased household savings through the pandemic. The pain was always going to come in one form or another.
[+] [-] StatsAreFun|4 years ago|reply
I was a teenager the last time we had a CPI this high so for all of my adult life it has been a fairly consistent metric to factor into my household budgeting. Now I'm forced to make conscious decisions on how to prioritize my family's spending. To me personally, this is a big issue.
So, while I appreciate the perspective people have that try to look at the bright side of these numbers, we must admit - regardless of one's political leaning or optimistic outlook - consumer prices have risen to the highest amounts in three decades.
[0] https://data.bls.gov/timeseries/CUUR0000SA0L1E?output_view=p...
[+] [-] bojangleslover|4 years ago|reply
[+] [-] everdrive|4 years ago|reply
[+] [-] sleepysysadmin|4 years ago|reply
For 2020 they never hit target of 2%, they are deciding to run inflation hot by leaving stimulus and interest rates low. The idea is to more or less bring everything back to normal target.
The problem:
https://tradingeconomics.com/united-states/money-supply-m2
There's about 40% locked in. The fed thinks they have this under control but they certainly do not.
[+] [-] Hokusai|4 years ago|reply
[+] [-] jerf|4 years ago|reply
This has to be one of the most clear cases of this phenomenon I've seen. Inflation is rising prices [1]. There is no requirement in the definition of inflation that it just be ambiently "happening" for no reason. Inflation always has some reason or other. That doesn't mean it's not happening. If the prices are going up because of government insolvency, it's inflation. If prices are going up because aliens are ordering all stores at raygunpoint to raise prices, it's inflation. If there's a global pandemic and everyone response with massive economic interventions and the result is rising prices, it's inflation. If prices rise this month, but we think that the reasons are probably transitory and they'll go back down next month, that's still inflation, simply followed by deflation next month. If prices rise because of second-order effects of interest rates being dropped to zero by the central bank, that's inflation. If the prices rise because the moon is in the seventh house and Jupiter has aligned with Mars, that's inflation.
It's fine and valuable to ask about the reasons why inflation is occurring, but the answer does not add or diminish it in the slightest.
They're not waiting for the "shock to pass", they're trying to make sure you don't find out something that you are going to use to decide they're not doing a good job. This is purely political, not economic.
[1]: And whatever other details you like. I'm not too worried about exactly which definition you plug into this post, it holds regardless for any sensible definition.
[+] [-] hartator|4 years ago|reply
Is it? It's way more probably that having 40% of our Dollars being created in the last 12 months is the actual root cause.
Ref: https://fred.stlouisfed.org/series/M1SL
[+] [-] WillPostForFood|4 years ago|reply
It would be nice if that was true, but it is unclear if it is. It looks like it accounts for some of the inflation, but whether it is 20% is 80% of it is unknown.
[+] [-] boringg|4 years ago|reply
[+] [-] hpoe|4 years ago|reply
The only barrier is inflation; however that instead means that taxes at the federal level have nothing to do with income or revenue but only inflation control. So the IRS should be the Internal Inflation Control Service.
I am still working on the full implications of that understanding but it has definitely changed the way I look at things.
EDIT: Updated to make clear I am discussing the US government, not governments in general.
EDIT EDIT: To make clear I think this is a bad thing, it is a lever that the more powerful in society have the ability to pull, in order to move wealth from the lower class to themselves as inflation is generally only positive for the asset owning class.
[+] [-] boringg|4 years ago|reply
The US government has more leeway than most other countries in the world to spend higher amounts. There is a theory that has not been accepted by a majority of economists (Modern Monetary Theory) that governments can spend without impact.
The counter theory (which I prescribe to) is that the US government has more leeway to increase their debt burden higher than most countries as a function of being the global reserve currency (and having a long track record, federal reserve separated from political power and a mostly functioning democracy). That has given a bit more tolerance to their higher debt load as well economists have forever underestimated the end point at which that would create problems (also they misunderstood the benefits the US had accrued as a function of aforementioned features of the Union). We are still within the tolerable range. However this misstep by economist has created space for MMT to get traction amongst those who do not understand the economy but need a mechanism to finance their ideas. I believe it can work for a little while but it certainly gets closer to a dangerous situation.
Higher inflation (~>4%) just erodes the power of our dollar and increases costs throughout the supply chain.
The IRS has nothing to do with monetary supply, they only collect taxes on behalf of the people of the country. Monetary supply is controlled by the Federal Reserve and is completely separate.
Based on your comments about the IRS/monetary supply I believe this you should do a full read up on how our monetary system works (not being rude, just want educated conversation here and don't want you to fall victim to poor sources of information/conspiracy theories).
[+] [-] someguydave|4 years ago|reply
[+] [-] xibalba|4 years ago|reply
Are you not then highly constrained in your currency creation ability? I would think there might be disastrous implications for foreign trade, upon which the U.S. economy is extremely dependent.
Additionally, does this not imply a significant shift in private property rights (possibly to the degree of being unconstitutional)? MMT seems to imply near complete control of the economy of by a central authority.
Is there not a major problem with the timing and syncing of inflation (money creation) and deflation (via taxation)? The velocity of transactions and thus the velocity of inflation seems to be far, far greater than the velocity of tax transactions. What's more, our ability to measure inflation is very slow, incomplete, and politicized. There is also no consensus on how to do it. For evidence of this, just go look at the different published inflation numbers and dig into what does and does not get included and the measurement methodologies.
> So I recently had a realization that the money the government spends has absolutely no relation to the money the government receives
This might be true in the short run, or even over one lifetime that started in in the 1940s, but it may not true in the long run. Ray Dalio has some interesting thoughts on short and long term debt cycles and their relation to money.
[+] [-] nickik|4 years ago|reply
While conceptually it is not false, many of the conclusion this school builds on this is not very accurate.
It is much better to separate fiscal and monetary. The monetary policy has one job, the fiscal policy has another.
The monetary policy should be based on rules and targets, and not just be in the hands of politicians to crank up spending whenever they feel like it.
There is a reason this was separated in the first place.
[+] [-] nopassrecover|4 years ago|reply
For instance, how does taxation play a role in keeping the most productive people in society producing, motivated, and feeling like they’re getting fairly rewarded, without them say checking out for “less challenging” work or making enough to retire early?
I suspect at some level, consciously, intuitively, or perhaps just accidentally (and the US seems a bit exceptional here to e.g. Canada, UK, Australia, NZ) that housing policy is similarly supported by an idea that the productive middle class and upper working class are kept as active participants in society by some sort of debt-fuelled hedonic treadmill. From what I understand other sources of debt (student debt, new cars etc.) play a greater role in the US.
This is of course in addition to and balanced against all other monetary sinks / rents, e.g. utility bills, literal house rent, health costs etc.
And being a dynamic system, it’s hard to model outcomes, e.g. would cutting income taxes liberate workers to put a bit extra away and perhaps invest extra hours in overtime or a side gig, or would it just serve to give temporary wage pressure relief to companies who are already refusing to fairly pay workers while allowing easier wealth extraction by rent-seekers?
I find it a bit interesting we aren’t having more discussions about employment vs capital taxation, especially now that we’re seeing both escalating (rich getting richer) and broadening (a wider class of “rich” getting richer) inequality. I suspect historically there was little awareness/interest in your extremely wealthy growing their portfolios, but it becomes a bit more interesting when there’s eg a lottery around “the bank of Mum and Dad” or simply which specific year you were born (relative to eg the GFC) fuelling extremely different outcomes for people with otherwise similar backgrounds, capability, class, and contributions to society.
[+] [-] xxpor|4 years ago|reply
[+] [-] jvreeland|4 years ago|reply
[+] [-] helen___keller|4 years ago|reply
But in this MMT world, tracking US debt is still valuable (think of it as a measure of how much money was printed, which correlates through some unknown economic function to inflation).
Either way, all the bad things that happen with printing money can be reframed as "bad because inflation" if you want them to. E.g. we print infinite money to pay off debts denominated in foreign currencies, which blows out the exchange rate and results in hyperinflation; yep, that's an inflation problem, check!
[+] [-] Spooky23|4 years ago|reply
In this era in the US, inflation is the only meaningful form of taxation, as the ability of the national government to explicitly tax is essentially gone.
[+] [-] tootie|4 years ago|reply
https://fred.stlouisfed.org/graph/?g=HHdA
[+] [-] syshum|4 years ago|reply
[+] [-] dageshi|4 years ago|reply
[+] [-] AnimalMuppet|4 years ago|reply
[+] [-] organic_popcorn|4 years ago|reply
[+] [-] seibelj|4 years ago|reply
https://www.nytimes.com/2021/09/10/opinion/transitory-inflat...
https://www.nytimes.com/2021/06/21/opinion/inflation-economy...
[+] [-] boredumb|4 years ago|reply
He's shown himself to be a hack for decades.
[+] [-] misiti3780|4 years ago|reply
[+] [-] asah|4 years ago|reply
1. yes, inflation has spiked first due to stimulus and now to supply chain disruption, also triggered by the pandemic changing consumption patterns faster than suppliers could adapt. These will hopefully subside if COVID doesn't get worse e.g. vaccines/therapies stay ahead of the inevitable new variants.
2. yes, "transitory" is meaningless if it continues long enough. Specifically, the scary part about inflation is when market participants raise prices expecting future inflation, crushing consumers who can't capture higher wages at the same pace. IMHO we're not quite there yet, and prices are tumbling when supply-demand has returned to equilibrium, e.g. lumber.
3. anybody who pontificates as much as Krugman is bound to make lots of mistakes. IMHO the issue is with the publisher's need to create exciting headlines, i.e. that's on us for listening to newspaper columnists (I've largely stopped). Hit rates go up when you can choose your battles and sit on your hands the rest of the time. Less excusable to me are the guys who can sit on their hands but still put their feet in their mouths, e.g. Dimon, Buffett, etc. One of these days, the masses will wake up and realize that these old emperors aren't wearing clothes. (e.g. look at Buffett's 10 year return...)
kind thoughts welcome.
[+] [-] unknown|4 years ago|reply
[deleted]
[+] [-] boringg|4 years ago|reply
I will posit that almost every individual who makes future predictions on anything related to humanity is going to make some serious mistakes. That and our economy is beyond the capability for any people (or machines) on our planet to fully understand all the impacts maybe only the large flows. It's highly dynamic made up of many intelligent (and unintelligent) actors and national groups with sophisticated needs/wants.
Let's not try and take down economists for trying to help understand the economy when they clearly do understand it at a greater level then most people.
I also don't necessarily just put all my trust at the feet of any individual who says they know the future - thats a huge red flag.
[+] [-] dmix|4 years ago|reply
[+] [-] thowaway1238431|4 years ago|reply
[deleted]
[+] [-] mcs5280|4 years ago|reply
[+] [-] Workaccount2|4 years ago|reply
I don't know if they are working on a diesel motor, complex but fully serviceable, or if they are working on a black box, doing ritualistic tapping and prodding that seems to usually correlate with outputs.
[+] [-] thiago_fm|4 years ago|reply
We'll have another year to come, of even higher inflation and some people will still be talking about "supply chain" problems created 2 years ago. Just watch. I'd take any bet I can afford about this.
FED knows that if it hikes up 0.5% interest rates a few times, markets will melt, unemployment to 40%+ and a big civil war will happen.
Except a few US companies that can really make money without much debt(like tech companies), almost all of the rest are walking zombies. So many suburban cities in America are 100% bankrupt being kept alive by policies which should be temporary, such as this Biden's infrastructure package.
You can hide some dust under the carpet only up to a certain point. Citizens let politicians do it until it's out of control. I don't believe it's a mistake solely done by politicians and the FED, but rather, the average american citizen consuming and owning shit to a unmaintainable degree.
[+] [-] reacharavindh|4 years ago|reply
Not saying a government shouldn't provide relief during a pandemic, just stating that it sounded obvious to me rather than alarming.
[+] [-] whoevercares|4 years ago|reply
[+] [-] bell-cot|4 years ago|reply
[+] [-] Retric|4 years ago|reply
However, imports only represent a fraction of overall spending. It’s really increasing productivity that’s been keeping inflation low.
[+] [-] eunos|4 years ago|reply
[+] [-] lumost|4 years ago|reply
These are two intentional policy goals for the last two administrations, why would we not expect inflation to remain high until automation improves?
[+] [-] unstatusthequo|4 years ago|reply
[+] [-] phreeza|4 years ago|reply
[+] [-] tharne|4 years ago|reply
[+] [-] baby-yoda|4 years ago|reply
I believe there were signs of a deflationary environment up until about 18 months ago, then we had velocity drop to 0. tons of money was added to make up for the decreased velocity. we've had some signs of inflation for sure, some exacerbated by supply issues. but much of the money put into the system is collecting in pockets of unproductive asset classes - sitting in bank accounts, paying off debts(?), getting off shored, NFT and crypto. there is no "multiplicative" effect on the economy with this new money added and so its effect will wear off quickly. stimulus etc. filters through and collects in certain pockets/areas, individuals who realize these profits then shift to unproductive classes.
the fed, having few tools, knows they need interest rates. so next month they start raising through the end of 2024, which will further the whipsaw as housing prices decrease and capital dries up. a spending bill might be approved which will trickle some money back in but largely as boomers continue leaving the workforce, younger people straddle the sideline of the workforce (due to debt and/or low wages), declining birth rate, etc. these various contractions are all conducive to a deflationary environment, so we will be in a state of fighting the tide for a couple of years.
meanwhile, higher education keeps going up and with federally backed student loans the cycle continues. the shift to electric cars will increase vehicle purchase prices substantially. if the rest of the CPI basket keeps trickling up, where does this end up in a couple of years?
EDIT - this is ignoring geopolitical issues for now. of course that certainly can have a massive effect on things and we are not in a vacuum.
[+] [-] newaccount2021|4 years ago|reply
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