Unpopular opinion -- in the US, inflation is necessary.
My feeling is that we have been in an immensely inflationary regimen in many ways for a long time. We see that in the money supply, and we see it in the credit market and the capital markets in general -- too much cheap capital. This manifests in many unhealthy ways.
The core problem is that we have been playing games to hide inflation. Outsourcing has allowed us to hide the general inflation of almost all sectors with deflation in electronics and consumer goods. Lax antitrust and "consumer rights" has pushed heavy discounting and loss-leading into the forefront, which means that plentiful capital can cause prices to appear low by shifting them to other sectors.
If we enact important policy changes to antitrust, trade, labor, and climate, there will be inevitable increases in prices, because there's a reason that we're buying all of our consumer goods from China. Hedge funds and private equity and investment banks have huge amounts of capital from loose monetary policy, and they use that to create situations that drive down prices and drive up equity prices, which they unload on huge index funds with consumer funds driven by vast government incentives, and once they manipulate the price up high enough the mark-to-market of their holdings unlocks the ability to access even more capital for this cycle.
Teams of economists work constantly to ensure that our macroeconomic metrics balance out so that we get increasingly useless measures of "productivity" or "GDP" or frankly even "inflation". All we are seeing now is that we are running out of ways to hide inflation.
Is there a visualization of this anywhere? Do you see this as how the money people have invested in index funds (bogleheads and whatnot) gets "harvested?"
Asset price inflation is more or less eating the children. None of the younger people can afford to live on their own which means keeping the same production requires civilization destroying high rates of immigration (and even that isn't really working.)
It doesn't really matter now, it's way way too late to fix but these two things will more or less end the US, it's how most of the large Western empires ended.
Inflation is eating the elderly, and those living without an expandable paycheck.
IMHO, today's inflation seems inevitable based on recent very loose monetary policy. Blaming it on Putin is ludicrous.
It's also noteworthy that inflation is perhaps the most attractive way (politically) for the growing debt to be marginalized. The other tools (tax raises and spending cuts) tend to bring sharper reactions at the ballot box.
you know it's bad if they are already trying to get out in front of the numbers with propagandized slogans to shift blame
the real irony is people saying this is evidence we need to shift to "green energy", when almost all the key components for that come from China rather than Russia. Even if we make the shift, the end result will be the same in 20 years where China has huge leverage due to countries being reliant on them for energy
Fortunately, depending on your perspective, 20 years is plenty of time to not only switch to renewable energy but also to bring back the manufacturing jobs that make the components for renewable energy.
But good luck (literally) selling that to American companies who have to pay those factory salaries.
If the US manages to transition to 100% solar, but then China cuts off exports, then we're still at 100% solar. It will just be more expensive to add more capacity or replace damaged panels. Annoying, but not oil-embargo level bad.
Sure, PV solar panels lose 0.5% of capacity a year. Coal plants also require regular maintenance and replacement of bearings, boilers and turbines. Not to mention landfilling the ash produced by digging up rocks and burning them. Nobody has figured out a source of perpetual electricity that does not produce solid waste. If that happens, it would be real exciting.
If China was the sole-source of steam turbines and enacted a export ban we would also be in trouble. But China isn't the sole source of coal plants, turbines, or PV solar panels.
With renewables it's more fixed capital instead of a direct supply of literal energy in the form of fuel. That's less of an immediate dependency than it is with oil. Capital does depreciate over time, but ebbs and flows of international prices offer more room for short-term elasticity in demand (people can delay upgrading or replacing equipment). It's also got lower barriers to entry so dependency can be a policy choice (reversible in the medium term) rather than a simple fact of geology the way fossil fuel dependency is.
I will quote it to you from the sacred ancient texts:
Cutting back money supply growth will slow down economic activity and raise unemployment because it makes capital less available. That will happen instantly, because tightening the availability of capital is central bank's one and only lever to influence the money supply. Delayed, on the other hand, is the response of prices and interest rates, which will only stabilize when people are confident that the money supply is going to stop increasing as fast. That means there will be a tough period after the fix is implemented, before things improve.
That creates a problem where democratic governments are stuck trying to get their economies to "take their medicine," dooming the metrics (and real people's prosperity) for their term so that the other politician who replaces them can claim credit. That's not likely to happen, so we get long inflationary periods that continue until it gets so bad that people demand the tough solution and are willing to stomach it. The OP blames "populism" because a democratic society cannot do such a thing until the people agree, while a society controlled by elites could force-feed the public their "medicine" and still be in power to enjoy the benefits when it was over.
Having only a few, highly entrenched and powerful people control the central bank lengthens the time horizons over which it can average the results of its decisions, but that is not the only way to get inflation under control. The other route is to shorten the time between the institution of the austere policy and the time when people believe it is there to stay. Milton Friedman famously proposed a constitutional amendment, but there are other ways to make it difficult for Congress to change direction.
Populism blinds the public from understanding the true root cause of our problems and therefore destines our solutions to fail.
In this case, the populism is Biden’s admin labeling inflation as the ‘Putin Price Hike’. This completely ignores the possibility that the American Rescue Plan Act of 2021, $2 Trillion in stimulus that’s largely already spent, could’ve contributed to inflation also. This leaves us vulnerable to repeat our mistakes when making future policy decisions - like whether to waive all student debt.
From what I've read, stimulus in infrastructure building is rarely correlated with inflation, provided the new infrastructure is useful to continued growth/expansion.
I wonder if anyone hears Psaki or others say "Putin Price Hike" without thinking "a bunch of lying politicians" since Putin's craziness came long after the printing of money.
"Inflation is always and everywhere a monetary phenomenon" M2 has been increasing at an unprecedented rate: https://fred.stlouisfed.org/series/M2SL If you don't solve this you don't solve inflation.
The jump in 2020 is explained by a footnote saying that the definition was broadened in May of that year. Other than that, the rate is unprecedented in absolute terms only in the way that any chart of exponentional growth will always be.
Absolutely no one believes this has anything much to do with Putin, Russia, or Ukraine. Congress' spending is out of control. The Fed's 20-year low interest rate policy is finally coming home to roost.
You can spend it now on things that reduce your costs in the future (dry goods, energy efficiency). You can take on fixed rate debt at an interest rate lower than inflation (a home mortgage). If you want to store your wealth:
The suggestion for I bonds is the safest approach, but you can only put a limited amount in, and you will still lose a little: most experts believe that government inflation numbers under-represent inflation (the debate is by how much, if you buy an I bond you hope just a little).
Otherwise, investors look for "hard assets". A hard asset will maintain its value, going up in nominal dollar terms when the dollar loses its value. This is a reason why real estate has gone up so much recently (and gone up historically).
Most investments appreciate with inflation. Stocks however risk a rapid negative response to the current market conditions because they have already priced in the value of monetary policy being loose and it is currently tightening to counter inflation (this is more true of growth stocks). Similarly these aren't good conditions for most bonds.
Commodities and gold historically have done much better in high inflation conditions. Gold is a very simple way to replace a depreciating currency with hard money, but commodities may have better tail winds in our supply constrained environment. Bitcoin is a digital hard asset that deserves mention for investing with a speculative amount of money due to additional risks.
Series I savings bonds are designed to track inflation. https://www.treasurydirect.gov/indiv/research/indepth/ibonds... . I only recently became aware of them and I am not qualified to give financial advice, so I have no idea if they actually accomplish this well.
They're doing pretty well at this point as they're paying 7.12%. Likely at the rate reset in May they'll pay that much or more for the next 6 months. Only downside is you can only put in $10k/year. If you have a spouse then you can put in $20K/year. Another nice thing about them is that the interest is state-tax free so if you live in a state with income tax it's an added bonus.
Except they're not a good investment. They pay inflation. So they're approximately equal to a 0% return. Better than keeping money under the mattress but not if you want your money to grow.
Wish I knew too. Do you put it in savings, where the inflation erodes away its purchasing power? Do you put it in the stock market, where raising interest rates could precipitate a crash that wipes out much of your portfolio? Do you put it in real estate, but possibly end up buying at the top of an asset bubble there? There seems to be no safe answer. If you have six or seven figures in assets, the $10K/year limit on inflation-protected bonds doesn't help you.
I'm about 33/33/33 cash, stocks and real estate right now. Stuff that feels like it should be an inflation hedge, like commodity ETFs, aren't actually performing well. I haven't found any good advice from family, friends, or the internet in the past few years. It makes me think nobody else knows how to safeguard their savings these days either.
A stock market crash only wipes out your portfolio if you sell. If the company is at all viable it will be able to raise prices with inflation, thus continuing to exist. You own a piece of the company, and maybe the price other people are willing to pay you for that does not reflect the actual value of the company. So when Mr. Market uncrashes and is more optimistic about the future, you can sell then. Or, better yet, just buy something you'd like to own forever (paying a dividend helps make forever look more attractive).
A company like Coca-Cola is pretty inflation-proof, to my mind. Not only does the product have a demonstrated multi-decade appeal, including during a full-on Depression, but the company is working hard to make it more valuable tomorrow.
Re stock market, at least there are many neutral-bearish options strategies. They come with other risks of course and you sort of need to know what you're doing, but the concepts are not difficult.
Currently I have a bunch of QQQ credit call spreads, and much of my long share losses have been tempered by selling ATM calls.
Software in non-financial field, investing is just something I find interest in so I have found it easy to absorb knowledge through various means (misc books, forums, etc).
And yes, risk management is the name of the game, especially when it comes to options. Basically comes down to trade size (don't have say more than 5% acc size in one position) and being aware of your risks (how many "deltas" you have on, etc).
The best way to learn is do. Trade with small amounts to understand your trading platform, identify a strategy you're comfortable with & stick to it, learn from your mistakes.
tastytrades youtube playlist on selling options (theta gang strategies) is a good start and I found it helpful in the beginning to learn concepts.
this is my concern; I've saved my entire life and I'm not seeing corresponding interest rate increases. The only thing I see is a sucker in the mirror who's getting screwed by what started as "quantitive easing" and is now all-out "finance the present and let the kids figure out the solution".
Buy iBonds which are currently paying 7.12% and will likely be paying that much or higher at the rate reset in May. Only problem is you can only buy $10K/year. If you have a spouse they can buy another $10k. We maxed out our ibond buying last year and this year.
The global stock market is currently at 18 P/E, which means barring any growth, it's an investment that returns 5.5% while keeping up with inflation long term. Right now, that's an expected 14% nominal and 5.5% real return (and there will be some growth over the medium and long term).
In addition, moving up major purchases (housing, cars, appliances, long lasting commodities like toiletries) will retain value with inflation, instead of being eroded at -8% real from savings accounts.
I don't think crypto has yet been proven to be hedge against other assets... From what I have heard it seems to more or less correlate with the stocks.
That can be a reasonable strategy if you're sure you'll be able to service that debt and if you can take on the debt before the interest rates go up significantly. There will likely be a nasty recession coming which is why you want to make sure you're in a position to service the debt even if you were to lose your job.
Also, you'll probably want to keep some of your powder dry so that if 30 year TBills start paying, say, 7% or more that you're in a position to buy some of those. People who bought 30 year TBills in the early 80s when they were paying in the mid-teens did really well. Maybe we'll see that kind of opportunity again.
If I understand this correctly, inflation hurts working people and a recession hurts Wall Street. If this is correct, I expect to see huge efforts made avoiding a recession and caring much less about inflation.
> I wonder if those Modern Monetary Theory people will start pushing to increase taxes to combat inflation.
Probably, but (1) MMT support among people with any political relevance is already in the faction known for supporting higher taxes, and (2) no one listens to the people who support MMT, anyway.
The problem is that millionaires and billionaires consume the same amount of toilet paper as us. Taking away money from them doesn't actually change the upwards price pressure on a roll. You actually have to tax away money from consumers for it to have any work combating inflation - I would like to see who can possibly sell raising taxes across the board as a way of fighting inflation.
Interest rates need to return to 5% (perhaps more temporarily). Of course this will trigger an asset price collapse. Fiscal policy should then be used to ensure that it is the rich who carry the burden, to result in a society with a fairer distribution of wealth.
The Fed rate probably needs to be around 7% right now. We need to take the Paul Volcker medicine. Yes, there are side effects to this prescription and things will suck for a couple of years, but it's the proven way to quell inflation.
Do you really think giving everyone $5000 is going to make a "fair distribution of wealth"? This statement shows a lack of even basic math skills.
Some homework for you: Take Bezos entire fortune, plus Elon Musk's, and for fun... Trump's. Hell throw another of the top 50 billionaires in. Divide that by the US population.
This is such a stupid assertion that keeps getting repeated.
The sum of free choices is a fair distribution. People aren't getting robbed at gunpoint; they're _giving_ their wealth to the rich. Bezos is a zillionaire because people literally gave him all his money_.
Definition of “fair” is similar to definition of “random”.
Both terms are very ambiguous, unless qualification is provided.
Random variables can have many distributions e.g. Poisson, Gaussian, uniform.
I don’t know names of categories of “fairness”, but clearly you and GP have different meanings for the same word.
On one end of the spectrum seems to be: “fair == same end result” -> effort and luck should not matter, not in the slightest.
On the other end of the same spectrum: “fair = same system/rules” -> you could have racketeered more people to get more money and bought a bigger gun to stay alive.
Both definitions of “fair” are equally valid, the choice of the definition is subjective.
Sorry but that is inaccurate. The deck is stacked in favor of Bezos and others. Your choice to not buy from Amazon is rapidly decreasing when alternatives just can't complete in an unfair market. People are giving their money to Amazon or Walmart because they have no alternatives left or can't afford what alternatives still exist.
The deck is stacked for every American or western country. If you're posting on HN, you likely live an extraordinarily privileged life compared to the vast majority of earth's population. Instead of complaining about Bezos, how about you ask yourself what you're doing to help those in need?
"Calling it the "Putin price hike," Psaki said she expected to see "a large difference" between headline inflation and "core" CPI, which excludes volatile food and energy prices.
Economists say the annual inflation rate could be close to 8.5 percent, the highest seen since late 1981.
According to the median forecast of analysts, monthly CPI growth will accelerate to 1.2 percent compared to February when the gain was 0.8 percent rate, while core CPI will remain unchanged at 0.5 percent.,,
So its energy and food then I guess based off of this statement alone.
The core CPI is broken out because energy and food have high short term volatility, so core usually better represents longer-term factors, but as long as the war & sanctions continue and (especially for food) for some time after food and energy are going to be problematic, so the core breakout is probably at a low point in relevance.
This should be the nail in the coffin for UBI. The consumer demand created by the last round of stimulus is nothing compared to what UBI would create, and that stimulus is clearly a contributor to the inflation we have been seeing since last year.
Larry Summers was right about the stimulus and the Fed, and quite a lot of the economists who missed this are guilty of wishful thinking. They let their political preferences blind them to the consequences of the stimulus package. Larry Summers is right about UBI too.
UBI != stimulus. The vast majority of this money went into state and local governments which led to infrastructure projects, expanded social programs, etc. which have large ripple effects in the economy. I'm not really on one side or another regarding UBI, but it's faulty to compare large scale government spending with UBI. The demand is in different places. It's also faulty to lay this strictly at the feet of stimulus when the seismic shift in the global economy and workforce also play a role.
The stimulus was implemented by the same people who will implement the UBI. It is obvious they don't understand the UBI theory, or they'd have implemented the stimulus differently.
They also aren't even admitting that their policies are the cause. In the linked article, the white house has incorrectly identified policy failures as evidence of Putin's influence US economy. Which is kinda off, Russia is a global minnow compared to the inflation that is going on. Doesn't sound like someone learning the theory correctly based on their mistakes.
There is evidence that while what you want != stimulus, what is most likely to get implemented just got nailed in a coffin in the minds of people who like evidence.
The theory that an increase in the dollar supply will drive down the price of a dollar (as denominated in tons of grain) is not hard to understand, and there is no shortage of educated people in Washington. I am afraid to say what we are seeing is a great example of politicians deflecting the blame for a crisis they themselves engineered.
Are you aware of the huge wealth transfer that happened due to the PPP loans that a lot of them have been forgiven?
The best thing is, the database is public. I know so many people who got dozens to hundreds of thousands of dollars and got it forgiven by the govt.
The stimulus is a distraction. We had the largest wealth transfer from the working class to the rich during the pandemic and they've got us squabbling about the small stimulus checks.
Yeah, I checked on that website and my (somewhat shady) friend somehow got $42k PPP money, his wife got $41k and his mom got $40k.
None of them have businesses or employee paychecks of any kind to protect. I do wonder how common this is and if any of them will actually have to pay this back ever. (I also feel like a little bit of a sucker working for a living...)
But yeah people blaming the stimulus checks which literally directly went back into the economy are just...unaware of how much money was printed and distributed to large companies and shady people during the pandemic.
> This should be the nail in the coffin for UBI. The consumer demand created by the last round of stimulus is nothing compared to what UBI would create
Unlike deficit-funded stimulus, paid-for UBI is redistributive and this has less of an inflationary effect (not none at all, because marginal spending and where it is directed differs across the economic spectrum, and downward redistribution has some stimulative effect.)
> Unlike deficit-funded stimulus, paid-for UBI is redistributive and this has less of an inflationary effect
Unless you manage to replace Congress with people who fully buy in to the vision of pure UBI, that's not going to happen. UBI, if it ever exists, will be implemented by the politicians we have.
People bought food and therefore cost of food went up?
So, following this logic, we have enough people who are regularly not getting enough food that when they can, it kills the economy?
I...honestly if that's the actual reason this is happening then it seems like we should be looking at seeing how do we make it so everyone has food and produce food with that metric. Not with a lower metric and be fine with people hungry.
Giving everyone more money for the same supply of goods is the very basis of inflation.
In Monopoly, if you give 1 player $500 they get a big advantage. If you give every player $500... nothing happens other than all auctions go up.
> I...honestly if that's the actual reason this is happening then it seems like we should be looking at seeing how do we make it so everyone has food and produce food with that metric. Not with a lower metric and be fine with people hungry.
This is exactly the point. If your goal is 0% inflation, the supply of money needs to be tied to actual economic growth. If the economy makes less stuff (like, during a pandemic) you actually need to find ways of taking money out to keep prices stable.
This is obviously about money supply. And UBI is not necessarily an increase in money supply (as it’s usually paid for by taxes and reduced welfare programs), whereas a government stimulus during an economic slowdown is, nearly by definition, an increase in money supply via government printing.
(And the relationship between money supply and inflation would be covered in 101, not 102)
Maybe not for UBI, but definitely for Modern Monetary Theory.
2 years ago, Stephanie Kelton was doing lectures about how fears of inflation are unfounded. Now she is reduced to sharing every conspiracy theory about price fixing.
Even if you believed that there was some amount of free money the government was able to find before reaping the penalties of inflation a) it ended up being a lot less than they promised and b) high inflation is much more painful and politically toxic than people remember.
> Maybe not for UBI, but definitely for Modern Monetary Theory
MMT: “The only real constraint, and the one from which false fiscal constraints are a distraction, of government net tax and spending policy is monetary impacts like inflation/deflation, so government spending and taxation debate should center monetary conditions and considerations, not fiscal balance“
(For sake of argument leaving off debate over accuracy of this characterization): massive inflation resulting from monetary effects of fiscal stimulus
Commentators: “This is why wer should disregard MMT!”
Many of the chief proponents of MMT are now spending their time arguing that current inflation is not a result of net tax or spending policy. Kelton has even been advocating for things like price controls and micromanagement of supply chains. My point is that their own model implies that now is the time for a tax-hike or spending controls but none of them want to admit it.
They're right. Current inflation is not a result net tax of spending policy. Current inflation is the result of sabotaging the supply chain (due to Covid, not saying it wasn't justified) + Russia attacking Ukraine ...
That doesn't really change the reaction central banks/MMT/all of finance should have. It doesn't matter what causes inflation to start rising. It only matters that we don't get it feeding back on itself: we must have inflation ... without raises (because demand for goods needs to go down).
You're of course right that it'll be politically toxic in the extreme. So they will try everything in their power to avoid doing that.
> current inflation is the result of sabotaging the supply chain
This is an often repeated misconception (signal boosted by the White House, no less), but a lot of the purported supply chain disruptions are a result of consumers flat out just consuming more stuff:
A chip shortage can explain the cost of a car going up, and a global war can explain the cost of gas or wheat. But why is the cost of domestic beef going up? Or a cubic yard of soil?
The old Monetarist explanation is clearly the right one - there is too much consumer money in the economy. From both stimulus (much of which was initially good), but clearly interest rates have been too low for too long.
You think this to do with the stimulus check? I haven't heard that.
What about fuel? The billions that have been pumped into the economy by the government as covid measures?
Re UBI, its coming. But not until we have a CDBC. And it will come with conditions - be a good citizen. (Points will be deducted if you scream on your balcony when you're locked in)
No - I'm talking about money given to vaccine companies, media companies, hospitals, emergency measures, etc, etc. The stimulus was small by comparison.
There are plenty of countries that are seeing inflation and didn't get any stimulus money. The official explanation blaming the war also happens to be the better fit temporally (you'd have to explain a two-year lag) and sectorally (why are energy prices and energy-intensive food prices rising sharply, when income effects would be seen more broadly, or focussed on luxury products (i. e. everything except food, energy, and housing))
> This should be the nail in the coffin for UBI. The consumer demand created by the last round of stimulus is nothing compared to what UBI would create
UBI or the stimulus checks are nothing compared to interest rates held to record lows for a record amount of time. Basically, what we found out is that welfare for the rich (via low interest rates that the poor can't take advantage of anyways) does not work.
because that's boring to report on. Effectively anything that has been digitized has practically collapsed in price. Newspaper, books, movies, music, and so on. Ask your dad what he paid for records compared to your Spotify subscription.
See: the price of gas at the pump. The one exception that lead to a mild reduction was shutting down the entire world, everything else is explained by this perfect linkage between crude increasing a few penny on the barrel leading to an increase at the station.
sadly my original nihilist prediction of 10%+ inflation by Q4 is starting to seem more meritous every month.
the efforts to incept quantitative tightening as of April are...bad comedy. The federal reserves one quarter of one pecent increase of the prime interest rate is a performance art. it has absolutely no ability to control inflation in any context. The real solution, 3-5% interest, is suicide as it would blow up the already shaky corporate credit bubble which is over-leveraged in empty office buildings post-covid. the honeymoon from last december of downplaying the issue as 'transient' inflation is over. Unchecked inflation and sky high gas prices have the very real potential to defenestrate whole sectors of the US economy predicated on summer travel and spending. other options include increasing minimum wage, which is a third-rail for neoliberal capitalism it seems, or works projects, which were torpedoed some time ago by apparently just a single senator.
this isnt solely foreign policy to blame. its a QE addiction stretching all the way back to 2008 the fed has tried and failed to treat.
> other options include increasing minimum wage, which is a third-rail for neoliberal capitalism it seems, or works projects, which were torpedoed some time ago by apparently just a single senator.
Neither of those fix it.
Most people don't make minimum wage; the 25th percentile wage is already $15/hour and all of those people are paying higher prices. Which increase even more if you raise the minimum wage and require that cost increase to be priced into goods and services.
Works projects reduce unemployment. Unemployment is already very low. That's not the problem so that's not the solution.
> The real solution, 3-5% interest, is suicide as it would blow up the already shaky corporate credit bubble which is over-leveraged in empty office buildings post-covid.
The real solution is a little weird.
There are two real problems. a) People can't afford consumer goods (short term). b) Asset bubble inflated by low interest rates (long term).
It's actually the second one that contributes to the first. High housing prices etc. relative to wages increase real cost of living. But what do you want to do, pop the bubble by raising rates?
What we need is for nominal asset prices to stay where they are but for interest rates to go up. So how do you keep the bubble from popping while raising interest rates? Put money into it from somewhere else.
Send people checks.
That will cause inflation to counteract the effect of higher interest rates on nominal asset prices, but this time the beneficiaries of the policy are the people who get the checks (i.e. everybody) instead of the holders of speculative assets.
So nominal asset prices stay the same and nominal non-asset prices (consumer goods and wages) go up. But people have the checks to cover that in the short term and long term we finally get out of low interest rates and high housing costs relative to wages.
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?
Congress should be directing monthly increases to SS to match inflation numbers. Instead they'll wait and see which party can promise they'll do just that better than the other party if they get the votes.
And where's the money going to come from for that? We are in this mess because we are printing money out of thin air, artificially increasing the money supply without the output to match. What you propose continues to amplify the root cause.
> Congress should be directing monthly increases to SS to match inflation numbers
Post-retirement SS benefits are tied to inflation, but in occur annually. (Retirement baseline is adjusted pre-retirement by a wage index, rather than inflation.)
I’m shocked there’s no blame being put on the trillion dollar spending bills that have been passed the last two years. But of course that would make politicians responsible. Our government spending is out of control and mostly to blame for all of this. Putin is not the root cause, and if you believe that then you are a victim of propaganda.
I think most individuals keyed in and paying attention have been aware and saying this since the original stimulus under Trump. And at the time it was "yes inflation will be an outcome, but it may be better than burning it down in the short term". Most anyone I spoke with that had even a basic "macroeconomics 101" level of understanding or took any time to manage their own investment portfolio said this.
But then it came time to put the meat in the with potatoes. And there was little, if any, oversight in the distribution. A LOT of money was handed out to both individuals and companies that frankly didnt need it. And then the Biden admin added more and more.
Most that i recall seemed shakey at the prospect initially but understanding of the urgency of action. And outright offended at the implementation/outcome, and then viewed it as ludicrous with the follow ups.
These are largely the results coming home to roost.
But agian, those were not the majority or even a vocal minority that i saw. You know how many on certain sites will be outright certain xyz is how the masses view something (ie: an election) and then when the actual results come in everyone is shocked and just states that the differing viewpoint is stupid and gross. Well it seems those individuals got their way this time, and even now possibly haven't realized how shortsighted their viewpoints were and still arent connecting the dots.
Narration to justify crisis. Yes, that is what I can see in Europe too. Prices of energy was rising around 3 months before invasion, overall prices are rising since 2021. And now we should believe that it is because of Putin. And if you are not agree, then you are supporting invasion and consuming Russian propaganda. This is ridiculous.
You’re in for a bumpy ride. Normally the advice is to buy bonds if you’re risk averse, but the government got those into a nice bubble as well with QE.
It has already been “extraordinarily elevated” because the money supply has been “extraordinarily elevated.
This is accelerating inflation. That’s going to be a problem. They can call it the Putin price hike all they like but the invasion only made the situation worse. This is 100% poor monetary policy and a Fed that is painted into a corner. Buckle up.
That's one of the democrat's talking points that didn't really hold up well. If Putin really had kompromat on Trump, why wouldn't Putin take Ukraine during Trump's presidency?
Trump kept in place the Magnitsky Act, which targeted high-ranking Russians with sanctions. His administration also put new sanctions on five Russians and Chechens over human rights abuses, and it approved lethal arms sales to Ukraine. Trump also signed a bill in August 2017 that targeted Russia’s energy and defense sectors with sanctions, and put into place sanctions that affected the Nord Stream 2 pipeline.
Yet somehow people accuse Trump of being Putin's puppet. Doesn't add up to me.
>Trump kept in place the Magnitsky Act, which targeted high-ranking Russians with sanctions. His administration also put new sanctions on five Russians and Chechens over human rights abuses, and it approved lethal arms sales to Ukraine. Trump also signed a bill in August 2017 that targeted Russia’s energy and defense sectors with sanctions, and put into place sanctions that affected the Nord Stream 2 pipeline.
Don't forget incessantly pleading with European NATO members (in the unique Trump manner of "pleading") to raise their defense spending to the sky-high level of ... 2% of GDP that all NATO powers have been supposed to be spending all along. I got a good laugh from a video I saw from a European aviation YouTube content creator, discussing countries falling over themselves boosting their spending after the current war started, in which he went out of his way to chastise viewers who had the foolish notion that Trump might have been in any way right.
Also, keeping up and accelerating the training/arming of Ukraine that began under Obama after Russia took Crimea/eastern Ukraine in 2014. There's been tons of media coverage of how Ukraine totally remade its tactics and training on Western models post-2014, and how much of a difference that has made in the current war, but curiously little analysis of the common-sense observation that having all of this happen post-January 2021 is impossible.
>Yet somehow people accuse Trump of being Putin's puppet. Doesn't add up to me.
One might even conclude that the allegations of Putin's insidious influence on US politics/media are correct ... but that the message said influence backs has always been misdescribed. Might.
Can someone fact check the “Putin price hike” angle or are all the debunkers on vacay this administration? I do recall months and months of extremely high inflation and gas prices $1.50/gal more than they were two years ago, prior to any “Russian interference” in our economy via the war in Ukraine. Is the media really going to let Biden get away with this? Because I don’t think anyone in the real world is really buying it.
Fact check: Mostly false. Inflation and overall cost of living (housing anyone?) has been increasing significantly for over a year prior to the invasion.
In retrospect it looks like wishful thinking, but for a while I held out hope that the transition to white collar remote work during COVID would be permanent so all that empty office space could be converted into residential. Might have gone a long way towards addressing inflation and the housing crisis, but I guess we'll never know what could have been.
In Seattle there is plenty of office space that was previously residential. Seems likely that this happens everywhere. I'm sure changing it back wouldn't be too bad.
The problem is that all the commercial real estate has clauses that you can tack missing rent onto the end of the contract but lower rent adjusts the basis so you have to cough up cash.
This means that it is almost always better to have an empty space than an occupied one that you lowered the rent on--I've seen quite a bit of commercial real estate unoccupied for going on 5+ years now.
This merry-go-round will continue until everything crashes simultaneously.
In my market there is an absolute glut of condo and apartment new housing, with more coming on the market because the lead time is so long. It's single family residential in the burbs that has seen the huge increase and commercial conversions don't address this.
Converting a high rise office building to residential is possible but expensive. Usually you have to gut the interior and completely rebuild. Water, sewer, and gas may need to be reconfigured and upgraded.
The chicken or the egg? Without people nearby, you’ll have no offices/jobs. Without jobs, you’ll have no people is your argument. I prefer the former cause and effect as more plausible mainly due to simple financial returns. Who is going justify from a financial returns perspective building an office where there are few people? Nowadays offices are even less impactful with technology and a worldwide, scattered workforce facilitating working in homes and/or smaller satellite offices. Large, central office hubs are in big trouble.
> The chicken or the egg? Without people nearby, you’ll have no offices/jobs.
No, that's wrong. Cities develop for painfully obvious reasons. There are two:
1. The government needs an administrative or military hub and constructs a city to be that hub. This is only moderately sensitive to location, but it involves offices being designated to exist in a particular location and a city growing to support them. Note that there are many, many historical examples of this in which the city came into existence by government decree; it was not necessary for anyone to be living there beforehand. Offices were necessary, and sufficient.
2. Work needs to be done in a particular location. Sea trade happens at a port (and San Francisco is just such a city, though the port is now dead); river trade happens along a river; mining happens at a mineral deposit. This case also involves offices coming into existence and a city growing to support them. But unlike the first case, it's pretty sensitive to location; the hub that supports a port needs to be coastal.
Without the offices, there is no reason for a city to exist at all. Some industries may die and be replaced by other industries that take advantage of the local concentration of people in an existing city. But if every industry dies, which is what eliminating the offices means, the city will die too.
That's largely true for the mineral deposits, but not at all for the harbors. Harbors necessarily host warehouses, tax assessors, harbormasters, lighthouses, repair services... and all of those require offices on site (though the lighthouse is capable of containing its own office).
(Offices are of course required at a mine too, but a comparatively tiny number of them.)
Quantitavie easing: money created of of thin air to buy stock to "keep prices" -> this money goes to other markets (commodities, houses..) and causes bubbles.
Small people screwed about it the most. Most literallu gain nothing in this wealth redistribution scheme.
They're using him to scapegoat their incompetencies. Everyone with an ounce of critical thinking was able to see that money printing will cause this. "Transitory inflation" yeah right.
The US isn't really exposed to Russian gas prices. Nat gas prices are pretty low in the US, although converging with global prices as the US exports grow, because of fracking. Food prices are up, but not to a huge extent.
The noticeable thing in the US, relative to the rest of the world, is the level of fiscal and monetary stimulus. This wasn't only Biden, it was thrown into the economy at a time of significant supply shortages and when people were suddenly accumulating large cash balances. It is a crazy situation. Obviously, prices will rise and soak up all that excess demand but: inflation near 10%, interest rates 1%...wow, it is impossible to look at that and conclude anything other than politics has totally debauched monetary policy.
It is also entertaining to go back and read the views of some people (the usual candidates) who were loudly insisting that inflation wasn't going to rise, then that is would be temporary, then that is was due to Putin...this should impress upon the public that economists don't know better, they have no credibility (extraordinary given that the economic logic has dictated policy for close to three decades, they were regarded as omnipotent by politicians).
How is President Biden affecting inflation and gas prices in, e.g., Europe? Crude futures were in line with pre-pandemic prices in early 2022, then they spiked in March. Along with Ags and Nat Gas futures.
President Biden may not, but Fed certainly is. Remember with the eurodollar system, Fed's role at this point is pretty much a liquidity provider for anyone and everyone which they did with unconditional access to swap lines etc. since April 2020 injecting trillions of dollars of liquidity into the system. The inflation we are seeing right now is largely a by-product of that. Fed with its utterly irresponsible course of acts over the past two years is directly responsible for this crisis. Their choice at this point is doomed to crash the US economy with recession if they want to do anything measurable to fight inflation. Which if they end up doing, will largely invalidate their mandate of full employment and thus the validity of their existence.
With regards to President Biden, he will have to be held responsible for applying all out sanctions which have not been able to achieve their objectives. If the goal of the sanctions was to stop the war, that has not happened in last 45 days. We don't know how difficult life has been for the average Joe in Russia from those sanction bites due to the censorship in media in both west and Russia. It certainly has however affected the life of the average Joe here and not for good. But, we are told this is at the expense of our moral victory.
Not to stop the war, but to degrade Russia's ability to prosecute it and any future aggression. We should be doing everything that stays short of the nuclear trigger to destroy Putin's war machine.
That right there. Sanctions like this are meant to make prosecuting a war more expensive, so make ending the war more appealing, but also to make it harder to recover from e.g. battlefield losses of equipment, and to otherwise make further military buildup slower and more difficult, if the war keeps going for any length of time. In a case like this, they're not just "to stop the war", at least not immediately, even if that would be considered a great outcome. They haven't necessarily failed if they don't bring a swift end to the war, even if that'd be considered ideal.
Inflation was baked in even prior to the pandemic. Biden bears little blame here. The previous president was starting trade wars that were already starting to blow up supply chains even before covid. The Fed with it's years of loose money policy, the previous president (who, in addition to trade wars, also blew up the deficit at a time when it should have been reduced) and of course covid deserve most of the blame. There's not a whole lot Biden can do to stop this inflation, it's up to the Fed but I doubt they'll take decisive enough action. These puny 1/4% rate increases aren't going to do anything anywhere near fast enough. We need to take the medicine that Dr. Volcker would prescribe were he here.
Putin is partially responsible, but it seems like we're in a perfect storm of price increases. The entire supply chain was disrupted by COVID, and we still haven't fixed all of it. That is almost certainly a bigger factor than the invasion of Ukraine.
What about the Biden administration itself being responsible for cornering Putin with talk of Ukraine joining NATO, which Putin stated many times was a red line. Furthermore, US had agreed to not push NATO farther east, but its actions were in complete opposition to that agreement.
Biden administration has cornered themselves as well into an unnecessary conflict with little chance of an exit ramp. Dangerous stuff.
“The more serious cause of tensions has been a series of democratic breakthroughs and popular protests for freedom throughout the 2000s, what many refer to as the “Color Revolutions.” Putin believes that Russian national interests have been threatened by what he portrays as U.S.-supported coups. After each of them—Serbia in 2000, Georgia in 2003, Ukraine in 2004, the Arab Spring in 2011, Russia in 2011–12, and Ukraine in 2013–14—Putin has pivoted to more hostile policies toward the United States, and then invoked the NATO threat as justification for doing so.”
“These episodes of substantive Russia-NATO cooperation undermine the argument that NATO expansion has always and continuously been the driver of Russia’s confrontation with the West over the last thirty years.”
The article you linked is all over the place with its reasoning. How does it reconcile the two above points? There is a great deal of hand waving with a sole focus on democratic models of government…sounds straight out of the CIA playbook that attempted to justify the US tangled up in so many conflicts for the sake of democracy.
Also, who said NATO expansion has always been the driver of confrontation?
And finally, Ukraine is and has been a far cry from an independent democracy. It is a fractious country that has clear divisions of tribal and ethnic conflict. Their elections and politics have been heavily influenced by Russia and the United States. Biden has been at the center of heavy US influence in a huge country that has been the source of many wars against Russia for centuries. Ignoring the perspective of Russia and only focusing on democracy is critically short-sighted.
They're all levers, interconnected. Pull one lever and many others are slightly tugged as well.
"Putin Price hike" is just alliteration, its not scapegoating everything on Putin, its reducing the expected constriction of energy on the market to the geopolitical catalyst in response to Putin's actions. This constriction is not nearly as heavy as it could be, with mostly just a few large US/EU private sector companies choosing not to trade Russian oil and gas right now. The oil and gas is not sanctioned right now. Even this explanation is the beginning of a dissertation that will be irrelevant in a few weeks, so it might make more sense why a reductive 3 word phrase is chosen.
Of course they're going to get away with this. It is politically unfavorable to say "our actions rose gas prices". If the media is operating in your favor just go for it.
If you wanted an indication that some actual humans understood the doublespeak, well now you know that I do, and largely don't care. I follow the macroeconomic environment pretty closely, politicians are a lever too.
Where I'm currently at is that Biden/the US taking action to try to flood the market with their oil reserves and bring down prices is going to be mostly show, as the oil reserves will just need to be topped up again and very quickly. So this means supply and demand for oil has not changed at all, not even in the near term. The market via oil prices is still digesting what the price should be in light of Russian's actions and has not finished even doing that, with an initial overreaction (margin call) and just settling in the $93/barrel range for now. I don't think US oil reserves, for example, is having any effect on that. Just a small tangent to show how I think, in light of political speak which I consider benign and not relevant enough to be as passionate about as you are.
Well, where I am gas is $1/gal higher than it was in March. That's down to Putin/Ukraine/sanctions and all that. That's going to show up in as a big inflation bump.
Now, inflation was up before that, definitely, in a way that it hadn't been since 2008. But it got a bit spur from Putin's non-war war.
My feeling is that we have been in an immensely inflationary regimen in many ways for a long time. We see that in the money supply, and we see it in the credit market and the capital markets in general -- too much cheap capital. This manifests in many unhealthy ways.
The core problem is that we have been playing games to hide inflation. Outsourcing has allowed us to hide the general inflation of almost all sectors with deflation in electronics and consumer goods. Lax antitrust and "consumer rights" has pushed heavy discounting and loss-leading into the forefront, which means that plentiful capital can cause prices to appear low by shifting them to other sectors.
If we enact important policy changes to antitrust, trade, labor, and climate, there will be inevitable increases in prices, because there's a reason that we're buying all of our consumer goods from China. Hedge funds and private equity and investment banks have huge amounts of capital from loose monetary policy, and they use that to create situations that drive down prices and drive up equity prices, which they unload on huge index funds with consumer funds driven by vast government incentives, and once they manipulate the price up high enough the mark-to-market of their holdings unlocks the ability to access even more capital for this cycle.
Teams of economists work constantly to ensure that our macroeconomic metrics balance out so that we get increasingly useless measures of "productivity" or "GDP" or frankly even "inflation". All we are seeing now is that we are running out of ways to hide inflation.