Prices, Inflation/Deflation, Interest Rates & The Fed

I'll jump in. Supply chain shocks have caused an increase in prices. So while it is not monetary inflation, the price has indeed gone up so result is the same. The money supply is inflated, so when the velocity of money picks up, when people really get back to business, things could very well run buck wild.

Your previous post implied inflation was above 2% but you're saying now what you posted isn't actually monetary inflation. The mechanism of action matters for what we might expect in the future.
 

NoMoreTO

Ostrich
I found this insightful.

Clearly there is asset inflation on homes, stocks, etc. Some consumer products are going up in price, others not. But the question persists when the price of an individual product goes up, is it a price rise due to monetary inflation, or a price whether it is demand, supply, and shipping costs. The first half of this video explores this.

The 2nd half of the video talks about how there are indeed jobs, but people don't really want them. Jobless numbers in US are improving, so a Fed Interest Rate hike is indeed very possible.

 

SamCru

Chicken
The inflation numbers are bunk. It includes all sorts of things you hardly ever buy like cars and homes, and I don't think this is taken into account. I buy food every day, and I already have a car. The price of a car doesn't affect me. My experienced inflation is with food, not cars.
 

NoMoreTO

Ostrich
The inflation numbers are bunk. It includes all sorts of things you hardly ever buy like cars and homes, and I don't think this is taken into account. I buy food every day, and I already have a car. The price of a car doesn't affect me. My experienced inflation is with food, not cars.

The question is are food prices rising due to money supply, or supply issues. Corona policies are wreaking havoc on food supply chains, and a whole host of supply chains.
 

Laner

Hummingbird
Gold Member
Leeks in Canada are $4.50 right now.

For comparison, my wife checked with her mom in Tokyo and they are 2 for $1.50.

Supply and demand? Perhaps. I am sure leeks are not flying off the shelf like a $9 piece of beetle killed lumber. But still.
 
Inflation has been 7-10% since 2008...look at things like college tuition, healthcare, etc...none of which are in the CPI. What they cherry-pick are things that have been deflationary due to improvements in technology, efficiency, and cheaper energy (fracking). Your $100 phone has replaced about 40 different devices that cost probably $2000 only a decade ago. Technology has massively increased productivity, but QE has put so much money in the wrong places that most of that has been wasted.
 

Arado

Pelican
Gold Member
See this is what I mean. Inflation compared to when? The biggest deflationary event in 150 years when we shut down the whole global economy?

Come on.

Edit: @Arado do you consider supply chain shock price increases to be true inflation?
This is a fair point - Brent Johnson, Jeff Snyder, and even good old Jay Powell claim that supply chain shocks can lead to temporary inflation surges but that the larger situation is still deflation.

-What if the supply chain shock is a result of workers not taking jobs because they are getting paid more sitting on the couch watching Netflix than working in a lumber yard or a port? If they need higher wages to get off the couch that's inflationary.

-If the government did not spend trillions on handouts in the last year, I don't think we would have had these price increases, as natural deflation would have outweighed the supply chain shocks. We have to acknowledge that the printing has prevented the natural deflation from taking place, is that really so different from saying that the printing caused inflation?

-Is there any indication that once the supply shocks are addressed then the benefits are going to be significantly tapered and that the Fed will stop buying up most of the new debt?

I think we have to focus on reality rather than theory. A lot of the deflationists have lots of charts and explanations and theories as to why we're in deflation despite everyone seeing commodities and living costs skyrocket and the quality of products gone to shit. Sure, perhaps technically QE isn't money printing, but prices are going up (while it's obvious the statistics are manipulated to hide it) and the money printer go brrrrr meme takes hold and the parallels with Weimer become more clear. We may still get another rug pull if the Fed tries to raise interest rates or taper the balance sheet with all this debt - but it won't last long, as politically it's always easier to print money then take the deflationary medicine. It's also about psychology - once faith in fiat is lost, it really doesn't matter how strong the deflationary forces are.



Above is an example of shrinkflation in the wild; two rolls of paper towels being sold at Costco at the same price, but with the end consumer getting less paper towel for their cuck buck. For those with below optimal eyesight, the roll on the left is comprised of 140 2-ply sheets of paper towels (74 sqft) while the roll on the right is comprised of 160 (85 sqft). For those keeping track at home that is 12.5% less paper towel (as measured in 2-ply sheets) for the same amount of cuck bucks. Not ideal, especially if you have a child who spills a lot of milk and stray glasses of water and like maintaining your purchasing power over time. As our friend Jeff Vandroux points out, what we're witnessing is part of a process that will attempt to control the narrative around price rises as they continue.
....
Anyone who attempted to sound the alarm bells as they experienced price rises in their every day life over the last few years were labeled a CoNsPiRaCy ThEoRiSt for uttering words that happened to fall outside of the "expert" class' accepted talking points. Now, as it becomes impossible to ignore the fact that inflation is here in many essential commodities, real estate, and the stock market, the narrative is shifting to it's not a big deal. "It was expected!" they'll cry as what's left of the middle class gets pushed closer and closer to the brink of poverty.

After this phase comes the "cope" phase. During which the "expert" class will attempt to fiatsplain the reasons why losing purchasing power in a very quick manner is "actually good" and you shouldn't want to own anything anyway....

Criminals at the ECB want you to think inflation isn't a concern.


Arab Spring II coming?

 
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AntoniusofEfa

Kingfisher
Do your part by buying as much precious metals as possible. Both gold and silver are a bargain at the moment. I have heard stories of how in the height of the recession in Weimar Germany, one could buy a whole town house in Berlin for a gold coin.
 

Fenaroli

Sparrow
This might be one of the most important topics that affect the day-to-day of everyone on the planet, and yet it is purposely made confusing/difficult for the average person to follow. MMT (Mad Monetary Theory) is becoming more popular and is completely nuts. Get ready for obscene price inflation for the things that matter for average people: energy, groceries, bills. People close to government will benefit from the money printing first, and could care less if it wrecks the economy.

I think the Austrian economists of the Mises/Rothbard school are very much correct in their analyses of the problems here. I also like David Stockman, Ron Paul, and the guy who runs Economic Policy Journal, Robert Wenzel.
 

00anon00

Chicken
I'm so mad at myself for hoarding a ton of cash these past few years... Just learned a big lesson in inflation. Here I am, waiting for yet another big crash to dump all my money in the market, and the big crash came in the form of inflation...

1lb of Amazon Fresh grass-fed beef (95%): 11.98$ (!). Passed, bought 30lbs of grass-fed chuck (I have a grinder) at 13.50$ per lb, which is still insane. With Starlink, I can now seriously consider homesteading.
 

AntoniusofEfa

Kingfisher
I'm so mad at myself for hoarding a ton of cash these past few years... Just learned a big lesson in inflation. Here I am, waiting for yet another big crash to dump all my money in the market, and the big crash came in the form of inflation...

1lb of Amazon Fresh grass-fed beef (95%): 11.98$ (!). Passed, bought 30lbs of grass-fed chuck (I have a grinder) at 13.50$ per lb, which is still insane. With Starlink, I can now seriously consider homesteading.
Many people will learn what is inflation and a currency crash. Now, why Amazon?
 

Arado

Pelican
Gold Member
I'm so mad at myself for hoarding a ton of cash these past few years... Just learned a big lesson in inflation. Here I am, waiting for yet another big crash to dump all my money in the market, and the big crash came in the form of inflation...

1lb of Amazon Fresh grass-fed beef (95%): 11.98$ (!). Passed, bought 30lbs of grass-fed chuck (I have a grinder) at 13.50$ per lb, which is still insane. With Starlink, I can now seriously consider homesteading.
My concern is that (maybe later this year?) once concerns about inflation penetrate into the mainstream that's when the rug pull comes and the Fed curtails the printing and asset prices crash, screwing over the little guy while the insiders who knew this would happen get to scoop up assets on the cheap. There's a balance between being all-in and being all in cash, and you can (ideally though hard in practice) adjust based on real interest rates and which assets are relatively cheap against each other (looking at ratios between real estate, metals, commodities, crypto, stocks).
 
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