Prices, Inflation/Deflation, Interest Rates & The Fed

vstk

Pigeon
You're missing the point: if the boat sank to the bottom of the ocean but then floated up halfway, you're still underwater and dead. Despite what everyone here wants to believe, the boat is the economy and the move up is irrelevant because we're STILL DROWNING.

You conflate strong price action and a strong and healthy economy. These things are not the same. I thought the discussion was about price increases, ie. inflation. Not about real GDP growth.
If the boat is prices, it's more like it sank to the bottom of the ocean and popped right back up and started flying.

That's what the past year and a half has been. We are in the middle of the biggest deflationary event of history. Like I keep saying, there's supply chain issues and dislocations but there is no inflation.
You sound like a central bank official here. Price increases are not really price increases if they are due to supply chain disruptions?
Now even the FED has recently shifted its tune from "nothing to see here, there is no inflation" to "ok but it isn't our fault, it is despite our best efforts !"


Would you agree that we have stagflation
Stagflation is high inflation + low GDP growth.

I don't think anyone here is arguing that we'll have high inflation + high growth.
I agree in theory that most macro forces are deflationary minus current supply chain hiccups.
So far the most important deflationary force has been labor cost arbitrage through globalization - China basically. That was at the (hidden) cost of making supply chains fragile. There could be a paradigm shift now that the fragility of globalized supply chains has revealed itself.


Black line : M2 growth (money printing)
Red line : inflation

rffRx2m.png



The spike in inflation could be delayed by a few years, just like what happened after WW2 or in the 70s and 80s. But it would be strange if it never happened.
 
What's your definition of inflation, then? Is the government making up their made up CPI stat in a way weirder than the rest of us think?

The history of the word is a good place to start, around the mid-1800s. However, an overall measure of price increases through the economy due to devaluation. Let me repeat what so many ignore: the Fed does not print money. I typically look at the broad heat maps which are published though. Really, the term is vague, imho and what really matters, REALLY, is what mechanism of action is fueling a trend, so we can take advantage of it. Inflationistas mostly point to CNBC as their evidence but this is merely propaganda.

From my experience in business: what inflation is not is businesses raising their prices because CNBC told them there's inflation coming (almost every business owner I know did this in 2020). This is like how the stocks go up even when the Fed doesn't buy anything. Inflation is also not businesses screwing you more and more over the generations (which they are by raising prices to cater to the rich who are hoovering up all the money and the assets in existence).

Would you agree that we have stagflation?

No, you've admitted we don't either.

If the boat is prices, it's more like it sank to the bottom of the ocean and popped right back up and started flying.

It was a simple metaphor but we do not see anything "flying," outside a select bunch of dislocated industries.

You sound like a central bank official here.

You sound like Jim Cramer.

Black line : M2 growth (money printing)

You had me until you cited M2. This is another example of economic illiteracy. I'll leave it for you to figure out why but I will comment: look at where your chart starts to decouple and dig into what happened around that time (hint: it starts with Euro and ends in Dollar).
 

Blade Runner

Ostrich
Orthodox
The history of the word is a good place to start, around the mid-1800s. However, an overall measure of price increases through the economy due to devaluation. Let me repeat what so many ignore: the Fed does not print money.
On one level or another, increasing the money supply (something that the FED does in fact do) is a type of devaluation. Otherwise, they are getting something for nothing.

Your bolded point is therefore incorrect. At the very least by buying unproductive assets (as Richard Werner would tell you is what QE is) they are creating digital dollars and reimbursing players OUTSIDE of them in the REAL economy that wouldn't have had either the cash, or the collateral. In this fashion, of course it is printing money. The shell game you have to play to explain it all away is still proven wrong by the fact that the system isn't honest anymore and money that would clearly have been destroyed is not destroyed at all. The dung on the FED balance sheet, by the way, will never re-enter the economy as anything of value, so in that sense, again, you are also wrong.

What you are really saying is that QE doesn't cause across the board raises in pricing, or significant ones. Ok, that's fine, but it is a gradations argument, which is why I can't stand it when people use the word deflation, since deflation of the USD has NEVER happened for any significant amount of time, in our history. Perhaps it is coming, but first greater inflation will occur, as is my position.
 

Blade Runner

Ostrich
Orthodox
I believe the long depression at the end of the 19th century had prices trending down for about two decades. No FED back then… (i entirely agree with the rest of the post)
I actually meant in our lifetimes, but wrote history - I guess I'm a self centered modern. LOL
 
What you are really saying is that QE doesn't cause across the board raises in pricing, or significant ones.

No, I'm saying QE literally does nothing. It's a marketing program for the Federal Reserve. They call it money printing and people think there's going to be inflation. The Fed doesn't control rates or anything else in the market.

Have you never wondered what bank reserves ACTUALLY DO? Or if it's effective at anything why they keep doing it OVER and OVER again?

Edit: price dislocations are because you can't shut the global economy off and on like a light, despite what both liberals and conservatives erroneously believe.
 

SeaEagle

Robin
No, I'm saying QE literally does nothing. It's a marketing program for the Federal Reserve. They call it money printing and people think there's going to be inflation. The Fed doesn't control rates or anything else in the market.

Have you never wondered what bank reserves ACTUALLY DO? Or if it's effective at anything why they keep doing it OVER and OVER again?

Edit: price dislocations are because you can't shut the global economy off and on like a light, despite what both liberals and conservatives erroneously believe.
Please elaborate how printing billions does literally nothing if you don't mind.

Edit: I agree with your point about price dislocations being (partially) a result of disrupting economies.
 

MRAll134

Pelican
Please elaborate how printing billions does literally nothing if you don't mind.
They are printing trillions:

"Over a three-and-a-half-month period, the US Federal Reserve, the American central bank, has printed a little over $3 trillion in order to counter the economic impact of covid-19. What are the lessons to be learnt from this? Mint takes a deep dive."

I believe they have printed trillions more in 2021.

Source: https://www.livemint.com/industry/b...3-trillion-money-printing-11592322603528.html
 

Arado

Pelican
Gold Member
Another banger from Tucker - highlighting that inflation is here despite Biden claiming over the summer that spending money would reduce inflation :laughter:


Now the media is trying to gaslight the public into thinking that it's actually a good thing. Here's former Obama economic advisor - typical Keynesian.


I think Tucker's point about people tolerating wokeness because they have easy access to food, entertainment, cheap energy, and the made in China consumer crap is interesting. Will people tolerate wokeness if all of the modern comforts became harder to attain?

On another note, it's great to see politicians finally calling out both parties on the endless deficit spending.

 

ISR92

Sparrow
Another banger from Tucker - highlighting that inflation is here despite Biden claiming over the summer that spending money would reduce inflation :laughter:


Now the media is trying to gaslight the public into thinking that it's actually a good thing. Here's former Obama economic advisor - typical Keynesian.


I think Tucker's point about people tolerating wokeness because they have easy access to food, entertainment, cheap energy, and the made in China consumer crap is interesting. Will people tolerate wokeness if all of the modern comforts became harder to attain?

On another note, it's great to see politicians finally calling out both parties on the endless deficit spending.

People are willing to tolerate A LOT so long as the economy is going well. Just look at China.
 

vstk

Pigeon
No, I'm saying QE literally does nothing. It's a marketing program for the Federal Reserve. They call it money printing and people think there's going to be inflation. The Fed doesn't control rates or anything else in the market.

Have you never wondered what bank reserves ACTUALLY DO? Or if it's effective at anything why they keep doing it OVER and OVER again?

Edit: price dislocations are because you can't shut the global economy off and on like a light, despite what both liberals and conservatives erroneously believe.
For the rest of us, "price dislocations" that are increases in price are indeed called inflation. It doesn't make communication easy if you try to reinvent the English language.
 
For the rest of us, "price dislocations" that are increases in price are indeed called inflation. It doesn't make communication easy if you try to reinvent the English language.

No. You'd be wrong. However, let me know how those blips in time work out for you. What QE are we on now?

Inflationistas have been consistently wrong since 2008. No one should take them seriously anymore.
 
Supply chain issues decrease supply and pent up demand from covid is being released. People with wfh jobs have saved a ton etc.

This supply/demand dislocation causes inflation. Yes the gov spending had an impact, but most of that money doesn’t just end up in the real economy within a day week or month.

This will be a 1 year large inflationary period and then it’ll regress to the mean.

Great narrative for crypto though. Hodl.
 

Blade Runner

Ostrich
Orthodox
No. You'd be wrong. However, let me know how those blips in time work out for you. What QE are we on now?

Inflationistas have been consistently wrong since 2008. No one should take them seriously anymore.
Did you actually read my response? If so, then counter what I said. If not, please refrain from the platitudes ,when simultaneously dodging the points set forth.
 

Blade Runner

Ostrich
Orthodox
Supply chain issues decrease supply and pent up demand from covid is being released. People with wfh jobs have saved a ton etc.

This supply/demand dislocation causes inflation. Yes the gov spending had an impact, but most of that money doesn’t just end up in the real economy within a day week or month.

This will be a 1 year large inflationary period and then it’ll regress to the mean.

Great narrative for crypto though. Hodl.
We can argue on time frames, but for now, that sounds good. Again, my position is similar: two artifical maneuvers exacerbating inflation (FED and gov't response to the kung flu). Then problems really roar in the economy, and people are liquidated ... deflation. I have no problem with that explanation, as that is my sequence.
 
Did you actually read my response? If so, then counter what I said. If not, please refrain from the platitudes ,when simultaneously dodging the points set forth.

I did and you clearly understand very little about economics or finance outside what you want to believe. Zero curiosity or interest in understanding what's happening or why. So there's not much reason to take what you're saying seriously. It's a shame really.

If select dislocations are temporary, as they certainly are, what happens next when inflation never sets in?

Hint: many of you are going to realize you got fleeced...again.
 

cosine

Robin
I did and you clearly understand very little about economics or finance outside what you want to believe. Zero curiosity or interest in understanding what's happening or why. So there's not much reason to take what you're saying seriously. It's a shame really.

If select dislocations are temporary, as they certainly are, what happens next when inflation never sets in?

Hint: many of you are going to realize you got fleeced...again.

S&P has dramatically high valuations, home prices have surged. Goods at Target, Walmart(now Amazon) are comparatively cheap. Gasoline is cheap. But, young people(the ones who are actually working) struggle to afford housing in coastal cities in particular.

Shares of the S&P have increased 33% since their top before the March 2020 drop. The idea that the economy has increased 33% since February 2020 is absurd -- it's simply printed money all looking for a reasonably decent place to park it. The Fed, ECB and China are all competing to devalue their currencies to help their exports.

We have deflationary effects from technology, but that exists simultaneously with massive money printing. The result is asset inflation. I don't see how any rational person could think that asset inflation hasn't already been raging since 2011 or so, with a turbocharge in 2020.

This is also the model that entrenches bitcoin and gives it value.
 

SeaEagle

Robin
I did and you clearly understand very little about economics or finance outside what you want to believe. Zero curiosity or interest in understanding what's happening or why. So there's not much reason to take what you're saying seriously. It's a shame really.

If select dislocations are temporary, as they certainly are, what happens next when inflation never sets in?

Hint: many of you are going to realize you got fleeced...again.
Please tell me then, I'll admit I've seen every old school "Here's why the Fed is stealing from you" video and still don't get it.

Perhaps I am lacking in fundamentals. I would imagine weakening the purchasing power would not be largely a result of inflationary central bank policy. Hence price dislocations in speculative markets.

Very open to seeing other perspectives.
 
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