Prices, Inflation/Deflation, Interest Rates & The Fed

NoMoreTO

Hummingbird
If I could rename this thread I would include "Supply Chain Disruptions". I think the implementation of the vax pass and associated BS will really threaten supply chains this next year.

A supply chain disruption or "shock" as they call it in Micro ECON 101 knocks the supply down. As the supply curve moves down it naturally intersects the demand curve at a higher price point. This isn't inflation, it's a "price increase".

At the same time they are printing money like mad, the fed is doing their thing, in a more brazen and bold fashion than many of us could have imagined. I remember people thinking QE2 was insanity. Macro ECON 102 tells you that expansion of the money supply fuels inflation.

Either way, the following holds true. The economy is clearly growing at a slower rate than the money supply.
Inflation is caused when the money supply in an economy grows at faster rate than the economy's ability to produce goods and services.

It's almost impossible to know when the price change is due to supply, or when it is due to inflation but this is what I have seen:
(1) Supply Chain: Empty shelves and products gone missing is the best case of the supply issue. I noticed it recently trying to pick up some PVC at the hardware store. Half the sizes were sold out, at multiple stores.
(2) Inflation: Home prices. I think anytime you see big money trying to park itself, prices inflating on assets, you are seeing inflation. Commodities across the board are flying, along with metals...everything except silver and gold :cool:

Some ECON 101 here, takes me back to Uni
 

Parmesan

Woodpecker
I wonder what will come next, It seems to me the globalists will move us into socialism GEwork mentions. I'd rather see the great default and let the people sort it out.
We shouldn’t have bailed out Wall Street in 2008. It wouldn’t have been the single cure for our compounded problems, but the initial pain would have been over by now and we could have at least tried to implement something better. Instead, we now have a Wall Street that faces no real threats from either political party and is basically a club of backslapping insiders along with the Fed and Treasury. It’s too bad most the Occupy Wall Street crowd seems more concerned with mean tweets and defending men wagging their dicks in female spas these days.
 

NoMoreTO

Hummingbird
We shouldn’t have bailed out Wall Street in 2008. It wouldn’t have been the single cure for our compounded problems, but the initial pain would have been over by now and we could have at least tried to implement something better. Instead, we now have a Wall Street that faces no real threats from either political party and is basically a club of backslapping insiders along with the Fed and Treasury. It’s too bad most the Occupy Wall Street crowd seems more concerned with mean tweets and defending men wagging their dicks in female spas these days.
Agree. They shouldn't have bailed out the big boys in 2008, it set us on a path of capitalism over the free market. The new mantra seems to be "What is good for big business is good for america". Even if big business operates on just in time delivery from international suppliers and pays crappy wages. Everything is from China except the chips, they come from Taiwan in the South Sea which is totally secure. Trump was right about many things and his example of the American success story and his belief in it was something worth protecting.

One of the sad themes of all this is that if they get their way, Wall Street will have decimated Main Street. Previously privately owned businesses such as restaurants and small retailers will be destroyed and replaced by corporations. Private farm land, commercial downtown real estate and even residential real estate will be bought up by corporations and those who are able to refinance their property for more loans for more property. These previous bastions of private wealth will be increasingly tilted towards large corporations, or heavily indebted firms and persons, who will comply with whatever requirements the government sets to preserve their wealth. The idea of making a buck through your hard work and owning something from that work is less likely than ever. America the land of opportunity is more of an idea.

It really is too bad occupy didn't resonate. I was actually in NYC during the latter part of occupy and it was indeed a lefty joke. As a young professional I cruised about 8 hours from the Canadian border down to NYC to visit a buddy who had a hotel and was working for IBM on a project there. I remember after a pretty decent weekend walking around NYC, seeing only insanity at Occupy Wall Street. While I partially blame myself, it must have also been that the people there at that time simply were not serious people. I still remember going to a table where it was occupy lego, a pretty impressive lego setup showing the entire occupy setup on wall street. By the time I saw it, it had been fully taken over by hippies.
 
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Blade Runner

Ostrich
Orthodox
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.
I have no problem going back and forth. My request was that you counter my points. All I see here is you calling me, or guys like me here, names. So please, I'll give you another chance, counter the reasoning I put forth. Thanks.
 

Blade Runner

Ostrich
Orthodox
Let me add another thing: People get too caught up in the super specific, rather than focusing on the big picture "problem." For example, the real issue is that when you say the word inflation, you can do the back and forth we've been doing forever here, but most of the people here call it disingenuous to act like we should parse something out microeconomically, when in reality we should be talking about the INCREASING COST OF LIVING.

By focusing on that term or subject, people can't fool you or be easily deceived. Why? You get to talk about what's actually meaningful in life, not some academic subject that can be explained away by some, or a distraction from the problem.

Are prices up? Yes.
Are home prices up? Yes.
Are stock valuations higher than ever? Yes.
Is medical cost up? Yes.
Is education cost up? Yes.
Are taxes up? Yes.

It's bizarre to act like there is "no inflation" when cost of living is up HUGE across the board. It's a distraction of terms.
 

Robert High Hawk

Kingfisher
Let me add another thing: People get too caught up in the super specific, rather than focusing on the big picture "problem." For example, the real issue is that when you say the word inflation, you can do the back and forth we've been doing forever here, but most of the people here call it disingenuous to act like we should parse something out microeconomically, when in reality we should be talking about the INCREASING COST OF LIVING.

By focusing on that term or subject, people can't fool you or be easily deceived. Why? You get to talk about what's actually meaningful in life, not some academic subject that can be explained away by some, or a distraction from the problem.

Are prices up? Yes.
Are home prices up? Yes.
Are stock valuations higher than ever? Yes.
Is medical cost up? Yes.
Is education cost up? Yes.
Are taxes up? Yes.

It's bizarre to act like there is "no inflation" when cost of living is up HUGE across the board. It's a distraction of terms.
Cannot agree more. I was talking to a former friend (now a total pro vax idealogue filled with ad hominems), about this about a year ago, commenting how it is harder and harder for a guy to get ahead. I would simply point out all these basic but insane price increases in Healthcare, housing, education, and he would counter that "lol I just don't get it" because houses are so much bigger than 40 years ago, or how Healthcare has advanced and also Healthcare industry and academia provides all these amazing jobs that didn't exist before so there for it's good.

I'm not exaggerating. It is like you're saying the new mafia in town that shakes you down all the time is good because it's giving all these high paying jobs to gangsters.

Anyway, call it what you want but regardless something is pretty messed up and doesn't feel right, especially now, but even for the last 15years I would say.
 

holgerdanske

Woodpecker
Home prices are truly worrying



This will not end well.

Another word that comes to mind is 'unaffordable'. The prices you are seeing are a direct result of run away inflation. I mean we live in a time when the Fed keeps jawboning about 'transitory inflation' which officially is quoted at 5.5% but is much closer to 10%.

The problem we all face is that QE and infinite bond purchases have worked for such a long time. Basically all the Austrians who kept warning about moral hazard and hyperinflation continue to be laughed out of the room, precisely because we've had over a decade of Keynesian monetary policy without much (observable) consequence.

What most analysts and economists do not seem to understand is that inflation is exponential, imagine a hockey stick graph. It builds up slowly over time and by the time you start to panic it's way too late to reverse course.

By the way, in the long term this is a good thing. Human beings need to experience periods of true difficulty and suffering every other generation or so. The carelessness, hedonism, and licentiousness I continue to observe among the broader population is nothing short of stunning.

The gobalists wanted a 'big reset' and just like mythological Faust they have no idea what they are actually in for. If the U.S. Dollar loses its reserve currency status the entire country is in for literally decades of readjustment. Some people will thrive, but for most the new reality and drop in collective wealth will be a tough pill to swallow.

And this does not even account for the cultural long term damage that is currently being inflicted on the population by a ruthless and ideologically driven mainstream media. Beyond a multitude of external problems the U.S. is heading for a veritable civil war slash race war.

I've said it before and I'll say it again: This is going to be a very dismal winter for many people. Make sure that you are sufficiently prepared.
 
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NoMoreTO

Hummingbird
The problem we all face is that QE and infinite bond purchases have worked for such a long time. Basically all the Austrians who kept warning about moral hazard and hyperinflation continue to be laughed out of the room, precisely because we've had over a decade of Keynesian monetary policy without much (observable) consequence.

What most analysts and economists do not seem to understand is that inflation is exponential, imagine a hockey stick graph. It builds up slowly over time and by the time you start to panic it's way too late to reverse course.

Absolutely True. A friend of mine works as a financial planner. I was discussing with him how I had got into physical silver. His comment is always "don't bet against the fed". In many ways he has been consistently right while my little silver stack is stashed away doing nothing. It's a tough bet against the fed, or timing how long this house of cards will be able to stand. Still, I am happy I have it in the larger picture, if/when that exponential hockey stick ever kicks in.

One thing truly fascinating about Keynesian policy, it is predicated on the fact that in the "Long run we are all dead". Well, they are all dead, and their posterity is left with this sham of a monetary system.
Keynes.jpg
 
It's bizarre to act like there is "no inflation" when cost of living is up HUGE across the board. It's a distraction of terms.

This is why I say the mechanism of action, whatever is causing some prices to increase, is all that matters. It's critical we understand what is happening and why. In every case, we see extreme shocks to the system from shutdowns. It would be stupid to think this wouldn't cause temporary price dislocations. That is all you're seeing.

Why this is important is because we can determine how we're being affected and what we intend to do about it.

The global data, even aside from dislocations, is screaming deflation and another dollar shortage. Take a look at producer prices coming out of China or bond rates while the Fed pretends they're going to taper. These things are doing exactly what they've done for two decades every time we do this same song and dance. They're signaling reduced demand, a run on good collateral, banks in fear to lend, and margin calls.

I'm old enough to remember when Zerohedge told everyone to buy gold coins in 2011...at the very top of that cycle...because inflation.

This will not end well.

Finally, we agree here. I've predicted the real estate market very well over this and I'm not seeing a good situation for 2022.
 

Robert High Hawk

Kingfisher
This is why I say the mechanism of action, whatever is causing some prices to increase, is all that matters. It's critical we understand what is happening and why. In every case, we see extreme shocks to the system from shutdowns. It would be stupid to think this wouldn't cause temporary price dislocations. That is all you're seeing.

Why this is important is because we can determine how we're being affected and what we intend to do about it.

The global data, even aside from dislocations, is screaming deflation and another dollar shortage. Take a look at producer prices coming out of China or bond rates while the Fed pretends they're going to taper. These things are doing exactly what they've done for two decades every time we do this same song and dance. They're signaling reduced demand, a run on good collateral, banks in fear to lend, and margin calls.

I'm old enough to remember when Zerohedge told everyone to buy gold coins in 2011...at the very top of that cycle...because inflation.



Finally, we agree here. I've predicted the real estate market very well over this and I'm not seeing a good situation for 2022.
Solid points. But want to ask why you don't believe in Bitcoin for example, when another huge deflationist, Jeff Booth, is a real believer in it. He says the same thing as you about deflation, but says bitcoin gives us a way out of this nonstop cycle. Basically a deflationary currency for a deflationary future.
 

BURNΞR

Pelican
The Dollar Will Break Inflation | Steven Van Metre

I found it to be a good article arguing for the deflation / disinflation case. I think the key really is wages. If those start rapidly catching up with CPI, then inflation will scream. Otherwise rising commodities and energy prices could simply trigger a recession.

"A rising dollar broke inflation during the Great Financial Crisis"

Is this revisionist shilling because I'm living in 2021 and inflation has been observable in everything since 2008. There was housing bust but it was temporary. Prices of property world wide recovered thanks to brrrrrrrrrrrr, number always go up.

I don't care what the deflation shills say, I already know number always go up. Let me see their portfolio.
 
The Dollar Will Break Inflation | Steven Van Metre

I found it to be a good article arguing for the deflation / disinflation case. I think the key really is wages. If those start rapidly catching up with CPI, then inflation will scream. Otherwise rising commodities and energy prices could simply trigger a recession.
Any prolonged deflation will collapse the entire monetary and banking system. There is simply too much debt in the system, it is too fragile for there to be deflation. If that means the Fed has to do things that violate its charter, it will. If we get any I would predict we have a 3 to 6 month deleveraging of 15%-30%…enough to cause a market panic maybe, but 12 months later, assets will be higher than they were in 2019. If they lose control and that 30% becomes 90%, then my prediction is a hot war somewhere, possibly a world war. I think the intel community is aware of this and wants a currency debasement rather than a managed deleveraging that could spin out of control, due to the system‘s extreme fragility.

if things started to spin out of control, the Fed would use the nuclear option: spend its liabilities directly as legal tender. This would stop any deflationary implosion in its tracks. It would also sow the seeds of hyperinflation.
 
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BURNΞR

Pelican
Any prolonged deflation will collapse the entire monetary and banking system. There is simply too much debt in the system, it is too fragile for there to be deflation. If that means the Fed has to do things that violate its charter, it will. If we get any I would predict we have a 3 to 6 month deleveraging of 15%-30%…enough to cause a market panic maybe, but 12 months later, assets will be higher than they were in 2019. If they lose control and that 30% becomes 90%, then my prediction is a hot war somewhere, possibly a world war. I think the intel community is aware of this and wants a currency debasement rather than a managed deleveraging that could spin out of control, due to the system‘s extreme fragility.

That's what the Great Reset is. It'll be similar to taking three 0's off the Venezuelan currency but in our case it will be something like reintroducting USD as Fed Coin. All the debts can be wiped off with the rich holding all the hard assets that matter. The rich won't care about what's owed to them as the currency owed to them is going to 0.
 
At this debt level, the sytem shock to deleverage would be catastrophic. Roosevelt and order 6102 only needed to devalue the dollar from $25/oz to $35/oz gold. In 2009 GFC, to get the debt ratio below 40% would have meant devaluing the dollar from $1200/oz to $5,000/oz. In 2020, that devaluation would be from $1700/oz to $50,000/oz. This is a house of cards built on sand.
 
Solid points. But want to ask why you don't believe in Bitcoin for example, when another huge deflationist, Jeff Booth, is a real believer in it. He says the same thing as you about deflation, but says bitcoin gives us a way out of this nonstop cycle. Basically a deflationary currency for a deflationary future.

I'm not sold on crypto only because its just not something I'm interested in. So I try not to speak with authority on the subject, although I think it resembles a ponzi scheme. However, I can observe a chart during dollar shortages. A deflationary currency for a deflationary future? I can't comment on this.

Do you need to deny the price increases (= inflation in English) to discuss the mechanism involved and your predictions?

This isn't Reddit. We're discussing complex real-world things. By your understanding, I can say there's mass deflation because I got a free fry with my Big Mac today.

Is this revisionist shilling because I'm living in 2021 and inflation has been observable in everything since 2008. There was housing bust but it was temporary. Prices of property world wide recovered thanks to brrrrrrrrrrrr, number always go up.

I don't care what the deflation shills say, I already know number always go up. Let me see their portfolio.

I think it's somewhat established around here that I've done okay for myself and I like to put my money where my mouth is.

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Going forward though, I'm ignoring any of you who claim there's money printing happening or who suggest the dollar is a domestic currency. You're wasting everyone's time with your easily-disproved propaganda and nonsense.
 
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