Prices, Inflation/Deflation, Interest Rates & The Fed

Cynllo

Kingfisher
Other Christian
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EndlessGravity

Ostrich
Protestant
Looks like I'm not alone in saying they're just jacking up prices to see what happens and that "Inflation" is largely NPC media narrative. I know multiple business owners who did this and hotels are a good example: traffic still isn't back to 2019 levels and they are still leaving rooms empty for 24 hours as a "covid mitigation." Yet prices have continued to climb.


The problem for global corporations feasting on "Inflation" profiteering is that the vast majority of consumers can't afford another lavish vacation, overpriced vehicle or specious subscription. Their desperate desire to splurge has emptied their coffers, and so once the current splurge fades, there won't be a secondary wave of splurging that will buy regardless of price.

Frugality will transition from an option to a necessity. And as that transition is reflected in plummeting demand, consumer "Inflation" will drop as tapped-out buyers go on strike--voluntarily or involuntarily.
 

joe40

Pigeon
Other Christian
Did global corporations finally catch on to Big Tech's gravy train of turning ownership into subscriptions?
By transitioning away from the smartphone and its digital economy to cash for tangible things only, I got rid of lots of accounts and subscriptions, including home Internet access. Since then I found myself unable to purchase lots of new "products" and "subscriptions", so frugality became the natural result. I don't miss anything of it.
 

COtrailrider

Robin
Gnostic or New Age
Very good response. I want to be clear I'm not anti precious metals and I have a decent amount myself. Bitcoin is still in its infancy and there are significant risks. I think PMs are the ultimate insurance policy.

At the risk of sounding like a total bitcoin shill (too late ha!), if any market or community wants to scale, both in terms of complexity and number of transactions. Hopefully as parallel communities evolve and get more dynamic and sophisticated, some more advanced system (in my opinion bitcoin but maybe something else) will need to evolve.

Heck maybe paper bills backed by gold in the alt-community bank. The ultimate irony of going back to where we started.
I'm not really a 'maxi' in any one currency. I hold an array just like yourself. Bitcoin has its place, as do others such as Monero. It's all about being speculators at this point given the global changes unfolding.

When talking of parallel systems it really depends on the scale. Agreeing on payment methods will become more convoluted the bigger it gets which is where trade agreements and trade blocs will be erected. I hope that on a smaller scale, as local as possible, alternative means of currency are utilized outside of the establishment system.
 

Blade Runner

Hummingbird
Orthodox
Looks like I'm not alone in saying they're just jacking up prices to see what happens and that "Inflation" is largely NPC media narrative. I know multiple business owners who did this and hotels are a good example: traffic still isn't back to 2019 levels and they are still leaving rooms empty for 24 hours as a "covid mitigation." Yet prices have continued to climb.

Classic "I have a conclusion" and then a search for reasons to support it, which incidentally can't be proven, but can continue the "fun" argument. This is out of Elizabeth Warren's playbook.
 

EndlessGravity

Ostrich
Protestant
I'm looking forward to hearing everyone in this thread change their tune as prices continue to reverse through deflation, even as supply chain disruptions jacked the prices up in the first place. Hope you were stacking cash over the past two years rather than buying stuff.


With broad weakness in 'hard' economic data and 'soft' survey data coming fast and furious, it was no surprise that S&P Global's US Manufacturing PMI fell further intramonth to 52.2 in July from 52.7 in June - the lowest since July 2020. On the other hand, ISM Manufacturing beat expectations, falling from 53.0 to 52.8 (the lowest since June 2020) but that was better than the expected 52.0.


WTI slid below $97/bbl after sinking almost 7% in July in the first back-to-back monthly loss since late 2020. Weekend data indicated a surprise contraction in Chinese factory activity, highlighting the cost of mobility curbs to tackle Covid outbreaks. Purchasing managers’ indexes also weakened in South Korea and the euro area’s four largest members.
 

Blade Runner

Hummingbird
Orthodox
I'm looking forward to hearing everyone in this thread change their tune as prices continue to reverse through deflation, even as supply chain disruptions jacked the prices up in the first place. Hope you were stacking cash over the past two years rather than buying stuff.




What exactly is your thesis over the next 6 months? 18 months?

I think the equities markets will "deflate" for various reasons, and some demand destruction due to the Fed tinkering will occur - for a time. That doesn't make what you've said leading up to this point true in any sense, though, in terms of a coherent thesis. Thus, my question.
 

Max Roscoe

Ostrich
Orthodox Inquirer
I looked into getting a PhD in Economics. Eventually I decided against it because you will probably work for the government and it's kind of like psychology in that most of it is fake and theoretical and you can find data to back up whatever position you like. I considered doing an online program during covid and found a hilariously truthful post on quora someone made about it. Keep this in mind in light of anything from Krugman or any other talking head on the economy.

Yeah you can do some broad things to make conditions better like having a strong and stable currency, but mostly "the economy" is difficult to control.


Related
Is an economics PhD the only one worth getting?

Bu*****

OK. Here is what the article doesn't tell you

3) The idea that you will have intellectual autonomy is pretty nutty. Outside of a narrow set of disciplines (like econometrics), your job will be sales and marketing. Someone rich and powerful wants to pass policy X. At that point, they hire economics Ph.D.'s to come up with reasons why policy X is good. If you argue that policy X is bad, say good bye to your consulting contract, your job is not sell policy, and not to come up with anything approaching truth. If they wanted truth, they would have hired a astrophysics Ph.D. that puts up less with academic bull****.

Here's a quiz. Name any economic or political policy for which you can't find someone with an economics Ph.D. advocating it. If you want more government regulation, you look for person X. If you want less government regulation, you look for person Y. Now ask yourself, if you can find any economist to advocate pretty much any policy, then what do economists get hired for? You figure out what you want the government to do, then you hire your economists. Hiring an economics Ph.D. is like hiring a lawyer or lobbyist. It's not a bad job, but it's not the type of job a lot of people seem themselves doing, and it's not one that gives you much intellectual autonomy.

Not surprisingly, the economists that got hired by Wall Street before 2008, were people that were telling regulators how wonderful Wall Street was.

Here's another quiz. Who do you think knows more about real world economics: some economics Ph.D. who has never worked a day in his life outside of a university, or Bill Gates who didn't finish college.

4) People in finance do not respect degrees. Having a degree from Harvard (or for that matter a Ph.D in physics) means *NOTHING* to people. In finance, being called an academic or an intellectual is a massive insult. What matters is how much money you make, and how much money you can make people. Too much education is considered a bad thing because it's seen as the fact that you can't make money.

5) Ph.D.'s in other fields don't respect you. (I.e. this article). Let me ask you another question. Suppose we were talking about string theory or computational hydrodynamics, I'm arguing with someone with an economics Ph.D. Whose answer are you going to take more seriously. Now I'm saying bad things about economics Ph.D. and I might get into an argument with several. Now along with having a science Ph.D., I've also worked on Wall Street for six years and I'm starting my own company here in Hong Kong. Whose answer are you going to take more seriously?

Ironically, this article reveals a lot that's wrong with the world of economics Ph.D.s. When I talk about astrophysics Ph.D.'s, I believe in something called objective truth so I'm going to try to tell you the good parts and the bad parts, and I'll try not to "sell" astrophysics. This is what the world of physics Ph.D.'s are like. You might like it, you might hate it. Now the article that you referred to is trying to "sell" economics Ph.D., and he is leaving out stuff that's important.
 

Easy_C

Peacock
I'm looking forward to hearing everyone in this thread change their tune as prices continue to reverse through deflation, even as supply chain disruptions jacked the prices up in the first place. Hope you were stacking cash over the past two years rather than buying stuff.





I highly doubt it will last. We will likely see a correction back downwards as demand contracts and speculation cools, but the long term trend still looks extremely bullish for commodities prices because of continued shortages, an imminent severe energy crisis, and continued Western dependence on Russia/China/India for production of commodities and finished goods.
 

chance vought

Woodpecker
Protestant
We are seeing a decrease in the value of money substitutes VS the USD, just like there is a decrease in the value of other fiat VS USD.

If you look at the JPY/USD chart, using JPY as your baseline, USD appears to be gaining value. In fact in purchasing power the JPY is simply falling faster, but they are both falling.

If you look at the gold mark/paper mark chart in Weimar, there were brief periods when the paper mark increased in value. One simply has to zoom out on the chart to see that the fugoid pattern only trends in one direction.

If there is any "deflation" I'd say it is "transitory".

I would expect the Fed to start buying Japanese bonds by next year, to prevent a crisis. This will be the Fed Put, without losing credibility by lowering rates too soon.
 

TMITT

Chicken
Catholic
I highly doubt it will last. We will likely see a correction back downwards as demand contracts and speculation cools, but the long term trend still looks extremely bullish for commodities prices because of continued shortages, an imminent severe energy crisis, and continued Western dependence on Russia/China/India for production of commodities and finished goods.
People are still buying a lot of useless products. I can't understand it but that's what people like to do and it's depressing to find out the economy is based on that whim and not on anything useful. Material respite is apparently the meaning of life.
 

Easy_C

Peacock
We are seeing a decrease in the value of money substitutes VS the USD, just like there is a decrease in the value of other fiat VS USD.

If you look at the JPY/USD chart, using JPY as your baseline, USD appears to be gaining value. In fact in purchasing power the JPY is simply falling faster, but they are both falling.

If you look at the gold mark/paper mark chart in Weimar, there were brief periods when the paper mark increased in value. One simply has to zoom out on the chart to see that the fugoid pattern only trends in one direction.

If there is any "deflation" I'd say it is "transitory".

I would expect the Fed to start buying Japanese bonds by next year, to prevent a crisis. This will be the Fed Put, without losing credibility by lowering rates too soon.

Also keep In mind that asset prices will experience contractions along with demand.
 

Easy_C

Peacock
4) People in finance do not respect degrees. Having a degree from Harvard (or for that matter a Ph.D in physics) means *NOTHING* to people. In finance, being called an academic or an intellectual is a massive insult. What matters is how much money you make, and how much money you can make people. Too much education is considered a bad thing because it's seen as the fact that you can't make money.

That’s true only for PhDs. The financial world is obsessed with credentialism and generally they won’t even talk to you without an Ivy League degree.
 

grenade001

Woodpecker
Catholic
People are still buying a lot of useless products. I can't understand it but that's what people like to do and it's depressing to find out the economy is based on that whim and not on anything useful. Material respite is apparently the meaning of life.

Discretionary consumption took a massive hit over the last three to four months once folk were squeezed by high fuel prices and interest rate rises.

Whilst there are people that will continue to buy useless products and pay the corona tax on discretionary purchases (ie: boats, sports cars, etc.), the demand is merely softening and sellers will have to work for a sale. Demand for such items will never reach zero, even if it drops by 50% from the peak level of demand.

The lockdowns in 2020, and the rapid appreciation of residential property in nominal terms made a lot of people feel richer than they were, which in turn supercharged demand in 2020 and 2021. Neither of those two years would represent a normal year with any price movement being a distortion of the unique conditions that COVID brought.

Even though Corona is not front of mind for folk these days, I can't say that I observe the 2019-levels of conspicuous consumption in daily life. People are spending on discretionary items, though the broader trend looks more like mass hunkering down population wide. A large number of those who weren't established pre-2020 are concluding that they will not ever be, based on what has occurred over the last two years.
 
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