“The University of Michigan’s latest consumer survey released Friday showed that Americans’ long-run inflation expectations rose to 3.2% this month, the highest level since 2011.
And those perceptions could continue to get worse the longer it takes the Fed get inflation back to its 2% target. Fed officials don’t expect inflation to reach 2% until 2026, according to their latest economic projections released in September.
If there’s one thing that would make the Fed quake in its boots, it would be worsening inflation expectations.
“If we find that consumers or businesses are really starting to feel like that long-term level of inflation … is creeping up, if that’s their expectation, we’ve got to act and we’ve got to get that under control,” Atlanta Fed President Raphael Bostic told Bloomberg earlier this month.
If Americans lose faith that inflation can ever return to normal that would prompt the Fed to tighten monetary policy even more — either by raising interest rates or keeping them elevated for much longer than expected.”
You know, raising/lowering interest rates is just about the only tool that the fed has in its toolbox to combat inflation/deflation. At a basic level, it’s just increasing/decreasing the money supply. Playing around with interest rates ends up hurting the poor and middle class since they’re the ones that are hit the hardest by rising interest rates. There is another way to increase or decrease the money supply that people rarely ever talk about and that’s taxes. But, Congress doesn’t want to have that conversation.
Politicians can never be trusted with taxpayer money, at all, not Democrats nor Republican nor Independents. Taxes are only for war, that's why America is constantly at war, to fund their greed.
Taxes have existed in nearly every government and economic system since the beginning of time. Traditionally, they were about moving money from the poor people to the rich, under the guise of protecting poor people from each other (via warfare or police).
Ironically, the best way to use tax money to protect people is to actually give it to poor people instead of rich ones, but one side of the political aisle keeps voting against that, and so we have what we have.
"The lowest quintile experienced a combined tax and transfer rate of negative 127.0 percent, meaning that for each dollar they earned, they received an additional $1.27 from the government, netting transfers (gains) and taxes (losses), while the top quintile had a rate of positive 30.7 percent, meaning on net they paid just under $0.31 for every dollar earned."
Which is an argument that entirely disregards political incentives.
The reason to have na independent central bank that is responsible over money supply/inflation is that political incentives favor spending and tax reductions. You win elections by making promises that voters like. Being the party that wants to raise taxes and spend less won't get you very far in any country .
That’s a big assumption though in a democracy with generally short-terms, no term limits, and special interests. Politicians will kick the can on debts and deficits so they can spend money during their term either to sway short-sighted voters their way, please lobbyists they’re beholden to, or to improve their legacy. Most fiscal conservative republicans have no problem spending either provided it’s on the military-industrial complex given their ties to the defense industry and national security being their true religion.
Show me a politician who presents the public with a 15-20 year plan to strengthen the country’s finances by reducing fat in the government, reducing the us military footprint, raising taxes, building necessary infrastructure in “your backyard”, and raising the age for retirement benefits due to the country’s financial state and demographic time bomb, and I’ll show you someone who won’t be a politician for long.
So basically in the past half-century, the US has had a balanced budget for a total of TWO periods. And the country was far less polarized in pre-social media 1990s.
Let’s see how often we get balanced budgets again in the next half-century with all the tribalism in American politics.
And the Democrats lost in 2000, despite a roaring economy and low inflation, to someone promising massive tax cuts. I'm not sure that an incumbent party has ever lost with such an economy after just two terms - certainly not in the modern era where presidents are held more responsible for economic performance.
Politicians will be fiscally conservative if people reward it with their votes, but American voters have decided to take advantage of cheap debt opportunities since the Reagan Revolution.
I’d argue that at a basic level, it doesn’t increase/decrease the money supply. It just makes getting money more expensive. And if the consumer believes that things are going to be more expensive, they will eventually accept that higher costs to access money is also normal.
Raising taxes would help lower spending a bit as people would have less take home to spend. The problem is that it would likely tank the economy if it was passed for lower and middle class earners, more of which are already living paycheck to paycheck. The truth is we need to increase taxes on businesses who are seeing record profit levels thanks in no small part to massive price hikes under the guise of inflation
I dont like that national idea at all. If you have 1000 acres in rural wyoming, theres no point in “developing” that. And thats not even considering the environmental impact.
Those sorts of taxes should be done much more locally imo
Sorry my use of nationally was incorrect here. I meant it more as being introduced around the entire nation. Not at a federal level. But I can definitely see how that came across incorrectly
Costs get passed to consumers and government just spends more money when taxes go up…. It’s like handing a kid a dum dum and asking them not to suck on it…
Interesting way to say "My ass is wrong and full of shit and I keep on parroting the idiotic all parties are the same bullshit" but I'm glad you admitted it. Bozo shit.
> I’d argue that at a basic level, it doesn’t increase/decrease the money supply.
Well, not directly, but indirectly it does.
> It just makes getting money more expensive.
Yes, it reduces the amount of loan activity between lenders and borrowers, which does decrease the money supply, because money is created when a loan is created, and destroyed when a loan is repaid. With an overall lower aggregate balance in loans out in the economy, the money supply will shrink in response to high interest rates.
The worry is that it won’t actually decrease the money supply as people are using credit cards more and more to fill in the gap between income and expenses. There’s over $1 trillion in credit card debt currently, a record high. So the money supply is being artificially kept high as folks are overextending themselves.
> The worry is that it won’t actually decrease the money supply as people are using credit cards more and more to fill in the gap between income and expenses.
You're right that credit card balances are loans, and therefore increased balances increase the money supply.
But higher interest rates would reduce the amount of credit available to consumers: either on the demand side, as the higher cost of borrowing reduces willingness to borrow through the cards, or on the supply side, as banks start to get nervous about delinquency rates or a smaller spread between their own cost of borrowing and their profits from credit card interest.
I've said this before and agree with you. The Fed is doing everything they can. We need fiscal policy enacted, but our congress likes to focus on shit that barely matters and disagree on that endlessly.
We've cut taxes for billionaires, millionaires and corporations twice in the last twenty years. The rest of us are shouldering that burden. Republican working class voters need to demand the rich pay higher taxes to support their disability, farm subsidies and other rural infrastructure and social safety net needs.
> Playing around with interest rates ends up hurting the poor and middle class since they’re the ones that are hit the hardest by rising interest rates. There is another way to increase or decrease the money supply that people rarely ever talk about and that’s taxes. But, Congress doesn’t want to have that conversation.
Sounds like the poor and middle class should vote for reasonably higher taxes on the wealthy, and for policies that help foster the middle class.
Raising taxes on high income earners wont solve anything. We need to REDUCE taxes as much as we can on the middle and lower classes. It's much more efficient to let people keep their money and do what they want with it than to increase the flow from the rich through the government and distribute it to the other people. My point is only valid though if your goal is to make people's lives better and your agenda isn't to simply punish rich people because they make you seethe.
You probably have at least a couple huffy replies coming your way from commenters if this sub who thinks it's sacrilege to even suggest taxation might be the answer to inflation in our situation.
Yes, and the current deficit is HIGHLY stimulative. Most consumer spending is by people with higher income/wealth which would be most directly addressed with taxes.
The money only disappears from the economy if government debt is paid down, or the money saved somewhere (less likely given the debt repayments is the wiser option) otherwise it circulates.
THANK YOU. I'm far from an economics expert but I was reading the article and thinking how there was such a lack of mentioning taxes. Fucking hell. I'm of the mind that I should be paying more in taxes. I dont make crazy money either, but I'm just a working professional with no kids. Even already being in NYC, there is a dramatic gap between myself and lower income which is also what taxes are for.
i am also a working professional w no kids and pay like 1/3 of my income to the federal govt. how does that not seem like enough??? i don't see much, if any, benefit from it
I’m with you. My taxes are crazy high! I spent more in taxes last year than I spent on myself. To think that I also barely used the roads even, pay for my own healthcare etc., I almost just don’t even understand how it can be that way.
No because that’s not spending. That’s saving. My needs/my spending was apparently less than what society needs from me. And that’s bizarre. That was my point.
Maybe the government should stop printing money and increasing the national debt. Isn't 33.7 Trillion enough to have somebody say no more money!!!!!! Cut programs and force people back to work. There are help wanted signs everywhere. You might not want that job but if the "Free Shit" stopped you would have little choice.
It's talked about a ton, both in the real world, in the different legislatures, in academia and most importantly for this comment in r/Economics. You could point at income disrtibution in many conversations but they add zero to them and just blunt good discussion.
They also only have control of the supply side. Everyone operates on the assumption that dollar demand will always be there. What if it's not? Then we have the crack up boom.
I don't have a horse in the race, but there are some reasons for not using fiscal policy that way.
The FOMC meets almost monthly and makes a decision at that meeting which they immediately implement. Congress on the other hand can't even agree on basic stuff like electing a Speaker or passing a budget. The idea that they could adjust fiscal policy on a monthly basis is wishful thinking.
The lag between implementation and effect is probably even longer and more variable with fiscal policy than monetary policy. Income tax is on an annual calendar, unless you plan on having the payroll departments of thousands of companies adjust withholdings every pay period.
There would be very real economic distortions to having the tax code changing monthly or quarterly.
If people know taxes are likely to increase substantially for the next few months before dropping again, they will take steps to defer the recognition of income and capital gains until tax rates fall.
Yeah it’s really not a great tool. In many cases raising interest rates creates inflationary pressure. As borrowing gets more expensive, companies have to raise prices.
For the past decade, many tech companies were in growth mode, trying to gain market share over profits. They kept prices low to get more costumers.
Yeah like the housing market where companies only made up about 3% of home sales in 2022. If the government stayed out of it I'm sure they would stay low
Those tools were used by Trump prior to the pandemic to keep the stock market spinning and had been exhausted when hyperinflation started. That's the conversation to be had.
This isn’t 100% true. The high interest rate’s absolutely destroyed the bond market and the big banks balance sheets with it. Bank stocks are trading their lowest in a very, very long time. Maybe you can sleep a little better knowing US bank, and their shareholders, are suffering too.
Taxes in and of themselves neither reduce or increase the money supply.
You can make the argument if the treasury collects taxes, then they just deposit them in the account at the Fed that they can sterilize it.
Though from a technical definition, the money supply doesn’t change. They change its velocity. In the example above they change it to zero for some of it for some period.
Currency only has three ways it gets destroyed (ignoring physical bills that are a very small fraction of currency): 1. A loan is repaid. 2. A loan is defaulted and written off. 3. The Fed sells assets off its books.
Inflation is actually pretty nice for people with a lot of debt because it makes paying down debt easier. Higher inflation generally leads to higher salaries while payments on existing debt stay the same.
People with a ton of assets and low expenses like inflation too. If you’re a homeowner you’re certainly more ok with inflation than those that are not (homeowners).
Inflation has very few redeeming qualities. High inflation doesn’t always reflect into higher salaries unless you are on Social Security which does track with inflation.
There's people whose business will naturally profit from higher inflation, because they can keep other costs down.
There's people in unions. They tend to be able to keep wages up with inflation.
There's people who are skilled at advocating for themselves. Same situation.
Then that's everyone else. In America, that tends to be workers who can't or won't unionize, or very small business owners who survived by exploiting such people, and are now finding it harder.
> people whose business will naturally profit from higher inflation
and those profits are not going to the wages of all of that business's workers, but the top few elite corporate employees who control everyone else's salaries.
>everyone else
That's the majority of people, the 99% who's wages haven't moved in 40 years.
>can't or won't unionize
It's incredibly difficult to do so when the government doesn't support unions and allows companies to perform (formerly illegal) union busting activities.
No i'm writing from [experience] (https://www.reuters.com/world/us/biden-signs-bill-block-us-railroad-strike-2022-12-02/) and [history] (https://en.wikipedia.org/wiki/2023_Ohio_train_derailment)
The opinion on inflation IS a social trend. It's irrelevant. The relative value of goods and services is basically unchanged. Inflations only problem is that it makes the math harder for the average person.
Explain yourself. If I expect prices to be higher next year, I’m still not going to go out and purchase shit I don’t need and I’ve already put off buying a home and cut back on other spending where I can. How does that lead to more inflation?
You'll invest the money rather than hide it under a mattress, right? So someone else will be using the money, e.g. to buy equipment or consumer durables.
However, you make a good point: people's inflation expectations have an impact on their spending, but so do other things, like their incomes. If people expect inflation to exceed their incomes, then they might cut back spending, to keep their (inflation-adjusted) money in the bank at an acceptable ratio of income.
High inflation and brutal interest rates at the same time. Which, if people expecting inflation to stay at 3.2% is bad, the expectation that the Fed will raise rates and it still won't matter must be catastrophic, even existential.
How is the FED able to shrug off the impact of the boomer retirement wave? Of population flatening? These create inflation pressure that interest rates are ineffective against on any time scale less than decades.
2% is an arbitrary target. 3.2% isn't terrible. The problem is if people expect inflation to be at high levels, like 7%, then we get a stagflation situation like in the '70s. And given that inflation dropped substantially since last year, I'm not sure where this idea comes from that consumers will expect high inflation.
I hate this headline. It’s like AI tried to dumb down a valid headline to plain English. What it means to say is “The fed is concerned that higher expected inflation will make it more difficult to curb actual inflation.”
Absolutely no one is getting use to high inflation. The price goes up and it takes some time but you will normalize it. If it keeps going up you never have time to adjust
I expect corporations to arbitrarily raise prices in concert with each other. And that it will look like inflation and not be stopped with interest rate hikes.
Part of the reason we don't "know" is b/c the FTC has been super lax when it comes to studying the potential impacts of proposed mergers.. especially during the Trump admin that shit went unchecked.
Biden's appointed FTC chair, Lina Khan, made a splash by making strong antitrust enforcement her whole position, and proposing legal interpretations that would once again give antitrust enforcers (the FTC, the DOJ, state attorneys general, and private plaintiffs) a stronger legal position to prevent market consolidation before it happens, rather than waiting until after a company abuses its monopoly position.
In a recent interview (I think on NPR's Planet Money), they talked about the FTC's antitrust lawsuits under her tenure as FTC chair, and how even though they've lost more than they've won, they're still influencing behavior at the merger level, especially in voluntary actions to dilute the power, like divestment of certain assets, or enter legally binding agreements to give competitors equal footing in pricing or access to products. As an example, part of the Microsoft-Activision merger explicitly included a 10-year deal with Sony not to make Call of Duty an XBox/PC exclusive, which was cited as one reason why the FTC failed to prove consumer harm.
They also briefly discussed how Khan's original paper, arguing that Amazon was harming the consumer by consolidating market power even while lowering prices, is different from the FTC's most recent lawsuit against Amazon (initiated while Khan was chair), in that the lawsuit itself focuses on how Amazon raises prices even off of its platform, which is a much more traditional theory of antitrust harm. It was partially a recognition that an academic paper can argue for more aspirational "the law should recognize" arguments than a lawsuit claiming that "the law as currently recognized is being violated," but also partially a validation of the theory that market consolidation leads to price increases later, and should be nipped in the bud rather than waiting around for the concrete harm to be felt.
It's always greed, all data can be manipulated. Centralbanks should not be the one that stimulates or interfere the market, the market is self regulating.
"market rate" is just the new way of saying collusion. When everybody is onboard with equal price increases without cost increases that support it, that's collusion.
I mean this is just a common property of market structures that exist as oligopoly instead of competitive. Which is one of the fundamental problems with economic theory versus observable reality
You’re putting yourself in danger of seeing a spike in inflation, and lagging interest rate hikes & other stimulus / bailouts then mistaking it for corporate greed. I don’t mind people drawing attention to pricing but when rates are 0% for 20 years & the government spends a trillion in a month while the Fed is not trying to outright solve the issue… why are people surprised at prices being hiked? When Diesel was sky rocketing & inflation was measurably still very high, which it still is, I still saw people larping about the corporations.
Rates must rise.
Spending must subside.
A real economy must emerge.
If we want homes, healthcare, education, low crime for our children we must stop the vicious cycle we’ve been in since the 1970’s and never let this happen again.
Suggesting a sort of collusion? Interesting thesis, explain with evidence.
I can well believe a business would increase prices charged to its customers simply because the cost of its inputs have increased -- materials, labor, etc. So, Occam's razor and all, but I try to keep an open mind.
It seems like this conclusion has been naturally drawn among many given that, despite claiming their rising costs were driving consumer prices, corporate profits were at record highs during the same period. One article, but there are many
If I’m a company, I’d raise my prices every week until I actually see lower sales. Then I’d look at costs, sales, etc. and try to find the point where I maximize profit. If my competitors are doing the same, then the prices are going to jump across the board until consumers just refuse to buy my product. No collusion necessary.
It isn’t competition that will limit price. It’s consumers deciding the product isn’t worth the price. Now eventually maybe another company enters the market wanting to take market share and that will pull prices down. The problem is the cost to enter the market is high, requires a lot of risk, and borrowing the money to start is very expensive right now.
In a "perfect" world that would be the way, but these days brand impressions are a big factor. For many companies, once you start losing sales you've already lost trust of your customer and that can be hard to recover from.
This is also where VC money can fuckup some of these same levers.
Did you mean to say "losing"?
Explanation: Loose is an adjective meaning the opposite of tight, while lose is a verb. Statistics
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That doesn’t suggest collusion at all. All that means is the equilibrium price point increased due to increased demand. That will lead to higher profits.
>despite claiming their rising costs were driving consumer prices
If that's what they were saying, then they were wrong. Inflation was partly a product of supply-side shocks, but most due to a huge expansion in demand. There isn't extra inflation in the data for collusion to explain.
Businesses have access to the same competitor information consumers have but additionally possess the industry knowledge to understand the signaling, pressures and opportunities of the market they both occupy.
The fact this reasonable comment gets downvoted shows how this sub has been filled with mostly young conspiracy theorists. Not a single industry or business around the world isn’t experiencing the impacts of inflation. Yet, somehow Redditors think that some businesses getting high profits means that there is a world wide conspiracy amongst the millions of businesses, across hundreds of nations and thousands of languages, to raise prices. Inflation isn’t a US thing, it is a worldwide thing. Businesses are not evil for raising their prices when they have their costs increasing or expect costs to increase. Most businesses are not massive multinational companies. Most businesses are run on relatively thin margins and need to be risk adverse. Redditors obsession with “inflation isn’t real, it’s just corporate greed” shows how humans love to simplify complex problems and find a single boogeyman to blame everything on.
Reminder that this is the sub that thinks more rent control is the solution to high housing costs, not building more housing. This sub is practically an anti-economics sub.
Razor thin margins does not equal record profits. Increased cogs does not equal record profits. One could argue you are also being overly simplistic. Most of us aren't arguing conspiracy and collusion. But something is wrong with the system that looks almost the same and has the same result.
Increased cost DOES mean record profits though, becaus basically every business is thinking about things as a percentage. As their costs go up, a 5% profit margin becomes a larger dollar amount.
Also, companies have been raising prices and blaming inflation.
My pet conspiracy theory is to make people upset, who then vote-in Right-wingers, who reduce the taxes for those who are causing this kind of greed-flation because that makes them even more money.
> And that it will look like inflation and not be stopped with interest rate hikes.
Raise rates, drain liquidity, force a recession, laid off people cannot buy even if they wanted, Company’s can’t raise prices, Problem solved.
Instead the Fed is aiming for a “soft landing”. No reset, zombie companies stay afloat, Fed still injecting liquidity here and there to keep the markets up, bailing out the banks, companies raise prices at will, inflation imbedded. Congratulations.
Playing nice isn’t going to get it done. Asking the company to not raise prices will get you nowhere. Recession is what usually occurs, and I don’t think the Fed has the conviction to get it done. Simple.
> I expect corporations to arbitrarily raise prices in concert with each other. And that it will look like inflation and not be stopped with interest rate hikes.
In capitalism, vendors are free to charge whatever price the market will bear. The mechanism where buyers and sellers come together to decide what they're both willing to accept is called price discovery.
If corporations raise prices in tandem (but without collusion), and consumers just accept it and start paying those prices, that is inflation. It doesn't look like inflation, it IS inflation.
For my self, i stopped spending on things I can live without. Movies, going to restaurants, vacations, driving outings, delivery service, fun Amazon purchases.
My family income is pretty good. Yet i see many of my friends who earn less, spending like nothing's changed. Ordering uber eats. Screw that! I can't afford that.
Folks who simply don't care about price, I believe, represent the a huge portion of the population.
I'm definitely doing more home cooking than before, and on other things, just doing without. Doing these sorts of things, I catch myself thinking, "I should have done that ages ago." These economically beneficial decisions will likely stick even after times get better. I guess I'm my own example of how economic cycles are necessary -- hard times force people (and businesses) to make choices to create good times later.
COVID showed many that tomorrow is not guaranteed. Not to mention the overall shift in the American dream. Many young people no longer think owning a home is in their future, so they’re not saving at all
As a relatively young person who spends too much: 1. Inflation is eating up the savings and stocks can't keep up. 2. Some months ago I expected WWIII to happen any day now. 3. Estate prices and interest rates are a joke to laugh at. I could maybe barely afford it as a STEM graduate. But we have no fixed interest rates over here and it could get worse. 4. I don't plan on having kids nor do I plan on retiring. Prices for geriatric care are absolutely insane. I don't think normal people can save up enough to not end up in a neglected government facility, if they even exist in a few decades.
If I turn out to be wrong and the future is an utopia, I'll just smile and wave at all the happy people while collecting bottles.
Bro, I totally hear you. The struggle is definitely real. Inflation's a sneaky beast that slowly gnaws at your savings. But guess what? Consider parking your savings in high-yield savings accounts. Even though they aren't a permanent solution, they can certainly help your savings keep up with inflation. Rates right now are surprisingly solid, hovering around a sweet 5%.
Now about that WWIII. Rationally, we can't plan our lives around it happening any day now, right? As for real estate, yeah, the market's a bit nuts at the moment. But remember, home ownership isn't the only path to financial health.
Finally, the retirement bit... while the costs of elderly care can be astronomical, the goal isn't to have enough to cover every potential expense, but to save enough so you're prepared for a variety of scenarios.
I took some time to aggregate live rates for the top APY savings accounts, might be worth a peek. Might help you keep up with inflation and possibly stow away a bit for the golden years.
Bank | APY | Link | Min. Deposit | Fees
:-:|:-:|:-:|:-:|:-:|:-:
CIT Bank (Platinum Savings) | 5.05% | Link | $5000 | None
Synchrony Bank | 4.75% | Link | $0 | None
CIT Bank | 4.65% | Link | $100 | None
Sofi Bank | 4.60% | Link | $0 | Direct deposit required to get the highest rate.
Quontic Bank | 4.50% | Link | $100 | Excess transaction fee (over six) - $10.00
Live Oak Bank Savings | 4.40% | Link | $10 | Dormant account fee administered on inactivity for 24 straight months and a balance of less than $10.01
Just remember, diversify and don't put all your eggs in one basket. Keep going mate, continue questioning and learning more about financial strategies, it can only help you in the long run.
Fuck off, people who are struggling to save any money and are having to cut out luxuries in their life to scrape by, are not going to be helped by some financial advisor who is chasing a fee.
>1. Inflation is eating up the savings and stocks can't keep up.
Dollar cost averaging into an index of the stock market and reinvesting the dividends has more than caught up over the long term, regardless of whether it has in the short term. Sure, there's no guarantee of that, but it's not beyond reason to think that it still will over the long term.
If we don't spend the whole country shuts down because that's entirely what we are built on. If it shuts down there are no safety nets. The movies and restaurants these redditors so proudly talk about never going to have people who work there and depend on that income for basic survival.
If we all just tighten our belts and go straight into a recession with literally no safety nets not only will people suffer bigly, but we'll get Donald J Trump as our next president.
SPEND PEOPLE.. THERE IS LITERALLY NO TOMORROW IF YOU DON'T
BTW I'm no proponent of this system we have, but it is the system we have.
Same boat as you, though it’s hard to distinguish changes that occurred through life decisions vs changes that occurred due to COVID’s impact on the economy. Had my first child at the end of 2019 and my second in the middle of 2021.
I can cook a meal that I don’t need to fight with my kids to have them eat it, for about 15% or less of the cost of eating out. And I have more time since we don’t need to drive to the restaurant. When cooking at home saves so much time and money, and the restaurant food and experience isn’t even that good, it just doesn’t make sense to eat out.
I see some people who are complaining about McDonald's meals being so expensive while I'm over here making delicious cheap burgers at home in like, 10 minutes. We've officially gone to the bizarro world where fast food is more expensive and takes more time than cooking at home.
The conversation has shifted when buying fast food. It's no longer about cheap, it's about convenience now supposedly. And I do understand that it can be convenient. But if it's about taste, you're right. I'd rather make it at home cheaper and much better tasting.
Ironically, that's the opposite of how one should think.
If inflation expectations are high, then your dollar today is worth more than your dollar tomorrow. Saving 1,000 for the future means you'll have less buying power than if you had spent it now; it could be the difference between 20 nights out vs 10 nights out, or 10% car down payment vs 5%.
If you can't afford it now, what makes you think you can afford it 5 years from now with rising costs and stagnating wages?
Agree, because the vast majority of Americans are finally understanding what inflation is. People now know that prices will never go down, just that they’ll increase by 2-3% per year instead of 5% as the Fed wants.
I’ve actually gotten what would normally be considered great raises the last two years. I’m still comparatively making less than I was two years ago and I doubt this year’s raise even matches inflation.
Globalization has allowed wage arbitration as a tool to deflate low-skill-manufactured-goods prices. All the cheap plastic crap made in China. And clothes and low precision metal tools and electronics, too.
Meanwhile technology has driven down the prices of many things, or allowed substitute goods to take their place ($10/mo Spotify subscription instead of buying two 8-tracks a week).
I half suspect "bailan" and "tangping" are orchestrated head fakes by some Chinese disinformation ministry, lulling us into complacency about their future power, while they are actually raising up a generation of Chinese youth to be piranhas devouring the rest of the world.
Anyway, that's one conspiracy theory I'm willing to indulge myself.
Regulatory capture with profit being the ultimatum has led to this.
Opacity in markets has led to this.
This version of capitalism is being noticed by the American public.
Quality over quantity over the longterm given breakthroughs in technological advancements.
Competition requires breaking up monopolies of markets once they are cornered.
This is essentially what the technology sector has gone through today, like back when logistics and resource extraction tech breakthroughs occured a hundred years ago.
Im arguing that power concentration in a democracy with the purpose being to create a more equitable world, is better than power in the hands of homogeneous nations with the expressed intent to skirt around sanctions being imposed on them for invading neighbors and interning their own citizens who had the audacity to disagree with the state approved thought.
Which makes perfect sense but I'll admit, it requires some nuance understanding of what's at stake.
And could you please stop trying to gaslight me and just address the issue.
How will a multipolar world be safer and/or better?
I think it has been a problem for a long time, it’s just that it’s baked into the equation of financial literacy. That’s why people used to be content and make a living wage without a college degree. Now, you need a college degree in a field that’s marketable or a masters degree in an over saturated field. It’s why you see people working at coffee shops who have degrees in psychology or English.
The people who have no financial literacy have been totally left behind. Nobody even cares about them. They aren’t going to be on an economics sub because a lot of them have lived their whole lives with less and are just used to it. Homelessness rates are higher now, and it takes two incomes to support a household. All this stuff has been slowly happening for a long time.
That the elites only shit their pants about the economy when the middle class and the poor start to experience some degree of comfort and job-market leverage.
"The poors are starting to dig their way out from under our thumbs! Sound the alarms!"
The median home in 1980 was 47k. In today's dollars that's 185k. It is true that home prices have increased faster than inflation. You can blame a decade of low rates for that.
I think part of the reason is people want bigger homes. They want 2500 sqft homes in the burbs. So older homes from the 50s-70s become starter homes as they are 1100-1700 SQ ft around me at least. And people upgrade into homes built after 2005 with three car attached garages and 2.5 bathrooms.
Then due to per unit costs, it makes.more sense to build attached condos which would stand in for a starter home.
I've never met anyone in my age bracket who actually wants the literal square footage so much as they want the layout and features associated with it. My friends want a 3 or 4 bedroom, 2 bathroom home with a garage. Having an enormous master bedroom and attached bathroom the size of a child's bedroom, having a living room you have to shout across, etc., are something I have never heard people say they enjoy. They want the same general features but scaled down to a reasonable size.
That's not true. Real median income is up over the past forty years, not down. The current downswing started during COVID, before that it was going up.
As noted many times before on this sub, the government changed the definition of CPI in the 1980's and 1990's. The old definition (what most lay people care about...the price change of a set basket of goods) shows inflation as 8% to 12% now. The new definition includes substitution, increase in quality, and owners' equivalent rent. It's a not-so-subtly different metric than was measured 40 yrs ago so your info/FRED chart is misleading.
EDIT: Many think the motivation was to lower payouts for programs like social security, medicare, and the like.
Whatever. As a college finance educated who has worked since 16 and never had a gap in jobs more than 2 months, with a good job making ~80k/year, and who is more frugal than 90% of my peers, I have no hope of ever buying a home worth living in, in my are (Seattle surrounding cities). Like, I can literally buy a 1000 sqft home for 550k no less. That’s 110k cash down and then 5-5.5k/month for 30 years (yes I realized you can refinance, but that’s 5+ years away as this topic states). That is literally like 90% of my annual income after taxes, and basically my life savings as someone who has always saved and contributed to retirement/Roth/401k etc… that lost equity for a generation will suck out so much of our life savings over 40 years.
I’m not sure I would call it a downswing. It’s relatively flat for the last few years. Real median income, adjusted for inflation, is quite a bit higher today than it was 5 years ago.
Wages have kept up with prices for most of the last 40 years. The issue is we are talking in broad strokes here. Not all categories have been impacted the same by inflation.
Any product that has been able to embrace automation has gone down in real prices. Meanwhile any product that is labor intensive and resistant to automation has gone up in real price.
Shoes, food, apparel, electronics, and entertainment are all quite a bit cheaper today than they were 40 years ago.
Even heating/cooling is cheaper due to technological improvements in insulation and more efficient HVAC machines.
But education? Unless you can increase the student/teacher ratios significantly, you can’t really get cost improvements.
we say that but hell I took my family to Texas Roadhouse for dinner last weekend and even w/ call ahead seating it was an hour wait. The place was absolutely packed, we called around at other restaurants and was also 45-70 minute waits. Anytime I stop at the outlet mall to grab anything it's slammed. Everyone on reddit acts like they don't have two nickels to rub together but in the real world people are spending like its going out of style
It is hardly surprising that people might not be clear what the definition of "inflation" is. The word didn't exist in English in the context of economics until the 1850s, right before the Civil War. Right from the beginning, the single term "inflation" was being used to refer to multiple different topics. To paraphrase Lewis Carol's character Humpty Dumpty, if you expect a word to do a lot of extra work you should pay it better. Heh heh.
So how was "inflation" referring to multiple concepts simultaneously? First, it was referring to the currency itself. In the times before the Civil War there was a rise in private bank notes that often did not match the reserves of the banks that issued them and this was where the term began to emerge in the context of economics. Price inflation was a separate topic that emerged after the Civil War but the same word was used to refer to both of these topics muddying the use of the term that was being used simultaneously with multiple meanings. The terms "money" and "currency" were also merged in this era due to sloppy usage.
I would love to see rates around 4%, inflation at 5% and wage increases at 6% for a decade. That would essentially balance out any debt-issues we are having. I´d argue that would be healthier for the economy in the long run.
Inflation is such a garbled and abused metric anymore that it's meaningless, the fed could yell that it's NEW totally not massaged numbers are only .000000000002% and it wouldn't matter. As long as purchasing power continues to drop people will continue to call it inflation and act accordingly
Prices have absolutely never gone down and never will. Inflation is basically a made up number based on made up numbers. High inflation or low inflation is a separate measure from purchasing power which accounts for inflation relative to wages. The 2% bar is completely arbitrary it just needs to be consistent. If it was 3% or 8% or 10% makes no difference. Only that it does what people expect. That's why the Fed gets concerned when expectations move because it becomes impossible to stay on expectation.
> Inflation is basically a made up number based on made up numbers.
I mean, this is true in an incredibly philosophical sense, like in the same way that time is a human concept. Inflation is calculated from insanely complicated models that are trying to approximate markets. A low inflation rate is important because it keeps things affordable, if wages were rising at a rate more on par with inflation, a higher inflation rate wouldn't be noticeable, but if wages are stagnant or rising more slowly than inflation, it starts becoming an issue.
Current high inflation rates are a problem because it's becoming harder for a larger percentage of people to make ends meet, not because they're greater than 2%.
Where inflation hurts more is in the long-term view of things. For example: How's your retirement fund doing if its purchasing power is decreasing? What's the value of your real estate if inflation means you can't ever sell it and use the money to buy something else equivalent?
Still, NO inflation, as we've had for some time before recently, is pathetic too. It means, there's no pressure on the rich to do something with their wealth (via corporations generally). Like competition that challenges their ability to continue gliding along doing nothing special, inflation puts on some pressure.
For lack of a better word, inflation is good, in moderation.
Yes and what the fed is absolutely worried about is a 1990s Japanese stagflation situation. So they flood the media with jobs reports that don't reflect accurate standard of living metrics.. it's not mass unemployment - rather it's underemployment. And this is coupled of course with the inflation we're all aware of.
Accordingly what I think keeps them up as night is that people reduce discretionary spending. This causes a ripple effect through the consumption based growth model, and ultimately GDP
I think the data just keeps getting manipulated to keep the equities markets propped up.
The FED want people reduce their spending, that’s the point, have you read the article? Reducing inflation is their top priority, GDP comes second (they aim for a soft landing ie little to no recession, but if it takes a true recession they’ll accept it)
Ah yes... The "too much money chasing too few goods" line
The Fed tried to take the free money heroin away from the market in 2018 and then back paddled when the indexes is dropped significantly. This week home depot, walmart and some other major retail indicators will have their Q2 earnings reports and show what the consumer spending trajectory looks like
Posturing as reducing inflation after 14 years of QE and the COVID print is predictable and based on the narrative. But the damage is done and there's a huge disparity now between the classes.
My point is what they're saying and what they're thinking/doing are two different things
time isn't a human concept, it's a physiological reality. we are all fully aware of the past, present, future, and our finite existence whether we look at clocks or not.
but inflation can be understood in as simple terms as time, our money is generally worth less now than at some point in the near past.
Huh? Truly spoken like someone who knows fuck all. Deflation happened regularly in the 1800s, and still happens in several countries today. 2% was chosen for good reasons, even if it is a bit arbitrary. Large inflation is bad, but we want a rate larger than 0 by a decent margin. That’s why 2% was chosen.
Prices have never gone down is a very weird thing to say. Japan had deflation. Deflation happened all the time under the gold standard. Deflation don't real?
>Prices have absolutely never gone down and never will
Thats not at all true. Deflation is a real thing and it can be just as devastating as high inflation. At the beginning of the Great Depression was a period of deflation when desperation set in where businesses were constantly trying to make a dollar any way they could, even if that meant selling at prices below what they paid to stock items.
Now, in a modern sense, with mega corporations that can absorb some pretty long term halts in product movement, its far less likely to be an issue. Despite this it was the fear of this happening again for the reason behind a lot of the pandemic money though.
>Inflation is basically a made up number based on made up numbers
Yes and the People are starting to see how running a military around the world for decades, and trying to police other countries as well as funding corporate/bank bailouts causes inflation. (cough 2008 and covid,,,,,,cough)
I’ve seen almost all of the ones I review display higher operating costs, particularly on labor. The caveat is that some are taking this environment as an opportunity to increase prices above and beyond what they’d normally do to offset higher costs simply because they can get away with it and consumers are buying .
Wouldn’t hurt to watch this video. Milton Friedman cleared the fallacy that inflation was caused by corporations, unions, and everything else outside of the fed’s money printing and government deficit spending decades ago.
Especially complaining about raising wages while no one will work because it was more beneficial getting paid to stay at home by the government rather than work during the pandemic so wage/incentives rose as well as teenage worker participation.
Why does nobody point out the 1135660 Covid deaths + those with long Covid who can’t work when citing numbers? https://www.cdc.gov/nchs/products/databriefs/db480.htm
agree to disagree Putinpeeparty. Most people I know and I had to experience worked from home or did not work at all during the shutdowns and refused to work while the economy tried to reopen.
Hence the worker shortage and the rise in wages as an incentive. I know since I was teaching, that some of my teen and college students were working in positions that able adults left during the pandemic and both municipalities and businesses were looking at 14 year olds to work the jobs.
Don't make me cite my news sources I really don't want to re-live the embarrassing moment when a student of mine told me they were making $20+/hour while my salary was lower than theirs while I was working more hours. It's embarrassing.
BTW I quit teaching since a minimum wage job will pay just as much now.
Now some of my former students report that retail is both getting rid of those higher wage earners during the pandemic and hiring new younger workers at lower costs closer to minimum wage than the pandemic wages. LOL
Edit: Hey this is from them and I'm seeing the firing and rehiring by retail don't downvote me from experiencing it first hand by hearing it from workers and managers in retail.
This is where the high profit margins came from. Companies kept their labor costs low, and raised prices to meet demand from all the excess liquidity provided by the government.
I mean, duh. How could it be any other way ? You know how to get a mortgage right ? You go into the bank and demand money, and they have no choice but to give you that money, no matter what with no conditions whatsoever.
Because banks are famous for their desire to readily lend money to anyone and everyone at the drop of a hat.
Yeah, but they're not exactly keen to give money to anyone, are they ? They want to get that money back, with interest. 2008 was banks just giving mortgages to anyone and everyone, specifically because of risk-packaging schemes, derivatives, that allowed them to make the loan and then instantly get their money back by dumping all that shit on the secondary markets.
Basically, they no longer had an incentive to make sure they were making reliable loans, and instead just spread money out to everyone. Now, you can still try to argue in this context that, sure, the lendees should have done their research, etc., but at the same time, the lender is also responsible for doing research on where they're putting their money.
All of this was forgone in the interest of profits, in a market that had been convinced (partly by good old style con-man antics, partly by mathematical wizardry that proved less magical than hoped) everything was going to be fine. This was the Era of Bernanke's Great Moderation after all.
Anyone who says it's all the lendees' fault is wrong. Anyone who says its all the banks fault is also wrong. But they're less wrong than the first one, because at the base of it, the banks had the money. The lendees couldn't force them to lend. All banks had to do was not lend it to unreliable people. Yet they couldn't help themselves, because the whole system convinced them it was fine and that they could make huge amounts of money doing so.
Boy you waited a whole 11 days with this account to start spreading misinformation. You’re not gonna make it long at the troll farm with these kind of amateur moves.
That's expected on this site. Took long enough for the downvotes.
The propagandas been strong on reddit.
Time to counter it. Or be banned as usual.
I was surprised when I was getting upvotes on my first comment. Took enough time for some to get in and read it.
I get it, I get it, dont' talk bad about the federal reserve, don't talk bad about r/politics being biased, don't talk bad about Israel, don't discuss BDS, don't cite information, you will be banned by the mods, and when you make a post try to make it lite and make people laugh for Karma and be neutral.
That's not what the Fed is terrified of. The Fed is terrified of inflation expectations rising meaningfully, compelling American households to pull forward future purchases for fear of them becoming more expensive later than they are now. Think of durable goods and other spending decisions like that.
If such a mindset becomes the norm, it actually exacerbates inflation because the fear of it causes more spending, driving up demand in a world of limited supply of key resources.
It can lead to a vicious feedback loop, where people pull forward more and more purchases.
It also would mean that US households, who have been some of the largest buyers of US sovereign debt, would likely become concerned and could stop buying or even sell holdings. Inflation expectations have a big impact on demand for fixed income.
This is totally what I’m doing. I’m buying things sooner because I expect prices to go up (or products to disappear). It’s been on my mind since COVID.
Is it just me, or did this article never actually say WHY consumers getting used to inflation is so terrifying for the Fed? What’s the why behind consumers losing hope about a gradual return to lower inflation that is so scary? And what other choice exists for consumers, besides getting used to it? We have to keep buying groceries, paying for housing and transportation, no matter what it costs, until we literally have no ability to do so, or until things change for the better. As far as I can tell, that’s “getting used to it”, and I don’t see another option.
Inflation expectations are one of the key contributors to future inflation. The Fed has to convince people it has things under control in order to reign in inflation expectations and prevent future inflation.
I'm not sure who has the means to buy as if the inflation is not impacting them. Something that costs $8 a couple years ago is now $17. I'm over it. My wages didn't increased.
It seems like a panic piece about something which doesnt seem all that scary, compared with simply ignoring "expectations" and just actually lowering inflation
There's a theory that inflation is based on inflation expectations, i.e. it becomes a self-fulfilling prophecy because high inflation expectations incentivizes pulling spending forward (before prices increase more), begetting more inflation.
Apparently, the Fed gives this theory some, um, currency, because Powell mentions consumer inflation expectations in every speech -- whether they remain "anchored" or "moored, " etc.
So there are two reasons why rising consumer inflation expectations are of interest. First, that consumers are potentially unconvinced that the Fed's policies will bring down inflation. Second, that knowing how expectations influence inflation, the Fed might become more aggressive with monetary policy.
Brazil was saved from hyperinflation in the 90s by creating a temporary parallel currency tied with inflation, so products wouldn’t change price in this new currency.
This currency turned into Real, our current currency. It got its name because it’s supposed to represent the real value of stuff.
Sometimes we still get some inflation spikes but nothing like before the Real. Managing inertial inflation worked really well for us!
What pisses me off about the Fed (and most economists in general) is that they can't wrap their big brains around the fact that they're in a social science.
They only ask if people expect higher inflation, not why people expect higher inflation. The fed can raise the rate all they want, but everyone knows that it isn't going to do a damn thing.
Vast majority of mortgages are locked in at incredibly low rates
Boomers are retiring in droves (shrinking the workforce, therefore inflationary) and only consume (inflationary)
Companies aren't going to lower their prices. Prices will stagnate at best and they'll lay off to maintain their profit margins.
Sell their homes to whom? When no one got the cash to buy who is buying? Corporate landlords? Even they are getting iffy about buying up more assets.
Your statement sounds like one of those dumb conservative talking heads said about rising sea level flooding your house. Just sell the house! Sell the house to who? Aquaman?
First, I'm just providing a counterexample to the melodramatic statement that raising rates won't do anything no matter how high you raise them. If you raise them high enough, the economy will crash - I think you can agree that would be the outcome of raising rates high enough, even if you don't think that is good outcome. You could stand to benefit from acquiring the ability to decouple your fact judgments from your value judgments.
Second, after the economy collapses, which wonks might call "capitulation," that would be when the Fed cuts rates again -- combined with unemployed people forced to sell, that would restore housing affordability for people currently priced out of homes.
So, yes, raising rates will eventually restore housing affordability. But we can't have that and a "soft landing." No free lunch.
> dumb conservative talking heads
No need for unpleasantness. We're just here to have a good time. Keep it academic, my friend.
> combined with unemployed people forced to sell, that would restore housing affordability for people currently priced out of homes.
2008 showed us that corporations will buy up those homes, not people. The people will always be the ones to suffer from the economy crashing, and the corporations will be bailed out by the govt.
Even in the Great Depression, unemployment only reached about 30%. That means 70% of people kept their jobs. Probably one of them would buy the home an unemployed person is forced to sell.
How many of those 70% already have a house or have the current cash deposit needed for 20% down?
America’s high housing prices is purposefully low housing supply. For economic forum, why do you people only look at the demand side and completely ignore supply?
I think they would get foreclosed on so the bank would have to sell them now at a lower price because less people can afford them. So that would be prices coming down
Again, that’s under the assumption that the economy is only bad enough to affect homeowner to force them to sell but won’t affect buyer market which makes little sense.
They know they are a social science. They also know that treating it like a hard science works. Particularly with game theory, it gives a way of mathematically determining social behaviour
If people expect their money to be worth less in the near future they will spend it faster before it loses value. The faster people spend their money the higher inflation goes.
This. Also this is how it’s done in Venezuela but with loans? I am a novice guys but I know they have hyperinflation over there. What’s going to stop that frm happing here in the US?
Expectations set future inflation. If people expect inflation to be 3% they will demand pay increases of 3%. If businesses expect inflation to be 3% they will increase prices at 3%. Even if prices are growing at that moment below that expectation.
Lol well good luck finding that unicorn job cause most companies don't offer you more than 3% raises unless it's a promotion. You're lucky where you are.
Most jobs offer 1-5% raises. Finding a new company usually comes with 10%+. If after 2 years you're not getting a significant raise and or promotion or at the very least on a plan to one then you are wasting your potential and losing out from opportunity costs.
If the company has you at 3% the first year without a plan, you are wasting your time.
The biggest difference between the boomer generation and younger ones is understanding this fact. Younger people are constantly switching jobs because raises and loyalty are not what they used to be. There's no Christmas bonuses anymore, companies try to get the cheapest health insurance they possibly can, and lower the least amount of PTO possible.
Yes. And that is the problem of central banks. The economy is composed of subjective entities. So in aggregate you can have some sense of objectivity but still have some subjectivity.
For that reason they spend more time managing expectations than actually changing rates to curb inflation.
If you are interested this is a video about the inflation theories in history. Inflation expectations is relatively new (post 70s)
So if I expect 100% inflation, can I demand my salary to be doubled? What nonsense logic is this? How about, if people start curtailing their spending bc of budget limitations, prices will also curtail?
Yes. You can. And is already done everyday. It's just that is a collective demand so one person expecting 100% inflation would not change it, but if a big enough chunk of the workforce demands it it will be updated at that rate. Like it happens in countries with big inflation.
You technically could demand 100% pay raise, but the realistic financial factors surrounding your employer and the context of your timing would probably result in you being fired instead. Unless of course, you lived in Weimar Germany or Robert Mugabe's Zimbabwe.
Second, there is no realistic way to force someone to curtail their spending now short of smashing the US economy with sky-high interest rates and watching the country rot like Japan. You would also need to convince US consumers to not purchase items, which is next to impossible and political suicide when the result is entering recession when your economy is powered by 70% consumer spending centered on credit.
Third, prices will not curtail, because that would require businesses and shareholders to understand and adopt a cultural mindset of not unilaterally raising prices. Which is a difficult concept to contend with when that is precisely what has happened for the last 30 years with the overemphasise on meeting quarterly growth targets.
The real reason why the Fed needs to keep inflation expectations low is that we know how easily an uncontrolled cycle of prices and wages chasing each other can easily spiral into hyperinflation.
Yeah you can. Companies demand higher prices for their products in line with how they see inflation going. Why can't the workers sell their labor as such too?
Last I read, most inflation is around food, housing and energy. People are already downgrading food items. What can you do about energy and housing?
Live on the street? Not fill up your gas to go to work?
Luxury good demand has been on the decline and so have certain car demands.
Looking at American car brands, the time on lot for a new car is getting longer and longer meaning less demand from consumers, yet little change to dealer pricing.
Food, shelter and transportation are the leading drivers of current inflation. Happens to be three core sectors that drives the economy and preventing societal breakdown.
So tell me what to cut back? Only eat one meal a day? Live in a cardboard under the overpass and walk 50 miles to go to work then back to your box?
lol sounds like you have never bought your own grocery.
Live with your parents? So if your parents live in a different state, you should quit your job to live with your parent which would improve your economic how?
The only way to beat inflation without deflation is to make more money personally.
Also energy for AC is down where as energy for transportation aka gas is continuing high.
Again, when a gallon of milk is hitting 3-4$, and a dozen eggs getting close to $5, where else are you suppose to cut? Not eat? Not drive to work?
Look at the CPI number, main driving factor for continued high inflation is food, gas and housing
The Fed can't lower inflation directly. Inflation emerges from the economic activity and expectations of every participant in the economy.
The Fed has basically one and only one lever: they set the interest rates at which they provide loans to banks which provide loans to businesses and consumers. Those bank loans effectively add to the money supply; if they stop or slow down then it reduces economic activity and makes money more precious, reducing inflation. If the loans become easier to get, it increases economic activity and increases inflation.
In the 1970s, powerful unions would negotiate future pay raises with employers. Since everyone expected inflation in the future, those negotiated pay raises priced in inflation but also basically guaranteed future inflation: the wage-price spiral.
The Fed desperately wants to avoid a return to 1970s type conditions, where the economy saw increases in inflation paired with decreased economic activity.
Edit: also, the Fed wants to avoid deflation, because deflation gave us the Great Depression.
Because consumers don’t slow their spending which in turn keeps the economy running hot, which in turn hurts the feds goal of lowering inflation. Inflation is harder to tame when the economy is running hot and people become used to higher prices.
What’s even worse is that companies will believe that they can continue to increase prices faster than they would normally or discount less because they know consumers have become normalized to these prices. Thus continued or higher inflation
What do you mean "get used to it"? Either I buy food or I starve. There are no affordable homes. There are no new normal priced automobiles from most manufacturers. Vendors are gouging the fuck out of the average person and rationalizing it with "higher shipping costs".
I'm alright because I'm single, earn decent money, and don't waste much. I hate to think of how much pain most of the country is in.
I am used to it because I was told it was transitory by these same people. Am I being told I am supposed to be concerned now? Or maybe YOU PRINTED FRIGGING TRILLIONS OF DOLLARS DURING AN ECONOMIC DOWNTURN!
Inflation was transitory until Russia invaded Ukraine and initiated an energy crisis, which prolonged inflation. Otherwise yes, the bullwhip from closing down the global economy and then reopening it was transitory.
Transitory implies that the rate of increase is temporary, it does not imply that it will switch the stagnation or deflation at all. Simply disinflation.
Anyways we seem to be largely agreeing besides semantics. Have an upvote.
They estimated the problem and how much to print (spend really, mostly on infrastructure projects that produced stuff) and weren't off by too much. Your spending is much appreciated because all that kept the economy going well and now it's in great shape, though the media who hate Democrats don't want you to know that.
The economy going well is laughable, despite all the propaganda fluff pieces posted here daily, and what media outlets that hate democrats? The one, Fox News?
This is more of people have realized that companies, both large and small will raise prices to maintain their profit levels, and that is a neverending spiral.
Should have just rippped the bandaid off and crushed prices rather than this slow drip trying to hit a soft landing. We won’t see 2% until a real crash happens
Saying rates are at 22 year highs doesn’t really mean a lot since rates have been historically low for so long. Here’s some questions:
If demand is so high contributing to inflation, how does oil continue to be low? Many inflationary periods are preceded by rising oil. With oil being a large inflationary driver that is not high, what costs are high that is driving inflation?
Rates are actually just sitting around slightly above normal (not super low like past 15 yrs, but not super high). Has the economy really even been subjected to “high” interest rates? I personally don’t think so.
This current inflation is mostly the result of the pandemic, spending to prevent the economy from collapsing during the pandemic, and consumer behavior + supply chains being disrupted by the pandemic.
Also, where are you the oil prices are low? Even if they're lower than they were a few months ago, it still seems high to me!
The white house just got done dumping an extra 350 million barrels onto the market. That is why oil isn’t as high. He also hasn’t even moved to replenish the SPR now that it is basically drained and probably won’t. Furthermore, oil will go higher as the already drilled wells get depleted. Oil companies aren’t reinvesting the money into drilling because the green idiots say they shouldn’t…this will lead to shortages in the near future
So check it out. Inflation has been continuously compounding since, like, the forties. That means it's an exponential curve. It might not be rising as rapid as the wermacht, but it will. Currency has become a quarter less valuable than it should be according to the minimum wage. National debt and an unregulated currency just so happen to cause inflation to spike. So does personal debt. How much does bread have to cost before we start charging legislatures with fraud? It's Congress' constitutional right to regulate the value of currency, except they don't. They're acting in bad faith towards the majority of Americans and have no qualified immunity for their (lack of) actions. If you see someone breaking the law by saying nothing, you've become an accomplice. Pretty fucked up, yet they can see the majority of Americans being harmed and somehow doing nothing is legal. Refusing to protect us is mentioned in the Declaration of Independence as a tyrannical action. Fraud, tyranny, abuse of power, insider trading, bribery. God I love my country.
"It's Congress' constitutional right to regulate the value of currency"
hell to the fuck no. the only way this works is through currency pegging which is how you destroy the dollar. you complain about corruption, but putting monetary policy and pegging in the hands of congress would be a the fast track to banana republic land.
If the Feds wanted to curb expectations they need to cooperate with the IRS and actually audit companies and rich people and cooperate with the SEC to stop collusion.
If all companies raise prices at the same time that makes a cartel and the Ban Hammer or Break Up Hammer needs to fall hard.
It would take a decade for an anti-trust breakup action of any giant corporation to work its way through the courts, and the corporation would win. Anti-trust legislation needs a full rework, and that won't happen.
Feds when inflation is low be like "See guys inflation is down to record lows, we fixed it!" while completely ignoring the shrinkflation of products that has run rampant over the past few years. You have to buy double of an item now to get the same amount you did before.
It’s not consumers, it’s the executives controlling America that “ don’t need to get comfortable with inflation ”. We aren’t seeing natural inflation, we the consumer are seeing overwhelming greed orchestrated by the rich and connected to fix prices across industries and raise the prices as much as they can. The price of raw materials and labor aren’t drastically going up, and the fuel supply is more stable despite what’s been going on in the Middle East. All the inflations we are seeing directly correlates to the “ record profits” many companies are seeing.
All executives do is jump from company to company, cutting workforce and giving themselves ridiculous bonuses. The only people the executives have to hold them accountable are the board of trustees and the majority shareholder which are all the same people.
All this inflation will do is drive more people to crime, because when working a full days has been so devalued most people can’t afford apartments or homes. The government needs to fund small businesses because the current working formula isn’t working.
What choice do we have besides getting used to it? We still have to pay for goods and services regardless of how predatory the companies that run our country get.
The choice is to go through a major recession to cut demand on everything. Better millions (or ten million) go unemployed so we can drop inflation by a couple points.
Well what ******** choice do we have?
The fed is enforcing pain to the common man in attempt to curb inflation. The current government is having a victory parade over its economic plan. Corporations are gouging with impunity And my dad just yesterday mentioned the pandemic money must be running out by now. I yelled at him for that 1800 3 years ago
Then it’s the well where did everyone go. He works in construction. So I get that.
>The current government is having a victory parade over its economic plan.
No they aren't.
>The fed is enforcing pain to the common man in attempt to curb inflation.
That's why you also need a Congress willing to reasonably increase taxes on the wealthy and to support policies that benefit the poor and middle classes. The Fed all by itself is just a one trick pony.
Wtf else do they expect people to do? Just shrug our shoulders "Welp, everything is too expensive now so I guess ill be homeless and starve and die so inflation can come down."
If the feds want me to spend more, they need to investigate all of these gigantic businesses that keep seeing record profits in this trash economy. Prices are being raised for the sake of corporate profits, and it's pretty fucked up when companies that sell you food at the local grocery stores are doing it. If I can't afford to eat I guess I'll start shop lifting so I can. Is that what everyone wants?
A lot of our inflation is tired directly to corporate greed, and the worse is gets the more people are gonna hate the very idea of capitalism and letting corporations control the means of production of our essentials.
No, the fed is terrified that seniors who have saved their entire lives have suddenly found themselves half short of their ability to pay for their retirement. That means a whole lot more American deaths, which is against any federal organization’s mandate. The other thing that is in balance is the stability of the financial system. Losing control of either of these will create a situation where the fed loses its trust and ability to make productive progress, de-leveraging its ability to maintain the flow of US currency.
The Fed has two mandates -- price stability and employment. It's written into the law, and everything else is speculation at best or conspiracy theory at worst.
First, this is true. I yield to this fact. I should not have used the word mandate. I think what I mean to say is that price stability by itself means nothing, it is just a math problem. The reason that we need price stability and not runs away math is because real money has real meaning and a rapid enough change in that meaning hurts vulnerable people, such as seniors. On the flip side, the mechanism that the fed uses to perform this trick is through leverage on the financial system, otherwise this knob doesn’t exist. A hidden requirement of the fed, by this logic, is that it has to maintain this power, otherwise all it has is a mandate and no way to enact its stated outcome. Imagine an engine that is told to push with no gas in it. A broken banking system has no purchase.
Inflation rate will eventually be back to normal but the damage is done and prices of everything has gone up and we probably will not see them come back down to pre pandemic levels. Salaries on the other hand will always be playing catchup.
This isn’t a problem the fed can solve. Congress needed to regulate heavily forty years ago. Now it’s likely they cannot avoid a major crash. They still need to regulate or it will only get much worse.
I didn't realize that we had a choice other than do our best to adapt to it. It's not so much "getting used" to it when on a daily basis things are much more expensive than they were in a short amount of time. I personally re budget every month and "getting used to" it implies that there is some level of comfort but that isn't the case. It's constant anxiety for a lot of folks.
I still have hope cause the 2 fr 1 tacos at Jack in the box briefly went to 1.5 but now back to 1. And recently they added large soda for a dollar in the app too 🐱
"Americans choose to continue purchasing food to live and to continue paying bills to avoid homelessness. They're a resilient bunch. Clearly, the margin for unprecedented profits is too thin. Make an onion $6 to see what else they have up their sleeves".
Here's an example from yesterday. Claritan (generic) at Walgreens was $29.99 last year. My wife just bought some for $39.99. What are we supposed to do?
I disagree. I think the Fed knows we've already begun the recession. They SHOULD have let us get used to inflation and adjust. They raised rates and screwed up. They were trying to protect their product (the US dollar). They can't unless Government balances a Budget. They won't. They should've let the market adjust.
I just feel like pointing out the Nasdaq is rallying at the same pace as during post-Covid infinite QE. Meanwhile the Fed claims it’s doing QT and shrinking the money supply.
Idk how many people follow the stock market, but I can tell you from my POV the Fed is blatantly lying about their inflation fight. Powell and Treasury secretary Yellen are far more concerned with protecting risk assets from volatility.
Short-term Treasury yields are within the publicly stated fed funds rate target range. I don't see evidence they are deliberately disregarding their own publicly stated monetary policy.
I will not quit saying this, the fed needs to stop increasing interest rates. Period. Stop. Stop. Stop Jerome. It isn’t helping inflation. The entire world is dealing with inflation. Corporate greed is just out of control. I get it, make a profit, but bringing costs back down because they’re way too high is the answer. Not I need another super yacht.
Actual official statements, theory, and such about inflation or really anything "monetary"approaches the borders of superstition inexplicably regularly.
Animal spirits. Easiest example.
The monetarist assumption, one hell of an assumption, that all the contracts in existence and money markets prices (private discount rates) reflect a rational, aggregate prediction of future value of money.
Of course people develop common sense, blocky notions. We are people. We don't think in 0.001% per week. Our expectations work like "my next phone / laptop/car will cost at 20% more." That's kind of a binary. Blocky, at the least.
At some point some genius, and I mean that both literally and ironically, will propose regulated prices for cinema tickets. Might be the last moment in history when cinema tickets are the primary inflation signal for consumers. It's now or never.
It's been 50 years since deep, indelicate new thinking about macroeconomics has he merged. Mmt, and accounting approaches to currency, are (shockingly) novel. However, they don't really know what to do from there, at this point.
Imo, inflationary sentiment, is an issue in as much as prices are affected by Monopoly, or firms with pricing power, if you prefer.
Think of simple scenarios affected by price theory. Expose the assumption of perfect competition and moderate it with assumptions about pricing power, of different strength. Pricing power is extremely compatible and easy to model, within the classical frameworks.
The result, inevitably, regardless of how you structured this.. is that the market becomes far more sensitive to inflationary pressure.
Apple has pricing power. Google has pricing power. Amazon have pricing power. A lot of it. Most of the profit generating segments in the auto industry. Also industrial tooling, chips, and many others.
Firms always want to raise prices. That is the one assumption that exists in every model. It's a constant. What moderates that is competition, market prices, substitutes. Consumer sentiment and expectation is a much weaker, context dependent force.
Greedflation isn’t driven by interest rates. The fed is just trying to drive up unemployment. It’s almost like they’re trying to hurt Biden’s economic gains and usher in Trump’s fascism
You know, money is a great and useful store of worth but crops are still edible despite fluctuations in value. We need a new economic system that combines the best of capitalism and provides a stable source of the basic resources for humans.
2% was always a "because we said so" number anyway, plus a growing economy demands a larger money supply. The Fed rate-hiking itself into irrelevance is pretty funny though.
That's because it's doing it too small, too slowly. A powerful entity which prevaricates and second-guesses itself would still invite contempt. That's how we got 9/11. Osama bin Laden called us a "paper tiger." And that's what consumers think of the Fed right now. I know, some analogy. But it's Monday and I'm cranky.
All they have to do is tell the government to cut the budget. But we are in fiscal dominance. Our government is gonna spend and we are going to have inflation.
2% has always been an arbitrary goal. If we start to see prints at 3% early next year and under that later in the year, I don’t think it will matter much whether the Fed chose to raise a bit more or keep it steady. It’s not like one or two more raises will be the straw that broke the camel’s back.
The deficit and the latest disasters at the TBill auctions are the much bigger problem. The US govt is starting to see lenders walk away from us. People who kept saying “but where will they go? They have no choice but to park their money with us” are being proven wrong.
Well, all the financially irresponsible idiots buying homes (but the interest rates will fall soon, really you know this how?) and new vehicles with markups....it's never going to go back down. The point of the high interest rates was to stop the buying of high price ticket items. But alas when you don't know the value of the dollar why save it? Spend, spend, spend...Christmas is right around the corner...use those credit cards cause the interest rates aren't tied to what credit cards charge you in intertest. I counted 23 new vehicle tags on new cars and trucks Friday while out enjoying a day off for Veteran's Day. People are STUPID!!!!!
What am I supposed to do, stop living my life, i can cut back, and I am doing that, but i cannot control corporations price changes. That is the job of the government which hasn't been functioning since the ACA was passed, and that was barely functioning.
Interest rake hikes only affect the common man, they don't really impact businesses chasing profit in the same way, taxing revenue would more likely slow down price increases but that wont happen anytime soon in a meaningful way.
To me, this just may mean they’re getting used to conveniences, not more goods. Things like going out for dinner and getting doordash for all 3 meals a day are becoming scarily more popular. Throw in the growth of online slots and sports betting, it’s a recipe for disaster. I know I’ve named mostly male spending tendencies but that’s my take.
Why are people even still talking about inflation like it's a news worthy topic anymore? We're back to normal ~3% inflation levels that have been the norm for the last 40 years. It's over.
Get used to? It's not in our civic fabric to get used to ANYTHING. The last time we got over something was surely before Appomattox, probably long before it.
There’s no way anything besides CPG have the shame shopping rates pre pandemic. We have to eat, but no one has the cash to buy luxury goods like we used to.
Wasn't there an article out sometime last year where economists figured we're paying 2030 prices for many consumer good and services because of the impacts of COVID on global markets?
The best thing we can do as consumers to curb inflation is to undermine demand by reducing consumption wherever possible.
One reason prices kept rising was the fact that demand remained strong throughout. Some consumer items have doubled in price and demand is still strong.
I understand needing the staples (bread, eggs, etc), but non-essentials like snack foods, soft drinks, and fast foods are an area where if demand diminishes, prices will go down. It will also likely bring down the prices of many other foods with it since this will cause a surplus of basic ingredients in the production phase.
It's almost impressive that the article manages to spend as much time as it does on the danger of consumer expectations without explaining why those expectations might be dangerous. I suspect the reason for this evasion is that it would reveal the framework of the article to be meaningless insofar as the point that's being made can be reduced to the less fearmongering headline form of: "The Fed is concerned that perceptions of sustained inflation could create additional inflationary pressure."
For clarity, the issue involved in expectations of higher inflation is that it promotes consumption now rather than later, in order to take advantage of prices that are perceived to be headed higher in the future. Obviously, this relative increase in demand creates additional pressure on prices in a theoretically limitless 'vicious cycle'. The Fed is therefore not terrified that "Americans could get used to high inflation," nor are they "terrified" at all. Their policy response is intended to counteract the demand-driven dimension of inflation as sharply as possible in order to curtail its potential for self-perpetuation.
Well the fed kept inflation around for a long time with their Bs 25bps hikes. Maybe Powell shouldn’t have tipped the system off and went full 300bps hike at the start
Ah, yes, "forward guidance." The Fed has become much too fearful about volatility over the past few decades. They just need to maintain general credibility that they will raise rates to preserve price stability and lower them to promote employment. They do not need to telegraph. Every. Single. Move.
Inflation can feed on higher inflation expectation, but that is one factor among many. The monetary basis is decreasing, maybe not fast enough but it is decreasing, so at some point inflation will have to abate. Also Powell can always raise the interest rates and do more of whatever is the opposite of quantitative easing.
Consumer spending is 80-90% of US GDP so yes, inflation long term will stifle consumer credit borrowing and spending.
The remaining elements of the GDP equation are government spending and business investments and I think lower consumer spending could see increased government spending and productvity investments by business to cut costs such as automatic teller machines and the like but those have been well underway since 2010 where I live.
The real question is how will long term debt be repaid if the economy of the future is smaller than today's or much less than expected in any case?
So funny. I suppose they think the Americans who lived the Nixon through Reagan years have all dropped dead. This is a very old story. Who has not known double-digit inflation except for the young.
They have been for the last couple years, inflation is still extremely high compared to say 10 years ago, but the year over year numbers don't look so bad
GimmeFunkyButtLoving | 2 years ago
“The University of Michigan’s latest consumer survey released Friday showed that Americans’ long-run inflation expectations rose to 3.2% this month, the highest level since 2011.
And those perceptions could continue to get worse the longer it takes the Fed get inflation back to its 2% target. Fed officials don’t expect inflation to reach 2% until 2026, according to their latest economic projections released in September.
If there’s one thing that would make the Fed quake in its boots, it would be worsening inflation expectations.
“If we find that consumers or businesses are really starting to feel like that long-term level of inflation … is creeping up, if that’s their expectation, we’ve got to act and we’ve got to get that under control,” Atlanta Fed President Raphael Bostic told Bloomberg earlier this month.
If Americans lose faith that inflation can ever return to normal that would prompt the Fed to tighten monetary policy even more — either by raising interest rates or keeping them elevated for much longer than expected.”
zed7267 | 2 years ago
Has anyone ever spoken to the Fed about consumer expectations about healthcare and education inflation?
What about Dior bags?
Rapidshotz | 2 years ago
How dare you come after my Dior Purse!! /s
BenjaminHamnett | 2 years ago
What am I supposed to just live off rice and carb board? The pain ain’t cheap
nutella_rubber_69 | 2 years ago
inflation will only come down once hermes makes more birkin bags in stock
ElCuboCompanero | 2 years ago
You know, raising/lowering interest rates is just about the only tool that the fed has in its toolbox to combat inflation/deflation. At a basic level, it’s just increasing/decreasing the money supply. Playing around with interest rates ends up hurting the poor and middle class since they’re the ones that are hit the hardest by rising interest rates. There is another way to increase or decrease the money supply that people rarely ever talk about and that’s taxes. But, Congress doesn’t want to have that conversation.
Harlequin5942 | 2 years ago
Taxes and not spending the extra revenue.
ElCuboCompanero | 2 years ago
That is correct. My comment assumes that the extra tax revenue will not be spent.
Anon-E-Mouse88 | 2 years ago
Politicians can never be trusted with taxpayer money, at all, not Democrats nor Republican nor Independents. Taxes are only for war, that's why America is constantly at war, to fund their greed.
FunetikPrugresiv | 2 years ago
Taxes have existed in nearly every government and economic system since the beginning of time. Traditionally, they were about moving money from the poor people to the rich, under the guise of protecting poor people from each other (via warfare or police).
Ironically, the best way to use tax money to protect people is to actually give it to poor people instead of rich ones, but one side of the political aisle keeps voting against that, and so we have what we have.
c_a_l_m | 2 years ago
"The lowest quintile experienced a combined tax and transfer rate of negative 127.0 percent, meaning that for each dollar they earned, they received an additional $1.27 from the government, netting transfers (gains) and taxes (losses), while the top quintile had a rate of positive 30.7 percent, meaning on net they paid just under $0.31 for every dollar earned."
https://taxfoundation.org/research/all/federal/who-pays-taxes-federal-state-local-tax-burden-transfers/
TeaKingMac | 2 years ago
You know the tax foundation was started by a business cabal, right? And their objective goal is trickle down economics?
Also, yeah, rich people pay more in taxes, while poor people get more from the government. This is the system functioning as intended.
Legitimate_Sail7792 | 2 years ago
The political opinion formed entirely in a mom's basement.
still_dream | 2 years ago
Taxpayer money can't be trusted with any politician so we shouldn't collect it.
Legitimate_Sail7792 | 2 years ago
That is a moronic statement. Have fun in Gault's Gulch.
TeaKingMac | 2 years ago
It's Galt actually.
The secret is to only have one superior businessman from each industry, and like robots to do all the work or something?
They never made it clear how it actually functioned, just that it was an ideal utopia
Anon-E-Mouse88 | 2 years ago
The political opinion of a working man who pays taxes. The political opinion formed from observation. So fuck off you self righteous prick!
Legitimate_Sail7792 | 2 years ago
Lololol. Hey guys I found 'The Taxpayer'.
Anon-E-Mouse88 | 2 years ago
LOL, hey guys, I found the self righteous baby boomer!
Legitimate_Sail7792 | 2 years ago
Keep on spouting that taxes are bad m'kay into the void of the internet you moron. It's an idiotic libitarian take.
doodoo4444 | 2 years ago
I think no one can ascend to such levels of power without becoming corrupted by it to some degree
x1000Bums | 2 years ago
Then let's take motions to create a more horizontal hierarchy
AdminYak846 | 2 years ago
MIC goes brrrrrrrrrr
3_Thumbs_Up | 2 years ago
Which is an argument that entirely disregards political incentives.
The reason to have na independent central bank that is responsible over money supply/inflation is that political incentives favor spending and tax reductions. You win elections by making promises that voters like. Being the party that wants to raise taxes and spend less won't get you very far in any country .
idiskfla | 2 years ago
That’s a big assumption though in a democracy with generally short-terms, no term limits, and special interests. Politicians will kick the can on debts and deficits so they can spend money during their term either to sway short-sighted voters their way, please lobbyists they’re beholden to, or to improve their legacy. Most fiscal conservative republicans have no problem spending either provided it’s on the military-industrial complex given their ties to the defense industry and national security being their true religion.
Show me a politician who presents the public with a 15-20 year plan to strengthen the country’s finances by reducing fat in the government, reducing the us military footprint, raising taxes, building necessary infrastructure in “your backyard”, and raising the age for retirement benefits due to the country’s financial state and demographic time bomb, and I’ll show you someone who won’t be a politician for long.
Legitimate_Sail7792 | 2 years ago
Clinton balanced the budget you bozo.
idiskfla | 2 years ago
Yup. And LBJ in 1969.
So basically in the past half-century, the US has had a balanced budget for a total of TWO periods. And the country was far less polarized in pre-social media 1990s.
Let’s see how often we get balanced budgets again in the next half-century with all the tribalism in American politics.
I stand by my point, bozo.
Legitimate_Sail7792 | 2 years ago
Keep standing on your point that is factually incorrect and only validated by your feels. Believe me you are the clown here.
idiskfla | 2 years ago
What’s it like sailing on Denial River?
Legitimate_Sail7792 | 2 years ago
What's it like being blatantly wrong and still acting like a dick less smug shit stain?
Harlequin5942 | 2 years ago
And the Democrats lost in 2000, despite a roaring economy and low inflation, to someone promising massive tax cuts. I'm not sure that an incumbent party has ever lost with such an economy after just two terms - certainly not in the modern era where presidents are held more responsible for economic performance.
Politicians will be fiscally conservative if people reward it with their votes, but American voters have decided to take advantage of cheap debt opportunities since the Reagan Revolution.
Legitimate_Sail7792 | 2 years ago
This is exactly why we don't have a balanced budget. Not that politicians won't do it. It's that the political will is not there.
Moister_Rodgers | 2 years ago
An excellent point nonetheless
americansherlock201 | 2 years ago
I’d argue that at a basic level, it doesn’t increase/decrease the money supply. It just makes getting money more expensive. And if the consumer believes that things are going to be more expensive, they will eventually accept that higher costs to access money is also normal.
Raising taxes would help lower spending a bit as people would have less take home to spend. The problem is that it would likely tank the economy if it was passed for lower and middle class earners, more of which are already living paycheck to paycheck. The truth is we need to increase taxes on businesses who are seeing record profit levels thanks in no small part to massive price hikes under the guise of inflation
ElCuboCompanero | 2 years ago
My comment assumes that taxes would be raised on the wealthiest. Not the poor and middle class.
americansherlock201 | 2 years ago
Fair enough.
I’d love for us to instill a land value tax introduced nationally to add revenue while also pushing for development of land
i_says_things | 2 years ago
I dont like that national idea at all. If you have 1000 acres in rural wyoming, theres no point in “developing” that. And thats not even considering the environmental impact.
Those sorts of taxes should be done much more locally imo
americansherlock201 | 2 years ago
Sorry my use of nationally was incorrect here. I meant it more as being introduced around the entire nation. Not at a federal level. But I can definitely see how that came across incorrectly
TreacleNo1351 | 2 years ago
Costs get passed to consumers and government just spends more money when taxes go up…. It’s like handing a kid a dum dum and asking them not to suck on it…
Legitimate_Sail7792 | 2 years ago
Clinton balanced the budget. Stop lying.
TreacleNo1351 | 2 years ago
Oh so it’s happened 1 time in 60 years…. My bad
Legitimate_Sail7792 | 2 years ago
Interesting way to say "My ass is wrong and full of shit and I keep on parroting the idiotic all parties are the same bullshit" but I'm glad you admitted it. Bozo shit.
TreacleNo1351 | 2 years ago
:)
Already-Price-Tin | 2 years ago
> I’d argue that at a basic level, it doesn’t increase/decrease the money supply.
Well, not directly, but indirectly it does.
> It just makes getting money more expensive.
Yes, it reduces the amount of loan activity between lenders and borrowers, which does decrease the money supply, because money is created when a loan is created, and destroyed when a loan is repaid. With an overall lower aggregate balance in loans out in the economy, the money supply will shrink in response to high interest rates.
americansherlock201 | 2 years ago
The worry is that it won’t actually decrease the money supply as people are using credit cards more and more to fill in the gap between income and expenses. There’s over $1 trillion in credit card debt currently, a record high. So the money supply is being artificially kept high as folks are overextending themselves.
Already-Price-Tin | 2 years ago
> The worry is that it won’t actually decrease the money supply as people are using credit cards more and more to fill in the gap between income and expenses.
You're right that credit card balances are loans, and therefore increased balances increase the money supply.
But higher interest rates would reduce the amount of credit available to consumers: either on the demand side, as the higher cost of borrowing reduces willingness to borrow through the cards, or on the supply side, as banks start to get nervous about delinquency rates or a smaller spread between their own cost of borrowing and their profits from credit card interest.
talltim007 | 2 years ago
Congress so doesn't want to have that conversation that they created the Fed with very long appointments to disassociate themselves with it.
skinnybuddha | 2 years ago
I would much rather live with FED decisions than any decision coming out of the senate or the house, especially the house.
MagicDragon212 | 2 years ago
I've said this before and agree with you. The Fed is doing everything they can. We need fiscal policy enacted, but our congress likes to focus on shit that barely matters and disagree on that endlessly.
TeaKingMac | 2 years ago
> congress likes to focus on shit that barely matters and disagree on that endlessly.
This is functioning as intended. Keeps them from having to actually deliver on anything.
Also keeps people from noticing they only work like 140 days a year, and spend the rest fundraising
workacct20910 | 2 years ago
We've cut taxes for billionaires, millionaires and corporations twice in the last twenty years. The rest of us are shouldering that burden. Republican working class voters need to demand the rich pay higher taxes to support their disability, farm subsidies and other rural infrastructure and social safety net needs.
mmortal03 | 2 years ago
> Playing around with interest rates ends up hurting the poor and middle class since they’re the ones that are hit the hardest by rising interest rates. There is another way to increase or decrease the money supply that people rarely ever talk about and that’s taxes. But, Congress doesn’t want to have that conversation.
Sounds like the poor and middle class should vote for reasonably higher taxes on the wealthy, and for policies that help foster the middle class.
borch3z | 2 years ago
Lol. Yeah cuz that's how that would work.
rivero4747 | 2 years ago
Raising taxes on high income earners wont solve anything. We need to REDUCE taxes as much as we can on the middle and lower classes. It's much more efficient to let people keep their money and do what they want with it than to increase the flow from the rich through the government and distribute it to the other people. My point is only valid though if your goal is to make people's lives better and your agenda isn't to simply punish rich people because they make you seethe.
Legitimate_Sail7792 | 2 years ago
You probably have at least a couple huffy replies coming your way from commenters if this sub who thinks it's sacrilege to even suggest taxation might be the answer to inflation in our situation.
electrodan99 | 2 years ago
Yes, and the current deficit is HIGHLY stimulative. Most consumer spending is by people with higher income/wealth which would be most directly addressed with taxes.
OrganicFun7030 | 2 years ago
The money only disappears from the economy if government debt is paid down, or the money saved somewhere (less likely given the debt repayments is the wiser option) otherwise it circulates.
ocelot08 | 2 years ago
THANK YOU. I'm far from an economics expert but I was reading the article and thinking how there was such a lack of mentioning taxes. Fucking hell. I'm of the mind that I should be paying more in taxes. I dont make crazy money either, but I'm just a working professional with no kids. Even already being in NYC, there is a dramatic gap between myself and lower income which is also what taxes are for.
workmeow6 | 2 years ago
i am also a working professional w no kids and pay like 1/3 of my income to the federal govt. how does that not seem like enough??? i don't see much, if any, benefit from it
seems like a lot of me
blankarage | 2 years ago
you should be angry that billionaires and companies making billions in profit have a lower effective tax rate than you
interactive-biscuit | 2 years ago
I’m with you. My taxes are crazy high! I spent more in taxes last year than I spent on myself. To think that I also barely used the roads even, pay for my own healthcare etc., I almost just don’t even understand how it can be that way.
TeaKingMac | 2 years ago
>I spent more in taxes last year than I spent on myself.
What?
You have a 51%+ tax burden?
interactive-biscuit | 2 years ago
Why are you making assumptions on how much I spend?
TeaKingMac | 2 years ago
Because of what words mean.
Even if you spent the money on your mortgage or retirement savings or something, that's still money spent on you.
interactive-biscuit | 2 years ago
No because that’s not spending. That’s saving. My needs/my spending was apparently less than what society needs from me. And that’s bizarre. That was my point.
LibsKillMe | 2 years ago
Maybe the government should stop printing money and increasing the national debt. Isn't 33.7 Trillion enough to have somebody say no more money!!!!!! Cut programs and force people back to work. There are help wanted signs everywhere. You might not want that job but if the "Free Shit" stopped you would have little choice.
isimplycantdothis | 2 years ago
Maybe once the election season is finished
GimmeFunkyButtLoving | 2 years ago
Narrator: it’s never finished
Waesrdtfyg0987 | 2 years ago
It's talked about a ton, both in the real world, in the different legislatures, in academia and most importantly for this comment in r/Economics. You could point at income disrtibution in many conversations but they add zero to them and just blunt good discussion.
Upvotes4Trump | 2 years ago
They also only have control of the supply side. Everyone operates on the assumption that dollar demand will always be there. What if it's not? Then we have the crack up boom.
FuguSandwich | 2 years ago
I don't have a horse in the race, but there are some reasons for not using fiscal policy that way.
tipsystatistic | 2 years ago
Yeah it’s really not a great tool. In many cases raising interest rates creates inflationary pressure. As borrowing gets more expensive, companies have to raise prices.
For the past decade, many tech companies were in growth mode, trying to gain market share over profits. They kept prices low to get more costumers.
imscaredalot | 2 years ago
Yeah like the housing market where companies only made up about 3% of home sales in 2022. If the government stayed out of it I'm sure they would stay low
-said fuckin no one
whorl- | 2 years ago
They’re also the ones hurt by inflation. So, it seems like we’re fucked either way and that the system was set up like that on purpose.
Imallowedto | 2 years ago
Those tools were used by Trump prior to the pandemic to keep the stock market spinning and had been exhausted when hyperinflation started. That's the conversation to be had.
Rando1ph | 2 years ago
This isn’t 100% true. The high interest rate’s absolutely destroyed the bond market and the big banks balance sheets with it. Bank stocks are trading their lowest in a very, very long time. Maybe you can sleep a little better knowing US bank, and their shareholders, are suffering too.
CremedelaSmegma | 2 years ago
Taxes in and of themselves neither reduce or increase the money supply.
You can make the argument if the treasury collects taxes, then they just deposit them in the account at the Fed that they can sterilize it.
Though from a technical definition, the money supply doesn’t change. They change its velocity. In the example above they change it to zero for some of it for some period.
Currency only has three ways it gets destroyed (ignoring physical bills that are a very small fraction of currency): 1. A loan is repaid. 2. A loan is defaulted and written off. 3. The Fed sells assets off its books.
That is all there is.
Deep-Neck | 2 years ago
How do they factor in the sociological element in economics. They're one dumb social media trend away from people thinking inflation is actually lit.
ElCuboCompanero | 2 years ago
Inflation is actually pretty nice for people with a lot of debt because it makes paying down debt easier. Higher inflation generally leads to higher salaries while payments on existing debt stay the same.
Magificent_Gradient | 2 years ago
Debt with fixed APR, yes.
wbruce098 | 2 years ago
Unless it’s credit card debt.
Ape-With-Darts | 2 years ago
Unless it’s on a variable interest rate.
Trumpy_Po_Ta_To | 2 years ago
People with a ton of assets and low expenses like inflation too. If you’re a homeowner you’re certainly more ok with inflation than those that are not (homeowners).
Iceman8675309 | 2 years ago
Inflation has very few redeeming qualities. High inflation doesn’t always reflect into higher salaries unless you are on Social Security which does track with inflation.
abstractConceptName | 2 years ago
From a macro economic perspective, it has one major advantage: national debt reduction.
https://cepr.org/voxeu/columns/using-inflation-erode-us-public-debt
JakJak6969 | 2 years ago
You’re a fool
ElCuboCompanero | 2 years ago
Can you explain why? Don’t just sit behind your computer and hurl insults.
Shasato | 2 years ago
You think higher inflation pushes wages up, but the last 40 years has shown otherwise.
abstractConceptName | 2 years ago
There's people whose business will naturally profit from higher inflation, because they can keep other costs down.
There's people in unions. They tend to be able to keep wages up with inflation.
There's people who are skilled at advocating for themselves. Same situation.
Then that's everyone else. In America, that tends to be workers who can't or won't unionize, or very small business owners who survived by exploiting such people, and are now finding it harder.
Shasato | 2 years ago
> people whose business will naturally profit from higher inflation
and those profits are not going to the wages of all of that business's workers, but the top few elite corporate employees who control everyone else's salaries.
>everyone else
That's the majority of people, the 99% who's wages haven't moved in 40 years.
>can't or won't unionize
It's incredibly difficult to do so when the government doesn't support unions and allows companies to perform (formerly illegal) union busting activities.
abstractConceptName | 2 years ago
Think your numbers are way off, and you're writing from your gut.
https://www.nbcnews.com/politics/white-house/biden-highlight-support-unions-meet-uaw-president-illinois-rcna124396
Shasato | 2 years ago
No i'm writing from [experience] (https://www.reuters.com/world/us/biden-signs-bill-block-us-railroad-strike-2022-12-02/) and [history] (https://en.wikipedia.org/wiki/2023_Ohio_train_derailment)
Richandler | 2 years ago
The opinion on inflation IS a social trend. It's irrelevant. The relative value of goods and services is basically unchanged. Inflations only problem is that it makes the math harder for the average person.
soidvaes | 2 years ago
you’re wrong, inflation expectations could worsen inflation. inflation isn’t a function of the “relative value of goods.”
i_say_fuckin | 2 years ago
Explain yourself. If I expect prices to be higher next year, I’m still not going to go out and purchase shit I don’t need and I’ve already put off buying a home and cut back on other spending where I can. How does that lead to more inflation?
Harlequin5942 | 2 years ago
You'll invest the money rather than hide it under a mattress, right? So someone else will be using the money, e.g. to buy equipment or consumer durables.
However, you make a good point: people's inflation expectations have an impact on their spending, but so do other things, like their incomes. If people expect inflation to exceed their incomes, then they might cut back spending, to keep their (inflation-adjusted) money in the bank at an acceptable ratio of income.
wobbegong | 2 years ago
The problem with inflation is that it raises interest rates.
SirJelly | 2 years ago
I expect both.
High inflation and brutal interest rates at the same time. Which, if people expecting inflation to stay at 3.2% is bad, the expectation that the Fed will raise rates and it still won't matter must be catastrophic, even existential.
How is the FED able to shrug off the impact of the boomer retirement wave? Of population flatening? These create inflation pressure that interest rates are ineffective against on any time scale less than decades.
the_hell_you_say | 2 years ago
Oh hey, now it's our fault
GulfstreamAqua | 2 years ago
Yes, just this morning I said to the Mrs. “Who know I expect long-run inflation will be 3.2%.” She disagreed and thought it’d be closer to 2.8%.
WCland | 2 years ago
2% is an arbitrary target. 3.2% isn't terrible. The problem is if people expect inflation to be at high levels, like 7%, then we get a stagflation situation like in the '70s. And given that inflation dropped substantially since last year, I'm not sure where this idea comes from that consumers will expect high inflation.
jrm2003 | 2 years ago
I hate this headline. It’s like AI tried to dumb down a valid headline to plain English. What it means to say is “The fed is concerned that higher expected inflation will make it more difficult to curb actual inflation.”
kcaykbed | 2 years ago
The whole article is terrible. It never specifies why it’s so terrifying.
Remarkable-Way4986 | 2 years ago
Absolutely no one is getting use to high inflation. The price goes up and it takes some time but you will normalize it. If it keeps going up you never have time to adjust
area-dude | 2 years ago
I expect corporations to arbitrarily raise prices in concert with each other. And that it will look like inflation and not be stopped with interest rate hikes.
NewKitchenFixtures | 2 years ago
Not entirely crazy. In electronics groups of manufacturers get caught price fixing every few years.
Could be more of that happening than anyone knows.
DangKilla | 2 years ago
Not crazy at all. Every industry you look at shows this happening when you look at the data. The auto industry for example
Erlian | 2 years ago
Part of the reason we don't "know" is b/c the FTC has been super lax when it comes to studying the potential impacts of proposed mergers.. especially during the Trump admin that shit went unchecked.
EatsFiber2RedditMore | 2 years ago
We shouldn't give Trump a pass but we also shouldn't give Bush or Obama a pass either.
Casual_Hex | 2 years ago
We need some Anti-Trust hardons in government. We need people going around and smashing these mega corps.
We’ve let some of the most egregious mergers happen over the last 20 years, it’s time to have some teeth from the FTC
Already-Price-Tin | 2 years ago
> We need some Anti-Trust hardons in government.
Biden's appointed FTC chair, Lina Khan, made a splash by making strong antitrust enforcement her whole position, and proposing legal interpretations that would once again give antitrust enforcers (the FTC, the DOJ, state attorneys general, and private plaintiffs) a stronger legal position to prevent market consolidation before it happens, rather than waiting until after a company abuses its monopoly position.
In a recent interview (I think on NPR's Planet Money), they talked about the FTC's antitrust lawsuits under her tenure as FTC chair, and how even though they've lost more than they've won, they're still influencing behavior at the merger level, especially in voluntary actions to dilute the power, like divestment of certain assets, or enter legally binding agreements to give competitors equal footing in pricing or access to products. As an example, part of the Microsoft-Activision merger explicitly included a 10-year deal with Sony not to make Call of Duty an XBox/PC exclusive, which was cited as one reason why the FTC failed to prove consumer harm.
They also briefly discussed how Khan's original paper, arguing that Amazon was harming the consumer by consolidating market power even while lowering prices, is different from the FTC's most recent lawsuit against Amazon (initiated while Khan was chair), in that the lawsuit itself focuses on how Amazon raises prices even off of its platform, which is a much more traditional theory of antitrust harm. It was partially a recognition that an academic paper can argue for more aspirational "the law should recognize" arguments than a lawsuit claiming that "the law as currently recognized is being violated," but also partially a validation of the theory that market consolidation leads to price increases later, and should be nipped in the bud rather than waiting around for the concrete harm to be felt.
Michaelprunka | 2 years ago
US antitrust regulations are a joke.
L4gsp1k3 | 2 years ago
They could have done the same, but in reverse a couple of years back, to keep the inflation down and get the benefits of low or zero interest.
GimmeFunkyButtLoving | 2 years ago
Instead of greedflation it was selflessflation
L4gsp1k3 | 2 years ago
It's always greed, all data can be manipulated. Centralbanks should not be the one that stimulates or interfere the market, the market is self regulating.
SeymourHoffmanOnFire | 2 years ago
This is the plan
assi9001 | 2 years ago
If there are no laws tying wages to inflation, they will always keep gouging.
Bottle_Only | 2 years ago
"market rate" is just the new way of saying collusion. When everybody is onboard with equal price increases without cost increases that support it, that's collusion.
nixed9 | 2 years ago
I mean this is just a common property of market structures that exist as oligopoly instead of competitive. Which is one of the fundamental problems with economic theory versus observable reality
Curious_Technician85 | 2 years ago
You’re putting yourself in danger of seeing a spike in inflation, and lagging interest rate hikes & other stimulus / bailouts then mistaking it for corporate greed. I don’t mind people drawing attention to pricing but when rates are 0% for 20 years & the government spends a trillion in a month while the Fed is not trying to outright solve the issue… why are people surprised at prices being hiked? When Diesel was sky rocketing & inflation was measurably still very high, which it still is, I still saw people larping about the corporations.
Rates must rise. Spending must subside. A real economy must emerge.
If we want homes, healthcare, education, low crime for our children we must stop the vicious cycle we’ve been in since the 1970’s and never let this happen again.
[OP] ifuckedyourdaddytoo | 2 years ago
>in concert
Suggesting a sort of collusion? Interesting thesis, explain with evidence.
I can well believe a business would increase prices charged to its customers simply because the cost of its inputs have increased -- materials, labor, etc. So, Occam's razor and all, but I try to keep an open mind.
thefinalcountdown29 | 2 years ago
It seems like this conclusion has been naturally drawn among many given that, despite claiming their rising costs were driving consumer prices, corporate profits were at record highs during the same period. One article, but there are many
Hawk13424 | 2 years ago
If I’m a company, I’d raise my prices every week until I actually see lower sales. Then I’d look at costs, sales, etc. and try to find the point where I maximize profit. If my competitors are doing the same, then the prices are going to jump across the board until consumers just refuse to buy my product. No collusion necessary.
It isn’t competition that will limit price. It’s consumers deciding the product isn’t worth the price. Now eventually maybe another company enters the market wanting to take market share and that will pull prices down. The problem is the cost to enter the market is high, requires a lot of risk, and borrowing the money to start is very expensive right now.
ocelot08 | 2 years ago
In a "perfect" world that would be the way, but these days brand impressions are a big factor. For many companies, once you start losing sales you've already lost trust of your customer and that can be hard to recover from.
This is also where VC money can fuckup some of these same levers.
ammonium_bot | 2 years ago
> start loosing sales
Did you mean to say "losing"?
Explanation: Loose is an adjective meaning the opposite of tight, while lose is a verb.
Statistics
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^^Github
^^Reply ^^STOP ^^to ^^this ^^comment ^^to ^^stop ^^receiving ^^corrections.
ocelot08 | 2 years ago
Thank you bot
Upvotes4Trump | 2 years ago
What a well thought out reasonable response.
Downvoted.
Jk ;)
2PacAn | 2 years ago
That doesn’t suggest collusion at all. All that means is the equilibrium price point increased due to increased demand. That will lead to higher profits.
Harlequin5942 | 2 years ago
>despite claiming their rising costs were driving consumer prices
If that's what they were saying, then they were wrong. Inflation was partly a product of supply-side shocks, but most due to a huge expansion in demand. There isn't extra inflation in the data for collusion to explain.
deadkactus | 2 years ago
sometimes its not the simplest answer. And you need to hash it out. Cartels happen.
-butt_slut- | 2 years ago
Businesses have access to the same competitor information consumers have but additionally possess the industry knowledge to understand the signaling, pressures and opportunities of the market they both occupy.
p_rite_1993 | 2 years ago
The fact this reasonable comment gets downvoted shows how this sub has been filled with mostly young conspiracy theorists. Not a single industry or business around the world isn’t experiencing the impacts of inflation. Yet, somehow Redditors think that some businesses getting high profits means that there is a world wide conspiracy amongst the millions of businesses, across hundreds of nations and thousands of languages, to raise prices. Inflation isn’t a US thing, it is a worldwide thing. Businesses are not evil for raising their prices when they have their costs increasing or expect costs to increase. Most businesses are not massive multinational companies. Most businesses are run on relatively thin margins and need to be risk adverse. Redditors obsession with “inflation isn’t real, it’s just corporate greed” shows how humans love to simplify complex problems and find a single boogeyman to blame everything on.
Reminder that this is the sub that thinks more rent control is the solution to high housing costs, not building more housing. This sub is practically an anti-economics sub.
sleepybeek | 2 years ago
Razor thin margins does not equal record profits. Increased cogs does not equal record profits. One could argue you are also being overly simplistic. Most of us aren't arguing conspiracy and collusion. But something is wrong with the system that looks almost the same and has the same result.
mkwmann | 2 years ago
Increased cost DOES mean record profits though, becaus basically every business is thinking about things as a percentage. As their costs go up, a 5% profit margin becomes a larger dollar amount.
dotelze | 2 years ago
If a company had a profit margin of 1%, and it remained constant over time, they will have record profits every year simply due to inflation
Beardamus | 2 years ago
Show me this company.
flatfisher | 2 years ago
When was the last time you heard about an anti trust case?
Deft_one | 2 years ago
https://en.wikipedia.org/wiki/Shrinkflation
In Capitalism, Greed is a motivation.
It's not always about the cost of materials, etc; sometimes, it's about the cost of yachts for the CEOs.
https://www.theguardian.com/commentisfree/2022/sep/25/inflation-price-controls-robert-reich
Also, companies have been raising prices and blaming inflation.
My pet conspiracy theory is to make people upset, who then vote-in Right-wingers, who reduce the taxes for those who are causing this kind of greed-flation because that makes them even more money.
That's what it's about.
SweepsAndBeeps | 2 years ago
The absence of evidence is not the existence of absence
Sol_Hando | 2 years ago
Increasing prices means decreasing demand. A corporation wants to optimize total profit, not profit per unit sold.
Preme2 | 2 years ago
> And that it will look like inflation and not be stopped with interest rate hikes.
Raise rates, drain liquidity, force a recession, laid off people cannot buy even if they wanted, Company’s can’t raise prices, Problem solved.
Instead the Fed is aiming for a “soft landing”. No reset, zombie companies stay afloat, Fed still injecting liquidity here and there to keep the markets up, bailing out the banks, companies raise prices at will, inflation imbedded. Congratulations.
Playing nice isn’t going to get it done. Asking the company to not raise prices will get you nowhere. Recession is what usually occurs, and I don’t think the Fed has the conviction to get it done. Simple.
xxirish83x | 2 years ago
Big cereal and toilet paper
pzxc123 | 2 years ago
> I expect corporations to arbitrarily raise prices in concert with each other. And that it will look like inflation and not be stopped with interest rate hikes.
In capitalism, vendors are free to charge whatever price the market will bear. The mechanism where buyers and sellers come together to decide what they're both willing to accept is called price discovery.
If corporations raise prices in tandem (but without collusion), and consumers just accept it and start paying those prices, that is inflation. It doesn't look like inflation, it IS inflation.
Darth19Vader77 | 2 years ago
I don't get why this isn't seen as price fixing, that's obviously what it is
area-dude | 2 years ago
Its like how lobbyist can get away with bribery. ‘We didnt say the word collusion! No collision! Just winks and nods everything was above board.’
mattiaitaly | 2 years ago
Corporates are already doing this. Source: I work in pricing
petesapai | 2 years ago
For my self, i stopped spending on things I can live without. Movies, going to restaurants, vacations, driving outings, delivery service, fun Amazon purchases.
My family income is pretty good. Yet i see many of my friends who earn less, spending like nothing's changed. Ordering uber eats. Screw that! I can't afford that.
Folks who simply don't care about price, I believe, represent the a huge portion of the population.
[OP] ifuckedyourdaddytoo | 2 years ago
I'm definitely doing more home cooking than before, and on other things, just doing without. Doing these sorts of things, I catch myself thinking, "I should have done that ages ago." These economically beneficial decisions will likely stick even after times get better. I guess I'm my own example of how economic cycles are necessary -- hard times force people (and businesses) to make choices to create good times later.
xMrBojangles | 2 years ago
Thank you for your perspective on being fiscally responsible, u/ifuckedyourdaddytoo
jawshoeaw | 2 years ago
You are clearly in the minority. I can’t explain it but Americans are spending like there’s no tomorrow
Droidvoid | 2 years ago
COVID showed many that tomorrow is not guaranteed. Not to mention the overall shift in the American dream. Many young people no longer think owning a home is in their future, so they’re not saving at all
Sudden-Grape3467 | 2 years ago
As a relatively young person who spends too much: 1. Inflation is eating up the savings and stocks can't keep up. 2. Some months ago I expected WWIII to happen any day now. 3. Estate prices and interest rates are a joke to laugh at. I could maybe barely afford it as a STEM graduate. But we have no fixed interest rates over here and it could get worse. 4. I don't plan on having kids nor do I plan on retiring. Prices for geriatric care are absolutely insane. I don't think normal people can save up enough to not end up in a neglected government facility, if they even exist in a few decades.
If I turn out to be wrong and the future is an utopia, I'll just smile and wave at all the happy people while collecting bottles.
EmotionalChungus | 2 years ago
Bro, I totally hear you. The struggle is definitely real. Inflation's a sneaky beast that slowly gnaws at your savings. But guess what? Consider parking your savings in high-yield savings accounts. Even though they aren't a permanent solution, they can certainly help your savings keep up with inflation. Rates right now are surprisingly solid, hovering around a sweet 5%.
Now about that WWIII. Rationally, we can't plan our lives around it happening any day now, right? As for real estate, yeah, the market's a bit nuts at the moment. But remember, home ownership isn't the only path to financial health.
Finally, the retirement bit... while the costs of elderly care can be astronomical, the goal isn't to have enough to cover every potential expense, but to save enough so you're prepared for a variety of scenarios.
I took some time to aggregate live rates for the top APY savings accounts, might be worth a peek. Might help you keep up with inflation and possibly stow away a bit for the golden years.
Bank | APY | Link | Min. Deposit | Fees :-:|:-:|:-:|:-:|:-:|:-: CIT Bank (Platinum Savings) | 5.05% | Link | $5000 | None
Synchrony Bank | 4.75% | Link | $0 | None
CIT Bank | 4.65% | Link | $100 | None
Sofi Bank | 4.60% | Link | $0 | Direct deposit required to get the highest rate.
Quontic Bank | 4.50% | Link | $100 | Excess transaction fee (over six) - $10.00
Live Oak Bank Savings | 4.40% | Link | $10 | Dormant account fee administered on inactivity for 24 straight months and a balance of less than $10.01
Just remember, diversify and don't put all your eggs in one basket. Keep going mate, continue questioning and learning more about financial strategies, it can only help you in the long run.
[OP] ifuckedyourdaddytoo | 2 years ago
The person you're replying to isn't in the US, and would not be able to get those bank deposit rates at those American banks.
"Estate prices." "we have no fixed interest rates here."
SayCanYouSeer | 2 years ago
No
lestuckingemcity | 2 years ago
You don't believe a bank would give you a low risk better than inflation investment platform that is completely fungible?
Shasato | 2 years ago
Fuck off, people who are struggling to save any money and are having to cut out luxuries in their life to scrape by, are not going to be helped by some financial advisor who is chasing a fee.
mmortal03 | 2 years ago
>1. Inflation is eating up the savings and stocks can't keep up.
Dollar cost averaging into an index of the stock market and reinvesting the dividends has more than caught up over the long term, regardless of whether it has in the short term. Sure, there's no guarantee of that, but it's not beyond reason to think that it still will over the long term.
TopDrawerToTheLeft | 2 years ago
Self-fulfilling prophecy?
magnetar59429 | 2 years ago
Long COVID lowered already low IQs. Many, many such cases.
Z3r0sama2017 | 2 years ago
Plus rising co2 levels affects intelligence, although that's a more granular reduction.
[OP] ifuckedyourdaddytoo | 2 years ago
The data back that up, but the positive spin which the media puts on it is consumer "sentiment" is "strong."
bdiddy_ | 2 years ago
If we don't spend the whole country shuts down because that's entirely what we are built on. If it shuts down there are no safety nets. The movies and restaurants these redditors so proudly talk about never going to have people who work there and depend on that income for basic survival.
If we all just tighten our belts and go straight into a recession with literally no safety nets not only will people suffer bigly, but we'll get Donald J Trump as our next president.
SPEND PEOPLE.. THERE IS LITERALLY NO TOMORROW IF YOU DON'T
BTW I'm no proponent of this system we have, but it is the system we have.
ReplyIfYoureMadLUL | 2 years ago
https://tradingeconomics.com/united-states/wage-growth
https://tradingeconomics.com/united-states/core-inflation-rate
Because US wages are keeping up with inflation.
kiklion | 2 years ago
Same boat as you, though it’s hard to distinguish changes that occurred through life decisions vs changes that occurred due to COVID’s impact on the economy. Had my first child at the end of 2019 and my second in the middle of 2021.
I can cook a meal that I don’t need to fight with my kids to have them eat it, for about 15% or less of the cost of eating out. And I have more time since we don’t need to drive to the restaurant. When cooking at home saves so much time and money, and the restaurant food and experience isn’t even that good, it just doesn’t make sense to eat out.
lupuscapabilis | 2 years ago
I see some people who are complaining about McDonald's meals being so expensive while I'm over here making delicious cheap burgers at home in like, 10 minutes. We've officially gone to the bizarro world where fast food is more expensive and takes more time than cooking at home.
petesapai | 2 years ago
The conversation has shifted when buying fast food. It's no longer about cheap, it's about convenience now supposedly. And I do understand that it can be convenient. But if it's about taste, you're right. I'd rather make it at home cheaper and much better tasting.
Eliju | 2 years ago
But someone with a moderate income should be able to do those things sometimes.
Eddagosp | 2 years ago
Ironically, that's the opposite of how one should think.
If inflation expectations are high, then your dollar today is worth more than your dollar tomorrow. Saving 1,000 for the future means you'll have less buying power than if you had spent it now; it could be the difference between 20 nights out vs 10 nights out, or 10% car down payment vs 5%.
If you can't afford it now, what makes you think you can afford it 5 years from now with rising costs and stagnating wages?
GoNinjaGoNinjaGo69 | 2 years ago
so now you gonna have a boring life and then just die? great idea
Putinpeeparty | 2 years ago
Agree, because the vast majority of Americans are finally understanding what inflation is. People now know that prices will never go down, just that they’ll increase by 2-3% per year instead of 5% as the Fed wants.
iiJokerzace | 2 years ago
When wages don't keep up with prices, that pinch will be impossible to ignore even for the least savvy in monetary policy.
aurorasearching | 2 years ago
I’ve actually gotten what would normally be considered great raises the last two years. I’m still comparatively making less than I was two years ago and I doubt this year’s raise even matches inflation.
Putinpeeparty | 2 years ago
Wages haven’t caught up with prices for 40 years, yet somehow it’s only a problem now. What a coincidence 🤔
lmaccaro | 2 years ago
It’s more nuanced than that.
Globalization has allowed wage arbitration as a tool to deflate low-skill-manufactured-goods prices. All the cheap plastic crap made in China. And clothes and low precision metal tools and electronics, too.
Meanwhile technology has driven down the prices of many things, or allowed substitute goods to take their place ($10/mo Spotify subscription instead of buying two 8-tracks a week).
jeditech23 | 2 years ago
Hey... Dont forget externalized cost like pollution exploitation and the detriment of an overworked population
Chinese youth figured things out #BaiLan
[OP] ifuckedyourdaddytoo | 2 years ago
I half suspect "bailan" and "tangping" are orchestrated head fakes by some Chinese disinformation ministry, lulling us into complacency about their future power, while they are actually raising up a generation of Chinese youth to be piranhas devouring the rest of the world.
Anyway, that's one conspiracy theory I'm willing to indulge myself.
sens317 | 2 years ago
Regulatory capture with profit being the ultimatum has led to this.
Opacity in markets has led to this.
This version of capitalism is being noticed by the American public.
Quality over quantity over the longterm given breakthroughs in technological advancements.
Competition requires breaking up monopolies of markets once they are cornered.
This is essentially what the technology sector has gone through today, like back when logistics and resource extraction tech breakthroughs occured a hundred years ago.
Codza2 | 2 years ago
Globalization is not the issue.
It's greed. It has and always will be, greed.
Globalization doesn't completelyremove industry from a country, greed does. Globalization is used as the excuse.
"We could, so we did, if it weren't for globalization, we couldn't have!"
It's a scapegoat.
EatsFiber2RedditMore | 2 years ago
Cool just remove greed from the world and we'll be fine
Codza2 | 2 years ago
And without globalization, greed runs even more rampant.
With the added side of effect of a multipolarity and a balkanization of the world.
Blaming globalization as a problem while.ignoring the most obvious problem, wealth concentration, is what's going to send.us back to the dark ages.
EatsFiber2RedditMore | 2 years ago
That's a much better point than "greed bad". I completely agree.
TabletopVorthos | 2 years ago
Haha, so you are arguing AGAINST wealth concentration but arguing FOR power concentration? Make it make sense.
Codza2 | 2 years ago
Im arguing that power concentration in a democracy with the purpose being to create a more equitable world, is better than power in the hands of homogeneous nations with the expressed intent to skirt around sanctions being imposed on them for invading neighbors and interning their own citizens who had the audacity to disagree with the state approved thought.
Which makes perfect sense but I'll admit, it requires some nuance understanding of what's at stake.
And could you please stop trying to gaslight me and just address the issue.
How will a multipolar world be safer and/or better?
TabletopVorthos | 2 years ago
Ah okay. So you're just a nationalist.
Boomslang2-1 | 2 years ago
I think it has been a problem for a long time, it’s just that it’s baked into the equation of financial literacy. That’s why people used to be content and make a living wage without a college degree. Now, you need a college degree in a field that’s marketable or a masters degree in an over saturated field. It’s why you see people working at coffee shops who have degrees in psychology or English.
The people who have no financial literacy have been totally left behind. Nobody even cares about them. They aren’t going to be on an economics sub because a lot of them have lived their whole lives with less and are just used to it. Homelessness rates are higher now, and it takes two incomes to support a household. All this stuff has been slowly happening for a long time.
shepardownsnorris | 2 years ago
> What a coincidence
What are you implying?
KryssCom | 2 years ago
That the elites only shit their pants about the economy when the middle class and the poor start to experience some degree of comfort and job-market leverage.
"The poors are starting to dig their way out from under our thumbs! Sound the alarms!"
Resident_Magician109 | 2 years ago
What was the real median income 40 years ago vs today?
Do you know?
Putinpeeparty | 2 years ago
21k per year, now it’s 55k.
Want to guess how much more prices have gone up?
Those 18% mortgage rates in the 80’s were still affordable because you could buy a house for 40k
Resident_Magician109 | 2 years ago
The median home in 1980 was 47k. In today's dollars that's 185k. It is true that home prices have increased faster than inflation. You can blame a decade of low rates for that.
Steverino5000 | 2 years ago
And homebuilders avoiding building any starter homes like the plague.
Catch_ME | 2 years ago
And zoning laws that focus on one type of home that brings your city the most tax revenue.
DivinationByCheese | 2 years ago
It’s the opposite actually. Suburbs and single family homes bring little tax per square foot.
Distributing resources for maintenance and infrastructure is also less efficient in the suburbs. The urban centers are usually footing the bill
Resident_Magician109 | 2 years ago
I think part of the reason is people want bigger homes. They want 2500 sqft homes in the burbs. So older homes from the 50s-70s become starter homes as they are 1100-1700 SQ ft around me at least. And people upgrade into homes built after 2005 with three car attached garages and 2.5 bathrooms.
Then due to per unit costs, it makes.more sense to build attached condos which would stand in for a starter home.
HerbertWest | 2 years ago
I've never met anyone in my age bracket who actually wants the literal square footage so much as they want the layout and features associated with it. My friends want a 3 or 4 bedroom, 2 bathroom home with a garage. Having an enormous master bedroom and attached bathroom the size of a child's bedroom, having a living room you have to shout across, etc., are something I have never heard people say they enjoy. They want the same general features but scaled down to a reasonable size.
laxnut90 | 2 years ago
It's not as much what people want in this case, but what builders want to build.
There is a shortage of construction workers and firms compared to the overall demand for housing.
This means the workers and firms who are operating only focus on the most profitable jobs which happens to be the luxury developments.
Steverino5000 | 2 years ago
Starter families want a home they can afford and 2500 sq ft ain’t it…
unknownpanda121 | 2 years ago
It’s greed and people always wanting more.
Resident_Magician109 | 2 years ago
Sellers are motivated to sell for the highest price they can. That is true.
I think there might be a smidgen more to the story than that though...
quietsauce | 2 years ago
Its insecurity, dumping all liquid money into ones home as a realized investment vehicle. Its capitalism stupid, not stupid people.
YIMBYqueer | 2 years ago
And nimbys
Resident_Magician109 | 2 years ago
Seems more of a local problem than a nationwide one.
laxnut90 | 2 years ago
Yes.
But it is a local problem in just about every area that has a shortage.
It may be local laws, but those laws are prevalent enough for it to be a national problem.
Resident_Magician109 | 2 years ago
Edit: I see you added today's median income.
No, prices have not increased faster than that. We use CPI to determine inflation adjusted dollars.
Housing has, sure. Prices on all things? No.
TypicaIAnalysis | 2 years ago
You are probably looking at household vs individuals.
Resident_Magician109 | 2 years ago
No,
https://fred.stlouisfed.org/series/MEPAINUSA672N
TypicaIAnalysis | 2 years ago
This literally says 42,000... Essentially what they said. And definitely not twice that...
Resident_Magician109 | 2 years ago
His original post before his edit stated real income in 1980 was 21k with no mention of today's income.
So...
biglyorbigleague | 2 years ago
That's not true. Real median income is up over the past forty years, not down. The current downswing started during COVID, before that it was going up.
ProductivityMonster | 2 years ago
As noted many times before on this sub, the government changed the definition of CPI in the 1980's and 1990's. The old definition (what most lay people care about...the price change of a set basket of goods) shows inflation as 8% to 12% now. The new definition includes substitution, increase in quality, and owners' equivalent rent. It's a not-so-subtly different metric than was measured 40 yrs ago so your info/FRED chart is misleading.
EDIT: Many think the motivation was to lower payouts for programs like social security, medicare, and the like.
Sracco | 2 years ago
If you believe the CPI numbers.
nuko22 | 2 years ago
Whatever. As a college finance educated who has worked since 16 and never had a gap in jobs more than 2 months, with a good job making ~80k/year, and who is more frugal than 90% of my peers, I have no hope of ever buying a home worth living in, in my are (Seattle surrounding cities). Like, I can literally buy a 1000 sqft home for 550k no less. That’s 110k cash down and then 5-5.5k/month for 30 years (yes I realized you can refinance, but that’s 5+ years away as this topic states). That is literally like 90% of my annual income after taxes, and basically my life savings as someone who has always saved and contributed to retirement/Roth/401k etc… that lost equity for a generation will suck out so much of our life savings over 40 years.
ThisUsernameIsTook | 2 years ago
Single people have rarely been able to afford homes, at least back to the 90s. It sucks but this phenomenon isn’t exactly new.
scheav | 2 years ago
I’m not sure I would call it a downswing. It’s relatively flat for the last few years. Real median income, adjusted for inflation, is quite a bit higher today than it was 5 years ago.
VealOfFortune | 2 years ago
Wages are one of the reasons there's double-digit inflation buuuuut ok 👌
Theres a reason it costs $16 for a Big Mac Combo and it's not all energy-based (although that accounts for the VAST majority of costs)
kiklion | 2 years ago
Wages have kept up with prices for most of the last 40 years. The issue is we are talking in broad strokes here. Not all categories have been impacted the same by inflation.
Any product that has been able to embrace automation has gone down in real prices. Meanwhile any product that is labor intensive and resistant to automation has gone up in real price.
Shoes, food, apparel, electronics, and entertainment are all quite a bit cheaper today than they were 40 years ago.
Even heating/cooling is cheaper due to technological improvements in insulation and more efficient HVAC machines.
But education? Unless you can increase the student/teacher ratios significantly, you can’t really get cost improvements.
Urdnought | 2 years ago
we say that but hell I took my family to Texas Roadhouse for dinner last weekend and even w/ call ahead seating it was an hour wait. The place was absolutely packed, we called around at other restaurants and was also 45-70 minute waits. Anytime I stop at the outlet mall to grab anything it's slammed. Everyone on reddit acts like they don't have two nickels to rub together but in the real world people are spending like its going out of style
ahfoo | 2 years ago
It is hardly surprising that people might not be clear what the definition of "inflation" is. The word didn't exist in English in the context of economics until the 1850s, right before the Civil War. Right from the beginning, the single term "inflation" was being used to refer to multiple different topics. To paraphrase Lewis Carol's character Humpty Dumpty, if you expect a word to do a lot of extra work you should pay it better. Heh heh.
So how was "inflation" referring to multiple concepts simultaneously? First, it was referring to the currency itself. In the times before the Civil War there was a rise in private bank notes that often did not match the reserves of the banks that issued them and this was where the term began to emerge in the context of economics. Price inflation was a separate topic that emerged after the Civil War but the same word was used to refer to both of these topics muddying the use of the term that was being used simultaneously with multiple meanings. The terms "money" and "currency" were also merged in this era due to sloppy usage.
"On the Origin and Evolution of the Word 'Inflation'" Cleveland Federal Reserve 1997
oskarege | 2 years ago
I would love to see rates around 4%, inflation at 5% and wage increases at 6% for a decade. That would essentially balance out any debt-issues we are having. I´d argue that would be healthier for the economy in the long run.
Putinpeeparty | 2 years ago
Totally agree
Lanky-Masterpiece | 2 years ago
And I want to be the pope
MobiusCowbell | 2 years ago
It doesn't help that Americans actually saw 10+% actual inflation.
magnetar59429 | 2 years ago
What are you talking about? We have landed softly. Inflation has been conquered. https://i.imgur.com/wQ6up23.jpg
gkazman | 2 years ago
Inflation is such a garbled and abused metric anymore that it's meaningless, the fed could yell that it's NEW totally not massaged numbers are only .000000000002% and it wouldn't matter. As long as purchasing power continues to drop people will continue to call it inflation and act accordingly
angriest_man_alive | 2 years ago
> just that they’ll increase by 2-3% per year instead of 5% as the Fed wants.
The Fed absolutely does not want 5% annual inflation lol
The_Spaghettio_Kid | 2 years ago
I think what was meant is...
>just that they’ll increase by 2-3% per year, instead of 5%, as the Fed wants
or put another way...
>just that they’ll increase by 2-3% per year as the Fed wants, instead of 5%
donutgiraffe | 2 years ago
The Fed would have an aneurysm if inflation was 5% every year. My economics teacher is rolling in her grave.
nonprofitnews | 2 years ago
Prices have absolutely never gone down and never will. Inflation is basically a made up number based on made up numbers. High inflation or low inflation is a separate measure from purchasing power which accounts for inflation relative to wages. The 2% bar is completely arbitrary it just needs to be consistent. If it was 3% or 8% or 10% makes no difference. Only that it does what people expect. That's why the Fed gets concerned when expectations move because it becomes impossible to stay on expectation.
n-some | 2 years ago
> Inflation is basically a made up number based on made up numbers.
I mean, this is true in an incredibly philosophical sense, like in the same way that time is a human concept. Inflation is calculated from insanely complicated models that are trying to approximate markets. A low inflation rate is important because it keeps things affordable, if wages were rising at a rate more on par with inflation, a higher inflation rate wouldn't be noticeable, but if wages are stagnant or rising more slowly than inflation, it starts becoming an issue.
Current high inflation rates are a problem because it's becoming harder for a larger percentage of people to make ends meet, not because they're greater than 2%.
MarkHathaway1 | 2 years ago
Where inflation hurts more is in the long-term view of things. For example: How's your retirement fund doing if its purchasing power is decreasing? What's the value of your real estate if inflation means you can't ever sell it and use the money to buy something else equivalent?
Still, NO inflation, as we've had for some time before recently, is pathetic too. It means, there's no pressure on the rich to do something with their wealth (via corporations generally). Like competition that challenges their ability to continue gliding along doing nothing special, inflation puts on some pressure.
For lack of a better word, inflation is good, in moderation.
jeditech23 | 2 years ago
Yes and what the fed is absolutely worried about is a 1990s Japanese stagflation situation. So they flood the media with jobs reports that don't reflect accurate standard of living metrics.. it's not mass unemployment - rather it's underemployment. And this is coupled of course with the inflation we're all aware of.
Accordingly what I think keeps them up as night is that people reduce discretionary spending. This causes a ripple effect through the consumption based growth model, and ultimately GDP
I think the data just keeps getting manipulated to keep the equities markets propped up.
Edit: bond king agrees with me
https://youtu.be/mnhnYAe-88Q
At 10:00
flatfisher | 2 years ago
The FED want people reduce their spending, that’s the point, have you read the article? Reducing inflation is their top priority, GDP comes second (they aim for a soft landing ie little to no recession, but if it takes a true recession they’ll accept it)
jeditech23 | 2 years ago
Ah yes... The "too much money chasing too few goods" line
The Fed tried to take the free money heroin away from the market in 2018 and then back paddled when the indexes is dropped significantly. This week home depot, walmart and some other major retail indicators will have their Q2 earnings reports and show what the consumer spending trajectory looks like
Posturing as reducing inflation after 14 years of QE and the COVID print is predictable and based on the narrative. But the damage is done and there's a huge disparity now between the classes.
My point is what they're saying and what they're thinking/doing are two different things
https://www.reddit.com/r/wallstreetbets/s/L8T70DGFX6
DaRealMVP2024 | 2 years ago
Yes, the lizard people are manipulating data to keep the snake people happy. Also, the water is turning the frogs gay.
jeditech23 | 2 years ago
is this like... your attempt at humor?
facedownbootyuphold | 2 years ago
> time is a human concept
time isn't a human concept, it's a physiological reality. we are all fully aware of the past, present, future, and our finite existence whether we look at clocks or not.
but inflation can be understood in as simple terms as time, our money is generally worth less now than at some point in the near past.
deadkactus | 2 years ago
time for humans is entropy.
simernes | 2 years ago
Agreed. We use the concept of time to describe something we all feel but is hard to exactly pinpoint. Same with inflation
brainfreeze3 | 2 years ago
the number does matter because savings that aren't invested are disproportionately affected. and not every bit of saving can be invested
GIO443 | 2 years ago
Huh? Truly spoken like someone who knows fuck all. Deflation happened regularly in the 1800s, and still happens in several countries today. 2% was chosen for good reasons, even if it is a bit arbitrary. Large inflation is bad, but we want a rate larger than 0 by a decent margin. That’s why 2% was chosen.
Putinpeeparty | 2 years ago
I applaud you sir 👏
Magificent_Gradient | 2 years ago
Prices spike, then ease a bit. Shock, ease, then settle into new normal until the next inflationary cycle.
It's the general pattern. Elevator up, stairs down.
Starcraft_III | 2 years ago
Prices have never gone down is a very weird thing to say. Japan had deflation. Deflation happened all the time under the gold standard. Deflation don't real?
the_friendly_dildo | 2 years ago
>Prices have absolutely never gone down and never will
Thats not at all true. Deflation is a real thing and it can be just as devastating as high inflation. At the beginning of the Great Depression was a period of deflation when desperation set in where businesses were constantly trying to make a dollar any way they could, even if that meant selling at prices below what they paid to stock items.
Now, in a modern sense, with mega corporations that can absorb some pretty long term halts in product movement, its far less likely to be an issue. Despite this it was the fear of this happening again for the reason behind a lot of the pandemic money though.
>Inflation is basically a made up number based on made up numbers
Fully agree with this though.
Sir_Creamz_Aloot | 2 years ago
Yes and the People are starting to see how running a military around the world for decades, and trying to police other countries as well as funding corporate/bank bailouts causes inflation. (cough 2008 and covid,,,,,,cough)
Putinpeeparty | 2 years ago
Not really, it’s proven that corporate monopoly greed caused most the inflation. You can always raise prices when you have little to no competition.
If you read shareholder reports, they didn’t even pretend to hide this fact. Profits up, operating costs the same
Resident_Magician109 | 2 years ago
So your working theory is that monopolies (unspecified which ones) all decided to get greedy at the same time?
Could always do what Zimbabwe did and try to outlaw inflation.
Deicide1031 | 2 years ago
What shareholder reports are you reading?
I’ve seen almost all of the ones I review display higher operating costs, particularly on labor. The caveat is that some are taking this environment as an opportunity to increase prices above and beyond what they’d normally do to offset higher costs simply because they can get away with it and consumers are buying .
TheEighthTriagram | 2 years ago
https://youtu.be/B_nGEj8wIP0?si=gCnrZmnIK4cv_V1W
Wouldn’t hurt to watch this video. Milton Friedman cleared the fallacy that inflation was caused by corporations, unions, and everything else outside of the fed’s money printing and government deficit spending decades ago.
Sir_Creamz_Aloot | 2 years ago
Especially complaining about raising wages while no one will work because it was more beneficial getting paid to stay at home by the government rather than work during the pandemic so wage/incentives rose as well as teenage worker participation.
Putinpeeparty | 2 years ago
It’s really more of a demographic problem, there’s more people retiring than working age young people to take their place.
Lots of companies offered early retirement during Covid instead of paying unemployment
Eye_foran_Eye | 2 years ago
Why does nobody point out the 1135660 Covid deaths + those with long Covid who can’t work when citing numbers? https://www.cdc.gov/nchs/products/databriefs/db480.htm
Sir_Creamz_Aloot | 2 years ago
agree to disagree Putinpeeparty. Most people I know and I had to experience worked from home or did not work at all during the shutdowns and refused to work while the economy tried to reopen.
Hence the worker shortage and the rise in wages as an incentive. I know since I was teaching, that some of my teen and college students were working in positions that able adults left during the pandemic and both municipalities and businesses were looking at 14 year olds to work the jobs.
Don't make me cite my news sources I really don't want to re-live the embarrassing moment when a student of mine told me they were making $20+/hour while my salary was lower than theirs while I was working more hours. It's embarrassing.
BTW I quit teaching since a minimum wage job will pay just as much now.
Now some of my former students report that retail is both getting rid of those higher wage earners during the pandemic and hiring new younger workers at lower costs closer to minimum wage than the pandemic wages. LOL
Edit: Hey this is from them and I'm seeing the firing and rehiring by retail don't downvote me from experiencing it first hand by hearing it from workers and managers in retail.
Putinpeeparty | 2 years ago
Sorry, your personal anecdotes don’t reflect the reality of statistics
Sir_Creamz_Aloot | 2 years ago
I'm sorry that Putinpeeparty doesn't inspect the real politic rather just looks at academic data as absolute.
Look at the social, political, historical, philosophical economy. Not just numbers.
There is a reason UPenn Has PPE degrees now, maybe you should look into one.
Good Day Putinpeeparty.
GimmeFunkyButtLoving | 2 years ago
This is where the high profit margins came from. Companies kept their labor costs low, and raised prices to meet demand from all the excess liquidity provided by the government.
Outsidelands2015 | 2 years ago
If you believe corporations cause inflation then you’ve been misinformed. These two books annihilate that theory.
https://www.goodreads.com/en/book/show/58485511
https://www.goodreads.com/en/book/show/97822
Adventurous_Class_90 | 2 years ago
Except this is a data question and the data point to two things: supply shocks and corporate profiteering subsequent to that shock.
Putinpeeparty | 2 years ago
Lol, I am sure you also blamed 2008 on people taking out mortgages they couldn’t afford.
usaaf | 2 years ago
I mean, duh. How could it be any other way ? You know how to get a mortgage right ? You go into the bank and demand money, and they have no choice but to give you that money, no matter what with no conditions whatsoever.
Because banks are famous for their desire to readily lend money to anyone and everyone at the drop of a hat.
Putinpeeparty | 2 years ago
Fill out form, get money! So easy!
Deicide1031 | 2 years ago
What does this mean?
A major part of a banks operation is literally loaning money out. It’s been that way for decades.
usaaf | 2 years ago
Yeah, but they're not exactly keen to give money to anyone, are they ? They want to get that money back, with interest. 2008 was banks just giving mortgages to anyone and everyone, specifically because of risk-packaging schemes, derivatives, that allowed them to make the loan and then instantly get their money back by dumping all that shit on the secondary markets.
Basically, they no longer had an incentive to make sure they were making reliable loans, and instead just spread money out to everyone. Now, you can still try to argue in this context that, sure, the lendees should have done their research, etc., but at the same time, the lender is also responsible for doing research on where they're putting their money.
All of this was forgone in the interest of profits, in a market that had been convinced (partly by good old style con-man antics, partly by mathematical wizardry that proved less magical than hoped) everything was going to be fine. This was the Era of Bernanke's Great Moderation after all.
Anyone who says it's all the lendees' fault is wrong. Anyone who says its all the banks fault is also wrong. But they're less wrong than the first one, because at the base of it, the banks had the money. The lendees couldn't force them to lend. All banks had to do was not lend it to unreliable people. Yet they couldn't help themselves, because the whole system convinced them it was fine and that they could make huge amounts of money doing so.
Outsidelands2015 | 2 years ago
That’s another way of saying you don’t actually want to learn about inflation.
Putinpeeparty | 2 years ago
No, it’s saying you’ve been lied to your whole life and are still just covering your ears because you read some book
Outsidelands2015 | 2 years ago
Friedman won a Nobel prize for his monetary principles and equations.
I definitely trust him more than some rando on Reddit who watched a couple click bait YouTube videos.
Putinpeeparty | 2 years ago
Friedman’s entire worldview has been disproven for over a decade, his former colleagues don’t even take him seriously anymore
The world has changed
Outsidelands2015 | 2 years ago
Whatever you say has been disproven. Compelling argument.
liesancredit | 2 years ago
The Federal Reserve is a corporation. So are its owners (private commercial banks).
Outsidelands2015 | 2 years ago
If the Fed is a corporation who’s the ceo?
liesancredit | 2 years ago
Depends on which branch, John C Williams is the CEO for the New York branch (most would argue the most important one).
https://www.newyorkfed.org/research/economists/Williams
Oh and source for it being a corporation: https://www.frbsf.org/education/publications/doctor-econ/2003/september/private-public-corporation/
Outsidelands2015 | 2 years ago
The NY Fed obviously conducts certain functions for the Federal Reserve, but they are not the same thing. J Powell is not a ceo of a corporation.
Your own source you used even said yes and no.
liesancredit | 2 years ago
Yes AND no. So the fed IS a corporation. If you have a problem with that, take it up with the fed. I'm just some guy on the internet.
Outsidelands2015 | 2 years ago
This link should help you out
https://www.federalreserve.gov/faqs/about_12799.htm
Lucavious | 2 years ago
Boy you waited a whole 11 days with this account to start spreading misinformation. You’re not gonna make it long at the troll farm with these kind of amateur moves.
Sir_Creamz_Aloot | 2 years ago
That's expected on this site. Took long enough for the downvotes.
The propagandas been strong on reddit.
Time to counter it. Or be banned as usual.
I was surprised when I was getting upvotes on my first comment. Took enough time for some to get in and read it.
I get it, I get it, dont' talk bad about the federal reserve, don't talk bad about r/politics being biased, don't talk bad about Israel, don't discuss BDS, don't cite information, you will be banned by the mods, and when you make a post try to make it lite and make people laugh for Karma and be neutral.
I'll back off I can see I touched a nerve.
brain-juice | 2 years ago
You could try just not talking
Sir_Creamz_Aloot | 2 years ago
Maybe you could start thinking?
socaldan92 | 2 years ago
They'll increase 3-5% per year inflation was never transitory
Mayhem4Markets | 2 years ago
That's not what the Fed is terrified of. The Fed is terrified of inflation expectations rising meaningfully, compelling American households to pull forward future purchases for fear of them becoming more expensive later than they are now. Think of durable goods and other spending decisions like that.
If such a mindset becomes the norm, it actually exacerbates inflation because the fear of it causes more spending, driving up demand in a world of limited supply of key resources.
It can lead to a vicious feedback loop, where people pull forward more and more purchases.
It also would mean that US households, who have been some of the largest buyers of US sovereign debt, would likely become concerned and could stop buying or even sell holdings. Inflation expectations have a big impact on demand for fixed income.
bedlumper | 2 years ago
This is totally what I’m doing. I’m buying things sooner because I expect prices to go up (or products to disappear). It’s been on my mind since COVID.
shepherdofthesheeple | 2 years ago
Bingo
JustAGreenDreamer | 2 years ago
Is it just me, or did this article never actually say WHY consumers getting used to inflation is so terrifying for the Fed? What’s the why behind consumers losing hope about a gradual return to lower inflation that is so scary? And what other choice exists for consumers, besides getting used to it? We have to keep buying groceries, paying for housing and transportation, no matter what it costs, until we literally have no ability to do so, or until things change for the better. As far as I can tell, that’s “getting used to it”, and I don’t see another option.
[OP] ifuckedyourdaddytoo | 2 years ago
Ooo great point. I suspect people are unconvinced the Fed's policies are enough to bring down inflation to 2%.
lock_robster2022 | 2 years ago
That change can signal the start of a vicious cycle where people begin to pull forward future demand in expectation of higher prices.
SethEllis | 2 years ago
Inflation expectations are one of the key contributors to future inflation. The Fed has to convince people it has things under control in order to reign in inflation expectations and prevent future inflation.
Altruistic_Reach8468 | 2 years ago
I'm not sure who has the means to buy as if the inflation is not impacting them. Something that costs $8 a couple years ago is now $17. I'm over it. My wages didn't increased.
itslitfamongnocap | 2 years ago
>Fed officials don’t expect inflation to reach 2% until 2026
>The Fed is terrified Americans could get used to high inflation
Okay, but these are the same thing.
Frigidspinner | 2 years ago
What is so bad about "inflation expectations"?
It seems like a panic piece about something which doesnt seem all that scary, compared with simply ignoring "expectations" and just actually lowering inflation
[OP] ifuckedyourdaddytoo | 2 years ago
There's a theory that inflation is based on inflation expectations, i.e. it becomes a self-fulfilling prophecy because high inflation expectations incentivizes pulling spending forward (before prices increase more), begetting more inflation.
Apparently, the Fed gives this theory some, um, currency, because Powell mentions consumer inflation expectations in every speech -- whether they remain "anchored" or "moored, " etc.
So there are two reasons why rising consumer inflation expectations are of interest. First, that consumers are potentially unconvinced that the Fed's policies will bring down inflation. Second, that knowing how expectations influence inflation, the Fed might become more aggressive with monetary policy.
felds | 2 years ago
Brazil was saved from hyperinflation in the 90s by creating a temporary parallel currency tied with inflation, so products wouldn’t change price in this new currency.
This currency turned into Real, our current currency. It got its name because it’s supposed to represent the real value of stuff.
Sometimes we still get some inflation spikes but nothing like before the Real. Managing inertial inflation worked really well for us!
Parking_Reputation17 | 2 years ago
What pisses me off about the Fed (and most economists in general) is that they can't wrap their big brains around the fact that they're in a social science.
They only ask if people expect higher inflation, not why people expect higher inflation. The fed can raise the rate all they want, but everyone knows that it isn't going to do a damn thing.
Vast majority of mortgages are locked in at incredibly low rates
Boomers are retiring in droves (shrinking the workforce, therefore inflationary) and only consume (inflationary)
Companies aren't going to lower their prices. Prices will stagnate at best and they'll lay off to maintain their profit margins.
[OP] ifuckedyourdaddytoo | 2 years ago
> The fed can raise the rate all they want, but everyone knows that it isn't going to do a damn thing.
If they raise it high enough, like Volcker levels, it will crash the economy. Unemployment will cause people to sell their homes at that time.
MD_Yoro | 2 years ago
Sell their homes to whom? When no one got the cash to buy who is buying? Corporate landlords? Even they are getting iffy about buying up more assets.
Your statement sounds like one of those dumb conservative talking heads said about rising sea level flooding your house. Just sell the house! Sell the house to who? Aquaman?
[OP] ifuckedyourdaddytoo | 2 years ago
First, I'm just providing a counterexample to the melodramatic statement that raising rates won't do anything no matter how high you raise them. If you raise them high enough, the economy will crash - I think you can agree that would be the outcome of raising rates high enough, even if you don't think that is good outcome. You could stand to benefit from acquiring the ability to decouple your fact judgments from your value judgments.
Second, after the economy collapses, which wonks might call "capitulation," that would be when the Fed cuts rates again -- combined with unemployed people forced to sell, that would restore housing affordability for people currently priced out of homes.
So, yes, raising rates will eventually restore housing affordability. But we can't have that and a "soft landing." No free lunch.
> dumb conservative talking heads
No need for unpleasantness. We're just here to have a good time. Keep it academic, my friend.
Rooflife1 | 2 years ago
If all you have is unpleasantness, all you can give is unpleasantness. MD_Yoro seems to be arguing from anger and ideology. Not facts and logic.
Shasato | 2 years ago
> combined with unemployed people forced to sell, that would restore housing affordability for people currently priced out of homes.
2008 showed us that corporations will buy up those homes, not people. The people will always be the ones to suffer from the economy crashing, and the corporations will be bailed out by the govt.
[OP] ifuckedyourdaddytoo | 2 years ago
> Corporations bought people in 2008.
MD_Yoro | 2 years ago
Why is your assumption only house owners would be unemployed but non house owners would not be affected by a giant economic downturn?
As for high rate killing the economy, historical U.S. interest average were around 5-6%.
The sup 1% interest were a recent phenomenon and arguably led to more bad companies creation
[OP] ifuckedyourdaddytoo | 2 years ago
Oh, some non-house owners would be affected by unemployment too.
But there will be some, both house owners and non-houseowners, who will manage to stay employed.
ThisUsernameIsTook | 2 years ago
Even in the Great Depression, unemployment only reached about 30%. That means 70% of people kept their jobs. Probably one of them would buy the home an unemployed person is forced to sell.
MD_Yoro | 2 years ago
How many of those 70% already have a house or have the current cash deposit needed for 20% down?
America’s high housing prices is purposefully low housing supply. For economic forum, why do you people only look at the demand side and completely ignore supply?
flawstreak | 2 years ago
I think they would get foreclosed on so the bank would have to sell them now at a lower price because less people can afford them. So that would be prices coming down
MD_Yoro | 2 years ago
Again, that’s under the assumption that the economy is only bad enough to affect homeowner to force them to sell but won’t affect buyer market which makes little sense.
MoogTheDuck | 2 years ago
Bro chill
qw8nt | 2 years ago
"The Fed doesn't understand inflation expectations, a subject they have studied for decades"
https://www.newyorkfed.org/microeconomics/topics/inflation
The markets will adjust inflation expectations from FOMC meetings based on the color of JPow's tie I think they understand it plenty!
Starcraft_III | 2 years ago
If they think inflation expectations are driven by Jay's tie and not the money supply then they really don't understand inflation expectations lol
dotelze | 2 years ago
They know they are a social science. They also know that treating it like a hard science works. Particularly with game theory, it gives a way of mathematically determining social behaviour
TypicalOwl5438 | 2 years ago
What does pulling spending forward mean
Tinister | 2 years ago
Buying a year's worth of toilet paper today rather than buying weekly as you run out.
Outsidelands2015 | 2 years ago
If people expect their money to be worth less in the near future they will spend it faster before it loses value. The faster people spend their money the higher inflation goes.
Bright_Client_1256 | 2 years ago
This. Also this is how it’s done in Venezuela but with loans? I am a novice guys but I know they have hyperinflation over there. What’s going to stop that frm happing here in the US?
Angel24Marin | 2 years ago
Expectations set future inflation. If people expect inflation to be 3% they will demand pay increases of 3%. If businesses expect inflation to be 3% they will increase prices at 3%. Even if prices are growing at that moment below that expectation.
PrancesWithWools | 2 years ago
But who actually has a specific number in mind?
Teamerchant | 2 years ago
If I get a 3% raise I’m looking for a new job.
akc250 | 2 years ago
Lol well good luck finding that unicorn job cause most companies don't offer you more than 3% raises unless it's a promotion. You're lucky where you are.
nuck_forte_dame | 2 years ago
My job literally said they dont go over 4%. Quit that week.
Teamerchant | 2 years ago
Most jobs offer 1-5% raises. Finding a new company usually comes with 10%+. If after 2 years you're not getting a significant raise and or promotion or at the very least on a plan to one then you are wasting your potential and losing out from opportunity costs.
If the company has you at 3% the first year without a plan, you are wasting your time.
Raichu4u | 2 years ago
The biggest difference between the boomer generation and younger ones is understanding this fact. Younger people are constantly switching jobs because raises and loyalty are not what they used to be. There's no Christmas bonuses anymore, companies try to get the cheapest health insurance they possibly can, and lower the least amount of PTO possible.
dotelze | 2 years ago
Moving between jobs is, outside of a few very specific areas, the best way to increase your salary
MarkHathaway1 | 2 years ago
And that can stimulate businesses to do something valuable to earn enough to pay you that additional 3%. It's good for business.
GimmeFunkyButtLoving | 2 years ago
Sounds subjective
Angel24Marin | 2 years ago
Yes. And that is the problem of central banks. The economy is composed of subjective entities. So in aggregate you can have some sense of objectivity but still have some subjectivity.
For that reason they spend more time managing expectations than actually changing rates to curb inflation.
If you are interested this is a video about the inflation theories in history. Inflation expectations is relatively new (post 70s)
Video
i_say_fuckin | 2 years ago
So if I expect 100% inflation, can I demand my salary to be doubled? What nonsense logic is this? How about, if people start curtailing their spending bc of budget limitations, prices will also curtail?
Angel24Marin | 2 years ago
Yes. You can. And is already done everyday. It's just that is a collective demand so one person expecting 100% inflation would not change it, but if a big enough chunk of the workforce demands it it will be updated at that rate. Like it happens in countries with big inflation.
Tokidoki_Haru | 2 years ago
You technically could demand 100% pay raise, but the realistic financial factors surrounding your employer and the context of your timing would probably result in you being fired instead. Unless of course, you lived in Weimar Germany or Robert Mugabe's Zimbabwe.
Second, there is no realistic way to force someone to curtail their spending now short of smashing the US economy with sky-high interest rates and watching the country rot like Japan. You would also need to convince US consumers to not purchase items, which is next to impossible and political suicide when the result is entering recession when your economy is powered by 70% consumer spending centered on credit.
Third, prices will not curtail, because that would require businesses and shareholders to understand and adopt a cultural mindset of not unilaterally raising prices. Which is a difficult concept to contend with when that is precisely what has happened for the last 30 years with the overemphasise on meeting quarterly growth targets.
The real reason why the Fed needs to keep inflation expectations low is that we know how easily an uncontrolled cycle of prices and wages chasing each other can easily spiral into hyperinflation.
Unexpectedpicard | 2 years ago
This is exactly what you should do as a worker. I showed a CPI chart in my last salary adjustment request.
i_say_fuckin | 2 years ago
Except the whole point is that we should collectively not do this or else we’d face runaway inflation.
Unexpectedpicard | 2 years ago
Collectively sure. But you the individual should be doing what's good for you. Taking one for the team to battle inflation is not a good idea.
Unkechaug | 2 years ago
Aaaaand we arrive at the prisoner’s dilemma in a race to inflation, because if you do not and others do, you will lose.
flawstreak | 2 years ago
That’s pretty much what’s going on for many people in Argentina. They often get multiple raises a year
MarkHathaway1 | 2 years ago
mmm, no.
nuck_forte_dame | 2 years ago
Yeah you can. Companies demand higher prices for their products in line with how they see inflation going. Why can't the workers sell their labor as such too?
MD_Yoro | 2 years ago
Last I read, most inflation is around food, housing and energy. People are already downgrading food items. What can you do about energy and housing?
Live on the street? Not fill up your gas to go to work?
Luxury good demand has been on the decline and so have certain car demands.
Looking at American car brands, the time on lot for a new car is getting longer and longer meaning less demand from consumers, yet little change to dealer pricing.
Food, shelter and transportation are the leading drivers of current inflation. Happens to be three core sectors that drives the economy and preventing societal breakdown.
So tell me what to cut back? Only eat one meal a day? Live in a cardboard under the overpass and walk 50 miles to go to work then back to your box?
rudebwoy100 | 2 years ago
Live with your parents, ditch the ac and cook all of your meals.
MD_Yoro | 2 years ago
lol sounds like you have never bought your own grocery.
Live with your parents? So if your parents live in a different state, you should quit your job to live with your parent which would improve your economic how?
The only way to beat inflation without deflation is to make more money personally.
Also energy for AC is down where as energy for transportation aka gas is continuing high.
Again, when a gallon of milk is hitting 3-4$, and a dozen eggs getting close to $5, where else are you suppose to cut? Not eat? Not drive to work?
Look at the CPI number, main driving factor for continued high inflation is food, gas and housing
JuanDeager | 2 years ago
lol, dumbass
kenlubin | 2 years ago
The Fed can't lower inflation directly. Inflation emerges from the economic activity and expectations of every participant in the economy.
The Fed has basically one and only one lever: they set the interest rates at which they provide loans to banks which provide loans to businesses and consumers. Those bank loans effectively add to the money supply; if they stop or slow down then it reduces economic activity and makes money more precious, reducing inflation. If the loans become easier to get, it increases economic activity and increases inflation.
In the 1970s, powerful unions would negotiate future pay raises with employers. Since everyone expected inflation in the future, those negotiated pay raises priced in inflation but also basically guaranteed future inflation: the wage-price spiral.
The Fed desperately wants to avoid a return to 1970s type conditions, where the economy saw increases in inflation paired with decreased economic activity.
Edit: also, the Fed wants to avoid deflation, because deflation gave us the Great Depression.
Gotl0stinthesauce | 2 years ago
Because consumers don’t slow their spending which in turn keeps the economy running hot, which in turn hurts the feds goal of lowering inflation. Inflation is harder to tame when the economy is running hot and people become used to higher prices.
What’s even worse is that companies will believe that they can continue to increase prices faster than they would normally or discount less because they know consumers have become normalized to these prices. Thus continued or higher inflation
MarkHathaway1 | 2 years ago
Then why has inflation come down over the last year (or so), back to a moderate level <= 2%/yr. ?
JoyKil01 | 2 years ago
Happy cake day!
BobbbyR6 | 2 years ago
What do you mean "get used to it"? Either I buy food or I starve. There are no affordable homes. There are no new normal priced automobiles from most manufacturers. Vendors are gouging the fuck out of the average person and rationalizing it with "higher shipping costs".
I'm alright because I'm single, earn decent money, and don't waste much. I hate to think of how much pain most of the country is in.
babaganoush2307 | 2 years ago
What else am I supposed to do about it? Starve to death? Please poppa FED print some more money so I can struggle moar!!! 🙄 this shit ridiculous….
ArcadesRed | 2 years ago
I am used to it because I was told it was transitory by these same people. Am I being told I am supposed to be concerned now? Or maybe YOU PRINTED FRIGGING TRILLIONS OF DOLLARS DURING AN ECONOMIC DOWNTURN!
Much_Victory_902 | 2 years ago
Inflation was transitory until Russia invaded Ukraine and initiated an energy crisis, which prolonged inflation. Otherwise yes, the bullwhip from closing down the global economy and then reopening it was transitory.
Independent-Space-23 | 2 years ago
“Inflation transitory”
Currency literally called inflationary
Z3r0sama2017 | 2 years ago
Inflation isn't transitory as that implies it will switch to either stagnation or deflation.
What you probably meant to say is high inflation is transitory.
Much_Victory_902 | 2 years ago
Transitory implies that the rate of increase is temporary, it does not imply that it will switch the stagnation or deflation at all. Simply disinflation.
Anyways we seem to be largely agreeing besides semantics. Have an upvote.
Z3r0sama2017 | 2 years ago
Back at you
MarkHathaway1 | 2 years ago
They estimated the problem and how much to print (spend really, mostly on infrastructure projects that produced stuff) and weren't off by too much. Your spending is much appreciated because all that kept the economy going well and now it's in great shape, though the media who hate Democrats don't want you to know that.
LogiHiminn | 2 years ago
You forgot the /s
MarkHathaway1 | 2 years ago
If you disagree with my comments, then you could have specified.
You forgot the discussion.
LogiHiminn | 2 years ago
The economy going well is laughable, despite all the propaganda fluff pieces posted here daily, and what media outlets that hate democrats? The one, Fox News?
I_hate_alot_a_lot | 2 years ago
Monetary policy gaslighting
ironicmirror | 2 years ago
This is more of people have realized that companies, both large and small will raise prices to maintain their profit levels, and that is a neverending spiral.
braiinfried | 2 years ago
Should have just rippped the bandaid off and crushed prices rather than this slow drip trying to hit a soft landing. We won’t see 2% until a real crash happens
[OP] ifuckedyourdaddytoo | 2 years ago
> ripped the bandaid off
I like this. Yes, that's what Volcker did, eventually.
We're all feeling slow-moving pain right now. Might as well get it over with and not waste time stagnating.
it-takes-all-kinds | 2 years ago
Saying rates are at 22 year highs doesn’t really mean a lot since rates have been historically low for so long. Here’s some questions:
If demand is so high contributing to inflation, how does oil continue to be low? Many inflationary periods are preceded by rising oil. With oil being a large inflationary driver that is not high, what costs are high that is driving inflation?
Rates are actually just sitting around slightly above normal (not super low like past 15 yrs, but not super high). Has the economy really even been subjected to “high” interest rates? I personally don’t think so.
kenlubin | 2 years ago
This current inflation is mostly the result of the pandemic, spending to prevent the economy from collapsing during the pandemic, and consumer behavior + supply chains being disrupted by the pandemic.
Also, where are you the oil prices are low? Even if they're lower than they were a few months ago, it still seems high to me!
proverbialbunny | 2 years ago
It depends what you consider high. 4.5-5% is the historical average. Last decade had historically low interest rates.
Richandler | 2 years ago
It also had historically low inflation. ;)
bootygggg | 2 years ago
The white house just got done dumping an extra 350 million barrels onto the market. That is why oil isn’t as high. He also hasn’t even moved to replenish the SPR now that it is basically drained and probably won’t. Furthermore, oil will go higher as the already drilled wells get depleted. Oil companies aren’t reinvesting the money into drilling because the green idiots say they shouldn’t…this will lead to shortages in the near future
proverbialbunny | 2 years ago
That was a while ago. The white house has been buying oil.
bootygggg | 2 years ago
Oh yeah the 5 million barrels 😂 what a fucking joke
BananasAndAHammer | 2 years ago
So check it out. Inflation has been continuously compounding since, like, the forties. That means it's an exponential curve. It might not be rising as rapid as the wermacht, but it will. Currency has become a quarter less valuable than it should be according to the minimum wage. National debt and an unregulated currency just so happen to cause inflation to spike. So does personal debt. How much does bread have to cost before we start charging legislatures with fraud? It's Congress' constitutional right to regulate the value of currency, except they don't. They're acting in bad faith towards the majority of Americans and have no qualified immunity for their (lack of) actions. If you see someone breaking the law by saying nothing, you've become an accomplice. Pretty fucked up, yet they can see the majority of Americans being harmed and somehow doing nothing is legal. Refusing to protect us is mentioned in the Declaration of Independence as a tyrannical action. Fraud, tyranny, abuse of power, insider trading, bribery. God I love my country.
trashfaced5000 | 2 years ago
"It's Congress' constitutional right to regulate the value of currency"
hell to the fuck no. the only way this works is through currency pegging which is how you destroy the dollar. you complain about corruption, but putting monetary policy and pegging in the hands of congress would be a the fast track to banana republic land.
OkCelebration6408 | 2 years ago
The most likely outcome would be 10 years later, people who still didn’t buy a house then would regret not buying their primary residence now.
EconomistMagazine | 2 years ago
If the Feds wanted to curb expectations they need to cooperate with the IRS and actually audit companies and rich people and cooperate with the SEC to stop collusion.
If all companies raise prices at the same time that makes a cartel and the Ban Hammer or Break Up Hammer needs to fall hard.
LuckyOne55 | 2 years ago
It would take a decade for an anti-trust breakup action of any giant corporation to work its way through the courts, and the corporation would win. Anti-trust legislation needs a full rework, and that won't happen.
MarkusRight | 2 years ago
Feds when inflation is low be like "See guys inflation is down to record lows, we fixed it!" while completely ignoring the shrinkflation of products that has run rampant over the past few years. You have to buy double of an item now to get the same amount you did before.
ccjohns2 | 2 years ago
It’s not consumers, it’s the executives controlling America that “ don’t need to get comfortable with inflation ”. We aren’t seeing natural inflation, we the consumer are seeing overwhelming greed orchestrated by the rich and connected to fix prices across industries and raise the prices as much as they can. The price of raw materials and labor aren’t drastically going up, and the fuel supply is more stable despite what’s been going on in the Middle East. All the inflations we are seeing directly correlates to the “ record profits” many companies are seeing.
All executives do is jump from company to company, cutting workforce and giving themselves ridiculous bonuses. The only people the executives have to hold them accountable are the board of trustees and the majority shareholder which are all the same people.
All this inflation will do is drive more people to crime, because when working a full days has been so devalued most people can’t afford apartments or homes. The government needs to fund small businesses because the current working formula isn’t working.
SoftlySpokenPromises | 2 years ago
What choice do we have besides getting used to it? We still have to pay for goods and services regardless of how predatory the companies that run our country get.
yogfthagen | 2 years ago
The choice is to go through a major recession to cut demand on everything. Better millions (or ten million) go unemployed so we can drop inflation by a couple points.
Yes. That's sarcasm.
paulteaches | 2 years ago
Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.
With that being said, inflation is a tax on all Americans.
It needs to be gotten under control even if the solution is a 1981-1982 recession.
[OP] ifuckedyourdaddytoo | 2 years ago
Agreed. However, there are people, influential people, who myopically dwell on short-term gratification at the expense of long-term welfare.
MasterDredge | 2 years ago
Well what ******** choice do we have?
The fed is enforcing pain to the common man in attempt to curb inflation. The current government is having a victory parade over its economic plan. Corporations are gouging with impunity And my dad just yesterday mentioned the pandemic money must be running out by now. I yelled at him for that 1800 3 years ago Then it’s the well where did everyone go. He works in construction. So I get that.
mmortal03 | 2 years ago
>The current government is having a victory parade over its economic plan.
No they aren't.
>The fed is enforcing pain to the common man in attempt to curb inflation.
That's why you also need a Congress willing to reasonably increase taxes on the wealthy and to support policies that benefit the poor and middle classes. The Fed all by itself is just a one trick pony.
Galapagos_Gary92 | 2 years ago
Wtf else do they expect people to do? Just shrug our shoulders "Welp, everything is too expensive now so I guess ill be homeless and starve and die so inflation can come down."
StoneTown | 2 years ago
If the feds want me to spend more, they need to investigate all of these gigantic businesses that keep seeing record profits in this trash economy. Prices are being raised for the sake of corporate profits, and it's pretty fucked up when companies that sell you food at the local grocery stores are doing it. If I can't afford to eat I guess I'll start shop lifting so I can. Is that what everyone wants?
A lot of our inflation is tired directly to corporate greed, and the worse is gets the more people are gonna hate the very idea of capitalism and letting corporations control the means of production of our essentials.
machyume | 2 years ago
No, the fed is terrified that seniors who have saved their entire lives have suddenly found themselves half short of their ability to pay for their retirement. That means a whole lot more American deaths, which is against any federal organization’s mandate. The other thing that is in balance is the stability of the financial system. Losing control of either of these will create a situation where the fed loses its trust and ability to make productive progress, de-leveraging its ability to maintain the flow of US currency.
[OP] ifuckedyourdaddytoo | 2 years ago
The Fed has two mandates -- price stability and employment. It's written into the law, and everything else is speculation at best or conspiracy theory at worst.
machyume | 2 years ago
First, this is true. I yield to this fact. I should not have used the word mandate. I think what I mean to say is that price stability by itself means nothing, it is just a math problem. The reason that we need price stability and not runs away math is because real money has real meaning and a rapid enough change in that meaning hurts vulnerable people, such as seniors. On the flip side, the mechanism that the fed uses to perform this trick is through leverage on the financial system, otherwise this knob doesn’t exist. A hidden requirement of the fed, by this logic, is that it has to maintain this power, otherwise all it has is a mandate and no way to enact its stated outcome. Imagine an engine that is told to push with no gas in it. A broken banking system has no purchase.
Big-Dudu-77 | 2 years ago
Inflation rate will eventually be back to normal but the damage is done and prices of everything has gone up and we probably will not see them come back down to pre pandemic levels. Salaries on the other hand will always be playing catchup.
OfTheAtom | 2 years ago
Imagine if we had mild deflation for years.
spaceisnotthathard | 2 years ago
This isn’t a problem the fed can solve. Congress needed to regulate heavily forty years ago. Now it’s likely they cannot avoid a major crash. They still need to regulate or it will only get much worse.
scottmushroom | 2 years ago
I didn't realize that we had a choice other than do our best to adapt to it. It's not so much "getting used" to it when on a daily basis things are much more expensive than they were in a short amount of time. I personally re budget every month and "getting used to" it implies that there is some level of comfort but that isn't the case. It's constant anxiety for a lot of folks.
AbiyBattleSpell | 2 years ago
I still have hope cause the 2 fr 1 tacos at Jack in the box briefly went to 1.5 but now back to 1. And recently they added large soda for a dollar in the app too 🐱
[OP] ifuckedyourdaddytoo | 2 years ago
No bueno para la salud, chico.
OodleOodleBlueJay | 2 years ago
Get use to it? Really? Like I have a choice?
(I use my "choice" with my vote, then you have to trust that they will do as they promise)
deep6er | 2 years ago
Didn't realize a choice was to be had.
"Americans choose to continue purchasing food to live and to continue paying bills to avoid homelessness. They're a resilient bunch. Clearly, the margin for unprecedented profits is too thin. Make an onion $6 to see what else they have up their sleeves".
Satisfied_Onion | 2 years ago
Here's an example from yesterday. Claritan (generic) at Walgreens was $29.99 last year. My wife just bought some for $39.99. What are we supposed to do?
Fragrant_Cut1219 | 2 years ago
Our government is allowing the big corporations to gouge us to death where are the investigations into all this excess profit they're making.
Instead the Republicans are more interested in Hunter biden's dick pics.
Chard-Pale | 2 years ago
I disagree. I think the Fed knows we've already begun the recession. They SHOULD have let us get used to inflation and adjust. They raised rates and screwed up. They were trying to protect their product (the US dollar). They can't unless Government balances a Budget. They won't. They should've let the market adjust.
LuckyOne55 | 2 years ago
You're saying they should have ignored their mandate. Legally, they can't do that.
sonicmerlin | 2 years ago
I just feel like pointing out the Nasdaq is rallying at the same pace as during post-Covid infinite QE. Meanwhile the Fed claims it’s doing QT and shrinking the money supply.
Idk how many people follow the stock market, but I can tell you from my POV the Fed is blatantly lying about their inflation fight. Powell and Treasury secretary Yellen are far more concerned with protecting risk assets from volatility.
[OP] ifuckedyourdaddytoo | 2 years ago
Short-term Treasury yields are within the publicly stated fed funds rate target range. I don't see evidence they are deliberately disregarding their own publicly stated monetary policy.
True_Dimension4344 | 2 years ago
I will not quit saying this, the fed needs to stop increasing interest rates. Period. Stop. Stop. Stop Jerome. It isn’t helping inflation. The entire world is dealing with inflation. Corporate greed is just out of control. I get it, make a profit, but bringing costs back down because they’re way too high is the answer. Not I need another super yacht.
[OP] ifuckedyourdaddytoo | 2 years ago
It's demonstrably helped. Just not enough.
Golda_M | 2 years ago
Actual official statements, theory, and such about inflation or really anything "monetary"approaches the borders of superstition inexplicably regularly.
Animal spirits. Easiest example.
The monetarist assumption, one hell of an assumption, that all the contracts in existence and money markets prices (private discount rates) reflect a rational, aggregate prediction of future value of money.
Of course people develop common sense, blocky notions. We are people. We don't think in 0.001% per week. Our expectations work like "my next phone / laptop/car will cost at 20% more." That's kind of a binary. Blocky, at the least.
At some point some genius, and I mean that both literally and ironically, will propose regulated prices for cinema tickets. Might be the last moment in history when cinema tickets are the primary inflation signal for consumers. It's now or never.
It's been 50 years since deep, indelicate new thinking about macroeconomics has he merged. Mmt, and accounting approaches to currency, are (shockingly) novel. However, they don't really know what to do from there, at this point.
Imo, inflationary sentiment, is an issue in as much as prices are affected by Monopoly, or firms with pricing power, if you prefer.
Think of simple scenarios affected by price theory. Expose the assumption of perfect competition and moderate it with assumptions about pricing power, of different strength. Pricing power is extremely compatible and easy to model, within the classical frameworks.
The result, inevitably, regardless of how you structured this.. is that the market becomes far more sensitive to inflationary pressure.
Apple has pricing power. Google has pricing power. Amazon have pricing power. A lot of it. Most of the profit generating segments in the auto industry. Also industrial tooling, chips, and many others.
Firms always want to raise prices. That is the one assumption that exists in every model. It's a constant. What moderates that is competition, market prices, substitutes. Consumer sentiment and expectation is a much weaker, context dependent force.
dotelze | 2 years ago
What products do you buy from google?
houseofextropy | 2 years ago
Greedflation isn’t driven by interest rates. The fed is just trying to drive up unemployment. It’s almost like they’re trying to hurt Biden’s economic gains and usher in Trump’s fascism
StemBro45 | 2 years ago
Greedflation is a made up term for political excuses.
OptimisticSkeleton | 2 years ago
You know, money is a great and useful store of worth but crops are still edible despite fluctuations in value. We need a new economic system that combines the best of capitalism and provides a stable source of the basic resources for humans.
brianw824 | 2 years ago
Just back dollars with corn
PseudonymIncognito | 2 years ago
Once again, the conservative, sandwich-heavy portfolio pays off for the hungry investor!
ddyourpleasure | 2 years ago
Why not Zoidbucks?
kenlubin | 2 years ago
During the Great Depression, crops rotted in the fields while people went hungry.
OptimisticSkeleton | 2 years ago
Thanks capitalism.
Icy_Cryptographer417 | 2 years ago
BTC
StocksTraveler | 2 years ago
2% was always a "because we said so" number anyway, plus a growing economy demands a larger money supply. The Fed rate-hiking itself into irrelevance is pretty funny though.
[OP] ifuckedyourdaddytoo | 2 years ago
> rate-hiking itself into irrelevance
That's because it's doing it too small, too slowly. A powerful entity which prevaricates and second-guesses itself would still invite contempt. That's how we got 9/11. Osama bin Laden called us a "paper tiger." And that's what consumers think of the Fed right now. I know, some analogy. But it's Monday and I'm cranky.
Eislemike | 2 years ago
All they have to do is tell the government to cut the budget. But we are in fiscal dominance. Our government is gonna spend and we are going to have inflation.
HamsterCapable4118 | 2 years ago
2% has always been an arbitrary goal. If we start to see prints at 3% early next year and under that later in the year, I don’t think it will matter much whether the Fed chose to raise a bit more or keep it steady. It’s not like one or two more raises will be the straw that broke the camel’s back.
The deficit and the latest disasters at the TBill auctions are the much bigger problem. The US govt is starting to see lenders walk away from us. People who kept saying “but where will they go? They have no choice but to park their money with us” are being proven wrong.
LibsKillMe | 2 years ago
Well, all the financially irresponsible idiots buying homes (but the interest rates will fall soon, really you know this how?) and new vehicles with markups....it's never going to go back down. The point of the high interest rates was to stop the buying of high price ticket items. But alas when you don't know the value of the dollar why save it? Spend, spend, spend...Christmas is right around the corner...use those credit cards cause the interest rates aren't tied to what credit cards charge you in intertest. I counted 23 new vehicle tags on new cars and trucks Friday while out enjoying a day off for Veteran's Day. People are STUPID!!!!!
punroc | 2 years ago
What am I supposed to do, stop living my life, i can cut back, and I am doing that, but i cannot control corporations price changes. That is the job of the government which hasn't been functioning since the ACA was passed, and that was barely functioning.
Interest rake hikes only affect the common man, they don't really impact businesses chasing profit in the same way, taxing revenue would more likely slow down price increases but that wont happen anytime soon in a meaningful way.
fistofthefuture | 2 years ago
To me, this just may mean they’re getting used to conveniences, not more goods. Things like going out for dinner and getting doordash for all 3 meals a day are becoming scarily more popular. Throw in the growth of online slots and sports betting, it’s a recipe for disaster. I know I’ve named mostly male spending tendencies but that’s my take.
[OP] ifuckedyourdaddytoo | 2 years ago
>mostly male spending tendencies
Why do I think you're fuming at someone in your life?
GallusAA | 2 years ago
Why are people even still talking about inflation like it's a news worthy topic anymore? We're back to normal ~3% inflation levels that have been the norm for the last 40 years. It's over.
Fgw_wolf | 2 years ago
Because groceries are still expensive AF.
guile_theme | 2 years ago
Get used to? It's not in our civic fabric to get used to ANYTHING. The last time we got over something was surely before Appomattox, probably long before it.
[OP] ifuckedyourdaddytoo | 2 years ago
We got used to having reproductive choice.
(Goodness, what's with absolutist, melodramatic statements today.)
Vodskaya | 2 years ago
People love thinking they live at the end of times, for some reason. Some people get a hard on from sweeping, dramatic statements.
gengarvibes | 2 years ago
There’s no way anything besides CPG have the shame shopping rates pre pandemic. We have to eat, but no one has the cash to buy luxury goods like we used to.
[OP] ifuckedyourdaddytoo | 2 years ago
CPG?
Luke5119 | 2 years ago
Wasn't there an article out sometime last year where economists figured we're paying 2030 prices for many consumer good and services because of the impacts of COVID on global markets?
muffledvoice | 2 years ago
The best thing we can do as consumers to curb inflation is to undermine demand by reducing consumption wherever possible.
One reason prices kept rising was the fact that demand remained strong throughout. Some consumer items have doubled in price and demand is still strong.
I understand needing the staples (bread, eggs, etc), but non-essentials like snack foods, soft drinks, and fast foods are an area where if demand diminishes, prices will go down. It will also likely bring down the prices of many other foods with it since this will cause a surplus of basic ingredients in the production phase.
[OP] ifuckedyourdaddytoo | 2 years ago
> hey guise let's boycott snack foods, soft drinks, and fast foods
You're asking too much of modern people.
nonsequitourist | 2 years ago
It's almost impressive that the article manages to spend as much time as it does on the danger of consumer expectations without explaining why those expectations might be dangerous. I suspect the reason for this evasion is that it would reveal the framework of the article to be meaningless insofar as the point that's being made can be reduced to the less fearmongering headline form of: "The Fed is concerned that perceptions of sustained inflation could create additional inflationary pressure."
For clarity, the issue involved in expectations of higher inflation is that it promotes consumption now rather than later, in order to take advantage of prices that are perceived to be headed higher in the future. Obviously, this relative increase in demand creates additional pressure on prices in a theoretically limitless 'vicious cycle'. The Fed is therefore not terrified that "Americans could get used to high inflation," nor are they "terrified" at all. Their policy response is intended to counteract the demand-driven dimension of inflation as sharply as possible in order to curtail its potential for self-perpetuation.
WurmBurner27 | 2 years ago
Well the fed kept inflation around for a long time with their Bs 25bps hikes. Maybe Powell shouldn’t have tipped the system off and went full 300bps hike at the start
[OP] ifuckedyourdaddytoo | 2 years ago
Ah, yes, "forward guidance." The Fed has become much too fearful about volatility over the past few decades. They just need to maintain general credibility that they will raise rates to preserve price stability and lower them to promote employment. They do not need to telegraph. Every. Single. Move.
Few-Sock5337 | 2 years ago
Inflation can feed on higher inflation expectation, but that is one factor among many. The monetary basis is decreasing, maybe not fast enough but it is decreasing, so at some point inflation will have to abate. Also Powell can always raise the interest rates and do more of whatever is the opposite of quantitative easing.
TheSimpler | 2 years ago
Consumer spending is 80-90% of US GDP so yes, inflation long term will stifle consumer credit borrowing and spending.
The remaining elements of the GDP equation are government spending and business investments and I think lower consumer spending could see increased government spending and productvity investments by business to cut costs such as automatic teller machines and the like but those have been well underway since 2010 where I live.
The real question is how will long term debt be repaid if the economy of the future is smaller than today's or much less than expected in any case?
Equivalent-Pay-6438 | 2 years ago
So funny. I suppose they think the Americans who lived the Nixon through Reagan years have all dropped dead. This is a very old story. Who has not known double-digit inflation except for the young.
w8gx | 2 years ago
They have been for the last couple years, inflation is still extremely high compared to say 10 years ago, but the year over year numbers don't look so bad