Inflation Scaremongering

ml1 said:

Smedley said:

I thought it was interesting that a credible report said Yellen wanted to cut the March 2021 stimulus package due to inflation concerns. She has denied the report, but I suspect the report is true and the denial is just her being the good soldier and team player.  

Of course there's no presidential magic wand on inflation, but at the same time, there are things and more things a president can do to fight inflation. And when the president is all about stimulus and waves off inflationary concerns for a very long time, and then inflation soars, the president was wrong on inflation. 

So ultimately one can approve of how Biden is handling inflation for whatever reason(s), or abstain from answering due to the semantics of the question (kinda lame if you ask me, but w/e). But there are also valid reasons to disapprove of how Biden has handled inflation. If that disapproval is "irrational" or "uninformed", then I don't want to be rational or informed.

it's not completely thinking the issue through to just "disapprove" of how Biden (and Congress) "handled" inflation. As PVW and jimmurphy have also pointed out, we can't have it all when it comes to the economy. Less stimulus would have likely meant more unemployment, more poverty, more evictions (assuming that less stimulus also meant allowing evictions during the pandemic), and slower recovery. It probably would have also meant a lot more COVID deaths because more people would have continued to go to a workplace if they weren't receiving pandemic relief.

"Disapproving" of Biden's "handling" of inflation also means either ignoring the likely other effects of not having COVID relief funding, or not understanding how those factors work together.

I don't like high inflation any more than anyone else. But if there was less money spent on COVID relief, I really worry about what our country would look like today from an economic and human suffering standpoint.  But maybe you are well-informed and rational, but you think somehow the economy would have been fine without COVID relief, and job growth would have been strong anyway.  Or maybe you just don't care if it hadn't been.

Nothing is as binary as you make it out to be, as usual. Of course there needed to be Covid relief. But at some point you turn off the spigot or at least dial it down. Did there really need to be a third, $1.9 tln stimulus in March 2021? I suspect with the benefit of hindsight, they would have done a smaller package, or maybe not do that one at all.

And you seem to not mind inflation much, even though it is known as the most regressive tax that brings about its own version of economic and human suffering, mostly to low-income workers. Or maybe you just don't care about that. 


Smedley said:

ml1 said:

Smedley said:

I thought it was interesting that a credible report said Yellen wanted to cut the March 2021 stimulus package due to inflation concerns. She has denied the report, but I suspect the report is true and the denial is just her being the good soldier and team player.  

Of course there's no presidential magic wand on inflation, but at the same time, there are things and more things a president can do to fight inflation. And when the president is all about stimulus and waves off inflationary concerns for a very long time, and then inflation soars, the president was wrong on inflation. 

So ultimately one can approve of how Biden is handling inflation for whatever reason(s), or abstain from answering due to the semantics of the question (kinda lame if you ask me, but w/e). But there are also valid reasons to disapprove of how Biden has handled inflation. If that disapproval is "irrational" or "uninformed", then I don't want to be rational or informed.

it's not completely thinking the issue through to just "disapprove" of how Biden (and Congress) "handled" inflation. As PVW and jimmurphy have also pointed out, we can't have it all when it comes to the economy. Less stimulus would have likely meant more unemployment, more poverty, more evictions (assuming that less stimulus also meant allowing evictions during the pandemic), and slower recovery. It probably would have also meant a lot more COVID deaths because more people would have continued to go to a workplace if they weren't receiving pandemic relief.

"Disapproving" of Biden's "handling" of inflation also means either ignoring the likely other effects of not having COVID relief funding, or not understanding how those factors work together.

I don't like high inflation any more than anyone else. But if there was less money spent on COVID relief, I really worry about what our country would look like today from an economic and human suffering standpoint.  But maybe you are well-informed and rational, but you think somehow the economy would have been fine without COVID relief, and job growth would have been strong anyway.  Or maybe you just don't care if it hadn't been.

Nothing is as binary as you make it out to be, as usual. Of course there needed to be Covid relief. But at some point you turn off the spigot or at least dial it down. Did there really need to be a third, $1.9 tln stimulus in March 2021? I suspect with the benefit of hindsight, they would have done a smaller package, or maybe not do that one at all.

And you seem to not mind inflation much, even though it is known as the most regressive tax that brings about its own version of economic and human suffering, mostly to low-income workers. Or maybe you just don't care about that. 

more than once I admitted that our inflation rate is a bad thing, so it's not that I don't mind it. Not blaming Biden for inflation is not the same as saying it's no big deal. It is a big deal if it persists. and not for nothing, but our most recent round of inflation actually hasn't hit lower income people as hard. they are the ones seeing wage gains.

and I completely disagree with you that COVID relief could have been dialed down before there was a critical mass of vaccinated Americans.  The pandemic was far from over last March.  


PVW said:

Smedley said:


Of course there's no presidential magic wand on inflation, but at the same time, there are things and more things a president can do to fight inflation. And when the president is all about stimulus and waves off inflationary concerns for a very long time, and then inflation soars, the president was wrong on inflation.

Whether the admin should be doing "things and more things" is a more interesting discussion than whether the admin said the right words, or how people responded to a poll.

FWIW, I agree with Ygelsias that the Biden admin should remove the Trump tariffs.

Has anyone read those two links? There really isn't anything there that would affect our current bout of inflation, except maybe the tariffs.

And I really don't understand why Biden didn't lift the Trump tariffs in Jan 2021.


drummerboy said:

PVW said:

Smedley said:


Of course there's no presidential magic wand on inflation, but at the same time, there are things and more things a president can do to fight inflation. And when the president is all about stimulus and waves off inflationary concerns for a very long time, and then inflation soars, the president was wrong on inflation.

Whether the admin should be doing "things and more things" is a more interesting discussion than whether the admin said the right words, or how people responded to a poll.

FWIW, I agree with Ygelsias that the Biden admin should remove the Trump tariffs.

Has anyone read those two links? There really isn't anything there that would affect our current bout of inflation, except maybe the tariffs.

And I really don't understand why Biden didn't lift the Trump tariffs in Jan 2021.

I think just about all of us are on board with ending the tariffs. If that was all it took to rein in inflation, I'd be all over Biden too. WRT to the rest of the "things" in the CNN article, not many of them can be unilaterally achieved by the president. Some of them require Congressional, Fed, or private sector action.  So there's that.


The Fed is officially in panic mode.


It was an aggressive cut but I see it as the Fed finally getting serious about inflation rather than pussyfooting around it. It'll take some time of course, but today's move seems like good news to me. 


It's the wrong solution. Not sure what the right solution is, but this ain't it.


You keep believing you’re smarter than all the experts. Must be nice to be that confident despite having no idea of an alternative.


jimmurphy said:

You keep believing you’re smarter than all the experts. Must be nice to be that confident despite having no idea of an alternative.

no, I simply believe other experts that have valid concerns. Raising interest rates works when there's too much money sloshing around in the economy. That does not appear to be the problem right now.

Inflation can be caused by different factors. Unfortunately the fed can only attack one factor. Politically, they had no choice but to pull out their only weapon.

So, they had no choice but to do this. That hardly makes it the correct option. Because it worked in 1980 doesn't mean it will work now.

I asked earlier in this thread: when food and energy are two of the primary drivers of inflation, how is raising interest rates going to lower those prices?

The answer, I think, is that they won't.

If anyone has a different answer, with an explanation, I'm all ears

Also, I'd like an explanation for how raising interest costs is preferable to inflation. Seems like consumers are gonna get f'ed either way.

Are interest costs even factored into the CPI?


here's the thing - you and smedley are quite confident in what the Fed is doing, yet you can't explain how it's supposed to work.


drummerboy said:

jimmurphy said:

You keep believing you’re smarter than all the experts. Must be nice to be that confident despite having no idea of an alternative.

no, I simply believe other experts that have valid concerns. Raising interest rates works when there's too much money sloshing around in the economy. That does not appear to be the problem right now.


what planet have you lived on these past couple years? Extraordinarily accommodative monetary policy. Massive fiscal stimulus. 

“…the growth rate of all the dollars in circulation (“M2 Money Supply”) soared a historic record 27% in 2020-2021. To put that in perspective, that is the biggest jump in the money supply in America's history.”

https://www.wheaton.edu/academics/academic-centers/wheaton-center-for-faith-politics-and-economics/resource-center/articles/2021/understanding-the-money-supply/

But you believe the Fox News commentator / former Gingrich advisor who puts out some crackpot theory that raising rates won’t lower inflation.

you do you.


drummerboy said:

….

I asked earlier in this thread: when food and energy are two of the primary drivers of inflation, how is raising interest rates going to lower those prices?

The answer, I think, is that they won't.


There is a reason that there are various measures of inflation, including “core inflation”, which excludes gas and food pricing. This is because the Fed recognizes that interest rates have little direct effect on these elements.

However, by lowering/eliminating the increase in other elements that interest rates DO affect, that creates room for consumers to absorb increases in pricing that they cannot affect.

drummerboy said

Alzó, I'd like an explanation for how raising interest costs is preferable to inflation. Seems like consumers are gonna get f'ed either way.

*ALL* consumers are “f’ed” by inflation, whereas only those taking on new debt or servicing existing VARIABLE RATE debt are significantly impacted by interest rate increases. Very, very big difference.


Lastly, because I can’t get the quote function to work again,

DB asked:“Are interest costs even factored into the CPI?”

No, appropriately so.   Debt is not something to be consumed. It is the result of excess consumption.


jimmurphy said:

*ALL* consumers are “f’ed” by inflation, whereas only those taking on new debt or servicing existing VARIABLE RATE debt are significantly impacted by interest rate increases. Very, very big difference.


Lastly, because I can’t get the quote function to work again,

DB asked:“Are interest costs even factored into the CPI?”

No, appropriately so.   Debt is not something to be consumed. It is the result of excess consumption.

Excess consumption... or insufficient supply. I take DB's point to be that here it's primarily the latter. But your point that raising rates could affect other, more discretionary spending categories is an interesting one. At this point inflation seems pretty broad, not necessarily restricted just to those areas tied directly to supply chain issues, so I can see the argument that there's some space for action there.


PVW said:

Excess consumption... or insufficient supply. I take DB's point to be that here it's primarily the latter. But your point that raising rates could affect other, more discretionary spending categories is an interesting one. At this point inflation seems pretty broad, not necessarily restricted just to those areas tied directly to supply chain issues, so I can see the argument that there's some space for action there.

I agree that it is primarily the latter, insufficient supply - very much so.

But if people are gonna buy a new washing machine and dryer or new car on credit, if those payments are more expensive now, maybe they’ll defer a bit. Maybe they’ll stay put in the house if they can, or not buy new furniture.

That’ll free up some some cash for bread or gas to go up because of Putin.


drummerboy said:

I asked earlier in this thread: when food and energy are two of the primary drivers of inflation, how is raising interest rates going to lower those prices?

1. Food away from home accounts for 60 percent of the food component of CPI. Less money in the economy, less money to spend at restaurants.

2. Food and energy accounted for 30 percent of annual inflation in the CPI report released last week. If somehow you got everything else down to 2 percent, while not affecting food (even food away from home) and energy at all, by my calculations total inflation would be 4 percent.


Smedley said:

drummerboy said:

jimmurphy said:

You keep believing you’re smarter than all the experts. Must be nice to be that confident despite having no idea of an alternative.

no, I simply believe other experts that have valid concerns. Raising interest rates works when there's too much money sloshing around in the economy. That does not appear to be the problem right now.


what planet have you lived on these past couple years? Extraordinarily accommodative monetary policy. Massive fiscal stimulus. 

“…the growth rate of all the dollars in circulation (“M2 Money Supply”) soared a historic record 27% in 2020-2021. To put that in perspective, that is the biggest jump in the money supply in America's history.”

https://www.wheaton.edu/academics/academic-centers/wheaton-center-for-faith-politics-and-economics/resource-center/articles/2021/understanding-the-money-supply/

But you believe the Fox News commentator / former Gingrich advisor who puts out some crackpot theory that raising rates won’t lower inflation.

you do you.

Do you have anything substantive to say about the "Fox News contributor", or are you all ad hominem?

(rhetorical question)

Show me data that consumption is somehow out of the ordinary.

Are people spending too much money on food and energy? Because that's sort of your implication.

Also, how does raising interest rates cut down on the amount of cash in the economy? Oh, it doesn't you say? What a surprise.

You're the guy who posted an article about what can be done about inflation, and raising rates wasn't close to their main prescription. Why was that?


1. Food away from home accounts for 60 percent of the food component of CPI. Less money in the economy, less money to spend at restaurants.

Sorry, I got that reversed: Food away from home accounts for 40 percent of the food component of CPI. Lapses in my math aside, the intent of both 1. and 2. was to give an idea of the amount of demand meat on the inflation bone.

[If anyone cares to see or check my work: Overall food inflation last month was 10.1 percent. Food at home was 11.9 percent. Food away from home was 7.4 percent. So, 11.9x + 7.4(1-x) = 10.1. x = 0.6.]

https://www.bls.gov/news.release/pdf/cpi.pdf


DaveSchmidt said:

1. Food away from home accounts for 60 percent of the food component of CPI. Less money in the economy, less money to spend at restaurants.

Sorry, I got that reversed: Food away from home accounts for 40 percent of the food component of CPI. Lapses in my math aside, the intent of both 1. and 2. was to give an idea of the amount of demand meat on the inflation bone.

[If anyone cares to see or check my work: Overall food inflation last month was 10.1 percent. Food at home was 11.9 percent. Food away from home was 7.4 percent. So, 11.9x + 7.4(1-x) = 10.1. x = 0.6.]

https://www.bls.gov/news.release/pdf/cpi.pdf

Are we currently overspending on food? Is there too much demand? Or is there some slack?

Are we binging on restaurant food? Grocery stores?

How does raising interest rates affect the amount of money someone allocates to food? Will people go to restaurants less because their credit card rate goes up x percent?

I just don't see the mechanism here. I don't see that demand is out of whack.

(all of the above applies to energy too)


drummerboy said:

Smedley said:

drummerboy said:

jimmurphy said:

You keep believing you’re smarter than all the experts. Must be nice to be that confident despite having no idea of an alternative.

no, I simply believe other experts that have valid concerns. Raising interest rates works when there's too much money sloshing around in the economy. That does not appear to be the problem right now.


what planet have you lived on these past couple years? Extraordinarily accommodative monetary policy. Massive fiscal stimulus. 

“…the growth rate of all the dollars in circulation (“M2 Money Supply”) soared a historic record 27% in 2020-2021. To put that in perspective, that is the biggest jump in the money supply in America's history.”

https://www.wheaton.edu/academics/academic-centers/wheaton-center-for-faith-politics-and-economics/resource-center/articles/2021/understanding-the-money-supply/

But you believe the Fox News commentator / former Gingrich advisor who puts out some crackpot theory that raising rates won’t lower inflation.

you do you.

Do you have anything substantive to say about the "Fox News contributor", or are you all ad hominem?

(rhetorical question)

Show me data that consumption is somehow out of the ordinary.

Are people spending too much money on food and energy? Because that's sort of your implication.

Also, how does raising interest rates cut down on the amount of cash in the economy? Oh, it doesn't you say? What a surprise.

You're the guy who posted an article about what can be done about inflation, and raising rates wasn't close to their main prescription. Why was that?

because that article was about what Biden can do about inflation, not what the federal reserve can do. The president doesn’t raise rates.



drummerboy said:

Are we currently overspending on food? Is there too much demand? Or is there some slack?

Are we binging on restaurant food? Grocery stores?

How does raising interest rates affect the amount of money someone allocates to food? Will people go to restaurants less because their credit card rate goes up x percent?

I just don't see the mechanism here. I don't see that demand is out of whack.

(all of the above applies to energy too)

Even Jerome Powell admitted yesterday, about being able to control inflation, "I think that what's becoming more clear is that many factors that we don't control are going to play a very significant role in deciding whether that's possible or not." [The winners and losers of the Fed hiking interest rates : NPR] He mentioned some, such as oil prices and supply chain disruptions.


drummerboy said:

Smedley said:

drummerboy said:

jimmurphy said:

You keep believing you’re smarter than all the experts. Must be nice to be that confident despite having no idea of an alternative.

no, I simply believe other experts that have valid concerns. Raising interest rates works when there's too much money sloshing around in the economy. That does not appear to be the problem right now.


what planet have you lived on these past couple years? Extraordinarily accommodative monetary policy. Massive fiscal stimulus. 

“…the growth rate of all the dollars in circulation (“M2 Money Supply”) soared a historic record 27% in 2020-2021. To put that in perspective, that is the biggest jump in the money supply in America's history.”

https://www.wheaton.edu/academics/academic-centers/wheaton-center-for-faith-politics-and-economics/resource-center/articles/2021/understanding-the-money-supply/

But you believe the Fox News commentator / former Gingrich advisor who puts out some crackpot theory that raising rates won’t lower inflation.

you do you.

Do you have anything substantive to say about the "Fox News contributor", or are you all ad hominem?

(rhetorical question)

Show me data that consumption is somehow out of the ordinary.

Are people spending too much money on food and energy? Because that's sort of your implication.

Also, how does raising interest rates cut down on the amount of cash in the economy? Oh, it doesn't you say? What a surprise.

And yes the Fed does control the money supply, not by raising/lowering rates, but by their market activity which they do in conjunction with rate changes. They are currently selling bonds as part of a quantitative tightening. 

 https://www.stlouisfed.org/-/media/project/frbstl/stlouisfed/files/pdfs/publications/pub_assets/pdf/re/2013/b/reader_exchange.pdf

https://www.marketplace.org/2022/04/06/the-fed-will-sell-some-of-the-bonds-its-been-buying-in-an-effort-to-cool-the-economy/

It's fine to not know about this stuff, but when you don't know about it and yet you're still certain they're doing it all wrong, that's suboptimal. 


Smedley said:

drummerboy said:

Smedley said:

drummerboy said:

jimmurphy said:

You keep believing you’re smarter than all the experts. Must be nice to be that confident despite having no idea of an alternative.

no, I simply believe other experts that have valid concerns. Raising interest rates works when there's too much money sloshing around in the economy. That does not appear to be the problem right now.


what planet have you lived on these past couple years? Extraordinarily accommodative monetary policy. Massive fiscal stimulus. 

“…the growth rate of all the dollars in circulation (“M2 Money Supply”) soared a historic record 27% in 2020-2021. To put that in perspective, that is the biggest jump in the money supply in America's history.”

https://www.wheaton.edu/academics/academic-centers/wheaton-center-for-faith-politics-and-economics/resource-center/articles/2021/understanding-the-money-supply/

But you believe the Fox News commentator / former Gingrich advisor who puts out some crackpot theory that raising rates won’t lower inflation.

you do you.

Do you have anything substantive to say about the "Fox News contributor", or are you all ad hominem?

(rhetorical question)

Show me data that consumption is somehow out of the ordinary.

Are people spending too much money on food and energy? Because that's sort of your implication.

Also, how does raising interest rates cut down on the amount of cash in the economy? Oh, it doesn't you say? What a surprise.

And yes the Fed does control the money supply, not by raising/lowering rates, but by their market activity which they do in conjunction with rate changes. They are currently selling bonds as part of a quantitative tightening. 

 https://www.stlouisfed.org/-/media/project/frbstl/stlouisfed/files/pdfs/publications/pub_assets/pdf/re/2013/b/reader_exchange.pdf

https://www.marketplace.org/2022/04/06/the-fed-will-sell-some-of-the-bonds-its-been-buying-in-an-effort-to-cool-the-economy/

It's fine to not know about this stuff, but when you don't know about it and yet you're still certain they're doing it all wrong, I'm afraid that's suboptimal. 

do you read what you link to?

your second link explains that the effect of selling bonds is to raise interest rates. so we're back to where we started from.

you still haven't explained how raising interest rates will reduce spending on food and energy.


drummerboy said:

Are we currently overspending on food? Is there too much demand? Or is there some slack?

Are we binging on restaurant food? Grocery stores?

How does raising interest rates affect the amount of money someone allocates to food? Will people go to restaurants less because their credit card rate goes up x percent?

I just don't see the mechanism here. I don't see that demand is out of whack.

(all of the above applies to energy too)

Asked and answered.


drummerboy said:


you still haven't explained how raising interest rates will reduce spending on food and energy.

Let me be really, really clear. 

RAISING INTEREST RATES WILL NOT REDUCE SPENDING ON FOOD AND ENERGY..

But people buy much more than food and energy.


jimmurphy said:

drummerboy said:


you still haven't explained how raising interest rates will reduce spending on food and energy.

THEY WONT FOR THE UMPTEENTH TIME.

People buy more than food and gas.

ok, so what inflation factors will you be spending less on because interest rates rise?

personally, I don't see any of my spending habits changing.


drummerboy said:

ok, so what inflation factors will you be spending less on because interest rates rise?

personally, I don't see any of my spending habits changing.

It's not all about you.

Are you buying a house? 

A car?

Other Durable goods?

Furniture?

Clothes?

Anything on credit?

Many other people besides you are buying these things.

Edited to add: If you ae not buying these things or servicing variable rate debt, then you will be unaffected by rises in interest rates.   

If you are saver, your yield will go up.


jimmurphy said:

drummerboy said:


you still haven't explained how raising interest rates will reduce spending on food and energy.

Let me be really, really clear. 

RAISING INTEREST RATES WILL NOT REDUCE SPENDING ON FOOD AND ENERGY..

But people buy much more than food and energy.

This. 

Raising rates is a blunt instrument. It's not surgical or tactical. It addresses some causes of inflation but not others. It also can cause collateral damage, in the job market for example. 

So while it's not perfect, raising rates lowers inflation. And given what a destructive force inflation is, inflation needs to be lowered. So rates need to go higher.


jimmurphy said:

drummerboy said:

ok, so what inflation factors will you be spending less on because interest rates rise?

personally, I don't see any of my spending habits changing.

It's not all about you.

Are you buying a house? 

A car?

Other Durable goods?

Furniture?

Clothes?

Anything on credit?

Many other people besides you are buying these things.

Edited to add: If you ae not buying these things or servicing variable rate debt, then you will be unaffected by rises in interest rates.   

If you are saver, your yield will go up.

gah.

I'm confusing myself and asking the wrong questions.

The main question is whether current inflation is being caused by excessive demand or inadequate supply.

I have not seen evidence of excessive demand - so how can dampening demand lower inflation?


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