Inflation Scaremongering

But MY ignorant comments are essentially a recitation of what the Federal Reserve is doing right now. Raising rates aggressively to tame inflation. 

So if you're calling my comments voodoo economics and a crock, you're calling current Fed policy voodoo economics and a crock, because there's no separation between the two. 


And you haven't even said what you think the Fed should or should not do, you ve only urinated on my comments, as is your m.o.

but, I assume you think the Fed should cut rates rather than raise rates. You know who else wanted the Fed to cut rates? Donald J. Trump.

https://www.reuters.com/article/us-usa-fed-trump/trump-heaps-pressure-on-fed-and-its-chairman-powell-to-cut-rates-idUSKCN1VB1I2

Who knew you were a closet Trump fan?


Smedley said:

And you haven't even said what you think the Fed should or should not do, you ve only urinated on my comments, as is your m.o.

but, I assume you think the Fed should cut rates rather than raise rates. You know who else wanted the Fed to cut rates? Donald J. Trump.

https://www.reuters.com/article/us-usa-fed-trump/trump-heaps-pressure-on-fed-and-its-chairman-powell-to-cut-rates-idUSKCN1VB1I2

Who knew you were a closet Trump fan?

What an a$$. Your comment that 8% is the same as 80%, or whatever BS you were spewing, was the ignorant BS I was  referring to.

As for you guesstimating what I believe, it is laughable. I absolutely do NOT believe the Fed should cut rates. As much as I hate to do it, I agree with sbenois' comment earlier that they started too late. Tightening rates is the ONLY tool they have, so continuing the process is also the ONLY thing they can do. Should they slow the hikes down a bit? Possibly.

And accusing someone of being a closet Trump fan is laughable, especially for you.


Wow you actually offered more than just Statler/Waldorf spitballs. Nice to see.


I don't understand supporting the Fed's actions just because it's the only action they can take.

Maybe that action is completely inappropriate and would do more harm than good - which is certainly what it looks like.

To say that the Fed waited too long also doesn't make any sense either. Maybe someone could explain why, if rate hikes don't seem to be working now, why they would have worked a year ago.

Also, the issue of Dem vs. Republican appointments to the Fed is a complete non-issue. Once a person is "qualified" to be on the Fed, they're pretty much just financial industry insiders with the same mind-set. Party doesn't matter.


drummerboy said:

I don't understand supporting the Fed's actions just because it's the only action they can take.

Maybe that action is completely inappropriate and would do more harm than good - which is certainly what it looks like.

To say that the Fed waited too long also doesn't make any sense either. Maybe someone could explain why, if rate hikes don't seem to be working now, why they would have worked a year ago.

Also, the issue of Dem vs. Republican appointments to the Fed is a complete non-issue. Once a person is "qualified" to be on the Fed, they're pretty much just financial industry insiders with the same mind-set. Party doesn't matter.

If one thinks 8% inflation is fine to just leave be, cross fingers and hope it resolves itself, I can see not understanding supporting the Fed’s actions bc it’s the only action they can take.

But if one thinks 8% inflation is not fine, then there’s no option other than to support the Fed’s actions, really. Because, well, it’s the only action they can take. 

And as for your D v. R point, I don’t disagree, but just note you started this as a Politics thread to begin with, and you reopened the same thread after 3.5 months. If you wanted an apolitical discussion about the Fed’s response to interest rates, you should have started a finance thread on the topic.


Smedley said:

If one thinks 8% inflation is fine to just leave be, cross fingers and hope it resolves itself, I can see not understanding supporting the Fed’s actions bc it’s the only action they can take.

But if one thinks 8% inflation is not fine, then there’s no option other than to support the Fed’s actions, really. Because, well, it’s the only action they can take. 

And as for your D v. R point, I don’t disagree, but just note you started this as a Politics thread to begin with, and you reopened the same thread after 3.5 months. If you wanted an apolitical discussion about the Fed’s response to interest rates, you should have started a finance thread on the topic.

Your comment about D v R is ridiculous. You don't think the Fed's actions are political? Everything's political. Political does mean partisan.

Anyway, the thread was started way before anyone was talking about Fed action, so your comment makes even less sense.

And yet again,  it's just kind of crazy to support the Fed's actions simply because it's the only action they could take. Maybe they should have taken no action. Maybe that was the correct action.


drummerboy said:

Yeah, it's not wage hikes. Wages are dropping.

https://jabberwocking.com/wages-were-down-once-again-in-september/

If the idea is that rising wages can goad even faster increases in prices — an inflationary spiral, as it’s called, that wages can’t keep up with — what light are inflation-adjusted wages supposed to shed?


DaveSchmidt said:

drummerboy said:

Yeah, it's not wage hikes. Wages are dropping.

https://jabberwocking.com/wages-were-down-once-again-in-september/

If the idea is that rising wages can goad even faster increases in prices — an inflationary spiral, as it’s called, that wages can’t keep up with — what light are inflation-adjusted wages supposed to shed?

If they're going down, how can they be applying upward pressure on inflation?


drummerboy said:

If they're going down, how can they be applying upward pressure on inflation?

Wages are going down in that chart because they’re adjusted for inflation. They’ve been rising, but inflation has been rising faster.

The worry is that wages and prices continue to prod each other — with inflation keeping the upper hand — until the pressures develop into a self-reinforcing spiral that’s even harder to reverse.

Unadjusted wage growth:

https://www.atlantafed.org/chcs/wage-growth-tracker?panel=1


DaveSchmidt said:

drummerboy said:

If they're going down, how can they be applying upward pressure on inflation?

Wages are going down in that chart because they’re adjusted for inflation. They’ve been rising, but inflation has been rising faster.

The worry is that wages and prices continue to prod each other — with inflation keeping the upper hand — until the pressures develop into a self-reinforcing spiral that’s even harder to reverse.

Unadjusted wage growth:

https://www.atlantafed.org/chcs/wage-growth-tracker?panel=1

Fine. Point taken.

But the point regarding inflation pressures is whether wage growth is the (or a) dominant factor. (and consequently, is it an effective target for the Fed?)

If it were just the case that inflation is just keeping pace with, or responding to, wage growth, that doesn't explain record corporate profits. Shouldn't profits be a lot flatter?


drummerboy said:

But the point regarding inflation pressures is whether wage growth is the (or a) dominant factor. (and consequently, is it an effective target for the Fed?)

If it were just the case that inflation is just keeping pace with, or responding to, wage growth, that doesn't explain record corporate profits. Shouldn't profits be a lot flatter?

Sorry, I’m only just smart enough to know how to look up when the members of the Federal Open Market Committee were appointed and to attempt a brief explanation of adjusted wages and inflationary spirals.


DaveSchmidt said:

drummerboy said:

If they're going down, how can they be applying upward pressure on inflation?

Wages are going down in that chart because they’re adjusted for inflation. They’ve been rising, but inflation has been rising faster.

The worry is that wages and prices continue to prod each other — with inflation keeping the upper hand — until the pressures develop into a self-reinforcing spiral that’s even harder to reverse.

Unadjusted wage growth:

https://www.atlantafed.org/chcs/wage-growth-tracker?panel=1

Thank you for showing us that drummerboy is, once again, quite wrong.

cheese

Smedley said:

DaveSchmidt said:

drummerboy said:

If they're going down, how can they be applying upward pressure on inflation?

Wages are going down in that chart because they’re adjusted for inflation. They’ve been rising, but inflation has been rising faster.

The worry is that wages and prices continue to prod each other — with inflation keeping the upper hand — until the pressures develop into a self-reinforcing spiral that’s even harder to reverse.

Unadjusted wage growth:

https://www.atlantafed.org/chcs/wage-growth-tracker?panel=1

Thank you for showing us that drummerboy is, once again, quite wrong.

cheese

yeah, not really. my main point still stands, which is that wages are not a major factor.

show me where wages are a dominant factor in our inflation and then you can tell me I'm wrong.


Smedley said:

Thank you for showing us that drummerboy is, once again, quite wrong.

There’s nothing to it. DB’s difficulties with math and charts are famously transparent.


The better policy would of course be for the US government to push that magic lever that makes sufficient goods appear to meet all the demand. Lacking such a lever...

Ok, not entirely fair. In some markets, for instance, there's definitely a government lever, though generally it works the opposite way -- government policies that constrict housing supply, for instance, certainly make housing more expensive. In general, I'm among that small minority that would like to see many of those policies loosened or removed. But that's a longer-term issue that doesn't do much about specific inflation now, which is of course the problem not just with housing, but broadly -- there's not a lot of tools that can quickly ramp up supply, so generally governments are left with tools that target demand.


PVW said:

The better policy would of course be for the US government to push that magic lever that makes sufficient goods appear to meet all the demand. Lacking such a lever...

Ok, not entirely fair. In some markets, for instance, there's definitely a government lever, though generally it works the opposite way -- government policies that constrict housing supply, for instance, certainly make housing more expensive. In general, I'm among that small minority that would like to see many of those policies loosened or removed. But that's a longer-term issue that doesn't do much about specific inflation now, which is of course the problem not just with housing, but broadly -- there's not a lot of tools that can quickly ramp up supply, so generally governments are left with tools that target demand.

The problem is not lack of goods.


drummerboy said:

PVW said:

The better policy would of course be for the US government to push that magic lever that makes sufficient goods appear to meet all the demand. Lacking such a lever...

Ok, not entirely fair. In some markets, for instance, there's definitely a government lever, though generally it works the opposite way -- government policies that constrict housing supply, for instance, certainly make housing more expensive. In general, I'm among that small minority that would like to see many of those policies loosened or removed. But that's a longer-term issue that doesn't do much about specific inflation now, which is of course the problem not just with housing, but broadly -- there's not a lot of tools that can quickly ramp up supply, so generally governments are left with tools that target demand.

The problem is not lack of goods.

and this is possible in many consumer categories because of consolidations over the past few decades. Some big manufacturers and retailers don't have much competition. 


drummerboy said:

The problem is not lack of goods.

For the understandably video-averse PVW, here’s the research by the macroeconomist whom Porter asked to testify.

https://rooseveltinstitute.org/publications/prices-profits-and-power/

From the abstract:

First, we see broad markup increases across many types and sizes of firms, suggesting a demand side of the story. Second, the data points to a historically unique movement of markups between industries in 2021, suggesting a supply story. Lastly, we find that, adjusting for size, pre-pandemic markups are a strong predictor of the increase in markups during 2021, suggesting a role for market power as an explanatory driver of inflation.


And the study’s final line:

In addition to showing that both demand and supply factors are behind the increases in markups, this evidence suggests that firms facing less competition before the pandemic have been able to take advantage of the one-time demand-and-supply shifts to increase their markups since, suggesting market power to be a third explanatory factor in inflation in 2021.


But it’s not a simple story of businesses driving up prices to earn more money, Mike Konczal, one of the paper’s authors, who is the institute’s director of macroeconomic analysis, told me. “Is greed the sole or main reason for inflation?” he asked. “I’d say no. It’s part of the mix of explanations that should be under consideration.”

***

I asked Konczal what he thought the Roosevelt paper implies for public policy. He said it shows that “there is room for these profit margins to come down” through competition, antitrust enforcement or presidential jawboning (which he called “the bully pulpit”). He said there are already signs in national accounts data — not included in the Roosevelt paper — that profit margins retreated a bit in the first quarter of this year from their recent peaks and may shrink more. The paper also supports the case for legislative and administrative actions to open bottlenecks in supply chains and for the Federal Reserve to be “more patient and less erratic” in raising interest rates, he said.

Are Large Corporate Profit Margins Causing Inflation? (Peter Coy, NYT)


DaveSchmidt said:

drummerboy said:

The problem is not lack of goods.

For the understandably video-averse PVW, here’s the research by the macroeconomist whom Porter asked to testify.

https://rooseveltinstitute.org/publications/prices-profits-and-power/

From the abstract:

First, we see broad markup increases across many types and sizes of firms, suggesting a demand side of the story. Second, the data points to a historically unique movement of markups between industries in 2021, suggesting a supply story. Lastly, we find that, adjusting for size, pre-pandemic markups are a strong predictor of the increase in markups during 2021, suggesting a role for market power as an explanatory driver of inflation.

Unfortunately, the excerpts you've provided do not accurately reflect what's in the video. Porter's point, which Konczal agreed to, is that the biggest driver of inflation, at 54%, is corporate profits, not supply issues

Avoiding videos doesn't always make sense. (Though I would have preferred a clip of the Congressional testimony only, without the talking head.)

Also, re the excerpts - Konczal comes across as a bit weak, with a lot of weaselly language (suggesting, points to), whereas in the video, faced with some straight-up questions he was a lot more definitive, 


Do you think future economists are more likely to cite the video, or the paper, as they either build upon or rebut these findings?


PVW said:

Do you think future economists are more likely to cite the video, or the paper, as they either build upon or rebut these findings?

Well, the data cited in the video is from the paper, I believe. The person being questioned in the video is Konczal. He's being questioned on the paper.

Katie Porter doesn't generally pull numbers out of thin air. (but, not having seen the video, you don't know that either of those people were in it.)

Anyway, the question is not will they cite the video, but will they cite his congressional testimony, which is what the video is an excerpt of.


drummerboy said:

Unfortunately, the excerpts you've provided do not accurately reflect what's in the video.

Here’s the source of Porter’s chart, from the Economic Policy Institute:

https://www.epi.org/blog/corporate-profits-have-contributed-disproportionately-to-inflation-how-should-policymakers-respond/

And here’s one small excerpt, referring to the 38% bar (vs. 54% for corporate profits):

Nonlabor inputs—a decent indicator for supply-chain snarls—are also driving up prices more than usual in the current economic recovery.

That appears to jibe better with the Konczal-Luciani research suggesting (pardon the circumspection) a combination of factors than it does with “The problem is not lack of goods.”


drummerboy said:

Well, the data cited in the video is from the paper, I believe. The person being questioned in the video is Konczal. He's being questioned on the paper.

That’s what I thought, too, but I discovered I was wrong. The chart is from a different source and paper, linked above. Score one for looking beyond a video.


DaveSchmidt said:

drummerboy said:

Well, the data cited in the video is from the paper, I believe. The person being questioned in the video is Konczal. He's being questioned on the paper.

That’s what I thought, too, but I discovered I was wrong. The chart is from a different source and paper, linked above. Score one for looking beyond a video.

Yes - agreed.


Yes, they're up. Undistributed earnings are way up and dividends are slightly down.

Interesting that most of what you hear in the financial press is about earnings misses lately.

https://www.bea.gov/data/income-saving/corporate-profits


source:
tradingeconomics.com


jimmurphy said:

Interesting that aggregate corporate earnings do not seem to be unusually high.

https://www.bea.gov/data/income-saving/corporate-profits


source: tradingeconomics.com

not according to all of this reporting


DaveSchmidt said:

drummerboy said:

Unfortunately, the excerpts you've provided do not accurately reflect what's in the video.

Here’s the source of Porter’s chart, from the Economic Policy Institute:

https://www.epi.org/blog/corporate-profits-have-contributed-disproportionately-to-inflation-how-should-policymakers-respond/

And here’s one small excerpt, referring to the 38% bar (vs. 54% for corporate profits):

Nonlabor inputs—a decent indicator for supply-chain snarls—are also driving up prices more than usual in the current economic recovery.

That appears to jibe better with the Konczal-Luciani research suggesting (pardon the circumspection) a combination of factors than it does with “The problem is not lack of goods.”

Yes, I overstated my case.

But my overriding point in this thread has been that the Fed is using a tool that is neglecting the major effects on inflation. Neither profit-taking or supply-chain issues will be impacted by raising interest rates.

(I know. not your area of expertise. You can ignore this.)


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