U.S. inflation likely to remain elevated for up to four years – BofA(reuters.com)
reuters.com
U.S. inflation likely to remain elevated for up to four years – BofA
https://www.reuters.com/business/global-markets-bofa-urgent-2021-06-25/
143 comments
Conveniently until Biden is out of office. If he is reelected, I'm sure it'll actually remain elected another four years in a transitory fashion according to the experts until it can be blamed on the GOP as usual
Precisely. I even predict rates will lower under current levels before this administration heads out.
I'm sticking to my "Who knows what inflation will do / be like." when after the 2008 financial crisis and subsequent stimulus it was pretty much accepted there would be a fair amount of inflation (ranging views from 'yes' to your typical end times predictions) and .... not so much.
Yeah this is what has been really bothering me about the inflation narrative being pushed everywhere. The same people crying about inflation now have been "warning" about it forever and have been consistently wrong.
I'm totally open to the idea that "things are different this time" but an inflationary spike after the deflationary collapse of COVID isn't surprising at all. I definitely see some prices increasing but most of them are the same or less. It's really difficult to untangle what is inflation and what is just a lingering supply shock from everything being shut down. I just wish the inflation people would have more humility in their predictions.
I'm totally open to the idea that "things are different this time" but an inflationary spike after the deflationary collapse of COVID isn't surprising at all. I definitely see some prices increasing but most of them are the same or less. It's really difficult to untangle what is inflation and what is just a lingering supply shock from everything being shut down. I just wish the inflation people would have more humility in their predictions.
Yeah crawling out of a pandemic, it's kinda new territory.
Had you described the actual pandemic to some folks before it happened I would think they would have predicted things would be way worse than they are.
I'm kinda surprised things are the way they are. I would have expected serious economic disaster type stuff.
Had you described the actual pandemic to some folks before it happened I would think they would have predicted things would be way worse than they are.
I'm kinda surprised things are the way they are. I would have expected serious economic disaster type stuff.
I'd like for history to repeat itself but the economy is in a much different place now than it was post 2008. There simply is no way to know how things will go down.
I'd add that the economy is in a fantastically different place than it was 40 years ago, which is the last time inflation was a serious issue in this country.
U.S. Core CPI, which is thought to represent the real rate of inflation consumers experience is up 0.7% since April 2021 and 3.8% since May of 2020. This is the highest jump since 1992.
And yet, our inflation is only 5.3% since 2019 (2.6% yoy)
If we go back two years (because 2020 was certainly an abnormal year) and take a look at the trends, things don't seem so bad.
If we go back two years (because 2020 was certainly an abnormal year) and take a look at the trends, things don't seem so bad.
> There simply is no way to know how things will go down.
Which is..exactly what they are saying.
Which is..exactly what they are saying.
[deleted]
Investment bankers are not completely objective commentators. It's their interest to keep inflation down. (I'm not talking about asset prices but core inflation). If you want to see what markets really think, look at daily Treasury Real Yield Curve Rates https://www.treasury.gov/resource-center/data-chart-center/i...
Real yields are negative.
ps. Fed changed their inflation targeting. The target is still 2% core PCE but now it's average targeting. They will allow inflation go above 2% and start to act only after the average inflation reaches 2% (over some unspecified timeline).
I believe Fed will have real fight to keep the inflation not going below 2% for the reasons Hartnett probably knows but don't wan to say.
ps. Fed changed their inflation targeting. The target is still 2% core PCE but now it's average targeting. They will allow inflation go above 2% and start to act only after the average inflation reaches 2% (over some unspecified timeline).
I believe Fed will have real fight to keep the inflation not going below 2% for the reasons Hartnett probably knows but don't wan to say.
Several economists, including Paul Krugman, predicted low inflation. Printing money doesn't create inflation, circulating money does.
Notably, Krugman is not predicting low inflation this time around.
Notably, Krugman is not predicting low inflation this time around.
The problem I have with this take is that you're looking at 2008 as a discrete event with a discrete recovery. Look at a chart of the national debt (which is what we have to monetize, which is the whole reason for inflation) and you'll see that we weren't able to reduce debt meaningfully at any point over the past 15 years.
If this is still the same event then all those people still could be right.
If this is still the same event then all those people still could be right.
I think I see what you're saying, but there's no real obvious end ... may not ever be if it is all one event.
Most folks I think read these as predictions of pretty soon to come events... not "never mind we meant over the next 20 ... 50 ... 100 years".
And at that point that's not 'right' IMO.
Most folks I think read these as predictions of pretty soon to come events... not "never mind we meant over the next 20 ... 50 ... 100 years".
And at that point that's not 'right' IMO.
Inflation happens when money grows more than economic activity.
National debt is only one piece of that. Banks could also raise (private loan) interest rates, or be forced to maintain more reserves, leading to fewer loans.
National debt is only one piece of that. Banks could also raise (private loan) interest rates, or be forced to maintain more reserves, leading to fewer loans.
Inflation happens when demand exceed supply. Interest rates have to be raised when we run out of the ability to expand production capacity (primarily by hiring people) to catch up with demand. Having enough work to hire everyone is not a bad thing.
Biggest problem I see: Is low inflation actually good for normal people? The financial crisis of 2008 was an absolute slog, lots of normal people suffered... BUT inflation was low and stocks soared -- but the blowback was significant.
Low inflation (far below 2%) actually makes it easier for stocks to soar as people are willing to save more money which then subsequently gets lent out in a way that ends up in housing and stock valuations. The lower inflation, the more desperate the central bank and the more exotic the policies it has to come up with. Decent inflation makes it easier to manage the economy as people cease selfish behavior.
Inflation increases asset prices and increases inequality. Deflation reduces asset prices and reduces inequality.
Keynsians do not like deflation because people save money during a deflationary period, and saving money reduces aggregate demand. They will tell you that deflation is equivalent to a recession for that reason, and point to the great depression as an example.
I would point out that after the deflationary period of the great depression, the US became a much more equitable society, and was followed by three decades of healthy growth (until bretton woods ended...).
Money has a natural ebb-and-flow. When people have no savings, they are less willing to part with money. The price of money (the interest rate of borrowing) increases. When people have lots of savings, they are more willing to lend it out. The price of money decreases.
These ebbs-and-flows were small when commodities stood for money. Fiat currency allows banks to practice price controls with money, so the ebbs-and-flows are more extreme, and last for longer periods of time.
Deflation rewards those with savings, because their savings can purchase more over time. Inflation rewards borrowing, because borrowers can repay a loan with money that is worth less. Understand, then, that the US government is a debtor. A deflationary period would be intolerable to them, because they would not be able to make payments on their debt. Expect inflation to continue apace, regardless of its effect on normal people.
Keynsians do not like deflation because people save money during a deflationary period, and saving money reduces aggregate demand. They will tell you that deflation is equivalent to a recession for that reason, and point to the great depression as an example.
I would point out that after the deflationary period of the great depression, the US became a much more equitable society, and was followed by three decades of healthy growth (until bretton woods ended...).
Money has a natural ebb-and-flow. When people have no savings, they are less willing to part with money. The price of money (the interest rate of borrowing) increases. When people have lots of savings, they are more willing to lend it out. The price of money decreases.
These ebbs-and-flows were small when commodities stood for money. Fiat currency allows banks to practice price controls with money, so the ebbs-and-flows are more extreme, and last for longer periods of time.
Deflation rewards those with savings, because their savings can purchase more over time. Inflation rewards borrowing, because borrowers can repay a loan with money that is worth less. Understand, then, that the US government is a debtor. A deflationary period would be intolerable to them, because they would not be able to make payments on their debt. Expect inflation to continue apace, regardless of its effect on normal people.
If stocks soared, then you’re missing inflation. Risk adjusted, an all market stock index fund should never return more than 4% above inflation (ignoring that even 4% must also include risk). So, as a general rule, whatever your stock portfolio is doing, inflation is roughly annual return minus 4%.
By my accounts inflation has actually been double or triple the fed’s 2% target for the better part of a decade.
By my accounts inflation has actually been double or triple the fed’s 2% target for the better part of a decade.
> all market stock index fund should never return more than 4% above inflation
why? what is special about 4%?
why? what is special about 4%?
It's sort of a historic adjusted return for annualized stock data. It also roughly matches a healthy 3% GDP growth of a "developed" country and still have some room for added risk.
If you want to sort of gross rank investments in terms of returns, I was taught in my econ classes, you first look at government bonds as the lowest risk, and expect to make less than 0.5% return after inflation. Next you look at the company bond market where you can expect to 0.5%-1.5% but take on considerably more risk. Then you look at company stock markets where you can expect to make 3-4% after inflation but at the cost of even more risk. After that you start getting into things like junk territory, where you can make a killing, but more likely you'll lose your investment.
These numbers may not hold in any given year, and certainly don't apply to markets that are able to sustain greater than 3% GDP growth for multiple decades in a row (usually because they are able to play "catch up" technologically). But once you're at the top of the S curve, competition sort of drives down the returns you can realistically get in investment markets.
If you want to sort of gross rank investments in terms of returns, I was taught in my econ classes, you first look at government bonds as the lowest risk, and expect to make less than 0.5% return after inflation. Next you look at the company bond market where you can expect to 0.5%-1.5% but take on considerably more risk. Then you look at company stock markets where you can expect to make 3-4% after inflation but at the cost of even more risk. After that you start getting into things like junk territory, where you can make a killing, but more likely you'll lose your investment.
These numbers may not hold in any given year, and certainly don't apply to markets that are able to sustain greater than 3% GDP growth for multiple decades in a row (usually because they are able to play "catch up" technologically). But once you're at the top of the S curve, competition sort of drives down the returns you can realistically get in investment markets.
I feel like that question raises the issue of trying to orchestrate some things that can't be all orchestrated at once.
Like "Well I'd like to see moderate inflation but control the stock market, oh and ..."
Usually I think governments just flip a lever in hopes of getting one thing done, maybe, hopefully.
Like "Well I'd like to see moderate inflation but control the stock market, oh and ..."
Usually I think governments just flip a lever in hopes of getting one thing done, maybe, hopefully.
2008 is barely a blip on on the chart when looking at the scale of what was done in the last year.
"Setup the goalposts but prepare for more"
They've predicted 20 of the last 1 inflation rises...
There's something different from the last 19 but I can't quite put my finger on what's different about it :thinking:
I think as long as China, Japan, Saudi etc continue buying USD as quickly as we print them there won't be any noticeable bump in inflation.
Whether they keep doing that is another question...
Whether they keep doing that is another question...
What does BoA stand to gain from increased inflation expectations?
Exactly. Bank economists needs to be treated like HR: branches of the business that exist to support and protect the business.
BofA by rights should not even exist. Here's why we should not care about anything they predict:
https://www.reuters.com/article/us-banks-idUSTRE50F1Q7200901...
https://www.reuters.com/article/us-banks-idUSTRE50F1Q7200901...
Nothing. He want's to talk inflation down by taking scary talk.
High core PCE hurts investors and helps those who are in debt.
High core PCE hurts investors and helps those who are in debt.
"investors" includes wage earners investing their labor for wages, and also welfare recipients, who lack negotiating power to get cost of living increases.
Debtors are either homeowners or other leverages investors who are more investors than debtors, or poor folks who are going to declare bankruptcy before paying back loans.
Inflation doesn't help most people. It's a wrench in the works.
Debtors are either homeowners or other leverages investors who are more investors than debtors, or poor folks who are going to declare bankruptcy before paying back loans.
Inflation doesn't help most people. It's a wrench in the works.
> Inflation doesn't help most people.
Moderate inflation helps the economy and the people after delay.
Welfare benefits have cost-of-living adjustments. Inflation does not affect normal investments. The real return reflects profits, not inflation. Institutional investors use debt as a hedge.
Moderate inflation helps the economy and the people after delay.
Welfare benefits have cost-of-living adjustments. Inflation does not affect normal investments. The real return reflects profits, not inflation. Institutional investors use debt as a hedge.
Inflation doesn't help most people... until we reach full employment and it helps literally everyone.
Nothing. If the BoA analyst makes lots of bad calls, he loses his job and has to find something else to do.
This is not related to anything else that BoA does.
This is not related to anything else that BoA does.
Anyone else get a "2% inflation raise" this year? Have you brought up rising inflation and pointed out that raise doesn't match reality? Did your employer agree to give you an extra couple percent?
I like my job and my employer but after getting that pittance after last years bs and now high inflation I'm not sure it's worth arguing for a bigger bump retroactively (showing my hand when I don't get it) and instead I think it might be easier to just find a new job.
I like my job and my employer but after getting that pittance after last years bs and now high inflation I'm not sure it's worth arguing for a bigger bump retroactively (showing my hand when I don't get it) and instead I think it might be easier to just find a new job.
Statistically, you'll make more money if you switch jobs every 2 years and right now there's huge demand for talent, so it's probably a good idea to switch.
> right now there's huge demand for talent
Not everybody on HN is an American tech worker.
Not everybody on HN is an American tech worker.
New jobs paying more is inflation. You're supposed to get a new one if the old one doesn't give you a raise. It's a way to allocate workers efficiently.
This might be true in tech world but in local economies does not make sense. How can folks “switch jobs” every two years when there may not be equivalent opportunities in many cases?
I’d also like to point out that while many tech folks are just as fickle with their jobs as they are with programming languages, there is a lot of benefit to holding one’s post and trying to build a better company, too.
That being said at some places stagnation can happen and then it’s obvious to switch jobs, but stability can offer many benefits over arbitrary switching for more money.
I’d also like to point out that while many tech folks are just as fickle with their jobs as they are with programming languages, there is a lot of benefit to holding one’s post and trying to build a better company, too.
That being said at some places stagnation can happen and then it’s obvious to switch jobs, but stability can offer many benefits over arbitrary switching for more money.
> I’d also like to point out that while many tech folks are just as fickle with their jobs as they are with programming languages, there is a lot of benefit to holding one’s post and trying to build a better company, too.
Why? Why should I spent my time/energy at a company that doesn't pay me what I'm worth? I've played this game before and it's not worth it. I've been on committees, I've organized events for work, I've worked on building team/company moral, written surveys and studied survey results, planned meals/outings, etc. That company did not reward that behavior at all and not matter how hard I pushed they wouldn't move on certain things (remote work being top of list but also treating all employees with dignity/respect). All I got was tiny "cost of living" pay increases (3% or less) even as my contributions increased at a much faster rate. I left that job and got a very sizable "raise" and I recommend other people do the same thing. You (often) have zero equity in the company and thus zero incentive to change it for the better, life is way to short to toil away for someone else's gain when they don't reward you for your effort.
Why? Why should I spent my time/energy at a company that doesn't pay me what I'm worth? I've played this game before and it's not worth it. I've been on committees, I've organized events for work, I've worked on building team/company moral, written surveys and studied survey results, planned meals/outings, etc. That company did not reward that behavior at all and not matter how hard I pushed they wouldn't move on certain things (remote work being top of list but also treating all employees with dignity/respect). All I got was tiny "cost of living" pay increases (3% or less) even as my contributions increased at a much faster rate. I left that job and got a very sizable "raise" and I recommend other people do the same thing. You (often) have zero equity in the company and thus zero incentive to change it for the better, life is way to short to toil away for someone else's gain when they don't reward you for your effort.
Of course each situation can be unique. I wouldn’t recommend staying at any place that overworks employees or unfairly compensates them.
I am referring to tech folks arbitrarily switching jobs JUST for a pay increase, every year or two years. What’s left behind many cases is in maintainable code where people shrug it off as “someone else’s problem.”
I am referring to tech folks arbitrarily switching jobs JUST for a pay increase, every year or two years. What’s left behind many cases is in maintainable code where people shrug it off as “someone else’s problem.”
There is an easy way for businesses to fix that though: Pay people more. If you compensate people for what they worth they will stay, if you don't they will leave. I don't think it's a good idea to shame people into staying in a job where they are being paid less than they could earn on the open market. Also why should I stay indebted to a company that won't/can't pay what I'm worth? Loyalty died a long time ago. There are no pensions or other incentives to stay and businesses lay people off at the first sign of trouble. If a business can fire or lay me off without warning then I'm not going to feel bad about leaving (and often giving 2-4 weeks notice).
I've never worked at a place that gave pay increases based on inflation.
I think debating inflation predictions for both the employer and employee could be an endless / counter productive and exhausting thing.
Probably better to make your case via the typical salary negotiation methods, discussing what you did, etc.
I think debating inflation predictions for both the employer and employee could be an endless / counter productive and exhausting thing.
Probably better to make your case via the typical salary negotiation methods, discussing what you did, etc.
> I think debating inflation predictions for both the employer and employee could be an endless / counter productive and exhausting thing.
Yes, and OP seems to be on the verge of a new approach - find a new job.
I’d also assume that inflation doesn’t hit the country evenly, and sectors, regions and individuals all experience it differently. The OP could be considerably better placed or worse off than the mean.
Yes, and OP seems to be on the verge of a new approach - find a new job.
I’d also assume that inflation doesn’t hit the country evenly, and sectors, regions and individuals all experience it differently. The OP could be considerably better placed or worse off than the mean.
I could be based on the most recently available data.
I mean, one of the main reasons we see so much inequality today is that workers haven't demanded inflation increases. The tactic of negotiating for it on merit is good, but it's good to have this as a fallback and to understand if your merit increase really is an increase or not even keeping pace.
I mean, one of the main reasons we see so much inequality today is that workers haven't demanded inflation increases. The tactic of negotiating for it on merit is good, but it's good to have this as a fallback and to understand if your merit increase really is an increase or not even keeping pace.
> I mean, one of the main reasons we see so much inequality today is that workers haven't demanded inflation increases.
Inflation increases are not increases.
Inflation increases are not increases.
Not sure why you are being downvoted. We are saying similar things. I think you just mean the real wage stays the same if you get an inflation adjustment. My point was without that adjustment (or an adjustment less than the inflation rate) the real wage decreases.
Not having inflation based pay raises is exactly equivalent to taking an automatic pay cut every year, which by your logic you only avoid if you "preformed well".
I think I'll pass.
I think I'll pass.
It's not a pay cut if you get a raise for .. some other reason.
I've just never seen 'inflation pay raise' as a policy.
I've just never seen 'inflation pay raise' as a policy.
You see it more in more traditional industries. My last job was public sector and the unionized workers had CPI somehow embedded into their contracts.
My new trendy tech company? No policies on pay whatsoever.
My new trendy tech company? No policies on pay whatsoever.
Yeah, we call it COLA (cost of living adjustment), and we get a bump every couple of years or so.
> I've just never seen 'inflation pay raise' as a policy.
They are pretty common.
They are pretty common.
Do they actually pick an inflation indicator and go by that?
I think it really depends.
I've seen big sector contracts (e.g. 10k-100k employees) with it built in for a fixed number of years. Presumably the negotiators talked through some indicators originally.
I've also seen several 'eh, on average it's about 2%" type giving leading to a 2% written into your comp.
I've also seen places give it but not in your contract; based on execs opinion I guess on what real cost-of-living was doing. I suppose that's plausibly as accurate as picking an index.
I've seen big sector contracts (e.g. 10k-100k employees) with it built in for a fixed number of years. Presumably the negotiators talked through some indicators originally.
I've also seen several 'eh, on average it's about 2%" type giving leading to a 2% written into your comp.
I've also seen places give it but not in your contract; based on execs opinion I guess on what real cost-of-living was doing. I suppose that's plausibly as accurate as picking an index.
I've seen inflation adjustments, but cost of living adjustments are far more common.
The two concepts are so intertwined they are often rolled together.
FWIW I've seen contracts with separate clauses (e.g. something like everyone gets 2%, if you live in this city or this city you also get a 5% col adjustment). The non-inflation aspect of c-o-l changes is usual housing related and regional, I think (or based on remoteness)
FWIW I've seen contracts with separate clauses (e.g. something like everyone gets 2%, if you live in this city or this city you also get a 5% col adjustment). The non-inflation aspect of c-o-l changes is usual housing related and regional, I think (or based on remoteness)
They are usually called something like "cost of living raise" but the meaning is the same.
The pay raise I expect is so much more than inflation. If I got less than 20% total comp increase at low numbers or less than $100k at high numbers, I’m assuming my performance is insufficient and I’m going to find a place to be more productive. At the point where we’re debating 2% increases, I don’t really care. I’m gone. You know it, I know it.
I’m not special. This is San Francisco as much as I know.
I’m not special. This is San Francisco as much as I know.
I got a nice speech about how the pandemic was hard on everyone and I should be happy with my 1.3% 'meritorious' raise.
=D
=D
If inflation is higher than your pay raise you know you can ask for more.
> Have you brought up rising inflation and pointed out that raise doesn't match reality?
But people aren't paid based on purchasing power, so what does inflation have to do with it?
Could be an interesting idea - you get paid 100,000 Big Macs per year. Changes with their price.
But that's not how things actually are.
But people aren't paid based on purchasing power, so what does inflation have to do with it?
Could be an interesting idea - you get paid 100,000 Big Macs per year. Changes with their price.
But that's not how things actually are.
[deleted]
It's a workers market. Go get yourself a 20% raise and don't over think it.
Where/how?
I feel like this is easier said than done.
I feel like this is easier said than done.
Go to a competitor. It can be a farce sometimes, when people from two different companies across the street essentially just replace each other for 20% more, but doing the exact same job. And then two years later they repeat and switch chairs again for another 20%.
Maybe there's some benefit to the companies in having stuff like this happen (learning a bit more about the competition), but the negative consequences that result from the loss of talent and internal knowledge seem to be avoidable in this situation if they just worked things out over pay.
Maybe there's some benefit to the companies in having stuff like this happen (learning a bit more about the competition), but the negative consequences that result from the loss of talent and internal knowledge seem to be avoidable in this situation if they just worked things out over pay.
My company will not hire people back after they leave.
Just go looking for a different job at all the top companies in your area. Some of them will offer you a job, and when negotiating pay, ask for 20% more than what you're making now. Simple as that.
This is a lot harder than you make it sound. I have worked in sectors where people would worry that asking that question would terminate the interview - hospitality for one.
If the new job doesn't pay more than the old one then why bother switching?
What do you have to lose? If there are a lot of companies interviewing (high demand), you just interview at a couple of them. When they ask how much you expect, tell them 20% more than what you are making now. If they say that can't be done, just politely say that it doesn't make sense for you to join at that time, but perhaps in the future another role will open up.
Then, at least you can go home knowing that you are already making what the market can bear, and you aren't leaving money on the table.
Then, at least you can go home knowing that you are already making what the market can bear, and you aren't leaving money on the table.
Even that's tricky in some markets. Plus I don't want my current job to fire me if they find out I'm looking.
"that asking that question"
Asking what question?
Asking what question?
Asking for a higher wage.
"I have worked in sectors where people would worry that asking that question would terminate the interview"
I did not understand this, and still don't.
If there's an advertised wage - $x/hr - and you know this going in, yet ask for more, I can see an interview being terminated.
If there's not an advertised wage, and I ask for something ($x/hr) I can't see how that would lead to an interview being terminated.
I did not understand this, and still don't.
If there's an advertised wage - $x/hr - and you know this going in, yet ask for more, I can see an interview being terminated.
If there's not an advertised wage, and I ask for something ($x/hr) I can't see how that would lead to an interview being terminated.
Yes, and it doesn’t work in all sectors or all places, but it does in tech sector in the US.
So my area doesn't have very many good companies for tech workers. There aren't a lot of tech jobs open here for intermediate devs. Most of the ones I do see are showing estimated salaries 10-20% less than mine already.
It is, but it's still possible and generally easier now than times in the past.
I'm wondering what will happen later this year in my review. I'm slated for a below average review, so I expect I'll get 1-2% for a real pay cut.
No raise last year ("because of COVID"). No raises communicated yet this year, and they should be taking effect on July 1 if history holds.
>it has been annualising at 8% so far in 2021, Bofa said in the note
Sounds like your inflation raise would need to be even higher than 2%.
Sounds like your inflation raise would need to be even higher than 2%.
The headline is technically correct, but the body of the article is much less alarming:
> Hartnett thinks inflation will remain in the 2%-4% range over the next 2-4 years.
> Hartnett thinks inflation will remain in the 2%-4% range over the next 2-4 years.
Self-fulfilling prophecy
When it comes to predicting future inflation, TIPS [1] is the thing to look at [2] - they are inflation-indexed bonds issued by the U.S. Treasury, and should track closely to what the market believes the average inflation will be over the next 5/7/10/20/30 years. They are accurate, because beating the efficient market hypothesis is really hard; anybody who has a better idea of how inflation will change could speculate on them to make money until the price moved to the better prediction.
[1] https://en.wikipedia.org/wiki/United_States_Treasury_securit... [2] https://fred.stlouisfed.org/series/T5YIE
[1] https://en.wikipedia.org/wiki/United_States_Treasury_securit... [2] https://fred.stlouisfed.org/series/T5YIE
EMH doesn't exist. People interpret a system that is accurate on average (and even then not really, it just reflects marginal expectations) with things like "efficiency" that are totally useless and irrelevant universal statements.
But I would be very careful about either saying that a certain market reflects expectations (some markets have structural issues that prevent accurate estimates 100% of the time, TIPS is potentially one of them...markets also don't price binary/multivariate outcomes well at all), or saying that this represents "the future"...expectations about the future, obviously, change more than the future (the future is deterministic but from our perspective it is probabilistic, many things are possible but only one thing will actually happen...that is markets can be so volatile).
To say this another way, was the market right in January with 2% and right today with 2.5%? No. The Fed made this mistake over and over earlier this year: expectations are anchored, expectations are anchored, inflation won't rise because the market says X (again, the market is not a point estimate, it is a distribution centered around the breakeven, and doesn't work with multivariate outcomes).
But I would be very careful about either saying that a certain market reflects expectations (some markets have structural issues that prevent accurate estimates 100% of the time, TIPS is potentially one of them...markets also don't price binary/multivariate outcomes well at all), or saying that this represents "the future"...expectations about the future, obviously, change more than the future (the future is deterministic but from our perspective it is probabilistic, many things are possible but only one thing will actually happen...that is markets can be so volatile).
To say this another way, was the market right in January with 2% and right today with 2.5%? No. The Fed made this mistake over and over earlier this year: expectations are anchored, expectations are anchored, inflation won't rise because the market says X (again, the market is not a point estimate, it is a distribution centered around the breakeven, and doesn't work with multivariate outcomes).
>But I would be very careful about either saying that a certain market reflects expectations (some markets have structural issues that prevent accurate estimates 100% of the time, TIPS is potentially one of them...markets also don't price binary/multivariate outcomes well at all),
can you elaborate on this? What you said so far is too handwavy to assess.
>saying that this represents "the future"...expectations about the future
EMH doesn't say "whatever the market predicts is going the future", all it says is "it's the best prediction we have".
relevant comment about what EMH is and what isn't: https://news.ycombinator.com/item?id=26636929
can you elaborate on this? What you said so far is too handwavy to assess.
>saying that this represents "the future"...expectations about the future
EMH doesn't say "whatever the market predicts is going the future", all it says is "it's the best prediction we have".
relevant comment about what EMH is and what isn't: https://news.ycombinator.com/item?id=26636929
What do you mean? There is no way to make it simpler because that is what it is: markets are not some kind of hyper-intelligent, sentient being. If you put garbage in, garbage comes out (and markets operate within a regulatory/social construct that means they do not accurately predict the future). You will never be able to "assess" it (just as most "proof" of EMH is non-existent, it is as precise as it is wrong).
Right, and I am saying the logic used in that link is wrong (it is also circular...everything is always priced in, how do you know? Because the price says so...saying that seasonal patterns reflect risk is also bizarre, there is no fixed notion of risk in financial markets, every investor has a different liability profile). Saying that you cannot make money from doing something (wrong), is not the same thing as saying it is the best prediction or that the market reflects all information or whatever (again, these are inherently unknowable statements). Btw, this is usually obvious when, unlike academics, you have to think forwards rather than backwards...there was lots of information inflation was going to rise, that is why a significant minority of people thought it was going to happen...the market didn't price this in, that is it. What happened is the perfect example of expectations not being well-grounded in reality...but ofc, circular logic of EMH: everyone predicted this, it was in the price all along.
Right, and I am saying the logic used in that link is wrong (it is also circular...everything is always priced in, how do you know? Because the price says so...saying that seasonal patterns reflect risk is also bizarre, there is no fixed notion of risk in financial markets, every investor has a different liability profile). Saying that you cannot make money from doing something (wrong), is not the same thing as saying it is the best prediction or that the market reflects all information or whatever (again, these are inherently unknowable statements). Btw, this is usually obvious when, unlike academics, you have to think forwards rather than backwards...there was lots of information inflation was going to rise, that is why a significant minority of people thought it was going to happen...the market didn't price this in, that is it. What happened is the perfect example of expectations not being well-grounded in reality...but ofc, circular logic of EMH: everyone predicted this, it was in the price all along.
>What do you mean? There is no way to make it simpler because that is what it is: markets are not some kind of hyper-intelligent, sentient being.
EMH doesn't claim this.
>Right, and I am saying the logic used in that link is wrong (it is also circular...everything is always priced in, how do you know? Because the price says so...
No, because if the price isn't priced in then someone can arbitrage the difference.
>saying that seasonal patterns reflect risk is also bizarre, there is no fixed notion of risk in financial markets, every investor has a different liability profile
no, but sharpe ratio (risk adjusted returns) is a thing, so risk is essentially fungible between different investors.
>Saying that you cannot make money from doing something (wrong)
what's wrong about not being able to make money from something?
>is not the same thing as saying it is the best prediction or that the market reflects all information or whatever
Only the strong form of EMH claims that the market price reflects all information on earth. I don't personally believe that, otherwise insider trading wouldn't be a thing.
>Btw, this is usually obvious when, unlike academics, you have to think forwards rather than backwards...there was lots of information inflation was going to rise, that is why a significant minority of people thought it was going to happen...the market didn't price this in, that is it.
Again, EMH (at least the non-strong forms) doesn't claim that it's accurate 100% of the time. The market can certainly be wrong, that doesn't mean it's the best prediction we have.
EMH doesn't claim this.
>Right, and I am saying the logic used in that link is wrong (it is also circular...everything is always priced in, how do you know? Because the price says so...
No, because if the price isn't priced in then someone can arbitrage the difference.
>saying that seasonal patterns reflect risk is also bizarre, there is no fixed notion of risk in financial markets, every investor has a different liability profile
no, but sharpe ratio (risk adjusted returns) is a thing, so risk is essentially fungible between different investors.
>Saying that you cannot make money from doing something (wrong)
what's wrong about not being able to make money from something?
>is not the same thing as saying it is the best prediction or that the market reflects all information or whatever
Only the strong form of EMH claims that the market price reflects all information on earth. I don't personally believe that, otherwise insider trading wouldn't be a thing.
>Btw, this is usually obvious when, unlike academics, you have to think forwards rather than backwards...there was lots of information inflation was going to rise, that is why a significant minority of people thought it was going to happen...the market didn't price this in, that is it.
Again, EMH (at least the non-strong forms) doesn't claim that it's accurate 100% of the time. The market can certainly be wrong, that doesn't mean it's the best prediction we have.
Same analyst said the same thing in 2016... Since then Core CPI is up ~10% or roughly 2% per year for the time period. Let's stop listening to these cranks?
CPI: https://fred.stlouisfed.org/graph/fredgraph.png?g=F50W
His "Inflation is coming" article from 2016: https://www.marketwatch.com/story/bank-of-america-tells-stoc...
CPI: https://fred.stlouisfed.org/graph/fredgraph.png?g=F50W
His "Inflation is coming" article from 2016: https://www.marketwatch.com/story/bank-of-america-tells-stoc...
I think a lot of people trust the prediction now because we see inflation all around us and if we didn't have it after so much money being injected into the system lately it would be revolutionary.
The difference is this prediction comes after a significant rise in stock markets and real estate.
Here's the problem - we use the Consumer Price Index to measure inflation, of which "housing" is only 33% - much of which is actually rent, which is quite a bit more inelastic than home prices. If someone buys an 8 unit condo building in 1980 and rents out each unit for a 20% profit, 20 years later they're still making a 20% annualized profit and maybe rent hasn't increased.
Asset inflation is inflation. That "real" inflation, also known as the consumer price index, hasn't been going up is a factor of both automation/economies of scale and an extremely bifurcated economy in which low end workers are making pennies, toilet paper is cheap, but a house in an area with a working economy costs triple what it did 10 years ago.
Here's the case shiller national home pricing index:
https://fred.stlouisfed.org/series/CSUSHPINSA
Compare that to any inflation chart. Its not supposed to be the same, but I posit the "housing" part of the CSI is almost completely inelastic and only reflects what people pay in rent/mortgage, not the cost of entry. Housing prices can go up by 20% a year for 5 years and there's still no "inflation".
Asset inflation is inflation. That "real" inflation, also known as the consumer price index, hasn't been going up is a factor of both automation/economies of scale and an extremely bifurcated economy in which low end workers are making pennies, toilet paper is cheap, but a house in an area with a working economy costs triple what it did 10 years ago.
Here's the case shiller national home pricing index:
https://fred.stlouisfed.org/series/CSUSHPINSA
Compare that to any inflation chart. Its not supposed to be the same, but I posit the "housing" part of the CSI is almost completely inelastic and only reflects what people pay in rent/mortgage, not the cost of entry. Housing prices can go up by 20% a year for 5 years and there's still no "inflation".
>If someone buys an 8 unit condo building in 1980 and rents out each unit for a 20% profit, 20 years later they're still making a 20% annualized profit and maybe rent hasn't increased.
This doesn't make any sense. You'd expect many of your costs (utility, maintenance, etc) to go up with inflation.
>Asset inflation is inflation. That "real" inflation, also known as the consumer price index, hasn't been going up is a factor of both automation/economies of scale and an extremely bifurcated economy in which low end workers are making pennies, toilet paper is cheap, but a house in an area with a working economy costs triple what it did 10 years ago.
It costs triple, but because of lower interest rates monthly payments (ie. your actual spend) are going down. https://awealthofcommonsense.com/wp-content/uploads/2021/03/...
This doesn't make any sense. You'd expect many of your costs (utility, maintenance, etc) to go up with inflation.
>Asset inflation is inflation. That "real" inflation, also known as the consumer price index, hasn't been going up is a factor of both automation/economies of scale and an extremely bifurcated economy in which low end workers are making pennies, toilet paper is cheap, but a house in an area with a working economy costs triple what it did 10 years ago.
It costs triple, but because of lower interest rates monthly payments (ie. your actual spend) are going down. https://awealthofcommonsense.com/wp-content/uploads/2021/03/...
Utility and maintenance are mostly labor costs, not asset costs.
I don’t think low interest rates tell even half the story of affordability. 200k at 10% is equivalent to 400k at 3.5%. But we haven’t seen 10% rates since 1989.
It accounts for more than half. Using the st louis fed chart that you linked, housing is up 137% from jan 2000 to jan 2021. If we adjust for interest rates[1] (8% -> 2.3%), that gets us down to 23%. If we adjust for inflation[2], it gets down to 21% lower.
[1] https://fred.stlouisfed.org/series/MORTGAGE30US
[2] https://fred.stlouisfed.org/series/CPIAUCSL
[1] https://fred.stlouisfed.org/series/MORTGAGE30US
[2] https://fred.stlouisfed.org/series/CPIAUCSL
But the point was that the CPI doesn’t accurately track real housing costs. Do you believe housing costs have gone down relative to inflation? Housing costs relative to median income have doubled but that isn’t reflected in CPI data.
>But the point was that the CPI doesn’t accurately track real housing costs. Do you believe housing costs have gone down relative to inflation?
Well we just saw that adjusting for interest rates wipes away most of the increases in housing prices, and we didn't need CPI to reach that conclusion, only housing price index and interest rates.
> Housing costs relative to median income have doubled but that isn’t reflected in CPI data.
And what's your source for that claim? I'm sure that in the hottest housing markets that's true, but the CPI is a national measurement, not a local one.
Well we just saw that adjusting for interest rates wipes away most of the increases in housing prices, and we didn't need CPI to reach that conclusion, only housing price index and interest rates.
> Housing costs relative to median income have doubled but that isn’t reflected in CPI data.
And what's your source for that claim? I'm sure that in the hottest housing markets that's true, but the CPI is a national measurement, not a local one.
> I posit the "housing" part of the CSI is almost completely inelastic and only reflects what people pay in rent/mortgage, not the cost of entry.
This is a really interesting point. A longstanding criticism of the reported unemployment numbers is that it doesn't take into account those who have given up / dropped out of the labor force.
Perhaps the CPI is similarly failing to capture people who have been shut out of the housing market altogether (e.g. homeless, staying with family longer than previous generations)
This is a really interesting point. A longstanding criticism of the reported unemployment numbers is that it doesn't take into account those who have given up / dropped out of the labor force.
Perhaps the CPI is similarly failing to capture people who have been shut out of the housing market altogether (e.g. homeless, staying with family longer than previous generations)
> A longstanding criticism of the reported unemployment numbers is that it doesn't take into account those who have given up / dropped out of the labor force.
You're not wrong, but that's why measure like the participation rate exist:
* https://fred.stlouisfed.org/series/CIVPART
Though (working) age also has to be considered:
* https://fred.stlouisfed.org/series/LNS11300060
You're not wrong, but that's why measure like the participation rate exist:
* https://fred.stlouisfed.org/series/CIVPART
Though (working) age also has to be considered:
* https://fred.stlouisfed.org/series/LNS11300060
> > I posit the "housing" part of the CSI is almost completely inelastic and only reflects what people pay in rent/mortgage, not the cost of entry.
but the CPI covers both owners equivalent rent (if you owned your house) and rent (if you rent)?
> A longstanding criticism of the reported unemployment numbers is that it doesn't take into account those who have given up / dropped out of the labor force
You mean U1-6 that the BLS puts out? There's a good reason for why some are excluded. eg. if you count only the people that are working, then your numbers would be biased if the number of retirees is going up or if people are studying rather than working. Even if you count working age adults it's still problematic because it's affected by people transitioning from/to homemaking. Women entering the workforce would have halved that number, but I doubt people would hail that as some sort of massive victory in terms of unemployment.
Likewise just using raw home prices is problematic because it's tied to interest rates (since it's an asset). Raising mortgage rates will certainly drive down housing prices, but whether that's actually better for consumers is debatable. Your purchase price might be lower but your interest would be higher, making it a wash.
but the CPI covers both owners equivalent rent (if you owned your house) and rent (if you rent)?
> A longstanding criticism of the reported unemployment numbers is that it doesn't take into account those who have given up / dropped out of the labor force
You mean U1-6 that the BLS puts out? There's a good reason for why some are excluded. eg. if you count only the people that are working, then your numbers would be biased if the number of retirees is going up or if people are studying rather than working. Even if you count working age adults it's still problematic because it's affected by people transitioning from/to homemaking. Women entering the workforce would have halved that number, but I doubt people would hail that as some sort of massive victory in terms of unemployment.
Likewise just using raw home prices is problematic because it's tied to interest rates (since it's an asset). Raising mortgage rates will certainly drive down housing prices, but whether that's actually better for consumers is debatable. Your purchase price might be lower but your interest would be higher, making it a wash.
> but the CPI covers both owners equivalent rent (if you owned your house) and rent (if you rent)?
The hypothesis is that folks have dropped out of the rental market as well (e.g. rents have hit a threshold that's caused people to live with parents longer or even become homeless.
I don't think that would be captured in CPI
The hypothesis is that folks have dropped out of the rental market as well (e.g. rents have hit a threshold that's caused people to live with parents longer or even become homeless.
I don't think that would be captured in CPI
Nor the other option which is renting with roommates. Is it cost for the whole unit, or cost per single adult?
> Asset inflation is inflation.
It isn't though for the use of the inflation statistic.
It is a measure of if low-income earners are going to need wage hikes in order to survive. It is concerned with avoiding wage-price spirals where the cost to businesses of employing your average blue collar worker is increasing or not, and employed to drive those costs to businesses down.
It doesn't work at all for the average HN reader because you're probably in the middle ground where you either own enough assets or want to own enough assets that you're seeing crazy rises in prices in how you actually live, but you're not rich enough to care about inflation as a measure of when your uppity blue collar workers are going to start demanding higher pay (and even if you are rich enough, by virtue of the fact you're reading HN you've probably got fewer blue collar workers).
The inflation statistic is a number that isn't about you, which is why it seems so weird.
It isn't though for the use of the inflation statistic.
It is a measure of if low-income earners are going to need wage hikes in order to survive. It is concerned with avoiding wage-price spirals where the cost to businesses of employing your average blue collar worker is increasing or not, and employed to drive those costs to businesses down.
It doesn't work at all for the average HN reader because you're probably in the middle ground where you either own enough assets or want to own enough assets that you're seeing crazy rises in prices in how you actually live, but you're not rich enough to care about inflation as a measure of when your uppity blue collar workers are going to start demanding higher pay (and even if you are rich enough, by virtue of the fact you're reading HN you've probably got fewer blue collar workers).
The inflation statistic is a number that isn't about you, which is why it seems so weird.
Most of my friends are blue collar workers with education being around the national average (“some college”). Practically nobody can afford a place to live without large amounts of roommates as costs have gone up. Housing costs being too high are the #1 economic problem for my generation. Most have decided they will never own a home. Most don’t have much more than a small emergency fund, and many were decimated by covid. Im saying the inflation statistic is used heavily as a catchall for “cost of living” and it values the cost of toilet paper over a roof over people’s heads.
Employers aren't concerned with if their employees are renters or owners.
You're certainly right it has nothing to do with "cost of living" though.
You're certainly right it has nothing to do with "cost of living" though.
Housing costs are up, but we are also consuming more housing (sq foot per capita).
Believe It or Not, Real Estate Affordability Hasn’t Changed Much in 40 Years: https://www.supermoney.com/inflation-adjusted-home-prices/
Believe It or Not, Real Estate Affordability Hasn’t Changed Much in 40 Years: https://www.supermoney.com/inflation-adjusted-home-prices/
Much of the data in the article support that it’s relatively unaffordable, and that it’s gotten worse over time. Anecdotally, not a single one of my friends parents lived with roommates by 30, but every single person I know has roommates.
The factor of square footage can be explained by cheaper materials.
The factor of square footage can be explained by cheaper materials.
I wonder how much of this is due to shifting housing stock. Were there more 1 bedroom/small 2-bedroom units in the past?
Anecdotally in Boston there has been a longstanding push towards "family housing" this results in a relative oversupply of 5+ bedroom units that are almost exclusively leased to large groups.
Anecdotally in Boston there has been a longstanding push towards "family housing" this results in a relative oversupply of 5+ bedroom units that are almost exclusively leased to large groups.
Perhaps cost per square foot hasn't changed much. But that's irrelevant if there's no more entry-level inventory left for folks who are just starting out.
> 20 years later they're still making a 20% annualized profit and maybe rent hasn't increased.
You live in a very different region to me. I just checked and it’s hovering at about 3%, and this is causing a lot of problems.
You live in a very different region to me. I just checked and it’s hovering at about 3%, and this is causing a lot of problems.
This is by design. CPI is meant to hand wave inflation away. Stocks, houses and hundred other things fly to the moon but there's no inflation according to CPI (almost none).
> If someone buys an 8 unit condo building in 1980 and rents out each unit for a 20% profit, 20 years later they’re still making a 20% annualized profit…
I can tell you don’t own any investment properties.
I can tell you don’t own any investment properties.
Rent is up more than 9% this year alone. Inflation is now large enough to show up in the CPI in a significant way.
Toilet paper is cheap? News to me, lol
By the CPI standards of what most people actually buy, yes. Think discount grocery stores not top of the line. Kirkland signature/Costco brand basics.
Property taxes normally go up with inflation too.
> Housing prices can go up by 20% a year for 5 years and there's still no "inflation".
No one will have any idea whether inflation is happening or not by looking at a single market. That's why CPI doesn't do that. Housing prices could increase 2.5x in five years and not be an indicator of inflation, although that seems unlikely. But without examining a large sample of other markets, it's nearly a pure guess.
> Here's the problem - we use the Consumer Price Index to measure inflation, of which "housing" is only 33% - much of which is actually rent, which is quite a bit more inelastic than home prices.
Demand for housing across the board is inelastic (notwithstanding vacation homes or other "second" homes, in which demand is elastic and also a very niche market). Demand for credit is elastic, and so increases in the price of credit, i.e. the interest rate, will cause potential home-buyers to substitute into being renters.
> If someone buys an 8 unit condo building in 1980 and rents out each unit for a 20% profit, 20 years later they're still making a 20% annualized profit and maybe rent hasn't increased.
There's not enough information here to understand this scenario. It's not at all obvious that the landlord in 2000 is making an annualized profit of 20% unless he's the king of slum lords. Not only will maintenance and other recurring costs increase as inflation increases, the opportunity cost of the landlord using the land to house renters as compared to other productive uses of the land will also increase in nominal terms (and probably also in real terms unless the local economy is dysfunctional). Those costs - both the accounting and opportunity costs - will be passed onto the renters.
> Asset inflation is inflation.
Typically in economics, an increase in the "general price level" is inflation. In micro terms, inflation means the aggregated prices across all markets have increased relative to money, i.e. the increase is not accounted for by income or substitution effects. This doesn't mean all markets will be affected with equal price increases or anything. We'd still expect markets with inelastic demand to have higher price increases and markets with very elastic demand to have small price increases (though competitive markets will probably also have some shenanigans with quantity restriction, which aren't captured by the supply-demand model). We'd also expect some noise from various markets due to peculiar circumstances unique to each market. E.g. a potato blight creates a supply shock that causes a drastic increase in the price of potatoes, and which could have ripples in decreases in prices of complements and increases in prices of substitutes which is non-inflationary.
> That "real" inflation, also known as the consumer price index, hasn't been going up is a factor of both automation/economies of scale and an extremely bifurcated economy in which low end workers are making pennies, toilet paper is cheap, but a house in an area with a working economy costs triple what it did 10 years ago.
CPI is just a measure of inflation, i.e. the general increase in prices across aggregated markets, that uses sampling. (Also, the word "real" is overloaded in economics, and means changes that take into account inflation or, alternatively, ignore the use of money.) Inflation is quite tricky to measure, and so CPI must make loads of assumptions about substitutes, complements, and income effects (e.g. technological progress, economies of scale, productivity, etc.).
Also, for point of comparison, the minimum wage in CA has doubled since 2001, but the price level has not. It's a similar story in New York, Massachusetts, Illinois and Washington (and presumably other blue states). Red states like Texas or Florida have not had a significant de jure increase beyond the federal level in that time, though if I were to guess, the market minimum wage is simply above the legal minimum wage in those areas. It seems likely that low-end workers are making more, middle-income workers have stagnated and then upper-income workers have seen their income skyrocket.
No one will have any idea whether inflation is happening or not by looking at a single market. That's why CPI doesn't do that. Housing prices could increase 2.5x in five years and not be an indicator of inflation, although that seems unlikely. But without examining a large sample of other markets, it's nearly a pure guess.
> Here's the problem - we use the Consumer Price Index to measure inflation, of which "housing" is only 33% - much of which is actually rent, which is quite a bit more inelastic than home prices.
Demand for housing across the board is inelastic (notwithstanding vacation homes or other "second" homes, in which demand is elastic and also a very niche market). Demand for credit is elastic, and so increases in the price of credit, i.e. the interest rate, will cause potential home-buyers to substitute into being renters.
> If someone buys an 8 unit condo building in 1980 and rents out each unit for a 20% profit, 20 years later they're still making a 20% annualized profit and maybe rent hasn't increased.
There's not enough information here to understand this scenario. It's not at all obvious that the landlord in 2000 is making an annualized profit of 20% unless he's the king of slum lords. Not only will maintenance and other recurring costs increase as inflation increases, the opportunity cost of the landlord using the land to house renters as compared to other productive uses of the land will also increase in nominal terms (and probably also in real terms unless the local economy is dysfunctional). Those costs - both the accounting and opportunity costs - will be passed onto the renters.
> Asset inflation is inflation.
Typically in economics, an increase in the "general price level" is inflation. In micro terms, inflation means the aggregated prices across all markets have increased relative to money, i.e. the increase is not accounted for by income or substitution effects. This doesn't mean all markets will be affected with equal price increases or anything. We'd still expect markets with inelastic demand to have higher price increases and markets with very elastic demand to have small price increases (though competitive markets will probably also have some shenanigans with quantity restriction, which aren't captured by the supply-demand model). We'd also expect some noise from various markets due to peculiar circumstances unique to each market. E.g. a potato blight creates a supply shock that causes a drastic increase in the price of potatoes, and which could have ripples in decreases in prices of complements and increases in prices of substitutes which is non-inflationary.
> That "real" inflation, also known as the consumer price index, hasn't been going up is a factor of both automation/economies of scale and an extremely bifurcated economy in which low end workers are making pennies, toilet paper is cheap, but a house in an area with a working economy costs triple what it did 10 years ago.
CPI is just a measure of inflation, i.e. the general increase in prices across aggregated markets, that uses sampling. (Also, the word "real" is overloaded in economics, and means changes that take into account inflation or, alternatively, ignore the use of money.) Inflation is quite tricky to measure, and so CPI must make loads of assumptions about substitutes, complements, and income effects (e.g. technological progress, economies of scale, productivity, etc.).
Also, for point of comparison, the minimum wage in CA has doubled since 2001, but the price level has not. It's a similar story in New York, Massachusetts, Illinois and Washington (and presumably other blue states). Red states like Texas or Florida have not had a significant de jure increase beyond the federal level in that time, though if I were to guess, the market minimum wage is simply above the legal minimum wage in those areas. It seems likely that low-end workers are making more, middle-income workers have stagnated and then upper-income workers have seen their income skyrocket.
How is 2%-4% inflation "elevated"? If anything, this is a return to normalcy.
1.5%-2.5% is target.
Remember earlier this year a fund manager said they expected inflation over 5%, and probably 8-10%...I can tell you that view was regarded as total and utter insanity at the time. But you looked at fiscal, you looked at monetary...and how could anything else happen?
What was truly odd was people saying that 50% of GDP of stimulus would have no price effect. The frog in the water not noticing the rising heat.
What was truly odd was people saying that 50% of GDP of stimulus would have no price effect. The frog in the water not noticing the rising heat.
The money supply is a hockey stick. Of course we're going to see massive inflation. And of course lots of serious people are denying it. It takes a lot of intellectual effort to fool yourself into disbelieving your own eyes
Fiat currency has a deflationary bias. Given an independent central bank you are not going to see persistent inflation because they will do the obvious thing and just raise rates.
The Fed has a big red "DUMP IT" button they can press at any time but no button to increase inflation.
The Fed has a big red "DUMP IT" button they can press at any time but no button to increase inflation.
Of course the fed has a button to increase inflation: massive asset purchases using money made with INSERT INTO.
I find it helpful to look at the data and analysis behind these predictions... but in this case, there's nothing of substance.
lol, bofa.
I'm not so sure about this without more detailed analysis. We've seen significant supply shocks across tons of sectors and that directly affects a good chunk of goods in the CPI. Slightly longer term issues like supply constraints for lower end semiconductors may be fully resolved within a year or so.
There's definitely significant increases in demand for certain goods (eg; luxury goods) but it's unclear how sustained that will be either.
There's definitely significant increases in demand for certain goods (eg; luxury goods) but it's unclear how sustained that will be either.
A perfect storm of covid shortages, political calls to raise wages, and government money printing plays strongly.
Watch the requests AARP makes to their lobbied representatives.