US annual inflation declines to 7.7% in October vs. 7.9% expected(bls.gov)
bls.gov
US annual inflation declines to 7.7% in October vs. 7.9% expected
https://www.bls.gov/news.release/archives/cpi_11102022.htm
562 comments
And to add to your explanation, because inflation jumped so quickly and then slowed we'll eventually hit a YoY number that plummets. If milk is $4/gallon today and still $4/gallon 12 mos. from now, that's 0% YoY inflation.
This will inevitably lead to people saying the numbers are fake because milk used to be $2/gallon.
This will inevitably lead to people saying the numbers are fake because milk used to be $2/gallon.
> If milk is $4/gallon today and still $4/gallon 12 mos. from now, that's 0% YoY inflation.
Conversely, if there was a one-time jump in a particular item, it will take a year before it gets 'removed' from the inflation numbers.
Extremely contrived example: if gas/petrol was $1/L in December 2021 (and generally in all of 2021), but $1.20/L in January 2022, then there will be a 20% YoY jump in inflation for the January number comparing Jan 2021 to Jan 2022.
Now if gas stays at $1.20/L in February 2022, it will still register as 20% YoY even though the price has not changed month-to-month. That 20% (YoY) is "stuck" in the system until January 2023 when we're comparing $1.20/L to $1.20/L.
A one-time jump can 'skew' the numbers if all you look at is YoY metrics.
Conversely, if there was a one-time jump in a particular item, it will take a year before it gets 'removed' from the inflation numbers.
Extremely contrived example: if gas/petrol was $1/L in December 2021 (and generally in all of 2021), but $1.20/L in January 2022, then there will be a 20% YoY jump in inflation for the January number comparing Jan 2021 to Jan 2022.
Now if gas stays at $1.20/L in February 2022, it will still register as 20% YoY even though the price has not changed month-to-month. That 20% (YoY) is "stuck" in the system until January 2023 when we're comparing $1.20/L to $1.20/L.
A one-time jump can 'skew' the numbers if all you look at is YoY metrics.
Which is partly what we’re seeing. CPI rose 0.4% MoM in October, or 4.8% seasonally adjusted. That’s above target, but better than YoY.
Really wish we reported the 4.8% number. Seems more reasonable for a monthly report to focus on the changes of the month.
I agree it's confusing. I think they do it to remove seasonality and the experts on the topic probably don't understand anymore why the rest of us think their way of reporting is confusing to lay people.
Seasonally adjusted != multiply by 12. Prices naturally fluctuate throughout the year due to weather, consumer patterns, and business cycles. Seasonal adjustment is an attempt to account for those changes.
> Seasonally adjusted != multiply by 12
My brain swapped annualised with seasonally adjusted. Sorry.
My brain swapped annualised with seasonally adjusted. Sorry.
I agree the annualizing the monthly figure would be handy, as an additional figure. Looking at annualized monthly figures, it was also apparent (say) six months ago, that the monthly annual figures would almost certainly continue to get worse.
Also note the four most recent (seasonally adjusted) monthly CPI numbers:
Jul 2022: 0.0%
Aug 2022: 0.1%
Sep 2022: 0.4%
Oct 2022: 0.4%It’s not really skewing anything though, since the price is 20% yoy?
It is skewing if you are looking for an up to date change. It's like, is it better to get two points on a curved line and draw a straight line through them, or is it better to calculate the derivative and the the slope at a specific point?
That depends on how noisy or smooth the changes are. That's why it's valuable to look at both.
It may be - but to the above poster's point - if gas went up 20% in Jan of this year and then stays flat... is it helpful to think of prices as "going up" ? It seems misleading.
"is it helpful to think of prices as "going up" ? It seems misleading."
Here you are encountering a common human cognitive failing, which is the belief that there is some sort of objective answer to the question "are prices going up?" that we should all be able to totally agree on, somehow floating in Platonic space without reference to any particular measure of "prices increasing".
The problem is that if you drill down to the question of "what does it mean for prices to be 'going up'?", you must admit to the fact that there are multiple valid definitions of that. It just isn't possible or plausible to create one true definition.
In the presence of that fact, it becomes inevitable that there will be senses in which the price is going up, and senses in which they are not, and senses in which prices are going up more than other senses. That is the reality, which is complicated.
(One propaganda technique is to take one of these numbers, which really exists and is perfectly defensible on its own terms, and then use it in a context in which you know people are generally going to interpret it as one of the other senses of the term. Excitingly, by controlling which "sense" you anchor your listeners to, both "sides" of a debate can push the numbers in whatever direction favors them at the same time.)
According to our nationally-used, generally-accepted metric, if gas is the same price today as it was 365 days ago, inflation is zero. But does that mean the metaphorical person on the street is "lying" if they say prices are generally going up because gas is 20% more expensive than it was three hundred and sixty six days ago? There is a fundamental arbitrariness both to our metrics, and how we all feel about things. I've seen plenty of "How can annual inflation be %8 if my eggs are 2.5x more expensive than this time last year?" posts around lately. The literal answer to that question is obvious, but if someone's expenses involve more eggs than mine, either because their food is a bigger percentage of their home budget or they are a business for whom eggs is a major input cost, they may feel a higher level of inflation than I do, and they're not wrong. They've just got their own inflation metric that disagrees with the national one, but their own metric may well be more relevant to their life than the national one is.
Here you are encountering a common human cognitive failing, which is the belief that there is some sort of objective answer to the question "are prices going up?" that we should all be able to totally agree on, somehow floating in Platonic space without reference to any particular measure of "prices increasing".
The problem is that if you drill down to the question of "what does it mean for prices to be 'going up'?", you must admit to the fact that there are multiple valid definitions of that. It just isn't possible or plausible to create one true definition.
In the presence of that fact, it becomes inevitable that there will be senses in which the price is going up, and senses in which they are not, and senses in which prices are going up more than other senses. That is the reality, which is complicated.
(One propaganda technique is to take one of these numbers, which really exists and is perfectly defensible on its own terms, and then use it in a context in which you know people are generally going to interpret it as one of the other senses of the term. Excitingly, by controlling which "sense" you anchor your listeners to, both "sides" of a debate can push the numbers in whatever direction favors them at the same time.)
According to our nationally-used, generally-accepted metric, if gas is the same price today as it was 365 days ago, inflation is zero. But does that mean the metaphorical person on the street is "lying" if they say prices are generally going up because gas is 20% more expensive than it was three hundred and sixty six days ago? There is a fundamental arbitrariness both to our metrics, and how we all feel about things. I've seen plenty of "How can annual inflation be %8 if my eggs are 2.5x more expensive than this time last year?" posts around lately. The literal answer to that question is obvious, but if someone's expenses involve more eggs than mine, either because their food is a bigger percentage of their home budget or they are a business for whom eggs is a major input cost, they may feel a higher level of inflation than I do, and they're not wrong. They've just got their own inflation metric that disagrees with the national one, but their own metric may well be more relevant to their life than the national one is.
Most people in this thread are using prices and CPI interchangeably, for better or worse. My read of the thread is that most people in the thread know they aren't actually the same thing.
If the last time you looked was last year, then yeah. They went up this year.
What’s misleading about reporting yearly percentage increases in prices? I’m baffled.
What’s misleading about reporting yearly percentage increases in prices? I’m baffled.
The misleading bit would be reporting yoy price increases every month. Still not necessarily misleading to someone trained in reading this data, but the average lay person would probably interpret yoy statistics reported monthly incorrectly when comparing adjacent months
Who’s doing that?
Everyone. Just about every report is talking about how the yoy numbers are changing each month.
Sigh.
The YoY is useful for businessmen and economists.
People aren't checking their statements for milk prices from Nov 2021 right now. They just know "man it jumped up".
The point is that the everyday person cares about jumps and trends, and hearing "20% YoY increase" for 12 months is misleading to someone not thinking about it in economists' terms.
The fact a bunch of people here are debating what it means and how to interpret it proves my point.
The YoY is useful for businessmen and economists.
People aren't checking their statements for milk prices from Nov 2021 right now. They just know "man it jumped up".
The point is that the everyday person cares about jumps and trends, and hearing "20% YoY increase" for 12 months is misleading to someone not thinking about it in economists' terms.
The fact a bunch of people here are debating what it means and how to interpret it proves my point.
And yet that's the same kind of distinction that you need to understand to be able to make decisions about household debt. If we're honestly at the point where this is considered too confusing for the masses, I think I've stopped thinking democracy is a good idea.
If there's a true step change that happens once (and nothing else), inflation looks like:
0% 0% 0% +10% +10% +10% +10% +10% +10% +10% +10% +10% +10% +10% +10% 0% 0% 0%
If there's a .8% price increase per month, every month, it looks like:
+10% +10% +10% +10% +10% +10% +10% +10% +10% +10% +10% +10% +10% +10%
The upside of reporting this way:
* Seasonal effects are (mostly) removed
The downside:
* You have to have a lot of context about surrounding numbers to try and distinguish between these scenarios.
* The drop from +10% to 0% is not related proximally at all to the real change.
* Even if you are careful in interpretation, information and context are removed.
It's not very user friendly or useful as a single number to get an idea about what's happening with prices now.
> If we're honestly at the point where this is considered too confusing for the masses, I think I've stopped thinking democracy is a good idea.
I have a lot of knowledge about economics and mathematics, and it's frequently confusing for me and difficult to tease out what's really happening with prices from a couple of macroeconomic aggregates. If that makes you give up on democracy, uh, so be it.
0% 0% 0% +10% +10% +10% +10% +10% +10% +10% +10% +10% +10% +10% +10% 0% 0% 0%
If there's a .8% price increase per month, every month, it looks like:
+10% +10% +10% +10% +10% +10% +10% +10% +10% +10% +10% +10% +10% +10%
The upside of reporting this way:
* Seasonal effects are (mostly) removed
The downside:
* You have to have a lot of context about surrounding numbers to try and distinguish between these scenarios.
* The drop from +10% to 0% is not related proximally at all to the real change.
* Even if you are careful in interpretation, information and context are removed.
It's not very user friendly or useful as a single number to get an idea about what's happening with prices now.
> If we're honestly at the point where this is considered too confusing for the masses, I think I've stopped thinking democracy is a good idea.
I have a lot of knowledge about economics and mathematics, and it's frequently confusing for me and difficult to tease out what's really happening with prices from a couple of macroeconomic aggregates. If that makes you give up on democracy, uh, so be it.
And it's not even a theoretical issue. Look at the energy component of CPI. And then consider how that flows through to food and transportation. It is very possible that the vast majority of what we are seeing is the result of a big jump in energy prices over a few months, 8-10 months ago.
Maybe that is why we have a republic with representatives? Of course we can just shift the discussion to point out that US Congress critters don't seem to have a strong grasp on these topics either. :-(
I think that's exactly why we have a republic with representatives, but I don't even think people are qualified to pick good representatives. A campaign can easily pander to people who are acting selfishly or stupidly. At the end of the day, if you have people who can't even understand compound interest by the time they're entering university and who can't do a cost-benefit analysis on loans, why are those people supposed to catch nuances in monetary and fiscal policy and select from a panel of alleged experts?
Imagine a more extreme case where we reported inflation over the past 50 years each month. Every month we compute the price of the basket 50 years ago and the price of the basket today and compare. This number would go up when the most recent month had more price increases than the month 601 months ago. It would go down when the situation was reversed. It would be a number, but it would tell you very little useful information.
It is also the case that going extreme in the other direction is ridiculous. Imagine a daily inflation measure. Also nearly useless. "Oh, prices were flat today so everything is fine."
Published inflation numbers in media are usually used to make either the claim "everything is fucked, you should be mad about public policy" or "everything is fine, you should be happy about public policy." To me, this means that the reported should ideally be tied to some cadence that matches public policy. I'm not sure what that cadence is.
It is also the case that going extreme in the other direction is ridiculous. Imagine a daily inflation measure. Also nearly useless. "Oh, prices were flat today so everything is fine."
Published inflation numbers in media are usually used to make either the claim "everything is fucked, you should be mad about public policy" or "everything is fine, you should be happy about public policy." To me, this means that the reported should ideally be tied to some cadence that matches public policy. I'm not sure what that cadence is.
You appear to be saying: factually reported data cannot be misleading.
This is wrong, but so obviously so that you must be making another point?
This is wrong, but so obviously so that you must be making another point?
Misleading implies the data has some agency. Data cannot be misleading. People can make whatever conclusions they want based on data at hand and it’s just bad analysis if it’s wrong. The data didn't mislead them.
That data was picked by someone out of all the data in the world. That's where the agency is.
A Federal agency: BLS.
Weird take. Most will agree "deliberately misleading" is what you are talking about.
That literally leads to the conclusion that prices rose, in your example.
The conclusion that “prices rose” is the correct one. What you should not conclude, even though the inflation has been at 20% all year is that “prices are (still) rising”.
But they have risen since last year. YoY they are still rising.
You can't use "rising" to strictly talk about the past. You need to expect it in the future too. If you don't expect the price to be higher a year from now, then it's not "rising YoY", it merely "rose YoY".
It isn't, yet it is.
The price is still 20% you, and still 0% mom. If reported as inflation still at 20%, does that affect perceptions of inflation, and if so, expectations of inflation? Because expectations of inflation often turn out to be self fulfilling drivers of inflation.
Reported as inflation stable even if it is 20%? Better? Not that 0% is a great target, but that's a separate issue.
The price is still 20% you, and still 0% mom. If reported as inflation still at 20%, does that affect perceptions of inflation, and if so, expectations of inflation? Because expectations of inflation often turn out to be self fulfilling drivers of inflation.
Reported as inflation stable even if it is 20%? Better? Not that 0% is a great target, but that's a separate issue.
Even in the early 80s after huge interest rate hikes, YoY CPI inflation stayed above 2% (until the mid 80s).
Rather than modeling it as "the price increases happened in a short period of time and then went back to normal," I think it's more likely that it happened more spread out and persistently, and perhaps still is going on. It's not going to jump to zero after some given month
Rather than modeling it as "the price increases happened in a short period of time and then went back to normal," I think it's more likely that it happened more spread out and persistently, and perhaps still is going on. It's not going to jump to zero after some given month
Honestly, I'm with those people.
Your explanation is fully technically correct, but the subsequent messaging that inflation is zero is a matter of not reading the room.
When an important item dramatically rises in price, this can have a massive impact on people. A dramatic drop in purchasing power or even businesses needing to close. It is impactful.
When the price continues to be high, the impact remains. The pain continues, the problem is not solved. The politically smart messaging is to say "we feel and acknowledge your continued pain, this is what we're going to do about it", not "Good news! Inflation is 0%."
Same with the opportunistic messaging of sometimes using MoM or YoY, whichever number looks better. When MoM inflation in October is 15% and 5% in November, you really shouldn't bring this as good news. The situation still got worse in the real world.
Your explanation is fully technically correct, but the subsequent messaging that inflation is zero is a matter of not reading the room.
When an important item dramatically rises in price, this can have a massive impact on people. A dramatic drop in purchasing power or even businesses needing to close. It is impactful.
When the price continues to be high, the impact remains. The pain continues, the problem is not solved. The politically smart messaging is to say "we feel and acknowledge your continued pain, this is what we're going to do about it", not "Good news! Inflation is 0%."
Same with the opportunistic messaging of sometimes using MoM or YoY, whichever number looks better. When MoM inflation in October is 15% and 5% in November, you really shouldn't bring this as good news. The situation still got worse in the real world.
That's a different issue. "High prices" are a problem, but that's not what "inflation" measures. There is no way to report inflation (derivative of prices) that correctly reports "price/wage ratio", which is what people really care about.
How to set inflation expectations - "Inflation shoots up like a rocket & floats down like a feather."
It's bullshit because it's an average of everything that no one buys. My grocery bills have doubled since 2020, meaning my CPI was 100% over 3 years. I will not shut up as you and many others are trying to force me into accept it's 10% inflation.
The Canadian government provides a personal inflation calculator. You may see higher or lower personal inflation than CPI.
https://www150.statcan.gc.ca/n1/pub/71-607-x/71-607-x2020cal...
Especially when their incomes didn’t double.
People who lack foundational skills in math are always vulnerable to being worried about witchcraft and conspiracy.
It’s a major reason why society spends so much on education. Stupid people make poor citizens.
It’s a major reason why society spends so much on education. Stupid people make poor citizens.
Don't be surprised when politicians use this to their advantage next year.
@matwood it is a disaster for working people regardless as wages are not keeping pace with the effects of inflation.
Month on month numbers are still slightly up.
If "inflation is transient" when is it going back to 2/gal?
You're making the same mistake. If inflation is transient, the price _increase_ is transient, but the high prices remain. It would only go back to 2/gal if the high prices themselves were transient. Which I really hope is the case, but IDK.
“Inflation” means “increase in price levels”. That’s it.
“Inflation is transient” fits prices increasing and then leveling out, and does not imply that every bit of price increase is balanced out one-for-one by immediate deflation afterwards.
As for gas prices, it’s going to depend on supply (including refinery capacity) and demand. The $2/gallon of April 2020 was an artifact of covid nuking demand.
“Inflation is transient” fits prices increasing and then leveling out, and does not imply that every bit of price increase is balanced out one-for-one by immediate deflation afterwards.
As for gas prices, it’s going to depend on supply (including refinery capacity) and demand. The $2/gallon of April 2020 was an artifact of covid nuking demand.
Transient inflation means the $4 / gallon milk prices stick around and don’t go any higher. Going back down to $2 would be deflation.
They effectively said, "The increase went down."
It would have been much clearer for them to say, "The increase has slowed."
It would have been much clearer for them to say, "The increase has slowed."
Or clearer still "The increase is smaller than expected."
This is like the 3rd derivative, right? e.g. we now have a slightly lower rate of acceleration towards the cliff than before?
I think it's second derivative.
3rd derivative would be Nixon's:
>When campaigning for a second term in office, U.S. President Richard Nixon announced that the rate of increase of inflation was decreasing, which has been noted as "the first time a sitting president used the third derivative to advance his case for reelection."[2] Since inflation is itself a derivative—the rate at which the purchasing power of money decreases—then the rate of increase of inflation is the derivative of inflation, opposite in sign to the second time derivative of the purchasing power of money. Stating that a function is decreasing is equivalent to stating that its derivative is negative, so Nixon's statement is that the second derivative of inflation is negative, and so the third derivative of purchasing power is positive.
https://en.wikipedia.org/wiki/Third_derivative#Economic_exam...
3rd derivative would be Nixon's:
>When campaigning for a second term in office, U.S. President Richard Nixon announced that the rate of increase of inflation was decreasing, which has been noted as "the first time a sitting president used the third derivative to advance his case for reelection."[2] Since inflation is itself a derivative—the rate at which the purchasing power of money decreases—then the rate of increase of inflation is the derivative of inflation, opposite in sign to the second time derivative of the purchasing power of money. Stating that a function is decreasing is equivalent to stating that its derivative is negative, so Nixon's statement is that the second derivative of inflation is negative, and so the third derivative of purchasing power is positive.
https://en.wikipedia.org/wiki/Third_derivative#Economic_exam...
Second derivative:
p = price
t = time
dp = change in price
dp/dt = change in price over time = inflation
d^2p/dt^2 = change in change in price over time over time = change in inflation over time = what we are talking aboutSecond derivative I think. Inflation is change in prices. Change in inflation is a second order derivative? I wish more Americans knew at least a little conceptually about derivatives. Personally, I need to review them. Anecdotally, the number of accountants that I've met that haven't progressed beyond middle school level math is depressing as well.
No, acceleration is going down. Not a lower rate of acceleration. The second implies acceleration is still increasing, but at a slower rate. What is actually happening is we're decelerating (so we're still going fast, meaning inflation is high, but inflation is going down...)
Without trying to be mean, I would also argue your framing is also poor as some inflation is not bad.
To put it in context, if current trends hold we'll expect 3-5% inflation yoy. That is not awful. Higher than last decade or so but we have had super low inflation for a long time. Averaging out, inflation over the last decades, even including the recent high inflation, will still be pretty low, around 3%.
Without trying to be mean, I would also argue your framing is also poor as some inflation is not bad.
To put it in context, if current trends hold we'll expect 3-5% inflation yoy. That is not awful. Higher than last decade or so but we have had super low inflation for a long time. Averaging out, inflation over the last decades, even including the recent high inflation, will still be pretty low, around 3%.
The velocity has slowed.
Also there isn't a cliff, there's only speed bumps for going too fast. At least if movement=inflation.
On the other hand if the "cliff" is supposed to be a specific level of inflation, then we didn't just slow down, we're walking away from it.
Also there isn't a cliff, there's only speed bumps for going too fast. At least if movement=inflation.
On the other hand if the "cliff" is supposed to be a specific level of inflation, then we didn't just slow down, we're walking away from it.
There's no cliff (at least for this to be the third, or even second, derivative with regard to.) Its not like there is a magic bad nominal price level.
Right, the cliff is when people lose confidence in the dollar, which probably has a lot to do with the inflation rate, changes in the inflation rate, and the duration over which we've seen what sort of behavior (... and probably a lot of other things) but not much to do with the actual price level itself.
If we average 2%yoy every single decade for the next 300 years, people will probably have a lot of trust in the dollar in the decade following. If we hit that same price level tomorrow, people will rightly flip. $1700 milk either way, but in one case we'd expect $1700 milk the following day and in the other we'd expect the dollar to plummet further from the shock of it.
If we average 2%yoy every single decade for the next 300 years, people will probably have a lot of trust in the dollar in the decade following. If we hit that same price level tomorrow, people will rightly flip. $1700 milk either way, but in one case we'd expect $1700 milk the following day and in the other we'd expect the dollar to plummet further from the shock of it.
What would the fourth derivative of inflation be? I can’t get my brain to work for that.
Since inflation is a 1st derivative of price, 4th derivative of inflation would actually be a 5th derivative of price. It'd be like: "The increase of the acceleration of the rate of price increase is slowing."
Definitely not a statement that I would be able to visualize :)
Definitely not a statement that I would be able to visualize :)
Well explained. Idk for english-speaking countries or your country of origin but the average spanish is an absolute illiterate in economy.
These explanations are very necessary so that people develop an intuition of what is going on.
These explanations are very necessary so that people develop an intuition of what is going on.
Many Americans are illiterate on numbers and the economy too. I still remember the classic example that a burger chain released a 1/3 pound burger to compete with another chain's 1/4 pound burger, and many people thought the 1/4 pound was bigger...
Edit: there are some people saying it's a myth, or not a complete picture. Looks like we don't have the data. But my point is that we aren't very good with numbers or economics.
https://www.scientificamerican.com/article/fractions-where-i...
https://www.stlouisfed.org/on-the-economy/2018/september/how...
Edit: there are some people saying it's a myth, or not a complete picture. Looks like we don't have the data. But my point is that we aren't very good with numbers or economics.
https://www.scientificamerican.com/article/fractions-where-i...
https://www.stlouisfed.org/on-the-economy/2018/september/how...
>Many Americans are illiterate on numbers and the economy too
Many more pretend to be less literate than they are for ideological reasons.
>still remember the classic example that a burger chain released a 1/3 pound burger to compete with another chain's 1/4 pound burger, and many people thought the 1/4 pound was bigger.
This trope needs to be taken out back and shot. It wasn't that people didn't get it. It's that it was poorly marketed and the difference between 1/3 and 1/4 isn't enough to make people go to a burger chain that was dying due to low and variable quality when they could just go to McDicks and get a reliable 1/4lb.
Many more pretend to be less literate than they are for ideological reasons.
>still remember the classic example that a burger chain released a 1/3 pound burger to compete with another chain's 1/4 pound burger, and many people thought the 1/4 pound was bigger.
This trope needs to be taken out back and shot. It wasn't that people didn't get it. It's that it was poorly marketed and the difference between 1/3 and 1/4 isn't enough to make people go to a burger chain that was dying due to low and variable quality when they could just go to McDicks and get a reliable 1/4lb.
There's certainly more than just the number confusion, but I specifically remember the case study we were looking at included a survey where a sizeable number of respondents said 1/4 was bigger than 1/3.
I don't know anything about this particular one, but just because it's a case study in a textbook doesn't mean it's true. There are lots of untruths that get propagated long after they've been debunked.
But they’re citing a survey where people literally didn’t get it. That, if not made up, factually supports the claim that some people really do think 1/3 is less than 1/4.
I really liked the 1/3 pound “thickburgers”. I don’t think it was just some dying chain trying to spread rumors about how stupid people didn't understand their marketing and that’s why they “died” (they’re still very much alive last I checked).
I really liked the 1/3 pound “thickburgers”. I don’t think it was just some dying chain trying to spread rumors about how stupid people didn't understand their marketing and that’s why they “died” (they’re still very much alive last I checked).
Sure, but there's nothing presented to debunk this so far. So far all the "testimony" shows it to be true, but it could be propaganda.
The larger point is that it does demonstrate what the actual data shows - that the US has a sizable portion not good at math/fractions or finance.
The larger point is that it does demonstrate what the actual data shows - that the US has a sizable portion not good at math/fractions or finance.
I’ve always thought this was somewhat apocryphal/a myth. Did it actually occur?
It's hard to find contemporaneous evidence, because it was apparently revealed by an internal company focus group, but here's [0] the page from the company themselves with the claim.
It wasn't revealed at all until the founder's memoirs in 2007, and it wasn't reported widely until this [1] 2014 article.
0: https://awrestaurants.com/blog/aw-third-pound-burger-fractio...
1: https://www.nytimes.com/2014/07/27/magazine/why-do-americans...
It wasn't revealed at all until the founder's memoirs in 2007, and it wasn't reported widely until this [1] 2014 article.
0: https://awrestaurants.com/blog/aw-third-pound-burger-fractio...
1: https://www.nytimes.com/2014/07/27/magazine/why-do-americans...
Sadly, it is true. The chain was A&W:
https://awrestaurants.com/blog/aw-third-pound-burger-fractio...
https://awrestaurants.com/blog/aw-third-pound-burger-fractio...
this is a 'haha Americans so dumb' myth that's been blown up - it's the result of a NY Times article that outline a private restaurant chain focus group result.
So tldr; some people in a private focus group questioned the value of a 1/3 pound burger over the same priced 1/4 pound burger. It's not indicative of any system numerical illiteracy.
I will add there were no actual data released - it's solely based on an anecdote from a A&W restaurant executive.
https://skeptics.stackexchange.com/questions/28745/did-aw-cu...
So tldr; some people in a private focus group questioned the value of a 1/3 pound burger over the same priced 1/4 pound burger. It's not indicative of any system numerical illiteracy.
I will add there were no actual data released - it's solely based on an anecdote from a A&W restaurant executive.
https://skeptics.stackexchange.com/questions/28745/did-aw-cu...
I was exposed to this myth in my youth as various European nations described their misadventures in the US of A or encounters with Americans and as a result came to US with wrong expectations. Now that I live here, things a little more clear to me. It is a nation of more than 350 million people ( depending on how and who you count ). Even a small percentage of certifiable idiots will be very well represented in terms of absolute numbers.
I would not say Americans in general are dumb though. I would say that:
1) they are under-educated ( and then we can also get about the quality of education for those that were educated ) 2) they are very heavily propagandized
I would not say Americans in general are dumb though. I would say that:
1) they are under-educated ( and then we can also get about the quality of education for those that were educated ) 2) they are very heavily propagandized
Even more than that, the accounts we get claim that some of the people in the focus group said the 1/3 pound burger was smaller than the quarter pounder. Even if those claims are accurate, it's possible they were looking at the diameter, since the 1/3 pounder has two smaller patties stacked on top of each other, while the quarter pounder is one large patty.
Most places that report on this say that the third pounder was cheaper and that Americans preferred the taste, but they didn't buy it because of the name and their poor math skills. But its name was changed to "Papa Burger," and it still didn't become the quarter pounder killer it's portrayed as.
Most places that report on this say that the third pounder was cheaper and that Americans preferred the taste, but they didn't buy it because of the name and their poor math skills. But its name was changed to "Papa Burger," and it still didn't become the quarter pounder killer it's portrayed as.
Since you bring up the name change... didn't it sell better after the name change?
But of course my point was never about the burger. It was just that many aren't good with numbers and finance (in the edit with the links).
But of course my point was never about the burger. It was just that many aren't good with numbers and finance (in the edit with the links).
Stupid people exist. It’s happened. In fact, it’s a pretty easy mistake to make if you don’t understand fractions. 4 > 3.
And since we don't know the context they could have shown a closer up burger, or heck, taller burger that is 1/4 and a 1/3 next to each other but further away or stepped on at which point they were asked, what's bigger?
Also, the 1/4 or 1/3 is referring to the raw, uncooked meat only. So in theory you can add 1400 lbs of lettuce to make something larger than my car. (Which is terrible, since lettuce is where you pick up all the disease these days - everyone here should order all their food without any lettuce)
Also, the 1/4 or 1/3 is referring to the raw, uncooked meat only. So in theory you can add 1400 lbs of lettuce to make something larger than my car. (Which is terrible, since lettuce is where you pick up all the disease these days - everyone here should order all their food without any lettuce)
I have a degree in it and I often don't feel that I know anything. For a guy who did a lot of STEM economics is a pretty odd subject in many ways. A mixture of interesting insights, strange models, and a lot of soft talk.
Also it is worth mentioning that part of the major reason accounting for inflation is car price. It’s going down now as chip makers produce more and prices go down further.
It's also going down because it's a debt market and financing is more expensive w/ used car interest rates at 9% instead of 4% and new cars at 5% instead of 0%...
I expect the number of car sales in the US to go down significantly like it has in Europe. Interest rates are one major factor, but another is the electric transition. Anecdotally I know quite a few people that aren't buying new vehicles right now. They're the kind of people that buy a new car every 10 years or so, and are delaying their purchase or buying used. They realize it's a bad idea to buy a new gas car but aren't yet ready to buy an electric car because they don't understand them yet, they're too expensive, have a massive backlog, or don't come in the style/variant they want.
Why is it a bad idea to buy a new gas car? ExxonMobil is not going to stop pumping oil out of the ground.
My reasons: in 10 years time most local gas stations will be closed, 95% of the demand for used cars will be for electrics and 97% of the supply will be gasoline so the car will only have its scrap metal value.
But most people aren't thinking that far ahead. They just know I can recharge my car for $10 but it costs them $100 to refill theirs. They know that electricity prices are a lot more stable than gas prices.
But most people aren't thinking that far ahead. They just know I can recharge my car for $10 but it costs them $100 to refill theirs. They know that electricity prices are a lot more stable than gas prices.
I agree with your general sentiment, but I think this timeline doesn't necessarily extrapolate well for the United States. The average age of a vehicle on the road in the US is about 12 years - aftermarket suppliers as well as oil/gas companies have a very strong incentive to plan that far ahead in order to keep up with the demand. Especially given that the quantity of gas vehicles on the road will be, as you say, such a large percentage of the market.
Miles/year of old cars is a lot less than new cars. So demand for gas in 10 years might be about half of what it is now. Some stations will still do well, but a lot of marginal stations will disappear.
Fuel can also be delivered at ones home or people can install their own fuel tanks that can last a few refills. Just a thought.
Gas exploration is way down. No gas production won't stop, but supply growth seems to be completely stalled while demand is not due to developing countries continuing to get richer. Gas will likely continue to be expensive as we transition away from fossil fuels.
Gas prices ice bans and global warming. If you buy a gas car today, I wouldn’t expect much in terms of resale value.
Hopefully that helps with new car pricing. Dealers are still selling well above MSRP.
Car lots need to be knocked down a peg or ten. Car sales folks are the scummiest folks on earth and they have been empowered by this disaster of a market for too long.
The overwhelming majority of car sales people know almost nothing about cars. That's already how you know that their industry is basically useless.
It's also extremely predatory. Anyone trying to pay a 30K mark up on a rav4 prime is being swindled (even if they think they're not). You (the sales person) should prevent obviously stupid car sales (or shit like 25% apr hellcats to US soldiers), but of course not, they're greedy!
The overwhelming majority of car sales people know almost nothing about cars. That's already how you know that their industry is basically useless.
It's also extremely predatory. Anyone trying to pay a 30K mark up on a rav4 prime is being swindled (even if they think they're not). You (the sales person) should prevent obviously stupid car sales (or shit like 25% apr hellcats to US soldiers), but of course not, they're greedy!
I don't buy cars often but it seems like the last decade or so, the major dealers anyways, don't play a lot of games like they used to. They put a decently fair price out there and can maybe knock a bit off but with some much information about cars today (CarFAX, BlueBook, searching online) it's really difficult to swindle people. So they just list a fair price and go from there.
They make a lot of their money today selling warranties, service packages, and financing.
I was looking a few weeks ago and the sales associate mentioned that it's starting to come down but they've just struggled so much at getting enough inventory that people were willing to bid up from MSRP. He advised me it's still a bad time to buy a car and that next year will probably be better.
They make a lot of their money today selling warranties, service packages, and financing.
I was looking a few weeks ago and the sales associate mentioned that it's starting to come down but they've just struggled so much at getting enough inventory that people were willing to bid up from MSRP. He advised me it's still a bad time to buy a car and that next year will probably be better.
They are only selling well above MSRP because people are willing to buy well above MSRP
Well, yeah. There was an imbalance in the market between the supply of cars and the demand from consumers for cars. People were willing to spend more than ever, especially with super low interest rates making it nearly free to borrow money.
Anyone else feel like this is such a dumb way for the general public to track inflation. Like, a simple line chart with the X axis being time and the Y axis being the price of a basket of goods would be so much clearer
Is inflation (meaning CPI figures) meant for the general public? It's a useful economic tool, but not very relevant to the average Joe. I would think expansion of cost of living is what the general public is interested in, and for that they have to track their spending, and can do so in any way they see fit.
I'm in the general public. Basically anyone not in finance or economics I'd consider to be the general public. It's still important to know the trend to know how and where to invest your resource.
If you're utilizing the inflation figure, are you really the average Joe, and if you are utilizing that information are you really going to stop with the headline figure? Inflation is more nuanced than is captured in a single variable.
It's prob the reason the average Joe doesn't look at inflation - because its presented in the worst way possible.
I'm not trying to be the best investor or anything like that - but knowing the basic inflation trend I think would be useful to a large % of the population.
I'm not trying to be the best investor or anything like that - but knowing the basic inflation trend I think would be useful to a large % of the population.
That's why we don't use it.
This isn't right. It could in fact mean prices are going down.
Had we just reported a month on month -0.4% instead of 0.4%, the yoy rate would have been reported as 6.9%. A headline of 6.9% would mean prices are actually going down.
Had we just reported a month on month -0.4% instead of 0.4%, the yoy rate would have been reported as 6.9%. A headline of 6.9% would mean prices are actually going down.
Anything positive YoY means prices have gone up overall over the last year. For prices to have gone down in general over the last year, the YoY would have to be negative. A headline of 6.9% would mean prices have gone up.
You're just talking about different time frames. Yearly inflation can be positive and prices can also be lower than they were last month. Ergo prices are going down but inflation still positive.
The slope of price v time would be going down if they'd posted 6.9% yoy.
The discussion is around how the numbers should be interpreted. There isn't confusion around what they have literally reported.
The discussion is around how the numbers should be interpreted. There isn't confusion around what they have literally reported.
Nope. You are continually overlaying data with different X axis and trying to draw conclusions and sound authoritative and it’s just sloppy and irresponsible.
The instantaneous slope would be negative if the last month happened to observe a slight decrease, true. But the slope of the line between last year and this year would be positive.
Both statements can be true:
1. prices just fell slightly since last month
2. prices have risen overall since last year
EDIT: you edited your comment I’m not going to update mine.
The instantaneous slope would be negative if the last month happened to observe a slight decrease, true. But the slope of the line between last year and this year would be positive.
Both statements can be true:
1. prices just fell slightly since last month
2. prices have risen overall since last year
EDIT: you edited your comment I’m not going to update mine.
Same x axis - time. CPI is a time series, you get a point every month. Everyone is trying to draw conclusions, it's the point of this thread.
>> The instantaneous slope would be negative if the last month happened to observe a slight decrease, true
This is sloppy. It's fine, it's a forum, we aren't writing academic papers.
Nobody is trying to figure the slope of the straight line between the two points, that's what is already reported.
Yes, both can be true.
>> The instantaneous slope would be negative if the last month happened to observe a slight decrease, true
This is sloppy. It's fine, it's a forum, we aren't writing academic papers.
Nobody is trying to figure the slope of the straight line between the two points, that's what is already reported.
Yes, both can be true.
Sigh. Obviously we’re talking time here. The scale on the X axis, the interval that appears on the graph between two points, is different if every unit is a month vs a year. Months and years are different units of time.
IDK… nobody is really trying to figure out how to interpret the data. People were just commenting that “declines to X%” actually still means that it’s gone up YoY and not that it’s declining YoY and here you are yelling that actually it is declining because recently it went down. Which is false, YoY.
IDK… nobody is really trying to figure out how to interpret the data. People were just commenting that “declines to X%” actually still means that it’s gone up YoY and not that it’s declining YoY and here you are yelling that actually it is declining because recently it went down. Which is false, YoY.
Scale is the same. The CPI reports every month. It's one chart, a single index, one point per month.
They just take the recent point and the point from a year ago and do the math and report the change. For mom they do the recent point and the one before that, do the math and report.
Some people actually know what the CPI is, how it gets reported, and understand the shortcomings of said reporting. If you aren't one of those people, it's silly to go around correcting others.
They just take the recent point and the point from a year ago and do the math and report the change. For mom they do the recent point and the one before that, do the math and report.
Some people actually know what the CPI is, how it gets reported, and understand the shortcomings of said reporting. If you aren't one of those people, it's silly to go around correcting others.
I… do… know that. That’s why I’m trying to clear up the shitstorm you’re causing by deliberately being provocative. You sound like a manager trying to deceive reports into thinking they don’t need an inflation bump this year because “look inflation is lessening” or something.
Year-over-year inflation doesn't tell us anything about whether prices are going up or down right now.
No historical data is going to tell us the future. But it can give us an idea of the trend, which is useful since in a large system like the economy the trend tends to change relatively slowly as compared to individual compentents.
A statistic is only useful if you know how to interpret it. Case in point: you can have double digit year-over-year inflation, while simultaneously falling prices for the last 11 months.
This doesn't make sense. Falling prices for what? CPI is a measure of cost of a basket of goods. You can't have net aggregate falling prices and a rising CPI unless you are measuring different prices.
CPI up 20% month on month in month 1. CPI down 1% month on month for the remaining 11 months. That would result in what they are saying.
Ah, so not mismatched prices/goods, but mismatched temporally.
It's just about how are you measuring the slope? Like, when you first learn derivatives and the math teacher draws a line between two points on a curve, then draws another from points closer together, then draws the tangent, then goes through how you get to a derivative function etc.
The yoy is just using two points very far apart. The mom is using two points closer together. It would be nice but practically impossible to measure it instantaneously, mom is about as good as we get.
The yoy is just using two points very far apart. The mom is using two points closer together. It would be nice but practically impossible to measure it instantaneously, mom is about as good as we get.
I can get the prices for goods online, and then get them delivered to my house. Getting the CPI more often seems entirely feasible to me if we really wanted to.
Maybe. But online isn't the only place to buy, and to arrive at a single number they do all kinds of adjustments to account for seasons, locations etc.
If you are right, I'd guess the cost benefit probably isn't there regardless.
If you are right, I'd guess the cost benefit probably isn't there regardless.
Which is still stupid to even be arguing about. It’s like people are trying to find a problem with data that is objectively reported by arguing that if you change the x axis you get an entirely different conclusion. No shit… that’s how data works.
No one is suggesting there is a problem with the data. They are discussing how best to interpret it.
And nobody is suggesting changing the x-axis. It's still time. The distinction people are making is which points does one use to calculate the slope? The most recent two? The most recent one and the one from a year ago? What are the implications of each?
And nobody is suggesting changing the x-axis. It's still time. The distinction people are making is which points does one use to calculate the slope? The most recent two? The most recent one and the one from a year ago? What are the implications of each?
From what I can gather you’re trying to suggest that prices are going down because “recently” they have been (which isn't even true MoM they’ve still increased). That’s a pretty sloppy and inaccurate statement without a very precise definition of recently, which has been omitted. And YoY it’s not true.
I didn't see any thread of discussion that you’re alluding to where people were trying to interpret what the data actually means. There was simply a word of caution about making sure not to let the headline confuse you. Then some incorrect and sloppy comments appeared like “actually this is incorrect data because the price is trending down MoM don’t be fooled”. That’s an entirely different thing. Hence why you see all the people trying to explain how it’s silly. I didn't introduce confusion by changing the slope calculation… I’m just responding to it trying to clean up the mess it’s made.
I’m seriously confused: what is your actual point?
I didn't see any thread of discussion that you’re alluding to where people were trying to interpret what the data actually means. There was simply a word of caution about making sure not to let the headline confuse you. Then some incorrect and sloppy comments appeared like “actually this is incorrect data because the price is trending down MoM don’t be fooled”. That’s an entirely different thing. Hence why you see all the people trying to explain how it’s silly. I didn't introduce confusion by changing the slope calculation… I’m just responding to it trying to clean up the mess it’s made.
I’m seriously confused: what is your actual point?
No, definitely not, and they haven't, not yoy or mom. Terrible gathering.
The comment was in response to a comment that was speaking to nuance and basically said there's even more nuance. It's right there to see.
The comment was in response to a comment that was speaking to nuance and basically said there's even more nuance. It's right there to see.
Inflation over the last year was 7.7% - if the October rate holds for a year, it will be under half of the last years inflation rate coming in at 3.6%
That’s the number that matters in a forward looking instrument like the market
That’s the number that matters in a forward looking instrument like the market
Which businessman in their right mind will decrease the price of their products because of cost decrease? Not unless there is intense competition. Because of that for large scale monopoly business like commodities once the prices go up it may not come down again.
I may be missing something, but if there is no competitive pressure/monopolistic market, why would these businesses need the excuse of inflation/cost increases to increase their prices? Wouldn't we expect prices to have gone up before inflation?
Or is this a specific criticism of a regulatory blind spot for reigning in market power? Monopolies can get away with price increases now, but they wouldn't normally?
Or is this a specific criticism of a regulatory blind spot for reigning in market power? Monopolies can get away with price increases now, but they wouldn't normally?
The argument is that they had market power before, but were afraid to exercise it for political reasons or because they feared enforcement action. Now, with inflation, the company has an excuse to raise prices, but now they're raising them only partly due to increased costs, and partly as an exercise of their market power.
What is "before inflation"? Deflation is bad it means you should keep your dollars instead of investing them.
Do you buy less food when interest rates on your investments are higher?
If you sell commodities that is literally the opposite of a monopoly
Yes the YoY number is useful for getting rid of seasonal variations. The monthly CPI is also noisy. But when there’s a big spike over a few months (like we had 8-16 months ago) YoY won’t go down meaningfully for at least a year.
This is actually great (if noisy) news. 2 months of 0.4% CPI increase is equivalent to 5% yearly inflation. But the YoY is still high because it was much worse 8-12 months ago.
I hadn’t even considered that people will think low numbers are a lie because prices don’t go down. But of course (sadly) you’re right.
This is actually great (if noisy) news. 2 months of 0.4% CPI increase is equivalent to 5% yearly inflation. But the YoY is still high because it was much worse 8-12 months ago.
I hadn’t even considered that people will think low numbers are a lie because prices don’t go down. But of course (sadly) you’re right.
The seasonality aspect is a distraction when inflation is so volatile due to all the pandemic craziness.
> The right way to interpret this number is that high prices have plateaued a bit.
This part is true.
> that means your groceries are going to be x% higher than in 2020
But this part jumps right back into the much bigger fallacy that inflation represents a change in value and not price! Sure, groceries are higher in price, just like your assets are higher in value (on average) and your wages are higher (on average).
But in any case, your notion that inflation isn't instantaneously halted is a little spun. In fact month-to-month CPI change for October is 0.4%, which corresponds to about 4.9% per year. That's higher than we've seen for most of the last decade, but not a number most people would consider "high" in the sense of "disruptive to economic activity".
This part is true.
> that means your groceries are going to be x% higher than in 2020
But this part jumps right back into the much bigger fallacy that inflation represents a change in value and not price! Sure, groceries are higher in price, just like your assets are higher in value (on average) and your wages are higher (on average).
But in any case, your notion that inflation isn't instantaneously halted is a little spun. In fact month-to-month CPI change for October is 0.4%, which corresponds to about 4.9% per year. That's higher than we've seen for most of the last decade, but not a number most people would consider "high" in the sense of "disruptive to economic activity".
I think of it like the accelerator pedal on a car. A decline in inflation means the foot has eased up on the accelerator some, but the car is definitely still moving forward.
You mean a negative CPI growth / CPI decline, right? With a negative CPI stuff would be free + we would be getting money on top (on average) :D
I think the best way to understand it is to just look at the index itself [1] and not the first or second derivative.
[1] https://tradingeconomics.com/united-states/consumer-price-in...
I think the best way to understand it is to just look at the index itself [1] and not the first or second derivative.
[1] https://tradingeconomics.com/united-states/consumer-price-in...
Sure, but this is still exactly what we want to see. If the target is 2%, YoY metrics moving in that direction is a positive step.
The only thing we can hope for is that, as inflation numbers continue dropping back toward "normal", wage increases will eventually catch up and make those already-higher prices less difficult to swallow. Of course, it never works out that neatly.
The only thing we can hope for is that, as inflation numbers continue dropping back toward "normal", wage increases will eventually catch up and make those already-higher prices less difficult to swallow. Of course, it never works out that neatly.
Couldn't some goods in the basket be slightly negative while others are positive? For example if rent went down relative to last year's baseline but groceries, gas, etc were all very much up.
The number is largely manipulated anyway. It's more complex than even this because you have to account for price elasticity. They are giving oil a very wide fluctuation, for instance.
I've been tracking my expenses since 2015 and they're up around ~50% since then, for effectively the same food (eggs, bread, meat, etc). I eat ~2800-3000 calories per day (which I also track) and that's been consistent.
According to BLS it should be up only 27%, but everyone knows that's just not true. Remember ~1 year ago when the administration was calling prices "transitory", that means they're claiming a larger elasticity in prices so inflation doesn't look bad because they believe they'll come back down (soon).
I've been tracking my expenses since 2015 and they're up around ~50% since then, for effectively the same food (eggs, bread, meat, etc). I eat ~2800-3000 calories per day (which I also track) and that's been consistent.
According to BLS it should be up only 27%, but everyone knows that's just not true. Remember ~1 year ago when the administration was calling prices "transitory", that means they're claiming a larger elasticity in prices so inflation doesn't look bad because they believe they'll come back down (soon).
You could just say: CPI is up 0.4% month-over-month. It gets reported.
As a general consumer, the slowdown in the erosion of my earning power is welcome news. My gamma hedging hedging costs have never been lower.
For the mathematically inclined among us, dp/dt is still positive. It's d^2p/dt^2 that is slightly negative.
Though the mathematically inclined should also know that we're not looking at dp/dt, we're looking at p(t) - p(t-T).
The difference is important, especially because we're looking at a yearly increase every month. The derivative of the annual inflation is not d^2p/dt^2 but (dp(t)/dt - dp(t-T)/dt).
The difference is important, especially because we're looking at a yearly increase every month. The derivative of the annual inflation is not d^2p/dt^2 but (dp(t)/dt - dp(t-T)/dt).
Anyone who's ever had to numerically estimate second and higher derivatives from noisy data can appreciate how difficult the Fed's job is.
Not really.
It means CPI_oct22 - CPI_oct21 < CPI_sep22 - CPI_sep21
d^2p/dt^2 isn't necessarily negative.
It means CPI_oct22 - CPI_oct21 < CPI_sep22 - CPI_sep21
d^2p/dt^2 isn't necessarily negative.
'Inflation is slower now than it was this time last year.'
Oh, right. I mixed it with month-on-month inflation.
For the mathematically inclined, here is a graph of 1/p over the past year:
https://totalrealreturns.com/s/USDOLLAR?start=2021-11-10&end...
or over a longer time period: https://totalrealreturns.com/s/USDOLLAR
(this site is my side project)
If "p" is the relative price level index (CPI-U in this case), then "1/p" represents the relative purchasing power of a single dollar over time -- explained on homepage in more detail.
https://totalrealreturns.com/s/USDOLLAR?start=2021-11-10&end...
or over a longer time period: https://totalrealreturns.com/s/USDOLLAR
(this site is my side project)
If "p" is the relative price level index (CPI-U in this case), then "1/p" represents the relative purchasing power of a single dollar over time -- explained on homepage in more detail.
Many words for something that can be explained by a single cumulative CPI graph.
Of course it probably needs a second graph under it of 2% cumulative CPI for comparison.
I.e. the rate of price increase has slowed, not the price increase itself
Prices are still increasing, and they are still increasing fast. It's just that recently, they increased even faster than now.
And I find it hysterical that the 10 year Bond dropped 4% because of this. They think this is the peak, as in the Fed will stop raising interest rates and inflation will only get lower from here.
A good time to but the 10 year Bond IMHO.
A good time to but the 10 year Bond IMHO.
Why would you suggest buying a bond on the exact day that yields just plummeted.
It is funny to me that this does not make sense to you.
Do you think I should have bought it when the price peaked?
What I am saying is that the "market", which is now controlled by AI reading newsprint, is wrong and that 10 Year Bonds will increases again.
Do you think I should have bought it when the price peaked?
What I am saying is that the "market", which is now controlled by AI reading newsprint, is wrong and that 10 Year Bonds will increases again.
I don’t think you understand how bonds work. However I do agree that yields will increase and this is temporary.
?
You don't think I know how bonds work? Yet you agree with me?
You don't think I know how bonds work? Yet you agree with me?
> the "market", which is now controlled by AI reading newsprint
You might as well say "I don't understand how bonds work". It's fewer words.
You might as well say "I don't understand how bonds work". It's fewer words.
[deleted]
Anyone notice that brand name soda (looking at you Coke) has increased almost 100% while the generic/house brand has had slight increases. I feel like Coke is testing the pricing limits of its customers especially with the smaller packaging and these prices will not come back down.
If you check Coke's financial statements, you'll see that although revenue has risen quickly, cost of revenue has risen about as fast, leading to relatively unchanged gross profit margins (36% so far in 2022, compared with 40%+ in every year from 1985-2014 and between 33%-39% from 2015 to 2021). Word from industry press is that the rising price of aluminum has been a major driver of the increased costs.
I don't know why pricing for the generic brands wouldn't increase as much. Perhaps some stores see the large price increase in branded soft drinks as an opportunity to get people to shift to the store brands and are willing to tolerate lower profit margins to see if that strategy pays off.
I don't know why pricing for the generic brands wouldn't increase as much. Perhaps some stores see the large price increase in branded soft drinks as an opportunity to get people to shift to the store brands and are willing to tolerate lower profit margins to see if that strategy pays off.
Store brands have very little advertising costs, for one.
Coke spent $4B on advertising in 2021 [0], which is about a quarter of their costs. [1]
[0] - https://statstic.com/coca-cola-advertising-costs/
[1] - https://www.macrotrends.net/stocks/charts/KO/cocacola/cost-g...
Coke spent $4B on advertising in 2021 [0], which is about a quarter of their costs. [1]
[0] - https://statstic.com/coca-cola-advertising-costs/
[1] - https://www.macrotrends.net/stocks/charts/KO/cocacola/cost-g...
I guess I must be wrong, but I'll never understand why Coke needs that much advertising. Or anything "that well known". The argument is maybe they are that well known because of advertising, but I just don't think that's the case. Maybe for a crappy product, but not a good product.
With Coke it's the quality (and consistency) of the product. I've never tasted anything "as good" as Coke. A new fresh cold can has a bite that simply nothing else has.
4 billion a year on advertising something everyone knows about...
With Coke it's the quality (and consistency) of the product. I've never tasted anything "as good" as Coke. A new fresh cold can has a bite that simply nothing else has.
4 billion a year on advertising something everyone knows about...
In blind taste tests, Coke performs about as well as Pepsi. However, people still overwhelmingly seem to like Coke, so it's really because they like the brand. If they reduced advertising, their brand will slowly be eroded.
I interviewed a guy who worked at Pepsi. He said their own tests actually showed that people enjoyed Pepsi for the first sip but then preferred coke when drinking more.
Pretty sure that's because Pepsi is sweeter (the regular non-diet version). The sweetness is initially preferable, so it tends to win out in the "Pepsi Challenge" but then is overwhelming when you're drinking the whole thing.
In my case I am sure that I like Coke better because of the packaging and logo design. Red & white with an old-school cursive text focuses my brain on the spicy interesting flavors. The smooth blue Pepsi logo with the circular logo makes me focus on the sugar. That, and their various "look how cool and hip we are!" Pepsi ad campaigns over the decades always seemed goofy.
They could both stop advertising forever and I would still have those associations for the rest of my life.
They could both stop advertising forever and I would still have those associations for the rest of my life.
Remember "New Coke"? The Coca Cola people responded to taste tests that indicated people like Pepsi better by making it more sweet like Pepsi. Sales and PR disaster ensued, famous case study in MBA courses.
https://en.wikipedia.org/wiki/New_Coke
https://en.wikipedia.org/wiki/New_Coke
still think it was a trick to change the formula of "classic" coke to cheaper ingredients.
I dont know if I am alone but for me I prefer Bottled Pepsi over Bottle Coke, but Fountain Coke over Fountain Pepsi
I also prefer Mt. Dew over them all so....
I also prefer Mt. Dew over them all so....
Coke’s advertising isn’t “hey this is what Coke is” it’s “hey aren’t you thirsty and don’t you remember how much fun you’ve had in the past while drinking Coke?”
I've never once grabbed a coke because of seeing a commercial. And I barely drink it because I have enough sugar in my life and don't want my kids chugging soda all day long like I did as a kid.
So I do see your point, I just don't get how that influences people. But again, I recognize it must to enough of a degree- I just don't feel like I'm one of them so it's hard to personally understand. Maybe I am, but I think I'm being objective about it.
So I do see your point, I just don't get how that influences people. But again, I recognize it must to enough of a degree- I just don't feel like I'm one of them so it's hard to personally understand. Maybe I am, but I think I'm being objective about it.
>Maybe I am, but I think I'm being objective about it.
Sure, not every person is a Coke consumer. What drinks do you drink?
Keep in mind, a very meaningful part of Coke's (and any other CPG company) advertising budget is paying grocery stores to put their products in prominent locations.
Sure, not every person is a Coke consumer. What drinks do you drink?
Keep in mind, a very meaningful part of Coke's (and any other CPG company) advertising budget is paying grocery stores to put their products in prominent locations.
The only reason you’ve ever drank a coke is because of these ads.
Do you think you’re immune to ads? Or that ads don’t work at all?
I think it’s reasonable that you’ve never seen an ad and consciously bought a coke, but that’s rarely the point of coke.
We’re not aware of all our subconscious motivations. I’d like to be, but it’s usually pretty hard for me to understand why I do things at a deep level.
Do you think you’re immune to ads? Or that ads don’t work at all?
I think it’s reasonable that you’ve never seen an ad and consciously bought a coke, but that’s rarely the point of coke.
We’re not aware of all our subconscious motivations. I’d like to be, but it’s usually pretty hard for me to understand why I do things at a deep level.
> The only reason you’ve ever drank a coke is because of these ads.
This isn’t true in all cases. When I first drank a coke I was very young and wasn’t even aware of advertising. The first coke I drank was because my parents took me to McDonalds and that’s all they sell. Then I found I preferred it over Pepsi. Advertising had very little to do with my first coke, it was more contracts with fast food companies.
This isn’t true in all cases. When I first drank a coke I was very young and wasn’t even aware of advertising. The first coke I drank was because my parents took me to McDonalds and that’s all they sell. Then I found I preferred it over Pepsi. Advertising had very little to do with my first coke, it was more contracts with fast food companies.
> it was more contracts with fast food companies.
Also known as 'advertising.' (Coke has an insane amount of control over how their products are sold at McDonalds, down to how the soda fountain equipment can look) Why do you think PepsiCo Bought KFC/Pizza Hut/Taco Bell (before spinning them back out as Yum!)?
Coke spends money so that every time you are thirsty you reach for a Coke, and part of that is the immense amount of work they do to make Coke the only beverage available in places like McDonalds, AMC, United Airlines flights, etc.
Also known as 'advertising.' (Coke has an insane amount of control over how their products are sold at McDonalds, down to how the soda fountain equipment can look) Why do you think PepsiCo Bought KFC/Pizza Hut/Taco Bell (before spinning them back out as Yum!)?
Coke spends money so that every time you are thirsty you reach for a Coke, and part of that is the immense amount of work they do to make Coke the only beverage available in places like McDonalds, AMC, United Airlines flights, etc.
You have really loose definitions of advertising. At any rate I’ll say it again, advertising had no effect on me trying or continuing to drink coke. I’m not sure why you’re demanding to be right here on something so simple.
> This isn’t true in all cases. When I first drank a coke I was very young and wasn’t even aware of advertising.
Your parents were. Or whoever it was that bought that coke.
Your parents were. Or whoever it was that bought that coke.
> Then I found I preferred it over Pepsi.
You "found" that either because of advertising, or because you were primed to like Coke more because of your childhood experience.
And the reason McDonald's only sold Coke? Advertising, of course. McDonald's believed they were better off selling Coke over Pepsi.
Advertising is everywhere. I try to avoid advertising as much as possible (adblockers, never watching ad-supported TV or movies, etc.) because I know how pervasive ads are, and how insidiously emotionally manipulative they can be. I know I can't make myself immune to their effects, so the best I can do is just avoid them as much as I can.
You "found" that either because of advertising, or because you were primed to like Coke more because of your childhood experience.
And the reason McDonald's only sold Coke? Advertising, of course. McDonald's believed they were better off selling Coke over Pepsi.
Advertising is everywhere. I try to avoid advertising as much as possible (adblockers, never watching ad-supported TV or movies, etc.) because I know how pervasive ads are, and how insidiously emotionally manipulative they can be. I know I can't make myself immune to their effects, so the best I can do is just avoid them as much as I can.
Maintaining a contract with a company is not advertising. It was simply matter of convenience. I could have easily been taken to taco bell and my first soda would’ve been a pepsi.
Coke does not pay to be in fast food restaurants. It’s the other way around. This would be the weirdest form of free advertising, but I think people are using that term very loosely in this thread.
Except when I watch broadcast TV and some TV shows with products embedded, I do not see ads. But the first time I had a coke was long before adblockers existed.
Coke does not pay to be in fast food restaurants. It’s the other way around. This would be the weirdest form of free advertising, but I think people are using that term very loosely in this thread.
Except when I watch broadcast TV and some TV shows with products embedded, I do not see ads. But the first time I had a coke was long before adblockers existed.
Coke is only one of their products, they probably need some advertising to promote their other 200 brands: https://www.coca-colacompany.com/brands
This comment sounds like you're getting a piece of that $4bn
Not sure what that is supposed to mean. I'm pointing out that it's a high quality product. There's a reason Coke absolutely dominates everything else out there. I guess to you I'm just a Coke shill though. Ok!
He means the reason you think it's a high quality product is that the $4B of advertising has had an affect on you subconsciously
Which is a pretty silly claim. There are great colas with far less advertisement, but they're small premium brands which cost the same or more. Store brands are typically awful, Pepsi is bad despite their advertisement budget.
Generic brands often don't come in aluminum cans, assuming the industry rumours are true.
In the US it is usually easy to find generic brand sodas in cans. Most large-ish grocery stores have them.
https://www.tomthumb.com/shop/product-details.208010001.html
https://www.kroger.com/p/big-k-cola-soda/0001111049680?
https://www.publix.com/pd/publix-cola/RIO-PCI-106059
https://www.walmart.com/ip/Sam-s-Cola-Soda-Pop-12-fl-oz-24-P...
https://www.heb.com/product-detail/h-e-b-original-cola-7-5-o...
https://www.tomthumb.com/shop/product-details.208010001.html
https://www.kroger.com/p/big-k-cola-soda/0001111049680?
https://www.publix.com/pd/publix-cola/RIO-PCI-106059
https://www.walmart.com/ip/Sam-s-Cola-Soda-Pop-12-fl-oz-24-P...
https://www.heb.com/product-detail/h-e-b-original-cola-7-5-o...
I’ve shopped in the US for a few decades. The store brand soda has always come in aluminum cans (in addition to all the other forms of packaging coke uses).
Also, prices for coke in plastic bottles are also up.
Also, prices for coke in plastic bottles are also up.
Care to elaborate?
I'm guessing parent resides from the UK or Europe. Mostly "own brands" here come in 2 litre bottles
In my European country all own brands are available in cans.
Increase diameter couple of mm and reduce height couple of mm, will that work ?
Of course they are. There was a much-watched video that went around a few weeks ago that composed quite a few CEOs talking about pushing the pricing envelope to take advantage of inflation news (effectively saying: "People now expect price increases, we can leverage that to our gain!").
https://www.youtube.com/watch?v=psYyiu9j1VI
https://www.youtube.com/watch?v=psYyiu9j1VI
There's not really much we can do about this. Artificial price ceilings were tried in Venezuela and it only contributed significantly to their massive food shortages they experienced.
Most notably it resulted in a big reduction in the variety of food available because while some of the biggest companies could survive with the new lower prices (and work with the gov directly to set those prices) the bulk of small/medium sized ones couldn't, often as other expenses eventually increased while prices didn't.
Most notably it resulted in a big reduction in the variety of food available because while some of the biggest companies could survive with the new lower prices (and work with the gov directly to set those prices) the bulk of small/medium sized ones couldn't, often as other expenses eventually increased while prices didn't.
I don't know. While price controls may not work in the long run, if businesses believe that there's a time-limited opportunity to raise consumer prices, you could try imposing time-limited controls until the opportunity is over. You might very well end up with lower consumer prices and thinner corporate margins, or at the very least, slow the rate at which the price increases occur.
Price controls are a pretty big deal though. Especially in a low margin industry you run the real risk of putting firms out of business and damaging supply. They're very dangerous when done wrong.
Price controls are a pretty big deal though. Especially in a low margin industry you run the real risk of putting firms out of business and damaging supply. They're very dangerous when done wrong.
Most importantly you communicate to investors that your government does not respect the pricing mechanism of the market. That'll make investors worried about which other norms of economic stewardship your regime will violate. The uncertainty alone will be a heavy burden for the economy of a country that decides to impose arbitrary price ceilings on commodities.
There's not really much we can do about this.
Not directly or quickly, no. Fully agreed that price caps and other invasive measures are usually counterproductive.
I was only pointing out that in a market economy led by profit-seeking CEOs, pushing pricing up is expected. Listening to those clips, they sounds downright sociopathic, but it's just another Tuesday in America.
The best way to deal with this is likely ensuring workers are paid a fair living wage. And take the appropriate measures to curb the worst of the inflation.
Not directly or quickly, no. Fully agreed that price caps and other invasive measures are usually counterproductive.
I was only pointing out that in a market economy led by profit-seeking CEOs, pushing pricing up is expected. Listening to those clips, they sounds downright sociopathic, but it's just another Tuesday in America.
The best way to deal with this is likely ensuring workers are paid a fair living wage. And take the appropriate measures to curb the worst of the inflation.
One thing we can do is give the NLRB actual teeth to enforce its laws.
I agree that that would be a good thing, but it won't lower consumer prices.
It would create more competition, and put more money into people’s pockets.
Putting more money in people's pockets will not reduce inflation.
I don't see how it will create more competition.
I don't see how it will create more competition.
Indeed, putting more money in people's pockets literally increases prices through higher demand.
Putting more money in people's pockets raises inflation, because they're willing to pay higher prices
I think the restaurant industry is going crazy with this. Yesterday I stopped at a food cart. The price of a gyro sandwich was $13. It didn't come with fries. I asked how much for a side of fries. $6. Throw in a drink and add another $2. So a sandwich, fries and drink "combo" is over $20.
And this is from a food cart, mind you - not a restaurant. And not a fancy food cart that people drive miles to try their unique food. Just a few years ago that sandwich would have been $8-9.
And this is from a food cart, mind you - not a restaurant. And not a fancy food cart that people drive miles to try their unique food. Just a few years ago that sandwich would have been $8-9.
That's literally how the market is supposed to work and it's not a bad thing. This is not some conspiracy. Companies price test all the time. They will increase the prices until either the consumer won't purchase their product or a competitor comes in and undercuts them. Sometimes the market conditions favor the consumer, sometimes they favor the company.
Then buy generic. This is one way to fight inflation. Coke will get the message very quickly if their sales start coming down.
If you drink neither and choose water, then it'll really come down. Bonus: you'll feel better
And then your medical expense category of the CPI will not go up as much.
That's heretical & anti-consumerism. Be a good citizen: Drink your sugar water, blow up your healthcare costs, increase money velocity. Broken Window Fallacy for the win!
Water is healthier, but not a substitute.
Something like Spindrift is a partial substitute.
A real substitute is Izze. Less sugar, but still sugary. Tastes awesome - better than Coke.
http://blog.nawaz.org/posts/2021/Dec/taming-my-soda-addictio...
Something like Spindrift is a partial substitute.
A real substitute is Izze. Less sugar, but still sugary. Tastes awesome - better than Coke.
http://blog.nawaz.org/posts/2021/Dec/taming-my-soda-addictio...
> Water is healthier, but not a substitute.
It can be, if you commit to really reducing your sugar intake. I did it, 20+ years ago, completely giving up soda. My go-to drink for every meal is water, and I drink water throughout the day from a large water bottle. I still consume sugar here and there in food (or the occasional cocktail), but I eat much less of the stuff than I used to. It's hard in the US, where everything has so much sugar, but it's doable.
The less sugar you consume, the less your body/brain will want and need it. It's like an addiction...
It can be, if you commit to really reducing your sugar intake. I did it, 20+ years ago, completely giving up soda. My go-to drink for every meal is water, and I drink water throughout the day from a large water bottle. I still consume sugar here and there in food (or the occasional cocktail), but I eat much less of the stuff than I used to. It's hard in the US, where everything has so much sugar, but it's doable.
The less sugar you consume, the less your body/brain will want and need it. It's like an addiction...
That's what I do. But I did not want to get too preachy towards the GP poster.
Are you assuming sugar for "feel better"?
I don't drink this kind of beverage, but from what I see in restauration, you don't really have a choice. Most fast-food and restaurant will have the "known" brand and no generic brand, so they will move the cost onto their customer.
Yes, restaurants (at least they used to) partner with either Coke or Pepsi and get things like free signage, etc. in exchange.
>Coke will get the message
Yes, you the single person going generic will definitely send a message to Coke!
Hey I get your "sending a message" concept. But you also have to be realistic. Coke is almost literally everywhere you could possibly go. A lot of times it's basically the only option aside from a grocery store. It's popularity is so high and it is to be fair a quality product, that you as the individual are never ever going to have anywhere close to a material impact no matter how hard you believe.
Also, most people agree it is objectively the superior product. So while you may save some money, you are also getting a shitter version of something that is already bad for you.
Send a message with your wallet- sure. But don't be so naive that it will actually have an impact for something like Coke. You are honestly just hurting yourself in the taste department to save a negligible amount of money. It's a no-win.
Yes, you the single person going generic will definitely send a message to Coke!
Hey I get your "sending a message" concept. But you also have to be realistic. Coke is almost literally everywhere you could possibly go. A lot of times it's basically the only option aside from a grocery store. It's popularity is so high and it is to be fair a quality product, that you as the individual are never ever going to have anywhere close to a material impact no matter how hard you believe.
Also, most people agree it is objectively the superior product. So while you may save some money, you are also getting a shitter version of something that is already bad for you.
Send a message with your wallet- sure. But don't be so naive that it will actually have an impact for something like Coke. You are honestly just hurting yourself in the taste department to save a negligible amount of money. It's a no-win.
Why do you think coke cost what it does instead of $10 per can? The price is what it is because people are willing to pay it. If they don't, the price either goes down or the company goes out of business.
I understand your point on saving money. Switching to cheaper substitutes is accounted for in chained CPI. e.g. If steak becomes too expensive and more people buy hamburger instead this substitution effect is accounted for in the basket of goods. It's very rare for food items to deflate. It's usually a slow monotonic upward march.
I bet some people are buying generic now, and Coke doesn't care, because they've done the math, and have decided that losing a few customers (perhaps only temporarily) is worth the extra revenue generated by the customers who keep buying Coke at the higher price.
Yep, americans aren't nearly as price conscious anymore in general, and there are just so many that are flush with cash now due to cheap money that they still don't care.
As a Pepsi guy, I can assure you: Coke drinkers will never switch to anything else.
I'm pretty low income ATM and I simply don't buy Coke zero or anything like that much anymore. I drink water, or tea. Loose tea is still pretty economical, even considering water and heating costs.
Yeah, coke can get expensive. I recommend you try cold brew tea, it's almost as refreshing as soda in hot days. You only leave water with tea in the refrigerator at night and enjoy it the next day.
Or make Sun Tea: https://www.simplyrecipes.com/recipes/sun_tea/
Oh, I didn't knew about that one. I'll try it, thanks for sharing!
I'm surprised to hear house brand cola still exists. My local Giant supermarket no longer ever has any in stock.
I’ve noticed this with many items. Nabisco Premium Saltine Crackers are $4.5 and Publix store brand are $1.5.
I’m not sure how much they’ve increased as I don’t remember the old price of crackers but I remember them being really cheap.
It seems odd that the inputs vary substantially between the two so is it just that Nabisco has very different labor costs? Or are they just jacking up the price because they can?
I suspect store brand have a very fixed cost-plus style of pricing where they just sell for a fixed markup over whatever their costs are and don’t really do market research for price points.
I’m not sure how much they’ve increased as I don’t remember the old price of crackers but I remember them being really cheap.
It seems odd that the inputs vary substantially between the two so is it just that Nabisco has very different labor costs? Or are they just jacking up the price because they can?
I suspect store brand have a very fixed cost-plus style of pricing where they just sell for a fixed markup over whatever their costs are and don’t really do market research for price points.
Is Pop Shoppe still a thing? http://old52blog.blogspot.com/2011/03/pop-shoppe.html
And bring back the "White Label" groceries from the 80's while you're at it. http://historysdumpster.blogspot.com/2012/08/generic-product...
And bring back the "White Label" groceries from the 80's while you're at it. http://historysdumpster.blogspot.com/2012/08/generic-product...
The biggest crock is the increase in price of sparkling waters. Literally just carbonated water with a squirt of flavor, somehow more expensive than soda nowadays.
This doesn't surprise me much. Most of the cost of these things is the cost of packaging and trucking them around - the cost of the sugar syrup in Coke isn't adding much cost versus the sparkling water. The soda maker might have a more efficient distribution network that allows a lower cost per unit. That, and the customer who's buying sparkling water (instead of buying soda, or just plain bottled tap water) probably is willing to pay more.
That's probably because the people drinking La Croix aren't too price-sensitive. However, if you actually care about buying them with little margin, Costco has em for $0.30/can and Trader Joe's for $0.40.
Prices around here have stayed the same or gone up a bit, but the sales have dried up. You could almost always get Coke on sale at the grocery store for half the "list price" now that's much rarer.
A 20oz bottle is easily 2.29 now compared to roughly 1.79 not long ago.
This price has everything to do with what consumers will pay for convenience and almost nothing to do with manufacturing costs, which are a tiny fraction of that. (Shipping and delivery are probably more, both for energy and labor.)
Sellers do not determine the market price for anything. Buyers do by what they will pay. Sellers can specify a price, but any transaction actually happening is only determined by the buyer. (Setting the price can be intended to apply psychological manipulation to the buyer, which often works.)
If you are complaining about the prices of anything, your complaint is not with the seller, it is with other buyers who have proven they are willing to pay it.
Sellers do not determine the market price for anything. Buyers do by what they will pay. Sellers can specify a price, but any transaction actually happening is only determined by the buyer. (Setting the price can be intended to apply psychological manipulation to the buyer, which often works.)
If you are complaining about the prices of anything, your complaint is not with the seller, it is with other buyers who have proven they are willing to pay it.
I remember when it was $1 for almost 7 years, then went to $1.49. It hurt because now you had to feed 2 bills into machines that could barely take 1 reliably, and were always out of change.
How that didn't drive the price back down to $1 or up to $2 I'll never understand. It had to have increased labor on the parts of the vendors and decreased demand for the vendors at the same time. That's about the time I started just stocking a 6 pack or 2 liter (depending on which was cheaper per oz) in the fridge for the week, too, which drops the unit price.it also decreased the total volume of soft drinks that I bought.
I don't know how soft drinks can continue to increase in prices under that dynamic. My guess is that the majority of people just buy it and don't notice anything that costs less than $10 anymore, so convenience stores can get away with movie theater prices as long as they don't cross that trivial threshold. People will pay for convenience under $10.
How that didn't drive the price back down to $1 or up to $2 I'll never understand. It had to have increased labor on the parts of the vendors and decreased demand for the vendors at the same time. That's about the time I started just stocking a 6 pack or 2 liter (depending on which was cheaper per oz) in the fridge for the week, too, which drops the unit price.it also decreased the total volume of soft drinks that I bought.
I don't know how soft drinks can continue to increase in prices under that dynamic. My guess is that the majority of people just buy it and don't notice anything that costs less than $10 anymore, so convenience stores can get away with movie theater prices as long as they don't cross that trivial threshold. People will pay for convenience under $10.
As someone who use to drink a lot of coke and quit.. this is very true here (Ontario, Canada) as well.
I remember buying 2L bottles for $0.99 on a regular basis (they often had sales). I don't drink it anymore (one month and counting) but i do check the prices weekly out of habit and never see it below $2.29/2L now?
I actually just checked and it has gone up in price once again, now $2.49/2L
Crazy.
I remember buying 2L bottles for $0.99 on a regular basis (they often had sales). I don't drink it anymore (one month and counting) but i do check the prices weekly out of habit and never see it below $2.29/2L now?
I actually just checked and it has gone up in price once again, now $2.49/2L
Crazy.
"Food at home" is up 12% year over year. Table A in the link is good reading.
What is inflation if not the capitalists raising prices?
MoM inflation is still unfortunately 0.4% which is about 5% annualized. I think it's unfortunate that reporting focuses around yearly inflation which isn't really useful for talking about inflation in the moment.
Interesting, that does seem like a more useful metric. Where do you find that data?
It's part of the whole BLS report, here:
https://www.bls.gov/news.release/cpi.nr0.htm
You may also be interested in what is referred to as "sticky CPI" which is reported by the Atlanta Fed: https://www.atlantafed.org/research/inflationproject/stickyp...
The name is fairly descriptive of what it is: the slowest re-acting elements of the CPI calculation. This is contrasted with the "flexible" CPI, which are the elements that react the fastest. In the last report, Sticky CPI was constant (no change), whereas all the decrease in CPI came in the flexible side of things.
https://www.bls.gov/news.release/cpi.nr0.htm
You may also be interested in what is referred to as "sticky CPI" which is reported by the Atlanta Fed: https://www.atlantafed.org/research/inflationproject/stickyp...
The name is fairly descriptive of what it is: the slowest re-acting elements of the CPI calculation. This is contrasted with the "flexible" CPI, which are the elements that react the fastest. In the last report, Sticky CPI was constant (no change), whereas all the decrease in CPI came in the flexible side of things.
5% is not that much higher than historic averages. 1990 had 5.4% inflation, and 2008 close to 4%.
5.4% in 1990 was the highest rate in an almost 40 year stretch. In 1991 it went down to 4.2% and then wasn't above 4% until last year.
Worse than 2008, got it.
I am not sure that we can predict how bad a recession will be based on inflation.
Some claim you can:
"The historical evidence indicates that when inflation is as high as it is today, and the unemployment rate is as low as it is today, the probability of a recession over the next one and two years is extraordinarily high"
source: https://www.hks.harvard.edu/sites/default/files/centers/mrcb...
Probability of recession, but severity?
Well, yes, and no, the crash of 2008 caused deflationary pressure, and below [Federal Reserve] (annualized average) target inflation until 2020.
Reminds me of Nixon's "the rate of increase of inflation is going down" comment and the associated quip that it was "the first time a sitting president used the third derivative to advance his case for reelection."
This isn't that. The rate of inflation is going down, not the rate of increase of inflation. 8.2% in September, 7.7% now. The second derivative of prices, not the third.
I'm aware of that, it just reminded me of that incident and I thought others would find it funny too is all.
Which is interesting because Nixon pressured official to make "cheap money" :
https://www.investopedia.com/articles/economics/09/1970s-gre...
Funny how markets and analysts lose their minds when the numbers don't match exactly the predicted when there are no error bars associated to either the estimate or the value.
Coming under or over is a lot different when we're talking +/- 0.05 vs. 0.5...
And yes, I tried checking. The Fed does put out their data, but nary a precision factor to be found
And yes, I tried checking. The Fed does put out their data, but nary a precision factor to be found
It wouldn't matter at all if the fed didn't put in a prediction. You can calculate what inflation level the market is predicting by looking at inflation swaps. When the official rates come out the market reacts to divergence from that prediction.
Is the pricing data for inflation swaps publicly available?
I'm always reminded of economists wonderful sense of humor whenever I start seeing decimal points on some of these forecasts!
My guess is that many of the actors in the market have their own error bounds.
The US has it easy, since the inflation was largely caused by lockdown stimulus, and also benefits from being the global reserve currency so it can leverage cheap imports as the interest rate rises increase the value of USD.
I wouldn't be surprised if it's better in a few months, especially with the growing protectionism in the anti-inflation act, etc. and acts against Chinese competition, etc. keeping more industry in the US.
I wouldn't be surprised if it's better in a few months, especially with the growing protectionism in the anti-inflation act, etc. and acts against Chinese competition, etc. keeping more industry in the US.
There was no Anti-Inflation Act, there was a spending... SPENDING bill they claimed would lower inflation because it also included a very limited amount of deficit reduction which 1 week later they had spent like 3 times on new programs including the Student Loan Cancellation which reversed any inflation reduction the original bill could have had (which was nill in the first place)
How did student loan cancellation reverse inflation reduction when it's on hold due to legal challenges? No one has received a penny.
I haven’t been paying anything since non-penalized forbearance started. Why pay when interest is 0% and there’s no penalty for not paying?
I’ve been using money that normally goes to loans for other bills. I imagine plenty of other people are buying more stuff with the money so i imagine it does contribute to inflation
I’ve been using money that normally goes to loans for other bills. I imagine plenty of other people are buying more stuff with the money so i imagine it does contribute to inflation
This is a potential contributor to inflation, but it wasn't part of the student loan forgiveness bill, and instead supports the proposition that inflation is mostly related to COVID-19 measures, which include this forbearance.
[deleted]
> Why pay when interest is 0% and there’s no penalty for not paying?
Just spitballing here… But maybe you should pay because you promised to pay it, the costs were borne by the vast majority of taxpayers who did not take out such loans, and because tradesmen and other perfectly deserving parties do not get access to such easy money?
Just spitballing here… But maybe you should pay because you promised to pay it, the costs were borne by the vast majority of taxpayers who did not take out such loans, and because tradesmen and other perfectly deserving parties do not get access to such easy money?
If the government decided it wants me to receive loan forbearance at 0% interest, then it’s my civic duty to accept it.
After all, I don’t want to be labeled some kind of troublemaker.
After all, I don’t want to be labeled some kind of troublemaker.
> the costs were borne by the vast majority of taxpayers who did not take out such loans
The sheer amount of interest I have paid, and will pay, on my student loans makes me think the costs will in fact be borne by me.
The sheer amount of interest I have paid, and will pay, on my student loans makes me think the costs will in fact be borne by me.
I also pay a great cost when a huge number of other people are stuck paying down debts they probably should never have taken on and/or became bad after the economy shifted and their income potential flattened out. It's not that different from bailing out a bank, except that the banks usually don't deserve the bailout on a moral level, while people with student loans generally do.
It might hurt to spit ball a little bit harder here, but just so you know, penalty free forbearance is going to end very soon. And just like that all of us dirty debtors will begin repaying.
If the government wanted us to repay during this period it would not have automatically turned our payments off and told us multiple times it turned auto-debit off.
What kind of absolute fool would restart payment during a 0% interest penalty free forbearance? That’s having a loan that’s much less than the inflation rate. Why on earth except based on irrational internet principles would an individual restart payments on a loan like that? Very little spit balling went into that original comment..
If the government wanted us to repay during this period it would not have automatically turned our payments off and told us multiple times it turned auto-debit off.
What kind of absolute fool would restart payment during a 0% interest penalty free forbearance? That’s having a loan that’s much less than the inflation rate. Why on earth except based on irrational internet principles would an individual restart payments on a loan like that? Very little spit balling went into that original comment..
An economic strategy should not depend on people behaving irrationally.
It seems like a logical consequence of the Permanent Income Hypothesis. If you expect your disposable income to rise by 500$ per month you'll spend more money this month, even though your disposable income hasn't risen yet.
People don’t need to make payments, why bother making a payment if its going to get forgiven?
The payment pause on student loans ends in a month and a half (and is a separate program that's been around since the start of the pandemic). The legal battles over the forgiveness program are likely to go far beyond that, and lots of people have loan balances well over the $10k proposed forgiveness.
I’ll be surprised if it actually ends. They said it will super duper definitely end, but there have been many “end dates” over the past two years.
I feel silly because I paid off a student loan during this period and if I had paid nothing it would have been forgiven.
The rational action is to pay nothing as long as possible.
I feel silly because I paid off a student loan during this period and if I had paid nothing it would have been forgiven.
The rational action is to pay nothing as long as possible.
I would bother to make my payments because I would feel like shit if I took that much money from the American taxpayer without paying it back.
I don’t think that’s how interest works.
The government stopping charging interest. They don’t care if you pay or don’t. You aren’t taking any money from the taxpayer.
Also, the “taxpayer” charged me 6% internet when the prime rate was 2%. Did it make you feel like shit because you, the taxpayer, were gouging student borrowers?
The discussion isn’t about never paying back. The discussion is about not paying back during the 0% interest period when the gov asking not to pay back.
The government stopping charging interest. They don’t care if you pay or don’t. You aren’t taking any money from the taxpayer.
Also, the “taxpayer” charged me 6% internet when the prime rate was 2%. Did it make you feel like shit because you, the taxpayer, were gouging student borrowers?
The discussion isn’t about never paying back. The discussion is about not paying back during the 0% interest period when the gov asking not to pay back.
the govt is forgiving $20k/per person with pell grants of loans.
And you’d be a sucker for not taking tax credits the government has legally granted you.
It’s the governments fault for making terrible loans and forcing taxpayers to absorb the risk. Don’t be mad at people for receiving…be mad the government is offering!
It’s the governments fault for making terrible loans and forcing taxpayers to absorb the risk. Don’t be mad at people for receiving…be mad the government is offering!
My partner and I make $420k gross. it's ridiculous the government is offering us another $20k because we graduated school in the last 2 years. still going to take it, of course, but simply bad policy.
Making $420k with student loans is a pretty clear edge case, and we often find that trying to means-test these sorts of things winds up making things worse, not better.
I find the arguments against means-testing less compelling for one time transfers.
Large income and large student loans is actually very typical for early-career doctors and many other professionals who have very high expected lifetime income.
FWIW, this transfer was means tested - it's just that they consider the lesser of 2021 & 2020 income and we were in school in 2020.
Large income and large student loans is actually very typical for early-career doctors and many other professionals who have very high expected lifetime income.
FWIW, this transfer was means tested - it's just that they consider the lesser of 2021 & 2020 income and we were in school in 2020.
100% agree. Our government needs to start being fiscally responsible. We cannot sustain our current levels of debt forever…
Why not start donating extra tax to repay any public school expenses you acrued as a child?
That’s bizarre but I’ll assume you don’t know how American public schools are paid for. It’s property tax, which is money the government takes from you when you own a house. Those property taxes were paid annually by definition.
The taxes used to forgive your loans were also paid for annually.
I am definitely familiar with how American public schools are funded (there are also federal funds in the mix).
I am definitely familiar with how American public schools are funded (there are also federal funds in the mix).
Wealth and income expectations play into current savings.
I expect my savings to go up by $20k thanks to this, so I will shift some of my current savings to spending.
I expect my savings to go up by $20k thanks to this, so I will shift some of my current savings to spending.
> I expect my savings to go up by $20k thanks to this...
You rate the risk of SCOTUS rejecting the program at 0%?
You rate the risk of SCOTUS rejecting the program at 0%?
> No one has received a penny.
The Biden administration mailed student loan checks to people (conveniently set up to arrive just before the most recent midterm): https://www.foxbusiness.com/personal-finance/student-loan-re...
The checks are "rebates" for people who paid their student loans during the moratorium. The idea is to reimburse those people and add back their student loan debt so they can claim the maximum $10K / $20K amount of the forgiveness program.
It's hard to argue that's not inflationary.
The Biden administration mailed student loan checks to people (conveniently set up to arrive just before the most recent midterm): https://www.foxbusiness.com/personal-finance/student-loan-re...
The checks are "rebates" for people who paid their student loans during the moratorium. The idea is to reimburse those people and add back their student loan debt so they can claim the maximum $10K / $20K amount of the forgiveness program.
It's hard to argue that's not inflationary.
That's not the student loan cancellation program.
Those are people who overpaid during the pause in payments. It's as inflationary as getting a tax refund in April.
Those are people who overpaid during the pause in payments. It's as inflationary as getting a tax refund in April.
> That's not the student loan cancellation program.
It’s directly related to the student loan cancellation program as it’s intended to maximize the amount of cancellation for people who paid during the moratorium.
> Those are people who overpaid during the pause in payments. It's as inflationary as getting a tax refund in April.
It’s not overpayment. It’s just payment because it’s money those people owed on their loans. A payment pause doesn’t mean the money is not owed, it’s simply delayed.
It’s directly related to the student loan cancellation program as it’s intended to maximize the amount of cancellation for people who paid during the moratorium.
> Those are people who overpaid during the pause in payments. It's as inflationary as getting a tax refund in April.
It’s not overpayment. It’s just payment because it’s money those people owed on their loans. A payment pause doesn’t mean the money is not owed, it’s simply delayed.
No checks were delivered because it’s still going through the courts though, so this likely hasn’t had much of an effect yet.
Additionally it’s only for people who paid their loans during the pandemic and have less than $10k in their current loan balance. The check is for whatever amount would return their balance back to $10k.
Additionally it’s only for people who paid their loans during the pandemic and have less than $10k in their current loan balance. The check is for whatever amount would return their balance back to $10k.
I'm not following your point about student loan debt relief impacting the economy. It seems that money has not yet been released yet. From your link [0]:
> "If you made voluntary payments during the payment pause (from March 13, 2020, through Dec. 31, 2022) and your current loan balance is below the amount of debt relief you’ll receive, after you successfully apply for and receive debt relief under the administration's debt relief plan, we’ll automatically refund the amount you paid during the payment pause (only up to the remaining amount of your eligible debt relief)," the Office of Federal Student Aid states on its website.
> But that plan is currently being challenged in court. A federal appeals court on Oct. 21 issued a temporary block on the student loan forgiveness program as it considers legal challenges raised by six states: Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina.
I didn't see anything corroborating your statement that checks were mailed out. Maybe I missed something?
It's my understanding that the pause in student loan payments was initiated prior to Biden becoming president, along with the trillions of dollars of stimulus given to small business owners and individuals, as alluded to by the top post in this thread.
[0] https://www.foxbusiness.com/personal-finance/student-loan-re...
> "If you made voluntary payments during the payment pause (from March 13, 2020, through Dec. 31, 2022) and your current loan balance is below the amount of debt relief you’ll receive, after you successfully apply for and receive debt relief under the administration's debt relief plan, we’ll automatically refund the amount you paid during the payment pause (only up to the remaining amount of your eligible debt relief)," the Office of Federal Student Aid states on its website.
> But that plan is currently being challenged in court. A federal appeals court on Oct. 21 issued a temporary block on the student loan forgiveness program as it considers legal challenges raised by six states: Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina.
I didn't see anything corroborating your statement that checks were mailed out. Maybe I missed something?
It's my understanding that the pause in student loan payments was initiated prior to Biden becoming president, along with the trillions of dollars of stimulus given to small business owners and individuals, as alluded to by the top post in this thread.
[0] https://www.foxbusiness.com/personal-finance/student-loan-re...
You are correct the anti-inflation act is hot garbage, and accelerated inflation immediately.
You are incorrect about the exact specifics about the Direct Student Loan program refunds - anyone who had made payments during the pandemic can be refunded.
You are still generally correct though - inflation is caused by several things, M1 and M2 money supply, employment, demand, supply, and sentiment.
Everyone not paying their loans decreased demand for jobs, as that was the primary motivator for many to work. Additionally, the money printed and disbursed to colleges not being paid back leads to another increase in money supply, since the money never gets repaid, and a few select loan companies are now holding very large U-O-ME's, which the department of education seemingly is going to average between all of us, by forgiving it, further adding to the printed money pile.
You are incorrect about the exact specifics about the Direct Student Loan program refunds - anyone who had made payments during the pandemic can be refunded.
You are still generally correct though - inflation is caused by several things, M1 and M2 money supply, employment, demand, supply, and sentiment.
Everyone not paying their loans decreased demand for jobs, as that was the primary motivator for many to work. Additionally, the money printed and disbursed to colleges not being paid back leads to another increase in money supply, since the money never gets repaid, and a few select loan companies are now holding very large U-O-ME's, which the department of education seemingly is going to average between all of us, by forgiving it, further adding to the printed money pile.
I wish the political people would go away from HN. The forum is becoming a rough spot.
raising corporate taxes is anti-inflationary
> since the inflation was largely caused by lockdown stimulus
This is a widely disproved myth.
This is a widely disproved myth.
The first order reason for inflation is, of course, a willingness to spend more. Prices flat out can't rise if buyers balk at a seller's higher expectations. Plain and simple.
But it is well understood that said willingness changes on what buyers believe[1]. If they believe that lockdown stimulus is causing inflation, it will cause inflation. The mere existence of lockdown stimulus won't cause inflation, but the emotional response to it very well could.
And given that this appears to be a widely held belief, something even some government officials trumpet as the cause of inflation, it seems unlikely that it isn't a significant contributing factor. How is this dispelled?
[1] https://www.brookings.edu/blog/up-front/2020/11/30/what-are-...
But it is well understood that said willingness changes on what buyers believe[1]. If they believe that lockdown stimulus is causing inflation, it will cause inflation. The mere existence of lockdown stimulus won't cause inflation, but the emotional response to it very well could.
And given that this appears to be a widely held belief, something even some government officials trumpet as the cause of inflation, it seems unlikely that it isn't a significant contributing factor. How is this dispelled?
[1] https://www.brookings.edu/blog/up-front/2020/11/30/what-are-...
One can only balk so much at the cost of housing, energy, and food, before one is homeless, cold, and hungry.
Housing has been hard to balk at for a decade for the same reason that nobody politically wants to address: a lack of supply in the market. Renters are now doubly stuck in renting, as home ownership as an alternative market is now rendered unaffordable by spiking mortgage rates. (I.e., the very "demand destruction" the fed desired. And my landlord knows it!)
Energy prices are spiking due to … a lack of supply in the market.
Still, the rate is allegedly +7% YoY, apparently, and my rent goes up +9.5% YoY "due to economic conditions", and my salary is -1% YoY.
Housing has been hard to balk at for a decade for the same reason that nobody politically wants to address: a lack of supply in the market. Renters are now doubly stuck in renting, as home ownership as an alternative market is now rendered unaffordable by spiking mortgage rates. (I.e., the very "demand destruction" the fed desired. And my landlord knows it!)
Energy prices are spiking due to … a lack of supply in the market.
Still, the rate is allegedly +7% YoY, apparently, and my rent goes up +9.5% YoY "due to economic conditions", and my salary is -1% YoY.
Please explain how literally directly increasing the M1 money supply doesn't cause inflation.
Everyone got money for free. Things that are free, tend to have less value.
Everyone got money for free. Things that are free, tend to have less value.
Everyone got a relatively small amount of money for free. It was nowhere near the amount that would be necessary to cause this amount of inflation.
Plenty of people got a lot more than the usual stimulus checks. People with multiple kids got quite a bit. I’m a photographer and was able to collect unemployment on weeks I didn’t make enough, or spent enough on expenses to offset my profits.
That means all of my usual expenses during that period were paid for (unless I made nothing or too much that week), plus a lot of weeks it made sense for me to get new equipment.
In many states, people on the low end of the earning scale made more through unemployment than they did working. I have two friends with small businesses that had a hard time getting people to come back to work for that reason.
That means all of my usual expenses during that period were paid for (unless I made nothing or too much that week), plus a lot of weeks it made sense for me to get new equipment.
In many states, people on the low end of the earning scale made more through unemployment than they did working. I have two friends with small businesses that had a hard time getting people to come back to work for that reason.
Now multiply that by every large corporation with their tax cuts since 2017. At least a lot of the money was borrowed at very low interest rates (from ourselves).
The myth is that inflation was caused primarily by this. It wasn't. Inflation is being driven by a combination of factors, the biggest being supply chain and war in Europe.
Inflation was plenty high before the war: https://www.statista.com/statistics/273418/unadjusted-monthl...
Yes, and the war has exacerbated, hence why I said a combination. The war, the supply chain, increased savings, government payments, corporate attitude. All of them have contributed, the supply chain, the war, and corporate attitude have contributed the most.
Not to mention suppliers and retailers increasing profit margins surreptitiously under the guise of "inflation".
That's just how inflation works. The supply side is always trying to charge the highest price they can, when they can do it successfully that means people have more dollars or more demand to throw at those items.
In a non-inflationary period increasing prices will be met with less demand.
In a non-inflationary period increasing prices will be met with less demand.
Look at the inflation measurements for fuel oil. It swings wildly. In September prices went down. In October prices went up.
If "more money makes each dollar worth less" was the story then we'd see all goods inflate at similar rates. Perhaps it'd be delayed from the money printing but we'd still see this consistency across industries.
But we don't.
If "more money makes each dollar worth less" was the story then we'd see all goods inflate at similar rates. Perhaps it'd be delayed from the money printing but we'd still see this consistency across industries.
But we don't.
08-20 money supply tripled but no inflation.
I'm not sure that provides an invalidation. There was unprecedented asset inflation during that period. Consumer inflation jumped at the same time the market realized that they were no longer making money hand over fist holding assets, no doubt in response to realizing that the only way to make money going forward was to produce something of value and charging accordingly.
You can print money endlessly, stuffing it into people's bank accounts limitlessly, and as long as they don't spend it you won't see inflation. But once they do start to spend it, the capacity to spend is magnified. Stocks, real estate, etc. provided essentially that bank account... until now.
You can print money endlessly, stuffing it into people's bank accounts limitlessly, and as long as they don't spend it you won't see inflation. But once they do start to spend it, the capacity to spend is magnified. Stocks, real estate, etc. provided essentially that bank account... until now.
And by “free” we mean “added to the gigantic mountain of debt our children must pay off“
The government that printed the money was supposed to reduce the money supply, while capturing productivity from more profitable industries, effectively neutering the difference. Turns out it is easier to print money than to burn it.
The Fed is trying to command the economy, but ultimately people must be more productive for a little less. QE easing and asset deflation have some part, but unemployment must increase, or we simply won't have the "strong labor market" that increased productivity requires. We don't have the sentiment or confidence, and that is going to be devastating if not quickly corralled - inflation can lead to hyperinflation exponentially.
Not for the USD - we have control of the world's economy - which is why the MIC complex and foreign policy is actually an investment in the largest scale.
That difference, between productivity gains and captured output, is the price our future generations pay (in inflation) for continuity _now_. But it isn't fair to push such a can down the road. Things need to pop sooner rather than later, and the Fed would like a "soft landing" - no pop, which may not be possible at this point.
The Fed is trying to command the economy, but ultimately people must be more productive for a little less. QE easing and asset deflation have some part, but unemployment must increase, or we simply won't have the "strong labor market" that increased productivity requires. We don't have the sentiment or confidence, and that is going to be devastating if not quickly corralled - inflation can lead to hyperinflation exponentially.
Not for the USD - we have control of the world's economy - which is why the MIC complex and foreign policy is actually an investment in the largest scale.
That difference, between productivity gains and captured output, is the price our future generations pay (in inflation) for continuity _now_. But it isn't fair to push such a can down the road. Things need to pop sooner rather than later, and the Fed would like a "soft landing" - no pop, which may not be possible at this point.
This is not how the national debt works.
You thinking inflated away or a default? Because those who have bought treasury bills are expecting that money in a few years.
THere is nothing that says that we ever have to pay off the debt. Debt can, and has continued to accrue to this nation since its founding. It is middle school thinking that debt incurred today must be "paid by our children". It's just not at all how the national debt works...like at all.
So when bond holders come by wanting their money do you not give it to them (defaulting) or do you just issue more (inflating)? Because those are your two options.
Note also that investors eventually get wise to inflation and start putting their money in gold or somesuch.
Note also that investors eventually get wise to inflation and start putting their money in gold or somesuch.
We issue more bonds. And because we do issue the bonds and don't simply print the money, it is non-inflationary. This is because there is an asset backing the dollars instead of simply paying out the money, ie: the accounting book is balanced, there is an asset and a liability. It's only when you print money and give it away is the money inflationary. This is why we can continue to increase M1 and not see massive inflation. As the overall economy grows, there are more assets available to back the currency.
Yes that middle school thinking is called “arithmetic“
You should keep your concern trolling about federal debt focused on things that are actually bad and not bail outs for citizens who are constantly getting fucked by the economy.
Check this out: https://www.federalreserve.gov/econres/notes/feds-notes/exce...
Stimulus checks contributed $844 billion to the $1.7 trillion of excess savings we still had by mid-2022.
> We estimate that households in the lower half of the income distribution were still holding about $350 billion in excess savings as of mid-2022—mostly stemming from the boost to income induced by fiscal stimulus in 2020 and 2021.
Personal consumption expenditure went up especially for the bottom income quartile, driven by stimulus. As soon as the bottom of the income distribution had extra money, they drove up the prices of things that are in the CPI.
In contrast, when the top of the income distribution has excess savings, they drive the prices of Tesla stock, NFTs, and real estate. Since they are not in the CPI, nobody cared and money printing could continue. This is what we had in 2010–2020. Direct money transfers to the poor were the thing that broke the system.
Stimulus checks contributed $844 billion to the $1.7 trillion of excess savings we still had by mid-2022.
> We estimate that households in the lower half of the income distribution were still holding about $350 billion in excess savings as of mid-2022—mostly stemming from the boost to income induced by fiscal stimulus in 2020 and 2021.
Personal consumption expenditure went up especially for the bottom income quartile, driven by stimulus. As soon as the bottom of the income distribution had extra money, they drove up the prices of things that are in the CPI.
In contrast, when the top of the income distribution has excess savings, they drive the prices of Tesla stock, NFTs, and real estate. Since they are not in the CPI, nobody cared and money printing could continue. This is what we had in 2010–2020. Direct money transfers to the poor were the thing that broke the system.
> I wouldn't be surprised if it's better in a few months, especially with the growing protectionism in the anti-inflation act
Wouldn't protectionism be inflationary?
Wouldn't protectionism be inflationary?
Absolutely. Higher prices for the same goods, plus a stimulus to domestic industry.
Unless you are a savvy technocrat who knows where production bottlenecks are better than the market does, protectionism is just a welfare program at best and a cynical rent-seeking, vote-buying scheme at worst.
Unless you are a savvy technocrat who knows where production bottlenecks are better than the market does, protectionism is just a welfare program at best and a cynical rent-seeking, vote-buying scheme at worst.
I too watch/read Peter Zeihan and think he has some insights, but please don't take it all on face value (industry is probably not coming back to the US in force, and shifts from China will be slow and painful)
Zeihan is one of those commentators that seems to throw a bunch of wild predictions at the wall to be entertaining, appear insightful, and be able to say he called it when one of every dozen ends up being correct.
In many European countries inflation is at 15%
If it reaches 20% that means every 3.5 years your cash reserve loses half its value
Mean someone correct me if I’m wrong I think that is astounding
If it reaches 20% that means every 3.5 years your cash reserve loses half its value
Mean someone correct me if I’m wrong I think that is astounding
I think people are underestimating how much the cost of energy impacts inflation.
It used to be primarily labor costs, and labor/wages is still a major part. However with automation some labor is being replaced by automation and thus converts what used to be labor cost to energy cost.
European countries are not in great shape from an energy POV.
It used to be primarily labor costs, and labor/wages is still a major part. However with automation some labor is being replaced by automation and thus converts what used to be labor cost to energy cost.
European countries are not in great shape from an energy POV.
And yet solar radiation falling on just 1% of Spain, Italy, & Greece - even in the Winter - can power >50% of Europe (and >100% in the Summer).
Europe already gets ~12% of its energy from Nuclear, ~5% from hydro.
Solar energy will not be a problem in the future - neither will sourcing the remaining 33% of energy from other renewables, nuclear, and fossil fuels.
Europe already gets ~12% of its energy from Nuclear, ~5% from hydro.
Solar energy will not be a problem in the future - neither will sourcing the remaining 33% of energy from other renewables, nuclear, and fossil fuels.
I don’t understand how you can be so optimistic about energy security in Europe. They’re in the midst of an energy crisis right now…
The infrastructure they have now is literally insufficient.
The infrastructure they have now is literally insufficient.
As the other poster pointed out, that's primarily due to the energy costs and those will most likely come down. For a more accurate look at inflation, you should look at core CPI which excludes energy and food which can be volatile. This number is closer to around 5% in most of Europe.
Ah yes, inflation is just fine if you exclude housing, energy and food, the 3 things sustaining everybody's life.
Shelter is included in core inflation.
Where in my post does it say that inflation is just fine? The point is that the crazy 15% numbers we are seeing are mostly due to energy prices, which are extremely volatile.
We should strive to get an accurate picture of the current state of affairs, not be overly optimistic or pessimistic.
Where in my post does it say that inflation is just fine? The point is that the crazy 15% numbers we are seeing are mostly due to energy prices, which are extremely volatile.
We should strive to get an accurate picture of the current state of affairs, not be overly optimistic or pessimistic.
assuming that the inflation rate remains the same for the next 3.5 years. Which seems unlikely
It appears to be more like tectonic plates shifting. Sometimes they shift a bit, a few aftershocks and pretty much back to normal order. But sometimes it kills a few hundred thousand, changes the landscape that even after the aftershocks subside, it leaves behind quite a different world. 20% loss against dollar for 2 years without reversion will end up creating quite a different world.
Why is this causing USD/EUR exchange rate to fall? And in general USD to lose value compared to other currencies.
My guess is that expectation of higher inflation was combined with expectation of further interest rate increases to combat it. Interest rate increases generally make currency more attractive for investments from abroad, which increases exchange rate.
This expectation was "priced in" current exchanged rates and now the market has corrected.
My guess is that expectation of higher inflation was combined with expectation of further interest rate increases to combat it. Interest rate increases generally make currency more attractive for investments from abroad, which increases exchange rate.
This expectation was "priced in" current exchanged rates and now the market has corrected.
That’s exactly why. It means US interest rates will perhaps not peak as high.
You're correct, that's why.
It's a bit higher in Denmark and I have a little too much stored as fiat in the bank. What is a safe asset to store value while inflation is >10% in a developed country?
Inflation linked government bonds from developed countries and your local currency or USD/EUR denomination, depending on your country you may get some tax advantages if you buy local ones. But you should probably have done this long ago, now it may be a bit late.
While that is better than nothing, for example US citizens are limited to only $10K USD in I-bond purchases per year per Taxpayer ID Number (TIN). Some people run their I-bond purchases through LLC's they control as well, but I don't know how the IRS would treat a fleet of LLC's set up purely just to get a TIN to use for buying I-bonds.
Oil and copper tends to follow inflation, but they're highly volatile so you can't rotate into them expecting good liquidity. If you hold say $100K+ USD you want to rotate and re-deploy after the carnage with fairly liquid assets at relatively low risk, then I can't think of much beyond take the hit in a conservative cash and select bonds positioned in a capital preservation posture, or Benjamin Graham-style conservative value equities.
Oil and copper tends to follow inflation, but they're highly volatile so you can't rotate into them expecting good liquidity. If you hold say $100K+ USD you want to rotate and re-deploy after the carnage with fairly liquid assets at relatively low risk, then I can't think of much beyond take the hit in a conservative cash and select bonds positioned in a capital preservation posture, or Benjamin Graham-style conservative value equities.
Depends on your time horizon.
In the very short term, inflation linked bonds as other comments mention.
In the 15+ year bracket, probably equities.
Perhaps real estate at a low mortgage rate but it's not very diversified.
Gold is commonly touted as an inflation hedge, but that's over a much longer time horizon, probably longer than most people are alive.
In the end it really depends on the cause of inflation - expected vs unexpected, supply vs demand side.
In the very short term, inflation linked bonds as other comments mention.
In the 15+ year bracket, probably equities.
Perhaps real estate at a low mortgage rate but it's not very diversified.
Gold is commonly touted as an inflation hedge, but that's over a much longer time horizon, probably longer than most people are alive.
In the end it really depends on the cause of inflation - expected vs unexpected, supply vs demand side.
I think its a hard call.
Real estate is inflated. Stocks are too, but seems less so than property, at least in Australia.
Traditional flight to safety like gold has significant gains last few years so are you buying another peak?
Meanwhile you know cash is devaluing 5-10% per year.
For my non-expert opinion I think Australia shares are fairly good relatively currently, but I say that as an Australian. Its reasonably valued compared to some of the markets, stable govt/economy with low govt debt as western nations go (consumer is high though). Shares will probably return dividends around 3-5% per year on a market tracking ETF, which should offset some drops while the market and inflation, and then you are in market for the turn as as the cycle flips and inflation has run I could see some sharp gains as companies revalue to the new cost bases.
Also I think a FSTE tracker wouldn't be so bad. Since Ukraine and general market drops these are off their peak pricing. US Id avoid as I think there's a bunch more to unwind both in the market, politically, plus govt debt (heading for 140% of GDP and showing no signs of slowing) so I would be hesitant market tracking there until things stabilise. That said there will always be amazing companies ongoing in the US if stock picking.
Im so far from an expert, so take all this with a shovel of salt. Keep things diverse. But overall I think a Aus/Eur market type tracker is probably a reasonably safe bet at the moment for a uncertain and unprecedented enviroment, and take the odd punt on companies that you think are getting trashed and fear has over taken. Keep some level of cash as if the markets do tumble you want to be able to go in, or generally have options.
I know nothing. Good luck.
Real estate is inflated. Stocks are too, but seems less so than property, at least in Australia.
Traditional flight to safety like gold has significant gains last few years so are you buying another peak?
Meanwhile you know cash is devaluing 5-10% per year.
For my non-expert opinion I think Australia shares are fairly good relatively currently, but I say that as an Australian. Its reasonably valued compared to some of the markets, stable govt/economy with low govt debt as western nations go (consumer is high though). Shares will probably return dividends around 3-5% per year on a market tracking ETF, which should offset some drops while the market and inflation, and then you are in market for the turn as as the cycle flips and inflation has run I could see some sharp gains as companies revalue to the new cost bases.
Also I think a FSTE tracker wouldn't be so bad. Since Ukraine and general market drops these are off their peak pricing. US Id avoid as I think there's a bunch more to unwind both in the market, politically, plus govt debt (heading for 140% of GDP and showing no signs of slowing) so I would be hesitant market tracking there until things stabilise. That said there will always be amazing companies ongoing in the US if stock picking.
Im so far from an expert, so take all this with a shovel of salt. Keep things diverse. But overall I think a Aus/Eur market type tracker is probably a reasonably safe bet at the moment for a uncertain and unprecedented enviroment, and take the odd punt on companies that you think are getting trashed and fear has over taken. Keep some level of cash as if the markets do tumble you want to be able to go in, or generally have options.
I know nothing. Good luck.
> Real estate is inflated. Stocks are too, but seems less so than property, at least in Australia.
But are they? To me many stocks look comparatively flat over 30 years given the fact that they should point upwards just to correct for inflation in the currency they are denominated in and even more upwards when taking into account productivity gains.
But are they? To me many stocks look comparatively flat over 30 years given the fact that they should point upwards just to correct for inflation in the currency they are denominated in and even more upwards when taking into account productivity gains.
The usual stuff - gold, silver, real estate.
High dividend stocks have been a good bet and hedge in previous downturns. Individual stocks will have high variance, but a basket of high dividend stocks would be worth looking into.
Do you have inflation protected bonds? In the USA you can buy I-Bonds (max $10k/year per person) that pay interest at the current inflation rate.
But what is considered “safe” really has a lot to do with your timeline. How soon do you want to access the money? If it’s in tears then index funds are likely a good buy today.
But what is considered “safe” really has a lot to do with your timeline. How soon do you want to access the money? If it’s in tears then index funds are likely a good buy today.
There are also TIPS which don’t pay as well but you get back 80-90% of inflation as a dividend
Poland offers something similar, but with a twist. On the plus side, the amount you can buy is unlimited. However, interest rate is fixed in the first year, at 7% (which is a far cry from 17.9% inflation). From the year two the interest rate is inflation rate + 1% premium. You can buy either 4 or 10 year bonds.
Inflation + 1% beat a lot of bonds the last decade to be sure.
[deleted]
Thankfully you're no longer earning negative interest on your bank account.
It's funny how people freaked out over the -0.1% interest rate but don't care about having money in the bank when the inflation is at +10%.
Absolutely.
I don't live where negative interest is a thing, but it seems like that would encourage people to keep money outside of banks.
I don't live where negative interest is a thing, but it seems like that would encourage people to keep money outside of banks.
Thus many EU countries reduced the maximum note value, reduced allowable amount for buying things in cash, and .se has mostly eliminated cash with everyone using cards.
How does that stop the money from being less valuable?
I'm not discussing inflation here, just the concept of negative interest on bank accounts.
If you had a pile of cash, it would remain a pile of cash. If you had 100,000 euro in the bank that might be 99,000 euro after some time because the bank essentially charges you a storage fee as interest rates are negative. Conversely, the bank would essentially be paying you to take out a loan.
Maybe I'm misunderstanding how it works since it's never happened in the USA, but I think that I have it right. See https://www.investopedia.com/articles/investing/070915/how-n...
If you had a pile of cash, it would remain a pile of cash. If you had 100,000 euro in the bank that might be 99,000 euro after some time because the bank essentially charges you a storage fee as interest rates are negative. Conversely, the bank would essentially be paying you to take out a loan.
Maybe I'm misunderstanding how it works since it's never happened in the USA, but I think that I have it right. See https://www.investopedia.com/articles/investing/070915/how-n...
Got it. I was confused because the parent to your post suggested people are cool with storing money on the bank with 10% inflation. That makes no sense to me because when you convert it to cash, the inflation still applies.
As for negative interest rates, here in the Netherlands banks didn't dare to go negative, even if conditions would warrant it. Perhaps because it might trigger a bank run.
As for negative interest rates, here in the Netherlands banks didn't dare to go negative, even if conditions would warrant it. Perhaps because it might trigger a bank run.
Yes property, shares, gold, here is a fantastic breakdown on inflation and the COVID stimulus: https://www.youtube.com/watch?v=Qlr5Vzrextk
Real estate probably for medium term, stocks for long term.
Several commenters have provided various reasons year-over-year numbers are, to put it mildly, difficult to interpret.
Another reason is that a major war in Europe started within this year, adding to the difficulty of Y0Y comparisons. The principal weapon deployed against the aggressor is economic warfare to collapse Russia's economy. That has only recently made an impact that can't be denied in Russia.
Meanwhile, the war has directly cut food exports from Ukraine and both directly and indirectly disrupted food and fossil fuel markets in many regions, mostly toward higher costs and trade substitutions that also mostly lead to higher costs.
Interest rate rises are probably needed but the causes of inflation are mostly outside central bankers' control.
Another reason is that a major war in Europe started within this year, adding to the difficulty of Y0Y comparisons. The principal weapon deployed against the aggressor is economic warfare to collapse Russia's economy. That has only recently made an impact that can't be denied in Russia.
Meanwhile, the war has directly cut food exports from Ukraine and both directly and indirectly disrupted food and fossil fuel markets in many regions, mostly toward higher costs and trade substitutions that also mostly lead to higher costs.
Interest rate rises are probably needed but the causes of inflation are mostly outside central bankers' control.
You can't blame US inflation on the Russia war, this is a DNC misdirection. For the US at least, it should be a minor factor.
The US were trading very little with Russia to begin with, even before the war. Russia's economy before the war was still smaller than California, New York or Texas. Waging economic warfare on a medium economy like that should not wreak the US, Europe or the World economies.
The US were trading very little with Russia to begin with, even before the war. Russia's economy before the war was still smaller than California, New York or Texas. Waging economic warfare on a medium economy like that should not wreak the US, Europe or the World economies.
Energy and food prices are global, regardless of who trades with who. Try to be less nakedly partisan.
But again, Russia is a small fish in the world economy, the US+EU have a combined GDP of 40 trillion dollars, you cannot say that waging economic war against a 1.7 trillion economy is causing such damage.
Like you said, the Russians still sell energy and food worldwide, even if Europe and US buy less (or at all), so I don't buy this explanation.
> Try to be less nakedly partisan
This is a talking point from DNC, I was trying to show how flawed it is. If that makes me partisan, fine. It means we're ready to swallow any bullshit that comes from the party/government, as long as it makes us feel good.
Like you said, the Russians still sell energy and food worldwide, even if Europe and US buy less (or at all), so I don't buy this explanation.
> Try to be less nakedly partisan
This is a talking point from DNC, I was trying to show how flawed it is. If that makes me partisan, fine. It means we're ready to swallow any bullshit that comes from the party/government, as long as it makes us feel good.
Agreed with one caveat: energy. Some countries in Europe depend on Russian gas for a significant percentage of their energy. Europe is desperate for LNG and is outbidding other gas importing nations, driving up prices.
Yet natural gas prices here in the US slumped last month…
Commodities are fungible. The US makes lots of oil and food. The companies that make these things sell them to all comers at global prices.
Seems like these days there are more people who want the economy to fail just to be able to make a point about the political party they support.
I'm personally ecstatic that inflation seems to be softening. It's likely that there will be another couple interest rate hikes regardless, but there does seem to be a "back to normal" in the (distant) horizon somewhere.
I'm personally ecstatic that inflation seems to be softening. It's likely that there will be another couple interest rate hikes regardless, but there does seem to be a "back to normal" in the (distant) horizon somewhere.
Isolated data points aren't really worth analyzing - something like a running 6-month average makes more sense. See this 2009 blog post on how to inflation-adjust current prices/revenues to those from decades before:
> "For this exercise, we’ll use the annual average CPI-U values for 1973 (44.4) and 2008 (215.303). Because the CPI-U includes relatively volatile items such as food and fuel, I tend to avoid the monthly values with their fluctuations. If you want to adjust to the most recent data available, consider averaging the most recent six months of CPI-U values."
https://anthonydebarros.com/2009/11/01/adjusting-for-inflati...
This is similar to analyzing climate trends, where you really want to look at 5-year running averages (possibly 10-year). Generally, 'response time of the system to forcing' is what matters, in both cases.
> "For this exercise, we’ll use the annual average CPI-U values for 1973 (44.4) and 2008 (215.303). Because the CPI-U includes relatively volatile items such as food and fuel, I tend to avoid the monthly values with their fluctuations. If you want to adjust to the most recent data available, consider averaging the most recent six months of CPI-U values."
https://anthonydebarros.com/2009/11/01/adjusting-for-inflati...
This is similar to analyzing climate trends, where you really want to look at 5-year running averages (possibly 10-year). Generally, 'response time of the system to forcing' is what matters, in both cases.
> Isolated data points aren't really worth analyzing - something like a running 6-month average makes more sense
Isn't the YoY inflation definitionally equivalent with running (geometric) mean of the past 12 (annualized) monthly increases?
Isn't the YoY inflation definitionally equivalent with running (geometric) mean of the past 12 (annualized) monthly increases?
Looking at the macro picture is so misleading. The only categories that are really down are natural gas, used cars & trucks, and apparel. Everything else is up but it is being masked by the huge drop in natural gas prices (which is due to the situation in Europe).
Weird that gas prices dropped, I would have thought they'd be up. Any insight?
From what I understand there was a lot of fear due to the conflict this summer. So Europe bought a ton of overseas liquefied natural gas and stocked up as much as possible. So much so there are tankers sitting in the ocean being used as temporary storage.
However currently temperatures are moderate and demand is pretty low. There's optimism for a mild winter and users have done a good job of reducing demand.
So at the moment there's a situation where Europe has too much gas in anticipation of future bad things which is driving a slump in prices.
This will probably change.
However currently temperatures are moderate and demand is pretty low. There's optimism for a mild winter and users have done a good job of reducing demand.
So at the moment there's a situation where Europe has too much gas in anticipation of future bad things which is driving a slump in prices.
This will probably change.
[deleted]
Finally the mania is slowing down. It seems the rate hikes and layoffs are working.
Probably too strong of a statement. I don't view this as a huge miss (.2%), and ask anyone you know on a fixed income what this is doing to their retirement. Ulitmately, it's the glut of cash out there (IMHO) that is going to need to resolve itself before inflation gets back to a normal level.
Whether it's through consumer price inflation or bond devaluation, retirees are affected by the economy.
There is no instrument or policy isolating them from it. The best you can do is diversify.
There is no instrument or policy isolating them from it. The best you can do is diversify.
>anyone you know on a fixed income what this is doing to their retirement
I don't know any retireees on a fixed income. They all get Social Security, which is not fixed. And if they have any signifcant savings, those interest rates are also not fixed, and have been rising a lot recently (recently advertised CD rates at 3-4% are common where I live).
I don't know any retireees on a fixed income. They all get Social Security, which is not fixed. And if they have any signifcant savings, those interest rates are also not fixed, and have been rising a lot recently (recently advertised CD rates at 3-4% are common where I live).
Fixed is too wide of a term, but there are still people like my grandmother, who is in her 90s, as well as my parents, who have seen huge drops in the ability for their savings to pay for their retirement.
> They all get Social Security, which is not fixed
It’s been fixed since the last cost of living adjustment almost a year ago. Trailing adjustments really hurt when inflation rises this fast.
It’s been fixed since the last cost of living adjustment almost a year ago. Trailing adjustments really hurt when inflation rises this fast.
But it does argue to permit the current tighter fiscal and monetary position to work as it appears to be doing, perhaps too well/quickly, rather than tightening more out of a dangerous over-abundance of caution.
Likewise, it gives the FED a chance to say that they'll only raise rates by 50% next time and maybe only 25% in January. Then they can keep high interest rates for a long time while layoffs continue to cause demand destruction.
FYI, 50 basis points is a 0.5 percentage point increase, not 50%
I agree. And buy the 10 Year Bond today, its at a great discount!
I feel like a .2 percentage point drop is near imperceptible and something easily subject to reversal. I don’t think we’re anywhere near an actual slowdown to inflation yet.
Inflation in and of itself isn't the problem per se. It's income(s) being able to keep pace, or more often than not keep pace.
Working citizens - as well as those on public assistance? - have been losing ground to inflation for decades.
The bottom line: In the eyes of bread winners this is old news, and does nothing (again) to mitigate their discomfort and pain. From a sociopolitical POV this is not sustainable.
Working citizens - as well as those on public assistance? - have been losing ground to inflation for decades.
The bottom line: In the eyes of bread winners this is old news, and does nothing (again) to mitigate their discomfort and pain. From a sociopolitical POV this is not sustainable.
I was just reading "Ray Dalio on the Downturn: 'There's a Lot More to Come'"[1], which said:
Inflation in the United States has risen 8.2 percent in the past 12 months. While the Federal Reserve’s long-term inflation target is 2 percent, Dalio predicted that the central bank will go for a more realistic target of around 4.5 to 5 percent.
Based on those numbers, he believes the real interest rate could land in between 4.5 percent and 6 percent. “Six starts to break things pretty bad,” Dalio said. “The vicinity of 4.5 and 6 may be the number in terms of cracking the thing.”
[1] - https://www.institutionalinvestor.com/article/b20hpgzhxph5h5...
Inflation in the United States has risen 8.2 percent in the past 12 months. While the Federal Reserve’s long-term inflation target is 2 percent, Dalio predicted that the central bank will go for a more realistic target of around 4.5 to 5 percent.
Based on those numbers, he believes the real interest rate could land in between 4.5 percent and 6 percent. “Six starts to break things pretty bad,” Dalio said. “The vicinity of 4.5 and 6 may be the number in terms of cracking the thing.”
[1] - https://www.institutionalinvestor.com/article/b20hpgzhxph5h5...
So a mere 0,2% delta led to a 6,4% increase in the Nasdaq. I really can't understand...
So how much of this is due to lower than normal heating costs last month?
Utility (piped) gas service -4.6%
I used the A/C more than heat last month since temps have been quite a bit higher than normal. Just using A/C in October is pretty abnormal for me.
Utility (piped) gas service -4.6%
I used the A/C more than heat last month since temps have been quite a bit higher than normal. Just using A/C in October is pretty abnormal for me.
Anyone know of a publicly available data of grocery prices for staple products month over month? I really wish I would have saved my grocery receipts over the past five years. Rather than rely on my perceptions.
If you buy from Whole Foods and have Amazon Prime, your receipts are in your order history forever. It's actually been informative, because amidst all of the breathlessness from the past two years, every time I have bothered to check, most of the prices I'm paying haven't gone up at all or have gone up a tiny bit. I buy almost all raw ingredients and cook from scratch, which maybe just works differently than processed goods sold by Coca Cola and what not, or Whole Foods was just so overpriced to begin with that they didn't bother raising.
My grocery bills overall have definitely gone up, but that's because I stopped eating out and buy a lot more groceries.
My grocery bills overall have definitely gone up, but that's because I stopped eating out and buy a lot more groceries.
>My grocery bills overall have definitely gone up, but that's because I stopped eating out and buy a lot more groceries.
Wouldn't this make your bills go down?
Wouldn't this make your bills go down?
>>My grocery bills overall have definitely gone up, but that's because I stopped eating out and buy a lot more groceries.
>Wouldn't this make your bills go down?
I'd imagine that when GP "eats out," they don't do so at the grocery store/supermarket. I know I don't. Usually I'll go to a restaurant.
Which may make my overall food bills go up, but it certainly doesn't increase my grocery bills.
>Wouldn't this make your bills go down?
I'd imagine that when GP "eats out," they don't do so at the grocery store/supermarket. I know I don't. Usually I'll go to a restaurant.
Which may make my overall food bills go up, but it certainly doesn't increase my grocery bills.
The few times I've eaten out at a grocery store has been at a Whole Foods. Their hot food bar and fresh pizza area is nice and they often have a small bar with seating available.
Not if you budgeted takeout in a separate category.
Inflation was 0.4% month-over-month. This is the same rate we saw las month.
What's sad is that prices will never be where they were ever. I keep getting slammed by family members telling me to "make sure you vote" cause they feel that it's all a single party's fault that we are in this mess and only the other party can fix it, when sadly, it's the world we live in now. Houses will always be insanely priced now and making 100K is like make 50K.
It's not "Inflation". It's straight up wage theft by the rich. They're jacking up prices and blaming (hand-wave) Inflation to extract more profit. And no, workers wages being bumped up to $15/hr is no excuse. Look no further than the profits.
------------------
"Workers around the world: lost $3.7 trillion in the pandemic Billionaires around the world: gained $3.9 trillion in the pandemic
It's the biggest one-year wealth transfer in history, yet somehow barely anyone is talking about it."
https://twitter.com/danpriceseattle/status/13751892041251143...
------------------
Iron Mountain CEO says he's been 'praying for inflation' because it means he can raise prices
https://www.businessinsider.com/ceo-praying-for-inflation-ra...
------------------
Leading grocery chains such as Kroger (KR) and Alberstons have said in recent days that they expect to benefit from rising prices. Sales boomed at these chains and other grocers during the early stages of the pandemic, but have slowed down in recent months as more people return to eating meals out.
“Our business operates the best when inflation is about 3% to 4%,” Kroger CEO Rodney McMullen said on an earnings call with analysts Thursday. “A little bit of inflation is always good in our business.”
https://www.cnn.com/2021/06/18/business/grocery-store-inflat...
------------------
"Workers around the world: lost $3.7 trillion in the pandemic Billionaires around the world: gained $3.9 trillion in the pandemic
It's the biggest one-year wealth transfer in history, yet somehow barely anyone is talking about it."
https://twitter.com/danpriceseattle/status/13751892041251143...
------------------
Iron Mountain CEO says he's been 'praying for inflation' because it means he can raise prices
https://www.businessinsider.com/ceo-praying-for-inflation-ra...
------------------
Leading grocery chains such as Kroger (KR) and Alberstons have said in recent days that they expect to benefit from rising prices. Sales boomed at these chains and other grocers during the early stages of the pandemic, but have slowed down in recent months as more people return to eating meals out.
“Our business operates the best when inflation is about 3% to 4%,” Kroger CEO Rodney McMullen said on an earnings call with analysts Thursday. “A little bit of inflation is always good in our business.”
https://www.cnn.com/2021/06/18/business/grocery-store-inflat...
The way I read it the price of things like eggs increased by 43% (on table 6 which is seasonally adjusted it's still 10%)?
Does anyone know why?
Lack of low-wage immigrant labor to fill farm jobs. https://www.economist.com/united-states/2022/07/28/a-shortfa...
Our local egg prices in Maine doubled, supposedly because we got hit bad with bird flu and had to cull a lot.
https://app.truflation.com/
Worth a look.
Worth a look.
Who set the expectation of 7.9%? I've never expected my money to lose value every month.
The fed.
Demand destruction is setting in.
This is especially good since it was a year ago we started to notice inflation rising rapidly. If this print was higher than expected it would have indicated something really bad. With this print we could be on the path to healthier inflation in the coming year.
Does anyone actually think this number is accurate to a decimal place?
Reporting yearly inflation every month is... confusing at best.
Time to purchasing power halving: 9.4 Years
The whole "expected" thing is sketchy for me. I probably know nothing but why is 7.9% expected, not say 7.5% expected? I think a lot of manipulation of those expectations can be done for "friends in IB".
Expected is just a survey of those “friends in IB” - it’s just a benchmark for the media to explain if things are surprising.
Anyone making impactful decisions based on expectations should not be making impactful decisions.
Anyone making impactful decisions based on expectations should not be making impactful decisions.
"the rate of increase of inflation is decreasing"
Not sure if this is quoting that economist from the 70s, but in this case it’s inflation that’s decreasing. We’re still just talking about the second derivative of prices, not the third!
0.2% less than expected and s&p pumps 5%. f* this timeline.
miked85(2)
orangepurple(5)
namelessoracle(21)
lol
Lies, damned lies, and statistics.
For those who were wondering if we would officially be in a recession after November 8 elections, the answer is still "no".
GDP grew +2% in Q3, after declining in Q1 and Q2. Gross Domestic Income (similar to GDP but measured differently) grew consistently the entire year. And unemployment rate has declined consistently every single month and stands at 3.57%. I think it would be hard to thread a needle to call any part of YTD 2022 as a recession with this kind of fact pattern. Only if unemployment rate starts to increase in a dramatic way can we really go back and say we were in a recession this year.
I agree with that, but mind you there are two kinds of job numbers. The household survey numbers and the official ones which mysteriously diverge from the survey before elections, but otherwise track nicely. There's some two million jobs that only exist on paper to benefit the incumbent government. This anomaly appears regardless of which party is in power.
It will take a quarter, but given the massive layoffs occurring now, the projections of early next year are looking spot on.
Inflation is a different problem.
Inflation is a different problem.
The argument being repeated here on HN wasn't that recession might happen in the future (which would be a true statement); the argument was that we've been in a recession since summer, but due to government propaganda and a media conspiracy, it was swept under the rug (which was false).
Yea just like "COVID" would go away when Biden became president.
You just have to roll your eyes at these people. They're too far gone now.
You just have to roll your eyes at these people. They're too far gone now.
> the projections of early next year
where do you see that projection?
where do you see that projection?
So, when will the US Fed announce its own layoffs? They need to contribute to bringing down inflation.
At what cost? "allies" as collateral damage, the US seems to be playing the solo game, not sure if that's gonna serve them well when they'll decide to go frontal with China, since their "allies" won't be able to be used as proxy anymore, too weak and no morale
The US announces retreat
The US announces retreat
RANT: This inflation and coming recession is entirely on the hands of the current leadership in the Fed and Treasury. Their super-low interest rates over the years are coming full circle. We live in a centrally planned economy. My advice to the Fed is to set the Fed Funds Rate to equal inflation! This will stop the wild swings in the economy and keep inflation in check. When the Fed Funds Rate is lower than inflation there is an arbitrage opportunity for anyone who has access to this money to invest it broadly into the economy and get a positive return. I actually think this is a huge source of income inequality because only the most wealthy have access to this arbitrage opportunity, but that is another rant.
> Their super-low interest rates over the years are coming full circle.
Super-low interest rates have very little to do with it. The Fed rate has been low for over a decade and inflation has only appeared recently:
* https://fred.stlouisfed.org/series/FEDFUNDS
Similarly neither has QE done much about consumer prices. People predicted the almost end of the financial world when QE started years ago and not much has happened in the intervening years; from 2010:
> We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment.
* https://economics21.org/html/open-letter-ben-bernanke-287.ht...
Neither does money supply: Japan's M2 has been rising for decades and they've had low inflation (and even deflation) in that same period:
* https://fred.stlouisfed.org/graph/?g=PA7P
The current situation is partly due to velocity and the cheques that were sent out by the Treasury (not Fed) earlier in 2022. But also due to supply-side stuff life oil (see RU) and food (see RU). An SF Fed report estimates about half of the current US inflation is on the supply side/chain side of things:
* https://www.frbsf.org/economic-research/publications/economi...
Super-low interest rates have very little to do with it. The Fed rate has been low for over a decade and inflation has only appeared recently:
* https://fred.stlouisfed.org/series/FEDFUNDS
Similarly neither has QE done much about consumer prices. People predicted the almost end of the financial world when QE started years ago and not much has happened in the intervening years; from 2010:
> We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment.
* https://economics21.org/html/open-letter-ben-bernanke-287.ht...
Neither does money supply: Japan's M2 has been rising for decades and they've had low inflation (and even deflation) in that same period:
* https://fred.stlouisfed.org/graph/?g=PA7P
The current situation is partly due to velocity and the cheques that were sent out by the Treasury (not Fed) earlier in 2022. But also due to supply-side stuff life oil (see RU) and food (see RU). An SF Fed report estimates about half of the current US inflation is on the supply side/chain side of things:
* https://www.frbsf.org/economic-research/publications/economi...
Yeah....and the inflation we're seeing elsewhere in the world is just a coincidence.
EU had negative interest rates for a decade. Low interest rates during the good times is definitely a mistake You end up paying for eventually
That’s the thing that makes me question the whole Keynesian/ interest rate setting problem, you cannot know if you are living in good times are bad times. That requires knowledge of the future.
Let’s say all of this is due to the war in Russia, or in some alternate reality China carpet bombs Taiwan, if you thought you were living in bad times before the event you are in for a rude awakening. It’s the same as black swans and cannot really work over time.
Let’s say all of this is due to the war in Russia, or in some alternate reality China carpet bombs Taiwan, if you thought you were living in bad times before the event you are in for a rude awakening. It’s the same as black swans and cannot really work over time.
You know if unemployment is low and the economy is having solid growth at the time.
You mean like right now?
I understand this is a bit snarky, but I think it perfectly makes my point clear. By some metrics right now looks like a golden age, by other metrics it looks like staring into the abyss.
I understand this is a bit snarky, but I think it perfectly makes my point clear. By some metrics right now looks like a golden age, by other metrics it looks like staring into the abyss.
Personally I’m still divided on the current situation. I’m not sure why we as workers would view very low unemployment as anything other than amazing. Our overlords seem to hate that workers have bargaining power finally and are doing everything they can to end it
there is some truth in that rant. The inflation, btw, can be imoorted via currency exchange.
For example, anything for which you pay in dollars (a strong dollar now) is more expensive. If you add the exchange rate to the fact of the inflation itself you end up paying the sum of both differences.
The strong dollar is also the reason why EU has no choice but to follow the interest rate escalation from dollars: if they do not do it, people run away to buy follars because the euro suffers depreciation.
Complex topic, with more ramifications than it looks at first.
For example, anything for which you pay in dollars (a strong dollar now) is more expensive. If you add the exchange rate to the fact of the inflation itself you end up paying the sum of both differences.
The strong dollar is also the reason why EU has no choice but to follow the interest rate escalation from dollars: if they do not do it, people run away to buy follars because the euro suffers depreciation.
Complex topic, with more ramifications than it looks at first.
Seeing as every single central bank has similar monetary policy to the US, and almost all governments in Europe and elsewhere injected huge amounts of cheap/free cash into their economies in attempts to counter the economic effects of lockdowns/Covid, it's anything but a coincidence. It's a confirmation that such policies do in fact cause inflation.
"Elsewhere" they have also had 0% or even negative Central Bank Interest rates.
https://pearsonblog.campaignserver.co.uk/wp-content/uploads/...
https://pearsonblog.campaignserver.co.uk/wp-content/uploads/...
The US Dollar is a world currency.
Yup they should have been raising rates ~2013. US government should also have been starting to pay down debt in that time frame too. It's like blind men are at the wheel of the economy.
Simple rules don't work with something as complex as the entire economy.
Also, this number is year over year, so the decrease just means the price increases between Oct 21 and Oct 22 are not as steep as between Sept 21 to Sept 22, which is not hard to achieve because Sept 21 to Oct 21 had a bigger month over month jump.
The right way to interpret this number is that high prices have plateaued a bit. Yes that means your groceries are going to be x% higher than in 2020. Short of deflation, they always will be.