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(National Review)   CURRENT INFLATIONARY PRESSURES WILL PERSIST THROUGH 2022, maybe   (nationalreview.com) divider line
    More: Obvious, Inflation, Federal Reserve System, United States Secretary of the Treasury, Inflation rate, Unemployment, Deflation, Administration officials, current inflation rates  
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203 clicks; posted to Business » on 25 Oct 2021 at 4:40 PM (5 weeks ago)   |   Favorite    |   share:  Share on Twitter share via Email Share on Facebook



15 Comments     (+0 »)
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2021-10-25 3:36:02 PM  
I hate to agree with Larry Summers on this
 
2021-10-25 4:47:04 PM  
Inflation is minor and transitory. The dollar is strong like bull.  Bitcoin is worthless and will crash soon.

Keep living the dream.
 
2021-10-25 4:50:02 PM  

Earl of Chives: Inflation is minor and transitory. The dollar is strong like bull.  Bitcoin is worthless and will crash soon.

Keep living the dream.


Exactly!  That's why us big brains don't spend USD.  Gotta hodl the line.
 
2021-10-25 5:03:06 PM  
I wisely invested all my money in handjob futures.
 
2021-10-25 5:05:24 PM  
By the time we actually pass a $15/hour minimum wage it'll be worth close the same as $7.25 was back in 2009, the last time we increased it.

Then big business will say, "What?! Raise it again? We just increased it to the $15/hour you wanted." And then we'll have to wait another decade or two before we can even hope for a meaningful change.
 
2021-10-25 5:10:32 PM  
Cause if there is one thing that is never wrong, it's economic predictions.
 
2021-10-25 5:13:11 PM  
Anybody that is cheering for their world reserve currency to fail is a farking God-tier moron, or else hoping for America to be toppled as world leader.

Inflation happens. And it ESPECIALLY it can happen when our governments are doing their best to stave off the economic repercussions of black swan events like FARKING PANDEMICS or HOUSING LOAN CRISES.

If we lived in a bitcoin-dominated world where governments could not move levers to print money, JUST WHATdo all the bitcoin bros think would happen when we have a black swan event like a pandemic or bank loan crisis? (YES, banks would still loan in a bitcoin world, and YES they would sometimes have loans crises). In a bitcoin-dominated world, since our government would not have levers to print more of the world reserve currency, the fallout would be MUCH, MUCH WORSE than inflation.

bitcoin bros:
"Inflation sucks, ergo we should destroy our fiat money system (Who cares that we have world reserve currency status, let's get on equal footing with the poors!"

Same bitcoin bros:
"I occasionally get dry patches of skin on my leg that give me really bad itching. I'm sick of this! Time to cut off my legs!"
 
2021-10-25 5:14:40 PM  
If this continues the trillion(s) dollar slush funds and little-to-no accountability "loans"  we gave the richest of the rich to--in part--keep people unemployed are not going to be worth a dime and we will have to do it all over again (again).
 
2021-10-25 5:20:02 PM  
Fine by me.

Got a mortgage, and inflation along with the labor shortage is pushing up wages, while my investments are still beating inflation.

Step on the gas a bit more so the rich have to find investments instead of hoarding cash.
 
2021-10-25 5:30:52 PM  

TyrantII: Fine by me.

Got a mortgage, and inflation along with the labor shortage is pushing up wages, while my investments are still beating inflation.

Step on the gas a bit more so the rich have to find investments instead of hoarding cash.


The rich don't hoard cash. They have securities. They're getting richer with all this inflation and increased liquidity. The gap is widening and goods are getting more expensive for normal folks
 
2021-10-25 5:53:47 PM  
Fark user imageView Full Size
 
2021-10-25 8:59:29 PM  
I have never seen a halfway coherent explanation for why deflation is supposed to be a bad thing. Always some weird meta reasoning about consumer confidence indexes or something.
 
2021-10-25 9:53:30 PM  

akallen404: I have never seen a halfway coherent explanation for why deflation is supposed to be a bad thing. Always some weird meta reasoning about consumer confidence indexes or something.


Because of the wage-price spiral, deflation raises the burden of debt.  The US endured 10% year over year deflation from 1930 through 1932.  The result was a lot of lost farms because of farmers trying to pay debts with lower crop prices.
 
2021-10-25 9:54:31 PM  

akallen404: I have never seen a halfway coherent explanation for why deflation is supposed to be a bad thing. Always some weird meta reasoning about consumer confidence indexes or something.


If your money is worth sufficiently more tomorrow than today, you won't spend it as much.

If enough of us do that, the economy grinds to a halt. Since few of us are self sufficient, that's a bit of a problem.

Unlike inflation, a small amount of deflation creates something of a feedback loop. Thus, because it is less controllable, low to medium inflation is preferable to low deflation. Inflation generally requires other very big problems with an economy and rather high numbers before it is truly out of control.
 
2021-10-25 10:11:18 PM  

akallen404: I have never seen a halfway coherent explanation for why deflation is supposed to be a bad thing. Always some weird meta reasoning about consumer confidence indexes or something.


Most wagies have low net worth or are in debt.

Moderate inflation scenario: If you make $100K and buy a $500K house with $100K down and $400K in debt, and there's 5% price inflation and 3% wage inflation -- your $500K house is worth 500 * 1.05^20 = 2.65 times more than what you paid for it or $1.32M, and you're earning $180K ($100K * 1.03^20 = 1.8x increase in salary) per year -- to service whatever's left of your original $400K debt. The price of the stuff you bought went up, the debt you owed stayed the same, and even though the amount of money you made went up slower than the value of your house, the debt you owed got way easier to pay off. You went from "Borrowed $400K while earning $100K" to "Paid most of it off and earning $180K"

tl;dr: you make it even though your wages are increasing slower than inflation. Even if you somehow found a lender dumb enough to let you pay only the interest on the loan and none of your principal at all, you started out borrowing 4 years' gross pay ($400K/$100K) on a $500K house and ended up owing 2.2 years' gross pay ($400K/180K) on a $1.325M house.

Moderate deflation scenario: Same deal - you make $100K and buy a $500K house with $100K down and $400K in debt - but this time there's 5% deflation and wages get cut by 3% for 20 years. At the end of that generation, houses are cheap. (0.95^20 ~= .35, your house goes for $180K, and your salary is 97^20 ~=.54, so you're making $54K.) There's just one problem with this. YOU STILL OWE THE BANK THE $400K YOU BORROWED. Or you can GIVE THEM BACK THE HOUSE AND STILL OWE THEM $220K, OR FIVE YEARS' INDENTURED SERVITUDE ASSUMING YOU CAN HOLD A JOB WHILE HOMELESS. The debts are worthless. The fiat is worthless. The properties are worthless. There is nobody (except for owners of physical gold, silver, and lead, because the first two make lousy bullets, and - assuming the electrical grid is restored someday - cryptocurrencies) who prospers after a generation of debt deflation.

tl;dr: A 20-year deflationary event is an XK-class end of the world scenario for anyone with a mortgage. It's also a ZK-class end of the world scenario for the banks, who will be unable to collect on the debts of the doomed wagies.

Some guy wrote a paper about deflation and the Great Depression. He co-wrote this essay in 1991.

https://www.nber.org/system/files/cha​p​ters/c11482/c11482.pdf (PDF, a little academic for Fark, but worth skimming.)

He concluded with "Monetary and financial arrangements in the interwar period were badly flawed and were a major source of the fall in real output. Banking panics were one mechanism through which deflation had its effects on real output, and panics in the United States may have contributed to the severity of the world deflation.

In this empirical study, we have focused on the effects of severe banking panics. We believe it likely, however, that the effects of deflation on the financial system were not confined to these more extreme episodes. Even in countries without panics, banks were financially weakened and contracted their operations. Domestic debt deflation was probably a factor, to a greater or lesser degree, in every country. And we have not addressed at all the effect of deflation on the burden of external debt, which was important for a number of countries. As we have already suggested, more careful study of these issues is clearly desirable."


His name was Ben Bernanke. I hear he went on to bigger and better things. Like, literally saving the farking world in 2008 when the austerians wanted to "rip off the band-aid" and "no-bailouts" and "hey, if we have another global depression and maybe even a third world war, at least we stuggit to the globalist banksters!"

Faced with that option - chosen by Europe, whose 2008-present recovery still lagged that of the US, and preferred by "hard-money" monetarists on the (R) side of the aisle in the 2008 election - Bernanke said FARK THAT NOISE, inflation sucks, but deflation is worse, so let's roll the dice on inflation.

money printer go brrr 1080p
Youtube WEMCYBPUR00


Best-case scenario, the world doesn't end and we can always raise rates if inflation does become a thing someday. Worst-case scenario, the world still ends, but it ends a decade or two later which buys a generation of economists time to come up with smarter ideas, and a generation of technologists time to come up with solutions to the other [A-Z]K-class civilization-enders out there. Crank up the money printer and let the good times roll!
 
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