Bonfire97 said:

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The printing of all that money was not mentioned ONCE as the cause or even a cause.

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I just don't understand why we are hearing so many figure heads who should know better saying there is no link. They are not that dumb. One theory I have is that they want inflation and don't want to bring attention to the root cause. Creating persistent inflation must be somewhere in the playbook of converting the US to socialism.

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Yep, the katastrophenhausse.

Sims said:

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YouBet said:

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One interesting tidbit that was called out is within the Used Car segment which has been a key indicator in supply constrained goods. Apparently, whole sale used car prices at auction have fallen in the last two months but consumer pricing has not budged. They were all perplexed by that and didn't understand why prices haven't dropped to the consumer.

I don't fully understand how the used car segment works behind the scenes so I have no comment here. Just thought it was interesting to hear.

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Same dynamic as meat prices.

Input prices down, middle men juicing margins, end consumer doesn't realize benefit of falling prices upstream.

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That was my assumption as well but since I don't know that market I wasn't sure.

tysker said:

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Interesting OP because a rate move like that could collapse housing prices

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Yeah, I'm going to personally get f'ed in this deal. We are going to move this year but there are things at play we have to wait on before we can put our house up.

ac04 said:

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Bonfire97 said:

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The printing of all that money was not mentioned ONCE as the cause or even a cause.

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I just don't understand why we are hearing so many figure heads who should know better saying there is no link. They are not that dumb. One theory I have is that they want inflation and don't want to bring attention to the root cause. Creating persistent inflation must be somewhere in the playbook of converting the US to socialism.

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they absolutely want/need inflation. its the only way to outrun the debt they've accumulated. the red line on this chart generates income to pay interest on the blue line:



they're ****ed. they can't default. they can't raise taxes enough to close the gap. the only option is to inflate the debt away.

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Yep, the debt is now so high that interest rate manipulation no longer works.

Bonfire97 said:

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Not 75 bps, not 100. We need 500. The Fed will admit to 9.1%, but we all know it's much higher. They have no control over inflation. There will be no soft landing.

Our options are to get ahead of this thing now and have a terrible correction, or continue raising rates a few basis points and chase inflation for a few years and have a potentially country-ending type of event happen at some point down the road.

I personally stand to make a lot more money with low interest rates, but this is the right thing to do for our country and our future, and it needs to be done sooner rather than later. The longer we wait, the worse it will be. To use Dr. Mark Dotzour's analogy, our country has had its face in the pile of cocaine for way too long. Time to go to rehab.

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I couldn't have said this any better myself. Gas prices didn't cause this inflation. Supply chain issues did not cause this inflation. Here is the said cocaine pile that caused this inflation:

M2 (M2SL) | FRED | St. Louis Fed (stlouisfed.org)

Unreal how some people can't understand how the # of dollars chasing the same amount of goods and services causes inflation. Goodness.

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gross. look at the M1 #... that's terrifying. Now I know why a person in my field now makes 50% more than they did 2-3 years ago

tysker said:

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Interesting OP because a rate move like that could collapse housing prices

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I have a fair amount of real estate investments and personally stand to lose a lot if we were to do this now. I understand the ramifications and would personally be much better off if we let inflation run for a while then take action. I'm not even talking about brokerage business. That should tell you how serious I am about this being the right thing to do.

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they absolutely want/need inflation. its the only way to outrun the debt they've accumulated. the red line on this chart generates income to pay interest on the blue line:

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Yeah, that's a good point. Devaluing the dollar also devalues their outrageous debt.

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It's pretty clear it's not the US dollar that's the problem because the US dollar is very strong right now when compared to other currencies. The Euro is at parity now for example. Even fake currencies like bitcoin have substantially underperformed the dollar.

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The dollar is strong due to recent rate increases and perception of near future rate increases. More money is flowing back into dollar denominated assets to capture riskless return via USTs.

Europe has a interesting dilemma that if the EU raises rates it could plunge certain countries (Greece, Spain, Portugal) into a massive recession and maybe cause a default on their national debts. Certain countries may not be able to cover debt payments at higher rates needed to fight inflation. And I'm not sure how much of, say, Greece's debt is actually owned by France or Holland, so a default on the Greek debt has complications for other stronger countries within the EU. We don't really have a similar game theory problem in the states

HumpitPuryear said:

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We are starting to hear from the government talking heads that recession is a good thing because it will counter inflation. When recession is spun as a good thing you know you are in big trouble. Its a strong indication that they expect us to crash right through recession and into depression.

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They're not necessarily wrong. At this point it's the best of the bad things. That doesn't make it good, so to speak, but a correction and mean reversion has always been inevitable. The fact we fought it for so long amplified it. If we fight it more, it would be worse.

HumpitPuryear said:

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Gordo14 said:

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Inflation is pretty clearly a global reality right now, so not sure why people think it's a domestic issue. The supply of commodities is very clearly the driver of what is happening right now. High prices will fix the scarcity problem eventually. Just have to encourage investment and be patient for the tine being.

It's pretty clear it's not the US dollar that's the problem because the US dollar is very strong right now when compared to other currencies. The Euro is at parity now for example. Even fake currencies like bitcoin have substantially underperformed the dollar.

Given the commodity price drop over the last few weeks I do think we've seen peak inflation. The question is how much demand destruction is necessary to fully solve the problem. Sure it's really not fun here, but countries around the globe are failing due to the current circumstances. Luckily, given the diversity of our economy, I firmly believe that the US will be among the better positioned economies as we pull through this mess.

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This is like bragging about being the tallest midget. EU is definitely in worse shape. The euro dropping to par with the US$ at a time when the US$ is losing value at nearly 10% annual rate is scary as hell. It may seem good for us on the surface but its an indication of some very bad underlying conditions.

We are starting to hear from the government talking heads that recession is a good thing because it will counter inflation. When recession is spun as a good thing you know you are in big trouble. Its a strong indication that they expect us to crash right through recession and into depression.

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I mean it's important because it provides context for the reality of the present time. If every country is experiencing high inflation, and every currency is prrforming worse than the dollar then that might be an indication that we are actually handling the current circumstances as well as we could be. We can't magic the global commodity issue away. Only incremental steps can be done to solve the commodity issue in the future. Inflation absolutely sucks, I agree. Obviously this is a setback to quality of life in the short term. But if it's just an unfortunate fundamental reality of current global supply-demand dynamics then how you handle the circumstance relative to the rest of the world is what we should be evaluating. If everyone is a midget then no one is a midget, and being the tallest still does matter.

Recessions on some level are inevitable and healthy. I wouldn't be shocked at all if we have a short technical recession. That doesn't mean it's the end of the world or American hegemony. I think the early 1990s recession is likely to be a good analog to today if we do have a recession. I also wouldn't be surprised if we had a relatively flat 2022 with alternating growth and decline quarters resulting in something that isn't technically a recession, but still sucks. What ever is happening between now and the end of the year is basically already locked in. What matters is the projection forward from there, and I think America is well positioned to capitalize on that. That's what matters far more to me than what June's inflation number was or whether we technically see a 2022 recession. I think some of the posts on here are too caught up in the emotions of the moment without reflecting how backward looking all of this data really is.

Gordo14 said:

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HumpitPuryear said:

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Gordo14 said:

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Inflation is pretty clearly a global reality right now, so not sure why people think it's a domestic issue. The supply of commodities is very clearly the driver of what is happening right now. High prices will fix the scarcity problem eventually. Just have to encourage investment and be patient for the tine being.

It's pretty clear it's not the US dollar that's the problem because the US dollar is very strong right now when compared to other currencies. The Euro is at parity now for example. Even fake currencies like bitcoin have substantially underperformed the dollar.

Given the commodity price drop over the last few weeks I do think we've seen peak inflation. The question is how much demand destruction is necessary to fully solve the problem. Sure it's really not fun here, but countries around the globe are failing due to the current circumstances. Luckily, given the diversity of our economy, I firmly believe that the US will be among the better positioned economies as we pull through this mess.

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This is like bragging about being the tallest midget. EU is definitely in worse shape. The euro dropping to par with the US$ at a time when the US$ is losing value at nearly 10% annual rate is scary as hell. It may seem good for us on the surface but its an indication of some very bad underlying conditions.

We are starting to hear from the government talking heads that recession is a good thing because it will counter inflation. When recession is spun as a good thing you know you are in big trouble. Its a strong indication that they expect us to crash right through recession and into depression.

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I mean it's important because it provides context for the reality of the present time. If every country is experiencing high inflation, and every currency is prrforming worse than the dollar then that might be an indication that we are actually handling the current circumstances as well as we could be. We can't magic the global commodity issue away. Only incremental steps can be done to solve the commodity issue in the future. Inflation absolutely sucks, I agree. Obviously this is a setback to quality of life in the short term. But if it's just an unfortunate fundamental reality of current global supply-demand dynamics then how you handle the circumstance relative to the rest of the world is what we should be evaluating. If everyone is a midget then no one is a midget, and being the tallest still does matter.

Recessions on some level are inevitable and healthy. I wouldn't be shocked at all if we have a short technical recession. That doesn't mean it's the end of the world or American hegemony. I think the early 1990s recession is likely to be a good analog to today if we do have a recession. I also wouldn't be surprised if we had a relatively flat 2022 with alternating growth and decline quarters resulting in something that isn't technically a recession, but still sucks. What ever is happening between now and the end of the year is basically already locked in. What matters is the projection forward from there, and I think America is well positioned to capitalize on that. That's what matters far more to me than what June's inflation number was or whether we technically see a 2022 recession. I think some of the posts on here are too caught up in the emotions of the moment without reflecting how backward looking all of this data really is.

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I agree. I think we CAN come out of the other side in better shape than much of the rest of the world but we are in that position by sheer luck. We didn't handle this well at all. We definitely should have expected an inflation uptick in response to surge in demand for all kinds of stuff coming out of covid and that the supply chain was injured and would take time to catch up. But we turbo-charged inflation by relieving people from obligations to pay rent and student loans and lavish them with handouts. It created a labor shortage which only fueled more inflation. Obviously the massive amounts of money printed and dumped on the economy also contributed. We wouldn't need a "healthy recession" if we had managed it better and instead of parity with the euro we could be much stronger than the euro. If and how much better we come out on the other side is dependent on how well we handle things going forward. Given that the feds that are now saying "recession good" were the same ones claiming very recently that "inflation is temporary" we still have a lot to be concerned about. It also doesn't inspire confidence that we are handling the current circumstances as best we can. The current administration is clearly focused on ESG scores and the rest is just along for the ride, however bumpy that may be. I guess fed action in the next month or so will give us some clues.

The dollar milkshake theory correct? How does the world awash in dollar debt handle a strengthening dollar long term?

It's ok guys - we have found out that Millennials are the reason behind the sky high inflation.

https://www.cnbc.com/2022/07/15/millennials-are-to-blame-for-sky-high-inflation-strategist-says.html

Damn those avacado toast loving young'ins

LMCane said:

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chris1515 said:

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This feels different because so much of the inflation is being driven by fuel prices which are being driven up by the restrictions on Russian oil and gas.

Boosting interest rates isn't going to impact oil supplies.
Eventually they can hammer down the demand, but it feels like we're using a monetary tool to address a mostly non-monetary problem.

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except you seem to have bought into the propoganda of Biden. this is NOT because of a foreign war 6000 miles away which does not involve us.

inflation has been rising in parts of the economy for 27 straight months now.

gas prices were at all time highs before Putin invaded.

inflation has been rising since the month Joe Biden took office.

try again

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You're right that gas prices were at a high before Ukraine got invaded, but they've definitely increased even further since that point.

https://ycharts.com/indicators/us_gas_price

My point, which I didn't flesh out to well, was that supply constraints on oil are driving a good bit of the inflation. Doing something to boost oil supplies would be more effective to combat that factor of inflation than just boosting rates until the crush demand. Politically that's unlikely imo, and I'm not sure why the oil industry/or OPEC would want to bail out this administration anyway.

Obviously the printing of so much money is the main driver here. Gotta pull it back in as much as possible. Time to increase taxes?

it's my understanding the issue with gas prices is refinery capacity, not necessarily availability/price of oil.

It's both supply constraints from restrictions on Russian oil and reductions in refining capacity.

themissinglink said:

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Our inflation issue is largely the result of (1) COVID supply/demand issues and (2) the fed continuing to print money despite adequate fiscal policy measures to combat the crisis.

With COVID shutdowns, supply declined and demand didn't declined to the same extent as fiscal policy stepped in to try to keep people employed, businesses solvent, etc. A supply curve shifting to the left and demand not following suit results in an increase in the equilibrium price assuming no change in the money supply. While lockdowns domestically have largely been lifted, we still have a number of supply issues.

At the same time, the fed continued to print money and expand the money supply. With less supply and more money in circulation, a classic case of too much money chasing too few goods.

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Great succinct explanation. This is exactly what happened. A third and unusual characteristic that is partially a function of money printing, but not 100%, is the Great Retirement/Reshuffle or whatever you want to call the worker shortage.

One of the main issues I see though is that (2) is not acknowledged by government, many in the media, or even major financial firms (Ex: Goldman Sachs) when discussing it. And I think that's intentional because it blows a hole in the majority theory of MMT that most everyone has adopted.

100% agree - current inflation levels are indicative of both a supply curve and demand curve shift. It's kind of crazy, and I think it's mostly *mostly* the supply curve driving it. Which is insane because the levels of Covid stimulus were insane.

What exactly do you mean? QE has ruined the American dream?

It's also a bit confusing when QE = bank bailouts = legislated stimulus = money supply.