Do we really have no hangover after the largest economic orgy in history - more than $10 trillion in fiscal and monetary stimulus in 2020 and 2021? The charts below suggest we're still just drunk.
I went to the supermarket yesterday. I made the most economical purchases possible, basing almost everything on the supermarket's weekly circular.
Pre-Covid the average cash register receipt showed approximately $80/week for a family of two (myself & my 90+ year old father). Now? I cannot get out of the store for less than $110--and I'm buying LESS.
I've seen this movie before: because I remember the 1970s I don't like this movie in reruns.
I'm really damned FED UP with pinching every penny and economizing and down-sizing and all the other methods of thrift and skinflintery.
Reminder that the roots of the inflation we're still dealing with are inextricably tied to the draconian risk-reduction measures and mandates enforced to foster the illusion that “erring on the side of caution” justified gross usurpations of power and violations of human rights. You cannot just turn off the economy and turn it back on. There are consequences, and the consequences multiply the longer you keep it turned off.
"The Obama administration’s stimulus package to respond to the 2008 recession was $787 billion. In a span of two months in the summer of 2021, the U.S. spent $2.4 trillion on the pandemic. That's more than the GDPs of all but six other nations."
You're right that inflation is the preferred state, but not for the reasons you set forth. Inflation favors debtors and investors who are leveraged; i.e. the Government and Wall Street. Like most Government policies, Federal Reserve policies are designed to benefit these two groups.
Inflation is the friend of the long-term debtor since it reduces the value of the outstanding balance of a debt over time. This is essentially how the U.S. Government got out from under the debt from WWII.
Inflation is also the friend of those who hold investments, whether stocks or physical assets, such as real estate. The value of these assets rises with inflation, while any debt taken on to finance them is reduced.
Inflation is the enemy of the working class, since they generally do not hold assets and debt that they owe is usually high interest rate revolving credit, such as credit cards. The rates on this debt is also more easily adjustable. Wages do rise in an inflationary environment, but rarely keep up with inflation.
On the flip side, wages also rarely deflate at the same rate as deflation, while the value of long term debt is increased and investment assets decline in value.
That is why the Federal Reserve pursues and inflationary policy. It is only when inflation gets out of hand that monetary policy is changed to rein it back in to around 2%, just so the proles won't recognize that they are being screwed.
What is bolloxing up the program now is that, as your correspondent pointed out, every other Government agency is pursuing an inflationary policy, while the Fed is trying to rein inflation in. Raising interest rates doesn't help much if the Federal Government is still spending like a drunken sailor.
The government inflation numbers are bunk because they eliminated housing costs... something no other OECD country does. When you add housing cost inflation the actual rates of inflation pummeling the average working American has been double-digits since Biden took charge. Unemployment numbers from the government are another pile-o-crap because they include part-time work and don't correct for people working multiple jobs. Also, they don't account for regional labor surplus problems... which happen to be in the same places where more Americans are getting destroyed by inflation.
Credit card debt is spiraling out of control as families cannot make ends meet with the cost of rent, gas, energy and food.
I got my homeowners insurance bill today. It's gone from $1618 to $2069, a 27.9% increase. Since 2020, it's gone up 66.6%. Think that's an omen?
I don't know the exact increase amountsand percentages for my car insurance but it's up around $80 every 6 months for the past 2 years.
Everyone I know is having the same experience no matter what state they live in, and that's when their insurer hasn't stopped writing policies in their state. Shopping around doesn't provide much, if any, relief. Inflation has NOT gone down in the insurance market..
"Economists call this a “wage-price spiral.” Once it happens in earnest it cannot be stopped until the labor market loosens up and employees have to fear for their jobs - that is, until the economy slows and unemployment rises."
Yep. Except many economists right now don't want to even address that. Mention it (and I have) and you'll get screeched at about living wage, BLM, trans rights and somehow even abortion will be slipped into that conversation. Many economists have turned into 13 year olds who cannot reconcile their own data to their personal viewpoints.
I've also been screeched at by many folks on social media for pointing out that the UPS deal (as Alex mentioned) is NOT a good thing (yes, I want people to make a living wage, no, I don't hate the working class) in the long run.
I'm from the rust belt. I grew up looking at dilapidated homes, factories, and the socio-economic casualties of what happens when wages spin out of control and employers simply shut down, move elsewhere (another state or overseas) or implement some sort of automation to bypass the need for humans.
To me, it's a frightening omen coming for the rest of the country.
Edit: to clarify, since some folks believe i clearly have no respect for UPS drivers or the working class: my issue is not with the UPS drivers. A couple of drivers are friends of mine. I know how hard they work for their income and their benefits. I also know how corporate would love to screw them, hard and turn them into sub-minimum wage slaves with no medical or disability benefits. I'm also quite familiar with corporate greed and the selfishness of CEOs (and by the way please learn the difference between the plural and the possessive tense).
My concern is not that UPS were granted their increase. It's not even about UPS or truck drivers or anything else - that's just one example.
It's what it represents in the larger economic scheme and what it means for inflation and the argument from our "brilliant minds" who think that humans are just too expensive and should be replaced with robots, automation, AI, etc. etc.
Likewise, these increases in wages aren't going to hurt big corporations - they have the ability to pay them (like UPS) but it WILL screw small & medium sized businesses that don't have the cash, debt or equity resources that big corporates do. If they can't hire employees due to inflationary pressures, then they'll either die out or sell their businesses to big corporations.
I also fear that the widespread increase in wages (they're advertising for 22$/hour at an ice cream store where I'm living right now - and i'm not in a major metropolitan area either) is going to lead to unemployment down the line.
I'm concerned about people at the bottom of the economic and/or experiential chain having to fight desperately to get into an entry-level job because NO ONE wants to hire them because they simply cost too damn much.
Again, it's not about UPS. It isn't about truck drives. It's about the inflationary pressures we're dealing with an the unforeseen consequences down the line.
As Phil Gramm (and partners) book, "The Myth of Income Inequality" pointed out, the inflation numbers have some deep problems, beyond the "core" figures.
The bigger time bomb is interest payments to service the debt racked up during the spending binge. It will soon top 100-percent of GDP, and keep soaring. With most federal spending on autopilot, this will drive debt higher when a national emergency (a real one, as opposed to Covid) hits.
Alex, the reason why government likes inflation is because it allows them to steal purchasing power without having to directly tax voters. They choose a level of 2% NOT because it allows them to "avoid deflation" but because it is low enough that most people won't complain too much. If they just steal a little each year, it is less likely to cause voter discontent.
Oh, and deflation does NOT cause people to hold gold. Inflation is what causes people to hold gold. Gold would drop in price with deflation (just like all other goods) so there is less value in holding gold in a deflationary environment. Where you want to hold gold is when the currency is being inflated because gold holds inherent value and therefore the price rises with inflation, unlike cash. In a deflationary environment, you may choose to hold cash but you always have the incentive to invest in businesses so that you can gain additional value. Deflation is nothing to fear. Unless you are the government and you are interested in stealing purchasing power from regular people. Deflation makes regular working people richer as they can buy more goods and services with their wages. Inflation does the opposite. Inflation makes middle class, working people poorer while it enriches the government.
The aim for energy should always be cheap and abundant. When filling the coffers of Chinese green energy companies become the primary driver, prices will go up quickly. This is before I even mention all the intermittent energy sources being added to the grid. Taken altogether, it shows how completely incoherent our energy policy is.
Everyone should read The Creature from Jekyll Island-about the Fed
Throw in some Milton Friedman, Ben Graham-the Intelligent Investor, and top it off with some Art Laffer-
These group is clueless-Modern Monetary Theory is TRASH-this will get worse-everyone keeps hoping for a soft landing BUT will NEVER happen without opening our fossil fuel industry, stopping the flow of illegals living off the system along tons of people here that already and stop funding dumb endless useless wars that benefit the military industrial complex- we also need to stop funding the teachers union that keep our students stupid-and they are!!
Everyone should also watch Waiting for Superman about the public featuring Randi Weingarten-an oldie but goodie AND
Recession is still very much in play. Massive consumer debt. Commercial real estate about to crater. Banks facing stress. Corporate profits coming down. Stock market overvalued.
Food costs are going to get insane in a few months. Grain shipments from Ukraine were just cut, and given destruction of many terminal facilities, will be slow to come back, and the Ukraine war has also meant that vast amounts of farmland have become unusable.
An even bigger impact is going to be what's been happening to China lately though. (Which there's strangely been a complete lack of comment about in US mainstream media.)
China was already suffering from a historic crop failure, *before* the typhoon-driven flooding in the north of the country. I haven't seen any stats, but there have to have been tens of thousands (hundreds of thousands?) of hectares of crops destroyed. I expect it will take a while to work its way through to the consumer level, but there's going to be enormous pressure on food supply and thus prices in the very near future.
I went to the supermarket yesterday. I made the most economical purchases possible, basing almost everything on the supermarket's weekly circular.
Pre-Covid the average cash register receipt showed approximately $80/week for a family of two (myself & my 90+ year old father). Now? I cannot get out of the store for less than $110--and I'm buying LESS.
I've seen this movie before: because I remember the 1970s I don't like this movie in reruns.
I'm really damned FED UP with pinching every penny and economizing and down-sizing and all the other methods of thrift and skinflintery.
And I'd most fed up with the LIES.
Reminder that the roots of the inflation we're still dealing with are inextricably tied to the draconian risk-reduction measures and mandates enforced to foster the illusion that “erring on the side of caution” justified gross usurpations of power and violations of human rights. You cannot just turn off the economy and turn it back on. There are consequences, and the consequences multiply the longer you keep it turned off.
https://www.euphoricrecall.net/p/je-me-souviens-i-remember
"The Obama administration’s stimulus package to respond to the 2008 recession was $787 billion. In a span of two months in the summer of 2021, the U.S. spent $2.4 trillion on the pandemic. That's more than the GDPs of all but six other nations."
They will ALWAYS find an excuse to print away the value of your savings and labor. Plan accordingly.
Edit: At the risk of spoiling my own upcoming article, check out Jerome Powell answer "why 2% inflation"?
https://twitter.com/ChrisBlec/status/1689491538932277248
FJB
You're right that inflation is the preferred state, but not for the reasons you set forth. Inflation favors debtors and investors who are leveraged; i.e. the Government and Wall Street. Like most Government policies, Federal Reserve policies are designed to benefit these two groups.
Inflation is the friend of the long-term debtor since it reduces the value of the outstanding balance of a debt over time. This is essentially how the U.S. Government got out from under the debt from WWII.
Inflation is also the friend of those who hold investments, whether stocks or physical assets, such as real estate. The value of these assets rises with inflation, while any debt taken on to finance them is reduced.
Inflation is the enemy of the working class, since they generally do not hold assets and debt that they owe is usually high interest rate revolving credit, such as credit cards. The rates on this debt is also more easily adjustable. Wages do rise in an inflationary environment, but rarely keep up with inflation.
On the flip side, wages also rarely deflate at the same rate as deflation, while the value of long term debt is increased and investment assets decline in value.
That is why the Federal Reserve pursues and inflationary policy. It is only when inflation gets out of hand that monetary policy is changed to rein it back in to around 2%, just so the proles won't recognize that they are being screwed.
What is bolloxing up the program now is that, as your correspondent pointed out, every other Government agency is pursuing an inflationary policy, while the Fed is trying to rein inflation in. Raising interest rates doesn't help much if the Federal Government is still spending like a drunken sailor.
The government inflation numbers are bunk because they eliminated housing costs... something no other OECD country does. When you add housing cost inflation the actual rates of inflation pummeling the average working American has been double-digits since Biden took charge. Unemployment numbers from the government are another pile-o-crap because they include part-time work and don't correct for people working multiple jobs. Also, they don't account for regional labor surplus problems... which happen to be in the same places where more Americans are getting destroyed by inflation.
Credit card debt is spiraling out of control as families cannot make ends meet with the cost of rent, gas, energy and food.
Quid Pro Joe is to blame.
I got my homeowners insurance bill today. It's gone from $1618 to $2069, a 27.9% increase. Since 2020, it's gone up 66.6%. Think that's an omen?
I don't know the exact increase amountsand percentages for my car insurance but it's up around $80 every 6 months for the past 2 years.
Everyone I know is having the same experience no matter what state they live in, and that's when their insurer hasn't stopped writing policies in their state. Shopping around doesn't provide much, if any, relief. Inflation has NOT gone down in the insurance market..
"Economists call this a “wage-price spiral.” Once it happens in earnest it cannot be stopped until the labor market loosens up and employees have to fear for their jobs - that is, until the economy slows and unemployment rises."
Yep. Except many economists right now don't want to even address that. Mention it (and I have) and you'll get screeched at about living wage, BLM, trans rights and somehow even abortion will be slipped into that conversation. Many economists have turned into 13 year olds who cannot reconcile their own data to their personal viewpoints.
I've also been screeched at by many folks on social media for pointing out that the UPS deal (as Alex mentioned) is NOT a good thing (yes, I want people to make a living wage, no, I don't hate the working class) in the long run.
I'm from the rust belt. I grew up looking at dilapidated homes, factories, and the socio-economic casualties of what happens when wages spin out of control and employers simply shut down, move elsewhere (another state or overseas) or implement some sort of automation to bypass the need for humans.
To me, it's a frightening omen coming for the rest of the country.
Edit: to clarify, since some folks believe i clearly have no respect for UPS drivers or the working class: my issue is not with the UPS drivers. A couple of drivers are friends of mine. I know how hard they work for their income and their benefits. I also know how corporate would love to screw them, hard and turn them into sub-minimum wage slaves with no medical or disability benefits. I'm also quite familiar with corporate greed and the selfishness of CEOs (and by the way please learn the difference between the plural and the possessive tense).
My concern is not that UPS were granted their increase. It's not even about UPS or truck drivers or anything else - that's just one example.
It's what it represents in the larger economic scheme and what it means for inflation and the argument from our "brilliant minds" who think that humans are just too expensive and should be replaced with robots, automation, AI, etc. etc.
Likewise, these increases in wages aren't going to hurt big corporations - they have the ability to pay them (like UPS) but it WILL screw small & medium sized businesses that don't have the cash, debt or equity resources that big corporates do. If they can't hire employees due to inflationary pressures, then they'll either die out or sell their businesses to big corporations.
I also fear that the widespread increase in wages (they're advertising for 22$/hour at an ice cream store where I'm living right now - and i'm not in a major metropolitan area either) is going to lead to unemployment down the line.
I'm concerned about people at the bottom of the economic and/or experiential chain having to fight desperately to get into an entry-level job because NO ONE wants to hire them because they simply cost too damn much.
Again, it's not about UPS. It isn't about truck drives. It's about the inflationary pressures we're dealing with an the unforeseen consequences down the line.
As Phil Gramm (and partners) book, "The Myth of Income Inequality" pointed out, the inflation numbers have some deep problems, beyond the "core" figures.
The bigger time bomb is interest payments to service the debt racked up during the spending binge. It will soon top 100-percent of GDP, and keep soaring. With most federal spending on autopilot, this will drive debt higher when a national emergency (a real one, as opposed to Covid) hits.
Alex, the reason why government likes inflation is because it allows them to steal purchasing power without having to directly tax voters. They choose a level of 2% NOT because it allows them to "avoid deflation" but because it is low enough that most people won't complain too much. If they just steal a little each year, it is less likely to cause voter discontent.
Oh, and deflation does NOT cause people to hold gold. Inflation is what causes people to hold gold. Gold would drop in price with deflation (just like all other goods) so there is less value in holding gold in a deflationary environment. Where you want to hold gold is when the currency is being inflated because gold holds inherent value and therefore the price rises with inflation, unlike cash. In a deflationary environment, you may choose to hold cash but you always have the incentive to invest in businesses so that you can gain additional value. Deflation is nothing to fear. Unless you are the government and you are interested in stealing purchasing power from regular people. Deflation makes regular working people richer as they can buy more goods and services with their wages. Inflation does the opposite. Inflation makes middle class, working people poorer while it enriches the government.
Only six percent Inflation? Among the things I buy, it's well over 10%. More like 15%.
The aim for energy should always be cheap and abundant. When filling the coffers of Chinese green energy companies become the primary driver, prices will go up quickly. This is before I even mention all the intermittent energy sources being added to the grid. Taken altogether, it shows how completely incoherent our energy policy is.
Everyone should read The Creature from Jekyll Island-about the Fed
Throw in some Milton Friedman, Ben Graham-the Intelligent Investor, and top it off with some Art Laffer-
These group is clueless-Modern Monetary Theory is TRASH-this will get worse-everyone keeps hoping for a soft landing BUT will NEVER happen without opening our fossil fuel industry, stopping the flow of illegals living off the system along tons of people here that already and stop funding dumb endless useless wars that benefit the military industrial complex- we also need to stop funding the teachers union that keep our students stupid-and they are!!
Everyone should also watch Waiting for Superman about the public featuring Randi Weingarten-an oldie but goodie AND
The Shadow World voiced by Stanley Tucci on PBS-
Our leaders are SPINELESS
Core inflation, yadda yadda inflation? Grocery and gas prices are not up 9% but 50? Yogurt, meat, eggs, gasoline are all up over 50%.
Inflation is out of control. The bidenistas want to stay in power, the dinosaur media lies about everything from Devon Archer to the Iran deal.
All a big lie.
Recession is still very much in play. Massive consumer debt. Commercial real estate about to crater. Banks facing stress. Corporate profits coming down. Stock market overvalued.
Food costs are going to get insane in a few months. Grain shipments from Ukraine were just cut, and given destruction of many terminal facilities, will be slow to come back, and the Ukraine war has also meant that vast amounts of farmland have become unusable.
An even bigger impact is going to be what's been happening to China lately though. (Which there's strangely been a complete lack of comment about in US mainstream media.)
China was already suffering from a historic crop failure, *before* the typhoon-driven flooding in the north of the country. I haven't seen any stats, but there have to have been tens of thousands (hundreds of thousands?) of hectares of crops destroyed. I expect it will take a while to work its way through to the consumer level, but there's going to be enormous pressure on food supply and thus prices in the very near future.