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2021 - Is inflation finally back in the conversation?


Reagan1k

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People have been howling about the imminent deficit spending induced collapse for a half century.  That's not to say it can't or won't happen, but the hysteria has been roughly the same the whole time.

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On 5/16/2024 at 8:09 PM, jimmyjazz said:

I'm sure he was right to some extent, but in my career prior to entering the private sector, I did a lot of research for ARPA/DARPA/etc., and wrote several successfully-funded proposals.  The way projects were strung along with funding piled on funding even when goals weren't remotely met (performance/schedule/both) was disgusting.  I was glad to get out.  There is a lot of waste in that world.  All of defense?  No idea.  Where I was?  Absolutely.

Now do that same mental calculus with the healthcare industry and you'll really see where some of our problems lie.  

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58 minutes ago, Biff Tannen said:

Yes, because of insurance companies.

And because of lobbyists.   And because of politicians in the pockets of lobbyists.  And because of politicians profiteering off the stock prices of companies.  And because of the laws of the land at some points in time that benefited north the companies and the politicians.    And so forth.   

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Just a reminder—Higher rates makes goods and services more expensive.

Unfortunately, higher rates also supply income (interest income) to support higher prices (i.e., “stickyfying” higher prices, especially in the services sector).

IMG_1125.thumb.jpeg.395c0f7fb07fc2c62048bdd7b2cea38e.jpeg

IMG_1124.thumb.jpeg.d171e6483116cfd5d339d27ec1e2f9f6.jpeg

 

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22 minutes ago, washparkhorn said:

Just a reminder—Higher rates makes goods and services more expensive.

Unfortunately, higher rates also supply income (interest income) to support higher prices (i.e., “stickyfying” higher prices, especially in the services sector).

IMG_1125.thumb.jpeg.395c0f7fb07fc2c62048bdd7b2cea38e.jpeg

IMG_1124.thumb.jpeg.d171e6483116cfd5d339d27ec1e2f9f6.jpeg

 

I'd love to see the breakdown between wages paid to people providing services vs revenues generated. I'd bet there's a similar divergence that tracks more with revenue than with wages - prices have gone up a shitload faster than wages

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On 5/18/2024 at 11:20 PM, jimmyjazz said:

People have been howling about the imminent deficit spending induced collapse for a half century.  That's not to say it can't or won't happen, but the hysteria has been roughly the same the whole time.

True. But there is a problem with the BRICS nations and ASEAN nations trying de-dollarization. Russia, Iran, and North Korea have been sanctioned off for a couple of years to decades. China and India have bought up enough gold and silver that COMEX and the LBM no longer control the precious metals market. The Bank of Shanghi has the majority of the World's gold, currently, and China is going to use it to back the BRICS currency, after they start a situation that gets them sanctioned by the Western nations.

We are dangerously close to loosing half of the nations, in the East, using US dollars as a reserve currency. The bond market is shit. Central banks are using printed dollars to buy up as much gold as they can, but foreign governments are reluctant to buy US debt. China liquidated from three billion dollars down to about 700 billion. I'm not sure who will eventually get left holding the bag, but someone is. The US has, by far, had the longest standing fiat currency, even though it has truly been a fiat currency since 1971. We have been printing money with nothing to back it for decades. The federal government just prints money to buy its own bonds. I have heard people say we will just inflate the debt away, others that say the trap has been laid. We may have some hyperinflation, followed by austerity  measures. No one will like it, but something has to be "reset".

CHIEF

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Posted (edited)
10 hours ago, CHIEF said:

True. But there is a problem with the BRICS nations and ASEAN nations trying de-dollarization. Russia, Iran, and North Korea have been sanctioned off for a couple of years to decades. China and India have bought up enough gold and silver that COMEX and the LBM no longer control the precious metals market. The Bank of Shanghi has the majority of the World's gold, currently, and China is going to use it to back the BRICS currency, after they start a situation that gets them sanctioned by the Western nations.

The BRICS countries all want their own individual currency to be used and don't really want the others' currency. Good luck with all of that.

Edited by Schulz2.0
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5 hours ago, Schulz2.0 said:

The BRICS countries all want their own individual currency to be used and don't really want the others' currency. Good luck with all of that.

The other flaw with @CHIEF’s prediction is its presumption that the central government in China or India have control over their market participants and could enforce transactions in their sovereign currency.  The Eurodollar podcast guys have repeatedly pointed out that every time, for example, the Chinese start making pronouncements that this might happen, large amounts of private money flows out of the country.  
 

Chinese investors may not like using dollars, but they like them a whole lot more than yuan.

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On 5/17/2024 at 6:14 AM, Snake Diggity said:

“The poorest people each paying $300/yr more in taxes is the answer to our debt crisis” is the most fatty thing yet.  Fucking idiot.

Nah, I don’t think he will ever be able to top his thought that poor people don’t deserve an education.

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This guy is a good listen. I started listening to him before I purchased precious metals. He lays out what he thinks will happen. The big one is he believes OPEC and the Saudis will start taking payment in other currencies besides the US dollar before eventually moving completely out of dollars. No currency has been the World's reserve currency for much more than a hundred years or so.

CHIEF

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I misquoted the amount of US debt that China has sold off. They had three trillion worth and sold off all but $700 billion. They are using that $2.3 trillion to buy up all the precious metals they can.

CHIEF

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On 5/19/2024 at 6:20 AM, jimmyjazz said:

People have been howling about the imminent deficit spending induced collapse for a half century.  That's not to say it can't or won't happen, but the hysteria has been roughly the same the whole time.

There's definitely no reason to consider today's concern as anything but the typical howling of the last half century.

fredgraph.thumb.png.4bf5af239bb6b49cb33b642ba918e6dc.png

fredgraph(3).thumb.png.3fa3b3fc05420254a23fbe25384466e9.png

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Goddamn Beeks never said a word 

https://www.cnbc.com/2024/05/30/orange-juice-makers-turn-to-alternative-fruits-amid-record-high-prices.html

Quote

Orange juice prices are going through the roof 

 

  • The benchmark frozen concentrated orange juice futures, traded on the Intercontinental Exchange in New York, closed at another record high of $4.77 per pound on Wednesday.
  • Harry Campbell, a commodity market data analyst at research group Mintec, said that soaring orange juice prices have forced manufacturers and blenders to adapt to the situation by considering alternative fruit juices.

image.png.95117f44becd113ccea2ad784ec4c6c1.png

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On 5/24/2024 at 12:26 PM, Captainant said:

I'd love to see the breakdown between wages paid to people providing services vs revenues generated. I'd bet there's a similar divergence that tracks more with revenue than with wages - prices have gone up a shitload faster than wages

Well, there's a multiplier effect on wages in terms of prices of goods in the market...

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On 5/27/2024 at 5:05 PM, CHIEF said:

I misquoted the amount of US debt that China has sold off. They had three trillion worth and sold off all but $700 billion. They are using that $2.3 trillion to buy up all the precious metals they can.

CHIEF

So they likely sold debt at a lower price than they bought it.  There's also a lot of annual flow, because the US isn't settling trade differentials with China with cash.  It's always debt.  Therefore, if China wants to keep selling rubber dog shit to the good people of Wink, TX and and Toad Suck, AR they will have to purchase US debt at some point.  

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9 minutes ago, Trey3216 said:

So they likely sold debt at a lower price than they bought it.  There's also a lot of annual flow, because the US isn't settling trade differentials with China with cash.  It's always debt.  Therefore, if China wants to keep selling rubber dog shit to the good people of Wink, TX and and Toad Suck, AR they will have to purchase US debt at some point.  

I think they are positioning themselves for when that all stops with an invasion of Taiwan. Get anything you can get right now before they are stuck with the debt because of sanctions.

CHIEF

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On 4/26/2024 at 10:27 AM, BeardIP said:

the Fed is stuck in “monetary policy purgatory,” said KPMG’s chief economist, as it deliberates if and when it will cut rates. All options are on the table, including a dreaded rate hike.

Leaning towards a cut in Sept 

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On 5/26/2024 at 5:51 PM, CHIEF said:

True. But there is a problem with the BRICS nations and ASEAN nations trying de-dollarization. Russia, Iran, and North Korea have been sanctioned off for a couple of years to decades. China and India have bought up enough gold and silver that COMEX and the LBM no longer control the precious metals market. The Bank of Shanghi has the majority of the World's gold, currently, and China is going to use it to back the BRICS currency, after they start a situation that gets them sanctioned by the Western nations.

We are dangerously close to loosing half of the nations, in the East, using US dollars as a reserve currency. The bond market is shit. Central banks are using printed dollars to buy up as much gold as they can, but foreign governments are reluctant to buy US debt. China liquidated from three billion dollars down to about 700 billion. I'm not sure who will eventually get left holding the bag, but someone is. The US has, by far, had the longest standing fiat currency, even though it has truly been a fiat currency since 1971. We have been printing money with nothing to back it for decades. The federal government just prints money to buy its own bonds. I have heard people say we will just inflate the debt away, others that say the trap has been laid. We may have some hyperinflation, followed by austerity  measures. No one will like it, but something has to be "reset".

CHIEF

The two biggest Brics players will never be all in together. 
 

 

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On 5/27/2024 at 12:43 PM, Fudge Nuggets said:

Nah, I don’t think he will ever be able to top his thought that poor people don’t deserve an education.

Typed without a hint of irony from the absolute least diverse and wealthiest Houston exurb to ever exist.   

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Posted (edited)
6 hours ago, fattyflattie said:

Typed without a hint of irony from the absolute least diverse and wealthiest Houston exurb to ever exist.   

Yes, I live in a terrible place when it comes to lack of diversity.  You won't get any argument from me on that point.  But it doesn't mean I buy into the hatred and lack of compassion of those like you.  Despite the wealth of this place, there are pockets of those that are doing what they can to survive.  I don't wish for their kids to be banned from a quality public education.

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Posted (edited)
On 5/31/2024 at 9:18 AM, UTPhil2006 said:

Leaning towards a cut in Sept 

When people were saying recession at the end of last year, I didn’t see it, and when they were saying rate cuts at the beginning of this year I didn’t see it.

I still don’t, for all the same reasons: this is an active and responsive market economy. Demand is strong, we aren’t overproducing goods, wages are up, housing inventories aren’t high, and most importantly the current rates are in a very historically normal range. 

We could MAYBE see a symbolic cut of 25bps this fall to signal flexibility and loosen up housing in particular, but 3.5% inflation is pretty benign at full employment but it’s still north of where they want it, and my guess is that until either inflation is in the 2’s or unemployment is in the 5’s with a higher LPR on top, we won’t see a material adjustment to rates. 

Edited by Bozo_Casanova
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1 hour ago, Bozo_Casanova said:

When people were saying recession at the end of last year, I didn’t see it, and when they were saying rate cuts at the beginning of this year I didn’t see it.

I still don’t, for all the same reasons: this is an active and responsive market economy. Demand is strong, we aren’t overproducing goods, wages are up, housing inventories aren’t high, and most importantly the current rates are in a very historically normal range. 

We could MAYBE see a symbolic cut of 25bps this fall to signal flexibility and loosen up housing in particular, but 3.5% inflation is pretty benign at full employment but it’s still north of where they want it, and my guess is that until either inflation is in the 2’s or unemployment is in the 5’s with a higher LPR on top, we won’t see a material adjustment to rates. 

Agree with you on a lot of this statement, but I do think there are some signs that there is overproducing of goods (namely durables that are very capital intensive).   

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3 hours ago, Trey3216 said:

Agree with you on a lot of this statement, but I do think there are some signs that there is overproducing of goods (namely durables that are very capital intensive).

No doubt, but in the antediluvian era before free liquidity covered the land, we called that the business cycle

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15 hours ago, fattyflattie said:

Typed without a hint of irony from the absolute least diverse and wealthiest Houston exurb to ever exist.   

“Wont someone ELSE think of the children?!?!?”

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9 hours ago, Bozo_Casanova said:

When people were saying recession at the end of last year, I didn’t see it, and when they were saying rate cuts at the beginning of this year I didn’t see it.

I still don’t, for all the same reasons: this is an active and responsive market economy. Demand is strong, we aren’t overproducing goods, wages are up, housing inventories aren’t high, and most importantly the current rates are in a very historically normal range. 

We could MAYBE see a symbolic cut of 25bps this fall to signal flexibility and loosen up housing in particular, but 3.5% inflation is pretty benign at full employment but it’s still north of where they want it, and my guess is that until either inflation is in the 2’s or unemployment is in the 5’s with a higher LPR on top, we won’t see a material adjustment to rates. 

Personally I think the Larry Summers “inflation might be due to high rates” drumbeat will grow as we get closer to the end of the year.  
 

Also, purely anecdotal but between me in mortgage lending and wife in tech, we know ALOT of people laid off in the last 12-24 months, many of whom are having a terrible time finding something comparable.  I’m getting really skeptical about using the unemployment rate as a predictive measure.  

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7 minutes ago, LCHorn said:

Also, purely anecdotal but between me in mortgage lending and wife in tech, we know ALOT of people laid off in the last 12-24 months, many of whom are having a terrible time finding something comparable.  I’m getting really skeptical about using the unemployment rate as a predictive measure.  

I don't know your age, but assuming you're old enough to have some well-paid higher-ups in your circle, that anecdote may not be so related to current economics as you think.  I helped found a company in the early 90s, rode the wave for 23 years, went thru a buyout and the moment I saw the new parent company's VP Engineering's resume I knew I was toast.  Virtually identical to mine, except in Europe.  I got canned a couple of months later.  Finding a new position in my field (where I was a recognized leader) was impossible.  Eventually I leveraged some old contacts and landed my dream gig that is now really taking off some 8+ years later, but searching for a new gig when you have some gray hair can be a real bitch.

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1 hour ago, jimmyjazz said:

I don't know your age, but assuming you're old enough to have some well-paid higher-ups in your circle, that anecdote may not be so related to current economics as you think.  I helped found a company in the early 90s, rode the wave for 23 years, went thru a buyout and the moment I saw the new parent company's VP Engineering's resume I knew I was toast.  Virtually identical to mine, except in Europe.  I got canned a couple of months later.  Finding a new position in my field (where I was a recognized leader) was impossible.  Eventually I leveraged some old contacts and landed my dream gig that is now really taking off some 8+ years later, but searching for a new gig when you have some gray hair can be a real bitch.

I’m not entirely sure I’m following but I think you’re referring to ageism.  That might be a part of it but we’re seeing the same thing across lots of differently aged peer groups.  

Mortgage lending historically is a good place for an older person to still be useful but I think this particular down cycle has been hard on them.  Tech, particularly because there’s just been so many more layoffs there, probably contributes more to my perception of labor weakness.

Again, all this is anecdotal, but I hear a lot of folks taking state jobs and they are happy to be employed but it’s a pay cut and not in their field of expertise.  

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3 minutes ago, LCHorn said:

I’m not entirely sure I’m following but I think you’re referring to ageism.

I guess that's what it's called.  There is a perception out there that someone ~ 50 YO is no longer able to deliver the energy required for a particular job.  It's a little different for the C-Suite guys, they have board allies all over the place, but in my case I made a (perhaps poorly calculated) effort to stay well within the tech team realm, and in that world, age becomes an issue.  I (of course) have no idea about real estate and lending.  It's all worked out for me personally, but there was a moment . . .

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Posted (edited)
1 hour ago, LCHorn said:

Personally I think the Larry Summers “inflation might be due to high rates” drumbeat will grow as we get closer to the end of the year.  
 

Also, purely anecdotal but between me in mortgage lending and wife in tech, we know ALOT of people laid off in the last 12-24 months, many of whom are having a terrible time finding something comparable.  I’m getting really skeptical about using the unemployment rate as a predictive measure.  

 

80’s: busting unions/LBOs etc

90’s: offshoring high skill non college jobs


2000-2010’s: automating routine professional work (ERP/CRM/etc)

2020’s-2030’s: automating or offshoring professional decisions (eg underwriting and approval) and basic creative work (contract drafting and editing) with AI etc. 

see a trend? 

all of those trends were enabled by low cost investment capital (cheap debt) and major wealth creators for a small number of people. All of them drafted or forced a large number of people into the service sector at lower wages. Since richer people spend less as a percentage of GDP growth, the net was lower inflation despite GDP expansion AND an acceleration of asset prices for things like housing. 
 

It’s all well and good for Summers to talk about the rates, but at some point the Tax code has to get a look.

Edited by Bozo_Casanova
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12 minutes ago, Bozo_Casanova said:

It’s all well and good for Summers to talk about the rates, but at some point the Tax code has to get a look.

I don’t want to put the cart before the horse but I think that’s something post election that will suddenly become the crisis de jure.
 

Not to go full Cloak Room, but I think the historical party of labor should be hammering this on the campaign to sever some of the populist energy on the right and it more naturally plays to their base.  Maybe they are and I’ve just not been paying attention.  

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On 5/30/2024 at 5:15 AM, 52-80 said:

There's definitely no reason to consider today's concern as anything but the typical howling of the last half century.

fredgraph.thumb.png.4bf5af239bb6b49cb33b642ba918e6dc.png

fredgraph(3).thumb.png.3fa3b3fc05420254a23fbe25384466e9.png

People who just brush away the debt issue are living in a fantasy world. 

Yes people have been talking about the debt forever, and yes a certain party only is concerned about it when they aren’t in the White House. 

But that doesn’t change the fact that all credible financial leaders have been warning over and over that we are on an unsustainable path and the later the country tries to fix it, the worse the human suffering will be. And the numbers now, as you’ve shown above, are starting to reach the critical zone. 

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11 minutes ago, LCHorn said:

Not to go full Cloak Room, but I think the historical party of labor should be hammering this on the campaign to sever some of the populist energy on the right and it more naturally plays to their base.

That party is gone

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2 hours ago, Dbeasy said:

People who just brush away the debt issue are living in a fantasy world. 

Yes people have been talking about the debt forever, and yes a certain party only is concerned about it when they aren’t in the White House. 

But that doesn’t change the fact that all credible financial leaders have been warning over and over that we are on an unsustainable path and the later the country tries to fix it, the worse the human suffering will be. And the numbers now, as you’ve shown above, are starting to reach the critical zone. 

Or, and bear with me here, one might conclude that these "credible financial leaders" have no clue what's happening when they sound the same alarm decade after decade.

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