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2021 - Is inflation finally back in the conversation?


Reagan1k

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Europe has to deal with the same supply chain issues as everyone else, plus they have the shitshow with Russia and have to figure out a way to replace all that russian O&G. Europe's inflationary outlook is probably fucked for awhile. 

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1 hour ago, Shaggy3.0 said:

It's almost like we want inflation, or something.

Who benefits from this economic climate?

 

Geopolitics complicate everything, but almost every policy decision outside of the Fed hiking (which is biggest to be fair) appears to be inflationary.
 

A ton of it is just the reversing of years and years of globalization that was disinflationary. Protectionism, re-onshoring of supply chains.
 

The frustrating one to me is the general approach to energy policy. High energy prices will feed into every part of the global economy. The west have set ourselves up for a lot of this and we don’t appear to be altering course at all. But that’s a whole other thread. 
 

Here’s another likely stimulant. No CR please, just sharing what is likely coming and the official gov position on its effect.  
 

 

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12 hours ago, Immaculate Vibes said:

counterpoint:  the only cure for high prices is to "give" people even more spending money...

treasury secretary janet yellen expresses contrition for being "wrong about path of inflation"... too bad elected officials cant ever admit the same.

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23 hours ago, Immaculate Vibes said:

Geopolitics complicate everything, but almost every policy decision outside of the Fed hiking (which is biggest to be fair) appears to be inflationary.
 

A ton of it is just the reversing of years and years of globalization that was disinflationary. Protectionism, re-onshoring of supply chains.
 

The frustrating one to me is the general approach to energy policy. High energy prices will feed into every part of the global economy. The west have set ourselves up for a lot of this and we don’t appear to be altering course at all. But that’s a whole other thread. 
 

Here’s another likely stimulant. No CR please, just sharing what is likely coming and the official gov position on its effect.  
 

 

I don't think that will be inflationary given nobody has been making any payments on their student loans regardless (i.e. that money is already accounted for in consumer spending).

 

Regardless, nominal growth of US GDP is what the government wants.  Nominal growth reduces debt to gdp.  We did it post ww2 as well.

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2 hours ago, Immaculate Vibes said:

🤔 

That statement is correct. Energy prices are increasing because of issues in the fossil fuel market, not because of renewable energy. Renewable energy is cheaper than fossil fuels and has been for awhile now. Ending reliance on fossil fuels is going to be best way to escape the yo-yo tantrums of that market. And, no, the issues with oil and gas right now aren't anywhere as simple as "we aren't drilling enough."  

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1 hour ago, Dahobbs said:

That statement is correct. Energy prices are increasing because of issues in the fossil fuel market, not because of renewable energy. Renewable energy is cheaper than fossil fuels and has been for awhile now. Ending reliance on fossil fuels is going to be best way to escape the yo-yo tantrums of that market. And, no, the issues with oil and gas right now aren't anywhere as simple as "we aren't drilling enough."  

Cheaper on what basis? Are you counting subsidies?


 

 

 

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Geopolitics complicate everything, but almost every policy decision outside of the Fed hiking (which is biggest to be fair) appears to be inflationary.
 
A ton of it is just the reversing of years and years of globalization that was disinflationary. Protectionism, re-onshoring of supply chains.
 
The frustrating one to me is the general approach to energy policy. High energy prices will feed into every part of the global economy. The west have set ourselves up for a lot of this and we don’t appear to be altering course at all. But that’s a whole other thread. 
 
Here’s another likely stimulant. No CR please, just sharing what is likely coming and the official gov position on its effect.  
 
 


You are aware that student loan payments have been paused and not accruing interest for two years now, right?

Are you under the impression student loan borrowers have been socking away monthly payments for loans as consumer spending continues to hold up in spite of inflation? Because otherwise, that’s not an additional stimulant. And if you are in fact under that impression - lol.

You could argue that pausing student loan payments for two years is/was a stimulant, absolutely; but that’s not what you said, and we all know why you wouldn’t go there. And of course, you make zero accounting made for the variance in potential policy decisions and outcomes.

This is a perfect example of just taking a low effort political shot while hiding behind the “no CR” note in bad faith.
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5 minutes ago, gmr548 said:

 


You are aware that student loan payments have been paused and not accruing interest for two years now, right?

Are you under the impression student loan borrowers have been socking away monthly payments for loans as consumer spending continues to hold up in spite of inflation? Because otherwise, that’s not an additional stimulant. And if you are in fact under that impression - lol.

You could argue that pausing student loan payments for two years is/was a stimulant, absolutely; but that’s not what you said, and we all know why you wouldn’t go there. And of course, you make zero accounting made for the variance in potential policy decisions and outcomes.

This is a perfect example of just taking a low effort political shot while hiding behind the “no CR” note in bad faith.

 

You’re ridiculous. I’ve stated on multiple boards here that fiscal responsibility is a “both sides” issue. Never have hidden from it or avoided it. Yes, halting student loan payments is a stimulant as well.
 

This loan forgiveness will disproportionately help the upper middle class. The kind of people that can afford to pay some down while interest is paused. Was that still an option? So there could be some stimulus there. Also, improving personal balance sheets across the board opens up opportunities for further credit creation.  
 

The effect will be interesting to follow. 

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40 minutes ago, Immaculate Vibes said:

Cheaper on what basis? Are you counting subsidies?


 

 

 

LCOE in the United States, with or without renewable subsidies (but including all indirect subsidies for fossil fuels). Solar is significantly cheaper than fossil fuels. Onshore wind is roughly even with combined cycle and cheaper than other fossil fuel options. Of course, this is a March 2022 report and doesn't include recent price hikes in natural gas. I do note that the addition of storage will drive solar to be higher than combined cycle in this estimate. However, storage is largely unnecessary until reaching higher percentages of renewables on the grid (and there are plenty of studies on that if you need cites). Notably, battery storage systems are quickly reaching price parity with combustion turbines, which is a pretty big deal since they largely serve the same purpose in the grid.

image.png.ffababa4c8faf80e06013b2b217fdd3e.png

https://www.eia.gov/outlooks/aeo/pdf/electricity_generation.pdf

Keep in mind, the EIA estimates for new renewable generation have been notoriously low-balled, with actual generation doing better than these predictions pretty much every year. There is a reason that something like 80% of new planned capacity in Texas is renewable (mainly solar), and you see a similar pattern nationally. It is economics. 

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1 hour ago, Immaculate Vibes said:

You’re ridiculous. I’ve stated on multiple boards here that fiscal responsibility is a “both sides” issue. Never have hidden from it or avoided it. Yes, halting student loan payments is a stimulant as well.
 

This loan forgiveness will disproportionately help the upper middle class. The kind of people that can afford to pay some down while interest is paused. Was that still an option? So there could be some stimulus there. Also, improving personal balance sheets across the board opens up opportunities for further credit creation.  
 

The effect will be interesting to follow. 

I know how it is gonna affect my family. CHIEF Jr. has made it through college by making the choice to get his hours by going to Junior College, working full time in the summer, and part-time in the winter. I am going to encourage him to take out all of the loans possible this coming year and park it in a money market account. Keep everything that gets forgiven, and pay back with what is left.

CHIEF

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On 6/2/2022 at 2:45 PM, CHIEF said:

I know how it is gonna affect my family. CHIEF Jr. has made it through college by making the choice to get his hours by going to Junior College, working full time in the summer, and part-time in the winter. I am going to encourage him to take out all of the loans possible this coming year and park it in a money market account. Keep everything that gets forgiven, and pay back with what is left.

CHIEF

Tell him Steve Dave!!

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Turkey's annual inflation rose to 73.5 percent in May, its highest rate in 24 years.

Among the most affected sectors are transportation, where prices rose 107.6 percent year on year, and food, where costs increased by 91.6 percent, according to data from the Turkish Statistical Institute released Friday.

It's Turkey's highest level of inflation since 1998, a year before the country adopted a comprehensive IMF-backed disinflation program.

Turkey's central bank has refused to raise interest rates despite inflation, keeping them unchanged for over five months.

President Recep Tayyip Erdoğan is particularly opposed to the measure, saying in late May: “Those who try to impose on us a link between the benchmark rate and inflation are either illiterates or traitors."

 

https://www.politico.eu/article/turkeys-inflation-rate-hits-73-5-percent/

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The gas price spike keeps getting worse.

The national average jumped to $4.87 a gallon on Monday, according to AAA. That's up 25 cents in the past week and 59 cents in the past month.

There are now 10 states where the average price of gasoline is $5 a gallon or higher, with the latest being Michigan and Indiana. Washington, DC, is also above $5.

New Jersey, Pennsylvania and Massachusetts are just pennies away. Georgia is the only state with an average below $4.30 a gallon.

Unfortunately, prices could continue to climb.

Veteran oil analyst Andy Lipow told CNN he expects the national average to hit $5.05 a gallon in the next 10 days.

So gas prices up about 14% over the last month. The next couple of inflation reports should be interesting. 

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So oil spiked to $125 when the Russia/Ukraine thing went down. Overnight gas prices jumped to $3.99 at every station in town.

Now oil is close to that level again (still below it), but gas prices are now $4.49.

I am but a simple man of the land. Why is this happening? 

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3 minutes ago, FirstTimeCaller said:

So oil spiked to $125 when the Russia/Ukraine thing went down. Overnight gas prices jumped to $3.99 at every station in town.

Now oil is close to that level again (still below it), but gas prices are now $4.49.

I am but a simple man of the land. Why is this happening? 

Bottlenecks in refining, and regional inventory issues, especially on diesel. 

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What's odd is that there is usually variance in station prices but it seems like all stations in my hood up in Round Rock went from $4.05-4.15 directly up to $4.49 at the same moment. Looking at GasBuddy shows the large majority are all priced exactly the same which I can't recall ever seeing before. 

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4 hours ago, FirstTimeCaller said:

So oil spiked to $125 when the Russia/Ukraine thing went down. Overnight gas prices jumped to $3.99 at every station in town.

Now oil is close to that level again (still below it), but gas prices are now $4.49.

I am but a simple man of the land. Why is this happening? 

Because we let them

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I said back here somewhere, and I think, that May's numbers are going to be bad.  Not record bad, but trend bad (again).  Mostly because gas shot up after the little April fart (er, breather) and has begun to screw everything (truck transpo (diesel fuel), supply chains, etc.

And, as stagflation guys have been saying, eventually the spending will go down, eventually the demand decline in goods = less revenue and job loss.

So, last week's job #'s are out, and it's the biggest weekly decline since January (and the latest jobs surge):
chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.dol.gov/ui/data.pdf

(+229K, plus the last few weeks' reports were revised up a bit).

This isn't necessarily the beginning of the jobs decline spiral - I think it'll take through the summer to really see actual losses if trends continue - and this could be just a small burp in otherwise great job news for 2022 so far.

But, keep an eye on this as it could just as easily accelerate if the stagflation double whammy really begins to take its toll.  Which it absolutely will if gas stays high for > one more month.  If gas comes down, this indicator could reverse.

I think we're about to enter the Mines of Mordor.  Hope not.

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Looked up U.S. oil production a day or two ago. I thought it was going to have fallen off a cliff the way that people talk and the way that prices have jumped. Peak was around 13 million barrels a day. Now it's at 11.6 and rising.

 

image.png.13358755a460d5cdbdba7f01e1b8589f.png

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Sometime between July 1 and Sept 30 we need some good news.  I still expect inflation to taper and (at worst) the august numbers (that come out in Sept) to be <4% yoy and <.2% mom.  If not it points to inflation being a lot worse (in terms of persistence and severity) than optimists like me expect.

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1 hour ago, Cheeseweasel said:

Weird that we're only about 2X the oil production for the 50's. You'd think efficiency alone would cover more than that.

It is a depleting resource. If all older wells could stay operational, what you say would make sense. But they don't. They run dry. We have to spend more effort to get the harder to reach stuff (which is what fracking does). 

Another way to look at is that we less than 2x our oil consumption from 1965, so the numbers are fairly in line. 

Edited by Dahobbs
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