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2021 - Is inflation finally back in the conversation?


Reagan1k

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2 hours ago, statsman said:

Yeah, I’m ok with pain and recession from the Fed, to stop inflation. I’m not in favor of pain and recession from the Fed, with inflation stopping thwarted by government largesse. 
 
These guys all need to get on the same page. 

Seems like that’s going to be the trend. 
 

Unelected central bankers willing to wreck economies to stop inflation. 
 

Elected officials pursuing fiscal stimulus in part to protect their jobs. 

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I’m increasingly concerned that this round of inflation is largely the result of demographic shifts and thus raising rates will not address the real issue, which is a worker shortage across the entire first world.  Instead of reducing access to capital for everyone we should be reallocating capital from those who’ve been increasingly hoarding it for the last 30 years (in addition to using immigration to increase supply of young workers).

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2 minutes ago, Snake Diggity said:

I’m increasingly concerned that this round of inflation is largely the result of demographic shifts and thus raising rates will not address the real issue, which is a worker shortage across the entire first world.

I honestly don't understand it. Did everyone just fuck off to a remote island? Hit big on Bitcoin and retire? UFO's? Where is everyone? 

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19 minutes ago, Snake Diggity said:

I’m increasingly concerned that this round of inflation is largely the result of demographic shifts and thus raising rates will not address the real issue, which is a worker shortage across the entire first world.  Instead of reducing access to capital for everyone we should be reallocating capital from those who’ve been increasingly hoarding it for the last 30 years (in addition to using immigration to increase supply of young workers).

Excellent post.  We have some much bigger systemic issues across the board.

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26 minutes ago, Snake Diggity said:

I’m increasingly concerned that this round of inflation is largely the result of demographic shifts and thus raising rates will not address the real issue, which is a worker shortage across the entire first world.  Instead of reducing access to capital for everyone we should be reallocating capital from those who’ve been increasingly hoarding it for the last 30 years (in addition to using immigration to increase supply of young workers).

maybe you're speaking to specific circumstances but i 100% disagree on a macro level.  we've been spraying money into every corner of the system for well over a decade and frankly i'm surprised more bubbles haven't burst sooner.  there has to be a lot of wealth destroyed, not redeployed.  

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47 minutes ago, Snake Diggity said:

I’m increasingly concerned that this round of inflation is largely the result of demographic shifts and thus raising rates will not address the real issue, which is a worker shortage across the entire first world. 

How do you reconcile this with near-record low unemployment?  Is it because people are leaving the workforce (retiring) and thus don't count towards the unemployed?

I admit I don't pay a whole lot of of attention to the subtleties of workforce accounting.

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1 hour ago, Cheeseweasel said:

I honestly don't understand it. Did everyone just fuck off to a remote island? Hit big on Bitcoin and retire? UFO's? Where is everyone? 

 

Labor force participation has been going down since turn of century.

https://fred.stlouisfed.org/series/CIVPART

 

fredgraph.png?g=TnE1

I think the current significant contributors are:

1.) Boomers, who would still be working sans the pandemic said fuck this I'm out.

2.) Lack of child care availability/expense has a portion of working age population unable/unwilling to work.

3.) Meth/opioid addiction explosion.  Primarily working age males.

4.) So called work penalty for benefits.  Disincentive to work by loss of more than extra amount earned in benefits.  Most people respond to incentives rationally.

 

 

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2 minutes ago, Incredulity said:

 

Labor force participation has been going down since turn of century.

https://fred.stlouisfed.org/series/CIVPART

 

fredgraph.png?g=TnE1

I think the current significant contributors are:

1.) Boomers, who would still be working sans the pandemic said fuck this I'm out.

2.) Lack of child care availability/expense has a portion of working age population unable/unwilling to work.

3.) Meth/opioid addiction explosion.  Primarily working age males.

4.) So called work penalty for benefits.  Disincentive to work by loss of more than extra amount earned in benefits.  Most people respond to incentives rationally.

 

 

Most excellent post.  These are all factors instead of just screaming "welfare!!!!" or whatever.  Also, a sub point to #2 was covid.  A million people died and it's easy to forget that, I guess, but a lot of these were older people who provided free child care to one degree or another for a family member.  Even if it was just a few days a month, that matters.

The workers just aren't here and I'm not sure how raising interest rates fixes that.

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1 hour ago, Incredulity said:

 

Labor force participation has been going down since turn of century.

https://fred.stlouisfed.org/series/CIVPART

 

fredgraph.png?g=TnE1

I think the current significant contributors are:

1.) Boomers, who would still be working sans the pandemic said fuck this I'm out.

2.) Lack of child care availability/expense has a portion of working age population unable/unwilling to work.

3.) Meth/opioid addiction explosion.  Primarily working age males.

4.) So called work penalty for benefits.  Disincentive to work by loss of more than extra amount earned in benefits.  Most people respond to incentives rationally.

 

 

I think #1 and #2 make up a LOT bigger % of the issue than 3 and 4.

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2 hours ago, Cheeseweasel said:

I honestly don't understand it. Did everyone just fuck off to a remote island? Hit big on Bitcoin and retire? UFO's? Where is everyone? 

Some got old, others got less productive.

2 hours ago, gsoda3 said:

maybe you're speaking to specific circumstances but i 100% disagree on a macro level.  we've been spraying money into every corner of the system for well over a decade and frankly i'm surprised more bubbles haven't burst sooner.  there has to be a lot of wealth destroyed, not redeployed.  

Why destroy wealth when you can redeploy it?

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2 hours ago, jimmyjazz said:

How do you reconcile this with near-record low unemployment?  Is it because people are leaving the workforce (retiring) and thus don't count towards the unemployed?

I admit I don't pay a whole lot of of attention to the subtleties of workforce accounting.

People retiring early is a big one but I also think a lot of prime working age people are working less (or are just less productive).

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Supply disruptions are the new normal.  Covid eliminated years of neoliberal efficiency gains.  

Lean = fragile.  

Fragile = inefficient when it breaks.

Inefficient =  more resources, including labor.

J Powell promises pain. It appears he plans to deliver. But if true to form, the Fed will loosen afterwards so the big boys can swoop in with cheap money and gobble up distressed firms and assets for pennies on the dollar.  Same as it ever was. 
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6 minutes ago, washparkhorn said:

Supply disruptions are the new normal.  Covid eliminated years of neoliberal efficiency gains.  

Lean = fragile.  

Fragile = inefficient when it breaks.

Inefficient =  more resources, including labor.

That's actually a really good synopsis of where we are. Instead of wasting their time on dick shaped rockets, our Billionaires need to invent some robot truck drivers / robot construction workers ASAP.

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16 minutes ago, Cheeseweasel said:

That's actually a really good synopsis of where we are. Instead of wasting their time on dick shaped rockets, our Billionaires need to invent some robot truck drivers / robot construction workers ASAP.

That is a good point that I didn’t mention.  Technology will certainly mitigate the labor supply issue, but that’s 5-10 years away at best.  And since we didn’t start pulling the immigration levers 5-10 years ago, we could be in for a decade of pain; not the kind where people are out of work, but the kind where shelves aren’t stocked, services aren’t available, and investments take a beatin.  Gonna stay weird.

Edited by Snake Diggity
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Krugman weighing in on currency issues. I think this means UK is fucked. 
 

Guess what? They do have external liabilities in a foreign currency. Energy/USD. How is he so dense to miss that?

 

Same thing has the Yen under pressure. And the yen is a systemically more important currency. Japan will have to sell US treasuries to support their currency. Watch out. 

 

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Related but personal- I need to pay my kid‘s tuition in the next few days. I’ve been putting it off because she goes to college in the UK and it’s payable in pounds.
On 9/25/21 the USD was worth .73GBP
today it’s .95

Yep. We had to pay a chunk of the tuition earlier, but still left some for later, and almost all of the housing invoice. Just the movement of the GBP in the last coupla months has saved me thousands.
We oughta buy each other drinks with the savings.
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we are going to need a very concerted effort along multiple fronts to bring inflation under control
maybe something like the advertising campaign launched in 1974
Should We Be Scared of Inflation? - St. Louis Trust & Family ...

 

It was so successful that the administration was able to bring it under 2.5% by mid-1983, only took 9 years for that little button to have a big impact

Footnote: I would like to thank that high inflation rate for ruining the Michigan economy, which led me to move to the great state of Texas and I spent the 80's and most of the 90's in the Houston area

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3 minutes ago, Wally Fairway said:

we are going to need a very concerted effort along multiple fronts to bring inflation under control
maybe something like the advertising campaign launched in 1974
Should We Be Scared of Inflation? - St. Louis Trust & Family ...

 

It was so successful that the administration was able to bring it under 2.5% by mid-1983, only took 9 years for that little button to have a big impact

Footnote: I would like to thank that high inflation rate for ruining the Michigan economy, which led me to move to the great state of Texas and I spent the 80's and most of the 90's in the Houston area

my condolences 

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Wharton Business School professor Jeremy Siegel (Siegel’s paradox) calls his shot:


“. . .One source of inflation that worries some economists and policymakers now is the threat from rising wages, which can create a so-called wage-price spiral, where higher prices push up wages, which then reinforce still higher prices.

However, Siegel said he doesn't think wages are really driving inflation this time, saying that recent worker raises appear to be "catch-up" rather than impetus.

"It seems to me wrong for Powell to say we're going to crush wage increases, we're going to crush the worker, when that is not the cause of the inflation. The cause of the inflation was excessive monetary accommodation for the last two years," Siegel said.”

https://apple.news/AkTa4wEPHQj2Gsm_esHoDew

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1 hour ago, workswithseed said:

They will be, America will be going on a diet. We didn't know it, but this was the true liberal plan all along. 

everybody has been promoting deficit spending - some on welfare, some on warfare, some on tax cuts, some on healthcare, oh yeah and the "non-political" FED was printing money like they were going to run out of paper or ink; both sides of the aisle are guilty of putting us trillions into debt.

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31 minutes ago, washparkhorn said:

However, Siegel said he doesn't think wages are really driving inflation this time, saying that recent worker raises appear to be "catch-up" rather than impetus.

Yes and no. "Wages increases" is not just about raises. It's about having to hire more people to get the same amount done / hiring more people to fill gaps created by supply chain issues.

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