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2021 - Is inflation finally back in the conversation?


Reagan1k

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The Fed wants to fight inflation by almost doubling unemployment from 3.5 to 6%. Why? Because that is the primary tool available to it.  They have no power to combat one of the primary drivers of inflation:

23E13BA8-D92E-4DE7-82F0-984D1B1A5706.thumb.png.37a9a4b604d16ebbb757d29c6aca3fe2.png

Political pressure will ramp up from the Dems and the Populist Repubs as a result of the yaw demonstrated above. Temporarily, that pressure indicates a weakening dollar and stronger S&P when pricing in the peak Fed Rates on the anticipation the Fed will blink. The Fed is caught in a trap of its own making.  
 

tldr: pain and no solution for one of the core drivers of inflation.

As the economic uncoupling of the West from China continues, supply chains must shorten and become more resilient. Localization and regionalization will redefine the economies of the West. Great opportunities will emerge as old solutions wither. 

No CR. We are all in this together. 

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BIS paper on dollar milkshake/wrecking ball  

A lot we have talked about here, but a couple interesting things.

 

Strong dollar hurts global trade generally.

 

”Second, an appreciation of the dollar tends to go hand in hand with weaker global trade (Graph 3, right-hand panel). This is linked to the widespread use of the dollar for trade invoicing and financing. When the dollar appreciates, export prices, which are sticky in the short term, do not change much, while import prices in local currency increase, depressing import demand.4 In addition, a stronger dollar tightens trade credit conditions as trade credit is denominated mainly in US dollars. This hinders both imports and exports and puts pressure on global value chains.5 Consistent with such outcomes, the World Trade Organization forecasts a significant slowdown in world trade growth in 2023.“


Also another call from a foreign entity for the Fed to chill. 
 

“Finally, there is the question of whether the sharp appreciation of the dollar makes the case for greater global coordination of monetary policy. The concern could be that central banks may otherwise overtighten monetary policy from a global standpoint as they try to limit exchange rate depreciations.12 While most central banks have increased policy rates rapidly in recent months and have communicated their intention to hike rates further, real interest rates have declined over the past year or so and remain negative in most regions (Graph 5, right-hand panel). Furthermore, inflation remains stubbornly elevated. These observations caution against the notion that monetary policy is overreacting to the global surge in inflation.”


Good luck with that. 

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48 minutes ago, Cheeseweasel said:

Truth. "Coming out of Covid" should have been a plan 2 years ago. We should have planned for it, but we suck at planning past the next quarter/month. We fucked around and we are about to find out.

/noCR there were several legislative attempts to plan longer, but they never made it past the senate for some reason ¯\_(ツ)_/¯

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ISM shows growth and stabilizing prices paid. Stable prices equals inflation slowing.

Jolts numbers scaring markets as employment remains strong (Fed wants higher unemployment to stop wage price spiral). The market has been pricing in a pivot (again).

Inversion in the 10/3 (key Fed measure) looming, which should signal the Fed to back off intensity of hikes. Small business missing rent payments and consumers relying more on credit cards with high interest rates are evidence of the Fed rate hikes working to destroy demand. 

Bad news is good news remains in play when it comes to the Fed. Perverse to say the least but reality in this Fed driven economy. 

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13 hours ago, Cheeseweasel said:

Truth. "Coming out of Covid" should have been a plan 2 years ago. We should have planned for it, but we suck at planning past the next quarter/month. We fucked around and we are about to find out.

There was a plan, unfortunately, this is what it looked like:

 

Screenshot 2022-11-01 at 9.51.21 PM.png

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2 minutes ago, 52-80 said:

 

So just to be clear: you're implying that social security benefits, not record corporate profit margins, is a leading driver of inflation? Or that this benefits increase of 8.7% to adjust for inflation is bad for Americans?

Like, you do know shit had gotten more expensive right? Lol

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32 minutes ago, PilotsError said:

JFC, you think this is on the corporations and not the government printing press??  Gd.  

moreover, regardless of the upstream cause of inflation, the fact that the social security benefits are increased to offset inflation was codified in law in the 1970s!!!! (under R presidency, IIRC)

something that happens automatically for 5 decades is somethng you dont usddenly take "leadership" credit for.  lmao.

 

https://www.ssa.gov/news/cola/

Quote

History of Automatic Cost-Of-Living Adjustments (COLA)

Congress enacted the COLA provision as part of the 1972 Social Security Amendments, and automatic annual COLAs began in 1975. Before that, benefits were increased only when Congress enacted special legislation.

 

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8 minutes ago, Cheeseweasel said:

Through my leadership, I am responding to your post with a positive message. Have a great day, 52-80. 

Thank you sir. Yesterday, he was the tallest, heaviest, and oldest hes been in his life, all credits to me. 

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All shitposting aside (who am I kidding) I think the pressure is easing finally.

 

 I am seeing contractors shrink their margins and getting much more competitive in pricing.  Supply chain still fucked but all of a sudden the tightness in a lot of the market has been relaxed.   I have stopped hiring period until next year, probably summer at the earliest.

 

I think we’ll get this hike and then it will begin to ease.  But rates are still going to go up until first quarter of next year.

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57 minutes ago, 52-80 said:

through my leadership, i provided my child his dinner yesterday.  not that im already supposed to do that as a parent anyway.

Lol I mean I'm not sure how to respond to this political grievancd without getting accused of CR'ing.

Oh no! A press release highlighting that this action, while routine, is the largest of it's kind so far! Someone stop this abuse of the press!!!

Did you actually think of anything that linked your post to inflation, or did you just want to post in your hugbox?

1 hour ago, PilotsError said:

JFC, you think this is on the corporations and not the government printing press??  Gd.  

BRRRRRT certainly inflated the capital base, but inflation is outrunning monetary supply growth by a factor of 2-3x, and correlates more strongly with increases in corporate profits.

And dangit wouldn't ya know it, since the 2017 TCAJ there's even fewer drains to remove capital from the economy via corporate taxes. Which are of course at historic lows while profits are record high and wages are increasing slower than inflation for low income (read: hourly) workers. 

I'm just saying, y'all are pretty eager to pick ONE thing that's still pretty recent as the cause of a long term problem that's been fucking coming for years since we never made any meaningful changes after 2008, and rolled back what we did put in place

Edited by Captainant
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WSJ article on CPI showing the details of components, and a clicky-boxy thing to get a more personalized inflation number (sorry if paywalled, and sorrier if already posted)

https://www.wsj.com/articles/inflation-tracker-cpi-data-prices-11657717467?mod=hp_listb_pos2

Quote

The Journal has put together a price tracker of common items that many Americans buy monthly to see the direction of prices that matter to you. This living page will automatically update with the most recent prices from the CPI as new numbers are released.

The CPI basket of 80,000 items is broken down into categories broad (such as food) and narrow (like bananas). Let’s take a closer look at fruits and vegetables, foods we’re all supposed to be eating daily.

 

 

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1 hour ago, Armybrat said:

Oh goody, we’re catching up to 2014.

Not fast enough, but we'll be paying for it.

SSI wage cap jumps up to $162K (from $147K).  They're also taking an additional 0.9 percent in Medicare taxes on earnings that exceed:

$250,000 for married taxpayers who file jointly
$125,000 for married taxpayers who file separately
$200,000 for single and all other taxpayers

OTOH, 401k limit jumps to $22,500 and IRA up to $6,500, so any raises you're planning on are probably spoken for. 

Is taxation a component of "Wage-Price Spiral?"

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5 hours ago, Captainant said:

Lol I mean I'm not sure how to respond to this political grievancd without getting accused of CR'ing.

Oh no! A press release highlighting that this action, while routine, is the largest of it's kind so far! Someone stop this abuse of the press!!!

Did you actually think of anything that linked your post to inflation, or did you just want to post in your hugbox?

BRRRRRT certainly inflated the capital base, but inflation is outrunning monetary supply growth by a factor of 2-3x, and correlates more strongly with increases in corporate profits.

And dangit wouldn't ya know it, since the 2017 TCAJ there's even fewer drains to remove capital from the economy via corporate taxes. Which are of course at historic lows while profits are record high and wages are increasing slower than inflation for low income (read: hourly) workers. 

I'm just saying, y'all are pretty eager to pick ONE thing that's still pretty recent as the cause of a long term problem that's been fucking coming for years since we never made any meaningful changes after 2008, and rolled back what we did put in place

1234

CR or not, pinning our economic crisis solely on this administration is fucking bullshit.  Sorry the last administration fucked us over and that we had a world wide shutdown.  Y’all chucklefucks were celebrating the 2017 tax cuts even though report after report indicated it would screw us years down the line.  

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