2021 - Is inflation finally back in the conversation?

[washparkhorn 9939]

10 minutes ago, Parliament said:

So what about the middle class and poors?  Or don't we care?

Some of us care - and believe the American Consumer is pivotal in our economic dominance. 

Others prefer eating the seed corn that feeds the American Economy.

Edited October 13, 2021 by washparkhorn

[gsoda3 3257]

The average consumer has money to burn and demand is healthy.  Our unemployment #s are caused by a population being more selective about jobs because they have cash reserves.  We're not headed towards stagflation.  

 

Once supply lines thaw and flow like normal that will help release inflationary pressures.  BUT when the Fed tapers if demand stays strong (stronger than expected) we might be headed toward higher rates than anyone thinks.  

[washparkhorn 9939]

1 hour ago, gsoda3 said:

1. The average consumer has money to burn and demand is healthy.  
2. Our unemployment #s are caused by a population being more selective about jobs because they have cash reserves. 
3. We're not headed towards stagflation.  
4. Once supply lines thaw and flow like normal that will help release inflationary pressures. 
5. BUT when the Fed tapers if demand stays strong (stronger than expected) we might be headed toward higher rates than anyone thinks. 

1. Agree, but the available "money to burn" wasn't great the last time it was officially measured (2019); the median "money to burn number" was bleak ($5,300). https://www.federalreserve.gov/econres/scf/dataviz/scf/chart/#series:Transaction_Accounts;demographic:all;population:1;units:median

2. Agree - cash reserves most certainly would be a factor.  The greater risk to GDP is that many have learned to survive on less. I have no doubt toxic work environments account much of the reluctance.

3. Agree. 

4. Agree. Good point.

5. An important measure. Agree.

Tapering of asset purchases is set to be re-examined on Nov. 2-3. The earliest start date for tapering is mid-Nov. 21.  I have no doubt we will see economic-ish tantrums surrounding the slowdown of that subsidy. But it is time to wean these asset bubbles off the Fed teat. 

[elfenix 34238]

more graphs from u/integralds (hot off the presses, 5 minutes old)

 

they also made this one, which goes to show that noisy data needs a base average to compare with a moving trend

[Satoshi 129]

47 minutes ago, washparkhorn said:

1. Agree, but the available "money to burn" wasn't great the last time it was officially measured (2019); the median "money to burn number" was bleak ($5,300). https://www.federalreserve.gov/econres/scf/dataviz/scf/chart/#series:Transaction_Accounts;demographic:all;population:1;units:median

2. Agree - cash reserves most certainly would be a factor.  The greater risk to GDP is that many have learned to survive on less. I have no doubt toxic work environments account much of the reluctance.

3. Agree. 

4. Agree. Good point.

5. An important measure. Agree.

Tapering of asset purchases is set to be re-examined on Nov. 2-3. The earliest start date for tapering is mid-Nov. 21.  I have no doubt we will see economic-ish tantrums surrounding the slowdown of that subsidy. But it is time to wean these asset bubbles off the Fed teat. 

4. This is a complex problem but we contributed on the demand side via stimulus/money printing. More stimulus is a certainty. 
 

5. You continue to overestimate the Fed’s ability to taper significantly. The asset bubbles may “need” to be popped but the will to follow through despite market and economic tantrums will not be there.
 

This isn’t Xi determined to pop his real estate bubble after consolidating his power and controlling all information available to his populace. That’s without mentioning the ultimate power and influence of our financial sector. 

[jimmyjazz 45919]

So the only difference between those two graphs is the point in time where the 1/2/3% paths are launched?

Pretty interesting divergence between the two.

[elfenix 34238]

2 hours ago, jimmyjazz said:

So the only difference between those two graphs is the point in time where the 1/2/3% paths are launched?

Pretty interesting divergence between the two.

yup.  central banks have had a very hard time hitting inflation targets over the past 35 years. 

[XYZ 2154]

What would be cool is if the Fed would target 0% inflation. You know, stable prices, like its charter says.

[washparkhorn 9939]

1 hour ago, XYZ said:

What would be cool is if the Fed would target 0% inflation.

That works in exporter Switzerland, but not massive importer USA, unfortunately.

But I agree with you that a stable rate is preferable to this gyration. We import inflation through suppliers, so 2% inflation is a solid conservative economic goal. It's stable. It sends the proper message to the rest of the economic world to keep investing in our economic sphere.

[Satoshi 129]

Wall st CEO becoming unanchored 

[bernorange 8361]

10 hours ago, washparkhorn said:

... 2% inflation is a solid conservative economic goal. It's stable. ...

I'm not convinced.

https://www.soundmoneydefense.org/news/2018/12/10/perpetual-inflation-sound-money-000199

[Neonmoon 38129]

On 10/14/2021 at 11:24 AM, bernorange said:

I'm not convinced.

https://www.soundmoneydefense.org/news/2018/12/10/perpetual-inflation-sound-money-000199

We’re going back to the gold standard?

[workswithseed 2103]

1 hour ago, Neonmoon said:

We’re going back to the gold standard?

Would be much cooler if we did

 

[washparkhorn 9939]

On 10/14/2021 at 9:24 AM, bernorange said:

I'm not convinced.

https://www.soundmoneydefense.org/news/2018/12/10/perpetual-inflation-sound-money-000199

Excellent article. The issues identified remain open and unanswered. The bigger question (which we chatted about years ago) is whether there is an exit ramp from this economic tinkering practiced by the Fed.
 

Spoiler

At these levels, the Fed juice acts like a poison pill - if we kill the fed's spice flow to those mainlining it, they start dying from withdrawal and release toxic debt into the system  (which decimates the American economy) - leading to game over. We may be hostage to this experiment continuing or face annihilation. 

The slow tapering of the $120 Billion a month subsidy (propping up our asset bubbles) will be informative on how addicted these markets are to the Fed spice (and what contagion arises from the action).  The holiday season will be interesting when the tapering begins in 11/21 or 12/21.

I expect taper tantrums. And tantrums over debt at the same time. 

Annihilation sounds dope, I suppose. I suppose the Masters of the Universe have some ideas, in between gorging themselves in the trough. 

[Upgrayedd 5810]

 

[Esque 135]

Say what you want about overall inflation.  Labor inflation is real.  It's been most noticeable and advertised in low- to moderate-income positions and the narrative has been this is a long overdue re-pricing exercise between capital and labor.  However, I am no long convinced this is the case as we are increasingly beginning to see it creep into our professional fees.  For example, discovered the big four accounting firms are materially (30% - 50%) increasing salaries to keep talent.  We're being massaged by our other third party consultants (engineers, attorneys, etc.) to expect the same in 2022.

I don't see how you roll any of these changes backwards.  So even if you believe (I do) that price increases are being driven by short term disruptions (supply chain or otherwise), I'm not as confident these will roll back as labor will simply be making more money on a nominal basis.  Granted, this will all take time to play out.

Just my two cents from a boots on the ground perspective.

[washparkhorn 9939]

"recessionary flattening of the curve" 

I think it's chop (transitory) due to uneven economic recovery around the globe (I.e., supply chain unevenness). We still have a lot of juice flowing ($120 Billion a month); we shouldn't see recessionary trends with that much booster still flowing into the system. 

https://mishtalk.com/economics/despite-widespread-belief-in-strong-inflation-the-long-bond-suggests-otherwise 

 

[Satoshi 129]

Spoiler

(Bloomberg) -- In Denver, public-school children are facing shortages of milk. In Chicago, a local market is running short of canned goods and boxed items.

But there’s plenty of food. There just isn’t always enough processing and transportation capacity to meet rising demand as the economy revs up.

More than a year and a half after the coronavirus pandemic upended daily life, the supply of basic goods at U.S. grocery stores and restaurants is once again falling victim to intermittent shortages and delays.

“I never imagined that we’d be here in October 2021 talking about supply-chain problems, but it’s a reality,” said Vivek Sankaran, chief executive officer of Albertsons Cos., who echoed the laments of other retailers. “Any given day, you’re going to have something missing in our stores, and it’s across categories.”

‘Whack-A-Mole’

In Denver, broken parts at the milk supplier’s plant affected shipments of half-pint cartons, on top of disruptions at one time or another in cereal, tortillas and juice.

“We’ve been struggling with supply-chain issues with different items since school started,” said Theresa Hafner, the executive director of food services at Denver Public Schools. “It just continues to pop up. It’s like playing whack-a-mole.”

In Chicago, Dill Pickle Food Co-Op ran out of certain dry goods because its two main distributors haven’t been sending orders in full in recent weeks.

“Early in the pandemic, panic buying was the cause of many of the out-of-stock situations that grocers experienced,” general manager I’Talia McCarthy said in an email to store owners this month. “Although the food industry was able to somewhat rebound, the sustained nature of the pandemic, combined with the slow pace of vaccination globally and the recent surge caused by the delta variant, have resurfaced the problem.”

The shortages aren’t as acute as they were earlier in the pandemic. At supermarkets, on-shelf availability has stabilized since dropping drastically in November last year, according to data from NielsenIQ.

Still, one key metric is trending down a bit. The total on-shelf-availability rate was 94.6% in September, a decrease from 95.2% in August. That means that 94.6% of expected revenue was generated last month, NielsenIQ says.

Price Pressure

Many food suppliers are planning for these hiccups and shortages to last.

Saffron Road, a producer of frozen and shelf-stable meals, is holding extra inventory, keeping about four months of supply on hand instead of the typical one or two months.

“People are hoarding,” said CEO and founder Adnan Durrani. “What I think you’ll see over the next six months, all prices will go higher.”

A&W Restaurants earlier this year had to cancel a marketing deal for chicken tenders when its supplier couldn’t get extra stock of poultry. Instead, the chain, which has about 560 locations domestically, went with chili-cheese fries.

“Rather than running short, we replaced the promotion with something we could get,” said CEO Kevin Bazner. Supplies are improving, he said, but the chain is still only getting about 80% of what it orders, he said.

Not Enough Styrofoam

Food producers complain of supply-chain headaches of their own.

Land O’Lakes Inc., one of the biggest U.S. farm cooperatives, said its members are producing abundant amounts of milk at their dairies.

“The challenges in the supply chain continue to be issues such as driver shortages, labor and congestion at the ports,” Chief Supply Chain Officer Yone Dewberry said in an email.

Meat processors tell a similar tale. Earlier this month, one pork supplier couldn’t get products out because there weren’t enough Styrofoam trays, said Steve Meyer, a consulting economist for the National Pork Producers Council.

Labor issues are also roiling the meat supply. Plants are running but not at full capacity due to a lack of workers and truckers, Meyer said. The problem is so bad that at least one U.S. meatpacker has tried to lure new employees with Apple Watches.

In most cases, animals are being harvested but there aren’t enough people to handle normal value-added processes such as boning, trimming and curing. That may make it harder for grocery-store customers to find such high-value products as boneless hams.

Said Meyer, “You name it, it’s going wrong somewhere.”

Something to track 

[Royalfan5 2354]

It’s almost like making meat packing jobs as bad as possible, keeping to workforce as transient as possible, and keeping spare capacity as limited as possible worked perfectly 

[Satoshi 129]

Paul Tudor Jones on CNBC today. Tried to find his interview all in one clip but wasn’t successful. Here’s a couple snippets though.  
 

 

[Dbeasy 15048]

I’ve been thinking inflation is going to move up, but someone I know with a team of economists believes the inflation is a head fake and they point to M2 money supply as the ultimate indicator that will cause all of this to abate in the next nine months. 

[Guest]

Been seeing stuff that shortages/inflation is heavily tied to not just supply disruptions due to labor/COVID impacts, but U.S. consumers are on fire. Demand is just through the roof. 

[washparkhorn 9939]

Source for above: https://www.census.gov/retail/marts/www/marts_current.pdf

The disclaimer for the data should be included when using this data. 

__________________

November 3rd is the next big day for the Fed. We are currently pumping $120 Billion a month into the financial markets (and have been since the pandemic started - March 2020). (Do the math). 

The Fed will decide whether to slow the pace of that income transfer into already inflated assets.

[Neonmoon 38129]

Billionaires express outrage over fear of inflation 

No way……

my portfolio matters!

[Satoshi 129]

Affects so many industries 

 

[washparkhorn 9939]

TSMC of Taiwan, not INTEL, is the bellwether for that sector. TSMC has stated their highly desirable chips will be in short supply through 2022. 

 

[Incredulity 11669]

so they agree.

[Reagan1k 3024]

I’m so tired of this.  Seven month lead times on product that has shipped in seven days for the last 30 years…. And that’s with the manufacturer running 3 full shifts. 

It’s getting worse not better in my industry as customers are piling in with forward orders, trying to get their name in the hat for product and beat future increases, swelling backlogs and driving demand higher and higher.

In turn, manufacturers feel compelled to raise prices faster so they aren’t holding the bag on a huge backlog if their costs continue rising. 

Reps are pulling samples out of the field and selling them.  Had one equipment manufacturer roll out a trade in program for old broken/worn product offering credit or cash if they can salvage parts to put back into new builds.

Customers are acting like junkies begging a dealer for a fix….calling me at home at night and on weekends asking if they can score product in “unconventional” ways.

The Fed and politicians can call it whatever they want- I’m calling it a shit show. 

[Parliament 14258]

What industry are you in?

I work in ag.  Fertilizer is 3x what it was a year ago, and many herbicides are sold out.  It's amazing we're doing so well despite things.

[Reagan1k 3024]

15 minutes ago, Parliament said:

What industry are you in?

I work in ag.  Fertilizer is 3x what it was a year ago, and many herbicides are sold out.  It's amazing we're doing so well despite things.

A few, mostly specific to electrical controls and hardware used in construction. 

[Fudge Nuggets 19190]

One small anecdote from my HEB excursion this morning… apples that two weeks ago were $1.75 / lb are now $2.30 / lb. But no, there’s no inflation. 

[Satoshi 129]

4 minutes ago, Fudge Nuggets said:

One small anecdote from my HEB excursion this morning… apples that two weeks ago were $1.75 / lb are now $2.30 / lb. But no, there’s no inflation. 

Please tag @jimmyjazz for any and all grocery price discussion. Thank you for your compliance. 

[MoJames 8244]

One of the effects in the medical field is CPAPs. This was dramatically amplified lately with the Philips recall (which probably half the country on CPAP has). They more or less required that all be sent back secondary to a potential breakdown in noise abatement foam.

I now have patient's with severe sleep apnea trying to figure out what to do. Use a recalled machine or not use a CPAP and suffer the consequences. As well, anyone coming in for a new diagnosis that needs a machine are generally waiting well over 2-3 weeks to get a machine. I only expect it to get worse.

[jimmyjazz 45919]

15 minutes ago, Satoshi said:

Please tag @jimmyjazz for any and all grocery price discussion. Thank you for your compliance. 

Please blow me, and after you do that, go back and look at the point in time I was talking about.  I have never denied current inflation.

[washparkhorn 9939]

The only issue in play is whether this is supply-side inflation or demand-pull inflation. The difference is important. 

Supply-side inflation (cost-push) is a different beast from demand side inflation (too much money burning a hole in someone's pocket). Different tools are deployed for each. 

A conservative economist explains the difference:

https://www.nationalreview.com/2021/10/inflation-is-more-complex-than-you-think/

Quote

 

Demand-side inflation derives from expansionary monetary policy, pursued by the Federal Reserve. When the Fed purchases assets with newly created money, increases in the money supply eventually drive up prices. This simple story has gotten more complicated since 2008, when the Fed began paying interest on excess reserves. Banks had an incentive to park the new money in their accounts at the Fed. The monetary base went up, but the broader money supply hardly budged. Today, however, there are no excess reserves, because the Fed suspended reserve requirements last spring as part of its pandemic response. Now the Fed pays interest on general reserves. The current rate is 0.15 percent, while the target range for the federal-funds rate, the Fed’s traditional policy barometer, is 0 to 0.25 percent. We’re closer now to the textbook policy framework than we have been in a decade.

Many commentators look at the Fed’s ramped-up asset purchases since March 2020 and infer that there must be lots of inflationary pressure on the demand side. But we must be careful. To create that pressure, it’s not enough to grow the money supply; the money supply must also grow faster than money demand. Just like other goods, the price of money — its purchasing power — is determined by supply and demand. You can’t know what’s happening to the price of money without looking at both.

The money supply did begin to grow quickly in March 2020 — but money demand rose sharply, too. The overall result on nominal income, what economists call “aggregate demand,” shows a fast recovery after the darkest days of COVID, followed by a higher growth rate. This suggests that the Fed’s monetary policy in response to COVID was reasonable. (Its credit policies are a different story. These were fiscal operations in disguise, which the central bank never should have tried.) And while demand is growing faster than before the crisis, that by itself can’t explain current inflation.

 

Supply-side inflation (as opposed to demand-pull inflation):

Quote

 

Enter the supply side. You’ve doubtless heard the stories about container ships unable to dock and unload, goods piling up in warehouses for want of transport, and trains backed up for miles at rail depots. Markets for important inputs, from energy to semiconductors, are feeling the squeeze. Furthermore, the latest jobs report showed a measly 194,000 jobs created in September. All of this screams supply problems.

For a given rate of aggregate-demand growth, we’ll get more inflation when aggregate-supply growth slows. There’s nothing central bankers can do about this. Other policy-makers can help by loosening regulations that would otherwise make it more costly to produce and distribute goods. But even then, there’s only so much that policy can accomplish. Inflation will probably remain elevated until the supply constraints ease.

Our interpretation of inflation changes significantly when there are supply problems. Goods are getting more expensive in general because, compared with money, they’re relatively scarce. Inflation is a by-product. To the extent that households are worse off, it’s because goods are hard to get, not because prices are going up. The greater hardship comes from the reduction in consumption power caused by supply shortages. Think about it this way: Is the public worse off when prices are high and goods are available, or when prices are low and goods are unavailable?

 

TLDR: 

But if inflation has a significant supply-side component, forcing the economy to adjust to a new, lower level of demand, it will spell trouble for both labor markets and goods markets. Economics textbooks warn of the dangers of targeting inflation when supply is unstable. In terms of real output, those supply problems could cause aggregate-demand restraints to make things worse, not better.

 

[Satoshi 129]

A couple examples of ongoing demand side boosts from around the world. 
 

 

[Knoxtnhorn 5975]

AP economics in high school was a clusterF for me.  I have no idea why I applied to, and was accepted by, McCombs.  That being said, thanks for all the info on this thread.  Interesting, even if I don't understand some of the lingo.

Like someone mentioned on another thread, I rarely ever take heed of gas prices.  I've made it a point to check the station I drive by each morning.  I'm pretty sure the price has gone up each and every day for the past two weeks.  Also, our school ran out of the containers we've always used to supply our breakfast and lunch.  The supplier is out, and there is no available supply any time soon.  

Fancy graphs aside, things don't seem to be getting any better.

[Satoshi 129]

Before People like WashPark get upset about CR, isn’t this just an example of MMTers using taxes to take excess money out of the economy to curb inflation? Wouldn’t that mean that they realize inflation needs to be moderated? Curious on the monetary policy opinions of this. 

 

Edited October 25, 2021 by Satoshi

[XYZ 2154]

1 hour ago, Satoshi said:

Before People like WashPark get upset about CR, isn’t this just an example of MMTers using taxes to take excess money out of the economy to curb inflation? Wouldn’t that mean that they realize inflation needs to be moderated? Curious on the monetary policy opinions of this. 

 

Is that lady insane?

[Satoshi 129]

10 hours ago, XYZ said:

Is that lady insane?

No. Just extremely misguided. 

[Neonmoon 38129]

12 hours ago, Satoshi said:

Before People like WashPark get upset about CR, isn’t this just an example of MMTers using taxes to take excess money out of the economy to curb inflation? Wouldn’t that mean that they realize inflation needs to be moderated? Curious on the monetary policy opinions of this. 

 

How did you connect Janet Yellen explaining a unrealized capital gains tax bill proposed by members of Congress to the reason it was proposed was to curb inflation?

They want to spend money on infrastructure. They also want to pay for the expenditures. Their proposal is tax the ultra rich. Seems pretty straight forward. 

Edited October 25, 2021 by Neonmoon

[Parliament 14258]

So I pay this tax on my TSLA stock and the next year it crashes.  Can I get my money back?

[XYZ 2154]

1 hour ago, Parliament said:

So I pay this tax on my TSLA stock and the next year it crashes.  Can I get my money back?

NO

[babysdaddy 2721]

choose your fighter.  Larry coming out with a thread

 

 

 

Edited October 25, 2021 by babysdaddy
thread

[workswithseed 2103]

3 hours ago, babysdaddy said:

choose your fighter.  Larry coming out with a thread

 

 

 

Thank you for reminding me of this.

 

Edited October 26, 2021 by workswithseed

[elfenix 34238]

marketplace's first few minutes from today:

https://www.marketplace.org/2021/10/25/yellen-says-high-inflation-is-temporary-and-if-it-isnt/

 

also on today's program a longer form segment on hatch chili production (and wtf there's 70% less acreage now than there was back in the 90s!?!)

https://www.marketplace.org/shows/marketplace/will-new-mexico-chile-crop-weather-labor-shortage-and-climate-change/

Edited October 26, 2021 by elfenix

[Neonmoon 38129]

HEB is going to lose their monopoly on the Hatch Chile customers?

[StassneyHorn 6575]

9 hours ago, Parliament said:

So I pay this tax on my TSLA stock and the next year it crashes.  Can I get my money back?

“It would affect people with $1 billion in assets or those who have reported at least $100 million in income for three consecutive years, according to news reports. That would ensnare perhaps 700 taxpayers — or the wealthiest 0.0002 percent”

https://www.nytimes.com/2021/10/25/business/dealbook/democrats-capital-gains-tax.html

[workswithseed 2103]

28 minutes ago, StassneyHorn said:

“It would affect people with $1 billion in assets or those who have reported at least $100 million in income for three consecutive years, according to news reports. That would ensnare perhaps 700 taxpayers — or the wealthiest 0.0002 percent”

https://www.nytimes.com/2021/10/25/business/dealbook/democrats-capital-gains-tax.html

Didn't income tax say the same thing until it didn't just hit the wealthiest?

[StassneyHorn 6575]

You have nothing to worry about