2021 - Is inflation finally back in the conversation?

[Satoshi 129]

Might contribute to some other regional decreases in fuel supply here. 
 

 

 

Edited November 5, 2021 by Satoshi

[MillerEP 30454]

Is there anything to this supposed "paradigm shift" that raising interest rates will increase inflation because of the Post GFC changes? This guy does a pretty good video explaining it, but I don't know how much I should buy into it all, it makes sense to me, but I'm far from an expert. You can stop listening around the 28 minute mark, because he goes a bit into cloakroom territory.

 

[Neonmoon 38129]

@Satoshi didn’t share anything about the great jobs report?

weird 

[Hefeweizen 5311]

Not doomy or crypto enough.  Those are his bits.  I do think there is going to be a long tail of inflation though.  I am seeing it in professional services now, we are increasing fee proposals by 15 to 20 percent right now on everything.  Just anecdotes but that’s going on with my competitors too.  Statewide in Texas.

[Parliament 14255]

10 hours ago, Trey3216 said:

Let them eat cake!

 

And the US is the globe's (checks notes) NUMBER 1 oil producer.  We should invade ourselves and take it.

[Satoshi 129]

3 hours ago, Neonmoon said:

@Satoshi didn’t share anything about the great jobs report?

weird 

Busy day at work. Missed the release and then it fell off my Twitter feed. 
 

 

[Laxtonto 12080]

On 11/5/2021 at 9:30 PM, Satoshi said:

Busy day at work. Missed the release and then it fell off my Twitter feed. 
 

 

I hate the “unemployment rate” games because the past 3 administrations have played games regarding the definitions and so none of the numbers match up.

Can we just show the #’s for how many are no longer in the workforce vs those not looking as listed by unemployment? 
 

The continued changes in how measure unemployment makes me skeptical of numbers, regardless of the administration.

[Cheeseweasel 26438]

You need to look at U-6 vs U-3.

 

October’s U-6 Unemployment Rate is 7.7%

https://unemploymentdata.com/current-u6-unemployment-rate/

[Satoshi 129]

 

[washparkhorn 9939]

1. What type of inflation is this - demand-pull or cost-push?
   1. demand-pull = money burning a hole in consumers' pockets. Can be caused by too much government money creating excess liquidity.
   2. cost-push = cost of production rises due supply shortages.
2. With cost-push inflation, there are two major concerns. Which is of greater concern if combatting inflation?
   1. decreased GDP (deflationary headwinds from higher interest rates) and
   2. the psychological effects (invisible hand) of consumer inflation expectations creating inflation (see this thread for the inflation scaremongering). 

Answer key: 

Spoiler

2 and 2

 

[Satoshi 129]

32 minutes ago, washparkhorn said:

1. What type of inflation is this - demand-pull or cost-push?
   1. demand-pull = money burning a hole in consumers' pockets. Can be caused by too much government money creating excess liquidity.
   2. cost-push = cost of production rises due supply shortages.
2. With cost-push inflation, there are two major concerns. Which is of greater concern if combatting inflation?
   1. decreased GDP (deflationary headwinds from higher interest rates) and
   2. the psychological effects (invisible hand) of consumer inflation expectations creating inflation (see this thread for the inflation scaremongering). 

Answer key: 

  Hide contents

2 and 2

 

I don’t think it’s that clear cut. We have definitely seen commentary assigning some of the supply chain blame to an expansion in post lockout demand. 
 

It’s also hard to imagine an infrastructure spending package not boosting demand. 
 

brrrrrrr

[washparkhorn 9939]

9 minutes ago, Satoshi said:

expansion in post lockout demand

I am not seeing many signs of consumer driven demand-pull inflation, are you?

Expansion was expected with the enormous Fed-monetary support to international capital ($120 billion a month and continuing since March 2020) and relatively modest fiscal support for humans and small businesses (these benefits for average consumers has stopped). 

Spoiler

The infrastructure bill was the corporate giveaway bill and not human-centered. Unless one is a beneficiary of this corporate welfare, individuals get nothing in that legislation (trickle down will not happen with this money). To cut to the chase, the corporate infrastructure bill does not create demand-pull inflation because consumers do not directly benefit from the giveaways. 

As for Fed support of assets - they are already balking on interest rate hikes, but the $120 billion a month subsidy will decrease to $105 billion a month mid-November. And then it will continue to decrease by another $15 billion in mid-December (down to $90 billion a month). (tapering). 

Can you imagine $120 billion a month in fiscal support ever being a possibility? Yet we Americans don't blink an eye at $120 billion a month in support of international capital. We don't balk, so international capital keeps collecting their welfare payments. 

Does the $120 billion a month in monetary support for international capital create inflation? Inflation in asset prices, sure, but not demand-pull inflation. Why? Those benefitting the most from the $120 billion a month giveaway park it on the sidelines (or buy back stocks). This shows up in my favorite chart - the Velocity of M2 Money Stock. Look at how much it has slowed:

TLDR - the spice given by the Fed to international capital does not flow to the consumer. The money pools in the hands of a select few. (Believe the current read is 1.1, which is dreadful from a U.S. economic perspective.)

The problem with cutting off this $120 billion a month subsidy to international capital is the risk of collapsing asset bubbles cratering the economy.

Large asset holders have become addicted to the Fed welfare subsidies and I anticipate we will see taper tantrums as the weaning begins mid-month. If these asset bubbles collapse, there will be hell to pay for most Americans (see 2007-2008).

In the midst of all of this, Powell may be replaced. And the Fed has a credibility problem given the "insider trading" by Fed Governors.

There is talk of Lael Brainard (more dovish than Powell) taking over for Powell when his term ends in Feb. 2022. What that means is anyone's guess long-term, but I would expect her to continue tapering and delay rate hikes past 2022. 

Sorry for the long post. 

[Dbeasy 15047]

11 minutes ago, washparkhorn said:

I am not seeing many signs of consumer driven demand-pull inflation, are you?

Expansion was expected with the enormous Fed-monetary support to international capital ($120 billion a month and continuing since March 2020) and relatively modest fiscal support for humans and small businesses (these benefits for average consumers has stopped). 

  Reveal hidden contents

The infrastructure bill was the corporate giveaway bill and not human-centered. Unless one is a beneficiary of this corporate welfare, individuals get nothing in that legislation (trickle down will not happen with this money). To cut to the chase, the corporate infrastructure bill does not create demand-pull inflation because consumers do not directly benefit from the giveaways. 

As for Fed support of assets - they are already balking on interest rate hikes, but the $120 billion a month subsidy will decrease to $105 billion a month mid-November. And then it will continue to decrease by another $15 billion in mid-December (down to $90 billion a month). (tapering). 

Can you imagine $120 billion a month in fiscal support ever being a possibility? Yet we Americans don't blink an eye at $120 billion a month in support of international capital. We don't balk, so international capital keeps collecting their welfare payments. 

Does the $120 billion a month in monetary support for international capital create inflation? Inflation in asset prices, sure, but not demand-pull inflation. Why? Those benefitting the most from the $120 billion a month giveaway park it on the sidelines (or buy back stocks). This shows up in my favorite chart - the Velocity of M2 Money Stock. Look at how much it has slowed:

TLDR - the spice given by the Fed to international capital does not flow to the consumer. The money pools in the hands of a select few. (Believe the current read is 1.1, which is dreadful from a U.S. economic perspective.)

The problem with cutting off this $120 billion a month subsidy to international capital is the risk of collapsing asset bubbles cratering the economy.

Large asset holders have become addicted to the Fed welfare subsidies and I anticipate we will see taper tantrums as the weaning begins mid-month. If these asset bubbles collapse, there will be hell to pay for most Americans (see 2007-2008).

In the midst of all of this, Powell may be replaced. And the Fed has a credibility problem given the "insider trading" by Fed Governors.

There is talk of Lael Brainard (more dovish than Powell) taking over for Powell when his term ends in Feb. 2022. What that means is anyone's guess long-term, but I would expect her to continue tapering and delay rate hikes past 2022. 

Sorry for the long post. 

All my of my friends flush with stock market gains and stimulus payments from the last year are all out building pools and buying stuff. Does that count?

[washparkhorn 9939]

1 hour ago, Dbeasy said:

All my of my friends flush with stock market gains and stimulus payments from the last year are all out building pools and buying stuff. Does that count?

Definitely. Demand-Pull Inflation remains an active concern.

The Fed combats consumer-caused inflation with interest rate hikes (currently planned for 2022-23), which cool demand by increasing the cost of borrowing for ordinary consumers who rely on credit. 

The general rule is central banks should not raise interest rates to combat inflation when employment and markets are unstable. Rate hikes are a broad spectrum deflator. I would hope by the end of 2022 or early 2023, we will see incremental rate hikes as the economy balances the sluggish and uneven recovery. With China conflict on the horizon, supply chains will continue to be an ongoing concern for our import-dependent economy. 

 

[Satoshi 129]

5 hours ago, washparkhorn said:

I am not seeing many signs of consumer driven demand-pull inflation, are you?

 

 

[Satoshi 129]

“Scaremongering” intensifies 

[Satoshi 129]

On 5/11/2021 at 8:34 PM, ChiTownDoc said:

I'm still calling inflation a bogeyman.  So are we gonna call our shot?  I'm saying mid 5's is the absolute highest we go - and that's far from disastrous.  But it would be the highest since 2008.  And prior to that really the early 80's (couple months in '89 touched that mark.  So, anyways, I'll look like a complete idiot in a few months but I'm guessing I won't be alone.  What say you, surly?  Maybe a poll if someone knows how that type of bullshit works...

Edit: To reiterate I think that mid 5's is worst case scenario and mid 3's is much more realistic.  

 

On 5/11/2021 at 9:21 PM, Neonmoon said:

I think 2.5 to 3

 

On 5/12/2021 at 8:12 AM, GRHorn said:

 

I was going to go a little higher. The one year expectations were already at 3.4%. I was going to go 4% middle of road, 6.5% high end. 

I remembered we had some predictions a while back. These were the only posters to put numbers down that I saw. Could be time to revisit. How much higher can we go?

[ChiTownDoc 21152]

45 minutes ago, Satoshi said:

 

 

I remembered we had some predictions a while back. These were the only posters to put numbers down that I saw. Could be time to revisit. How much higher can we go?

I still think it’s a matter of supply chain issues.  And the market thinks that too.  Not even close to panicked.  

[Satoshi 129]

42 minutes ago, ChiTownDoc said:

I still think it’s a matter of supply chain issues.  And the market thinks that too.  Not even close to panicked.  

Congress just passed another $1T spending bill. Plenty of demand going to be dumped in. I guess we’ll just have to circle back. 
 

Speaking of MMT

 

[jimmyjazz 45899]

2 minutes ago, Satoshi said:

Congress just passed another $1T spending bill.

Half of that bill was already budgeted.  The other half is funded by tax increases.

[elfenix 34230]

>50% of the increase YoY is still gas + cars.  gas we all buy so we feel it but as the price is controlled by a cartel of foreign governments and high gas prices tend to be recessionary it's folly for the fed to react to them.  cars i'm not sure prices will backslide much.  there were 2.5 million fewer cars sold in 2020 compared to 2019 and 2021 has rebounded about halfway but toyota and honda lost a lot of steam MoM.  thanks, bitcoin miners!

[Cheeseweasel 26438]

13 minutes ago, jimmyjazz said:

Half of that bill was already budgeted.  The other half is funded by tax increases.

[Satoshi 129]

18 minutes ago, jimmyjazz said:

Half of that bill was already budgeted.  The other half is funded by tax increases.

Is Bernie wrong?

 

[ChiTownDoc 21152]

Nobody gives a shit what Bernie says.  He’s an old man screaming at the clouds.  

[Satoshi 129]

2 minutes ago, ChiTownDoc said:

Nobody gives a shit what Bernie says.  He’s an old man screaming at the clouds.  

https://www.usnews.com/news/politics/articles/2021-08-05/cbo-infrastructure-bill-would-add-256-billion-to-deficit
 

But it’s fully paid for? Ok.

 

18 minutes ago, elfenix said:

>50% of the increase YoY is still gas + cars.  gas we all buy so we feel it but as the price is controlled by a cartel of foreign governments and high gas prices tend to be recessionary it's folly for the fed to react to them.  cars i'm not sure prices will backslide much.  there were 2.5 million fewer cars sold in 2020 compared to 2019 and 2021 has rebounded about halfway but toyota and honda lost a lot of steam MoM.  thanks, bitcoin miners!

how does bitcoin mining fit into this? Contributing to the chip shortage?

[jimmyjazz 45899]

taxfoundation.org estimates a net $1T revenue increase over 10 years.  I don't know where Bernie is getting a $265B shortfall.  I'm not interested enough to dig and find out.

[Satoshi 129]

1 minute ago, jimmyjazz said:

taxfoundation.org estimates a net $1T revenue increase over 10 years.  I don't know where Bernie is getting a $265B shortfall.  I'm not interested enough to dig and find out.

It’s in the tweet, dipshit. CBO. Congressional Budget Office. 

[BabaYaga 15290]

On 11/8/2021 at 6:46 AM, Laxtonto said:

I hate the “unemployment rate” games because the past 3 administrations have played games regarding the definitions and so none of the numbers match up.

Can we just show the #’s for how many are no longer in the workforce vs those not looking as listed by unemployment? 
 

The continued changes in how measure unemployment makes me skeptical of numbers, regardless of the administration.

Labor participation rate relatively unchanged.  That's the only metric that matters

[jimmyjazz 45899]

10 minutes ago, Satoshi said:

It’s in the tweet, dipshit. CBO. Congressional Budget Office.

Jesus Christ, try the decaf.  My point is that plus $1T is a lot different than minus $256B.  The former is the expected increase in tax revenue, the latter is (allegedly) an accounting result.  I suspect it doesn't address the fact that almost half the BBB plan is not new or unbudgeted line items, but again, I'm not interested enough in digging further.  Capiche?

[BabaYaga 15290]

8 minutes ago, Satoshi said:

It’s in the tweet, dipshit. CBO. Congressional Budget Office. 

CBO outputs and dependent on it's inputs and it makes very little assumptions.  If you tell it YOY economic growth will be @ 6%, and tax revenues will cascade from this to fund whatever bill is being discussed, those growth indicators (even if wildly off from historic norms), or spending previsions are scored "as is".

That's what discussions on "paying for" much of anything based upon future growth predictions are just theatre.  

[BabaYaga 15290]

38 minutes ago, Cheeseweasel said:

Tell us again what taxes are YOU as a percent of GDP?  They vary by, what?  2-3% up or down depending on tax rates?  And they LEFT in the SALT tax.  lol....

[washparkhorn 9939]

Politics - Take it to the CR. Or move the thread to the CR.  Please.

________________________________

Fed Reserve Mary Daly explains the economic issues succinctly:

San Francisco Federal Reserve Bank President Mary Daly on Wednesday said she expects high inflation to moderate once COVID-19 recedes, and repeated that it would be “quite premature” to raise rates now or even to speed up the Fed’s bond-buying taper.

“Uncertainty requires us to wait and watch with vigilance,” Daly said in an interview on Bloomberg TV. High inflation is being driven by supply-chain bottlenecks and high consumer demand for goods, she said, and labor supply is constrained due to COVID-19 fears and impact. 

https://www.reuters.com/article/usa-fed-daly/feds-daly-inflation-will-moderate-uncertainty-requires-us-to-wait-idUSS0N2O401Y

We knew the energy shock would translate into higher prices - always does. 

Supply chain remains fracture. 

Covid remains a drag on the economy (and on efforts to reduce supply chain inefficiency).

Demand remains strong, as expected (that's actually a healthy sign for the economy). Lose that demand and we see recessionary signals. 

 

 

[washparkhorn 9939]

14 minutes ago, BabaYaga said:

Labor participation rate relatively unchanged.  That's the only metric that matters

It is an important metric that shows a 1.7% decrease in labor participation rate since Feb. 2020. 

https://www.bls.gov/news.release/pdf/empsit.pdf

[Trey3216 15346]

1 hour ago, elfenix said:

>50% of the increase YoY is still gas + cars.  gas we all buy so we feel it but as the price is controlled by a cartel of foreign governments and high gas prices tend to be recessionary it's folly for the fed to react to them.  cars i'm not sure prices will backslide much.  there were 2.5 million fewer cars sold in 2020 compared to 2019 and 2021 has rebounded about halfway but toyota and honda lost a lot of steam MoM.  thanks, bitcoin miners!

What's fucking regarded is that we produce a shit ton of our own oil, but we don't have enough refineries to actually refine all of our own oil.  Our refineries are basically built to refine Saudi and Venezuelan crude grades.   

[Satoshi 129]

41 minutes ago, washparkhorn said:

Politics - Take it to the CR. Or move the thread to the CR.  Please.

________________________________

Fed Reserve Mary Daly explains the economic issues succinctly:

San Francisco Federal Reserve Bank President Mary Daly on Wednesday said she expects high inflation to moderate once COVID-19 recedes, and repeated that it would be “quite premature” to raise rates now or even to speed up the Fed’s bond-buying taper.

“Uncertainty requires us to wait and watch with vigilance,” Daly said in an interview on Bloomberg TV. High inflation is being driven by supply-chain bottlenecks and high consumer demand for goods, she said, and labor supply is constrained due to COVID-19 fears and impact. 

https://www.reuters.com/article/usa-fed-daly/feds-daly-inflation-will-moderate-uncertainty-requires-us-to-wait-idUSS0N2O401Y

We knew the energy shock would translate into higher prices - always does. 

Supply chain remains fracture. 

Covid remains a drag on the economy (and on efforts to reduce supply chain inefficiency).

Demand remains strong, as expected (that's actually a healthy sign for the economy). Lose that demand and we see recessionary signals. 

 

 

What was CR?

Sharing a Bernie tweet? If so, sorry. It was the first thing I could find that referenced the deficit. I really would hope that would not be too triggering to people. 
 

If it’s deficit talk, well I’m sorry but that’s quite relevant to inflation discussion. 
 

 

[Aqua Buddha 14590]

20 hours ago, washparkhorn said:

1. What type of inflation is this - demand-pull or cost-push?
   1. demand-pull = money burning a hole in consumers' pockets. Can be caused by too much government money creating excess liquidity.
   2. cost-push = cost of production rises due supply shortages.
2. With cost-push inflation, there are two major concerns. Which is of greater concern if combatting inflation?
   1. decreased GDP (deflationary headwinds from higher interest rates) and
   2. the psychological effects (invisible hand) of consumer inflation expectations creating inflation (see this thread for the inflation scaremongering). 

Answer key: 

  Hide contents

2 and 2

 

On the first point, I would argue it's a combo of the two.  There is a shitload of demand right now for a whole list of reasons.

[elfenix 34230]

1 hour ago, Trey3216 said:

What's fucking regarded is that we produce a shit ton of our own oil, but we don't have enough refineries to actually refine all of our own oil.  Our refineries are basically built to refine Saudi and Venezuelan crude grades.   

i thought that barely any saudi oil came through here

 

  

2 hours ago, Satoshi said:

how does bitcoin mining fit into this? Contributing to the chip shortage?

yes. 

Edited November 10, 2021 by elfenix

[washparkhorn 9939]

 

1 hour ago, Trey3216 said:

What's fucking regarded is that we produce a shit ton of our own oil, but we don't have enough refineries to actually refine all of our own oil.  Our refineries are basically built to refine Saudi and Venezuelan crude grades.

Energy prices (as discussed earlier) are fungible. We don't see the energy scramble in the US, but Europe and Asia are worried about Dark Winter due to supply problems. Energy price spikes have been a harbinger of recession or early red flag on the risk of recession in the past. We will/are feeling it in the US.

And I agree with you - our industrial policies are mismatched with our capacity. The global economy is shaky. With rising conflict with China, supply chain problems may continue as we transition away from China. Just another brick in the wall of worry. 

[Cheeseweasel 26438]

1 minute ago, washparkhorn said:

our industrial policies are mismatched with our capacity.

We should shut down more pipelines, right?

[Neonmoon 38129]

9 hours ago, Trey3216 said:

What's fucking regarded is that we produce a shit ton of our own oil, but we don't have enough refineries to actually refine all of our own oil.  Our refineries are basically built to refine Saudi and Venezuelan crude grades.   

Why don’t we build refineries to refine our own crude?

[jimmyjazz 45899]

8 hours ago, Cheeseweasel said:

We should shut down more pipelines, right?

Did we shut some down?  Honest question.

[Trey3216 15346]

7 minutes ago, Neonmoon said:

Why don’t we build refineries to refine our own crude?

NIMBY

[B00M 6414]

4 hours ago, jimmyjazz said:

Did we shut some down?  Honest question.

You've made 4 posts on this page of this thread. One made it clear you didn't read the post you replied to and this one makes it clear you haven't read this page of the thread. 

Here's a link to save you the scrolling time.

 

[jimmyjazz 45899]

6 hours ago, B00M said:

Here's a link to save you the scrolling time.

OK, those tweets are about pressure on Biden to shut down the cross-border pipeline.  You know, a hypothetical.

When someone says "we should shut down more pipelines, right?" the implication is that some pipelines have already been shut down.  In my experience, one kneejerk and inaccurate perception related to pipelines in the US is the canceling of Keystone XL, which was not yet operational.  So again, not the same as shutting down a pipeline.

I simply wanted to know what he was referring to, but thanks for the lecture, Dad.

[Cheeseweasel 26438]

8 minutes ago, jimmyjazz said:

In my experience, one kneejerk and inaccurate perception related to pipelines in the US is the canceling of Keystone XL, which was not yet operational. 

[Guest]

On 11/5/2021 at 11:15 AM, Satoshi said:

Might contribute to some other regional decreases in fuel supply here. 
 

 

 

It isn't remotely close to the last thing he wants.  His actions/ decisions say it's near the top of what he wants.

[Nice Guy Eddie 13510]

No one is closing a pipeline when fuel prices are up.

I understand that partisan groups have expectations when they help to elect a President but the President has to react to the hand that was dealt them.  This is more complex than a single sentence but Bush had high hopes for an agenda big on social issues but was forced to focus on foreign affairs with 9/11. Same with Obama having to deal with the 2008+ financial crisis. 

[Cheeseweasel 26438]

"Everybody has a plan until they get punched in the mouth." - Iron Mike

[B00M 6414]

1 hour ago, jimmyjazz said:

OK, those tweets are about pressure on Biden to shut down the cross-border pipeline.  You know, a hypothetical.

When someone says "we should shut down more pipelines, right?" the implication is that some pipelines have already been shut down.  In my experience, one kneejerk and inaccurate perception related to pipelines in the US is the canceling of Keystone XL, which was not yet operational.  So again, not the same as shutting down a pipeline.

I simply wanted to know what he was referring to, but thanks for the lecture, Dad.

 

Edited November 11, 2021 by B00M
I miss having a president that could say big words

[Satoshi 129]

Small amount of political discussion within. Tread lightly. Mostly monetary talk though. 
 

Don’t agree with everything in it but thought it was interesting.