Inflation

[bovie]

Unless you build your own roads, have your own militia, inspect your vegetables for parasites and water for lead, et al, you use all these services. Constantly, daily.

Not sure if you’re being intentionally disingenuous or just didn’t read what you quoted. Of course I use services. Everyone does.

But the people that pay for the vast majority of the services, don’t use the vast majority of the services. Those who use the vast majority of the services, don’t pay for the vast majority of the services. If any.

Case in point: What do you think the single biggest federal expenditure—nearly 25% of the budget—this year was? Income Security programs. Something that you, me, and probably every person here didn’t receive a single cent of benefit from.

Again, that’s a discussion for another time. But the point is that it’s paid for with debt, guaranteed by a small group of people yet benefiting a larger and completely separate group of people.

And you certainly shouldn’t expect the small group of people to be super excited about that.

[childay]

Case in point: What do you think the single biggest federal expenditure—nearly 25% of the budget—this year was? Income Security programs. Something that you, me, and probably every person here didn’t receive a single cent of benefit from.

https://datalab.usaspending.gov/americas-finance-guide/spending/categories/

Does Income Security include PPP loans? Cause plenty of us got those
I assume this year is an anomaly with the COVID relief package etc.

Otherwise MCR and SS are usually biggest I think. Then defense

[Tangler]

Seriously.

Back to inflation.

Dr. Ed Yareni wrote a book called Fed watching for Fun and Profit, and the interview by Rick Ferri is interesting:

https://bogleheads.podbean.com

Great podcast, released today, on topic, so i perseverate, sorry.

[bovie]

Does Income Security include PPP loans? Cause plenty of us got those
I assume this year is an anomaly with the COVID relief package etc.

Otherwise MCR and SS are usually biggest I think. Then defense

PPP is not included.

Medicare and SS are (essentially) funded via their own payroll taxes, not federal income tax--which I'm sure you know. And of course these are flat, or even regressive taxes--not progressive.

This year and last were certainly anomalies, but the overall point remains the same: Often, expensive government services provide for the betterment of some.

Coming full circle, this is all important because with high inflation and without sufficient wage increases to maintain purchasing power, the brunt is borne by those dependent on these services in terms of feeling the day-to-day impact, but the brunt is borne by those "guaranteeing" funding of these services in terms of ultimately footing the ever-increasing bill.

[Zaphod]

Wait, hasn’t the fed always raised rates to control inflation?

Kamban, isn’t this like saying 1+1 = 2?

Not being snarky here, but Zaphod you seem focused on defending them not doing anything and that confuses me.

The government did several things that seem to have contributed to inflation lately.

Do you disagree with that?

these are the things i think contributed:

1. Created a surplus in money supply
(focusing on the term printing is a distraction, we all know it is a digital creation of a surplus but it is essentially the same overall result as printing and irrelevant semantics)

2. lowered rates and kept them low. Encourages spending. Increases demand.

3. Paid people to stay home. (less people working to provide goods and services means more demand).

I know the problem is complex but to say that raising rates will make it worse, and to say it with certainty seems overconfident at best.

Have a good morning.

Which part of raising rates fixes these things?

QE is not a digital creation it is a simple asset swap, money is created when banks lend money to people. QE and related ideas just give the bank backing and confidence to lend.

2. debateable, and empirically hasnt worked the world over. We can agree its far far more complex.

3. This has ended, and even powell noted fiscal is going to be a headwind coming into next year and beyond thus far.

What happened is a stimulus and bored at home people which caused folks to buy a ton of junk, inflation was indeed much worse and supply chains tighter here. We could have dripped the money out over longer or targeted better, but its done.

Gas prices are same/lower than 2 years ago, 5 years ago, its not inflation, its recency bias. Some things have gone up. Inflation is policy/market failure at this point.

There is simply no reason in any way shape or form for inflation to continue at the rate it has. Remember inflation isnt price, its the rate of increase. Doesnt mean prices ever go down, they just go up slower than they did.

First of all, you have to beat last years comps, most of the inflation is simply from comparing 2021 prices with 2020, big deal, while still real, its not that big from 2019 even. The rates you'd have to have in 2022 to maintain where we are today would be crazy. They would indeed hike and it'd be appropriate.

A little inflation for a short few year span is better than decades of lost potential and wide spread harms to society that comes with it, which is what we've had. I'd rather have eggs cost a bit more and have more people employed and doing better overall.

People asking for hikes as the way to do this forget hikes are very blunt, and the way it works is by putting the country into a recession and causing unemployment to go up.

Now I dont think 0.25-1% makes a big difference but I also dont think inflation is going to be as persistent, nor is it that crazy as people are making it out to be.

I will continue to update priors and absolutely change mind with new info.

[Zaphod]

jerome powell that guy that is chair of the fed calls in printing money. digitally, obviously, but i don’t think that’s the point you’re trying to make. call it creation then if you prefer

then they buy treasuries. gov debt

whos income is that?

thats an asset swap, not income


when you buy bitcoin with dollars thats a swap.

[Tangler]

"Which part of raising rates fixes these things?"

Raising rates discourages borrowing.

This helps when money supply is too robust and inflation is increasing.

I guess we just don't agree on this and we are dancing around arguing in circles.

Sorry for going around in circles.

You seem like a smart dude, but you are very interested in defending the fed and the current administration.

I think we both hope it gets better (demand drops, supply increases, inflation normalizes, prices stop rising ).

I'm done. Have a good night.

[Zaphod]

"Which part of raising rates fixes these things?"

Raising rates discourages borrowing.

This helps when money supply is too robust and inflation is increasing.

I guess we just don't agree on this and we are dancing around arguing in circles.

Sorry for going around in circles.

You seem like a smart dude, but you are very interested in defending the fed and the current administration.

I think we both hope it gets better (demand drops, supply increases, inflation normalizes, prices stop rising ).

I'm done. Have a good night.

I dont care about fed/admin, that feels politics and teamy to me and idgaf at all about that. It just isnt quite right.

We have high demand for stuff, not borrowing, and we have a supply chain problem that is part pandemic, regulatory, inelastic, etc...etc....none of which are related to borrowing. The supply chain will fix itself with increased supply, etc....and that will meet demand, probably exceed bringing inflation down, remember it doesnt have to come down just simply slow.

Its the idea that absent a new round of money from fiscal side, that the monetary side all by itself is going to somehow keep inflation going despite decades and decades of evidence worldwide that isnt the case.

Now say theyre going to do another bill giving money to people in good amounts, then yes, inflation coming in hot, but that doesnt appear to be happening.

[xraygoggles]

Not sure if you’re being intentionally disingenuous or just didn’t read what you quoted. Of course I use services. Everyone does.

But the people that pay for the vast majority of the services, don’t use the vast majority of the services. Those who use the vast majority of the services, don’t pay for the vast majority of the services. If any.

Case in point: What do you think the single biggest federal expenditure—nearly 25% of the budget—this year was? Income Security programs. Something that you, me, and probably every person here didn’t receive a single cent of benefit from.

Again, that’s a discussion for another time. But the point is that it’s paid for with debt, guaranteed by a small group of people yet benefiting a larger and completely separate group of people.

And you certainly shouldn’t expect the small group of people to be super excited about that.

No I understood perfectly what you said, but it's nonsensical.

Anyways, don't wanna get this thread closed b/c politics, which is what these types of threads devolve into almost without fail...

[xraygoggles]

It seems like progressive tax systems always have quite a bit of pressure to continue to get even more progressive. It can become dangerous when you start taxing the incredibly wealthy more and more. From a fairness standpoint, I don't necessarily think it's fair the majority can vote to take significant money away from a minority.

Yep, agree with you there, but the big difference is I think that's GOOD and FAIR to become even more progressive. I'm guessing you are more in favor of flat tax. It's simply a philosophical difference in political ideology, and one which will not be changed from this discussion in any meaningful manner.

You'd better cross your fingers because it's shaping up to be an expensive winter with respect to energy prices (gasoline, oil, natural gas, etc.). Many of the components that go into fertilizer have risen sharply which could be setting up for some (what some would call) unexpected increases to food prices in the next year or so. Prices of many common things have a lot of resistance against them for coming down. I think the Fed is starting to acknowledge it which should be a telling sign.

Well, when I said shortly, I didn't mean tomorrow. It's quite obvious the supply chain issues are wreaking havoc on every sector, so yes, it could be inflated prices for a few months, or however long it takes to grease the wheels so they turn again fluidly.

[Tim]

“Its the idea that absent a new round of money from fiscal side, that the monetary side all by itself is going to somehow keep inflation going despite decades and decades of evidence worldwide that isnt the case.

Now say theyre going to do another bill giving money to people in good amounts, then yes, inflation coming in hot, but that doesnt appear to be happening.”
Well stated. The interest rates alone don’t cause inflation.
They do stimulate the economy and can cause the economy to crater.

The petroleum industry has had it’s wheels greased already.
https://www.eia.gov/dnav/pet/hist/Le...s=mcrfpus1&f=m
The intent is clear but demand is increasing for energy.

https://www.eia.gov/dnav/pet/PET_SUM_CRDSND_K_M.htm

Make no mistake, volumes count over the long term. The trend for domestic production and the capital budgets are being cut (either voluntarily and as a result of government actions). The petroleum industry has always been cyclical due to the long lead times. Remember $100/barrel dropping to $40/barrel.
However, the lead time points to supplies dwindling. If the renewable sources don’t come on line, the price of oil will continue to spike.

Powell and Yellen both underestimated the amount and duration of inflation and the supply chain logjams.
https://www.google.com/amp/s/thehill...y-snarls%3famp

IF the programs proposed are substantially implemented,
and if the full benefits are overestimated, it could take years to recover. For example, money for the ports have a clause that prohibits automation of the ports. I could be wrong, misinformation.
What I saw was this was inserted to protect union jobs.
Hold down productivity and keep the status quo. If the conversion to renewable energy sources is underestimated, we will have huge mismatch’s. Our economy depends on power and credit. It grinds to a halt without those.

[CordMcNally]

Yep, agree with you there, but the big difference is I think that's GOOD and FAIR to become even more progressive. I'm guessing you are more in favor of flat tax. It's simply a philosophical difference in political ideology, and one which will not be changed from this discussion in any meaningful manner.

I’m actually not a huge fan of a flat tax because with the way the US spends it would likely cripple the lower/middle class.

I don’t mind paying what I owe in taxes. Paying taxes is a privilege and I’m thankful to do well and live in the best country in the world. At the same time, I don’t think it’s fair to punish some of our greatest innovators for their success. There’s a fine line and I do feel there’s a strong push too far over that line. I do think our tax code is unnecessarily complicated and could be simplified.

[bovie]

No I understood perfectly what you said, but it's nonsensical.

It's math.

[bovie]

I’m actually not a huge fan of a flat tax because with the way the US spends it would likely cripple the lower/middle class.

I don’t mind paying what I owe in taxes. Paying taxes is a privilege and I’m thankful to do well and live in the best country in the world. At the same time, I don’t think it’s fair to punish some of our greatest innovators for their success. There’s a fine line and I do feel there’s a strong push too far over that line. I do think our tax code is unnecessarily complicated and could be simplified.

Well said.

And it's funny how often this is true in all manner of things: simple = better.

[Tangler]

I’m actually not a huge fan of a flat tax because with the way the US spends it would likely cripple the lower/middle class.

I don’t mind paying what I owe in taxes. Paying taxes is a privilege and I’m thankful to do well and live in the best country in the world. At the same time, I don’t think it’s fair to punish some of our greatest innovators for their success. There’s a fine line and I do feel there’s a strong push too far over that line. I do think our tax code is unnecessarily complicated and could be simplified.

Very well said.

The thing i don’t fully agree with is the flat tax part.

I think a simple flat tax of_____% (make it whatever is needed) of every federal dollar over 100k would encourage people to work rather than progressively penalizing them for productivity.

Keep charitable deductions and done.

Tax code finished in 3 lines.

I think we live in a great country. What bothers me is that we have a current system where the top 50% pays 97.1% of the federal income taxes and some feel they still don’t pay their “fair share”

”what exactly is your fair share of what someone else has worked for” Thomas Sowell

Paying taxes is ok.

Being grateful for our great country and grateful to pay your taxes is ok.

Being angry at someone because you think they are too wealthy and should pay more in taxes than they do……..?

The last one is where i have a problem.

Sorry for the political discussion. I know many disagree with my views.

No offense intended.

Have a good morning.