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You need to tell that to the economic advisers on the news networks and the United States secretary of the treasury or ministry of finance in the UK and Canada as they seem to be wrong on inflation and you know more and they should not be calling it inflation as there master degrees and PhD degrees in economics and finance is wrong.
He just means that inflation causes price increases, and not the other way around.
The Ford CEO doesn't just wake up one morning and decide trucks will be 30% more expensive today. If he did that, Chevy would steal all of Ford's truck sales and Ford would go bankrupt.
The cause of inflation is cheap money.
This is when the government prints a bunch of money and adds it to the national debt, or when the government holds bank loan rates down too low. They did both of those things during the pandemic.
It is the money printing and low bank loan interest rates that cause the inflation. High prices are an effect of inflation, not a cause of inflation.
We have recent year's long examples of large money supply increases not causing any appreciable inflation. Conversely we can also find quarter after quarter when prices increased as money supply decreased.
Further, and irrespective of money supply or even in decreasing money supply environments, a price increase of any included CPI item contributes to inflation.
maybe it's the punctuation (years-long...meaning more than 1 year?) or how you said it, but I'm not sure I get it.
The CARES Act was effectively passed to REPLACE what was the expected loss in GDP...and that's what it did. And we had about 1/4 of it left over, unused and could have clawed that back from any money supply calculation.
And despite injecting about 5% of GDP into the economy in April '20, inflation didn't budge. Even as it became clearer - to business at least - that Covid could be managed, inflation remained below 2%. Even the euphoria of Biden winning and even more stimmy money (a Trump mistake in Dec '20) couldn't get people chasing goods with their dollars.
But then even as it was clear that GDP was going to fully recover by end of March '21 (yes, in just 1 year), somebody decided they needed THEIR payoff too. And before the checks could even start arriving, inflation took off.
The Fed has done very little tightening, which was started in 2019. We were trying to drain a pool with a shot glass.
What seems to go unmentioned is that inflation today "going down" or decreasing each month is - that "inflation is only 6%" HIGHER from LAST YEAR'S prices, which were 8% higher. That means we're about 15% above 2020, when the Fed's target inflation would only have us at 3-4% above.
Thanks, and yes more than a two years.
Look at the period from 2009 through later 2020 and recall that M2 more than double per the period.
The CARES act and other associated largess was needed to offset 2Q-2020 real GDP of -30%+.
__________
Whether or not one believes The Fed. has done little or a lot of tightening is up for debate - what isn't up for debate is that whatever tightening has taken place is beginning to show effect.
People tend to buy on credit. If you have to pay a Mafia loan shark 100% interest by the end of the week or he would break your kneecaps, would you buy a TV or iPhone on credit? No. That is an example of expensive money. You have to pay with your kneecaps.
When interest rates are really low, people become shop-a-holics. When too many people are trying to buy the same amount of stuff, prices go up. The way to end that is to raise interest rates so lots of people who cannot afford to pay cash for their stuff stop spending.
The idea is, you only have to have high interest rates temporarily. Eventually, supply will match consumer demand again, and you can reduce interest rates to reasonably low levels.
Interest rates were low for nearly 30 years and it didn't result in rapid inflation.
It's when we agreed to spend $2T on Covid in April '20, including giving the 80% of folks whose job chugged along and 100% of retirees w/no loss of income checks from $600 to $3K to and spend into the economy. And then, by June when we knew what Covid was and how to manage it, and by September hadn't spent but $1.5T and Mnuchin wanted to claw that back we probably would have been OK. But then we had to spend that money, plus a whole nother $1.5-2T unnecessarily and we got to the very basic definition of inflation:
too much money chasing too few goods.
How do those stimulus payments compare to the tens of thousands of dollars lost by millions of people who suddenly found themselves without a job for most of 2020? My 2020 AGI was $50k lower than in 2019 and that's with the additional $600 federal UI.
How do those stimulus payments compare to the tens of thousands of dollars lost by millions of people who suddenly found themselves without a job for most of 2020? My 2020 AGI was $50k lower than in 2019 and that's with the additional $600 federal UI.
You're forgetting the millions that the Employers were paid to keep paying their employees (except they spent it elsewhere).
If you do nothing when inflation is soaring because it costs nothing to borrow, then you will get HYPERINFLATION.
If I lend you money for free -- pay me back any time with no interest -- your going to spend that money.
Do that for an entire nation, and you are going to get high inflation that will get higher and higher. There is no stopping it from getting higher and higher from there, as long as money is free to use, and you don't have to pay anything on it to use it.
So if, as you say just "do nothing", then you will get hyperinflation like Weimar Germany.
By raising interest rates, you hurt the spending power of a lot of people, who stop spending. That causes prices to level off. Someday in the future when pay raises balance out the new higher prices, things kind of go back to normal.
It's countries like Venezuela and Argentina where I see hyperinflation and I assure you it isn't because the people are flush with cash and borrowing for free and spending like drunken sailors.
Well, if that's the case, then explain to me why I get along so well with Mathjak and like him so well? I actually know a lot of people in my actual life who have done way better than I have financially and have no problem with that. What would I? I am a divorced, single female. Why would I expect to do as well as a married couple who have been married 20, 30, 40 to 60 years? I have friends that spend more time in Europe than they do on US soil and have done so for the last 25 years and have absolutely no money concerns whatsoever as just one example.
You never got my point with the entire post and I am tired of discussing it. My comments were meant for people other than yourself and you were determined to interject yourself into the whole thing and make it all about you. And, you still do not see that about yourself. No one needs to discuss anything because you have done well. Then, I see you interject your San Diego BS into a woman trying to live on $1,200 a month. Why do you interject yourself into that conversation? San Diego? Really? I have a very dear friend in San Diego who inherited her mom's 1960's ranch house in San Diego worth $650k in 2013 along with the $550 annual Prop 13 Property tax and that house is now $1.5 million. So, then, a NYC gal with $1,200 a month budget you're going to tell her all about San Diego. I am beginning to come up with a few choice words on your behalf; but, I will just keep that to myself. You are very inappropriate.
So why the animus - responding to me is not responding to others, just saying. I never made it about me, only stated my opinions that differed from yours - you kept up with comments about my perceived wealth to dismiss my opinion that I responded to. I believe my opinion on SS benefits is likely shared by most - few believe that SS will not be changed to fix.
Why post about what I said in another thread - it was meant to be helpful. It was not inappropriate at all - responding directly to what she asked about other areas with walkable places. I was just saying the places she was looking for existed here even though they are a little expensive and probably were in her area also. I have lived in the NY area and NYC and SD are both expensive locations - she did not post the details of $1200 a month till the day after I posted so I was unaware of the budget.
Please feel free to leave me alone if you do not want me to respond - it is your repeated comments directed at me that cause me to respond to clarify my opinion since seemed to not be clear - also to point out your inappropriate behavior which was in almost every reply. BTW - I never said anything rude to you, I just disagreed with your position.
I think you have absolutely no idea what you're talking about.
Quote:
Originally Posted by oceangaia
I think I do and you have absolutely nothing of substance to say.
I think oceangaia has some very legitiment comments.
The user with the name bad debt, is suppose to educate us on finances?
Everyone is saying raising interest rates keeps Americans from over consuming. Which in turn shutters stores then assembly lines, which then causes mass layoffs and massive unemployment. So this is all part of the plan to fix America?
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