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I have no idea why you would pose such a question, but the answer is obviously 'yes'.
Do you believe otherwise?
It was/is a question.
We don't have broad shortages. We have shortages of some things, for reasons other than too much demand. I explained this already.If you don't think inflation of 8% amidst broad shortages is a sign of overheating then I am not sure where your economics education came from.
The fundamental problem is that the federal government has simply put too many dollars into the economy. It has created a series of enormous asset bubbles that will, and may be now, popping with dire consequence.
Are you saying yes, it has no negative effects?I have no idea why you would pose such a question, but the answer is obviously 'yes'.
Do you believe otherwise?
We don't have broad shortages. We have shortages of some things, for reasons other than too much demand. I explained this already.
When you go to the store, don't you generally find what you are shopping for? The shelves aren't empty.
As for your idea that the government has put too much money into the economy, that is simply wrong. Government-created money is only a small fraction of the money supply that matters (M1), the stuff we all transact with. I don't hear too many people complaining that they have too much money and nothing to buy with it.
Are you saying yes, it has no negative effects?
I believe inflation and deflation both have some positive and negative effects.
i.e., spendingThe fundamental reason for inflation is demand exceeding supply, a shortage. There is a difference between unavailability and shortage.
Ugh. You want to talk about M1 v M3? I will give you one simple statistic, the household savings rate in 2020-2021. It was the highest on record. This was largely a result of federal policy in the form of helicopter money, student loan freezes, rent moratoriums, etc. This led to a spike in consumer discretionary spending (ie: demand) that exceeded supply. Hence, inflation.
Look at housing materials. Cheap money courtesy of federal policy stimulated housing demand beyond capacity. There is no material change in the quantity of housing materials being producted, it is simply that the federales juiced the demand.
Hard to hold inflation to around 2% when the federal budget since 1914 has averaged nearly a 9% per year increase.Ah, O.K., fair enough.
Mild inflation, of the often vaunted 2% variety, is IMO a good thing and indeed required for a smooth running economy.
More severe inflation is destructive, as we can see all around us, particularly in individual terms.
Deflation is just as bad as severe inflation, maybe even worse, as assets devalue over time and become shunned as everyone wants to sit on cash! Lenders can't lend, and purchasers of large assets do not want to buy a depreciating asset. Deflation causes a lot of collective problems.
Yes, the fundamental driver of prices is demand vs. supply, no argument there - except to point out that profits are up 25% across the board. Oil companies are making record profits while gas prices remain high, so supply and demand aren't the only drivers of inflation. And we are still dealing with the consequences of the COVID shutdown - supply chains are still in flux, inventories are adjusting, etc. This inflation isn't about "too much money." It's still largely a supply problem in many sectors.The fundamental reason for inflation is demand exceeding supply, a shortage. There is a difference between unavailability and shortage.
Ugh. You want to talk about M1 v M3? I will give you one simple statistic, the household savings rate in 2020-2021. It was the highest on record. This was largely a result of federal policy in the form of helicopter money, student loan freezes, rent moratoriums, etc. This led to a spike in consumer discretionary spending (ie: demand) that exceeded supply. Hence, inflation.
Look at housing materials. Cheap money courtesy of federal policy stimulated housing demand beyond capacity. There is no material change in the quantity of housing materials being producted, it is simply that the federales juiced the demand.
Hard to hold inflation to around 2% when the federal budget since 1914 has averaged nearly a 9% per year increase.
And you keep grasping at any straw you can find.AYes- overheated can economies do that. Many companies ran out of the inventory they had accumulated faster than they thought, and the manufacturing has still not sped up enough to meet the onslaught of demand.
“The U.S. economy contracted at a 1.4% annual rate in the first quarter of the year, as the trade deficit soared to a record high, government spending slowed, and businesses wound down the rapid inventory rebuild they had embarked on late last year.”
The Economy Shrank Last Quarter. Don't Panic Yet.
The negative reading will feed into recession concerns as the Federal Reserve continues to tighten monetary policy, but some economists see underlying strength.www.barrons.com
But keep trying to make hay out of this. It’s fun to watch.
I am not sure if that is what he meant but I guess China would be your classic example of an over heated economy in that its economic growth rate became unsustainable sustainable and they admitted it reached the limits of its capacity to meet all its internal pressures and demands.So in your mind you think an economy can never be overheated?
Yes, the fundamental driver of prices is demand vs. supply, no argument there - except to point out that profits are up 25% across the board. Oil companies are making record profits while gas prices remain high, so supply and demand aren't the only drivers of inflation. And we are still dealing with the consequences of the COVID shutdown - supply chains are still in flux, inventories are adjusting, etc. This inflation isn't about "too much money." It's still largely a supply problem in many sectors.
The govt. money was necessary to keep people and businesses afloat. Those whose jobs weren't badly affected did pretty well, cashing those stimmy checks. OF COURSE there was some pent up demand. But this isn't baked into the economy forever, except (hopefully) the bump in wages at the lower end.
And the housing market was dead there for a while. Again, pent up demand.
The answer to this period of inflation isn't starving the economy of demand. It never is. Production and distribution will come around again (as long as there is sufficient demand to justify investment), and everybody bitching about prices now will have to find something else to bitch about.
Inflation is never an overall loss. It's a redistribution of income. Dollars aren't disappearing - somebody is earning more than usual. If that somebody is labor, great, it's been a long time coming. Unfortunately, the companies are raking it in, because that's America, where people complaining about the price of eggs results in the Fed raising interest rates and trying to push wages down. Misguided NAIRU reasoning strikes again.
That's the magic cauldron where leftwing ideology is cooked up.
Profits spiked, are now declining. Gas prices are up, why? Supply v Demand. We went from having an oversupplied market to a shortage.
Too much money = too much demand. Look at hotel room prices, easiest example in the world. All hotel rooms are up *dramatically* compared to pre-covid. Why? People have more discretionary income competing for finite resources. Inflation.
The housing market never actually saw a meaningful decline in demand during COVID. There were two months up in the air followed by a surge in demand. There was no "pent up" anything in housing. It has been more and more demand as the feds kept subsidizing mortgage rates through QE.
Inflation is never an overall loss? That's absurd. Where did you get your econ degree? Tell that to people in Zimbabwe. Tell that to people in the US late 70s. Dollars don't disappear, sure, but the goods and services they buy shrink.
I didn't say "hyperinflation," did I? Now, explain to me how nobody is doing better in real terms. Incomes are going up. Profits are going up. You don't think anybody benefits from inflation? Forget economics degrees - this is simple math.
The Fed's interest rates are completely artificial, and they always have been. High interest rates don't benefit anybody but the banks. Nobody is getting "subsidized." Banks won't lend if they feel the mortgage is a bad risk, and if they do, that's their problem.
Your "too much money = too much demand" mantra is too simplistic to waste any more time on. I give you well-reasoned answers, and keep getting the same elementary-level answers in return. Inflation is a complicated phenomenon, and you insist on reducing it to a single variable. The rest of the world is experiencing inflation, too, and you can't blame that on our government spending.
And who has a higher national debt than Japan? I'm sure the BOJ is tickled that inflation is up to 2%.Inflation might be benefit to a small set of people, for a time, but in the long term it is good for no one except debt holders (assuming they can manage the float). In economics though, you talk about the wider implications. So the idea that inflation is never an overall loss is, again, absurd. Just because 1 in 10 benefis, doesn't mean it isn't an overall loss.
I don't think you understand how the banking system, particularly for mortgages works. When the FRB artificially drives down the interest rates, that in turn drives down the interest rate on the RMBS and Agencies, which in turn subsidies the homeowners through cheaper financing, inflated asset values etc. The banks don't care when it comes to mortgages, they aren't really doing the lending, they are simply doing the servicing, if you don't understand how this works you ought not be in this conversation.
Aren't you the guy who just said "forget economics degrees", now complaining about simplicity? My education in economics and finance combined with a career in high finance says I think I got a better handle on this topic than you do. You are missing some basic concepts of how the US economy works.
The entire world is facing inflation? Well considering 3 of the worlds largest central banks have been absolutely shoveling money into their economies for the last decade plus, that's not surprising, but your statement is also inaccurate. Japan is running ~2%, but don't let the facts confuse you.
There's demand-pull and cost-push.The fundamental reason for inflation is demand exceeding supply, a shortage. There is a difference between unavailability and shortage.
Ugh. You want to talk about M1 v M3? I will give you one simple statistic, the household savings rate in 2020-2021. It was the highest on record. This was largely a result of federal policy in the form of helicopter money, student loan freezes, rent moratoriums, etc. This led to a spike in consumer discretionary spending (ie: demand) that exceeded supply. Hence, inflation.
Look at housing materials. Cheap money courtesy of federal policy stimulated housing demand beyond capacity. There is no material change in the quantity of housing materials being producted, it is simply that the federales juiced the demand.
amazing right? Biden is so powerful (while simultaneously weak, useless and ineffective according to brain dead righties) that he controls the inflation rate, oil and gas prices of the entire planet lol.I wasn't speaking about Fed actions when I mentioned boneheaded policies and actions. I was speaking about the Biden puke's and the Congressional Dem's policies and actions.
Those are what caused this inflation...and the consequences.
Don't know if I'd refer to 1.8% future growth as rosy...Economists are marking down growth forecasts — and that's good news
Slower growth is needed to help cool inflation.www.axios.com
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So, there we go. By consensus of 1K individuals in the professional association cited above, the economic expansion rate is expected to drop to 2.4% in 2022 H2, and to 1.8% thereafter.
In addition, it is thought the economic slowdown should make inflation 'benign', and, "That would enable the labor market, housing market, and markets for goods and services to come into better balance without the economy tipping into contraction."
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Quite the rosy prospect, if it indeed comes to be!
And who has a higher national debt than Japan? I'm sure the BOJ is tickled that inflation is up to 2%.
I understand that banks don't hold most of the mortgages they create. That doesn't mean that somebody isn't making the informed(?) decision to buy that mortgage. You should know that much.
And some people absolutely do benefit from inflation. Every extra dollar I spend goes to somebody else. Didn't you learn that while getting your economics degree?
Don't know if I'd refer to 1.8% future growth as rosy...
Ok, so now you admit the inflation isn't a global issue? Which is it? Everyone or just some?
You also don't seem to realize that a major buyer of mortgages being bundled through federal agencies is another federal entity right now. You know, that little FRB that is holding $9,000,000,000,000 worth of debt securities.
You didn't say "some people benefit from inflation" you said "inflation is never an overall loss". While I was getting advanced degrees you were apparently skipping english classes.
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