Inflation cools sharply in June, good news for consumers and the Fed.

[The Stars Tremble]

As long as we are making analogies, you are like the homeless person given a free dinner at a fine steakhouse, who then complains, "what, no free wine too?"

Bringing inflation down to 3% without throwing millions of people out of work (like what happened in the 1980s) is a stellar accomplishment. 3% isn't the 2% Fed target but inflation is moving in the right direction. Moreover, some economists think 2%, which is arbitrary, is too low a target.

My argument is that 2021-2023 inflation was fundamentally different to the wages/prices inflation of the 70's. It was forced on consumers by a lack of certain products, and exploited by certain businesses in pursuit of higher profits. With very little unionism, or (at that time) worker bargaining power, it was not followed by significant increase in wages. There has been some increase in wages, yes, but only by labor market mobility: workers took jobs at higher wages. This is fundamentally different to workers demanding higher wages for the same work. Some businesses went under, due to debt they took on in the Covid year, or because they couldn't offer sufficient wages to procure competent workers. This process is different: it does not drive up future prices.

Federal government is spending more than it takes in taxes. This promotes growth, yet growth is not spectacular. Deficit spending is still necessary, but handing out money is NOT inflationary, as long as supply of goods and services can keep up.

I'm basically a Keynesian. I believe in deficit spending to fight recession and to recover from it. But I also believe in reversing deficits in good times. We are NOT living in good times. We are still recovering from the global crisis caused by Covid. And I will admit, the response of most governments TO Covid. If Biden is re-elected, with a workable Congress, I hope for tax increases to cut deficits at least to GDP growth.

 

[ttwtt78640]

Well energy and food are excluded because they're seasonally or randomly variable.

But they're also consumption variable. You can use less energy by wearing woolly clothes and turning down the thermostat. And though it sounds harsh, families can also save a lot of money on food. We waste a lot of food (cooking oversize meals we keep for leftovers, then throw out after a week) or eating too much meat.

Compared with the up-front expense and time involved to move to a cheaper rented property, energy and food are easy to economize on.

If that’s the case then get rid of SNAP.

 

[Visbek]

Decline in how fast it's rising. Nevermind that it continues to rise.

2% inflation is normal. 3% is on the high side of normal, but entirely acceptable. And as already discussed in this thread, deflation is far, far worse for the economy than 2-3% inflation.

 

[uptower]

Is this news responsible for the Afghanistan Withdrawal thread or the latest Hunter Biden "revelation"?

 

[The Stars Tremble]

If that’s the case then get rid of SNAP.

What's this bullshit? Subsidizing food helps individuals and their children, regardless of what bad choices they make in employment, housing, home heating or transport.

You think their bad choices should be punished by malnutrition?

 

[ttwtt78640]

What's this bullshit? Subsidizing food helps individuals and their children, regardless of what bad choices they make in employment, housing, home heating or transport.

You think their bad choices should be punished by malnutrition?

Your assertion was that increasing energy and food prices could (should?) pose no problem, since they “are easy to economize on”.

 

[Mongidig]

Over 5 digits.

Well I knew that. Your plane ticket is gonna cost that much.

Where are you going?

 

[The Stars Tremble]

Your assertion was that increasing energy and food prices could (should?) pose no problem, since they “are easy to economize on”.

My assertion is that they're EASIER to economize on. "Compared with" is a qualifier.

Don't tell me what I wrote, when it's right there on the page.

 

[ttwtt78640]

My assertion is that they're EASIER to economize on. "Compared with" is a qualifier.

Don't tell me what I wrote, when it's right there on the page.

Many things are “easier” than finding and moving to lower cost housing, but that doesn’t mean that it’s “easy to economize on“ energy or food costs.

 

[MTAtech]

My argument is that 2021-2023 inflation was fundamentally different to the wages/prices inflation of the 70's. It was forced on consumers by a lack of certain products, and exploited by certain businesses in pursuit of higher profits. With very little unionism, or (at that time) worker bargaining power, it was not followed by significant increase in wages. There has been some increase in wages, yes, but only by labor market mobility: workers took jobs at higher wages. This is fundamentally different to workers demanding higher wages for the same work. Some businesses went under, due to debt they took on in the Covid year, or because they couldn't offer sufficient wages to procure competent workers. This process is different: it does not drive up future prices.

Federal government is spending more than it takes in taxes. This promotes growth, yet growth is not spectacular. Deficit spending is still necessary, but handing out money is NOT inflationary, as long as supply of goods and services can keep up.

I'm basically a Keynesian. I believe in deficit spending to fight recession and to recover from it. But I also believe in reversing deficits in good times. We are NOT living in good times. We are still recovering from the global crisis caused by Covid. And I will admit, the response of most governments TO Covid. If Biden is re-elected, with a workable Congress, I hope for tax increases to cut deficits at least to GDP growth.

I don't fundamentally disagree with you. The major difference between inflation in the 70s and early 80s compared to recently, was that in the 70s and early 80s inflation was "entrenched," meaning that prices rose and wage contracts rose because it was assumed that inflation would continue, which made it a self-fulfilling prophecy. The Fed created a recession to wring out this inflation. It worked but with the high cost of joblessness.

 

[Cope]

1) Again: The frog thing is a lie. Frogs will in fact jump out of a pot that gets to hot. Your repeating this myth does not bode well for your reading comprehension.

I was agreeing with you. The ones with capital jump out much quicker.

2) Spare me the "Economism-ist" bullshit. The empirical reality is that increasing taxes on the wealthy does not, in fact, cause people to move, and we've known that for over a decade.

If the water gets too hot, you just said they would jump out? Contradiction much?
https://www.cbpp.org/research/state-budget-and-tax/tax-flight-is-a-myth

3) The "regular Joes with nowhere to jump" are those at the absolute bottom of income levels. That damage can be largely mitigated with the kind of reforms and safety net programs promoted by many on the left -- Medicaid, universal basic income, TANF, unemployment insurance, making it harder to evict people, building more housing, increasing food aid, etc -- that are typically reviled by conservatives, who spend lots of time making those programs inaccessible, when they're not busy trying to kill them off completely.

True, they are, but also those above the poverty line but with no disposable income, with nowhere to go will be among the last to jump.

4) Yet again: If you're so horrified by inflation, then why aren't you celebrating the rapid drop in inflation rates?

A drop from a previous high isn't to be touted as some miracle. I am happy that the rate is falling. I'll be joyful when the rate returns to previous lows.

 

[Greenbeard]

CPI yesterday, PPI today.

U.S. wholesale inflation slows to a crawl, PPI shows

Wholesale prices rose a meek 0.1% in May, extending a string of weak readings that suggest inflation in the U.S. is likely to continue to decelerate.

www.marketwatch.com

 

[ElChupacabra]

actually about anything

its like your cheating wife saying "well, I didn't cheat on you this week" ... really? you cheated the last 10 weeks in a row and NOT cheating this week makes everything ok?

3% inflation isn't good ..... and it doesn't erase the massive inflation since Biden took office, its not a victory, its not something to cheer about, it doesn't make anything ok

Well that depends on the perspective. Since we've gotten used to pretty low inflation, any change is going to be a shock to the system, in much the same way the far more aggressive interest rate hikes back in the early 80s which make these look pretty tame. However, inflation YoY has fluctuated over time, the main problem this go around is the expectation was that it would be a shorter period than it actually was. One of the issues is the unpredictability of pandemic related issues, along with the war in Ukraine and livestock diseases etc. that drove prices up in certain areas. The rationale of the last stimulus was to avert a potential recession, which would have been much harder to control than inflation and could be managed by controlling interest rates in order to cool the economy.

What's looking very probable given the state of the economy is a "soft landing" is looking more probable than what some were predicting earlier of going into a recession. Many of the supply chain issues that drove prices higher are now on the downturn as well, but the thing with periods of inflation is prices never go back to what they were pre-inflation, for a variety of reasons that include profit margins for private companies. One of the more fascinating aspects of this inflationary period has been the strong consumer spending in spite of inflation, which is one of those things that's good in terms of consumption, but not so good in terms of cooling the economy.

 

[ttwtt78640]

Well that depends on the perspective. Since we've gotten used to pretty low inflation, any change is going to be a shock to the system, in much the same way the far more aggressive interest rate hikes back in the early 80s which make these look pretty tame. However, inflation YoY has fluctuated over time, the main problem this go around is the expectation was that it would be a shorter period than it actually was. One of the issues is the unpredictability of pandemic related issues, along with the war in Ukraine and livestock diseases etc. that drove prices up in certain areas. The rationale of the last stimulus was to avert a potential recession, which would have been much harder to control than inflation and could be managed by controlling interest rates in order to cool the economy.

What's looking very probable given the state of the economy is a "soft landing" is looking more probable than what some were predicting earlier of going into a recession. Many of the supply chain issues that drove prices higher are now on the downturn as well, but the thing with periods of inflation is prices never go back to what they were pre-inflation, for a variety of reasons that include profit margins for private companies. One of the more fascinating aspects of this inflationary period has been the strong consumer spending in spite of inflation, which is one of those things that's good in terms of consumption, but not so good in terms of cooling the economy.

More problematic will be getting total federal spending as a percentage of GDP back to pre-pandemic levels (of about 20%). Without doing that, the US economy will be forever changed.

 

[Galactic Spin]

Decline in how fast it's rising. Nevermind that it continues to rise.

Because a small amount inflation is usually a good thing.

It's now at 3% annual for June, I think. 2% is good.

 

[Kushinator]

Not for existing jobs. Many are locked into union contracted increases. Sucks for them that everything goes at a much higher and faster rate then their salary.

Are you familiar with the longer term history of wages and price increases?

 

[NuffSaid]

Well I knew that. Your plane ticket is gonna cost that much.

Where are you going?

Canada and Puerto Rico

 

[MTAtech]

More problematic will be getting total federal spending as a percentage of GDP back to pre-pandemic levels (of about 20%). Without doing that, the US economy will be forever changed.

Already happening.

 

[Kushinator]

Reagan was given accolades, whether deserved or not for improving the economy. According to the graph from post #1, Reagan should have been blamed for 10%+ inflation on his watch. Everyone was thrilled that inflation got done to 4%. Inflation now is 3% and never got up to the levels in the 1980s.

I understand the Biden detractors want to show him in the worst light but Biden is doing remarkably well with the economy. (Now we will see Conservative post some poll showing Biden's approval rating on the economy.)

Let's not forget real wage growth during the Reagan administration

 

[Galactic Spin]

Not for existing jobs. Many are locked into union contracted increases. Sucks for them that everything goes at a much higher and faster rate then their salary.

What total nonsense. Union wages are far outperforming nonunion wages. Right wing tripe.

 

[Greenbeard]

More problematic will be getting total federal spending as a percentage of GDP back to pre-pandemic levels (of about 20%). Without doing that, the US economy will be forever changed.

Given that the long-term increase in federal spending as a percentage of GDP is driven by Social Security and Medicare, the real problem is this:

U.S. - seniors as a percentage of the population 2022| Statista

In 2022, about 17.3 percent of the American population was 65 years old or over; an increase from the last few years and a figure which is expected to reach 22 percent by 2050.

www.statista.com

 

[The Stars Tremble]

Many things are “easier” than finding and moving to lower cost housing, but that doesn’t mean that it’s “easy to economize on“ energy or food costs.

Right. So really the Fed should weight food and energy, and put it in one number, rather than issuing one number with, and one number without.

As to energy costs, it is arguable that the transport component has multiplier effects (eg on building materials, food, industrial components) so counting that would be double counting.

Food was traditionally seasonal. It was normal to have fresh food cheaper in spring and summer. But does that really apply now? Frozen vegetables are nearly as good as fresh vegetables. Certainly meat or fish are just as good frozen. That spans the whole year, so there's no good reason that food prices should be excluded from the inflation figures.

If you want to claim a win on that point, I don't mind.

 

[Galactic Spin]

Given that the long-term increase in federal spending as a percentage of GDP is driven by Social Security and Medicare, the real problem is this:

U.S. - seniors as a percentage of the population 2022| Statista

In 2022, about 17.3 percent of the American population was 65 years old or over; an increase from the last few years and a figure which is expected to reach 22 percent by 2050.

www.statista.com

And is easily solved, as soon as we stop prostrating ourselves for our rich and corporate masters.

 

[MTAtech]

Let's not forget real wage growth during the Reagan administration

Hmmm, negative wage growth.

 

[The Stars Tremble]

More problematic will be getting total federal spending as a percentage of GDP back to pre-pandemic levels (of about 20%). Without doing that, the US economy will be forever changed.

Changed for the better. The free market economy is a busted concept, it's just taking longer to die than the command economy of the Soviets.

Hybrid economy is the only way to go. Extract money from the top, inject it into the bottom (and the middle, the top is just that high). The greatest prosperity on average may in fact be heavily weighted to the top BUT the greatest happiness on average requires income redistribution.

Will the rich flee to Monaco? Who really cares. Their wealth can be replaced, and if they choose to isolate themselves from the SOURCE of their wealth (the US) then it's just a matter of time before they come begging. We can punish them with company-specific tariffs, and of course a tariff is a revenue source.