Can someone explain to me why we have such high inflation now?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Amazing how Americans don't understand basic econ. You thought all those stimmi checks, PPP loans, and other free give aways had no consequences? The US gov have away multiple trillion dollar+ stimuli. The Fed juiced the economy with zero percent interest rates, doubled the supply of money in only 2 years, and expanded the balance sheet to $9 trillion dollars (it was only $800B around 2008). When you have that much cash and credit liquidity in the system you get persistent inflation. How in the hell do American consumers STILL have a voracious appetite for vacations, cars, electronics, dining out, etc. even though prices are skyrocketing? It's because people have too much money. The stamina for price hikes that Americans have is absurd. It means inflation is sticky and very difficult to dislodge.


The latest CPI report tanked the markets. It was very bad. It clearly shows inflation is being driven by excessive demand as well as an overly tight labor market and not so much due to supply constraints. Yes, the labor market is too hot. Unemployment also needs to go back up to reduce the strangle the labor market has on inflation.

The fed is now raising interest rates and quantitative tightening to remove money and liquidity from the economy. Costs to borrow are skyrocketing. It will bring down asset values, remove.miney from the system, and hopefully cause unemployment to go up. The net result will hopefully be taming of this terrible inflation.

Amen. Can’t believe how many people thought the stimulus money would have little effect. So dumb.

If the stimulus was the sole cause of inflation then you wouldn’t be seeing high inflation worldwide. All the central banks across the globe are dealing with the same issue, which points to the supply chain woes being the primary drivers of inflation and not a particular fiscal policy. But economic data is squishy enough that all the Biden haters can manipulate it to suit their midterm agenda.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Amazing how Americans don't understand basic econ. You thought all those stimmi checks, PPP loans, and other free give aways had no consequences? The US gov have away multiple trillion dollar+ stimuli. The Fed juiced the economy with zero percent interest rates, doubled the supply of money in only 2 years, and expanded the balance sheet to $9 trillion dollars (it was only $800B around 2008). When you have that much cash and credit liquidity in the system you get persistent inflation. How in the hell do American consumers STILL have a voracious appetite for vacations, cars, electronics, dining out, etc. even though prices are skyrocketing? It's because people have too much money. The stamina for price hikes that Americans have is absurd. It means inflation is sticky and very difficult to dislodge.


The latest CPI report tanked the markets. It was very bad. It clearly shows inflation is being driven by excessive demand as well as an overly tight labor market and not so much due to supply constraints. Yes, the labor market is too hot. Unemployment also needs to go back up to reduce the strangle the labor market has on inflation.

The fed is now raising interest rates and quantitative tightening to remove money and liquidity from the economy. Costs to borrow are skyrocketing. It will bring down asset values, remove.miney from the system, and hopefully cause unemployment to go up. The net result will hopefully be taming of this terrible inflation.

Amen. Can’t believe how many people thought the stimulus money would have little effect. So dumb.

If the stimulus was the sole cause of inflation then you wouldn’t be seeing high inflation worldwide. All the central banks across the globe are dealing with the same issue, which points to the supply chain woes being the primary drivers of inflation and not a particular fiscal policy. But economic data is squishy enough that all the Biden haters can manipulate it to suit their midterm agenda.

You keep carping about supply chains, but the latest CPI report blows up that narrative. Supply chains have eased. The report shows that inflation is increasingly being driven by the cosnimer and is demand driven. Trillions of dollars in expansionary monetary and fiscal policy have consequences.

Stop posting partisan hack. Read the damn CPI report. Why do you think the markets lost $1.6T in a single day when it came out? Because everyone on the street can read it and see that inflation is becoming entrenched and is being driven my demand. It means the Fed's job is a.lot harder now and they'll bring the hammer.

Read the news for crying out loud:

https://abcnews.go.com/US/wireStory/driven-consumers-us-inflation-grows-persistent-89863444

Driven by consumers, US inflation grows more persistent

Some of the longtime drivers of higher inflation — spiking gas prices, supply chain snarls, soaring used-car prices — are fading. Yet underlying measures of inflation are actually worsening.

The other poster had it right - inflation is multifaceted, from supply chains to too much stimulus and govt spending/expansion. Writing off trillions in spending and monetary/fiscal policy as having zero effect is not based in reality at all.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Amazing how Americans don't understand basic econ. You thought all those stimmi checks, PPP loans, and other free give aways had no consequences? The US gov have away multiple trillion dollar+ stimuli. The Fed juiced the economy with zero percent interest rates, doubled the supply of money in only 2 years, and expanded the balance sheet to $9 trillion dollars (it was only $800B around 2008). When you have that much cash and credit liquidity in the system you get persistent inflation. How in the hell do American consumers STILL have a voracious appetite for vacations, cars, electronics, dining out, etc. even though prices are skyrocketing? It's because people have too much money. The stamina for price hikes that Americans have is absurd. It means inflation is sticky and very difficult to dislodge.


The latest CPI report tanked the markets. It was very bad. It clearly shows inflation is being driven by excessive demand as well as an overly tight labor market and not so much due to supply constraints. Yes, the labor market is too hot. Unemployment also needs to go back up to reduce the strangle the labor market has on inflation.

The fed is now raising interest rates and quantitative tightening to remove money and liquidity from the economy. Costs to borrow are skyrocketing. It will bring down asset values, remove.miney from the system, and hopefully cause unemployment to go up. The net result will hopefully be taming of this terrible inflation.

Amen. Can’t believe how many people thought the stimulus money would have little effect. So dumb.

If the stimulus was the sole cause of inflation then you wouldn’t be seeing high inflation worldwide. All the central banks across the globe are dealing with the same issue, which points to the supply chain woes being the primary drivers of inflation and not a particular fiscal policy. But economic data is squishy enough that all the Biden haters can manipulate it to suit their midterm agenda.

You keep carping about supply chains, but the latest CPI report blows up that narrative. Supply chains have eased. The report shows that inflation is increasingly being driven by the cosnimer and is demand driven. Trillions of dollars in expansionary monetary and fiscal policy have consequences.

Stop posting partisan hack. Read the damn CPI report. Why do you think the markets lost $1.6T in a single day when it came out? Because everyone on the street can read it and see that inflation is becoming entrenched and is being driven my demand. It means the Fed's job is a.lot harder now and they'll bring the hammer.

Read the news for crying out loud:

https://abcnews.go.com/US/wireStory/driven-consumers-us-inflation-grows-persistent-89863444

Driven by consumers, US inflation grows more persistent

Some of the longtime drivers of higher inflation — spiking gas prices, supply chain snarls, soaring used-car prices — are fading. Yet underlying measures of inflation are actually worsening.

The other poster had it right - inflation is multifaceted, from supply chains to too much stimulus and govt spending/expansion. Writing off trillions in spending and monetary/fiscal policy as having zero effect is not based in reality at all.

Dude. You keep repeating this line, and nobody in this thread is claiming that. Meanwhile, you and several others are fingering stimulus as the sole cause of inflation, which simply isn't true.

[Anonymous]

I'm surprised that this thread has not had more commentary on housing. In the CPI, shelter is the biggest component, and rents have moved up faster than at any time in decades.

[Anonymous]

there has been a huge shift in the workforce, people don't need to take on those crappy low paying jobs as they've moved on to either staying at home instead of paying for daycare or working remotely. The other issues are related to housing, the fed increasing the rate makes housing borrowing costs go up .

[Anonymous]

Anonymous wrote:I'm surprised that this thread has not had more commentary on housing. In the CPI, shelter is the biggest component, and rents have moved up faster than at any time in decades.

Yes, all of the govt intervention distorted home values. Rents lag home values, which is why we are now only seeing rents starting to sky rocket. The fed bought hundreds of billions of dollars worth of MBS. It flooded the economy with 0% interest rates which ballooned property values. The USG enacted rent moratoriums that allowed people to pocket tons of more cash and that landlords can now soak renters for. Inflation is going to remain elevated for a lot longer because housing is going to be very hard to bring down.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I take some comfort in rising interest rates in that it gives the Fed bullets to deal with the next downturn. How would the government juice the economy if interest rates are close to zero?

They aren't close to zero anymore. Do you want rates to get so high that nobody can afford to take out any loans? This isn't great either for businesses and economy. Housing market isn't the only thing that's a problem, but it seems like it's the focus of this strategy, as if having people panic over losing their equity and savings and feeling poorer is really the solution to every crisis.

DP. Interest rates cant go too high due to the enormous amount of federal debt we have, much of which is short term and will mature within the next 5 years, and the additional interest paid would add a considerable amount to our existing debt. I've thought about this nightmare for a while now, there is no good solution. The fed will have to accept higher baseline inflation at lower rates because otherwise higher rates are probably more inflationary (due to interest paid). We're basically F'd.

That's what I thought as well

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Amazing how Americans don't understand basic econ. You thought all those stimmi checks, PPP loans, and other free give aways had no consequences? The US gov have away multiple trillion dollar+ stimuli. The Fed juiced the economy with zero percent interest rates, doubled the supply of money in only 2 years, and expanded the balance sheet to $9 trillion dollars (it was only $800B around 2008). When you have that much cash and credit liquidity in the system you get persistent inflation. How in the hell do American consumers STILL have a voracious appetite for vacations, cars, electronics, dining out, etc. even though prices are skyrocketing? It's because people have too much money. The stamina for price hikes that Americans have is absurd. It means inflation is sticky and very difficult to dislodge.


The latest CPI report tanked the markets. It was very bad. It clearly shows inflation is being driven by excessive demand as well as an overly tight labor market and not so much due to supply constraints. Yes, the labor market is too hot. Unemployment also needs to go back up to reduce the strangle the labor market has on inflation.

The fed is now raising interest rates and quantitative tightening to remove money and liquidity from the economy. Costs to borrow are skyrocketing. It will bring down asset values, remove.miney from the system, and hopefully cause unemployment to go up. The net result will hopefully be taming of this terrible inflation.

Amen. Can’t believe how many people thought the stimulus money would have little effect. So dumb.

What was the size of the stimulus relative to the whole economy (eg GDP)?

The Fed's balance sheet expansion was $9,000,000,000,000 alone. That's almost half the entire amount of GDP. To put it into perspective, the Fed's balance sheet was only about $800B around 2008.

And in the middle of this Joe decides to burn another trillion on student loan forgiveness that only benefits a small amount of Americans. FFS.

It almost feels like "we are f-ed anyway, so why not", let's add another drop to the ocean. Unless, they are truly going to go for converting everything to fed digital currency and starting to get rid of cash.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I take some comfort in rising interest rates in that it gives the Fed bullets to deal with the next downturn. How would the government juice the economy if interest rates are close to zero?

They aren't close to zero anymore. Do you want rates to get so high that nobody can afford to take out any loans? This isn't great either for businesses and economy. Housing market isn't the only thing that's a problem, but it seems like it's the focus of this strategy, as if having people panic over losing their equity and savings and feeling poorer is really the solution to every crisis.

DP. Interest rates cant go too high due to the enormous amount of federal debt we have, much of which is short term and will mature within the next 5 years, and the additional interest paid would add a considerable amount to our existing debt. I've thought about this nightmare for a while now, there is no good solution. The fed will have to accept higher baseline inflation at lower rates because otherwise higher rates are probably more inflationary (due to interest paid). We're basically F'd.

That's what I thought as well

Interest rates can absolutely go higher. It is a common fallacy to think that interest rates 'can't go higher because it'd bankrupt the entire country'. No, it's not like all of the accumlated debt prior to rate hikes will magically change over all at once to higher rates. All of the previous accrued debt was obtained at lower interest rates. Debt going forward, however, will definitely be more expensive. Interest rates can absolutely, without question, go a lot higher.

[Anonymous]

Anonymous wrote:“ Understanding the CARES Act
At $2.2 trillion, the CARES Act stands as the largest financial rescue package in U.S. history. The 2009 Recovery Act was $831 billion, the Consolidated Appropriations Act (CAA) was $910 billion, and the American Rescue Plan Act (ARPA) comes closest at $1.9 trillion.”

Don’t believe the stupid Republican shitty explanation given above. They will go down to the hell with the markets but they will keep pointing their fingers at the wrong source (poor people helped by the Democratic government when the poor people lost jobs due to pandemic). Also, lot of money given out by the government was pocketed by white collar fraudsters and business owners. The pp who blamed the inflation on the fiscal stimulus has zero, I repeat zero knowledge of finance and macro economy.
Here is my explanation: when shit hit the fan in terms of global Covid pandemic, all central banks furiously opened up their spigots and created unprecedented amounts of currencies from thin air. Central banks like Federal Reserve create currencies (numbers in various commercial banks’ accounts and in their own accounts). Federal Reserve created, wait and tighten your belt, Nine Trillion dollars and freely distributed to all kinds of big borrowers, including publicly held corporations for the first time in history. All of those loans and near zero nominal (and negative real interest rates). This increased the money supply like never done in the history of mankind. At the same time the pandemic response by the countries literally shut down manufacturing and supply chains. That supply chain problem still lingers causing cost of materials and cost of transportation to increase and the volume of finished goods to go down. The energy crisis resulting from Russia’s invasion of Ukrain added to increased costs. So, the cost of producing goods is more and the volume of goods available is less (in other words, less supply and higher cost). On the demand side, there is lot of cheap money, thanks to the world’s central banks wrong headed action of creating too much money. So, lot of cheap money is chasing fewer goods. Classic case of inflation. The solution, the central banks to increase funds rate until the free money dries up. It will take time for that. In the mean time, companies that borrowed too much money will suffer. Consumers will spend less as they are worried about job losses. Company earnings will tank resulting in share prices falling. In other words, stock prices will fall. In my opinion, we are headed to a recession. The only question is, how deep a recession will it be and how long will it last. Already Great Briton’s central bank said UK will have recession in Q4, 2022 (starting Oct 1, 2022).

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I take some comfort in rising interest rates in that it gives the Fed bullets to deal with the next downturn. How would the government juice the economy if interest rates are close to zero?

They aren't close to zero anymore. Do you want rates to get so high that nobody can afford to take out any loans? This isn't great either for businesses and economy. Housing market isn't the only thing that's a problem, but it seems like it's the focus of this strategy, as if having people panic over losing their equity and savings and feeling poorer is really the solution to every crisis.

DP. Interest rates cant go too high due to the enormous amount of federal debt we have, much of which is short term and will mature within the next 5 years, and the additional interest paid would add a considerable amount to our existing debt. I've thought about this nightmare for a while now, there is no good solution. The fed will have to accept higher baseline inflation at lower rates because otherwise higher rates are probably more inflationary (due to interest paid). We're basically F'd.

That's what I thought as well

Interest rates can absolutely go higher. It is a common fallacy to think that interest rates 'can't go higher because it'd bankrupt the entire country'. No, it's not like all of the accumlated debt prior to rate hikes will magically change over all at once to higher rates. All of the previous accrued debt was obtained at lower interest rates. Debt going forward, however, will definitely be more expensive. Interest rates can absolutely, without question, go a lot higher.

Maybe if all the outstanding debt was long maturity but my understanding is a significant portion matures in 5 yrs or less.

[Anonymous]

Anonymous wrote:I don’t understand why now that we aren’t paying for the pandemic and for the war in Afghanistan that our government spending isn’t more under control and our country making more than during the pandemic. Why is inflation so bad right now?

Because every economy on turned on the money printers and made money printer go brrrrrr

https://brrr.money/

[Anonymous]

Anonymous wrote:

Anonymous wrote:I don’t understand why now that we aren’t paying for the pandemic and for the war in Afghanistan that our government spending isn’t more under control and our country making more than during the pandemic. Why is inflation so bad right now?

Because every economy on turned on the money printers and made money printer go brrrrrr

https://brrr.money/

Ok, but the timing is exceedingly delayed…it’s been 20 years of low interest/stimulus of various sorts (tax cuts, low rates, it all comes to the same thing). I don’t understand “why now” and based on my superficial understanding/reading neither does anyone else.

[Anonymous]

The Cares Act. The double unemployment that went on for a ridiculous amount of time.

[Anonymous]

Government policies.