Key Points
- Commerce Department indexes that the Fed relies on heavily for inflation signals showed prices continuing to climb at a rate still considerably higher than the 2% annual goal.
- The stubborn inflation data raised several ominous specters, namely that the Fed may have to keep rates elevated for longer or even have to hike at some point.
- Thus far, the economy has managed to avoid broader damage from the inflation problem, though there are some notable cracks.
Why would companies voluntarily reduce their prices when they’re making record profits? They’ll squeeze us until we’re dry.
To take market share from other companies and make even more profits?
What other companies? There’s just a handful of conglomerates and a few defacto monopolies who all stay out of each other’s lanes. Where they should be competing, they colude. We need to elect some trust busters but we keep being told our only options are keep things the same or burn it all down.
What are some products you think are surrounded by this kind of market right now?
I’m seeing ten root nodes in that structure. Are you claiming that ten distinct market competitors are able to maintain a pricing cartel without any defection? That seems unlikely to me.
And yet the prices continue to rise, the corps are bringing in record profits, and the fed’s best efforts have only slightly slowed the upward push on prices. Think that’s just a coincidence?
I think it’s a lack of competition in the retail space, due to forced closure of businesses over the last few years. Consumer prices are set by the end seller, and they don’t have much competition at all.
Monetary policy that worked historically did so I’m an environment where monopolies and oligopolies were broken up to prevent price gouging.
And they were taxed enough to keep them from getting “too big to fail”.
They also didn’t have the fucking Internet and algorithmic price fixing that spreads throughout the market immediately.
Very puzzling to me that anyone is blaming government spending for inflation. Is that just a corporate scapegoat?
No, new money entering the economy comes from the government and government spending is one of the ways that happens.
Government spending is doing some heavy lifting here.
Yeah, if you are Zimbabwe and you are minting your currency like there’s no tomorrow while all your debt is in USD. Your currency is at a huge disadvantage and you’ll hit trillion bank notes in no time.
Rich countries trade massively while they require poorer countries to hold debt in the currency the richer country controls. This makes rich countries too big to fail, because their currency failing hurts everyone. As long as a rich country is growing their economy they can mint as much as they want.
Japan is taking this to extreme levels with their debt to gdp because they are fighting deflation from an aging population. Russia had double digit inflation because of Western sanctions, but they literally spent their way into single digit inflation with their war economy.
This “fiscal responsibility” from conservatives is actually hurting the US economy. The only inflation the fed is fighting rn is high wages for workers. Don’t fall for the propaganda.
How does having international trade and loaning out money make it so increasing the money supply doesn’t cause inflation? And since we’re talking about government spending, this isn’t just adding to the money supply in a way where those dollars will sit hoarded in a bank account somewhere, with government spending people are being paid to do something, that’s going directly into the heart of the economy, and more dollars flying around -> economic stimulus -> inflation.
That isn’t to say I think the measures the government takes to fight inflation are justified and without blame. That thing about the fed fighting high wages is true and they literally admit it probably because wages and inflation are associated metrics so fighting high wages and fighting inflation are basically the same thing in economic terms.
more dollars flying around -> economic stimulus -> inflation.
This is a logic that seemed intuitive to me as well for a long time. However, it doesn’t make much sense to me anymore when I think about money as simply a representation of wealth or value.
Imagine somebody spending their time and Know-how to build a chair which can be sold at 50$ more than what the original materials are worth. Through their work, they created wealth. The still unchanged amount of money does not accurately represent the currently avaliable wealth anymore and in order to still be redistributed among all goods and services relative to their worth, prices would need to drop (deflation). Now of course, the value of a chair and other goods generally declines over time such that wealth can also disappear, which will cause inflation if it happens excessively. If the government decides to stimulate the economy, ergo creating new money and distributing it, there will still be no inflation if this money is in some way or form used to create the same or more wealth than the equivalent of the newly introduced money. This can easily happen when there are bottlenecks in the current economic situation such as high unemployment or underdeveloped infrastructure.
If of course the new money isn’t used to create more wealth, either because it is pocketed by some entities or because there simply are no people or natural resources available, it will lead to inflation.
What they tell us about money is often propaganda. My understanding about what money is changed after I realized:
A) Money is not fair, it will never make a lot of sense because the leaders who control a currency always use it to their benefit. It can take Americans tens of thousands if not hundreds of thousands of hours of labor to make a million dollars. But an ex politician / government official can earn that from a handful of 30 minute speeches.
B) Taxes never fund a government. Taxes are one of the tools to create demand for a currency. But a government creates it’s own currency, why would they need tax revenue to spend when they are the ones creating money? This would be like saying we can’t mail anymore because we ran out of stamps. The limiting factor for how much we produce is manpower, never money.
it will never make a lot of sense because the leaders who control a currency always use it to their benefit
It is true that there is a lot of misleading propaganda about money in the media. It isn’t true that money is purely a conspiracy of the wealthy and follows no other logic than their interests (though, granted, government economic policy does prioritize their interests). Economics is real.
Taxes never fund a government. Taxes are one of the tools to create demand for a currency. But a government creates it’s own currency, why would they need tax revenue to spend when they are the ones creating money? This would be like saying we can’t mail anymore because we ran out of stamps. The limiting factor for how much we produce is manpower, never money.
Does this contradict what I’ve argued? I’m not seeing the connection.
Does this contradict what I’ve argued? I’m not seeing the connection
You originally made the argument about spending and inflation. It implies money is limited resource to a central bank.
How does it imply that? The cause of inflation would be the same regardless of whether central banks can print as much as they choose (of course they can?). What do you think causes inflation if not money going into the economy?
It’s a long-standing observation of economists that government spending leads to inflation. Probably the simplest model is that the government is increasing demand without increasing supply.
Note that in this model, taxes have a deflationary impact because they reduce demand from individuals.
This is not an opinion on how much government spending is affecting current inflation (nor how much inflation is to blame for any particular category of goods).
Hey at least corporate profits are near all time highs though! It’s great! Gonna trickle down any time now!
I’m afraid to ask this, but is that adjusted for inflation and normalized by business entity or similar? I know corporate greed is out of control, I’m just trying to figure out if that graph is good representative data or not.
Cmon… Break already…
In all of this, the Amish are probably not affected.
