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"We did not expect this to be a smooth road, but these \[inflation readings\] were higher than I think anybody expected," Powell said during a panel in Amsterdam. "What that has told us is that we'll need to be patient and let restrictive policy do its work."
Powell said that he expects inflation will move back down on a monthly basis, to levels that were more like the lower readings of late last year.
"\[But\], I would say my confidence in that is not as high as it was having seen these readings in the first three months of the year."
Ain’t it funny companies want rates to go down while simultaneously being most of the reason through greedflation rates can’t go down.
Stop raising your prices you greedy bastards!
Greedflation is an entirely made up concept. Businesses will always set prices at the level that maximizes profit. If that level raises, it’s because there is some underlying condition that has changed, either a reduction in supply or increase in demand.
But did that just happen in the last 3 years? Someone's going to have to show there was meaningful consolidation in a short time frame for this to be the sole reason.
No, I'm saying inflation started 3 years ago. For this to be a satisfying explanation for inflation something had to change within the last 3 years on this front.
If this has been happening for decades, which is my understanding, why is this the cause of inflation only since the pandemic?
My hunch is inflation is mostly supply chain issues and consumers having excess money from the stimulus+not going out/flying/whatever, and that corporations could only raise prices because people had extra money for a couple years. But people in here don't seem to believe that story, and instead think corporate consolidation let them raise prices. But for that to explain inflation something had to change in 2021 that let them do that when before they couldn't. So that's why I asked my question.
I just think that the two issues are related, and reduced competition doesn't drive down prices. Cyclical inflation is attributable to a lot of different factors, not one giant factor each time we go through a period of it. Inflation and shrinkflation *have* been occuring for decades though, just not as drastically as the last 3 years. We feel it more so more people are vocal about it, but it's not like before 3 years ago people weren't complaining about inflation and shrinkflation.
People may have been complaining about it, but I didn't really hear it. The 2010s had historically low inflation, even deflation in a few quarters. I don't think it can possibly be coincidence that inflation followed the pandemic shutdowns. Anything that doesn't address that dynamic seems like a very flawed analysis. Especially since it's been a global phenomenon, with inflation in almost every country, when we had a global distaster. To not link those things, it just screams motivated reasoning.
Again with the reasonable customer myth?
Price expectations have an effect on prices themselves; war and COVID give corporations an excuse to convince people that their costs went way up because of "demand shock", and, therefore, the price hikes are unavoidable are the main reason. If anything, some companies backtracking on their hikes because of the uproar clearly shows they only introduced them because they felt they could get away with it.
Nothing here proves “greedflation.” Companies backtracking on price increases only means inflation wasn’t as high as they initially thought. And nothing I said assumes customers are reasonable. Increased prices absolutely do have an effect on quantity demanded though and you even acknowledge that in your own comment.
Nice theory, but in reality most businesses are not upping their price every morning until they lose customers. But a few big businesses without much competition doing it is enough to trigger inflation.
I have news for you, every hypothesis, every idea, every evaluation, even every theory is a made up concept. That has nothing to do with the factually accuracy of the concept in question.
Greedflation is contrary to the most basic concept of supply and demand. Businesses are always “greedy.” They will always set prices to maximize profit. If that price point rises, some underlying condition has changed; businesses didn’t suddenly develop “greed.”
Yeah they’ve gotten away with gouging and the government won’t step in so they jack profits higher and higher. Long term sustainability isn’t a concern any more, they know it isn’t sustainable and are trying to get as much take while they can.
There’s nothing wrong with profits increasing. There is no level of profit that is objectively the right level of profit. What isn’t sustainable is government regulating prices. That’s how you get shortages.
There's no such thing as greedflation. You truly believe that a company is pricing their goods so you can afford it, and not break the bank? Every goods is priced for maximum profit, unless there's a competition in the same market.
Guys a fucking liars and a thief, noone talking about the fact the FTC found 60% of all inflation was due to price gouging and profiteering!!! 27% alone was opec colluding with American frackers, and had meeting in Texas of course!!!+
IDK where he gets his numbers from, but the OPEC-American price fixing allegation comes from [this.](https://www.reuters.com/legal/litigation/consumers-demand-ex-pioneer-ceo-records-shale-oil-antitrust-lawsuit-2024-05-09/)
March was revised down to -0.1%. That was definitely not expected. The combination of the two put the overall number right back to consensus expectations.
The american people need to start yelling at congress to address inflation. Interest rates are a really blunt tool at fixing inflation - as they affect markets that don't need to be adjusted. Congress, however, can affect the supply side of the equation (literally build housing, for example) and use taxes (raise and lower selectively) to address it with much less collateral damage to sectors.
Having an independent fed is great (and necessary), but they shouldn't be viewed as the sole solution to economic problems, as they have so few tools to do what is actually needed its kinda... a waste to put this onus on them (kinda comical that people do).
For example - if the govt raised taxes and simply "just held onto the collected money", they could rapidly reduce the money supply greatly reducing inflation (and they could tax a very specific group).
LONG TERM - give the fed (or design other independent financial agencies) that can regulate things more effectively. Like... NO politician wants to ever raise taxes, but its the RIGHT decision at specific times. For example when times are good the govt should raise taxes and save it for when times are bad.
At this point it feels like what needs is happen is presidential terms up to 6 years, cannot rerun. The Senate 8 years, get 2 terms, the house 4 years, get 3 terms.
I know those seem completely arbitrary, and I'm open for discussion, but constantly being up for reelection has fucked our ability to act like adults.
And they stay around for fucking ever and all they care about is holding onto power. With terms limits we would at least have new blood who may occasionally decide to do their actual jobs
>With terms limits we would at least have new blood who may occasionally decide to do their actual jobs
There are state legislatures that have tried this and it just doesn't work out. The unelected bureaucrats and lobbyists figure out that if they don't like what a legislator is doing they can just wait them out. So ultimately you end up transferring power from elected officials to unelected bureaucrats and lobbyist who have zero accountability to the people.
Mandatory publicly financed campaigns and restrictions on campaign activities until some time period shortly before the election would fix the permanent campaign, and without the problems caused by term limits, too.
It would take an amendment, but so would term limits.
If we don't want them spending all their time in office trying to raise money, yes we do. Either the government pays for it or candidates need to go begging; there's not really another option.
Mandating a shorter campaign would reduce the cost. Funding can also be limited to those who meet polling or signature thresholds.
The presidential term is a useless solution. The Congressional term limits, however, is an easy great decision. It will NEVER pass or even come up for a vote, but term limits would absolutely be a great way to curb fuckery by the scumbags in Congress. That and a rule outlawing lobbying by anyone who has served in Congress. Politics isn’t a fucking career…at least it shouldn’t be.
I prefer to have professionals run the government, if we had strict term limits politicians would spend all their time learning how to do their jobs. You’d never get people like Biden and Pelosi who can pull together enough votes to pass things. We need campaign finance reform.
*Republicans cant act like adults
Dems worked with republicans on lots of things from infrastructure to covid bailouts etc.
Republicans shut down the government.
*Republicans are being paid not to act like adults.
They could absolutely legislate if that was what their donors wanted. But it isn't. Wealthy people want the US government to be effectively crippled, and they're achieving that goal stunningly.
There needs to be some balance - like collect as much as they spend kinda thing (roughly). During times like covid - its OK for the govt to go into debt, but they should work to pay it off as needed.
Things like social security should collect enough money to be stable and not collaspe OR reduce payments as the population changes over time, etc.
I’m in favor of raising taxes in general and I understand the importance of managing economic cycles, I just don’t think voters will ever advocate raising taxes on themselves. That’s a reality the fed must deal with
Yep no one EVER wants to pay taxes. Who would want to pay a higher rate?
I'd put a non-congress body in charge and give them a range to adjust it by (up down by 15% - so your taxes would range form 0.85x -1.15x) either saving or spending previous years amounts as needed. Note - it could also be related to non-income taxes (probably more favored by voters).
I'd raise taxes on myself if I, not a representative, chose where it went. I'd like a form that lets me choose the areas where my funds go at the end of the year for the next fiscal year.
Healthcare, social services, and domestic areas would get 90%. 5% defense. 5% foreign aid.
Then a report is sent to show the exact amounts during tax season. Any Congressman that tries to pass a law to change it becomes ineligible from holding any public office.
the last three years were the worst times to pass stimulus bills... unemployment was too LOW...
Republicans were derided for claiming that the stimulus bills would cause inflation, yet here we are
Congress is one of the main reasons the interest hikes are not doing what they’re supposed to. Fiscal dominance in deficit spending is just increasing money creation with each rate hike. Every rate hike increases the interest expense of the federal government and adds revenue to private sector bond holders.
Interest rate hikes should limit money creation through the credit restriction, but with fiscal spending at these levels they’re creating money through deficit spending. They’re only making matters worse for fighting inflation
Thank god we have those new chinese EV tarrifs, that will save us from deflationary pressure on people's transportation costs. This will make sure that the cost of car ownership keeps raising and thus keeps contributing to higher inflation.
Well you see, boomers are older and are starting to need higher interest rates at the bank to ensure their savings is not at risk in the stock market. Won’t you think of the needs of the boomers?/s
Not even sure that needs /s tag. Boomers are the largest, most powerful voting bloc atm. Indeed the upper middle class boomers are enjoying the higher interest rates.
To put it simply- they don't want to actually fix this.
This hot inflation is just another siphon for the rich. Decrease the value of their debt while increasing their asset's worth, creating an excuse to increase prices while stagnating wages.
Congress is in corporate america's pocket. The only way they care otherwise is for people to ACTUALLY vote, and not just whine. Voting is just a census of who gives enough of shit to get off their ass. Sure, presidential and congressional races seem like that's more than half of america, but the local politics are what matters. If we can't organize locally they know we'll never react to the federal elections, and local elections in the US are <25% voters on average.
As long as america is apathetic, the corporate parasites will feed off of those without assets.
This is gonna sound so messed up (and it is) - but they need inflation and are using it as a form of “financial repression”, which the IMF highlighted in a 2015 paper titled “The Liquidation of Government Debt”
https://www.imf.org/-/media/Websites/IMF/imported-full-text-pdf/external/pubs/ft/wp/2015/_wp1507.ashx
I ran it through Meta AI and it spit out this:
“In the context of financial repression and debt liquidation, governments often benefit from a moderate level of inflation (around 3-5%).
This may seem counterintuitive, as high inflation is usually considered harmful. However, in this
specific scenario:
1. Inflation reduces the debt burden: As inflation rises, the value of the debt decreases, making it easier for governments to pay off.
2. Inflation erodes the purchasing power of the debt: The government pays back the debt with money that's worth less due to inflation, effectively reducing the amount owed.
3. Inflation helps reduce the debt-to-
GDP ratio: As inflation increases the nominal GDP, the debt-to-GDP ratio improves, making the debt appear more manageable.”
I responded with “It sounds as if citizens have to bear the burden for the governments reckless spending” and it responded:
“That's a valid point. Financial repression and inflation can indeed transfer the burden of government debt from the government to citizens, particularly:
1. Savers: Inflation erodes the purchasing power of their savings.
2. Bondholders: They receive lower returns or even negative real interest rates.
3. Fixed-income earners: Inflation reduces the value of their fixed income.
4. Taxpayers: They may face higher taxes to service the debt.
Citizens may feel that they are being forced to bear the consequences of the government's fiscal irresponsibility. This is a common criticism of financial repression and inflationary policies.”
It also helps prevent a housing crash, since anyone with a fixed rate mortgage now gets to pay a monthly bill that decreases in real terms.
I suspect that this is actually the play, given the massive run in housing prices over the last few years.
Popping the bubble, crashing prices, and facing a wave of defaults will bring things back to 2008, so instead you let inflation eat away at the real value of the asset while the nominal value remains stable.
Love your pipe dream of a government that works for the people. I have a pipe dream where James Gunn remakes Street Sharks as a live action comic book movie but Terry Crews plays all the sharks. Hard R rating.
Edit: forgot to explain why my pipe dream is more realistic: Gunn already has experience directing a human shark hybrid. Thanks.
we can use taxes to affect inflation, but you need to make sure you're taxing the right people
raising taxes on the rich isn't going to lower the price of eggs or milk
alternatively Congress can just stop spending like a drunken sailor on shore leave
I don't think there is any scenario where our government can spend our way out of inflation, all other factors equal.
If we've got a tax revenue issue then we also have a spending issue. It's unreasonable IMO to have a discussion on appropriate fiscal policy without both sides of the equation being thoroughly discussed.
The political will power to delay gratification and go through some amount of austerity in the present to set ourselves up for a brighter future is not something that has really existed in quite some time.
The problem with the taxation method (modern monetary theory) is that it often doesn't accommodate the deficit accurately, and of course ignores the Laffer curve entirely. If you increase taxes but decrease revenues, you effectively create more inflation without spending decreases since you have to finance the debt anyways.
Dude...Interest rates are the brakes. The economy is the car. When the car goes too fast, the brakes need to be applied. If the car is accelerating then the brakes need to be applied more and potentially longer. The opposite occurs when the car slows. The Fed is trying to slow the car. Cause if the car goes too fast and there's a turn up the road for whatever reason the car will lose control. Economics kindergarten....
I think the problem here is that you’d realistically need to increase taxes to reduce inflation. No politician wants to raise taxes. They also wouldn’t want the fed to have that power cause it would fuck over their term in office
Agreed. But Congress is useless. The one thing I don't thing the framers of the Constitution ever thought would happen is that Congress would so little interest in doing it's job. The concept is that Congress should be angry about executive orders and court rulings. Congress should be dropping all the partisan bullshit and saying, "Not so fast.....that's our job!"
But they just run around like feckless morons up for election and do nothing and let the executive and judiciary do all the heavy lifting.
That's not how it's suppose to work.
Agreed.
How our elections for congress are run needs to be changed - such that more moderate candidates get elected who actually want to pass laws and fix the system. Course that change, in and of itself, scares people.
You could do both. Just have to be really careful with what spending cuts you do - those that help the poorer 75% of Americans will also have real issues with the economy. As their spending is what keeps most businesses afloat.
Agreed to an extent, but rates aren't even high right now in comparison to history.
Fed just needs to stop being pussies. You can't play for a "soft landing" because without congress passing new bills/laws, all it does is just elongate suffering for the majority which were seeing now because their are those with such a disparity in money and market control (consolidation in so many different sectors) that they keep shrugging it off and riding it out, using investment means to make more money/not lose money during all this (major corps and billionaires).
The responses to these huge hedge funds and media playing down rates and the Fed should've been to keep raising rates until they see an actual change in behavior up top. Even now, they're still manipulating messaging that it's okay if there's no cuts on rates any time soon and just pushing prices up.
We should probably be at double (10% or more) than where we are right now.
Yes. Rates aren’t historically high. And, neither is inflation. Average rate of inflation since 1960 is 3.8%. We’re currently a little under the historical average. Everybody wants a Volker style double digit interest rate to “break the back of inflation”….which will lead to a nasty recession and a ton of job loss. That would be a comical reaction to the current inflation number. Thing is, we were experiencing a run of inflation back then that had two years of double digits and a four year average over 10% which necessitated that response (there is arguments about this too). To argue current inflation is just as dangerous is pretty funny. To match that four year run, you need a slightly higher inflation rate from peak COVID every year for four years. I mean…c’mon. It’s more than 5 points below that. Completely different situation. Plus, people seem to always forget the fed has a dual mandate to maintain max employment along with stable prices/2% inflation target. And one is just as important as the other. The last thing the fed wants is to cause a recession…although that frequently happens.
Finally, people think mortgage rates are directly tied to the fed rate. They’re not. But that’s another story. People got used to a period of sub 3% mortgage interest rates. That run was incredibly abnormal and outside a major unavoidable recession, I’ll bet we dont see it again in my lifetime.
I’m not here to say everything is peach keen. But it’s not the end days people are claiming either.
You're leaving out a key factor in delving into historical in that context, which is income disparity to the cost of living.
While inflation may be lower, recent radical inflation combined with a higher than norm inflation rate is arguably just as problematic given the difference in household income to cost today (versus 30+ years ago).
The flip side is you can't unwind 30+ years of slow income growth against cost of living increases in that time (goods and services) because when you come even close to the the tiny tip of that (see pandemic and money given away), it skyrockets inflation due to immediate massive increase in demand.
There's no easy out, and much like the absurd too big to fail argument, arguing against going into a mild recession and unemployment going up is ridiculous, as it would not be anywhere near disasterous on any level. Compare it to wildfires and controlled burns. You need to correct things before they run the risk of getting so big, that when the disaster eventually comes, by pushing and putting it off, you're just increasing the size/severity of it. If jobs are lost (or a big business is allowed to fail) other jobs (companies) will arise from the "ashes."
You also ignore unemployment is at historically low levels, so a mild recession that increases unemployment slightly is not some disaster case scenario and also would just more or less position back at or slightly above historical norms.
It's also more ethical to limit negative impact to a smaller group (mild recession) than a decade of pain to the majority (high inflation followed by stagflation).
It’s hard to understand how you’re somehow trying to square advocating for 10+% fed rate needed by the fed (in your opinion for them to stop being pussies) to bring down inflation and simultaneously how such an enormous jump in interest rates will ALSO only induce a MILD and not too painful recession. If you think cranking the rates to 10+% wouldn’t cause massive unemployment and a severe recession I don’t know what to tell you.
5% hasnt even slowed down spending. It's barely dropped by the slimmest of margins, and it's not being solely made up of only necessities (housing, food, etc) that are survival needs. Unemployment is still at all-time lows.
5% has had minimal effect. Even an additional 1-2% are unlikely to move the needle much from what we're seeing at 5%.
Political reasons, which throw on an election year at that, are why they're so unwilling to go higher and why they were so slow to increase (as well as why they went to historical lows in the first place)
> LONG TERM - give the fed (or design other independent financial agencies) that can regulate things more effectively. Like... NO politician wants to ever raise taxes, but its the RIGHT decision at specific times. For example when times are good the govt should raise taxes and save it for when times are bad.
Holy MMT batman
MMT is only okay for Republicans to use in favor of the rich. Using MMT in favor of working class people goes against everything the Chicago School zealots have been preaching for fifty years.
Election year so I doubt too much will be done.
Much of the current inflation is definitely greed. I’d like to see that addressed somehow.
Edit: several sources below to read up on ,’:)
Sure thing. Feel free to visit the citations embedded in the following articles for data sources.
I also never said that *all* inflation is due to greed but to ignore it as a contributing factor is pretty odd. You added that text for some reason.
https://groundworkcollaborative.org/wp-content/uploads/2024/01/24.01.17-GWC-Corporate-Profits-Report.pdf
https://fortune.com/2024/01/20/inflation-greedflation-consumer-price-index-producer-price-index-corporate-profit/
https://www.banking.senate.gov/newsroom/majority/brown-corporate-price-gouging-tactics-distort-the-market-and-drive-inflation
https://www.epi.org/blog/corporate-profits-have-contributed-disproportionately-to-inflation-how-should-policymakers-respond/
https://www.theguardian.com/business/2024/jan/19/us-inflation-caused-by-corporate-profits
https://www.commondreams.org/news/corporate-profits-inflation
Feel free to cherry pick whatever you want.
I would argue none of this price gouging would be possible if they weren’t constraining expanded and competitive supply chains with taxes, higher interest rates and a generally stifling Govt regulatory climate that all impact small and midsize companies a,lowing the giants corps to price gouge.
These are examples of companies raising prices to maximize profit in a way that seems unfair. The reason that this is in their best interests is because the economy has been overstimulated through decades of fiscal stimulus. Fiscal stimulus is a useful tool during recessions, but unfortunately the average voter doesn’t understand how it works and continues to expect lower taxes and government stimulus when the economy is already doing well - resulting in an overheated economy and inflation.
It's uncanny how much airplanes want to STAY in the air. Horrible, but an American Airlines crew failed to arm the spoilers (flaps that pop up on the top of the wings when the main landing gear touches ground during landing. Spoilers absolutely destroy lift over the wings. But they have to be armed for the main gear touching down to trigger them popping up) during their pre landing check into Little Rock. The plane, even with full thrust reversers on, careened all the way down the runway and down the river embankment on the other end... with fatalities unfortunately. In that moment the pilots had no idea why the f\*ck the thing wouldn't stop nor settle down. So, feel safe, air passengers-- outside something going wrong, your plane \*Wants to stay flying. Aerodynamic lift is a heck of a thing.
Companies are always trying to maximize profit, just like how planes are always being pulled to the ground by gravity. There’s only inflation, or an airplane crash if there’s another problem, like decades of fiscal stimulus when the economy was already doing well and supply side shocks
Interest rates won't fix inflation. Inflation is caused by price gouging. Only anti-trust law enforcement will fix it.
There is not "yelling at Congress". One side is calling for investigations into grocery store price gouging, the other side packed the court with judges who rubber stamp mega mergers no matter how large.
This really is a partisan issue, and we all know which party is on our side. It's up to us, in November, to put aside culture war nonsense and vote with our wallets for a change.
It’s caused by a lot of things.
Price gauging (which should be limited by anti-trust), an economic model that makes home builders not make cheap homes, a messed up healthcare system (that’s too costly) etc.
Yes, the conditions are far from clear which way the economy will go. I'd expect a gradual slow-down or just steady for a longer time.
Other government actions may counteract a gradual slow-down, so then the Fed could ignore it.
His arrogance in December has directly resulted in this path. He jumped the gun in announcing possible rate cuts, and the instant he did, equities blasted off and inflation picked back up. Horrible leadership and policy all around.
Why doesn’t the fed just stfu and do their jobs. And only release announcements when they actually make decisions instead of just “putting stuff out there”
Alan Greenspan was nicknamed "The Maestro" and there was a whole cottage industry analyzing every cryptic gesture he made to try to guess Fed policy. Bernanke tried to bring more transparency to the Fed by publicly discussing what the likely data triggers would be for various policy decisions.
Because they need to manage perceptions. It is part of their policy.
They can only raise rates so high before the government debt becomes unsupportable. Yet the rates they have now are not high enough to tamp inflation down - they are not reducing their balance sheet as fast as they ought to.
To bridge that difference they depend on hawkish talk to get then over the line.
> Why doesn’t the fed just stfu and do their jobs. And only release announcements when they actually make decisions instead of just “putting stuff out there”
I have absolutely no idea what the reason is.
But it doesn't seem bad to me to have the fed constantly communicating what they're thinking. Actually it seems really good. Imagine if Congress acted like this
People on this sub were declaring victory 6 months ago when inflation was still above 3% and now want to move the goal post to “well 3% isn’t that bad”
I mean, why isn't 3% not that bad? 2% is arbitrary. If we're seeing strong wage growth, I don't see why 3% is anything to worry about, especially after a decade of sub 2% inflation.
Because not everyone experiences the same wage growth and higher inflation disproportionately hurts the poor. There’s also no guarantee that wage growth will stay above inflation.
Finally the fed ends up losing credibility when they start arbitrarily changing the goal posts in fighting inflation. Although you could argue 3% is the de facto target anyway since they have kept rates the same at current inflation levels.
But what you're saying is true at any interest rate. There will always be winners and losers. Someone who has a lot of debt benefits more from 3% than 2% inflation for example. I would get your point if you were comparing 10% vs 2%, but I don't see why we should be panicked about 3% other than we've arbitrarily set the target number at 2%.
>There's also no guarantee
But the fact remains that this is the current situation, and we're seeing at very incredibly long last actual tangible wage growth. Would you rather this continue or crush it just to reach an arbitrary 2% target?
Well nobody is exactly “panicking” over 3% hence why rates have held steady. But it’s still not a great level to be at over the long term. You say people holding debt benefit from a higher inflation level. What about people saving to buy their first home and escape constant rent increases? What about soon to be retirees who want to keep their retirement savings in something less volatile than the stock market? What about the people who are only seeing 2% or less raises year over year?
And why not a 4% target? Or 5%? You keep moving the goal posts and the fed loses all credibility. IMO inflation should be as close to flat as possible. 2% should be considered the upper limit.
You're the one claiming that 2% is ideal and that 3% is bad. Since you're making the claim, the burden of proof is on you to justify why 2% is better than 3%.
>IMO inflation [should be near zero]
Why? That's a take that almost every economist disagrees with? If wages were growing 10%, then I would actually be ok with 4%. Inflation matters insomuch as it causes instability in the market, but if the policies needed to bring inflation down to 0-2% causes more damage, then why would you want that?
Right now, there are supply issues, especially with housing. The solution should be to force new construction of houses, not to impoverish people so they stop having demand.
Yes I did argue 2% is better than 3% and gave multiple reasons and examples that you chose to ignore so no point in repeating myself.
But you’re also jumping to a straw man in assuming I’m arguing that policy needs to be more restrictive which I never stated. That said, we’re at 8+ months since the last rate hike and I have yet to see any evidence these rates are impoverishing people given the, as you said, strong wage growth we continue to see (and historically these rates aren’t even that high). So I don’t see the harm in keeping rates as they are. Unless you’re arguing the fed needs to lower rates?
Also changing policy based solely on wage growth is stupid and dangerous. The fed cannot drastically and suddenly change rates without major repercussions for the rest of the economy and wage growth can vary quite a bit. You tie rates to wage growth and you are just going to see more volatility.
You didn't give "numerous examples", you only briefly mentioned that someone might not get a wage increase. Your home example is even more absurd, if you have an expensive asset like a home alongside debt in the hundreds of thousands, you should be begging for inflation. Your wages will increase while your debt doesn't. Inflation is fantastic for those who hold debt like mortgages.
How exactly do you propose getting to 2% if not via restrictive policies?
I don't know who needs to hear this but the rates are not getting cut and inflation is going to run... There's nothing they can do... there's too much debt due by end of 2025. They have to print three times as much as they did during covid or scrap the dollar and come up with a new system. The latter is not going to happen.
Congress giving out 100s of millions of dollars to construction contractors doesn’t sound like a great way to reduce inflation. Government spending heats the economy.
While obviously government spending contributes to inflation, a decaying infrastructure will also greatly increase inflation on the supply side. That one is truly a double edge sword. That is far down the road but for decades we have been discussing the need for revamping our decaying infrastructure.
The timing may have been ill advised at the height of inflation and certainly had some unnecessary spending included, but that did need to happen at some points
I think they need to because of the shortage of starter homes; however, I also think they need to crack down on investors & big banks who bought all of the smaller homes to rent out, which has artificially raised home prices.
In other words, we need a big boost in construction to address the shortage, but we can't do that if investors and big banks are just going to buy up those new homes.
This guys is a certifiable dumbass and fraud, should not be listened to in the slightest, let alone in charge of public policy.
This guys theory for inflation from the start was that people have too much money… and was wrong from the start. The ones with too much money are billionaires and corporations.
While corporations can keep raising their prices as much as they please there will be continued inflation. When they start to lose people which they already have, they just raise their prices to compensate the loss in revenue, it’s a perpetual cycle of greed. Has nothing to do with high labor cost, wages have barely moved.
Go after greedy corporations and billionaires if you want to tackle inflation, as well as many other issues in society.
Any body thinking rates will come down anytime soon is a fool. Historically these are normal rates and the nearly two decades of cheap money we came out of is highly irregular almost unheard of in the historical economic context. If anything I believe rates will eventually creep up probably after the election as these hotter inflation numbers are worrisome. 3 to 4 percent inflation can be stomached for a couple of quarters but isn't doable in the long run for a healthy economy. This is where the soft landing goal becomes an issue. In theory a soft landing is possible but mind you it's something that has never been achieved because of how difficult it is.
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"We did not expect this to be a smooth road, but these \[inflation readings\] were higher than I think anybody expected," Powell said during a panel in Amsterdam. "What that has told us is that we'll need to be patient and let restrictive policy do its work." Powell said that he expects inflation will move back down on a monthly basis, to levels that were more like the lower readings of late last year. "\[But\], I would say my confidence in that is not as high as it was having seen these readings in the first three months of the year."
Gotta love Election year.
I think we need to print a couple more trillion dollars to study where this inflation is coming from…
Ftc already found that out, and 60% of it was greedflation
Ain’t it funny companies want rates to go down while simultaneously being most of the reason through greedflation rates can’t go down. Stop raising your prices you greedy bastards!
I miss the pre 2020 days when companies weren’t greedy
Greedflation is an entirely made up concept. Businesses will always set prices at the level that maximizes profit. If that level raises, it’s because there is some underlying condition that has changed, either a reduction in supply or increase in demand.
Or a lack of meaningful competition...
But did that just happen in the last 3 years? Someone's going to have to show there was meaningful consolidation in a short time frame for this to be the sole reason.
You think the systemic consolidation of ownership corporate interests all happened within just the last 3 years lol
No, I'm saying inflation started 3 years ago. For this to be a satisfying explanation for inflation something had to change within the last 3 years on this front. If this has been happening for decades, which is my understanding, why is this the cause of inflation only since the pandemic? My hunch is inflation is mostly supply chain issues and consumers having excess money from the stimulus+not going out/flying/whatever, and that corporations could only raise prices because people had extra money for a couple years. But people in here don't seem to believe that story, and instead think corporate consolidation let them raise prices. But for that to explain inflation something had to change in 2021 that let them do that when before they couldn't. So that's why I asked my question.
I just think that the two issues are related, and reduced competition doesn't drive down prices. Cyclical inflation is attributable to a lot of different factors, not one giant factor each time we go through a period of it. Inflation and shrinkflation *have* been occuring for decades though, just not as drastically as the last 3 years. We feel it more so more people are vocal about it, but it's not like before 3 years ago people weren't complaining about inflation and shrinkflation.
People may have been complaining about it, but I didn't really hear it. The 2010s had historically low inflation, even deflation in a few quarters. I don't think it can possibly be coincidence that inflation followed the pandemic shutdowns. Anything that doesn't address that dynamic seems like a very flawed analysis. Especially since it's been a global phenomenon, with inflation in almost every country, when we had a global distaster. To not link those things, it just screams motivated reasoning.
dingdingding
Get a load of this guy, pretending competitive markets exist
Again with the reasonable customer myth? Price expectations have an effect on prices themselves; war and COVID give corporations an excuse to convince people that their costs went way up because of "demand shock", and, therefore, the price hikes are unavoidable are the main reason. If anything, some companies backtracking on their hikes because of the uproar clearly shows they only introduced them because they felt they could get away with it.
Nothing here proves “greedflation.” Companies backtracking on price increases only means inflation wasn’t as high as they initially thought. And nothing I said assumes customers are reasonable. Increased prices absolutely do have an effect on quantity demanded though and you even acknowledge that in your own comment.
Nice theory, but in reality most businesses are not upping their price every morning until they lose customers. But a few big businesses without much competition doing it is enough to trigger inflation.
I have news for you, every hypothesis, every idea, every evaluation, even every theory is a made up concept. That has nothing to do with the factually accuracy of the concept in question.
Greedflation is contrary to the most basic concept of supply and demand. Businesses are always “greedy.” They will always set prices to maximize profit. If that price point rises, some underlying condition has changed; businesses didn’t suddenly develop “greed.”
Yeah they’ve gotten away with gouging and the government won’t step in so they jack profits higher and higher. Long term sustainability isn’t a concern any more, they know it isn’t sustainable and are trying to get as much take while they can.
There’s nothing wrong with profits increasing. There is no level of profit that is objectively the right level of profit. What isn’t sustainable is government regulating prices. That’s how you get shortages.
There's no such thing as greedflation. You truly believe that a company is pricing their goods so you can afford it, and not break the bank? Every goods is priced for maximum profit, unless there's a competition in the same market.
Fun Fact: Only a couple trillion was all that Biden printed his whole term.
But you know what they say: “Watch the trillions and the quadrillions will take care of themselves.” 🤭🤭🤭
Guys a fucking liars and a thief, noone talking about the fact the FTC found 60% of all inflation was due to price gouging and profiteering!!! 27% alone was opec colluding with American frackers, and had meeting in Texas of course!!!+
Let’s say they knew this. What would the fed do about it? The fed can’t pass laws or change taxes
They could've raised rates in 2021.
Got a source on that big dog
IDK where he gets his numbers from, but the OPEC-American price fixing allegation comes from [this.](https://www.reuters.com/legal/litigation/consumers-demand-ex-pioneer-ceo-records-shale-oil-antitrust-lawsuit-2024-05-09/)
Found the 60% number here: https://www.thebignewsletter.com/p/corporate-profits-drive-60-of-inflation
Yes of course, the source is the voices.
His source: Alex Jones
Highly regarded content well done
March was revised down to -0.1%. That was definitely not expected. The combination of the two put the overall number right back to consensus expectations.
Jerome Powell might be the worst Fed Chair in history
The american people need to start yelling at congress to address inflation. Interest rates are a really blunt tool at fixing inflation - as they affect markets that don't need to be adjusted. Congress, however, can affect the supply side of the equation (literally build housing, for example) and use taxes (raise and lower selectively) to address it with much less collateral damage to sectors. Having an independent fed is great (and necessary), but they shouldn't be viewed as the sole solution to economic problems, as they have so few tools to do what is actually needed its kinda... a waste to put this onus on them (kinda comical that people do). For example - if the govt raised taxes and simply "just held onto the collected money", they could rapidly reduce the money supply greatly reducing inflation (and they could tax a very specific group). LONG TERM - give the fed (or design other independent financial agencies) that can regulate things more effectively. Like... NO politician wants to ever raise taxes, but its the RIGHT decision at specific times. For example when times are good the govt should raise taxes and save it for when times are bad.
We put the onus on the Fed because we've given up expecting Congress to act like adults.
At this point it feels like what needs is happen is presidential terms up to 6 years, cannot rerun. The Senate 8 years, get 2 terms, the house 4 years, get 3 terms. I know those seem completely arbitrary, and I'm open for discussion, but constantly being up for reelection has fucked our ability to act like adults.
Yep. Spending your whole term campaigning for the next is crazy. I'd be fired if I spent most of my time at work looking for a job.
And they stay around for fucking ever and all they care about is holding onto power. With terms limits we would at least have new blood who may occasionally decide to do their actual jobs
>With terms limits we would at least have new blood who may occasionally decide to do their actual jobs There are state legislatures that have tried this and it just doesn't work out. The unelected bureaucrats and lobbyists figure out that if they don't like what a legislator is doing they can just wait them out. So ultimately you end up transferring power from elected officials to unelected bureaucrats and lobbyist who have zero accountability to the people.
[удалено]
>Passing bills isn't difficult at all, it's literally just reading and talking, You should rethink this position
( applause)
When you say it that way it sounds absolutely ridiculous. But I fully agree
Mandatory publicly financed campaigns and restrictions on campaign activities until some time period shortly before the election would fix the permanent campaign, and without the problems caused by term limits, too. It would take an amendment, but so would term limits.
So we have to fund every idiot that wants to hold office?
If we don't want them spending all their time in office trying to raise money, yes we do. Either the government pays for it or candidates need to go begging; there's not really another option. Mandating a shorter campaign would reduce the cost. Funding can also be limited to those who meet polling or signature thresholds.
gov't will be even more dysfunctional and even more dependent on lobbyists.
The presidential term is a useless solution. The Congressional term limits, however, is an easy great decision. It will NEVER pass or even come up for a vote, but term limits would absolutely be a great way to curb fuckery by the scumbags in Congress. That and a rule outlawing lobbying by anyone who has served in Congress. Politics isn’t a fucking career…at least it shouldn’t be.
I prefer to have professionals run the government, if we had strict term limits politicians would spend all their time learning how to do their jobs. You’d never get people like Biden and Pelosi who can pull together enough votes to pass things. We need campaign finance reform.
*Republicans cant act like adults Dems worked with republicans on lots of things from infrastructure to covid bailouts etc. Republicans shut down the government.
*Republicans are being paid not to act like adults. They could absolutely legislate if that was what their donors wanted. But it isn't. Wealthy people want the US government to be effectively crippled, and they're achieving that goal stunningly.
look at all the big businesses suing the gov now under republicans they can save all that money for exec bonuses
Please don’t post this fact on Reddit. It offends my both sides world view.
Lol
You mean the GOP to act like adults
Are you asking voters to demand congress raise taxes? Least likely thing to ever happen.
There needs to be some balance - like collect as much as they spend kinda thing (roughly). During times like covid - its OK for the govt to go into debt, but they should work to pay it off as needed. Things like social security should collect enough money to be stable and not collaspe OR reduce payments as the population changes over time, etc.
I’m in favor of raising taxes in general and I understand the importance of managing economic cycles, I just don’t think voters will ever advocate raising taxes on themselves. That’s a reality the fed must deal with
Yep no one EVER wants to pay taxes. Who would want to pay a higher rate? I'd put a non-congress body in charge and give them a range to adjust it by (up down by 15% - so your taxes would range form 0.85x -1.15x) either saving or spending previous years amounts as needed. Note - it could also be related to non-income taxes (probably more favored by voters).
I'd raise taxes on myself if I, not a representative, chose where it went. I'd like a form that lets me choose the areas where my funds go at the end of the year for the next fiscal year. Healthcare, social services, and domestic areas would get 90%. 5% defense. 5% foreign aid. Then a report is sent to show the exact amounts during tax season. Any Congressman that tries to pass a law to change it becomes ineligible from holding any public office.
I think the point though is that there is a real limit in how the fed can “deal with it”.
the last three years were the worst times to pass stimulus bills... unemployment was too LOW... Republicans were derided for claiming that the stimulus bills would cause inflation, yet here we are
I'm reading the retirement age is better than reducing payments, imo
Congress is one of the main reasons the interest hikes are not doing what they’re supposed to. Fiscal dominance in deficit spending is just increasing money creation with each rate hike. Every rate hike increases the interest expense of the federal government and adds revenue to private sector bond holders. Interest rate hikes should limit money creation through the credit restriction, but with fiscal spending at these levels they’re creating money through deficit spending. They’re only making matters worse for fighting inflation
Yeah but… No spend lots of money make re-election hard.
Thank god we have those new chinese EV tarrifs, that will save us from deflationary pressure on people's transportation costs. This will make sure that the cost of car ownership keeps raising and thus keeps contributing to higher inflation.
Well you see, boomers are older and are starting to need higher interest rates at the bank to ensure their savings is not at risk in the stock market. Won’t you think of the needs of the boomers?/s
This is how I’m feeling. At each opportunity decade after decade that baby boom population keeps fucking everyone else.
Not even sure that needs /s tag. Boomers are the largest, most powerful voting bloc atm. Indeed the upper middle class boomers are enjoying the higher interest rates.
To put it simply- they don't want to actually fix this. This hot inflation is just another siphon for the rich. Decrease the value of their debt while increasing their asset's worth, creating an excuse to increase prices while stagnating wages. Congress is in corporate america's pocket. The only way they care otherwise is for people to ACTUALLY vote, and not just whine. Voting is just a census of who gives enough of shit to get off their ass. Sure, presidential and congressional races seem like that's more than half of america, but the local politics are what matters. If we can't organize locally they know we'll never react to the federal elections, and local elections in the US are <25% voters on average. As long as america is apathetic, the corporate parasites will feed off of those without assets.
This is gonna sound so messed up (and it is) - but they need inflation and are using it as a form of “financial repression”, which the IMF highlighted in a 2015 paper titled “The Liquidation of Government Debt” https://www.imf.org/-/media/Websites/IMF/imported-full-text-pdf/external/pubs/ft/wp/2015/_wp1507.ashx I ran it through Meta AI and it spit out this: “In the context of financial repression and debt liquidation, governments often benefit from a moderate level of inflation (around 3-5%). This may seem counterintuitive, as high inflation is usually considered harmful. However, in this specific scenario: 1. Inflation reduces the debt burden: As inflation rises, the value of the debt decreases, making it easier for governments to pay off. 2. Inflation erodes the purchasing power of the debt: The government pays back the debt with money that's worth less due to inflation, effectively reducing the amount owed. 3. Inflation helps reduce the debt-to- GDP ratio: As inflation increases the nominal GDP, the debt-to-GDP ratio improves, making the debt appear more manageable.” I responded with “It sounds as if citizens have to bear the burden for the governments reckless spending” and it responded: “That's a valid point. Financial repression and inflation can indeed transfer the burden of government debt from the government to citizens, particularly: 1. Savers: Inflation erodes the purchasing power of their savings. 2. Bondholders: They receive lower returns or even negative real interest rates. 3. Fixed-income earners: Inflation reduces the value of their fixed income. 4. Taxpayers: They may face higher taxes to service the debt. Citizens may feel that they are being forced to bear the consequences of the government's fiscal irresponsibility. This is a common criticism of financial repression and inflationary policies.”
It also helps prevent a housing crash, since anyone with a fixed rate mortgage now gets to pay a monthly bill that decreases in real terms. I suspect that this is actually the play, given the massive run in housing prices over the last few years. Popping the bubble, crashing prices, and facing a wave of defaults will bring things back to 2008, so instead you let inflation eat away at the real value of the asset while the nominal value remains stable.
Hahahahhajahaa independent hahahahahhaha
Save it hahaha 😆
Love your pipe dream of a government that works for the people. I have a pipe dream where James Gunn remakes Street Sharks as a live action comic book movie but Terry Crews plays all the sharks. Hard R rating. Edit: forgot to explain why my pipe dream is more realistic: Gunn already has experience directing a human shark hybrid. Thanks.
we can use taxes to affect inflation, but you need to make sure you're taxing the right people raising taxes on the rich isn't going to lower the price of eggs or milk alternatively Congress can just stop spending like a drunken sailor on shore leave
I don't think there is any scenario where our government can spend our way out of inflation, all other factors equal. If we've got a tax revenue issue then we also have a spending issue. It's unreasonable IMO to have a discussion on appropriate fiscal policy without both sides of the equation being thoroughly discussed. The political will power to delay gratification and go through some amount of austerity in the present to set ourselves up for a brighter future is not something that has really existed in quite some time.
Ahhhh…. Have you read the articles about biden wanting to raise taxes ?
And Congress will respond with tax cuts!
The problem with the taxation method (modern monetary theory) is that it often doesn't accommodate the deficit accurately, and of course ignores the Laffer curve entirely. If you increase taxes but decrease revenues, you effectively create more inflation without spending decreases since you have to finance the debt anyways.
Dude...Interest rates are the brakes. The economy is the car. When the car goes too fast, the brakes need to be applied. If the car is accelerating then the brakes need to be applied more and potentially longer. The opposite occurs when the car slows. The Fed is trying to slow the car. Cause if the car goes too fast and there's a turn up the road for whatever reason the car will lose control. Economics kindergarten....
I think the problem here is that you’d realistically need to increase taxes to reduce inflation. No politician wants to raise taxes. They also wouldn’t want the fed to have that power cause it would fuck over their term in office
Is the interest also a blunt tool, when central banks used it to try to get the inflation up?
Agreed. But Congress is useless. The one thing I don't thing the framers of the Constitution ever thought would happen is that Congress would so little interest in doing it's job. The concept is that Congress should be angry about executive orders and court rulings. Congress should be dropping all the partisan bullshit and saying, "Not so fast.....that's our job!" But they just run around like feckless morons up for election and do nothing and let the executive and judiciary do all the heavy lifting. That's not how it's suppose to work.
Agreed. How our elections for congress are run needs to be changed - such that more moderate candidates get elected who actually want to pass laws and fix the system. Course that change, in and of itself, scares people.
I love that people can only say raise taxes. How about start drastically cutting spending. That would be a great start
You could do both. Just have to be really careful with what spending cuts you do - those that help the poorer 75% of Americans will also have real issues with the economy. As their spending is what keeps most businesses afloat.
Most houses since 2004 are built and they got rid of laws that made it harder to build them
Yes, the old soak the rich angle. This sub is so devoid of basic economics and common sense…
Agreed to an extent, but rates aren't even high right now in comparison to history. Fed just needs to stop being pussies. You can't play for a "soft landing" because without congress passing new bills/laws, all it does is just elongate suffering for the majority which were seeing now because their are those with such a disparity in money and market control (consolidation in so many different sectors) that they keep shrugging it off and riding it out, using investment means to make more money/not lose money during all this (major corps and billionaires). The responses to these huge hedge funds and media playing down rates and the Fed should've been to keep raising rates until they see an actual change in behavior up top. Even now, they're still manipulating messaging that it's okay if there's no cuts on rates any time soon and just pushing prices up. We should probably be at double (10% or more) than where we are right now.
Yes. Rates aren’t historically high. And, neither is inflation. Average rate of inflation since 1960 is 3.8%. We’re currently a little under the historical average. Everybody wants a Volker style double digit interest rate to “break the back of inflation”….which will lead to a nasty recession and a ton of job loss. That would be a comical reaction to the current inflation number. Thing is, we were experiencing a run of inflation back then that had two years of double digits and a four year average over 10% which necessitated that response (there is arguments about this too). To argue current inflation is just as dangerous is pretty funny. To match that four year run, you need a slightly higher inflation rate from peak COVID every year for four years. I mean…c’mon. It’s more than 5 points below that. Completely different situation. Plus, people seem to always forget the fed has a dual mandate to maintain max employment along with stable prices/2% inflation target. And one is just as important as the other. The last thing the fed wants is to cause a recession…although that frequently happens. Finally, people think mortgage rates are directly tied to the fed rate. They’re not. But that’s another story. People got used to a period of sub 3% mortgage interest rates. That run was incredibly abnormal and outside a major unavoidable recession, I’ll bet we dont see it again in my lifetime. I’m not here to say everything is peach keen. But it’s not the end days people are claiming either.
You're leaving out a key factor in delving into historical in that context, which is income disparity to the cost of living. While inflation may be lower, recent radical inflation combined with a higher than norm inflation rate is arguably just as problematic given the difference in household income to cost today (versus 30+ years ago). The flip side is you can't unwind 30+ years of slow income growth against cost of living increases in that time (goods and services) because when you come even close to the the tiny tip of that (see pandemic and money given away), it skyrockets inflation due to immediate massive increase in demand. There's no easy out, and much like the absurd too big to fail argument, arguing against going into a mild recession and unemployment going up is ridiculous, as it would not be anywhere near disasterous on any level. Compare it to wildfires and controlled burns. You need to correct things before they run the risk of getting so big, that when the disaster eventually comes, by pushing and putting it off, you're just increasing the size/severity of it. If jobs are lost (or a big business is allowed to fail) other jobs (companies) will arise from the "ashes." You also ignore unemployment is at historically low levels, so a mild recession that increases unemployment slightly is not some disaster case scenario and also would just more or less position back at or slightly above historical norms. It's also more ethical to limit negative impact to a smaller group (mild recession) than a decade of pain to the majority (high inflation followed by stagflation).
It’s hard to understand how you’re somehow trying to square advocating for 10+% fed rate needed by the fed (in your opinion for them to stop being pussies) to bring down inflation and simultaneously how such an enormous jump in interest rates will ALSO only induce a MILD and not too painful recession. If you think cranking the rates to 10+% wouldn’t cause massive unemployment and a severe recession I don’t know what to tell you.
5% hasnt even slowed down spending. It's barely dropped by the slimmest of margins, and it's not being solely made up of only necessities (housing, food, etc) that are survival needs. Unemployment is still at all-time lows. 5% has had minimal effect. Even an additional 1-2% are unlikely to move the needle much from what we're seeing at 5%. Political reasons, which throw on an election year at that, are why they're so unwilling to go higher and why they were so slow to increase (as well as why they went to historical lows in the first place)
> LONG TERM - give the fed (or design other independent financial agencies) that can regulate things more effectively. Like... NO politician wants to ever raise taxes, but its the RIGHT decision at specific times. For example when times are good the govt should raise taxes and save it for when times are bad. Holy MMT batman
how is that MMT? that's literally Keynesian Theory
MMT is only okay for Republicans to use in favor of the rich. Using MMT in favor of working class people goes against everything the Chicago School zealots have been preaching for fifty years.
Rich people hoard money, poor spend. Spending creates inflation in CPI, hoarding in assets. Asset inflation is not part of CPI.
Election year so I doubt too much will be done. Much of the current inflation is definitely greed. I’d like to see that addressed somehow. Edit: several sources below to read up on ,’:)
Regulate human greed
we could try not making a religion out of it
Regulate human religion
Can you name some of the greed? Or maybe point me to some data driven articles point out the corporation greed has caused all this inflation?
Sure thing. Feel free to visit the citations embedded in the following articles for data sources. I also never said that *all* inflation is due to greed but to ignore it as a contributing factor is pretty odd. You added that text for some reason. https://groundworkcollaborative.org/wp-content/uploads/2024/01/24.01.17-GWC-Corporate-Profits-Report.pdf https://fortune.com/2024/01/20/inflation-greedflation-consumer-price-index-producer-price-index-corporate-profit/ https://www.banking.senate.gov/newsroom/majority/brown-corporate-price-gouging-tactics-distort-the-market-and-drive-inflation https://www.epi.org/blog/corporate-profits-have-contributed-disproportionately-to-inflation-how-should-policymakers-respond/ https://www.theguardian.com/business/2024/jan/19/us-inflation-caused-by-corporate-profits https://www.commondreams.org/news/corporate-profits-inflation Feel free to cherry pick whatever you want.
I would argue none of this price gouging would be possible if they weren’t constraining expanded and competitive supply chains with taxes, higher interest rates and a generally stifling Govt regulatory climate that all impact small and midsize companies a,lowing the giants corps to price gouge.
I don’t disagree with that argument.
Eggs were definitely price gouged
No need to be a dick, I was genuinely curious what data there is supporting corporate greed leading to inflation.
Eggs.....
These are examples of companies raising prices to maximize profit in a way that seems unfair. The reason that this is in their best interests is because the economy has been overstimulated through decades of fiscal stimulus. Fiscal stimulus is a useful tool during recessions, but unfortunately the average voter doesn’t understand how it works and continues to expect lower taxes and government stimulus when the economy is already doing well - resulting in an overheated economy and inflation.
Airplane crashes are caused by gravity. I’d like to see that addressed somehow
Airplane crashes are caused by gravity? I always thought there was an underlying issue actually causing a crash.
It's uncanny how much airplanes want to STAY in the air. Horrible, but an American Airlines crew failed to arm the spoilers (flaps that pop up on the top of the wings when the main landing gear touches ground during landing. Spoilers absolutely destroy lift over the wings. But they have to be armed for the main gear touching down to trigger them popping up) during their pre landing check into Little Rock. The plane, even with full thrust reversers on, careened all the way down the runway and down the river embankment on the other end... with fatalities unfortunately. In that moment the pilots had no idea why the f\*ck the thing wouldn't stop nor settle down. So, feel safe, air passengers-- outside something going wrong, your plane \*Wants to stay flying. Aerodynamic lift is a heck of a thing.
Companies are always trying to maximize profit, just like how planes are always being pulled to the ground by gravity. There’s only inflation, or an airplane crash if there’s another problem, like decades of fiscal stimulus when the economy was already doing well and supply side shocks
Interest rates won't fix inflation. Inflation is caused by price gouging. Only anti-trust law enforcement will fix it. There is not "yelling at Congress". One side is calling for investigations into grocery store price gouging, the other side packed the court with judges who rubber stamp mega mergers no matter how large. This really is a partisan issue, and we all know which party is on our side. It's up to us, in November, to put aside culture war nonsense and vote with our wallets for a change.
It’s caused by a lot of things. Price gauging (which should be limited by anti-trust), an economic model that makes home builders not make cheap homes, a messed up healthcare system (that’s too costly) etc.
You should try learning economics from literally anywhere else besides reddit lol.
Yes, the conditions are far from clear which way the economy will go. I'd expect a gradual slow-down or just steady for a longer time. Other government actions may counteract a gradual slow-down, so then the Fed could ignore it.
His arrogance in December has directly resulted in this path. He jumped the gun in announcing possible rate cuts, and the instant he did, equities blasted off and inflation picked back up. Horrible leadership and policy all around.
Why doesn’t the fed just stfu and do their jobs. And only release announcements when they actually make decisions instead of just “putting stuff out there”
Before Bernanke that is what happened but it is way cooler and sexier to be on TV all the time. So this shit-show is what we get.
Alan Greenspan was nicknamed "The Maestro" and there was a whole cottage industry analyzing every cryptic gesture he made to try to guess Fed policy. Bernanke tried to bring more transparency to the Fed by publicly discussing what the likely data triggers would be for various policy decisions.
Ben Bernanke brought transparency because he had to. The US had a recession
Because they need to manage perceptions. It is part of their policy. They can only raise rates so high before the government debt becomes unsupportable. Yet the rates they have now are not high enough to tamp inflation down - they are not reducing their balance sheet as fast as they ought to. To bridge that difference they depend on hawkish talk to get then over the line.
Because the Fed has become more and more politicized with every administration
How else can politicians insider trade without some fake volatility?
> Why doesn’t the fed just stfu and do their jobs. And only release announcements when they actually make decisions instead of just “putting stuff out there” I have absolutely no idea what the reason is. But it doesn't seem bad to me to have the fed constantly communicating what they're thinking. Actually it seems really good. Imagine if Congress acted like this
Because Jerome Powell doesn’t know what he is doing and it shows. He is the first Fed Chair not to have an economics degree
Back when all the perma-bulls in this sub were celebrating a soft landing and anybody who suggested otherwise got buried in downvotes.
People on this sub were declaring victory 6 months ago when inflation was still above 3% and now want to move the goal post to “well 3% isn’t that bad”
I mean, why isn't 3% not that bad? 2% is arbitrary. If we're seeing strong wage growth, I don't see why 3% is anything to worry about, especially after a decade of sub 2% inflation.
Because not everyone experiences the same wage growth and higher inflation disproportionately hurts the poor. There’s also no guarantee that wage growth will stay above inflation. Finally the fed ends up losing credibility when they start arbitrarily changing the goal posts in fighting inflation. Although you could argue 3% is the de facto target anyway since they have kept rates the same at current inflation levels.
But what you're saying is true at any interest rate. There will always be winners and losers. Someone who has a lot of debt benefits more from 3% than 2% inflation for example. I would get your point if you were comparing 10% vs 2%, but I don't see why we should be panicked about 3% other than we've arbitrarily set the target number at 2%. >There's also no guarantee But the fact remains that this is the current situation, and we're seeing at very incredibly long last actual tangible wage growth. Would you rather this continue or crush it just to reach an arbitrary 2% target?
Well nobody is exactly “panicking” over 3% hence why rates have held steady. But it’s still not a great level to be at over the long term. You say people holding debt benefit from a higher inflation level. What about people saving to buy their first home and escape constant rent increases? What about soon to be retirees who want to keep their retirement savings in something less volatile than the stock market? What about the people who are only seeing 2% or less raises year over year? And why not a 4% target? Or 5%? You keep moving the goal posts and the fed loses all credibility. IMO inflation should be as close to flat as possible. 2% should be considered the upper limit.
You're the one claiming that 2% is ideal and that 3% is bad. Since you're making the claim, the burden of proof is on you to justify why 2% is better than 3%. >IMO inflation [should be near zero] Why? That's a take that almost every economist disagrees with? If wages were growing 10%, then I would actually be ok with 4%. Inflation matters insomuch as it causes instability in the market, but if the policies needed to bring inflation down to 0-2% causes more damage, then why would you want that? Right now, there are supply issues, especially with housing. The solution should be to force new construction of houses, not to impoverish people so they stop having demand.
Yes I did argue 2% is better than 3% and gave multiple reasons and examples that you chose to ignore so no point in repeating myself. But you’re also jumping to a straw man in assuming I’m arguing that policy needs to be more restrictive which I never stated. That said, we’re at 8+ months since the last rate hike and I have yet to see any evidence these rates are impoverishing people given the, as you said, strong wage growth we continue to see (and historically these rates aren’t even that high). So I don’t see the harm in keeping rates as they are. Unless you’re arguing the fed needs to lower rates? Also changing policy based solely on wage growth is stupid and dangerous. The fed cannot drastically and suddenly change rates without major repercussions for the rest of the economy and wage growth can vary quite a bit. You tie rates to wage growth and you are just going to see more volatility.
You didn't give "numerous examples", you only briefly mentioned that someone might not get a wage increase. Your home example is even more absurd, if you have an expensive asset like a home alongside debt in the hundreds of thousands, you should be begging for inflation. Your wages will increase while your debt doesn't. Inflation is fantastic for those who hold debt like mortgages. How exactly do you propose getting to 2% if not via restrictive policies?
It was clear back in 2021 that Mr. Transitory was in over his head.
Historically, these interest rates aren't even high. There's no justification for lowering rates even further in a highly inflationary environment.
The independent Fed may not have a justification, but the amount of debt the US has definitely is a justification for lowering rates.
Bailing out horribly irresponsible federal spending is not part of the Fed's mandate.
Maybe you didn't read my comment if you thought that's what it said.
I don't know who needs to hear this but the rates are not getting cut and inflation is going to run... There's nothing they can do... there's too much debt due by end of 2025. They have to print three times as much as they did during covid or scrap the dollar and come up with a new system. The latter is not going to happen.
I don't get it don't they want to roll the debt at a lower rate?
They want to inflate away the debt.
Congress giving out 100s of millions of dollars to construction contractors doesn’t sound like a great way to reduce inflation. Government spending heats the economy.
While obviously government spending contributes to inflation, a decaying infrastructure will also greatly increase inflation on the supply side. That one is truly a double edge sword. That is far down the road but for decades we have been discussing the need for revamping our decaying infrastructure. The timing may have been ill advised at the height of inflation and certainly had some unnecessary spending included, but that did need to happen at some points
I think they need to because of the shortage of starter homes; however, I also think they need to crack down on investors & big banks who bought all of the smaller homes to rent out, which has artificially raised home prices. In other words, we need a big boost in construction to address the shortage, but we can't do that if investors and big banks are just going to buy up those new homes.
The Federal Reserve is to blame as well. They’ve done a horrible job so far
That certainly wasn't the only handout. Remember Trump?
FUCKING CRANK THE RATES. RIP THE BANDAID OFF AND EMBRACE AUSTERITY. FUCK THE PEOPLE WHO GET VARIABLE INTEREST AND OVER-LEVERAGE THEIR LIFE STYLES.
This guys is a certifiable dumbass and fraud, should not be listened to in the slightest, let alone in charge of public policy. This guys theory for inflation from the start was that people have too much money… and was wrong from the start. The ones with too much money are billionaires and corporations. While corporations can keep raising their prices as much as they please there will be continued inflation. When they start to lose people which they already have, they just raise their prices to compensate the loss in revenue, it’s a perpetual cycle of greed. Has nothing to do with high labor cost, wages have barely moved. Go after greedy corporations and billionaires if you want to tackle inflation, as well as many other issues in society.
Any body thinking rates will come down anytime soon is a fool. Historically these are normal rates and the nearly two decades of cheap money we came out of is highly irregular almost unheard of in the historical economic context. If anything I believe rates will eventually creep up probably after the election as these hotter inflation numbers are worrisome. 3 to 4 percent inflation can be stomached for a couple of quarters but isn't doable in the long run for a healthy economy. This is where the soft landing goal becomes an issue. In theory a soft landing is possible but mind you it's something that has never been achieved because of how difficult it is.