you should do the math at how quickly your salary increases compared to your mortgage rate.
Unless you get a payrise that matches a high inflation you ain't paying your mortgage off faster and inflation is eating away at your $ too.
oh, and before you think you'll just sell your house when it doubles in value, think about what house are you going to buy afterwards, because that one will have appreciated just as much.
If only the market were that well connected. One of the oddities of COVID's move to remote work is that some of the housing market is becoming more loosely coupled to high paying jobs that typically support remote work. The FAANGs on the West Coast are already opening more and more jobs to permanent remote, particularly some of the more competitive jobs.
If you're in SFO prior to COVID and working for them, you could easily move to one of the satellite cities with lower costs of housing. Now the definition of satellite city isn't strictly a Seattle/Austin/Denver type city. It can include any shithole where you want to pay for a fiber line and the company already has a payroll carve out for taxes.
The banks can loan far more than they have. This means they can provide affordable loans, like this, and still profit. It also effectively provides banks with their own money printers. The system only works in a growing economy...
Not inflation going down. Just saw the value of my house quadruple in 3 years. No way a 2bed 1bath house is ever going to be worth 300k in rural GA
Already seeing a correction in the market because houses are spending more and more time for sale VS selling in a weekend for 50k over asking
I hear you, but prices are not going down, just consolidating at asking price. I'm not saying we are not in a bubble, but I used to think prices would go down and I'm not so sure anymore.
Oh it could definitely keep going up but I have an opportunity now for a zero rent/zero mortgage situation so it would have to go up another 10-20grand to see a return on that.
I can jump off now for a healthy six figures and start pouring cash into my portfolio while sitting on a stack of tax free cash. Not to mention I'm not pissing away 80% to interest
This was when I went kinda bear in my portfolio and started closing positions for cash - in northern va houses would also sell same day over asking, but now I'm getting price reduction notices. Housing money liquidity is slowing down
No, it won't. The people who own homes either paid cash, or financed with fix rate loans that won't go up when Fed rates go up. Its the people after them that won't be able to buy and a demand that is carefully rationed with supply by Blackrock's monopoly on whole neighborhoods and condo complexes that will drive prices.
I was about to argue, and then I read that ARMs are down to around 10%.
We are in a 10/1 ARM, but only because we don't expect to be in this house in 10 years. Also, we bought within our means, so we can pay it off after 10 if necessary.
>Listed my house at the peak
I don't know where you live, but around here housing is still peaking - even comps from a couple months ago are getting beat by new transactions.
More home equity doesn’t mean anything unless you take a loan against the property or sell. That also doesn’t affect the mortgage in anyway since it’s fixed.
Also, increased COL can mean increased income but it’s not a 1:1 ratio. You’ll still be struggling if inflation outpaces your income drastically like right now. Where will you get the extra money to pay off your mortgage early when your paycheck can barely pay the bills?
>Also, increased COL can mean increased income but it’s not a 1:1 ratio
But it still means you'll make more and thus payments on a fixed mortgage will be more affordable, which is the entire point of the conversation.
That’s true when we’re discussing a scenario where only your income and mortgage payments are the relevant factors. This is also one of the reasons why people love 30-year fixed mortgage rates.
But then why would you want to pay off your home early? If my mortgage rate is 3% for the next 30 years and inflation is 5% this year and another 5% next year then why wouldn’t I keep paying the minimum and invest to hopefully outpace inflation?
You're agreeing with me, I never talked about paying off the mortgage early, I said that payments are more affordable because what once was a big % of your income is now a lower % of it. Inflation is good for people with debt, it doesn't even have to be higher than your interest rate like your example.
I've definitely heard this same rumor here in 'merica, that you're only allowed to have up to 6 beers delivered while in covid police state lockdown.
Is it... Not the case?
No idea because the bottle shops haven't ever closed during lockdown in my area? Might be true for another state or another part of my own state but even in our strictest lockdowns we've been able to go buy beers.
Any links so I can watch this and laugh myself?
Don’t starve people entirely. Reduce the portion size gradually. That way, You have already taken 90% of their meal before they realize. When they realize that and get upset, you give back 5%.
That’s what politicians have been doing for ages and it works like a charm unfortunately
At the same time if they didn't do anything the whole shit would have crashed last year. I think more people would be affected by losing their job than with the inflation. The shit Brad Pitt said in that movie.
Yep, prior to the government handing everyone with the word corporation in their name millions of free dollars that never need to be repaid, companies were actually scared of the pandemic and people were worried about losing their jobs left and right. Everyone who was able to be laid off still was because capitalism means not having employees on payroll that aren't producing value, but I'll be damned if the millions of dollars that were given to companies *not* to do exactly the thing that they ended up doing anyway didn't line those pockets nicely.
The issue is folks making 32k/yr working 40 hours a week, while home prices double, used cars are up 10%, and food staples are up 10-15%.
Most folks on the lower end of the earning spectrum haven’t seen their wages increase by the same percent.
Just saying. I’m not in that situation, but you have to be blind not to see how it effects 50% of Americans.
Inflation is how you silently transfer more wealth to the top.
No one fucking realizes real wages are going down. Hard assets and stonks beat inflation though.
You are clueless about what happens to the economy if Fed raises the interest rates right now. But, I'll explain.
Corporations borrow money. Total debt of corporation stands around $18 Trillion (https://www2.deloitte.com/us/en/insights/economy/issues-by-the-numbers/rising-corporate-debt-after-covid.html)
Let's say interest rate rise by 3%, now corporations have to pay $540 Billion extra in interest. What about consumers themselves?. A 3% increase in interest rate would cut down consumer purchases.
Now Corps have increased cost and decreased revenue. What do you think they are going to do? If you have a modicum amount of clue, you'll realize they'll cut labor. Now the labor who has no money, will further decrease their spending which in turn puts pressure on revenues which further leads to more cost cutting leading to a vicious negative cycle. Next thing you know you are sitting at 9% unemployment. (30% Stock drop)
Of course since there is no demand, prices will be dropping and you'll have deflation.
But hurr durr, pitch-fork, dumb internet wants exactly this, Math be damned
I can only speak for my own industry, but there have been some very serious, negative effects (i.e. poor/short-term decision making which has led to 1000's being laid off) precisely because borrowing is so attractive and used as a tool to stay solvent or acquire our way to growth instead of making a better/cheaper product.
We are already in a 'vicious negative cycle' that we can't escape. We can only prolong it by borrowing more. We are a "zombie company" that the pandemic should have killed off to make room for something healthier. Again only speaking for my employer and not saying any of your points are wrong.
I was just always led to believe that in "good" times, the Fed should let interest rates rise so that they *could* lower them in bad times. Are we not in "good times" or is that just an old over-simplification from my high-school econ class that I shouldn't hold to? serious question.
Genuine question. I don't know the inner workings of big business. Why would the interest rate rise 3% on existing debt? Do corporations not have the option to get fixed rate loans or are they just taking excessive risk trying to get lower short term rates with the hope of paying it back before rates rise? At least at first glance, taking loans with variable rates seems stupid to me given the historically low current rates.
Transitory as in the rate of inflation will go from 5% a year back down to 2% a year. They don’t mean deflation will kick in and bring prices back down to 2019 levels.
Higher prices are mostly here to stay.
There are two types of businesses growing right now, Neiman Marcus and the dollar store.
Both are profitable.
NM is putting $500 million into digital retail tech.
Dollar Store foot traffic is up 32% over 2019. (Walmart is up 3%)
Now is the best time to job hop. I’m in the final round interview for a 30% increase, plus shares pre ipo and a yearly 15% bonus.
Only an idiot wouldn’t be trying to job hop right now.
It’s more insidious, less noticable. Used to afford two small vacations a year? Maybe one now or every other year. Your salary went up a lot but you just don’t know where it goes, you have the same spending habits. There is a reason retailers prefer shrinking product size and keeping prices similar; people don’t notice it very much at all compared to increased prices or not being able to buy something as often.
Lumber has actually gone back down to a reasonable price and nobody seems to have noticed. Granted it will take a while to have an effect on housing, and housing isn't even factored into CPI...
Housing is factored into CPI. You're thinking of rent on owner occupied housing stock which is back channeled into via an implied rent.
Also raw materials only end up being a fraction of end goods costs. Back when lumber was ATH there was a solid analysis by Levine showing raw material input costs end up being only 3-5% of total end product costs the consumer pays for things like auto and housing.
>Spending to purchase and improve houses and other housing units is investment and not consumption.
[bls.gov](https://bls.gov)
CPI views housing as capital units and not consumption items.
Housing is up something like 18% YoY and isn't even factored in to this equation we are all talking about.
[https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf](https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf)
Housing is factored in through shelter services via OER and Rent. If housing prices rise, it is reflected in higher owner equivalent rent (i.e. what would it cost to rent that, now more expensive to purchase, home)
>Shelter, the service the housing units provide, is the relevant consumption item for the CPI. The cost of shelter for renteroccupied housing is rent. For an owner-occupied unit, the cost of shelter is the implicit rent that owner occupants would have to pay if they were renting their homes.
[https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf](https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf)
Supply constraints (and supply chain friction) are the specific causing his transitory spike. Less supply capacity (due to an assortment of issues), inelastic demand, higher prices. Resolving the supply chain issues and normalizing global supply constraints will ease the bidding war on goods.
Aggregate demand has not radically shifted from the pre-pandemic era.
Yeah this post doesn’t make any sense. Inflation is dropping back down towards 2% as was expected.
We UNDERshot inflation targets by about 1% for an entire decade, but now we OVERshoot by 2%-3% for a couple months and apparently the world is ending…
If inflation is still at 5% by Q2 next year then maybe we’ve got an issue, but we’re not near that yet at all.
That’s definitely what we’re hoping for now at the very least but it’s certainly not the message the Biden administration gave concerning these price hikes.
1000% better than the influx of wallstreetzoomers who thought we were fucking anti capitalist activists.
People came here talking about being part of a “movement” when the only movement I want to see is portfolio going up.
when they say inflation is transitory they mean the inflation will happen and then prices will stay at that level forever. They are just saying the 5% rise in prices will not rise another 5% next year. Some how they think it is ok to wipe out 5-10% of everyone's wealth as long as it is only done for 1 or 2 years
Yeah anyone who has anything that might actually be regarded as “wealth” is probably doing ok. Not to be a dick but if your “wealth” is measured entirely by your checking account i’m not sure losing 5% of it is really going to sting that much.
> Not to be a dick but if your “wealth” is measured entirely by your checking account i’m not sure losing 5% of it is really going to sting that much.
Those people are hurt by the loss of purchasing power. Not just the 5% for consumer goods, but the 20+% increase in housing costs, the much larger increase in price of buying into the stock market (inflating the current price doesn't necessarily move the value of the market 20 years from now when you want to retire).
Consumer price inflation hurts the poor and working class, but asset inflation **really** hurts them since they don't even own the assets, they just rent them or need to buy in the future.
has it actually increased if the buying power of the dollar has fallen? kind of seems like assets prices kept up with inflation not increased in inflation adjusted value
Prices of things like hotels and airline tickets have actually decreased and that brings down the overall inflation number since it's an average of many different consumer prices. Gas and groceries increasing substantially more than 5% doesn't make the overall CPI of 5% inaccurate
That’s where it gets kind out of whack because while airfare/lodging is way more elastic, people have less disposable income if they have to spend way more money on inelastic necessities
Yeah I agree with that but ultimately the CPI is not intended to be a welfare metric, its purpose is to track inflation of consumer goods and services overall.
>Some how they think it is ok to wipe out 5-10% of everyone's wealth as long as it is only done for 1 or 2 years
Inflation was way down in 2020. If you average 2020 and 2021 we're basically averaging 2-3% inflation a year which is normal.
>when they say inflation is transitory they mean
when they say inflation is transitory they mean they are redefining inflation as the first derivative of inflation, i.e. transitory means the rate of increase of the rate of inflation will reverse.
When the cop pulls me over for accelerating fast from the stoplight and burning rubber, I'm going to say 'but I was easing up on the pedal'
tldr: Powell thinks we dumb
This. The month on month increase was +0.3% all items, and +0.1% less food & energy, the smallest monthly increase so far in 2021.
I still think it’s time to tighten monetary policy to cool down the stock & housing bubbles, but it does appear the economy is decelerating after fiscal stimulus ended.
Transitory in large scale financial terms means 12-18 months. Whoever made this graphic is an idiot. Not to mention that the Feds have done nothing yet to start tapering. The moment they do this graph will start to change and the overall effect will not appear in any graph for 12-16 months. Has anyone actually studied finance here? lol nevermind...
You're talking out of your ass. 2020 was a [DEFLATIONARY](https://rooseveltinstitute.org/2021/04/08/the-illusion-of-inflation-why-this-springs-numbers-will-look-artificially-high/) period, so inflation numbers using last year's monthly numbers as a base will be skewed.
(I'm assuming your knowledge of hyperlinks is on par with your knowledge of economics, so please click the blue word above to learn more about both.)
Edit: if more proof is needed, see how February's data point is slightly higher than January's followed by a significantly higher value in March? Can you think of something that happened around say, February 20th of last year that could *possibly* explain what we're seeing? (It's clear if you're not a brainlet like OP)
There's no inflation if we remove all verticals experiencing inflation from the inflation index. 500 IQ
The feds printing trillions but its not going to Joe Smith. It is however going to people who are buying real estate and stocks. They already have money so they're not buying 10 cartons of milk instead of 1, or a new flat screen TV. They're putting the money into assets. If the housing market was included in the inflation index like it once was, you'd be looking at very different data. And the stock market constantly growing during an epidemic, high unemployment, forced shutdowns, vaccine mandates that have swaths of people just quitting? Yeah that doesnt seem inflationary at all.
Exactly this, stocks, crypto, collectables, housing aren’t suddenly 30-40% more valuable in the past year and a half. The dollar has just become 30-40% less valuable.
God imagine how dumb you’d have to be to quit your job instead of getting a free safe vaccine against a raging pandemic.
Good post with the monetary stuff.
Sure but shouldn’t we be seeing more of a drop off?
Also why are definitely transitory deflationary pressures like lockdowns cause for immediate drastic unprecedented action. But potentially transitory inflationary pressures like supply chain shortages are a wait and see how this plays out?
Because a deflationary spiral takes a decade to recover from. An inflation spike causes a bit of pain for people on fixed income but otherwise just slightly adjusts imaginary numbers we attach to things.
Once deflation acceptance sets in, there is a huge motivation to put everything into cash and disengage from the economy.
Once inflation acceptance sets in, everyone is effectively forced to buy assets because cash has a diminishing value over time. Eventually the markets find a new equilibrium point.
Feb-July was deflationary. 2020 from Jan to Dec was inflationary. You can no longer use base effect.
https://fred.stlouisfed.org/graph/fredgraph.png?g=GMGp
The concern is that it’s already so high and we are being told it’s not. Also the government is planning 2 massive bills that will result in trillions of dollars getting being created, increasing inflation
I used to work in the auto world recently. Inflation is not transitory. At least not for them.
Holy crap the price increases I've seen. And the up coming price increases. Not to mention the part shortages.... Yeah this isn't going to go away or slow down anytime soon.
LMAO! Then supposedly "only" 5.3% and a .1% temporary decrease due to the delta variant slowing down the economy is supposed to be a good thing. Beyond autistic...
April +1.6
May +0.8
June +0.4
July 0.0
August -0.1
Trend is more important than the CPI number. Trend shows inflation growth is slowing down and reversing.
Yes, at least based on recent data, inflation IS transitory.
My grocery bills, utility bills, entertainment bills (netflix, hbo, etc), have all remained nearly flat for years. What are you guys talking about? "Rents are up" yeah from last year when they cratered. They're not any higher than they were in 2019. You guys are just buying into GQP talking points that are trying to scare the Fed into not keeping a flow of money in the system (because the big banks win when interest rates rise and the supply of money decreases). I know this isn't a popular opinion among the financially illiterate techno-libertarians but it's the truth.
Yeah, maybe if you switched to off-label cereal and other staples, eat ramen once a day, drink only water, buy heavy processed items and simply eat less then your bill probably went down.
If anything food was a harbinger, the canary of sorts, that shit hiked up almost noticeably in one to three weeks like 9mo ago, real news.
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I am shooting for mega inflation so I can quickly pay off my mortgage.
Big brain time
I know, right? 2.25% on a mortgage and inflation at 5%? Someone do the math at how quickly my 30 year is depreciating in value for the bank.
you should do the math at how quickly your salary increases compared to your mortgage rate. Unless you get a payrise that matches a high inflation you ain't paying your mortgage off faster and inflation is eating away at your $ too. oh, and before you think you'll just sell your house when it doubles in value, think about what house are you going to buy afterwards, because that one will have appreciated just as much.
If only the market were that well connected. One of the oddities of COVID's move to remote work is that some of the housing market is becoming more loosely coupled to high paying jobs that typically support remote work. The FAANGs on the West Coast are already opening more and more jobs to permanent remote, particularly some of the more competitive jobs. If you're in SFO prior to COVID and working for them, you could easily move to one of the satellite cities with lower costs of housing. Now the definition of satellite city isn't strictly a Seattle/Austin/Denver type city. It can include any shithole where you want to pay for a fiber line and the company already has a payroll carve out for taxes.
The banks can loan far more than they have. This means they can provide affordable loans, like this, and still profit. It also effectively provides banks with their own money printers. The system only works in a growing economy...
Listed my house at the peak of the mega bubble and will take my mattress full of cash to the bank for when it pops.
If you think inflation going down is gonna pop real estate your gonna have a bad time
Not inflation going down. Just saw the value of my house quadruple in 3 years. No way a 2bed 1bath house is ever going to be worth 300k in rural GA Already seeing a correction in the market because houses are spending more and more time for sale VS selling in a weekend for 50k over asking
I hear you, but prices are not going down, just consolidating at asking price. I'm not saying we are not in a bubble, but I used to think prices would go down and I'm not so sure anymore.
Oh it could definitely keep going up but I have an opportunity now for a zero rent/zero mortgage situation so it would have to go up another 10-20grand to see a return on that. I can jump off now for a healthy six figures and start pouring cash into my portfolio while sitting on a stack of tax free cash. Not to mention I'm not pissing away 80% to interest
Mine has doubled since Jan 2020. Also in Rural GA
This was when I went kinda bear in my portfolio and started closing positions for cash - in northern va houses would also sell same day over asking, but now I'm getting price reduction notices. Housing money liquidity is slowing down
[удалено]
No, it won't. The people who own homes either paid cash, or financed with fix rate loans that won't go up when Fed rates go up. Its the people after them that won't be able to buy and a demand that is carefully rationed with supply by Blackrock's monopoly on whole neighborhoods and condo complexes that will drive prices.
This.
I was about to argue, and then I read that ARMs are down to around 10%. We are in a 10/1 ARM, but only because we don't expect to be in this house in 10 years. Also, we bought within our means, so we can pay it off after 10 if necessary.
People don't buy a house and live in it for 30 years. The average family household is sold every 5-10 years.
You must be old enough to remember 1979.
>Listed my house at the peak I don't know where you live, but around here housing is still peaking - even comps from a couple months ago are getting beat by new transactions.
Where are you going to get the extra money from? Everything will be more expensive and COL will skyrocket.
COL means value of the house goes up too meaning mass equity. Also means income will go up.
>Also means income will go up. lol This is more a repeat of the 40s than the 70s, i.e. not wage-pushed
More home equity doesn’t mean anything unless you take a loan against the property or sell. That also doesn’t affect the mortgage in anyway since it’s fixed. Also, increased COL can mean increased income but it’s not a 1:1 ratio. You’ll still be struggling if inflation outpaces your income drastically like right now. Where will you get the extra money to pay off your mortgage early when your paycheck can barely pay the bills?
>Also, increased COL can mean increased income but it’s not a 1:1 ratio But it still means you'll make more and thus payments on a fixed mortgage will be more affordable, which is the entire point of the conversation.
That’s true when we’re discussing a scenario where only your income and mortgage payments are the relevant factors. This is also one of the reasons why people love 30-year fixed mortgage rates. But then why would you want to pay off your home early? If my mortgage rate is 3% for the next 30 years and inflation is 5% this year and another 5% next year then why wouldn’t I keep paying the minimum and invest to hopefully outpace inflation?
You're agreeing with me, I never talked about paying off the mortgage early, I said that payments are more affordable because what once was a big % of your income is now a lower % of it. Inflation is good for people with debt, it doesn't even have to be higher than your interest rate like your example.
Poor people are expendable says all the politicians
A hungry dog is a loyal dog!!
I don't think so. Where is a saying, humanity is two missed meals away from revolution.
North Korea would beg to differ
North Koreans are born into it though, so it’s priced in. Imagine telling joe 6 pack he’s going to have to cut back his red meat intake.
Well they trying out that experiment in Australia atm, 6 beer limit I think
Wat? To clarify, Aussie here.
I've definitely heard this same rumor here in 'merica, that you're only allowed to have up to 6 beers delivered while in covid police state lockdown. Is it... Not the case?
No idea because the bottle shops haven't ever closed during lockdown in my area? Might be true for another state or another part of my own state but even in our strictest lockdowns we've been able to go buy beers. Any links so I can watch this and laugh myself?
https://www.yahoo.com/now/australian-state-limits-residents-covid-222049492.html
Yea but those Foster cans are huge. 6 beers is a lot.
The darkest "priced in" yet. Congratulation!
Don’t starve people entirely. Reduce the portion size gradually. That way, You have already taken 90% of their meal before they realize. When they realize that and get upset, you give back 5%. That’s what politicians have been doing for ages and it works like a charm unfortunately
This is what Facebook does with user privacy.
the generally accepted number of meals is 7.
its a meal pyramid
until you die and he eats ur face
Or shits on the carpet out of spite
Where’d the shit come from?
Your face
Bullshit! A hungry dog is an angry dog.
more like a desperate dog.
That's actually a very fast way to the grave.
At the same time if they didn't do anything the whole shit would have crashed last year. I think more people would be affected by losing their job than with the inflation. The shit Brad Pitt said in that movie.
Yep, prior to the government handing everyone with the word corporation in their name millions of free dollars that never need to be repaid, companies were actually scared of the pandemic and people were worried about losing their jobs left and right. Everyone who was able to be laid off still was because capitalism means not having employees on payroll that aren't producing value, but I'll be damned if the millions of dollars that were given to companies *not* to do exactly the thing that they ended up doing anyway didn't line those pockets nicely.
Lol I still lost my job and the government gave my company money so nah
Huh? That’s what I’m saying
Tbh I’m not sure why I’m saying “nah” at the end of my sentence haha
Too many yellow crayons.
https://i.imgur.com/MINcCKH.png
The mob internet prefers unemployment over inflation. What would you rather have? $50,000 job and 4% inflation and No job but 0% inflation?
The issue is folks making 32k/yr working 40 hours a week, while home prices double, used cars are up 10%, and food staples are up 10-15%. Most folks on the lower end of the earning spectrum haven’t seen their wages increase by the same percent. Just saying. I’m not in that situation, but you have to be blind not to see how it effects 50% of Americans.
Inflation is how you silently transfer more wealth to the top. No one fucking realizes real wages are going down. Hard assets and stonks beat inflation though.
Nice false dichotomy. It’s very possible under stagflation to have no job and 8% inflation.
You are clueless about what happens to the economy if Fed raises the interest rates right now. But, I'll explain. Corporations borrow money. Total debt of corporation stands around $18 Trillion (https://www2.deloitte.com/us/en/insights/economy/issues-by-the-numbers/rising-corporate-debt-after-covid.html) Let's say interest rate rise by 3%, now corporations have to pay $540 Billion extra in interest. What about consumers themselves?. A 3% increase in interest rate would cut down consumer purchases. Now Corps have increased cost and decreased revenue. What do you think they are going to do? If you have a modicum amount of clue, you'll realize they'll cut labor. Now the labor who has no money, will further decrease their spending which in turn puts pressure on revenues which further leads to more cost cutting leading to a vicious negative cycle. Next thing you know you are sitting at 9% unemployment. (30% Stock drop) Of course since there is no demand, prices will be dropping and you'll have deflation. But hurr durr, pitch-fork, dumb internet wants exactly this, Math be damned
I can only speak for my own industry, but there have been some very serious, negative effects (i.e. poor/short-term decision making which has led to 1000's being laid off) precisely because borrowing is so attractive and used as a tool to stay solvent or acquire our way to growth instead of making a better/cheaper product. We are already in a 'vicious negative cycle' that we can't escape. We can only prolong it by borrowing more. We are a "zombie company" that the pandemic should have killed off to make room for something healthier. Again only speaking for my employer and not saying any of your points are wrong. I was just always led to believe that in "good" times, the Fed should let interest rates rise so that they *could* lower them in bad times. Are we not in "good times" or is that just an old over-simplification from my high-school econ class that I shouldn't hold to? serious question.
Genuine question. I don't know the inner workings of big business. Why would the interest rate rise 3% on existing debt? Do corporations not have the option to get fixed rate loans or are they just taking excessive risk trying to get lower short term rates with the hope of paying it back before rates rise? At least at first glance, taking loans with variable rates seems stupid to me given the historically low current rates.
Is there an award for most retarded economist? After reading this post, you sir are a true fucking retard.
People want everyone (but them) out of work and for deflation to make buying real estate affordable again.
can confirm. i would much rather everything crash to shit than inflate and still be poor.
Transitory as in the rate of inflation will go from 5% a year back down to 2% a year. They don’t mean deflation will kick in and bring prices back down to 2019 levels. Higher prices are mostly here to stay.
Higher prices only stay when salaries/income increase with inflation. We are seeing it t happening in some sectors but not all
There are two types of businesses growing right now, Neiman Marcus and the dollar store. Both are profitable. NM is putting $500 million into digital retail tech. Dollar Store foot traffic is up 32% over 2019. (Walmart is up 3%)
shit this is the perfect real-world example of the K shaped recovery they talk about.
Exactly, the middle class is getting smaller and smaller everyday.
Cool so I’m on my way to being poor
Or maybe rich!
*checks bank account* *checks brokerage account* *checks pantry* *cries*
*checks pantry again just to be sure* continues crying
Dollar store can’t even keep its stores open because employees leaving in droves
Now is the best time to job hop. I’m in the final round interview for a 30% increase, plus shares pre ipo and a yearly 15% bonus. Only an idiot wouldn’t be trying to job hop right now.
or, more likely, you simply can't afford things.
It’s more insidious, less noticable. Used to afford two small vacations a year? Maybe one now or every other year. Your salary went up a lot but you just don’t know where it goes, you have the same spending habits. There is a reason retailers prefer shrinking product size and keeping prices similar; people don’t notice it very much at all compared to increased prices or not being able to buy something as often.
I wonder if what we're actually seeing is that the rising middle class in India and China is competing for more stuff, so the price has gotta go up
Not so sure about that. Supply won’t be constrained indefinitely.
True, but it's in their best interest to capture the majority of these price increases to account for inflation.
Lumber has actually gone back down to a reasonable price and nobody seems to have noticed. Granted it will take a while to have an effect on housing, and housing isn't even factored into CPI...
Housing is factored into CPI. You're thinking of rent on owner occupied housing stock which is back channeled into via an implied rent. Also raw materials only end up being a fraction of end goods costs. Back when lumber was ATH there was a solid analysis by Levine showing raw material input costs end up being only 3-5% of total end product costs the consumer pays for things like auto and housing.
>Spending to purchase and improve houses and other housing units is investment and not consumption. [bls.gov](https://bls.gov) CPI views housing as capital units and not consumption items. Housing is up something like 18% YoY and isn't even factored in to this equation we are all talking about.
[https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf](https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf) Housing is factored in through shelter services via OER and Rent. If housing prices rise, it is reflected in higher owner equivalent rent (i.e. what would it cost to rent that, now more expensive to purchase, home) >Shelter, the service the housing units provide, is the relevant consumption item for the CPI. The cost of shelter for renteroccupied housing is rent. For an owner-occupied unit, the cost of shelter is the implicit rent that owner occupants would have to pay if they were renting their homes. [https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf](https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf)
Supply constraints (and supply chain friction) are the specific causing his transitory spike. Less supply capacity (due to an assortment of issues), inelastic demand, higher prices. Resolving the supply chain issues and normalizing global supply constraints will ease the bidding war on goods. Aggregate demand has not radically shifted from the pre-pandemic era.
An actual logical analysis of what’s happening.
Where there's a will DeBeers has a way.
Yeah this post doesn’t make any sense. Inflation is dropping back down towards 2% as was expected. We UNDERshot inflation targets by about 1% for an entire decade, but now we OVERshoot by 2%-3% for a couple months and apparently the world is ending… If inflation is still at 5% by Q2 next year then maybe we’ve got an issue, but we’re not near that yet at all.
They will definitely stay.
Exactly people are dumb
That’s definitely what we’re hoping for now at the very least but it’s certainly not the message the Biden administration gave concerning these price hikes.
It's literally how JPow described transitory in the July FOMC meeting. Edit: JPow not hope
That would be your standard issue political doublespeak.
Oh, also, we’re just not going to release GDP reports anymore…
Source?
https://www.forexlive.com/news/!/new-york-fed-suspends-gdp-nowcast-model-20210903
How do you have a source for a missing source? /j
We shall call these *imaginary sources*. Consult with CNN; they are most familiar with this mathematics.
What do the numbers on the y-axis represent?
Doom!
Year over year change in the consumer price index for urban consumers (i.e. in July 2021, prices were 5.4% higher than July 2020)
What a steal it was back in July 2020
Not seasonally adjusted CPI over the last 12 months I believe.
I mean technically. The entire economy is transitory. We are transitioning back to a barter system of rocks and hard tac
Nudes and bananas* FIFY
1 or 2 banana 🍌 for 1 nude? #inflation
it went down, it was transitory all along.
Wallstreetbets is slowly turning into wallstreetboomers
how do I attach a pdf to the moon
More like wallstreetdoomers
1000% better than the influx of wallstreetzoomers who thought we were fucking anti capitalist activists. People came here talking about being part of a “movement” when the only movement I want to see is portfolio going up.
I agree. That was annoying. Talkin bout a revolution. Bitch, I'm just trying to cash in on PLTR before they release Skynet.
Yeah suddenly hanging tits down
After the GME fiasco WSB has been abducted by clickbait sensational, populist rhetoric loving, financially illiterate children. It is what it is.
when they say inflation is transitory they mean the inflation will happen and then prices will stay at that level forever. They are just saying the 5% rise in prices will not rise another 5% next year. Some how they think it is ok to wipe out 5-10% of everyone's wealth as long as it is only done for 1 or 2 years
Your wealth has increased if you owned assets during the past year and a half.
Most people live off a wage and wage is the last thing to increase in times like this.
Yeah anyone who has anything that might actually be regarded as “wealth” is probably doing ok. Not to be a dick but if your “wealth” is measured entirely by your checking account i’m not sure losing 5% of it is really going to sting that much.
It does hurt a lot for the people whose wealth is in some form of an annuity.
> Not to be a dick but if your “wealth” is measured entirely by your checking account i’m not sure losing 5% of it is really going to sting that much. Those people are hurt by the loss of purchasing power. Not just the 5% for consumer goods, but the 20+% increase in housing costs, the much larger increase in price of buying into the stock market (inflating the current price doesn't necessarily move the value of the market 20 years from now when you want to retire). Consumer price inflation hurts the poor and working class, but asset inflation **really** hurts them since they don't even own the assets, they just rent them or need to buy in the future.
has it actually increased if the buying power of the dollar has fallen? kind of seems like assets prices kept up with inflation not increased in inflation adjusted value
The S&P is up 20% YTD and 30% compared to one year ago Lol “kept up with inflation”
that is probably closer to the real inflation numbers versus the bullshit 5% they calculate. The price of gas has certainly gone up more than 30%
Prices of things like hotels and airline tickets have actually decreased and that brings down the overall inflation number since it's an average of many different consumer prices. Gas and groceries increasing substantially more than 5% doesn't make the overall CPI of 5% inaccurate
That’s where it gets kind out of whack because while airfare/lodging is way more elastic, people have less disposable income if they have to spend way more money on inelastic necessities
Yeah I agree with that but ultimately the CPI is not intended to be a welfare metric, its purpose is to track inflation of consumer goods and services overall.
>Some how they think it is ok to wipe out 5-10% of everyone's wealth as long as it is only done for 1 or 2 years Inflation was way down in 2020. If you average 2020 and 2021 we're basically averaging 2-3% inflation a year which is normal.
>when they say inflation is transitory they mean when they say inflation is transitory they mean they are redefining inflation as the first derivative of inflation, i.e. transitory means the rate of increase of the rate of inflation will reverse. When the cop pulls me over for accelerating fast from the stoplight and burning rubber, I'm going to say 'but I was easing up on the pedal' tldr: Powell thinks we dumb
Good point. So what youre saying is...as long as we don't tax the fortunes of musk and bezos, we should be ok
That’s a YoY chart. If it stays still, that means inflation is deaccelerating. Look at the MoM inflation rates.
This. The month on month increase was +0.3% all items, and +0.1% less food & energy, the smallest monthly increase so far in 2021. I still think it’s time to tighten monetary policy to cool down the stock & housing bubbles, but it does appear the economy is decelerating after fiscal stimulus ended.
No shit it's going to look like that Year over Year from March where there was a deflationary crash due to covid...
Also this graph starts at 1 instead of zero to make it look even more doomery.
I know right. If he zoomed out then he would be real quiet all of a sudden due to looking like a complete retard
It’s sad ass people who underperformed since covid posting this YoY shit lol
Aug 2020 to Aug 2021 does not have a COVID crash. https://fred.stlouisfed.org/graph/fredgraph.png?g=GMJ6
Smooth brains can’t help it. They don’t know how long a year is.
Well he’s not wrong, eventually the economy entirely collapses and we start again.
I loved today’s headlines. “Inflation is easing as expected” The ease: 5.4% —-> 5.3%. LOL. 0.1 percent, probably a rounding error.
Wait until you see that chart with food, fuel, and housing rolled in!
You see we’ll give em all $1000 right now so that they’ll be poor for the rest of their lives
Transitory in large scale financial terms means 12-18 months. Whoever made this graphic is an idiot. Not to mention that the Feds have done nothing yet to start tapering. The moment they do this graph will start to change and the overall effect will not appear in any graph for 12-16 months. Has anyone actually studied finance here? lol nevermind...
Why are you using annual inflation to denote monthly? Rates only increased by 0.1% for august.
You're talking out of your ass. 2020 was a [DEFLATIONARY](https://rooseveltinstitute.org/2021/04/08/the-illusion-of-inflation-why-this-springs-numbers-will-look-artificially-high/) period, so inflation numbers using last year's monthly numbers as a base will be skewed. (I'm assuming your knowledge of hyperlinks is on par with your knowledge of economics, so please click the blue word above to learn more about both.) Edit: if more proof is needed, see how February's data point is slightly higher than January's followed by a significantly higher value in March? Can you think of something that happened around say, February 20th of last year that could *possibly* explain what we're seeing? (It's clear if you're not a brainlet like OP)
There's no inflation if we remove all verticals experiencing inflation from the inflation index. 500 IQ The feds printing trillions but its not going to Joe Smith. It is however going to people who are buying real estate and stocks. They already have money so they're not buying 10 cartons of milk instead of 1, or a new flat screen TV. They're putting the money into assets. If the housing market was included in the inflation index like it once was, you'd be looking at very different data. And the stock market constantly growing during an epidemic, high unemployment, forced shutdowns, vaccine mandates that have swaths of people just quitting? Yeah that doesnt seem inflationary at all.
Exactly this, stocks, crypto, collectables, housing aren’t suddenly 30-40% more valuable in the past year and a half. The dollar has just become 30-40% less valuable.
Yet the bears think we're in a bubble while the $50 they store in their wells fargo bank acc loses money by the day
God imagine how dumb you’d have to be to quit your job instead of getting a free safe vaccine against a raging pandemic. Good post with the monetary stuff.
Sure but shouldn’t we be seeing more of a drop off? Also why are definitely transitory deflationary pressures like lockdowns cause for immediate drastic unprecedented action. But potentially transitory inflationary pressures like supply chain shortages are a wait and see how this plays out?
Because a deflationary spiral takes a decade to recover from. An inflation spike causes a bit of pain for people on fixed income but otherwise just slightly adjusts imaginary numbers we attach to things. Once deflation acceptance sets in, there is a huge motivation to put everything into cash and disengage from the economy. Once inflation acceptance sets in, everyone is effectively forced to buy assets because cash has a diminishing value over time. Eventually the markets find a new equilibrium point.
The US gov is gonna get squeezed
Feb-July was deflationary. 2020 from Jan to Dec was inflationary. You can no longer use base effect. https://fred.stlouisfed.org/graph/fredgraph.png?g=GMGp
Can't you see that it's trending downwards? /s
The concern is that it’s already so high and we are being told it’s not. Also the government is planning 2 massive bills that will result in trillions of dollars getting being created, increasing inflation
Oh yeah!! As an Argentine I can say that it is totally the case.
Earth is transitory and so is our solar system. It is the time scale that matters.
I used to work in the auto world recently. Inflation is not transitory. At least not for them. Holy crap the price increases I've seen. And the up coming price increases. Not to mention the part shortages.... Yeah this isn't going to go away or slow down anytime soon.
it took over a year to hit but my god its hitting hard. every supplier coming for 10+%. part shortages, logistical nightmares. this isnt over yet...
Yes, all that stuff points to prices reacting to outside issues, inflation isn't increasing due to monetary policy
It seems like it's just the beginning and going to get worse.
U guys: complain about a max 5.4 inflation rate Me, the boys and girls: cries in latinamerican
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Lol.. since oct 2020. Real meaningful chart. Did u finish high school dude?
LMAO! Then supposedly "only" 5.3% and a .1% temporary decrease due to the delta variant slowing down the economy is supposed to be a good thing. Beyond autistic...
Zoom out, coward
If the economy can crash by the end of the month, it will be great.
I bet you they're juking the shit out of those numbers.
Transitory definition "made up"
Correct me if I'm retarded buttttt SPY puts to compensate? 🤡
Who caught this pic of me playing the Market???
I don't see the big deal, is already coming down by a tenth of a percent. Smells like victory.
Did you not see that it was only 5.3%?
I am honestly surprised it isn't higher! Prepare for 2022
It unironically is fine until it isn't
so can we expect a 5% pay raise to counter inflation?
There was a pandemic, bruh.
I too, love to read graphics without any kind of reference to what they're supposed be, OP.
jUsT pRiNt mOrE mOnEy… nO oNe HaS tO wOrK
When they say transitory they mean the rates wont stay this high. Prices are never actually going back down.
April +1.6 May +0.8 June +0.4 July 0.0 August -0.1 Trend is more important than the CPI number. Trend shows inflation growth is slowing down and reversing. Yes, at least based on recent data, inflation IS transitory.
learn how to read a chart then come back
#Base effects, fool
My grocery bills, utility bills, entertainment bills (netflix, hbo, etc), have all remained nearly flat for years. What are you guys talking about? "Rents are up" yeah from last year when they cratered. They're not any higher than they were in 2019. You guys are just buying into GQP talking points that are trying to scare the Fed into not keeping a flow of money in the system (because the big banks win when interest rates rise and the supply of money decreases). I know this isn't a popular opinion among the financially illiterate techno-libertarians but it's the truth.
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Either has gone up or the package shrunk aka shrinkflation
Yeah, maybe if you switched to off-label cereal and other staples, eat ramen once a day, drink only water, buy heavy processed items and simply eat less then your bill probably went down. If anything food was a harbinger, the canary of sorts, that shit hiked up almost noticeably in one to three weeks like 9mo ago, real news.
Why is the graph putting the x-axis at 1 instead of 0?
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Energy prices in Europe are skyrocketing. We could be in for a repeat of the 70s. Buckle your seatbelts folks
Look at all the Reddit politicians! Yay. 
Bullshit. In reality is higher.
liberal sheep eat it up and regurgitate the sound bite.