Thought on Inflation.

[bellisarius]

Here's an interesting quote.

The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.

—Ernest Hemingway, “Notes on the Next War: A Serious Topical Letter,” Esquire, Sept. 1935.

In 1965 LBJ planted the seeds of inflation while escalating war at the same time. It took us damn near 20 years to drive a stake in the heart of inflation, it lasted longer than the war he escalated.

So here we are once more. Inflation based on mismanagement with the scepter of war looming.

 

[Philthy_Phil]

Here's an interesting quote.



In 1965 LBJ planted the seeds of inflation while escalating war at the same time. It took us damn near 20 years to drive a stake in the heart of inflation, it lasted longer than the war he escalated.

So here we are once more. Inflation based on mismanagement with the scepter of war looming.

Every country is experiencing inflation due to the last 2 years of covid, shit for brains.

 

[Lazaran]

Every country is experiencing inflation due to the last 2 years of covid, shit for brains.

The title of the thread was good for a laugh though.

JFC

SAD!!!

 

[pecksniff]

In 1965 LBJ planted the seeds of inflation . . .

How?

Hemingway, of course, was no economist.

 

[GeorgeSoros]

Scepter of war? Looks like Ishy got out the box wine, again.

 

[phrodeau]

It’s no big deal.

https://i.insider.com/5a99bd7b487ff91f008b46fd?width=700&format=jpeg&auto=webp

 

[Lazaran]

Scepter of war? Looks like Ishy got out the box wine, again.

At least "Ishy" had all the necessary letters to spell SPECTER or SPECTRE.

Not bad for a Deplorable.

*half-impressed nod*

 

[pecksniff]

Thought on Inflation.

"Thought" is really too strong a word in this case.

 

[ishtat]

One definite good thing about inflation is that it will lead to demands for wage increases. That in turn will cause conservative business owners to demand more, not less migrants, in order to keep wages down.

They will, it is just a question of when.

 

[bellisarius]

One definite good thing about inflation is that it will lead to demands for wage increases. That in turn will cause conservative business owners to demand more, not less migrants, in order to keep wages down.

They will, it is just a question of when.

The throwing in of "conservative business owners" was rather gratuitous on your part. Why didn't you go with ALL business owners? It all comes down to cost vs competitiveness to which no business is immune regardless of the political leanings of the owner(s).

You are right concerning the issue of wages though and that sets up an Ouroboros situation, doesn't it? That will drive inflation even further and the sad reality is that wages will always lag in that environment. I believe the comment Milton Friedman made on the subject was "taxation without legislation."

 

[icanhelp1]

The throwing in of "conservative business owners" was rather gratuitous on your part. Why didn't you go with ALL business owners? It all comes down to cost vs competitiveness to which no business is immune regardless of the political leanings of the owner(s).

You are right concerning the issue of wages though and that sets up an Ouroboros situation, doesn't it? That will drive inflation even further and the sad reality is that wages will always lag in that environment. I believe the comment Milton Friedman made on the subject was "taxation without legislation."

Right now fighting inflation with fed rate hikes is going to cause more problems then it solves. Till the supply chain is remedied inflation will feed on itself. When you have too much money chasing too few products the best remedy is to increase supply and quantitative tightening. Although cheap labor is good for business it won't solve the problem of inflation long term. If Biden would have just entered office and sat back and did nothing, taking advantage of pent up demand most of these problems would have solved themselves. Continuing a positive approach to energy and maintaining an aggressive approach to energy independence would have kept the Russians at bay and kept oil prices low and gas prices at the pump more palatable.

 

[jomar]

Every country is experiencing inflation due to the last 2 years of covid, shit for brains.

Not to mention Putin is leading the scepter of war, not Biden.

Ish/bell, have you tried Big Sipper? Apparently it’s giving your Franzia a run for the money!

 

[icanhelp1]

One definite good thing about inflation is that it will lead to demands for wage increases. That in turn will cause conservative business owners to demand more, not less migrants, in order to keep wages down.

They will, it is just a question of when.

Wage increases due to inflation is never a good thing, it's adding gasoline to a fire. Wage increase due to competition and full employment complement each other and the best way to control inflation.

 

[LittleDixie]

Inflation is one of those words that has gone through definition creep.

Inflation does not mean that prices are going up across the board. Inflation is the expansion of the currency supply. Whenever the currency supply is inflated (increased), we have inflation. Rising prices is a predictable result of this, but the rising prices are a symptom of inflation, not inflation itself.

When you increase the supply of dollars, you make all dollars less valuable.

 

[JohnnySavage]

Right now fighting inflation with fed rate hikes is going to cause more problems then it solves. Till the supply chain is remedied inflation will feed on itself. When you have too much money chasing too few products the best remedy is to increase supply and quantitative tightening. Although cheap labor is good for business it won't solve the problem of inflation long term. If Biden would have just entered office and sat back and did nothing, taking advantage of pent up demand most of these problems would have solved themselves. Continuing a positive approach to energy and maintaining an aggressive approach to energy independence would have kept the Russians at bay and kept oil prices low and gas prices at the pump more palatable.

I generally agree with this.

Inflation is one of those words that has gone through definition creep.

Inflation does not mean that prices are going up across the board. Inflation is the expansion of the currency supply. Whenever the currency supply is inflated (increased), we have inflation. Rising prices is a predictable result of this, but the rising prices are a symptom of inflation, not inflation itself.

When you increase the supply of dollars, you make all dollars less valuable.

This is nonsense. You should get your money back for that Econ degree.

 

[jomar]

Lit PB experts are awesome.

 

[LittleDixie]

"...the essence of inflation is not a general rise in prices but an increase in the supply of money, which in turns sets in motion a general increase in the prices of goods and services."

"Inflation, as this term was always used everywhere and especially in this country, means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. But people today use the term `inflation' to refer to the phenomenon that is an inevitable consequence of inflation, that is the tendency of all prices and wage rates to rise. The result of this deplorable confusion is that there is no term left to signify the cause of this rise in prices and wages. There is no longer any word available to signify the phenomenon that has been, up to now, called inflation. . . . As you cannot talk about something that has no name, you cannot fight it. Those who pretend to fight inflation are in fact only fighting what is the inevitable consequence of inflation, rising prices. Their ventures are doomed to failure because they do not attack the root of the evil. They try to keep prices low while firmly committed to a policy of increasing the quantity of money that must necessarily make them soar. As long as this terminological confusion is not entirely wiped out, there cannot be any question of stopping inflation."

https://mises.org/library/defining-inflation

Ludwig von Mises

 

[JohnnySavage]

Ludwig was talking about a closed economy prior to globalization.

For your pilfered quote to be true, you are arguing that the entire global money supply has increased?

Again... nonsense.

 

[GeorgeSoros]

Ludwig von Mises

Ludwig von Mises? Conager is really working hard for those AJ belly rubs.

 

[icanhelp1]

Ludwig von Mises

The over abundance of money combined with a reduction in product availability decreases the value of the dollar and increases the value of product and services. When the value of product due to shortages go up and the amount of money available, chasing said product, is also abundant then people will be more willing to purchase at the higher price. Until an equilibrium between product availability and money supply is reached inflation will respond up or down. Eventually when demand for a product goes down the price usually follows. Inflation is real not perceived!

Raising the fed rate, I believe, will have a devastating effect on the housing market and possibly expose banks to the likes of the banking crisis in 2007/2008. IMHO

 

[bellisarius]

Everybody's right here.

There are three basic forms of inflation. Demand-pull, Cost-push, and builtin.

Demand-pull is basically too much money chasing too few goods. The primary culprit here is a dramatic increase in the money supply. From Jan. of 2020 to Nov. 2021 the M2 money supply increased by approx. 33%.

Cost-push is basically when manufacturing costs increase. Energy is one of the big drivers here. From Jan. 2020 to today crude oil prices have increased 61%.

Builtin is basically normal economic growth. Wages and prices grow annually at a moderate rate, typically in the 1% to 3% range.

Effectively we have a double whammy working against the economy today. Both cost-push and demand-pull are doing their thing.

 

[WillJ8787]

The over abundance of money combined with a reduction in product availability decreases the value of the dollar and increases the value of product and services. When the value of product due to shortages go up and the amount of money available, chasing said product, is also abundant then people will be more willing to purchase at the higher price. Until an equilibrium between product availability and money supply is reached inflation will respond up or down. Eventually when demand for a product goes down the price usually follows. Inflation is real not perceived!

Raising the fed rate, I believe, will have a devastating effect on the housing market and possibly expose banks to the likes of the banking crisis in 2007/2008. IMHO

Only two tools exist for this....raise the interest rate or tell folks to stop "demanding" goods...and they actually have to listen and do it.

So, only one tool exists....slow raises in the interest rate do exactly what they are intended to do.... essentially, curtail the supply of money(USA dollars can be viewed as a finite resource) which increases its value(deflation) without pulling the volume of currency off to the side(decrease the money supply).

Increase and decreases of the money supply can and often are devastating to economies (plenty of historical example of this). The safer way is manipulation of the interest rate...which allows folks a choice as to what to do with their money.

Also, it isn't a given that:
Inflation will never occur
Product and services will remain cheap
Even countries with fairly good economic policy won't experience catastrophic economic challenges.

 

[icanhelp1]

Only two tools exist for this....raise the interest rate or tell folks to stop "demanding" goods...and they actually have to listen and do it.

So, only one tool exists....slow raises in the interest rate do exactly what they are intended to do.... essentially, curtail the supply of money(USA dollars can be viewed as a finite resource) which increases its value(deflation) without pulling the volume of currency off to the side(decrease the money supply).

Increase and decreases of the money supply can and often are devastating to economies (plenty of historical example of this). The safer way is manipulation of the interest rate...which allows folks a choice as to what to do with their money.

When you raise the fed rate you affect many areas negatively starting with the interest on our debt.

You missed a tool, the one in the white house.

 

[phrodeau]

When you raise the fed rate you affect many areas negatively starting with the interest on our debt.

You missed a tool, the one in the white house.

So increase the tax burden on the wealthy. Pay down the debt and reduce the money surplus at the same time. Win win!

 

[bellisarius]

When you raise the fed rate you affect many areas negatively starting with the interest on our debt.

You missed a tool, the one in the white house.

Current interest payments on the debt is $562 Billion/year. You can figure out how much a 1% increase in the interest rate is going to cost. The source for this is the US Treasury.