Startz
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The definition of M1 changed in May 2020 to include savings accounts. Since 2020 M2 has risen by about a third. That's a lot, but nothing like the number from the redefinition of M1.
The definition of M1 changed in May 2020 to include savings accounts. Since 2020 M2 has risen by about a third. That's a lot, but nothing like the number from the redefinition of M1.
Ohmigod, people are talking about M1 again? I can remember when it was the hot topic of conversation around 1982-1983.
Milton Freedman:
Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output. ...
Milton certainly said that. And it is certainly true in hyperinflations and in some long-run sense true more generally. But the connection is not so simple. Here's a graph of annual inflation and M2 growth.
[qimg]https://www.econ.ucsb.edu/~startz/inflation and growth.png[/qimg]
The correlation in the monthly data is -0.05.
Is M2 inclusive of M1? It looks like it isn't because I see the drop in M2 that corresponds with the rise in M1 due to reclassification.
So I feel like this would be more indicative if it was changed to a combined M1+M2 chart.
Cross correlation would be more appropriate there is a delay between monetary changes and inflation. Even then, what you see may not really be indicative as inflation isn't really changing much because the Fed is actively targeting 2%, so changes in inflation over this period are going to be dominated by noise.
M2 does include M1.
Milton Freedman:
Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output. ...
Supply chain issues or other production issues can't produce inflation on their own, they just limit production. Inflation happens when money supplies increase and there is more money chasing a limited supply of goods.
If you want to blame it on Trump, go ahead, but there is a rather obvious reason for the insane bump in M1 in April 2020, and actually I do agree that the giveaway was excessive and inflationary.
Yes the 1,200 dollars poor people got to survive is obviously the problem.
Not that it matters...but the article is pretty clear it's not about mortgages. It's unsecured personal loans.
(Still a pretty big change.)
It's silly not to recognize a lot of money was pumped into the country during the COVID restrictions. So inflation following is a no brainer.
That's a drop in the bucket compared to the money both parties pump into the bottomless pit that is military spending.
Toyota Motor Corp. plans to pause production at more of its plants in Japan as it struggles to procure parts from China because of the prolonged COVID-19 lockdown in Shanghai.
. . .
China's zero-tolerance COVID-19 policy has hurt companies operating there. Toyota's Tianjin plant temporarily suspended its operations in January. Its Changchun plant was also forced to close for about a month and a half from mid-March.
The strict COVID-19 lockdown in Shanghai is affecting other major auto companies as well.
By US standards, Japan’s inflation rate in May might feel paltry. Year on year, the consumer price index rose 2.5%, compared to a heated 8.6% in the US that same month.
As politicians around the globe rush to tamp down inflation, Prime Minister Fumio Kishida is betting instead that older voters in particular will look past surging prices in a crucial election on Sunday.
Kishida has endorsed the Bank of Japan’s unorthodox stance of keeping borrowing costs at rock-bottom levels even as inflation heats up, and the yen has slid to a 24-year low. During the campaign for the Upper House election, Kishida has made the case that higher interest rates would hurt mom-and-pop shops and homeowners even more.
if this was a real inflation, company profit margins wouldn't be so high.
This is a case of price gouging.
if this was a real inflation, company profit margins wouldn't be so high.
This is a case of price gouging.
Does that make you feel better?Corporate profits in the United States fell 4.9 percent to USD 2.40 trillion in the first quarter of 2022, following a 0.2 percent gain in the previous period and compared with preliminary estimates of a 4.3 percent drop. Net cash flow with inventory valuation adjustment, the internal funds available to corporations for investment, fell 2.2 percent to USD 3.16 trillion, while net dividends rose 0.8 percent to USD 1.48 trillion. Meanwhile, undistributed profits slumped 12.8 percent to USD 0.93 trillion...
Corporate Profits in the United States is expected to be 2400.00 USD Billion by the end of this quarter, according to Trading Economics global macro models and analysts expectations. In the long-term, the United States Corporate Profits is projected to trend around 2070.00 USD Billion in 2023, according to our econometric models.
When a random sample of American adults were asked the question “Just a rough guess, what percent profit on each dollar of sales do you think the average company makes after taxes?” for the Reason-Rupe poll in May 2013, the average response was 36%...
How do the public’s estimates of corporate profit margins compare to reality? Not surprisingly they are off by a huge margin. According to this NYU Stern database for more than 7,000 US companies (updated in January 2018) in many different industries, the average profit margin is 7.9% for all companies and 6.9% for more than 6,000 companies excluding financials... more than 72% of industry profit margins were single-digits and the median industry profit margin is 6%....
For the general retail sector, the average profit margin is only 2.3% and for the grocery and food retail industry, it’s even lower at only 1.6%...
Interestingly, for nearly 100 industries analyzed by NYU Stern, there’s only one industry that had a profit margin as high as 36%... tobacco at 43.3%.
The states settled their Medicaid lawsuits against the tobacco industry for recovery of their tobacco-related health-care costs.[1]: 25 In exchange, the companies agreed to curtail or cease certain tobacco marketing practices, as well as to pay, in perpetuity, various annual payments to the states to compensate them for some of the medical costs of caring for persons with smoking-related illnesses. The money also funds a new anti-smoking advocacy group, called the Truth Initiative, that is responsible for such campaigns as Truth and maintains a public archive of documents resulting from the cases.
The settlement also dissolved the tobacco industry groups Tobacco Institute, the Center for Indoor Air Research, and the Council for Tobacco Research. In the MSA, the original participating manufacturers (OPM) agreed to pay a minimum of $206 billion over the first 25 years of the agreement.
Prices are higher. Now you can stop taking pain killers.I thought I could come here and learn why do I have the same amount of money, but I can buy less, instead my head hurts.
Is it something that can be fixed on an individual country basis?
Technically yes, but practically, no.
snip
The sad part is, everyone knew this would happen with unlimited funds being made available at zero interest rates. It's just taken a lot longer to show up, because the inflation had been hidden thanks to house prices not being included in inflation, which has always seemed stupid to me.
I keep seeing people blaming their country's government for high inflation.
Yet, inflation is high in most countries in the world, no matter left or right wing governments.
Is it something that can be fixed on an individual country basis?
In Australia, inflation is caused mainly by businesses increasing profits. Wages have not increased in line with inflation.
In the U.S., the imputed value of rent for house prices is included in the CPI.
While it's true that the countries in that article are experiencing inflation, the effect is far from even. Japan's inflation rate at 2.6% is quite a bit lower than the UK's at 10.1% and then you have Turkey at 79.6%.
I suspect a lot of the inflation we are experiencing today in the US is due to the spending during the recession of 2007-2009, along with the stimulus payments made by Trump and Biden in 2020 and 2021.
Me said:The sad part is, everyone knew this would happen with unlimited funds being made available at zero interest rates.
While it's true that the countries in that article are experiencing inflation, the effect is far from even. Japan's inflation rate at 2.6% is quite a bit lower than the UK's at 10.1% and then you have Turkey at 79.6%. At those rates, Japan's prices would double in 27 years, the UK's would double in 7.2 years and Turkey's will triple in 2 years.
While some of the blame can be laid at the government's door, the problem (at least in the US) is which government. The inflation of the 1970s was mostly caused by Lyndon Johnson. I suspect a lot of the inflation we are experiencing today in the US is due to the spending during the recession of 2007-2009, along with the stimulus payments made by Trump and Biden in 2020 and 2021.
No suspicion needed, it's factual. What caught everyone out was how long it took to be a problem.
While some of the blame can be laid at the government's door, the problem
(at least in the US) is which government. The inflation of the 1970s was mostly
caused by Lyndon Johnson. I suspect a lot of the inflation we are experiencing
today in the US is due to the spending during the recession of 2007-2009,
along with the stimulus payments made by Trump and Biden in 2020 and 2021.
Wow... I'd really like some info on that, never ever have I heard it before. Arthur Burns is probably the person most responsible for inflation in the 70s's, along with OPEC heads of states. Double checked and he was a Nixon appointee.
The inflation spiral that began in the mid-1960s also was war-related. Its roots were in the start of the Vietnam conflict, when President Johnson refused to raise taxes to finance both military operations and domestic social programs.