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Inflation

Startz said:
I really should have said that inflationary expectations increase interest rates. If inflation lasts long enough, then inflationary expectations rise.

It is also true that very short term interest rates are set by the Fed, not by the market or market expectations.

Note also that since the beginning of the year the five-year treasury rate has risen about 75 basis points.
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Yes, treasuries are sold at auction, the rates are whatever the market decides. But... the Fed can lower rates by buying back bonds. So, they can and do control even long term rates.
 
lobosrul5 said:
Yes, treasuries are sold at auction, the rates are whatever the market decides. But... the Fed can lower rates by buying back bonds. So, they can and do control even long term rates.
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The Fed certainly controls the overnight rate. Doing this (and some other things) influences long term rates. I don' think it's right to say that the Fed controls long term rates though.
 
Startz said:
The Fed certainly controls the overnight rate. Doing this (and some other things) influences long term rates. I don' think it's right to say that the Fed controls long term rates though.
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Maybe not controls, but they can greatly influence them.

https://www.nytimes.com/2021/07/28/business/economy/fed-taper-questions.html

Once they taper we'll see treasury rates increase, and the suckers holding them at 1 or 2% are going to get burned. I really think there are a lot of people that don't understand interest rate risks when buying bonds.
 
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lobosrul5 said:
ETA: bah there I go forgetting there be foreigners here. I haven't the foggiest about the state of your economy or its policies from decades ago.
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The '70s & '80s inflationary period was pretty well worldwide.
 
The Atheist said:
The traditional view has been that throwing money out creates inflation, and we've now had a decade of that, except the inflation has been assets rather than consumer products, so the idiotically-named "headline inflation" has shown nothing for the entire 12 years since quantitative easing became QE.
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Most of the transmission of the new money that has wound up in assets, has gone to the super-rich as well, which has allowed them to consolidate rents, which has both an offsetting deflationary effect, and a massive increase in the wealth gap. So not only do middle class people have less passive income from rents, their costs-of-living are rising at the same time. The poor of course are utterly screwed, as their wages can barely pay for their shelter.

Central banks are going to struggle with the issue, because printing more money won't fix it, but would exacerbate it nicely. Raising interest rates is a double-edged sword - it's guaranteed to push wage demands higher, leading to more inflation.

I'd love to know which way it's going, because if you pick it right there's a fortune to be made on the bond market.
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Before you short the bond market, consider that it is the primary method for central bank monetary transmission. They can create unlimited money and put a floor on the price of bonds, which means a ceiling on interest rates. This would represent an obscene condition of rising bond prices and consumer price inflation at the same time - will bond investors blink if they believe central banks cannot allow interest rates to rise? They already tolerate NIRP in Japan and Germany.

The endless central bank subsidies of bond and stock markets represent an insane colossal welfare scheme for the rich, perpetuating and widening an unsustainable wealth gap while destroying the social fabric of the developed world.

All of this will be blamed on "capitalism", by those without the intellectual capacity to distinguish between a system based on the private ownership of the means of production, and the colossal fraud of state counterfeiting for the benefit of the super-rich.
 
Inflation in food prices as global prices hit a 10-year high. https://www.aljazeera.com/economy/2021/11/4/inflation-watch-global-food-prices-hit-10-year-high

I have no doubt we will shortly see historical highs, because prices aren't coming down anytime soon, no doubt leading to famine in some places.

NZ has undergone another round of mortgage rate increases already, with the current 2-year fixed rate being advertised at an unbelievable 3.9%, more than double the rate of only four weeks ago.
 
The Atheist said:
Inflation in food prices as global prices hit a 10-year high. https://www.aljazeera.com/economy/2021/11/4/inflation-watch-global-food-prices-hit-10-year-high

I have no doubt we will shortly see historical highs, because prices aren't coming down anytime soon, no doubt leading to famine in some places.

NZ has undergone another round of mortgage rate increases already, with the current 2-year fixed rate being advertised at an unbelievable 3.9%, more than double the rate of only four weeks ago.
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It looks like inflation is coming to Japan too. At least, that's what I saw on my TV this morning.

Fuel prices are up. Mainly anything imported I think.

The thing is, it all seems to be stemming from problems on the supply side.

Semiconductor chips are in short supply, leading to shortages of the end products that incorporate them. There's also shipping problems. The ports on the US west coast are clogged up, and shipments are delayed, both coming and going.
 
Energy crisis. Inflation.

But enough about Jimmy Carter.
 
Hey, that just might work...

If you start with a United States federal yearly deficit of 3 trillion per year,
a 28 trillion starting debt, an ending debt of 100 trillion dollars, an average
inflation rate of 17.5% per year, then after 24 years the 100 trillion becomes
like 2 two trillion in debt today, thus stopping capital starvation in its tracks.

 
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Solitaire said:
Hey, that just might work...

If you start with a United States federal yearly deficit of 3 trillion per year,
a 28 trillion starting debt, an ending debt of 100 trillion dollars, an average
inflation rate of 17.5% per year, then after 24 years the 100 trillion becomes
like 2 two trillion in debt today, thus stopping capital starvation in its tracks.

[qimg]http://www.internationalskeptics.com/forums/images/smilies/arr.gif[/qimg]
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Its why it would be a ridiculous idea the the US ever will or will need to default on our debt, when we can just inflate our way out of it. Negative real yields for decades, here we come!
 
lobosrul5 said:
Its why it would be a ridiculous idea the the US ever will or will need to default on our debt, when we can just inflate our way out of it. Negative real yields for decades, here we come!
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Devaluing one's currency is essentially a soft default.
 
The Atheist said:
It is very reminiscent of the 1970s. Hopefully it won't be quite to that extent, but I'm not betting either way right now.
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What's the current informed assessment on how we got the heck out of "stagflation"? My understanding of it is rooted in a 90s-era analysis of what the Fed was doing wrong and how they finally wised up--with particular regard to policies by Volcker which were at first immensely unpopular, but probably did the trick.

I don't know if that analysis is still accepted 30 years later. Any more recent takes that aren't supply-side bullcrap instead?
 
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gnome said:
What's the current informed assessment on how we got the heck out of "stagflation"?
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Massively high interest rates until the economies had bled enough to get to the point where growth is possible, I think.
 
The Fed is wrong for existing. No human beings should have the power to create money, because it's too great of a power, and too easy to corrupt. Money should be pre-existing, scarce, and independently valuable.

Why is it that no one complains about the asset price inflation that has been occurring more or less since the Fed's inception, but they complain about consumer price inflation?

If there is a large contingent of homeless people who simply cannot afford the price of homes and/or who are not creditworthy enough to buy them, how is this any better for them than consumer price inflation is for the consumer?

If you want to solve the inflation problem and live in a more just world, then you have to abolish central banking, and the fiat money fractional reserve system. Raising interest rates at this point after all the assets have been stolen by the issuance of free money will only hurt the poorest, and ensure "The Great Reset" that people like Klaus Schwab desire.
 
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