Inflation Scaremongering
The post-Covid economy has been weird in a lot of ways. Personally, such surprising and mixed signals tend to lead me to less confident conclusion (eg maybe the interaction between rates, inflation, and unemployment is less clear cut than believed) rather than more (eg the rate hikes definitely had zero effect on inflation), but that's me.
The strangest thing, I think, has been the persistent mismatch between objective economic numbers and subjective economic perception. Are the "objective" numbers wrong? Missing something?
Thought this was an interesting rundown of some possibilities (gift linked for 14 days)
Why Americans Hate a Good Economy (Jersualem Demsas, The Atlantic)
She runs through six possibilities:
1. People need a second to adjust.
2. Inflation is just really that bad
3. Expectations are high
4. The rent is too damn high
5. The biggest winners are at the bottom
6. The media loves bad news.
For myself, I find 5 among the more convincing, as I think people toward the bottom of our economy are often borderline invisible. They aren't regular voters, and aren't well represented in cultural discourse (the (in)famous "working class" voters are generally a step or two above this group).
DaveSchmidt said:
ml1 said:
yes. Pretty much the same point I'm trying to make. What's the evidence for a hard inflation target?
Apparently there isn't any.
Maybe there is. I’m not informed enough to decide either way, and Google searches didn’t suddenly make me so.
Of Kiwis and Currencies: How a 2% Inflation Target Became Global Economic Gospel
Once the law was enacted, though, there was the difficult question of what the inflation target should be. Zero percent? Two percent? Five percent?
Mr. Brash and Mr. Caygill got a head start on an answer from an offhand comment made during a television interview in 1988. Roger Douglas, Mr. Caygill’s predecessor as finance minister, had been seeking to dissuade New Zealanders from thinking that the central bank would be content with high inflation, and so he said in an interview that he was aiming for inflation of around zero to 1 percent.
“It was almost a chance remark,” Mr. Brash said in a recent interview. “The figure was plucked out of the air to influence the public’s expectations.”
With Mr. Douglas’s figures as a starting point, Mr. Brash and Mr. Caygill agreed that it would be best to expand the range to give them more room to maneuver, but only a bit. New Zealand would aim for inflation between zero and 2 percent.
yahooyahoo said:
ml1 said:
tjohn said:
At 2%, prices double every 35 years, at 3%, 23 years, 4%, 17.5 years, 5%, 14 years.
Makes a pretty big difference.
and at what rate do incomes double under those scenarios?
Unfortunately, incomes have not kept up with inflation the past few years. That's one reason why the Fed needs to get inflation down. Companies are too greedy share the spoils with their workers.
this is not true.
Maybe it isn't the economy that has people unhappy. Maybe it is the steady drumbeat of bad news (wars, environmental collapse, etc.) along with a political system that is at war with itself. Maybe views on the economy are just collateral damage.
If we had leadership at this time who could remind us that 1) we have nothing to fear but fear itself and 2) could gains consensus on a way forward, people would be much happier.
PVW said:
The post-Covid economy has been weird in a lot of ways. Personally, such surprising and mixed signals tend to lead me to less confident conclusion (eg maybe the interaction between rates, inflation, and unemployment is less clear cut than believed) rather than more (eg the rate hikes definitely had zero effect on inflation), but that's me.
The strangest thing, I think, has been the persistent mismatch between objective economic numbers and subjective economic perception. Are the "objective" numbers wrong? Missing something?
Thought this was an interesting rundown of some possibilities (gift linked for 14 days)
Why Americans Hate a Good Economy (Jersualem Demsas, The Atlantic)
She runs through six possibilities:
1. People need a second to adjust.
2. Inflation is just really that bad
3. Expectations are high
4. The rent is too damn high
5. The biggest winners are at the bottom
6. The media loves bad news.
For myself, I find 5 among the more convincing, as I think people toward the bottom of our economy are often borderline invisible. They aren't regular voters, and aren't well represented in cultural discourse (the (in)famous "working class" voters are generally a step or two above this group).
Taking it back to politics, this research is constructive for Biden, if one is juxtaposing recent positive economic news with dismal polling.
However my opinion is that individual candidate issues will be more deterministic of next year's election than the economy, just like they were in 2020. Trump presided over a strong economy ex-Covid, but he lost the election because he's an a-hole. Trump is the same a-hole he was four years ago, however concerns about Biden's age and competence are way higher.
ml1 said:
yahooyahoo said:
Unfortunately, incomes have not kept up with inflation the past few years. That's one reason why the Fed needs to get inflation down. Companies are too greedy share the spoils with their workers.
this is not true.
Both true (“the past few years” vs. “the past 2.5 years”). From the full article:
But there are many caveats, Channel says. For one, inflation growth actually outpaced wage growth very recently, from April of 2021 to early this year. Households won't necessarily feel the difference immediately.
And averages can obscure what many are feeling on an individual level, he says. That average wages have potentially increased by more than prices doesn't mean everyone is better off; there will always be households struggling to make ends meet, as other recent data shows.
"It could take more time for rising wages to truly make up for how much higher prices have gone since the height of the pandemic," says Channel. "Though, if they haven't already, I'm confident that increases in wages will eventually totally offset the last few years of abnormally high price increases."
DaveSchmidt said:
ml1 said:
yahooyahoo said:
Unfortunately, incomes have not kept up with inflation the past few years. That's one reason why the Fed needs to get inflation down. Companies are too greedy share the spoils with their workers.
this is not true.
Both true (“the past few years” vs. “the past 2.5 years”). From the full article:
But there are many caveats, Channel says. For one, inflation growth actually outpaced wage growth very recently, from April of 2021 to early this year. Households won't necessarily feel the difference immediately.
And averages can obscure what many are feeling on an individual level, he says. That average wages have potentially increased by more than prices doesn't mean everyone is better off; there will always be households struggling to make ends meet, as other recent data shows.
"It could take more time for rising wages to truly make up for how much higher prices have gone since the height of the pandemic," says Channel. "Though, if they haven't already, I'm confident that increases in wages will eventually totally offset the last few years of abnormally high price increases."
of course wage growth lagged inflation for a the first couple of years of post-COVID inflation. I wasn't implying that it didn't.
but yahooyahoo appears to be talking about taming inflation from here forward because wages didn't increase to keep up. Unless I'm reading him wrong.
ml1 said:
yahooyahoo said:
ml1 said:
tjohn said:
At 2%, prices double every 35 years, at 3%, 23 years, 4%, 17.5 years, 5%, 14 years.
Makes a pretty big difference.
and at what rate do incomes double under those scenarios?
Unfortunately, incomes have not kept up with inflation the past few years. That's one reason why the Fed needs to get inflation down. Companies are too greedy share the spoils with their workers.
this is not true.
From spring of 2021 to spring of 2023, inflation was outpacing wage growth significantly. Sometimes in the range of 2-3%.
How many people here got a raise greater than 8.0% for 2022?
yahooyahoo said:
ml1 said:
yahooyahoo said:
ml1 said:
tjohn said:
At 2%, prices double every 35 years, at 3%, 23 years, 4%, 17.5 years, 5%, 14 years.
Makes a pretty big difference.
and at what rate do incomes double under those scenarios?
Unfortunately, incomes have not kept up with inflation the past few years. That's one reason why the Fed needs to get inflation down. Companies are too greedy share the spoils with their workers.
this is not true.
From spring of 2021 to spring of 2023, inflation was outpacing wage growth significantly. Sometimes in the range of 2-3%.
How many people here got a raise greater than 8.0% for 2022?
does that mean you don't believe the data that the article is referencing?
yahooyahoo said:
From spring of 2021 to spring of 2023, inflation was outpacing wage growth significantly. Sometimes in the range of 2-3%.
How many people here got a raise greater than 8.0% for 2022?
Good point. Wage gains generally result from labor shortages or increases in productivity, the latter of which generally result from technology improvements.
Prices change for many reasons. I’m a bit surprised that a few here dismiss the need to fight inflation at all costs and to keep it as low as possible, as its effects are felt most and hardest by the poor.
Sure, average wages may be up and maybe even keeping up with inflation in the aggregate, but does anyone doubt that those at the upper end of the spectrum skew the numbers?
To not use the only tool that the FED has in raising interest rates to combat inflation makes no sense.
And to think that an armchair economist knows more than the FED is ridiculous. Reminds me of climate deniers, who know better than the scientific community.
jimmurphy said:
Good point. Wage gains generally result from labor shortages or increases in productivity, the latter of which generally result from technology improvements.
Prices change for many reasons. I’m a bit surprised that a few here dismiss the need to fight inflation at all costs and to keep it as low as possible, as its effects are felt most and hardest by the poor.
Sure, average wages may be up and maybe even keeping up with inflation in the aggregate, but does anyone doubt that those at the upper end of the spectrum skew the numbers?
To not use the only tool that the FED has in raising interest rates to combat inflation makes no sense.
And to think that an armchair economist knows more than the FED is ridiculous. Reminds me of climate deniers, who know better than the scientific community.
you know, it's not just "armchair economists" who challenge the Fed's actions. Just because you don't see them talk about it on the TV doesn't mean that they don't exist. What's ridiculous is assuming that the Fed is all knowing and that their actions are all pure. Economics is not really a science, after all.
Inflation is a complex, poorly understood phenomenon. The Fed has exactly one tool to fight it. What are the odds that this one tool is always the best one? Or that it's even effective at all in a given circumstance?
ml1 said:
yahooyahoo said:
From spring of 2021 to spring of 2023, inflation was outpacing wage growth significantly. Sometimes in the range of 2-3%.
does that mean you don't believe the data that the article is referencing?
The article doesn’t give data for spring of 2021 to spring of 2023.
Inflation from April 2021 to April 2023 was 13.6%.
Wage growth from Q2 2021 to Q2 2023 was 11.1%
(Data from the Bureau of Labor Statistics.)
drummerboy said:
What's ridiculous is assuming that the Fed is all knowing and that their actions are all pure.
Not even the Fed assumes that. Who does?
jimmurphy said:
yahooyahoo said:
From spring of 2021 to spring of 2023, inflation was outpacing wage growth significantly. Sometimes in the range of 2-3%.
How many people here got a raise greater than 8.0% for 2022?
Good point. Wage gains generally result from labor shortages or increases in productivity, the latter of which generally result from technology improvements.
Prices change for many reasons. I’m a bit surprised that a few here dismiss the need to fight inflation at all costs and to keep it as low as possible, as its effects are felt most and hardest by the poor.
Sure, average wages may be up and maybe even keeping up with inflation in the aggregate, but does anyone doubt that those at the upper end of the spectrum skew the numbers?
To not use the only tool that the FED has in raising interest rates to combat inflation makes no sense.
And to think that an armchair economist knows more than the FED is ridiculous. Reminds me of climate deniers, who know better than the scientific community.
actually people in the bottom income quintiles did better than those at the top since COVID. I posted links to the data elsewhere in this thread.
There’s an entire invisible economy that could be causing all this debate… people are trading millions of dollars online on pop up sites. No… it’s not amazo.
DaveSchmidt said:
drummerboy said:
What's ridiculous is assuming that the Fed is all knowing and that their actions are all pure.
Not even the Fed assumes that. Who does?
jimmurphy
DaveSchmidt said:
ml1 said:
yahooyahoo said:
From spring of 2021 to spring of 2023, inflation was outpacing wage growth significantly. Sometimes in the range of 2-3%.
does that mean you don't believe the data that the article is referencing?
The article doesn’t give data for spring of 2021 to spring of 2023.
Inflation from April 2021 to April 2023 was 13.6%.
Wage growth from Q2 2021 to Q2 2023 was 11.1%
(Data from the Bureau of Labor Statistics.)
yes.
ml1 said:
actually people in the bottom income quintiles did better than those at the top since COVID. I posted links to the data elsewhere in this thread.
And those people are less visible in our cultural and political discourse.
drummerboy said:
What's ridiculous is assuming that the Fed is all knowing and that their actions are all pure. Economics is not really a science, after all.
Inflation is a complex, poorly understood phenomenon. The Fed has exactly one tool to fight it. What are the odds that this one tool is always the best one? Or that it's even effective at all in a given circumstance?
No such assumption has been made, so that is a straw man. As to purity, I look forward to your evidence that something is amiss with one or more of the Fed governor's conduct.
It *is* complex, and perhaps poorly understood by some.
If there is only one tool, what would be a better one, since it may not be the best? I'd say that the odds are good that the only tool is the best one.
You glossed over my point regarding climate science deniers. What makes them smarter than all of the scientists and what makes you smarter then the Fed? Your certainty regarding what is a fringe position is what I find off-putting, and its only explanation is that it doesn't fit your worldview.
We seem to have had a very good outcome when one considers the entire economy. Since you are so certain, Nostradamus, what would have happened had the Fed not raised rates?
Things would be better now?
jimmurphy said:
No such assumption has been made, so that is a straw man. As to purity, I look forward to your evidence that something is amiss with one or more of the Fed governor's conduct.
Your position is that we shouldn't criticize the Fed because they obviously know better, and you equate any criticism with climate denialism.
If you ask me, it's not much of a strawman
jimmurphy said:
...You glossed over my point regarding climate science deniers. What makes them smarter than all of the scientists and what makes you smarter then the Fed? Your certainty regarding what is a fringe position is what I find off-putting, and its only explanation is that it doesn't fit your worldview.
We seem to have had a very good outcome when one considers the entire economy. Since you are so certain, Nostradamus, what would have happened had the Fed not raised rates?
Things would be better now?
I know you must think you've got a killer analogy here, but in fact it suffers from a pretty fundamental flaw in reasoning.
Climate change is backed up by an empirical science. It rests on near universal support from its scientists and a huge body of research and evidence which has been confirmed for decades. Climate denialists are called denialists specifically because their arguments deny this body of evidence - they either deny its validity or misrepresent it. Theirs is a fundamentally dishonest position.
You are therefore claiming that the Fed's policy positions rest on a similar, scientific body of evidence and near universal confirmation by economists, and Fed critics are simply denying that science.
Ridiculous.
Economics is not a science and the Fed's policies are not backed up by near universal support from economists and a huge body of research and evidence which has been confirmed for decades. Eg, the Fed's policies partly rely on the NAIRU, which by now has been shown to be pretty clearly a fiction. In this case, the argument for being a denialist more aptly applies to the Fed then to its critics.
The Fed's critics that I favor provide well reasoned critiques and do not rely on dishonest arguments. They use data to help support their positions.
And it might not be even fair to regard Fed criticism as a fringe position, though that's admittedly a hard thing to measure. It largely depends on where you go to seek out economics information . As I said earlier, if you depend on who shows up on TV or on the pages of the Times or Wapo you're getting a pretty limited view. If your media sources turn to Larry Summers a lot, time to seek out new sources.
Yes, you can seek out sources that confirm your opinions and you can call all of the mainstream sources wrong. Have fun with that, a la Paul and Nan.
There’s really no point to this, right?
Keep trying to convince everyone else that they are wrong and you are right.
jimmurphy said:
Yes, you can seek out sources that confirm your opinions and you can call all of the mainstream sources wrong. Have fun with that, a la Paul and Nan.
There’s really no point to this, right?
Keep trying to convince everyone else that they are wrong and you are right.
good job ignoring all of the substantive points in my post.
also, good job ignoring all the evidence staring you in the face.
drummerboy said:
“The Fed's critics that I favor…
Step 1: Develop opinion
Step 2: Find sources that confirm opinion
Edited to add: Step 2a: Determine that since critics I favor agree with me, I must be absolutely correct, beyond any shadow of doubt.
Step 3: Post on internet.
Nobody said Fed criticism is a fringe position. That is a straw man.
But yes, when the Fed raises rates to lower inflation and inflation comes down, saying the rate hikes obviously didn’t have their intended effect is a fringe position. And of our course that was served up with a side of your signature know-it-allism, which adds to the tinfoil hat motif.
At any rate (pun intended), you should be pleased that Powell, after being slow to start raising rates, has been so effective in threading the needle and keeping the elusive “soft landing” in play. Biden may still lose, but if inflation and/or unemployment were high he’d really be toast.
Smedley said:
Nobody said Fed criticism is a fringe position. That is a straw man.
jim literally said this:
You glossed over my point regarding climate science deniers. What makes them smarter than all of the scientists and what makes you smarter then the Fed? Your certainty regarding what is a fringe position is what I find off-putting, and its only explanation is that it doesn't fit your worldview.
Smedley said:
...
...
But yes, when the Fed raises rates to lower inflation and inflation comes down, saying the rate hikes obviously didn’t have their intended effect is a fringe position.
yet again, post proc ergo propter hoc.
you like this particular fallacy, don't you.
raising rates is supposed to do things to the economy. those things are then supposed to affect inflation.
the "things", if they even occurred, were negligible. so how could they have produced such a dramatic effect on inflation?
isn't it more likely that inflation dropped for reasons other than raised rates?
of course it is.
jimmurphy said:
drummerboy said:
“The Fed's critics that I favor…
Step 1: Develop opinion
Step 2: Find sources that confirm opinion
Edited to add: Step 2a: Determine that since critics I favor agree with me, I must be absolutely correct, beyond any shadow of doubt.
Step 3: Post on internet.
yeah, your scenario is backwards. I developed the opinion after reading criticisms that made sense to me.
and I am convinced they are correct because their evidence is persuasive, whereas the evidence for the Fed position is not.
don't know about you, but this is how I learn things.
drummerboy