Free Markets

Politicians Play With Fire by Risking Inflation

The value of our money may be the latest victim of pandemic-era policy.

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Prices are rising, government spending is soaring, and trillions of dollars of new money appears as if by magic. It's all intended, we're told, to sustain the economy through the pandemic and then get individuals and businesses back on their feet as COVID-19 fears retreat. But many observers can't help but wonder if rising prices are a sign not of a country returning to health, but of money losing its value in a world starting to suffer a renewed bout with an old enemy of prosperity: inflation.

"Unfortunately, we've turned our backs to inflation during the past decade, and we're about to relearn a painful lesson about respect," warns Connel Fullenkamp, a professor of the practice of economics at Duke University. "The Fed and the Biden administration are dismissing the latest inflation data, claiming that the jump in prices is merely temporary. Besides, they continue, it will be good to let the economy run hot for a while. In other words, don't worry—higher inflation won't be a big deal."

The Biden administration isn't quite dismissing inflation worries, but it is downplaying them and putting them in the context of a return to normalcy after prices for many goods collapsed when demand disappeared during the pandemic.

"We take inflation very seriously," White House Press Secretary Jen Psaki told reporters on May 17. "But there are a number of factors, as the economy turns back on, including — there are areas like the cost of airline tickets where, you know, if you look back at pre-pandemic, they dropped by about 20 percent."

Psaki added that rising prices have "not changed our view and the view of economists, I would say, around the country that there's more that needs to be done to put 8.5 million Americans back to work."

Prominent among what "needs to be done" according to the Biden administration, is lots and lots of federal spending to revive the American economy—with politicians in charge.

"Mr. Biden's plans add up to about $6 trillion and reflect an ambition to restore the federal government to the role it played during the New Deal and Great Society," Glenn Thrush of The New York Times summarized at the end of April.

That figure may be trimmed a bit during congressional negotiations, but it still constitutes a massive sum, on top of the trillions already spent in pandemic-era "stimulus." Worryingly, much of that money was created by the Federal Reserve out of thin air, with M2, a standard measure of money supply, rising from $15.2 trillion in February 2020 to $19.6 trillion a year later.

"While the Fed can create money out of thin air, that does not mean it does so without cost," cautions William J. Luther, assistant professor of economics at Florida Atlantic University. "Indeed, there are two potential costs of creating money that one should keep in mind. The first results from inflation, which denotes a general increase in prices and, correspondingly, a fall in the purchasing power of money."

Even with relatively low inflation, that fall in the purchasing power of money can sneak up on you, eroding the value of any currency you hold. That's why the 2021 dollar will buy only about half of what a dollar would purchase in 1990. A sudden inflationary surge erodes the value of money even more quickly, eating into people's income and savings.

And, in fact, the widely watched (and equally criticized) Consumer Price Index is up 4.2 percent from April 2020 to April 2021. That's "the largest increase over a 12-month period since a 4.9-percent increase for the year ending September 2008," according to the Bureau of Labor Statistics. Production and transportation disruptions, as well as shifts in the way people live, contribute to (presumably) temporary spikes in prices for some goods. But businesses and individuals alike are seeing price increases across the economy, and anticipating more. "[F]orecasters have raised their projections for several measures of inflationary pressures – the consumer price index, the personal consumption expenditures price index and the PCE measure excluding food and fuel – for each quarter through March 2022," reports Bloomberg.

That's a problem for policymakers relying on the American public's long resistance to higher prices to keep a cap on inflationary pressures. If people resign themselves to rising prices no matter what, it's easier for sellers to respond to the pressures they face to charge more for finished products.

Policymakers feel comfortable ignoring warning signs because we've been largely insulated from such pressures for a decade says Duke's Fullenkamp. In part, this was because China based its recover from the financial crisis on becoming the world's factory, reducing costs of production. At the same time, it became increasingly easy for consumers to compare prices and shop online for the best deals. Stagnating wages for some people also placed a cap on price increases. "And the icing on the cake was the fall in energy prices, primarily due to the explosion of hydraulic fracking in the U.S.," he adds.

But even before the pandemic, Fullenkamp saw signs of inflation in rising prices for stocks, bonds, and real estate. "Most people aren't used to thinking about skyrocketing stock and home prices as inflation, but much of the 214 percent increase in the S&P 500 and the 73 percent increase in the Case-Shiller home price index over the past decade was due to all the extra money the Fed dumped into the financial system through quantitative easing," he writes.

If true, that means that inflation potentially remains as great a threat as it has been in periods such as the 1970s when the annual inflation rate, at times, exceeded 13 percent. That devoured the value of money, so that a 1980 dollar purchased less than half as much as a 1970 dollar.

And flirting with inflation is only arguably worth the risk if massive government spending and expansion of the money supply actually is necessary to restart the economy. But industrial production has revived to the point that it is only 2.7 percent below its pre-pandemic level. And the 6.1 percent unemployment rate has not only dropped dramatically from its 14.8 percent high last April, but would probably be even lower if the government would stop paying people to not work. More massive federal spending isn't stimulating the economy—it's distorting it.

"The Fed-driven economy relies on the creation of trillions of dollars — literally out of thin air — that are used to purchase bonds and push money into a pandemic-ravaged economy that has long been dependent on free cash and is only growing more addicted," Axios Markets Editor Dion Rabouin warned in December, even before economic activity picked up.

Politicians may like that addiction—addicts are dependent on their sources, after all. But, if they trigger a new round of inflation and devalue money in the process, nobody will be very happy.

NEXT: Section 230 Haters Aren't Going Away

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  2. You’ll find most economists won’t agree if this is going to be long term inflation or not. Remember that back in 2008-09 inflation went above 2% for a time as well and we didn’t see long term inflation.

    Stimulus money and changing consumer behavior (ie. spending a bunch of money on the house that you’re now at every day since working from home) has impacted a lot. Supply lines can and probably will catch up. Not to mention oil is included in this estimate which is wildly different considering people are driving more with covid easing.

    While you can’t ignore it, saying it’s going to go insane is foolish as we don’t know yet.

    And you can’t blame Biden/Dems for spending anyhow- Rs decided to add 2 trillion to the debt (a full 10% of the debt at the time) for tax cuts for the wealthy. The Dems are just trying to get their cut as well.

    1. Get three economists together and you get four opinions.

      1. Harry Truman said he wanted a one-handed economist, so he couldn’t say “On the other hand…”

    2. Inflation isn’t a problem.

      The real problem is that, somewhere, out there, someone’s making more money than you and gets to keep it.

      1. ^This. The last sentence is what it really wanted to say.

      2. As long as you get the money early on…its great…that is why hedge funds and the primary dealers and the whole “financial sector” have driven inequity since old Tricky Dick decided we were all Keynesians now..by the way we are not.

        1. Half the time I’m arguing against my self-interest for freedom.

          The people that this hurts are all poorer than me.

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    5. You’ll find most “jelly bean counter” (i.e. Gov Funded) economists are IDIOTS when it comes to ‘real’ life economy.

    6. Why is it that it’s always somehow the GOP that’s ultimately responsible for every feckless decision made by any Dem politician?

      The tax cut (including possibly SALT deduction limit which was possibly the single most “progressive” federal tax policy change that’s been made in this country in half a century) was going to add maybe $2Trillion (I seem to remember it being more like $1.7T on the high-end projections) over 10 years, assuming nothing like the pandemic shutdown would happen during that time is looking like it’s going to be undone 4 years in, meaning the full impact won’t actually happen.

      The Dems already got more than “their cut” with the $2Trillion+ “Covid relief” package (almost 20% of which might have actually gone to relieve damage resulting from the pandemic), and now also want “their cut” with a $2.3Trillion “infrastructure” package which might almost make it to 30% of spending eventually leading to some kind of non-political infrastructure (which thanks to the requirement of using union labor will also create a direct kickback donation to the DNC from the AFL-CIO and other unions who take a share of all those paychecks).

      Then when Kamala takes over for Joe (whether the party presses him to step aside or goes 25A on him remains to be seen, but I’d be shocked if he delivers the SOTU in 2023), they’ll once again get “their part” with a GND package that could come in at up to $6T more on top of it all. The real question is whether they’ll still be complaining about not being able to spend “enough” after doubling the size of the Fed balance sheet (up to a total of 20X what it was in 2008) in a span of one presidential term.

      At least they can take comfort in the knowledge that they have a loyal army of sycophants out there who will put the responsibility for every one of those choices on the GOP (while also roundly condemning that party for having opposed all of it).

  3. Nothing but same old lies.

    The Media and Internet Trolls spread these lies in 2012 after the Obama Admin ” threw money out the window.” to their buddies in the TBTF banks.

    Lie 1. Our money has value. False. It has not since Nixon took it off the gold standard. Its impossible to multiply it as they have done since if its tied to a scarce commodity like gold. The value of money us now what the corredponding goods are ” worth”. Cimmodity money caused severe problems in stabilizing the dollar value.

    Lie 2. 2012, like now, that inflation was high.
    That lie was told in 2012 with inflation at an all time low according to the BLS inflation calculator. As I recall it was down to 0.8%.

    Lie 3. Prices and inflation are related. They are not. The famous quote “inflation everywhere is a monetary phenomenon.l,” ( Friedman, I think it was) shows that inflation is, according to economic theory, an excess amount of money PRINTED thats not put into the economy. It is not in use and has no effect on goods or price levels.

    Lie 4. Money is being printed. False. Its the Fed issuing digital credits. Forbes Magazine addressed this lie in 2011 about the Money Printing Myth. 2011 November.

    In 2009 the Chair of the Denver Federal Reserve said that if they didnt claw back these fake credits and they were monitized there would be a disaster.

    Prices went up drastically 2009_ 2012 etc in a period of declining and nearly no inflation because of PRICE GOUGING JUST LIKE NOW.

    CREATE A SHORTAGE, INCREASE PRICES, SCREW PEOPLE OVER.

    1. The value of money is ALWAYS illusory. It is an abstract storage unit for value, not more or less. The same is true of anything used as a medium of exchange rather than as a barter-good in itself. Gold not excepted.

      Which doesn’t mean that whatever politicians are doing with the currency ISN’T shortsighted and stupid.

    2. Lie 3. Prices and inflation are related. They are not. The famous quote “inflation everywhere is a monetary phenomenon.l,” ( Friedman, I think it was) shows that inflation is, according to economic theory, an excess amount of money PRINTED thats not put into the economy. It is not in use and has no effect on goods or price levels.

      Interesting stuff I haven’t heard before. I’ve heard inflation described as more available money increasing demand that existing supply can not meet, so prices go up until supply and demand are better balanced. Is this simply a KIND of inflation or is it a whole new species that is best described by another term than inflation?

      What your quote posits is that inflation is where the money itself holds diminished value where you could have a great amount of it that lacks buying power and so it sits because it can’t afford a specific good. Doesn’t the price of the goods need to rise faster than the amount of money sitting unused for it to be considered inflation? Otherwise, it’s just savings for a bigger purchase, isn’t it?

      1. “It is not in use and has no effect on goods or price levels.”

        Friedman didn’t say that. More the opposite.

        “Inflation is always and everywhere a monetary phenomenon, in the sense that it cannot occur without a more rapid increase in the quantity of money than in output.”

        Which is a recitation of what he had on his license plate MV=PQ.

        When money increases out of proportion to the level of produced goods and services it is inevitable that the people with that money will be willing/able to apply more money in the acquisition of those goods or services. THAT is inflation.

        “Money that is not in use” is not money.

        1. I would add that inflation is not always and everywhere a currency phenomenon.

          We would be better off calling that sort of “inflation” what it truly and precisely is: currency debasement.

  4. “Politicians Play With Fire by Risking Inflation”

    No, they are doing so by trying to SPEND their way out of debt with more debt.

    Same thing Obama did. Vote buying is fun!!

    Ben Franklin said its all over when the People find they can vote themselves money from the Treasury.

    Democrats in charge = more massive debt.

    And you Democrat liars trying to blame Republicans, remember Nutsy Pelosi demanded that SHE in the House is in charge of spending.

    Her words.

    The assbag Republicans are just in bed with them, not actually in charge of spending.

    1. The GOPe enabled so much stupidity. In many ways they’re worse than the Democrats.

  5. I forget which economist said it, but inflation is basically a broad-based tax that nobody recognizes as a tax.

    It’s probably the easiest way forward for the feds. Plan ahead.

    1. And there you have the philosophical basis of the MMT nonsense. If you can’t deliver with growth or fiscal policy, do it by printing as much money as you need. It delivers the “taxes” as surely as passing new taxes without that pesky problem of politics, laws or budgets. And the people who are hurt the worst are the savers…really anyone who has more capital to keep, they’d call it hoard, than they have to spend to stay alive.

      Just put the right people at the Fed and it’s done with a whisper.

      1. Looks like a good synopsis of MMT, nut rubber. And of course with actually calling it what it is, our current administration seems to have embraced it whole heartedly.

        So how are you planning for it? Take everything you have and buy land? Precious metals? Anything with inherent value?

        1. Guns… lotsa guns!

          1. Once read a comment during a bear market along the lines of “The market has not truly failed until the only things going up in value are ammunition and canned goods.”

            The most pessimistic bit of market optimism I can remember.

            1. Have you tried to buy canning jars recently?

            2. 9mm range ammo costs 3 times what it did in late 2019. I’d have to check, but I’m guessing most of the world’s major handgun manufacturers are deep in the weeds covering backordered production as well.

              MRE stock was a little lower than normal last time I swung by the surplus store, but prices didn’t seem to have been raised.

        2. Bourbon? Although, I drink it as fast as I accumulate it so that might not work.

  6. I’m more concerned about the rise of Bitcoin et al and the efforts by China to make the yuan the world currency – when people lose their trust in fiat money, inflation and your dollar being worth less is of little concern when the dollar is worth nothing at all.

    1. Yes. I’m concerned about this. Deflation would be far preferable to currency collapse, but the Fed seems hard set against any kind of deflation at all.

      1. ‘Deflation’ is what will happen when we cease to be able to find an external market for dollar. It is what happens when paying off loans becomes a larger and larger part of your income – and when banks are no longer willing to refinance loans at principal rollover time. When you finally get squeezed dry, you will be popped like a zit. Your loans will be foreclosed and all your property will be taken. If you are lucky the lender will write off the loan at that point and you will no longer have to keep paying. If you are not lucky, you will still have to repay that loan even with all your property taken – oh and that is usually when the lenders declare war on you just to make sure they can find some hidden unsecured assets or force the loans to be paid off coercively with your labor.

        But hey – it’s no problem. It’s your KIDS problem. But fuck them right?

        1. Deflation benefits people with cash instead of assets. Basically, anyone accepting the government money and not paying off debt is either stupid or beyond hope. Young people who have paid off debt and have modest savings but can’t afford a house or to get in on investing benefit from deflation. It’s people with houses they are trying to sell for astronomically more than their worth that lose in a deflationary market. People with assets benefit in inflation. And if enough power brokers keep us in debt and sell their assets at huge profit, they can crash our economy again and put all that cash back in.

          But people with limited debt can weather such a crash.

          We would be better off with a cyclical inflation/deflation and less debt.

          1. “It’s people with houses they are trying to sell for astronomically more than their worth that lose in a deflationary market. People with assets benefit in inflation.”

            Gee, like our eldest extant generation? They benefit disproportionately from current monetary policy? You don’t say…

            Rough on those with fixed, unindexed-to-inflation, incomes though.

            1. “People with assets benefit in inflation.”

              No, they do not. Or at least, they do not reliably benefit. Much depends on the specific asset and what they are doing with it.

              If you own a fraction of your house and have a large fixed note for the rest, and do not want or need to move then yes, you can benefit. Just like anyone else who is highly leveraged. If you have a variable note? Ouch.

              If you own or mostly own your property, and are staying for the long term then no, you lose, because your taxes and upkeep are going to go up out of proportion to your basis. The inflated price you get paid at some later date may never compensate for your already incurred expenses.

              1. Having highly leveraged assets is the best position to be in during inflation (or currency debasement).

                Owning unleveraged assets is still a good position to be in. The value of the assets goes up, and they can still be leveraged at any time.

                Having no significant assets is a bad place to be in inflation/currency debasement.

                Inflation is to inequality what gravity is to an avalanche. Only first-order thinkers (especially “progressives”) can’t see that to be the case. The deflationary periods when the stock and real-estate bubbles burst in 2000 and 2008 are the only times in the last 40 years when the U.S. Gini ratio went down (meanwhile the people who claim to most oppose inequality were the most aggressive advocates of re-inflating those assets as quickly as possible. When Janet Yellin was up for confirmation to lead the Fed, she promised to make as much inflation as possible in the hopes that at some point it might become good for poor people instead of wealthy ones and got thunderous applause from every “progressive” who claims to believe that inequality of the economy’s biggest threat.

        2. Kids don’t vote, or pay union dues.

          1. Not yet…

          2. Of course not. they live in the basement until their 20’s because they can’t even afford to pay rent because housing prices went up.

            But hey – someday they’ll be able to stay in the basement until their 30’s. Course at a certain point – death and tax breaks for investors and continuing refis and cashouts instead of mortgage payoffs – well they’ll get kicked out of the basement.

            1. Unless the CDC bans the kids of folks that were foreclosed on from being evicted.

    2. “… China to make the yuan the world currency”

      In the short term I dont believe this is their goal. They would lose a lot of control over their currency and hence their economy if this happened. Who would they sell all of their garbage products to if they unseat the dollar and the american economy along with it? Then there is the inverse problem of imports. Chinese dont want any of that junk theyre making, theyre going to want american and european luxury goods. China is not a fan of money flowing out of it’s economy. Sometimes being #2 (or 3) has a lot of upside.

      If the yuan becomes the world currency, they’ll suffer the same fate as the US, but probably in half the time.

      1. I think China wants to be the primary global power, with all that comes with it.

        The problem with this is that Xi doesn’t believe in democracy and is actively working (alongside Putin and others) to spread the idea of authoritarianism. It’s just more efficient, see.

        You kind of have to choose, us or them, even if democracy doesn’t give you everything you want.

        If it makes the decision easier, keep in mind that our autocrats will never be as careful and judicious as Xi.

  7. “But there are a number of factors, as the economy turns back on, including — there are areas like the cost of airline tickets where, you know, if you look back at pre-pandemic, they dropped by about 20 percent.”

    I know that when I look at what’s hitting the pocket book hardest, airline tickets is where I start.

    Whoop-dee-shit, Jen.

    1. Airline tickets are cheaper? Almost like supply and demand is a thing. Yeah, airline tickets aren’t daily commodities I need to live my life, cherry pick more useless data points, Jen.

    2. The people who matter travel a lot.

  8. trillions of dollars of new money appears as if by magic.

    FFS. Have ‘libertarians’ become so effing stupid that they no longer even understand what money is? You can’t depend on markets if you don’t even fucking understand what markets themselves depend on in order to create pricing signals. Such a bunch of useless irrelevant fucking idiots.

    Money is not created by magic or by printing. It is created by a LOAN. Public or private – same thing. Meaning – by the ‘magic’ of double-entry bookkeeping – a future payment stream secures more than 100% (meaning principal PLUS interest) of whatever is issued.

    Since there is no economic scarcity of loans (unlike say a money system based on coins), there is no economic/scarcity notion of inflation here.

    All there is is a timing issue – a temporary surplus of currency before the loan repayments begin. At which time, those repayments destroy the money that was created by the loan.

    A repayment risk issue – which in theory (or in a less corrupted country than the US) is a difference between public and private loans.

    A beneficiary issue re that loan and currency proceeds. If the currency goes to some poor schmuck to buy food, that is considered extremely harmful. We call that inflation and measure that. Deadly to the continued subsidy of asset bubbles. If the money goes to buy houses or stock, that is considered extremely beneficial since it provides higher asset prices to lend larger amounts of money in future. That is not inflation at all. Nor is it measured. And we have become completely dependent on subsidizing that – for going on 30+ years now.

    1. “Money is not created by magic or by printing. It is created by a LOAN.”

      Fiat currencies are not money, they are legal tender in the US. They are indeed created not by magic or much printing anymore, but by electronic 1s and 0s which are there for the taking.

      Fiat legal tender is now created with an entry on a PC…

      1. You seem clueless to the fact that it is a LOAN. Which means the repayment provisions (destroying the currency) are directly connected to the issuing of the currency. Just because loans are made digitally does not mean they are comparable to a pigeon pressing keys on a keyboard because it gets free corn.

        1. It is one branch of government making a “loan” to another.

          It is the briefcase full of IOUs from Dumb and Dumber.

          So, which one are you?

    2. A loan ain’t worth dick if it ain’t paid back.

      1. I guess that’s true. So you tell me – who has the better ability to project that repayment risk and indeed force repayment in the event of any ‘problems’?:

        1. the primary broker-dealers who own and operate the NY Fed in conjunction with the banks who make/collateralize all the loans

        or

        2. a commenter on or author at Reason who’s read some Austrian fairy tale about Somalia

        No rush. I’ll wait for the answer.

  9. “The Fed and the Biden administration are dismissing the latest inflation data, claiming that the jump in prices is merely temporary. Besides, they continue, it will be good to let the economy run hot for a while. In other words, don’t worry—higher inflation won’t be a big deal.”

    La de da, tomorrow’s another day.

    1. Because the Fed and OPM Joe are so good at “running” an economy…

    2. Name the commodity, and there is a logical explanation for its current higher prices. Remember, there was a pandemic.

      I just wish this conversation were 1% honest. Runaway inflation is always the threat from these guys. An apple raises by 5 cents and it’s just like tulips all over again.

      You want to see monetary catastrophes, end the fed. Isn’t that what they want too?

        1. Materials costs, low supply, high demand.

          1. That’s logical, but it’s based on faulty assumptions.

            There’s no way you can look at a chart of the price of lumber over the years and blame high housing prices on that.

          2. Excess cash creates higher demand.

            I’m not staring at the general economic data, so I’m not sold on a nascent inflationary episode, but invoking supply and demand doesn’t rule out inflation.

            In particular, inflation is what happens when you push the aggregate demand curve up the aggregate supply curve far enough that the extant capital can no longer efficiently increase production to meet that demand – so prices have to rise. (Aggregate supply and demand models derive directly from money supply models, so the connection to money supply isn’t just coincidental either).

            1. Right, but the point is that the federal government is on top of it. Weimar started as monetary stimulus and ended up in hyperinflation because of debts imposed by foreign countries and a currency tied to gold.

              Creating demand was the point of the covid stimuli. The US government has been trying to prevent deflation, and assuming nobody does anything especially stupid like go back on the gold standard and print quintillions of dollars with nowhere to go, it’s the primary function of the central bank to manage an economy that’s too hot by adjusting interest rates. Housing, of course, is in such high demand partly because mortgage interest rates are rock-bottom.

              But the United States has never experienced a period of hyperinflation except for the Confederate states using Confederate dollars. My take is it’s simply the one economic disaster that Republicans and their allies are aware of (helped get Reagan elected, offers an excuse not to redistribute money). But when we’re still in a period where without government support we’d be in deep recession, not inflation, I think it’s an opportune time for me to make some money off some suckers.

              1. “but the point is that the federal government is on top of it” — Bow down to your gov-gods.

            2. the unintended consequence which is what Keynes never really understood was the impact of the artifically low rates on expanding sectors of the economy whose marginal return would not normally support expansion. You can print a ton of money and give it away for “free” and yes prices will go up as short term supply can’t meet demand..and the obvious response by suppliers. BUT the killer is what do you do when you have sectors overbuilt? Do you continue to subsidize (student loans, housing, healthcare)? Do you continue to run up higher and higher debt (which is a good indication of inflation as if productivity actually went up debt levels wouldn’t) in both private and public sectors when do you pay the piper? With China to off load the dollars and then recycle them back to buy Federal Debt we have off shored our inflation..and that is a very scary thing given it’s implications that to do this you have to stop producing things domestically.

              Inflation is a tax and social distructive force..it is almost always created by govt which is afraid to raise taxes to buy votes or fund wars…

              1. Education, housing, and healthcare are all things that should be subsidized whether there’s market demand or not.

                At some point we should put aside maximizing profits and start living as human beings with human needs.

  10. Risking inflation? It is here. Have you been to a grocery store, gassed up a vehicle or purchased lumber?

    1. Or seen your house price or your 401k account balance?

      1. Because liquidating those to buy groceries is so fucking easy.

        Better to look at wages instead.

        1. Those increasing asset prices based on increasing debt to buy them ARE inflation. We just choose to pretend that it isn’t.

        2. its wages and prices that count in the end. Not GDP or any bullshit measurement that is pretty meaningless like “aggregate demand” which you can’t measure..sorry Keynes created a pseudo science trying to borrow from Physics…

          Food, Transportation, housing, education and healthcare…and all of these have jumped quite a bit and wages have not. If the only way you can afford a house is by the Fed keeping rates artificially low (which only increases prices by the way) and having the Fed Govt backstop..well that dog isn’t going to hunt.

      2. Thinking that inflation benefits your 401K is a special level of stupid.

        1. Not surprising since JFree is a special level of stupid, luckily muting users works really well to keep from seeing egregiously stupid shit.

      3. If my house valuation increases so do my property taxes. Which is horrific since 55% of them go to a school system I didn’t use, am not using and will not use in the future.

        1. Sure you are using them. You get to live in a community without any illiterate feral children. Payment for service.

          1. The Amish kids here don’t use the school, are literate, manage livestock, sell baked goods and operate mechanical equipment. Thankfully, they have parents that parent instead of relying on an expensive, cumbersome government institution that requires people that do not us their service to subsidize them.

            1. I have a ton of respect for the Amish and other groups that step up and take care of themselves.

              But don’t for one nano-second confuse communitarian with libertarian.

        2. And your house price depends entirely on the NEXT buyer. Guess what the main driver of house value is?

          1. What the buyer is willing to pay. But I’m not selling.

            1. So what. You want that legal title defended from anyone else who chooses to pay? Then you pay.

              You didn’t create that land. You didn’t create that title. It is NOT your property. It is a grant of monopoly. The cost of that grant is the cost of that grant. Either you pay it – or it goes to the highest bidder who will pay it.

              You people don’t understand land or history. Which is why you don’t understand much of anything.

  11. It’s been obvious for decades that they are just going to inflate away the debt. Plan accordingly.

  12. Government expansion of the money supply IS inflation.

    If you follow the fallacious practice of calling discrete market price increases “inflation”, then you mistake the symptoms for the cause, and worse create policies to stop the symptoms instead of the cause…

    1. This. They even changed the definition in the dictionary a few decades ago to hide their own malfeasance. I wish reason read more Mises and Rothbard than Friedman.

    2. Indeed.

  13. I’m loving watching the Biteme admin fuck it up. Hopefully there will be some buying opportunities as the chumps clear out. The mid terms are gonna be a full on repudiation of liberalism and leftie assholes. And there’s some great GOP front runners for ’24 who can actually speak and be understood, unlike the dementia patient and his sociopathic protege.

    1. This. They even changed the definition in the dictionary a few decades ago to hide their own malfeasance. I wish reason read more Mises and Rothbard than Friedman.

      1. Oops, replied to wrong post

  14. Rising prices in some sectors is not the same as runaway economy-wide inflation.

    The main reason Republicans are setting their hair on fire over inflation hysteria is because they want to relive the ascendence of Reagan.

    The inflation of the 1970s was caused by bad monetary policy, urged specifically by Nixon to juice up employment rates with cheap money in order to help him win election. Monetary policy isn’t supposed to work that way.

    The major problem for the past 20 years or whatever has been the risk (and reality) of recession. Runaway inflation is a theoretical problem that could happen, but it would take near-deliberate malfeasance on the part of the Fed. That body exists to prevent such things, and it can, because it can control the money supply.

    The caveat to everything is that it’s important to have non-evil non-stupid people making monetary policy, or any other policy. Put an illiterate orange chimp in charge, and you get shit flung on everything.

    And Republicans and perpetual inflation hawks are not to be expected to be arguing in good faith when a Democrat is in the White House. Wouldn’t you just like it if we imposed a recession on purpose? Not to mention the ever-shifting excuses you have to offer for cutting the social safety net, not a regrettable forced reality, an end unto itself, because of moral/cultural assumptions that are bad and dumb.

    1. How much power does the Fed have over inflation? And what will the consequences be to the wider economy? The Fed had been trying and failing to cause inflation for the last decade. Who is the say it will be successful in stopping inflation? Now, I do believe that we can stop runaway inflation with a recession, but, ideally, the Fed can be a bit more delicate than that. However, it has been a long time since the Fed has successfully “taken away the punchbowl” without causing major issues.

      Blaming Trump feels particularly out of place. While he was noisy about what he wanted the Fed to do, they never went along with it. Meanwhile, the Fed announces within a month or so of Biden taking office that they are changing policy to be more tolerant of inflation.

      1. The US does it in a roundabout way, but essentially, if the government can print and destroy money at will, that’s a powerful tool to manage any problems associated with money supply!

        Trump was the most economically literate Republican to come along in a long time, in a way. He knew that to keep the economy afloat and keep voters happy, you send checks. He even signed his name on them so they know who was responsible.

        But that’s not Republican ideology. Theirs is to let recessions and depressions happen and do nothing about them, to lower taxes during booms and lower taxes during busts, but not on anyone who creates aggregate demand. The funny thing about plutocratic looting is it doesn’t work out for most of us regardless of the circumstances.

        1. I disagreed with the “stimulus” checks. And the extra unemployment buff. He was responding to states shutting down their economies under the auspice of covid protection. Cuomo did help him put though by reducing the number of folks eligible for checks.

          1. Don’t you think we’ve had enough of this Puritan bullshit about how people should be forced to work because it’s good for them?

            Do you know where you got this idea? Do you know what the Puritans were concerned about?

            You break your back working so you aren’t tempted to think about sex. That’s what the “work ethic” has always been about.

            People stayed home from work because they didn’t want to get sick and die. You might as well just say in plain English that your economic ideas have no room for things like viruses. And that’s a flaw in them.

        2. “if the government can print and destroy money at will, that’s a powerful tool to manage any problems”

          Never-mind; ***SOME*** of us put ‘labor’ into *earning* money thus by your explanation puts the ‘government’ in the powerful position of making all of us their ‘slaves’…

          Democrats; The party of Slavery.

          1. So you think that dollar bills are things with inherent value?

            1. Yes Tony; Just about everyone considers money a medium of exchange for produce and resources as well as exchange for human labor.

  15. Policymakers feel comfortable ignoring warning signs because we’ve been largely insulated from such pressures for a decade[,] says Duke’s Fullenkamp. In part, this was because China based its recover [sic] from the financial crisis

    If you fire Binion I’ll agree to take a position as copy editor for a reasonable salary.

  16. Just one observation about inflation. When you run inflation numbers over longer periods of time you start getting some really wonky results. Like saying that 2021 dollars are half the value of 1990 value dollars. Does that mean I could have bought a $1000 iPhone for $500 back in 1990? That would have been a neat trick.

    Or maybe that $800 40″ flat screen could have been had for $400 back then. Instead of the 25″ or so CRT that I actually got – pretty seriously bad shopping on my part.

    1. It breaks down on commodities that see substantial technological improvement. (Which is a kind of increased wealth, there’s no point to downplaying that).

      However, if you make a literal apples to apples comparison, you probably could buy twice as many apples in 1990 as in 2021 for the same dollar value. Not all goods change substantially over time, and many of the ones that are most critical to daily living (food, gasoline) don’t change that much.

    2. a single iPhone has more computing power than all the billions of dollars spent on all computers combined in 1950 and before

      obviously hedonics has to reduce this to relative values, but all such judgements are necessarily subjective

      thus you often get (in the same breath) people wondering at the many marvels of 2021 but also (improbably) moaning that people lived better in the 1970s

  17. Housing prices are going up across the country, even in places where the population isn’t growing, and no one wants to build. That’s not a construction shortage, and the fact that the media pins the blame there first is a testament to their own dishonest propaganda.

  18. Economic inflation is devaluation of a monetary unit. For the USA that is our dollar. Looking at the value of the USD over the past four decades interns of the percentages of an ounce of gold, Our dollar has declined in value by 45%, and is falling fast. The highs of the stock market are mostly just the inflation as the government prints money not backed up in our economy. Those of us who do real work for a living are losing, ans our paychecks are about the same as they were most of a decade ago. The FED is monetizing our incredible debt levels ever since the Obama Regime. Our world is looking more and more like an economic crash into poverty as we are headed for WWIII.

    1. All of these things are preventable if you take rank stupidity out of the equation.

      Forget the next particle collider. Get our big brains working on that problem. It’s the only thing that could kill us all.

      Your paycheck has been stagnant for half a century not because of inflation, but because it hasn’t been permitted to rise with inflation because every single cent of the riches generated by productivity gains by you and the technology around you has been gobbled up by your CEO.

      You can’t keep cutting taxes on the extremely wealthy while cutting the social safety net and expect anything other than wage stagnation for the many, absurdly large mansions and actual spaceships for the few.

      1. Keep raising prices on the wealthy, who incidentally just happen to own all the stuff that you’ll soon notice prices rising on– Don’t piss off your owners or you will be sorry

        1. At some point these ridiculous extortion attempts will need to be justified by action.

          Let Charles Koch take his business elsewhere. See how he likes living in some shithole with a small safety net.

      2. “…You can’t keep cutting taxes on the extremely wealthy while cutting the social safety net and expect anything other than wage stagnation for the many, absurdly large mansions and actual spaceships for the few…”

        Lies from lefty shits are not lacking; the supply is far greater than the demand.

  19. Read what some analysts have to say. The Fed is, apparently, running out of options. Inflation may be the only acceptable choice.

    1. Politically it is the least worst option since it disproportionately hits those with the least ability to avoid it. Who, not coincidentally also happen to be the people made furthest from the levers of power.

      You didn’t think the Permanent Fusion Ruling Party’s shift away from the middle class, and their subsequent war against them was in any way accidental?

  20. ‘Risking inflation’? What risking, prices in my industry have been climbing steadily–I just noticed Burger King is now paying $15/hr, so you can bet that prices will be going up even higher

  21. Who will suffer from this? Of course, those who have no influence on it. This is my opinion, best regards. my site

  22. The Nazi’s have majority Gov-Gun control again….
    A Great Depression
    A Great Recession … or …
    A Great FAILING
    … is expected by repeated historical lessons.

    I surprised anyone even uses the USD anymore. No-one sits on USD’s anymore because everyone ‘knows’ it a failing currency.

    1. That day Democrats learned how to *STEAL* massive amounts of produce created by others using Gov-Guns and ‘fiat’ that they stole so d*mn much their “livable wage” produce supply went dry.

  23. nope, Fed will not inflate in the long run, look at the Fred for five-year-forward inflation expectations, it’s at a recent high but well under last month’s rate

    instead, and arguably worse, Fed will be forced to offset greater-than-expected spending with tighter-than-expected monetary policy to hit the target

    then returns to investment mysteriously fall and the left-liberal econ-pundits all nod sagely and chant “secular stagnation”

    but don’t overreact to one month, Fed has essentially infinite ability to inflate or deflate the currency as it wills, but it does not have infinite calibration, there are going to be misses high and low

    of course if you really think we’re about to become VenezWeimar, just buy TIPS

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  26. Argh! I love Reason, but on this they’re letting some economic incompetent embarrass us.

    Government spending cannot cause inflation. In fact, the premise that government spending can stimulate at all is Keynesian, and ignores how inflation actually works.

    “Inflation is, always and everywhere, a monetary phenomenon.”

    In other words, it only occurs when the supply of money shifts higher than demand. You have to actually increase the money supply faster than demand, or have some other equivalent mechanism.

    Government spending cannot do that. In fact, government spending depresses the economy, because it operates under the Broken Window Fallacy, taking money away from mutualistic, wealth-creating transactions to become one-sided wealth transfers. https://www.todaygoldrateinhyderabad.in/

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