OH MY GOD!!! Inflation now at a 3.4% annual rate! Stock market meltdown, bond yields soaring!

The 1970s average inflation rate per year was 6.8%. With some years with double digit rates. By definition, you can't have stagflation with inflation rates around 3%, which is the average rate historically in the US. 2% is the target, but 3% is not uncommon.

The 1970s also saw times of recession marked by two straight quarters of negative growth. While 1.8% growth isn't great, it's still positive growth. The two straight quarters of negative growth isn't an official definition of recession, but hardly any economist would call a quarter with 1.8% growth a recession.

 

Speaking of the second Covid stimulus:
Trump demands that Congress raise second stimulus check from $600 to $2000 under new Covid relief bill
Trump was running for reelection at the time and believed that more Covid relief would help his chances of reelection. By the way the amount was $600 per person so that a 4-person household with two adults and two minor children could end up with a check of up to $2,400.

 

Unnecessary and ridiculous, right?

 

For the record & I bet "the record" is on the long covid thread, I was against the 2nd stimulus. However, it is EZ to Monday morning QB this (Pence wrote an op-ed in summer of 2020 for the WSJ about how there would be no 2nd wave). yeah, it turns out that the 2nd stimulus was bad timing, but all in all, it's called NOVEL for a reason.

 

As you know, inflation and unemployment are generally inversely related other things being equal. The FED knows it too, as well do all the economists who were saying a year or 2 ago it was going to take a recession a to bring inflation down.

 

well inflation went down and no recession and unemployment went down.

The key above is “all things equal”. More often than not they aren’t.

 

Yeah, and a lot of economists are very surprised that inflation went down without an increase in unemployment. But a lot of the reason inflation increased in the first place was due to post-pandemic supply issues and a lot of the reason it came down was because those issues got resolved.

 

Wait I’ve been told it wasn’t spending but just supply chains that drove inflation, is this not true?

Biden had the American rescue plan in March of 2021 1.9 trillion stimulus, the Build back better plan in Nov of 2021 2.2 trillion stimulus. Mind you in March of 2021 Covid was largely over as most were vaccinated.

What do you think the build back better plan does /will do for inflation?

 

That is true but it’s kind of the point. Often all things aren’t equal.

Not only did supply issues resolve, but food and energy issues due to Ukraine was largely stabilized. Also while there was still a lot of excess liquidity in the system, much of it dried up as deficits came back down.

I posted this in the other thread:


The thing is CPI inflation isn’t terribly correlated with unemployment in the short term:

40% of CPI is housing and based on rent measures that significantly lag. This component of cpi is largely baked in for the rest of 2024 as it continues to catch up to new rents. My recollection is by the end of the year it will be between 3-4%.

Then a chunk of the remainder is food and energy. These are correlated to short term demand to a degree, but there are a lot of other factors, such as geopolitical, wars, OPEC, weather, etc.

Then another chunk is services, which tend to follow wages, which are somewhat sticky.

Finally you have some consumer goods and services that are more sensitive to demand swings.

 

Are you ignoring the role of Gov spending and fiscal stimulus with respect to inflation?

It came down because the Fed hammered interest rates, less cheap money less consumer spending.

 

Yeah, that's just not true. In 2023 real consumer spending increased by about 3% and inflation decreased by about 3%.

Consumers Will Continue Spending In 2024

The January 2024 data show a small increase in dollar spending but a tiny decline in inflation-adjusted expenditures. In 2023 consumers increased their total spending by 5.9% (December 2022 through December 2023). After inflation adjustment the gain was still 3.2%. The increase came despite the Federal Reserve’s sharp interest rate increases in 2022 and 2023.

 

The govt doesn’t operate in a vacuum, so of course if the govt is building an increased # of infrastructure projects it would be competing against other construction projects for those materials and labor. That aspect alone is “inflationary”.

Don’t think this matters, considering the supposed “infrastructure deficit” (aging/crumbling infrastructure) is something like $10T to fully repair. It’s not really an option to sit on the sidelines. The people around Baltimore aren’t going to accept “hold on, y’all, not sure we can rebuild this bridge, inflation is kinda high right now”.

 

Simple minds need simple explanations. Explains the entire existence of the GOP. Anyone who thinks a payment 3 years ago, or increased demand, is driving any inflation is utterly bereft of intelligence or honesty. Complexity of factors include supply constraints, corporate pricing, world disruptions and labor shortages. Those are the culprits.

• Housing is much of the inflation over 2% and that is 100% supply driven - there is a whole thread on it.
• Food prices arent going up because of people demanding to eat more.
• Plane miles are down, prices are not. Its not demand.
• Car prices havent risen because more are being sold - not demand.
• Energy usage hasnt spiked
• Oil usage isnt growing, but again, oil output is down other than the US.

So, housing, autos, food, travel, energy are all not demand driven. Where exactly am I to look and see all this free money demand you righties are seeing?

Food Spending Per Year


Plane Miles Per Year


Vehicle Sales Per Year


Energy Usage By Year in TWHs


Oil Consumption by Year

 

This was not a compelling argument.

 

A similar thought (and more needed at the time ) goes for the 2020 covid bill.

 

You always seem to lean on the “simple payment “3 years ago story.
It wasn’t just the direct stimulus to citizens, it was also the litany of payments to business, state and local governments, and Fed reserve fiscal stimulus.
We pumped at least 5 trillion into the economy in a short time, who is shocked inflation shot up to 9% at one point.

 

Meh. The reopening economy drove demand for transportation for about a year and a half which has now subsided back to normal levels but notice how prices didnt come down but corporate profits went up? When their costs dropped they didnt return the prices. But show me where this demand went. Where did these "pumped up payments" go? I just listed most of the major industries leading to inflation and how the demand for goods was disconnected from prices. Egg prices never spiked from demand. All the favorite talking point items didnt increase in prices cuz more people wanted to buy more of them.

 

Lot of great info on what started as a trolling thread. Too bad OP just posts nonsense for attention and won't actually read or understand any of this.

 

Totally agree. I am completely unschooled in economics and I have learned quite a bit and found the differences expressed to be illuminating. I now have a good deal of sympathy for Harry Truman who said (paraphrasing) - my economists tell me that on the one hand this But on the other hand that ….
What this country needs is a one handed economist.