Wholesale prices up 0.4% for month, 8.5% for year

They're not going to halt the rate hikes after receiving a 0.6% reading, especially if they didn't halt the hikes after a 0.0% and a 0.1%. They are still terrified of inflation, if you listen to their commentary recently. A reading that annualizes at 7.2% on CPI is simply going to confirm their fears and likely add to their timeline on rate hikes.

I never made a comparison. I simply pointed out the Fed doesn't want to have prolonged inflation like we had back in the late 70s, early 80s. We are not quite at that point yet. Eventually that would lead to stagflation. I did make a contrast, which was our debt to GDP ratio now versus what it was in the late 70s/early 80s. Which has nothing to do with Fed intervention.

This is faulty arithmetic. The national debt is rising at a much faster pace than inflation. You're assuming the amount of the national debt owed remains static or reduces with time, like a traditional mortgage or car loan. It does not. The principal owed on the national debt is skyrocketing every year.

 

You have it backwards, the "fast rising inflation part" is what makes the long term debt a good deal for the government. We had 31 trillion in debt in 2021 that can now be payed back in less valuable dollars. Granted, new borrowing will be higher, but the bulk of the debt is older than the inflation spike. I mean, if this is such bad deal for the goverment, explain why US bond ETFs are falling fast? It's because investors know the deal. The government is getting a much better deal on the old debt than the new debt.

 

US Bond ETFs are falling, because the value of bonds are falling. Interest rates rise as bondholders sell off. Hence, bond ETF's going down. Has nothing do to with the government getting a good deal on the national debt because of inflation. As their borrowing costs go up, naturally it becomes more difficult for the Treasury to service the pre-existing debt.

I'm going to let you debate Economics 101 with somebody else, but it's been fun.

 

LOL ... come on, man.... why are the old bonds falling? It's because you can buy new bonds at higher rate, so why would you buy an ETF that mostly holds old bonds? It's a complete loser if interest rates on old bonds is below inflation. You probably have bonds issued at less than 1-3% in the mix of these ETFs, with 8% inflation??? It seems obvious to me.

Let me give you an example. My parents bought their property in the mid 1970s, and they thought they were insane, their mortgage payment was barely affordable to them and they struggled for a few years. But guess what ... the high inflation of the 70s and 80s quickly made their fixed mortgage payment a smaller and smaller percentage of their expenses, and by the late 80s, it was "chump change" to them. Rapid devaluation of the dollar and increases in income that accompany inflation will do that for you. Old debt benefits from inflation, period.

The government could benefit in the same way -- especially if incomes keep rising (more tax dollars) and the dollar keeps losing value-- and the longer we have high inflation the better off it will be, when it comes to paying the old debt.

Again, new debt is a problem, but I think we both agree on that.

 

We will never see 2-3% unless the government stops spending money like drunk sailors. The best shot we have is for Feds fund rate to be at 5.75% and we drill drill drill to be energy independent again. We all know Obiden will never do that.

 

Domestic oil production in 2023 is set to be 12.4 million b/d, which would surpass the record high set in 2019, pre-pandemic. And if you use the simple energy independent equation of oil exported minus oil imported, then we are oil independent again under Biden, and have been since 2021. But this definition is way too simplistic, because much of the oil we export is very low grade, and cannot be used for our energy demands.

The news today isn't good, but it isn't awful either. The last three months, we've seen .7% inflation. That works out to 2.8% over the course of a year. Still not where we want to be given YOY numbers, but not all out panic inducing numbers either. Likely another Fed increase, but I hope they don't go too high.

Meanwhile, on the employment front, still very interesting. Low unemployment and still about 1.6 open jobs per person on unemployment. The last recession, it was completely flipped, with only about .5 job open per person on unemployment. Current sign still points to the potential for a soft landing? Very hard to tell, as these are unprecedented times in terms of inflation, employment, and the economy. We've never really had numbers quite like this, so hard to predict what they mean, exactly, for the future.

 

You do know how inflation is calculated correct? It's by annual rate, not month to month.

 

what's the pt of being energy independent & using up our own oil? do you just like big gov marxist bs? does it just make you feel good?

 

That's not exactly true

 

I like how some people say we should just drill more oil and that will fix things. It's almost as if they think that US oil producers are required to sell the oil they drill domestically when really they will just sell it to the highest bidder

 

the BIG GOV energy independence nonsense is almost as idiotic as thinking that trade deficits mean other countries are ripping us off. so dumb

 

Wrong....

US Crude Oil Production

 

Okeechobie, you are going to need a bigger bottle of Advil if you want to debate with wardamn. Head up to Costco before they close.

 

Inflation insta-reduces the real value of debt. A good example of this is post WWII when price controls expired, inflation went up & it reduced debt to GDP ratio from 119% to 92%. Inflation also can raise the cost of future borrowing, but you got to pay attention to the REAL rate not the nominal rate. Example. the gov - for a time - was borrowing at neg real rates in the 1970s despite nominal rates being high. real rates are currently neg. BTW, Econ 101 is micro, so this would not be a topic there.

the general rule is that inf transfers wealth from lenders to borrowers

 

Yeah, I think he may have trolled me. Oh well.

 

btw, you contradict yourself. the value of bonds falling IS THE GOV GETTING A BETTER deal. the debt is WORTH less hence it sells for less.

 

The government has to borrow money to service the pre-existing debt. You may have a point if the government did not have to do this, but they do. Thus that debt becomes exponentially more costly to service, because the new debt taken to service the ponzi scheme is at a higher interest rate. There's no such thing as a free lunch.

 

I'll help you play catch up another time.

 

You do realize that int rate on existing debt does not change, hence it is selling for less. Inflation MAY raise servicing costs, but only if the nominal rate > inflation. The example from post WWII clearly shows inf being a net benefit to borrowers. The lenders bought lunch. there was no free lunch.

The real value of government debt is calculated by dividing the nominal debt value by the price level. So, that unambiguously has gone way down.

 

Yep. Do you realize if you take out a car loan at 3% fixed interest and then you take out a signature loan at 6% fixed interest in order to be able to make the payments on the car loan that you still have to repay that signature loan too?