9 hours ago, The_Omega said:

 

 

That graph shows inflation rising rapidly before Biden was inaugurated on 1/20 and then leveling slightly right after the 3rd stimulus was passed on 3/21 (end of Q1).

"I don’t think any president would say he himself made [inflation] happen – of course the public policy that we’re engaged in made it happen, BUT the private sector made it happen too,” Pelosi said.

It’s "just the way it is,:” Pelosi said.

🙄

Well, I had to buy generic saltine crackers today. Pretty much outraged right now. F you Joe Biden. 

https://fred.stlouisfed.org/series/CURRCIR

Before the pandemic we had $1.8T in circulation. When Joe took office it was at $2.1T. now it's at $2.2T.

Cash in circulation goes up more than 22% in response to COVID, 75% of which was before Biden took office.

The American Rescue Act contributed to inflation, but the inflation you're seeing is the release of a lot of inflationary pressures that built up even before Covid. And once inflation starts it can snowball.

5 hours ago, JohnSnowsHair said:

https://fred.stlouisfed.org/series/CURRCIR

Before the pandemic we had $1.8T in circulation. When Joe took office it was at $2.1T. now it's at $2.2T.

Cash in circulation goes up more than 22% in response to COVID, 75% of which was before Biden took office.

The American Rescue Act contributed to inflation, but the inflation you're seeing is the release of a lot of inflationary pressures that built up even before Covid. And once inflation starts it can snowball.

Probably not made better by the pandemic and war in Ukraine.

1 hour ago, Toastrel said:

Probably not made better by the pandemic and war in Ukraine.

Certainly not. But what causes inflation is incredibly complex.

When QE was implemented in response to the financial crisis, worries about inflation were everywhere. But ultimately it didn't amount to much, the general thought being it was offset by the deflationary pressures caused by the crisis itself.

With COVID related QE, there were some early deflationary pressures that probably helped - for example demand for gasoline plummeted and stayed down for a while. Gas prices had rebounded by the end of 2020, coupled with supply chain issues that constrained goods to market and you have a perfect storm for inflation. 

And there is a psychological element to inflation as well. When inflation is expected, it affects buying - people end up rushing to buy more now ahead of expected price increases. This drives inflation higher.

To be sure the political price here will be paid by the party in power. It doesn't matter how well reasoned or accurate an argument might be that Biden's impact on the current inflation levels is overstated. The American Rescue Act surely contributed. But a lot of inflation was already baked in. 

I'd be curious what Vikas thinks. He certainly would have a more informed position.

13 minutes ago, JohnSnowsHair said:

Certainly not. But what causes inflation is incredibly complex.

When QE was implemented in response to the financial crisis, worries about inflation were everywhere. But ultimately it didn't amount to much, the general thought being it was offset by the deflationary pressures caused by the crisis itself.

With COVID related QE, there were some early deflationary pressures that probably helped - for example demand for gasoline plummeted and stayed down for a while. Gas prices had rebounded by the end of 2020, coupled with supply chain issues that constrained goods to market and you have a perfect storm for inflation. 

And there is a psychological element to inflation as well. When inflation is expected, it affects buying - people end up rushing to buy more now ahead of expected price increases. This drives inflation higher.

To be sure the political price here will be paid by the party in power. It doesn't matter how well reasoned or accurate an argument might be that Biden's impact on the current inflation levels is overstated. The American Rescue Act surely contributed. But a lot of inflation was already baked in. 

I'd be curious what Vikas thinks. He certainly would have a more informed position.

Inflation is simply a function of supply and demand, and we are currently hitting a period of elevated demand (caused by the economy re-opening and increased money supply) with limited demand (mainly thanks to the issues of restarting the supply chain post COVID). It's all coming together simultaneously to drive inflation, but there is some real nuance here that needs to be discussed. I'd say these are the factors contributing to inflation:

1. Expanding money supply/government spending -- this isn't a new problem, but the COVID relief measures put it on steroids. And it's not just the free money from the government. It's also things like eviction freezes -- people don't need to pay rent, leaving more money to buy things since money is fungible. Now, you mentioned that QE in response to the financial crisis "didn't amount to much" inflation, but that's not exactly right. Remember, the government heavily manipulates inflation data by using heuristics and manipulating the basket. Look at the price of homes -- after bottoming at ~260k in Q4 '11, it hit $478k in Q4 2021. That's a 6.3% annual increase, which we would say is rampant inflation, but it doesn't hit a CPI basket that prioritizes rent in a low rate world (lower cap rates = lower rents). So assets like housing and stocks (S&P up over 15% per year for same period) skyrocket on cheap borrowing, but CPI is manipulated lower. This obviously got much worse with COVID relief.

2. Supply Constraints -- The global supply chain isn't designed to shut down and re-start. Think of it like shutting down a massive piece of equipment and then trying to re-start it a year later -- ish is gonna break. The global supply chain is based on just-in-time delivery, so a breakdown in any part of the chain will cause an issue. So when China shuts down a region, everything stops in certain supply chains. On top of that, in response to COVID, a ton of capacity was permanently taken out of the market, especially in transport (shipping, trucking, etc.). 

3. Rising input costs -- Away from transportation, the cost of other inputs (goods and labor) are rising quickly. One of the reason we avoided/could lie about inflation previously was thanks to deflation in the cost of labor thanks to outsourcing. By moving jobs to China/Mexico/Vietnam, companies cut labor costs more than enough to offset rising input prices like oil. But there's no where left to move (Africa doesn't have the infrastructure), and wages are now rising in those places. So labor costs are are going up for the 1st time in decades.

4. Pent Up Demand -- basically, everyone wants out and is flush with cash thanks to the government money train. Look at the cost of hotels right now -- off the charts. 

You don't get this without all of the above. If the supply chain were working, we'd have inflation, but not 7%. If the government cut spending, we'd likely have stagflation until the supply chain fixes itself. The only real answer is we have to take the pain -- the Fed raising rates isn't going to do that much given supply constraints. 

Are supply chain issues still persisting? I know there are regions of China intermittently dealing with shutdowns because of Covid, but I have no feel for the effects. My gut feeling is supply chains are performing at or near pre-pandemic levels but demand is still outpacing, but that's a casual take.

The point about wages starting to rise in manufacturing centers abroad is interesting, and IMHO a good thing that globalism promised: poor countries entering the manufacturing pipeline would be their first step in climbing an economic ladder. I do think investments in Africa would be interesting and worry about what fruit that will bear for China because that seems a big part of their strategy lacking here, but we'll see which bet is the right one.

2 minutes ago, JohnSnowsHair said:

Are supply chain issues still persisting? I know there are regions of China intermittently dealing with shutdowns because of Covid, but I have no feel for the effects. My gut feeling is supply chains are performing at or near pre-pandemic levels but demand is still outpacing, but that's a casual take.

The point about wages starting to rise in manufacturing centers abroad is interesting, and IMHO a good thing that globalism promised: poor countries entering the manufacturing pipeline would be their first step in climbing an economic ladder. I do think investments in Africa would be interesting and worry about what fruit that will bear for China because that seems a big part of their strategy lacking here, but we'll see which bet is the right one.

The supply chain is still completely screwed. Guys are paying in advance to try and get goods. Every company I talk to says they can't get products without paying up, and then they still get cut back. 

It doesn't turn back on in an instant. It's going to take the rest of the year at a minimum.

2 minutes ago, vikas83 said:

The supply chain is still completely screwed. Guys are paying in advance to try and get goods. Every company I talk to says they can't get products without paying up, and then they still get cut back. 

It doesn't turn back on in an instant. It's going to take the rest of the year at a minimum.

I just talked to some old coworkers this afternoon. They have orders for about 120,000 cases of product a week and are barely making half that. 

And get this, Arm and Hammer cannot even supply its own factories with enough bicarbonate (baking soda) to keep their own lines running. 

1 minute ago, Boogyman said:

And get this, Arm and Hammer cannot even supply its own factories with enough bicarbonate (baking soda) to keep their own lines running. 

My old company would have solved that by having one division sell the product to another and declare the profits so the division president got a bonus.

4 minutes ago, JohnSnowsHair said:

My old company would have solved that by having one division sell the product to another and declare the profits so the division president got a bonus.

It's a serious problem for them. For instance, some of the toothpastes are 60 percent bicarbonate. To keep the dental area running, they need at least one 45,000lb trailer a day, usually a bit more than that (say 6 or maybe 7 for a 5 day week depending on the products on the schedule) They are getting 2 a week if lucky.

Lots of other stuff is coming up really short as well. We would go through 2 sorbitol tankers a day, they have been getting 1 most days and some days none. The bicarbonate thing is alarming though, because they produce it themselves.

On 4/1/2022 at 6:48 AM, JohnSnowsHair said:

https://fred.stlouisfed.org/series/CURRCIR

Before the pandemic we had $1.8T in circulation. When Joe took office it was at $2.1T. now it's at $2.2T.

Cash in circulation goes up more than 22% in response to COVID, 75% of which was before Biden took office.

The American Rescue Act contributed to inflation, but the inflation you're seeing is the release of a lot of inflationary pressures that built up even before Covid. And once inflation starts it can snowball.

Goes back further to the onset of QE. And beyond that…

On 4/1/2022 at 2:21 PM, vikas83 said:

The supply chain is still completely screwed. Guys are paying in advance to try and get goods. Every company I talk to says they can't get products without paying up, and then they still get cut back. 

It doesn't turn back on in an instant. It's going to take the rest of the year at a minimum.

We just cut a deposit for an october/nov delivery on some capex

1 hour ago, ToastJenkins said:

Goes back further to the onset of QE. And beyond that…

Sure. Inflation has been crazy low for decades despite the financial engineering the Fed has been applying. I think a good chunk of what you're seeing is inflationary pressure kept at bay at least partially by collective psychological will, and now we're going to experience a correction.

But my point is that blaming all this on policies put in place by Biden is stupidity.

He'll pay the political price either way, of course.

7 minutes ago, JohnSnowsHair said:

Sure. Inflation has been crazy low for decades despite the financial engineering the Fed has been applying. I think a good chunk of what you're seeing is inflationary pressure kept at bay at least partially by collective psychological will, and now we're going to experience a correction.

But my point is that blaming all this on policies put in place by Biden is stupidity.

He'll pay the political price either way, of course.

Fed policy has been identical in both parties

3 minutes ago, ToastJenkins said:

Fed policy has been identical in both parties

Sure. I don't think that changes anything I said.

If we want to "blame" someone, the Fed is the more logical choice. The question then comes down to gaming out what the economic reality would have been without the Fed's actions, or at least with different actions taken.

If nothing else I hope the inflation scare will keep MMT nonsense from taking (more) hold.

Too late that cancer is wide spread

On 4/1/2022 at 2:06 PM, vikas83 said:

the Fed raising rates isn't going to do that much given supply constraints. 

I don't see how the Fed can make any significant rate hikes in any event.  The interest on the national debt makes it unsustainable.  This is not the early 80's where Paul Volcker's Fed was able to jack up rates to unseen levels before or after to stop inflation.

Low lead 100 octane avgas is up $1.00 to $6.71 a Gallon. 😒

 

"Putin Price Hike" 

Ohhh F off