American Economics Thread

[KYli]

And United States is in either recession or stagflation, but regardless of that. What does that have to do with the Fed making a "tough" or "easy" decision? Regardless of whether the interest rates were raised by 0.25% or 0.5% or a full percentage, the Fed is continuing to keep rates high. It is actively monitoring the situation and try to make the best decisions it can, regardless of how it looks politically.

At the moment, the US growth is very slow and the inflation is very high. That means the US is in stagflation.

Inflation is transitory as a few months ago according to the Fed and many experts. The inaction of the Fed during late 2021 and early 2022 causes the inflation to get out of control. People just don't have a lot of faith in the Fed at the moment.

As Inflation is causing by expectation and If the Fed is soft, then people think the Fed won't make tough decision and subsequently people expect inflation to climb and workers would demand more salaries, companies would increase prices on their products, and landlord would ask for more rent. That's the cycle of unbreakable hyperinflation that has been a problem for many nations. Because people don't have faith in the central bank and the government to contain prices and the expectation of price increases would become a self-fulfilling prophecy.

The 70s and 80s were a painful period because Volcker raised rates so aggressively. Stagflation is mis-represented because most people haven't studied its history and/or they didn't live through it. To be fair, neither have I.

But, in terms of the economic pain, stagflation is particularly feared because Volcker had to induce a deep recession to end high inflation. He cut a limb to save the body. Today, United States is facing a different problem. Unemployment isn't high, it's actually extremely low with very high labor demand. Inflation is high, but has significantly come down over the last 3-6 months.

Deflating bubbles doesn't mean "popping" them, and while the world and pundits have been mocking Fed's stated goal of a "soft landing", the Fed has actually been working hard and succeeding at achieving just that.

That's what they said about inflation is just transitory and Modern Monetary theory. They always say this time is different. This time the unemployment is low and labor demand is high. Wait until the shit hits the fan, and then they would find another excuse to explain why they haven't seemed it coming.

Most people have already burned through their savings accumulating during the pandemic to keep food on the table. After they burned up their savings, then what. I don't know about you. But my spending for groceries has doubled during the last two years and is still rising. Friends that I know that don't owe a home have their rent increase at least 50% and some even double. Without a recession, it is likely these prices would keep increasing and let along come down.

The so called soft landing is wishful thinking at best and self delusional at worst. The Fed just doesn't have stomach to make tough decision anymore and would sell such copium like they did by saying inflation is transitory a few months ago.

 

[Chevalier]

At the moment, the US growth is very slow and the inflation is very high. That means the US is in stagflation.

Inflation is transitory as a few months ago according to the Fed and many experts. The inaction of the Fed during late 2021 and early 2022 causes the inflation to get out of control. People just don't have a lot of faith in the Fed at the moment.

As Inflation is causing by expectation and If the Fed is soft, then people think the Fed won't make tough decision and subsequently people expect inflation to climb and workers would demand more salaries, companies would increase prices on their products, and landlord would ask for more rent. That's the cycle of unbreakable hyperinflation that has been a problem for many nations. Because people don't have faith in the central bank and the government to contain prices and the expectation of price increases would become a self-fulfilling prophecy.

That's what they said about inflation is just transitory and Modern Monetary theory. They always say this time is different. This time the unemployment is low and labor demand is high. Wait until the shit hits the fan, and then they would find another excuse to explain why they haven't seemed it coming.

Most people have already burned through their savings accumulating during the pandemic to keep food on the table. After they burned up their savings, then what. I don't know about you. But my spending for groceries has doubled during the last two years and is still rising. Friends that I know that don't owe a home have their rent increase at least 50% and some even double. Without a recession, it is likely these prices would keep increasing and let along come down.

The so called soft landing is wishful thinking at best and self delusional at worst. The Fed just doesn't have stomach to make tough decision anymore and would sell such copium like they did by saying inflation is transitory a few months ago.

I imagine this is why they want to increase unemployment, reduce pressure for higher wages and priced to bring down inflation

 

[HighGround]

At the moment, the US growth is very slow and the inflation is very high. That means the US is in stagflation.

Inflation is transitory as a few months ago according to the Fed and many experts. The inaction of the Fed during late 2021 and early 2022 causes the inflation to get out of control. People just don't have a lot of faith in the Fed at the moment.

As Inflation is causing by expectation and If the Fed is soft, then people think the Fed won't make tough decision and subsequently people expect inflation to climb and workers would demand more salaries, companies would increase prices on their products, and landlord would ask for more rent. That's the cycle of unbreakable hyperinflation that has been a problem for many nations. Because people don't have faith in the central bank and the government to contain prices and the expectation of price increases would become a self-fulfilling prophecy.

That's not what stagflation is. A key indicator of stagflation is high unemployment, amidst low economic growth and high inflation. This present a dilemma for policy makers since traditional methods to increase economic growth and alleviate unemployment, will involve measures that encourage inflation.

As to your point about people not having confidence in the Fed, well I don't listen to what random people say, or what is printed on the headlines. I look at key economic indicators. And what do they tell us? Well they tell us that Fed's interest hikes have been effective. The most recent

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indicates that month-to-month (MtM) inflation was actually negative 0.1 percent this December, and MtM inflation over the past 3-6 months is significantly lower than from earlier this year.

So no, basic economic data tells us that United States has largely weathered the supply chain storm from Covid, and then dealt with the after-effects rather effectively.

That's what they said about inflation is just transitory and Modern Monetary theory. They always say this time is different. This time the unemployment is low and labor demand is high. Wait until the shit hits the fan, and then they would find another excuse to explain why they haven't seemed it coming.

Most people have already burned through their savings accumulating during the pandemic to keep food on the table. After they burned up their savings, then what. I don't know about you. But my spending for groceries has doubled during the last two years and is still rising. Friends that I know that don't owe a home have their rent increase at least 50% and some even double. Without a recession, it is likely these prices would keep increasing and let along come down.

The so called soft landing is wishful thinking at best and self delusional at worst. The Fed just doesn't have stomach to make tough decision anymore and would sell such copium like they did by saying inflation is transitory a few months ago.

There is not a single person on the Federal Reserve Board who believes in Modern Monetary Theory. Furthermore, a lot of the context surrounding inflation were ultimately things that the Fed had no control or reasonable ability to predict. At the time, in mid-2021, there was absolutely no reason to believe that there would be a War in Ukraine in February 2022 which would spark off yet another major supply shock.

On the other hand, your comment about "savings" and personal costs are based purely off anecdotal evidence. A lot of people just plain lie and over-exaggerate. Costs have risen aggressively over the last two years, but they did not "double". On average, food has risen 10% over the last 12 months, whereas shelter has risen 5.5%. I am sure there are some very bad landlords out there who jacked the prices up for whatever reason, but I live in one of the most expensive metropolitan areas in Seattle, and rents have increased by roughly $500 in aggregate over the last 12-18 months. Which is anywhere from 16% to 30% increase in living costs, and this is one of the worst areas for this sort of thing in United States.

So no, it's not delusional or wishful thinking. It's a data driven approach that looks at actual numbers, instead of individual horror stories. Will the Fed succeed? I don't know, we will see what happens in 2023, but I really don't like this sort of baseless lambasting of the Fed or gross mis-characterizations of the economy. This is exactly what US pundits do when they talk about China and the imminent "Chinese collapse".

 

[Staedler]

As to your point about people not having confidence in the Fed, well I don't listen to what random people say, or what is printed on the headlines. I look at key economic indicators. And what do they tell us? Well they tell us that Fed's interest hikes have been effective. The most recent

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indicates that month-to-month (MtM) inflation was actually negative 0.1 percent this December, and MtM inflation over the past 3-6 months is significantly lower than from earlier this year.

On the other hand, your comment about "savings" and personal costs are based purely off anecdotal evidence. A lot of people just plain lie and over-exaggerate. Costs have risen aggressively over the last two years, but they did not "double". On average, food has risen 10% over the last 12 months, whereas shelter has risen 5.5%. I am sure there are some very bad landlords out there who jacked the prices up for whatever reason, but I live in one of the most expensive metropolitan areas in Seattle, and rents have increased by roughly $500 in aggregate over the last 12-18 months. Which is anywhere from 16% to 30% increase in living costs, and this is one of the worst areas for this sort of thing in United States.

I don't much care for the rest of your essay but what was the price of eggs pre-COVID vs now in Seattle? What about the price of a whole raw chicken? Do you actually buy any food yourself? Even hand-soap and tissues have risen in prices quite a bit.

 

[HighGround]

I don't much care for the rest of your essay but what was the price of eggs pre-COVID vs now in Seattle? What about the price of a whole raw chicken? Do you actually buy any food yourself? Even hand-soap and tissues have risen in prices quite a bit.

I think this sort of questioning perfectly illustrates the ignorance with which people approach this subject.

This is the price of eggs over time.



As you can see, the price of eggs has skyrocketed since the beginning of January 2022. Now, you might think, "My god! The inflation is wreaking havoc in the food markets!" Whereas in reality, a deadly avian flu has hit Chicken farms across America, killing millions of birds. This has been going on since

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.

By contrast, every single other category, while higher in price, did not "double."




Understandably, reality isn't going to make people happy, especially if it runs counter to their biases and established beliefs, but numbers don't lie. But for the record, I can still buy eggs 3$ or under. It's more expensive than what I'm used to, but I'm not going to run around and lie about how my household expenses have literally doubled. Majority of Americans live paycheck to paycheck. If our expenses literally doubled, I'd be seeing a housing crash, Great Depression level homelessness, and a general collapse of society.

 

[Staedler]

I think this sort of questioning perfectly illustrates the ignorance with which people approach this subject.

This is the price of eggs over time.

View attachment 106395

As you can see, the price of eggs has skyrocketed since the beginning of January 2022. Now, you might think, "My god! The inflation is wreaking havoc in the food markets!" Whereas in reality, a deadly avian flu has hit Chicken farms across America, killing millions of birds. This has been going on since

Please, Log in or Register to view URLs content!

.

By contrast, every single other category, while higher in price, did not "double."

View attachment 106396


Understandably, reality isn't going to make people happy, especially if it runs counter to their biases and established beliefs, but numbers don't lie. But for the record, I can still buy eggs 3$ or under. It's more expensive than what I'm used to, but I'm not going to run around and lie about how my household expenses have literally doubled. Majority of Americans live paycheck to paycheck. If our expenses literally doubled, I'd be seeing a housing crash, Great Depression level homelessness, and a general collapse of society.

Since you live in America, I'm sure you're aware CPI is tied to the price-increases in many social programs and thus the government has strong incentive to understate inflation. If you've lived here for many decades, you should be well aware on-the-ground inflation has practically never matched government figures.

Regardless of that, why don't you give some numbers from your actual experience instead of government numbers? How about your lived experience?

I'll tell you mine.
Whole chicken was around $10, it is now $15+.
Hand-soap was $9.99, it is now $14+
Tissues were $16+, they are now $24+
Toilet paper was $28, they are now $32+
Eggs were $1.2, they are now $6+ & $8+ if organic
Croissants were $5.99, they are $7.1 now

I say pre-COVID vs now, but most of the price changes happened within the last year or two. Sure egg prices are supposedly due to the bird flu, but what about the rest when they're supposed to have low to no inflation? I didn't claim food prices doubled, but I do take issue with your assertion that inflation is significantly lower.


Beyond that, we can even look at high-interest saving accounts from banks. In recent years, it hit a low of only barely 2% across many institutions (2019-2020) and has recently (2022-2023) started to rise significantly. Bank interest rates also move in a correlated fashion with inflation. Just this month, I got informed of another increase - this time from 4% to close to 4.2%. If inflation was actually low and felt low, these banks would have dropped their interest rates as they have done so many times in the past.

 

[KYli]

That's not what stagflation is. A key indicator of stagflation is high unemployment, amidst low economic growth and high inflation. This present a dilemma for policy makers since traditional methods to increase economic growth and alleviate unemployment, will involve measures that encourage inflation.

Basic indicator of stagflation is high inflation rate, low economic growth rate and then steadily high unemployment rate. We already meet 2/3 gauges of stagflation. In addition, we have low labor participation, massive early retirement, and huge amount of underemployment. These all points toward a pain index that is no lesser than a full blown stagflation.

As to your point about people not having confidence in the Fed, well I don't listen to what random people say, or what is printed on the headlines. I look at key economic indicators. And what do they tell us? Well they tell us that Fed's interest hikes have been effective. The most recent

Please, Log in or Register to view URLs content!

indicates that month-to-month (MtM) inflation was actually negative 0.1 percent this December, and MtM inflation over the past 3-6 months is significantly lower than from earlier this year.

Are you joking? December negative 0.1 percent is due to falling gasoline price. Anyone with small knowledge over economic would use core rate for comparison. The core inflation during December is actually positive 0.3 percent. In addition, we are still having the highest inflation since 80s even after high base comparison as inflation rise rapidly since late 2021 and accelerate ever since.

So no, basic economic data tells us that United States has largely weathered the supply chain storm from Covid, and then dealt with the after-effects rather effectively.

Right, inflation is transitory.

There is not a single person on the Federal Reserve Board who believes in Modern Monetary Theory. Furthermore, a lot of the context surrounding inflation were ultimately things that the Fed had no control or reasonable ability to predict. At the time, in mid-2021, there was absolutely no reason to believe that there would be a War in Ukraine in February 2022 which would spark off yet another major supply shock.

It didn't stop both Trump and Biden to pump multiple trillion dollars to the economy and claiming that MMT would prevent inflation. Or did it stop the Fed from pumping 9 trillion into the economy or cutting and keeping ultra low and zero rate for so long even after the economy is overheating from stock market to housing.

Rapid rise in inflation happened during second half of 2021 and hasn't slowed down ever since. Many experts already questioned that inflation isn't transitory. What did the Fed do, keep buying trillion of bonds and maintaining zero interest rate. Blaming Ukraine conflict for inflation is a joke when inflation was creeping up faster and faster before the conflict.

On the other hand, your comment about "savings" and personal costs are based purely off anecdotal evidence. A lot of people just plain lie and over-exaggerate. Costs have risen aggressively over the last two years, but they did not "double". On average, food has risen 10% over the last 12 months, whereas shelter has risen 5.5%. I am sure there are some very bad landlords out there who jacked the prices up for whatever reason, but I live in one of the most expensive metropolitan areas in Seattle, and rents have increased by roughly $500 in aggregate over the last 12-18 months. Which is anywhere from 16% to 30% increase in living costs, and this is one of the worst areas for this sort of thing in United States.

Take a look rent in the chart. One year increase in rent from NYC 25%, Fresno, Calif 28%, Scottsdale, Ariz 28%, Orlando, Fla 28%, Knoxville, Tenn 27%, Boston 27%,to Austin, Texas 26%. The aggregate increase of rent over 2 years could be at least 50% for many cities. For individuals, many could have their rent double. That's the reality.

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I don't know if you do groceries shopping or live in a dream world. Shortly after the pandemic and to now, my groceries bill increased tremendously. Chicken breast was $1.99 and now $3.49. Chicken leg was $0.99 and now $1.99. Eggs was 1.50 and now $5. A bag of rice was $18 and now $25. Apple was $1 and now $2. Most of the vegetable and fruits prices almost double.

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Prices for vegetables have almost doubled since last year after the states that grow fresh produce for the US winter saw water cuts and storms that decimated supply.

So no, it's not delusional or wishful thinking. It's a data driven approach that looks at actual numbers, instead of individual horror stories. Will the Fed succeed? I don't know, we will see what happens in 2023, but I really don't like this sort of baseless lambasting of the Fed or gross mis-characterizations of the economy. This is exactly what US pundits do when they talk about China and the imminent "Chinese collapse".

Data that was manipulated and inaccurate to reflect the reality on the ground. Did I say the US would collapse? I only said that the inflation would rebound if the Fed is soft. If they couldn't tame the housing prices, the rent would increase and 5.5% increase in rent is a joke and everyone knew that it is inaccurate.

 

[HighGround]

Since you live in America, I'm sure you're aware CPI is tied to the price-increases in many social programs and thus the government has strong incentive to understate inflation. If you've lived here for many decades, you should be well aware on-the-ground inflation has practically never matched government figures.

Indeed. These are aggregates, the actual numbers are sometimes better than the inflation numbers would suggest.

Regardless of that, why don't you give some numbers from your actual experience instead of government numbers? How about your lived experience?

I'll tell you mine.
Whole chicken was around $10, it is now $15+.
Hand-soap was $9.99, it is now $14+
Tissues were $16+, they are now $24+
Toilet paper was $28, they are now $32+
Eggs were $1.2, they are now $6+ & $8+ if organic
Croissants were $5.99, they are $7.1 now

Why would I use my own anecdotal experience, instead of just looking at the actual data? Regardless, your own story simple prove my point. Even for the goods you want to cite (i.e. most likely the goods who's prices stood out to you the most), inflation roughly matches what government numbers indicate, roughly a 20% increase to the cost of living.

I say pre-COVID vs now, but most of the price changes happened within the last year or two. Sure egg prices are supposedly due to the bird flu, but what about the rest when they're supposed to have low to no inflation? I didn't claim food prices doubled, but I do take issue with your assertion that inflation is significantly lower.

The numbers don't saw "low to no inflation". Quite the contrary, the numbers indicate a significant increase to the cost of living over the last 2-3 years. Significant meaning roughly 20% or so, not a doubling of people's expenses.

Beyond that, we can even look at high-interest saving accounts from banks. In recent years, it hit a low of only barely 2% across many institutions (2019-2020) and has recently (2022-2023) started to rise significantly. Bank interest rates also move in a correlated fashion with inflation. Just this month, I got informed of another increase - this time from 4% to close to 4.2%. If inflation was actually low and felt low, these banks would have dropped their interest rates as they have done so many times in the past.

The banks base their interest rates on the Fed's interest rates. Even if inflation was "low", their savings rate wouldn't drop, because it's not based on inflation alone. In fact, I would even argue that it is influenced primarily by the Federal Funds Rate, AKA, US interest rates.

 

[Staedler]

Indeed. These are aggregates, the actual numbers are sometimes better than the inflation numbers would suggest.



Why would I use my own anecdotal experience, instead of just looking at the actual data? Regardless, your own story simple prove my point. Even for the goods you want to cite (i.e. most likely the goods who's prices stood out to you the most), inflation roughly matches what government numbers indicate, roughly a 20% increase to the cost of living.

View attachment 106400



The numbers don't saw "low to no inflation". Quite the contrary, the numbers indicate a significant increase to the cost of living over the last 2-3 years. Significant meaning roughly 20% or so, not a doubling of people's expenses.



The banks base their interest rates on the Fed's interest rates. Even if inflation was "low", their savings rate wouldn't drop, because it's not based on inflation alone. In fact, I would even argue that it is influenced primarily by the Federal Funds Rate, AKA, US interest rates.

If I wanted to pick out goods that stood out to me the most, I would be using the price of Asian goods which has skyrocketed. I used the items I did because the typical American also consumes those products. I know their pre price and post price and could give them and not just a vague, "it increased a few dollars again".

Statistical figures are based on multitudes of anecdotal experiences. When those statistics are tied to real costs that the government wants to avoid such as increases in social security payouts, those statistics can no longer be trusted. CPI has become a quasi-KPI that why quoting it verbatim and believing it totally is complete nonsense. Maybe if you have stats that weren't from the government, we could talk, but all you have ever trotted out is the government line. This is the same level of nonsense as if we were to take Chinese provincial GDP growth rates and assume it's true.

 

[HighGround]

Basic indicator of stagflation is high inflation rate, low economic growth rate and then steadily high unemployment rate. We already meet 2/3 gauges of stagflation. In addition, we have low labor participation, massive early retirement, and huge amount of underemployment. These all points toward a pain index that is no lesser than a full blown stagflation.

It's not meeting 2/3 "gauges". You either have it or you don't. And you can use any metric of "unemployment" you want. This information is

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And it's record low.

Are you joking? December negative 0.1 percent is due to falling gasoline price. Anyone with small knowledge over economic would use core rate for comparison. The core inflation during December is actually positive 0.3 percent. In addition, we are still having the highest inflation since 80s even after high base comparison as inflation rise rapidly since late 2021 and accelerate ever since.

Lol. So when inflation goes up it's becasue everything goes up. When inflation starts going down it's becuase it's "just gas". Come on people. Be consistent with your story.

And speaking of core inflation, even 0.2 positive inflation minus food/energy, represents a massive drop. This is what 12 MtM inflation looks like.



But yeah, it's "just gas" man.

Right, inflation is transitory.

Is there an argument somewhere in that statement?

It didn't stop both Trump and Biden to pump multiple trillion dollars to the economy and claiming that MMT would prevent inflation. Or did it stop the Fed from pumping 9 trillion into the economy or cutting and keeping ultra low and zero rate for so long even after the economy is overheating from stock market to housing.

Rapid rise in inflation happened during second half of 2021 and hasn't slowed down ever since. Many experts already questioned that inflation isn't transitory. What did the Fed do, keep buying trillion of bonds and maintaining zero interest rate. Blaming Ukraine conflict for inflation is a joke when inflation was creeping up faster and faster before the conflict.

Biden and Trump don't even know what MMT is.

And inflation has factually slowed down, and continues to be rather tempered. Also, ignoring global inputs in a global economy as well as a highly disruptive global event is hilarious. Because there is absolutely no way that Ukraine and sanctioning Russia would have any global effects whatsoever. I guess they did MMT all across the world, that's why inflation was such a global phenomena

Take a look rent in the chart. One year increase in rent from NYC 25%, Fresno, Calif 28%, Scottsdale, Ariz 28%, Orlando, Fla 28%, Knoxville, Tenn 27%, Boston 27%,to Austin, Texas 26%. The aggregate increase of rent over 2 years could be at least 50% for many cities. For individuals, many could have their rent double. That's the reality.

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So you're saying you lied when you said it doubled? It's actually going to reach 50% in two years instead? Let's stop moving goalposts and then trying to tell me what reality is, when I explained the "reality" of rents prices to you in my area, two posts ago.

I don't know if you do groceries shopping or live in a dream world. Shortly after the pandemic and to now, my groceries bill increased tremendously. Chicken breast was $1.99 and now $3.49. Chicken leg was $0.99 and now $1.99. Eggs was 1.50 and now $5. A bag of rice was $18 and now $25. Apple was $1 and now $2. Most of the vegetable and fruits prices almost double.

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Prices for vegetables have almost doubled since last year after the states that grow fresh produce for the US winter saw water cuts and storms that decimated supply.

Vegetables and Fruits experienced a rise in price of roughly 16-20% over the last two years. Again, let's stop misleading the public.

Data that was manipulated and inaccurate to reflect the reality on the ground. Did I say the US would collapse? I only said that the inflation would rebound if the Fed is soft. If they couldn't tame the housing prices, the rent would increase and 5.5% increase in rent is a joke and everyone knew that it is inaccurate.

You claimed a lot of things, very few of which are reflected by data. Of course the "data" must be faked. But when I give you the actual numbers, you refuse to provide your own. Here's the a picture of the tomatos at my local grocery store, which cost roughly 2$ per pound before the pandemic.




Incredibly, they did not double in cost.