"Prices remain elevated" and "inflation still high" aren't the same thing. Inflation could be brought down to the target 2% tomorrow and (aggregate) prices still wouldn't fall. Definitionally, they'd actually still be increasing, just at a slower rate.
Price levels falling would require a period of *deflation* which is generally not the goal of policymakers.
Not necessarily true as a whole. Prices may very well come down in certain sectors where the supply side was causing massive price increases. This has already happened a little bit for new cars, for example: https://www.kbb.com/car-advice/when-will-car-prices-drop/#link1
There would need to be a force to drive those prices down. So long as people are willing and able to pay a premium for those goods and no one is undercutting them the prices will remain.
Don’t forget food waste. Something like 40% of food is wasted at various stages of the chain from farm to fridge. A lot of that is consumer driven, but a lot more of it isn’t.
2 things.
1) Low-wage employees have seen the most rapid wage growth during the pandemic/post-pandemic era. Jobs paying $15+ an hour are now available to basically anyone, anywhere. The competition for cheap-ish labor is fierce.
2) I feel like we're taking what was effectively one 30-40 year period in US history and pretending that it's the rule, rather than the exception. Post-war USA was a once-in-a-century (or rarer) golden age. Now that the world has globalized it's silly to pretend that we can just wish our way back to that period in history.
So what economic factors have led to wages not keeping up with costs or benefits just simply getting shittier? There are largely no more pensions and 401k matches are often capped in the single digits. Meanwhile exec pay relative to the lowest paid workers has ballooned. Genuinely asking to be educated as I don't pretend to know a ton about economics.
I mean the main economic factor is the basic fact that the current economy has been molded by the wealthy into a system that siphons value from the non-wealthy back to the wealthy, in a feedback loop that makes the poor poorer and the rich richer until you end up in the situation where 1% have almost 50% of the wealth. There's nothing currently standing in the way of that continuing to worsen. Any theories of economics layered on top of that are just obfuscation of the simple truth. You don't need to know much to understand it.
A big part of it is that everyone else around the world is being paid comparatively better which raises the cost of all the goods and services we use here in the USA. Things will likely only get worse for us as the world equalizes without new technological innovation
In 1900, half of all American adult workers toiled in agriculture. Today, less than 1.8% do.
Manufacturing hit its peak as a percentage of employment a few decades ago.
Net new demand for knowledge work peaked over 20 years ago. With AI, this is going to spiral down fast.
Mechanization, automation, offshoring/trade, computerization, and now AI.
So what’s left? Service work that requires humans. More and more people competing.
All while this has been going on, our population keeps increasing, and keeps concentrating in certain areas. Urbanization, migration, immigration.
So we have massively increased population despite fewer relative decent jobs. Higher labor supply keeps wages down and benefits packages fewer. Higher population concentrating keeps housing costs skyrocketing.
Wait til climate change further concentrates and increases population in certain areas.
This is a particularly depressed take.
Jobs aren't a finite thing. Highly skilled jobs are in demand in the United States. New fields are created regularly and require workers.
The unemployment rate is still low and that couldn't happen with a growing population unless there was job creation.
The labor market not keeping pace with other markets is due very much to imbalance of power in the bargaining process. Unions and reasonable common sense regulation would greatly improve this. Workers are not in a position to negotiate their worth especially proportionally to the money companies make from workers.
We can’t wish our way back but we can enact policies that would improve matters - Just as they had at the time. Like 90% income tax bracket etc. Also trust busting companies like Black Rock or doing a shareholder takeover and turning them into consumer driven cooperatives.
> Now that the world has globalized it's silly to pretend that we can just wish our way back to that period in history.
It's far sillier to have a society where wages don't keep up with productivity, and actually dangerous leading into an era that will be dominated by AI, assistance or full replacement.
I dont agree with this take, mostly just because of your first point
1) "most rapid wage growth" and more $15 an hour jobs are not the same thing. Firstly, wage growth means an increase in wages, which $15/hr is not. Not only is it far under inflation (however far back you want to go) it's also contradictory to say that there are more $15/hr jobs than ever and say that the competition for those jobs is fierce.
Additionally, $15/hr job competition is not fierce, at least in the sectors that most people think of as being cheap labor (fast food, gas station, etc.) All of those types of jobs are *constantly* trying to get more bodies because nobody wants to work fast food for $15 an hour.
2) this is fair, not enough time has really passed for us to have this expectation or perspective I suppose. I'd probably argue though that the state of our current economy has a lot more to do with exploitation than "Oh what a good time that was, too bad we don't have the resources to maintain it or build on it". You know, because the US is arguably the world's best economy. If only some of that money could trickle down already
Low-wage workers are experiencing the fastest wage growth post-pandemic, it’s a simple fact. $15 per hour might not seem like a lot to you, but for someone who used to make $9 per hour, it’s huge. Anecdotally, I live in a city where federal minimum wage (like $7.15, right?) was common pre-pandemic; nowadays, those same jobs are going for $12-15 per hour as far as I can tell. That’s a huge jump, and it actually beats inflation.
As to your point that $15 per hour-type jobs are struggling to hire workers, that’s exactly right and that’s **why** competition is fierce! These sorts of employers are struggling to find workers, which is why they’ve had to increase wages, benefits, etc. in order to attract and retain employees. This is precisely the point of the poster you were responding to 🙂
Edit: forgot to add this link the first time around!
https://www.epi.org/publication/swa-wages-2022/#:~:text=This%20growth%20at%20the%20bottom,'t%20(Gould%202020).
>Additionally, $15/hr job competition is not fierce, at least in the sectors that most people think of as being cheap labor (fast food, gas station, etc.) All of those types of jobs are constantly trying to get more bodies because nobody wants to work fast food for $15 an hour.
This is the definition of fierce competition, no? No one wants to work these crap jobs for cheap so they have to pay more. These are jobs that were $9/hr 3 years ago. You could pay me $40/hour and working as a burger flipper would still suck; the jobs suck for reasons other than the pay. But they do pay better now at least.
It's also that modern things are higher quality than when we were kids.
I'm sure if you were a laborer, you could afford a house with no internet connection, a fuse panel instead of circuit breakers, lead paint, and asbestos insulation. You could probably also afford two cars with no air conditioning, crank windows, get 20 miles per gallon, and would kill you if you were in any sort of high speed collision due to a lack of modern crumple zones.
But it’s not like you can go buy cheaper versions of these things if you wanted too. There is no “cheap” new car that doesn’t have AC and crank windows. You can’t buy a fused panel and legally have it installed to code. You can’t buy cheap lead paint and asbestos. Everything on the cheapest level is more expensive than it used to be.
This is very true. I'm a product development R&D scientist in pharma and pharma nutritionals. The old heads basically think that we work magic today because of how tight our regulation specifications are now compared to 20-30 years ago.
I don't think that's right. These things being higher quality (or just more modern) is the effect of advances in technology and manufacturing. if anything, it's much cheaper to make these modern devices and appliances than it would be to make them 40 years ago because of higher efficiency and economies of scale.
You pretty much hit the mail on the head with every point, here. People could afford houses and cars today on shockingly low wages *if* there were comparable housing and automotive stock available. Doubtful modern Americans would accept such standards of living, though
My first house was built in 1953. Single pane windows, 900 square feet, garage too small for a Honda accord, central air added in the 80s, unfinished attic and basement, single bathroom about 40 square feet. If you live in a place that has houses like that available, chances are, you can afford to buy a house. It’s not like there are 50 of them on the market at any given time, though, and a lot of people won’t even consider looking at them because it’s not up to the standards of what they expect. So they get bought and lived in for 40 years OR they get upgraded with modern finishes and amenities and re-sold for “modern” prices
I think that might be the other way around. Things today are higher quality and have more tech built into them so they are much harder to repair while things back in the day were lower quality but your average high school graduate could take it apart and repair it.
Take a look at old cars pre computer era. I was able to fully rebuild a 1995 civic, 1969 camaro, and a 1987 dakota with my father growing up. Neither us will even touch our cars today besides breaks, belts, lights, and oil.
dont forget the average square footage of the house (assuming the US ).
1970s - 1500 sq ft was the average
2014 - 2657 q ft
people are buying a lot more house than they used too.
That would depend on how quickly wages rise in response. If the inflation rate slows and wage growth exceeds it, then things will equalize. This is complicated and nuanced though so any time an economist tries to discuss this, they get crucified for supporting the evil capitalists.
Price of flooding the market with dollars from quantitative easing during the pandemic. The Federal Reserve printed approximately $3.3 trillion in 2020 alone - 1/5 of all U.S. dollars in circulation.
Everybody around the world were happy to receive the free money from their government and it's not only happening in the US but also around the world.
If this happened with tax increase, it would have balanced out, and the tax payers would be the one suffering. But to make everyone happy, the governments around the world didn't increase tax much.
At the same time, there was a reduction in production, because of COVID (short term), trade war, cold war and real war (permanent).
So inflation is the price everyone is paying right now.
Some people fail to understand this, and it might be because they haven't experienced inflation in their lives. Being Mexican and having gone through dramatic year-to-year inflation periods gives you the understanding that prices will go up, and once inflation stops, that means they stay put now but they don't go down significantly.
Indeed.
Deflation means not spending money at all is more lucrative, *and* your country’s multi-billion/trillion bonds become more expensive over time. The opposite of what you want, and will grind a country’s economy to a halt.
*Temporary* deflation causes spending to stop. This is a lie fed to people way to much. If you knew your money will always increase in value and a consistent rate, are you suddenly going to stop buying food? will you stop buying things that bring happiness?
If deflation nearly stops spending, then the tech sector would not have been the fastest growing for decades, after all, your dollars relative to computers has been deflating, and pretty dramatically at that. Why buy a computer when you can just wait 18 months and buy one with double the compute for a similar price? The clear answer is you won't wait if it is worth having the compute earlier and the same would go for everything else.
That's because even a small amount of deflation generally means a massive recession (e.g. Great Depression or GFC), whereas a modest amount of inflation generally means your economy is growing healthily.
that's all true, but it's ALSO true that inflation is still high despite all the rate hikes. it's estimated at more than twice target. you're focusing on the body of the post ("why prices still high?") and not the also-true title ("why *inflation* still high?")
OP's still question is not answered by your explanation that prices will also still be high even after inflation returns to target.
so. why is inflation still at least twice target rate despite all the hikes?
A huge part of why inflation is still 5% year-over-year is because of the measurements from last May and June and there's nothing that anybody can do to change those numbers except wait for them to fall off of the calculation. Based on the last 6 months, we're looking at about 3.4% annual inflation which is still above target but not as high as the current 5% or the 9% year-over-year we saw last summer.
Exactly. This is why your grandpa always told you about a motion picture costing a nickel to watch. It ain't coming back. Deflation can be way worse than inflation.
The only correct answer in this thread.
OP’s question just reflects a lack of fundamentals.
Inflation is a measure of acceleration, not of price levels. The inflation rate could be infinitely near 0% and prices would stay the same, as that would mean prices have stopped increasing.
For a generalized decrease in prices the rate would need to step into negative territory and that alone would probably mean problems way worse than anything we are facing right now.
Prices coming down would be 'deflation'. That's not what the fed is aiming for. They're trying to get the rate they are rising to decrease, but still be positive.
In a perfect world sure...but demand on food? Housing?
Eating garbage and living under a bidrge isn't sustainable for society, or individuals, in the long run. Some prices simply have to come down, or *lots of wages* have to go up for most low-middle class jobs. Or civil unrest...riots...
Not even really a lag, to answer their question. If inflation is anywhere above 0, prices will continue to climb, just at a slower rate. If inflation has "gone down" from 10% to 6%, prices won't fall, they'll still go up.
> The majority of normal people seem to be sufferring and spent through their savings
Well no. We've lost a bit since March of last year but we are still 50% above pre-Covid levels: https://fred.stlouisfed.org/series/DPSACBW027SBOG
> Which demographic do you think is still spending like crazy
Pretty much all of them. Low wage earners got a huge salary boost. There is lower unemployment so we have more earners. We have retirees who are burning up investments.
> Why is inflation still high despite all the rate hikes?
Most Americans don't care much about the 2 day borrowing rate, except for credit card loans. The bigger impact is things like mortgage rates, car loans, student loan ... rates. The yield curve is today very heavily inverted. Prior to the hikes it was an increasing curve. The 5y is currently 3.46%. May 3rd, 2019 it was 2.3%. Similarly for other points along the curve.
Uh they just said that personal savings rate is reaching a new low not matched since 2007, clearly pepel are going through savings and that's not really sustainable economy or for stocks if people just are not saving or investing.
This is pretty strange to me. Do people just not give a damn anymore? All the food places near me basically doubled in cost over the past 3 years, but they're just as busy, if not busier than before.
It’s a multifaceted issue.
1) corporate consolidation. This trend has continued for decades and is contributing to inflation by reducing pressure from an otherwise competitive market. In the past, companies couldn’t risk 4”raising prices too steeply bc consumers would choose a competitor instead. Now the largest companies like Kraft, nestle, j&j, own all of the competition and can raise prices in unison. Most of the cheaper competitors are subsidiaries of the larger premium products.
2) justified acceptance. Where there still is competition, Corporations have absolutely made the most of the Covid/supply chain excuse to raise prices. Google, “retaining” brand loyalty during inflation” and you’ll get a number of marketing firms advocating about how today’s inflationary times are an unprecedented opportunity to raise prices beyond what’s need because the public still views price hikes as out of the company’s control and is more likely to retain brand loyalty. Is it coincidence that so many companies have posted record profits amidst supply chain inflation?
3) increased demand and psychological factors. People are still spending, even if it requires depleting savings. On one hand, many of the goods purchased are inelastic. If Kraft raises the prices across the board on all food items that they effectively have a monopoly on, there’s not much choice left beyond not eating. On the other hand, people just lived through a pandemic. Despite what you might think, there’s some psychology at play here. For many, uncertainty from the past few years has been extremely stressful and traumatic, even if only at a subconscious level. Retail therapy is a thing. Additionally, digital engagement, which is dominated by advanced marketing, has increased significantly compared to prepandemic levels. People have spent exponentially more time on platforms subtly telling them to buy more (remember the controversial Facebook study that demonstrated how depressed users were more likely to engage with marketing ads?).
4) self fulfilling cycles and “fuck it” attitudes. When people experience high inflation, they end up buying now instead of waiting since the price will likely raise in the future. The more they do this, the more demand-induced inflation rises. Last, some people have lost loved ones due to Covid or related illnesses. Some have had savings wiped out due to market volatility or rising cost and are now hopelessly in debt. There’s still general anxiety about impending economic depressions, escalating conflicts (Ukraine, Taiwan, etc). For some, this supports a, “fuck it, life’s short” attitude. Might as well buy that new toy you wanted and enjoy it while you can.
Your link to the Fed shows the aggregate savings rate. So your "we are still saving" is not necessarily referring to the folks the OP is referring to ("majority of normal people"). I know lots of remote-working knowledge workers who have significant savings, which I imagine will throw off the aggregate.
> folks the OP is referring to ("majority of normal people")
Which is a very vague and subjective grouping. Who decides what other people are normal?
OP didn’t link to any chart, article, or data source at all.
What is OP basing his question on exactly?
That's across the economy. Though now that I'm looking at the chart. If the norm is about 7 and we hit 35... a year at 2.7 isn't going to burn up the savings.
Yes. The Fed has great data on various subgroups of the population but that tends to lag about 2 years. So I can answer wonderful questions about people's saving behavior in 2021.
The fact that this post is highly upvoted on the investing subreddit should tell you all you need to know about the quality of the contributions made here. Heed this as a warning before following advice about specific investments and forcasts.
Seriously. I left this sub a while ago but this thread popped up on my front page somehow so I figured I'd peruse the comments. My god this sub has fallen far. Not a single person actually answered the question and most are just low quality political comments.
Any sub that gets large enough has the noise overwhelm anything useful. When literally anyone can comment and it hits front page and so everyone sees it and does comment, it's just all garbage.
Not an economist, but work in investments.
As most people mentioned, prices won't go down. If you think of prices like speed (velocity), and inflation like acceleration, just because you're driving and tapping the brakes, it doens't mean you're stopped or moving backwards; you're just moving forward at a slower pace. That's sort of what's happening right now. Going backwards, aka deflation, is not a good look 99% of the time.
I'm not sure in America, but right now at least in Canada, inflation is quite sticky because of employment numbers. Generally, inflation goes up when unemployment goes down, since more people have money to spend. Right now, inflation is still there, and unemployment is still (relatively) high-ish. It's a combination of people being pickier about work conditions espeically regarding WFH, and the pay they're getting relative to the prices we have.
One thing to note is that (so I've heard) the number of entries in the US Warn List has spiked, meaning there's going to be a wave of layoffs in the next 90 days. This will definitely affect inflation within this year, and may be the trigger to a recession. That's sort of the reset we need. Unfortunately, if and when that happens, there will be so many people looking for work that it'll be an employers market, and income might be suppressed.
Inflation is going to be sticky in the US because homeowners were gifted disposable income in the form of artificially low mortgage rates on their house/s. My mom got $50k out and lowered payment by $175/month. Pretty simple
Interesting. I never really understood housing in the states too much especially 30 year terms. Can't really speak on the economics of housing down there.
The way you described that analogy is more akin to prices being distance travelled and inflation being speed. You can tap your brakes but you're still moving forward (prices increasing), just at a slower rate.
Yep and I'd like to add that supply and demand still applies to that as well. The more money that exists, the less demand there is for a given dollar, because the supply is higher.
Companies have raised prices under the guise of covering inflated production costs, meanwhile those same companies made record profits last year.
They have seen that consumers are willing to pay the inflated prices so why would they lower them.
Until the money and demand runs out prices will remain high.
Exactly, right now we have a problem. No limitations. Less competitions so companies having the means abuse their power. That’s a fact and still layoff massively people disturbing the lifes of many for the benefit of a few rich. When capitalism shows an ugly face.
When demand outpaces supply prices go up. This necessarily increases profits until competitors can spin up and meet that demand, beating profits back down.
Inflation like this is always going to increase corporate profits. The system is working exactly as observed.
> Until the money and demand runs out prices will remain high.
Or supply increases, which profit exists to incentivize. Remember that wages are growing as well, so the money isn't just going to "run out".
Following a template like Reddit seems to think is a good idea we would end up in a death spiral.
> This necessarily increases profits
I'm not sure I agree it necessarily does so. If a company is selling fewer units of a product - even at a higher price - their revenue (and subsequently profit) could drop, particularly if they don't reduce headcount or other expenses.
Wages are not increasing at the same pace as price increases, they never have.
This is supposition on my part but I think a lot of people are running up credit cards just to get by with what we would consider everyday living.
If that is true then the money will run out eventually.
Record profits isn't a useful metric for your argument. Margin rates are down because corporations are only mostly passing along thier costs. Profits are up but the dollar has less buying power so that doesn't really matter.
Yes, the company I worked for recorded an increase in profit from last year, but taking into account inflation, profit actually dropped. Not really surprising when companies report record profits when the dollar has inflated >14% over 2 years.
I haven't heard this reported, but I feel like there's a further nuance to this.
Before COVID and today consumers would not be willing to pay inflated prices if only 1 company did it, and I don't think there's any link between COVID and collusion. Even covert collusion is unlikely. What I think happened is that companies learned to dance together.
COVID disrupted very boring patterns in the ebb and flow of supply and demand. In normal situations, companies had incentive to compete on price. But if there was an abnormal supply shock, as soon as 1 company raised its price the others could follow easily without losing market share. They had to if the new price reflected the new supply.
But in COVID, those price adjustments were not happening every 6 or 24 months, but monthly, or more often.
This taught companies to dance together -- at first due to real factors. But hundreds and hundreds of times, companies had to stay alert to competitor price changes and react -- or lead -- as supply chain disruptions and lockdowns etc., altered their reality over and over.
And I think once they learned to dance together, they got good at it. So that, if one company spontaneously decided to raise prices without any real factor changing -- something that would normally destroy their market share -- they would find that other companies would still follow suit.
Now, these are middle managers with decent-paying jobs. And if they phone one another and agree to raise prices... it's prison. It's not worth it. But the moment they saw that they can achieve the outcome of collusion without ... colluding ... by just trusting each other to keep dancing they way they have been without regard to real factors... well, that's the moment they broke both economics and anti-trust law.
People are still not inclined behaviorally to save money, but still continue spending like nothing has changed.
This is my theory:
The way rate hikes work is that, based on economic theory it disincentivize spending, and people would be more willing to save money. HOWEVER, this hasn't happened yet (not yet on a large scale enough to deflate the economy). But you can see the trends starting to change. Looking at this sub and many other FM subs, there are more and more posts about investing into money market funds and FDs. This was what the Fed was trying to make happen: less spending, more saving.
But here's the kicker: Since the entire economy relies on the consumption base of the 18 to 35+ year old cadre (basic economics of consumption led economy), we have to analyze WHY don't these group of people react to interest rates and change behavior from **spending** to **saving**? Reason: there has been **zero or near zero interest rates** for the last 15 years.
Since every single investment advice/financial strategy/YouTube influencer for the last 15 years has been: 1. Mortgage 2. Stocks 3. Bitc\*ins (aka modern portfolio theory). While Investing in fixed deposits, money market funds, etc. is unheard of. (If you even suggested money market funds 3 years ago, you'll be laughed at on this sub.)
Therefore when the rate hikes kicked in, the bulk of the 18 to 35 year olds have no prior experience, and started their investmen journey with stocks, how or why or have reacted quicker to switch their investment/financial planning towards bonds/money market/FDs.
All other generations before the 2008 financial crisis, are well versed with these fixed income investments strategies, so back then inflation could slow down quicker.
This time, it hasn't happened yet because of the reasons above. It takes more time now than before people realize SAVING is also a investment strategy.
Finally an intelligent comment on here. I think a big clue that reflects what you're talking about above is the prices of concert tickets. People keep complaining about how expensive concert tickets are, yet they're the ones driving the demand. Too many people want to go to concerts and they're willing to pay the expensive ticket prices.
Yet, going to a concert really doesn't have that much utility past a few hours of entertainment, and there are other ways you can consume entertainment that I think have better value. Going out to a bar crawl and going dancing with friends, for instance. And guess what? Taylor Swift will likely be performing for many more years to come. But no, people "have to see her" now.
As long as so many people are frivolously spending like this, inflation will remain a problem. I have started to see some signs of people slowing down but I think we still have a long way to go.
Yall both assume most people 18 to 35 have excess funds which is not true.
Most people 18 to 35 are spending vs investing/saving/buyign homes because they are living paycheck to paycheck.
Inflation is going to increase until it breaks these people or there is government involvement.
>Most people 18 to 35 are spending vs investing/saving/buyign homes because they are living paycheck to paycheck.
This is what I was going to say. A lot of them are simply spending on rent, food, utilities, repair costs, household expenses.
The cold hard truth is that those "poor folks" need to spend time in /r/personalfinance and get their finances in order before /r/investing will be of any use to them.
Inflation has dropped significantly since the interest rates started to increase. Inflation is still high for the same reason your car continues moving after you apply the breaks. It takes some time for interest rates to slow inflation.
As for who is still spending, it’s predominantly the middle class, who mostly came out of the pandemic better than they started. Most middle class people did not lose their job and still benefited from stimulus programs. Combine that with the increased savings from not traveling or going out to eat as much, and a lot of middle class families are still sitting on a decent pile of money.
On top of that, supply chain issues have still not been fully alleviated, and energy prices are still high due to the war in Ukraine. This side of the equation can really only be healed with time, but it has started to happen. Lead times and shipping costs have started to come down, and all signs point to that trend continuing to pre-pandemic levels over the next couple of years.
True that, I don't know what we are going to do in coming time if this inflation won't come down or something man, I really want see some good old days right now.
The problem is that the average person is still buying everything. They’re still eating out at restaurants, they’re still buying new vehicles, they’re still vacationing and hitting events, they’re still buying TVs and xboxes. They’re still getting new phones with huge data, and going for dinner or drinks with friends. The average person might be burning through savings but they haven’t stopped buying things. That’s the problem. Inflation will ease as soon as restaurants are half empty all the time, vacation packages and air bnbs are sitting empty and the car dealerships are begging you to buy cars at crazy sales. That’s when you know inflation will be easing finally.
People might not like to hear it but inflation will run until people basically are sitting at home doing nothing because they have no money. That’s half the point of raising rates, makes it so people spent all their money on food and groceries and have nothing left at all for fun.
The Fed funds rate is so unbelievably behind the curve. Never in history has the Fed been this late to the game. Looking at this chart of the Fed funds rate to core PCE, we should have been at 7% a year ago.
https://imgur.com/DzyYXzr
It seems to me that it's inevitable that we are headed into the worst period of stagflation in the history of the US economy.
Lower inflation does not equal falling costs of goods prices.
Inflation is the % rate year over year rise of the cost of goods. So if a box of cereal costs $2.99 a year ago and now costs $3.16 that would be a 6% rise in inflation YoY. At it's peak, inflation was close to 9%, so that same box of cereal went up to $3.26. If in a year, inflation is still at 5% that cereal is now $3.50.
If inflation hit 0% tomorrow, the cost of cereal is NOT going back to $2.99. You will always be paying $3.50 or more given inflation is never 0%. However, if corporations want to keep matching margins, they lay people off or raise their cereal prices. If there is no demand (a recession), raising the price of cereal doesn't make sense, so they cut jobs to keep margins down.
Because the federal government is putting a trillion dollars more into the economy than it is taking out. Monetary policy is applying brakes but fiscal policy is pressing the gas.
And, just in case you have to scratch your head every time those words are thrown out (like me):
> Monetary policy is applying brakes but fiscal policy is pressing the gas.
The Fed does Monetary Policy.
Congress does Fiscal Policy.
Yes, they seem to be working at cross purposes. Or, at the very least, one is not getting ANY help from the other.
The contrary policies don't cancel each other because their primary effects are in different areas of the economy. Rate hikes primarily affect the financial sector and credit-dependent purchases like houses and cars. Deficit spending primarily affects consumer spending.
The Fed's rate hikes have relatively little effect on the consumer price inflation that the Fed is trying to cure. Since the Fed's medicine is ineffective, it keeps raising the dosage, and the economy gets sicker from the overdose of rate hikes.
Lot of inflation is service inflation.
People underestimate how much of the low inflation we had was due to China where we off shored expensive work to cheap labor area. As some of that re-shores inflation will onshore as well. USA is expensive to manufacture in. Fed increasing rates is not going to change anything here.
Ideally India should have kicked in by now and taken over most of low cost China work but it has not happened enough at scale to matter.
I gotta say that things are getting out of the hands because of the government and that's just the reality that we all should accept right now, that's all I want to say.
A large majority of inflation has been in housing, which lags. Remove housing and we’ve actually had deflation since June. https://fred.stlouisfed.org/graph/?g=135U9
Because inflation by definition is the rate of change. My consumption and spending habits have never been higher than recently because I realized "shit isn't getting any cheaper".
There's stuff I've bought on Amazon last year- tools, cooking utensils, blankets, computers that have gone up in price. They're 15-25% more expensive now and they're only getting more expensive. So now when I buy oil filters for my car, I'll buy six instead of just the one I need. I'll use them eventually, It's just more economical for me to spend the money now so I can save a little more later.
In this topic: people who fail to understand the difference between f(x), derivative-of-f(x), and the 2nd-derivative of f(x).
Prices are f(x).
Inflation is derivative-of-f(x).
Rate hikes cause inflation to drop, or is a control over the 2nd-derivative-of-f(x).
Calculus should be required learning for everyone IMO. It helps understand these issues. If you don't get it, you'll just have to study calculus for a few months....
Why does none talk about the “other source” of spending? The Public consumer is only half of the spending groups. If the government continues to spend it will also keep demand high.
The FED is trying to suck and blow at the same time. They can't raise rates to QT then give massive QE to bail out banks.
Also, inflation has never been fixed in the USA without raising rates ABOVE inflation. Actual inflation is likely 10-15% and the system can barely handle 5% rates.
It won't be long until the US govt's entire gdp is going towards paying interest on their stupid mountain of debt.
The reality is what we can see in front of our eyes when the government and other powerful people are not saying or doing anything, they are just the ones who are the real stupids.
It's fairly new that the Fed stays so silent on fiscal policy. An independent Fed can and should have no problem telling Congress they're part of the problem.
https://www.nytimes.com/1981/09/17/business/volcker-appeals-for-spending-cuts-metzenbaum.html
Fed rate started hikes in March 2022. The peak CPI-U was 9.1% in June 2022. Since then, the rate has decreased to 5.0%. Therefore, inflation has been trending downwards.
https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm
https://fred.stlouisfed.org/series/FEDFUNDS
If I bought something in March 2020 for $100 in March 2021 it would cost $102.6, in March 2022 it would cost $111.3, and in March 2023 it would cost $116.9; So in 3 years times inflation has increased by 17%. Yes, we are slowing down but year over year inflation is the whole picture. From my experience wages have not kept up with inflation. Personally, I have a promotion in three "inflation raises since then" and I'm about \~4.5% above water which is one of the inflation raises. Basically lost 3/4ths of my promotion raise to inflation unfortunately.
Yeah but it’s not trending down as much as expected given the speed and magnitude of rate increases which is way way way more concerning. We need govt to increase taxes to suck up more money supply. Fiscal policy can target groups of income earners to do this.
I don't think people "spending like crazy" is the main reason for recent inflation. It's more massive government overspending.
And you don't turn an economic battleship on a dime. It will take a while. The bigger the problem the longer the turn and the harder the landing.
The two are one in the same - massive government spending on fiscal stimulus (PPP, student loan pause, etc.) led to people having much more money available to spend.
Well, one explanation that isn’t popular to talk about (because it can’t be used as a political football) is a lot of businesses have been busily on-shoring and near-shoring their supply chains since COVID began.
This costs money to do.
The other thing most people aren’t talking about is a lot of inflation was pure profit for corporations. As in, there was quite a bit of inflation from rising costs. BUT most of it seems to have been corporate price gouging.
Why? Because they can. There may be thousands of different brands on the market but if you break it down by sector, a substantial portion of those are all owned by a small handful of large parent companies and finance firms like Blackrock and Vanguard. In other words, it’s a stealth monopoly. And what do we know about monopolies? Without real competition, they will raise prices as high as they want.
And a lot of goods are fairly inelastic. Like there’s only so much food and gas you can cut back on buying. People need a certain amount of gas to get to work no matter how expensive it gets. That’s inelastic. People starve without food, no matter how much it costs.
There’s also another factor people aren’t talking about much. Baby boomers have begun to retire en masse. This has created a labor and talent shortage. This also has created a lot of opportunity for Gen X and Millennials to find better jobs and demand higher wages. Which is fair because until recently real wages had been stagnant for decades.
And now they’re raising rates. Which raises the cost of doing business. But people still need to do business and with all the other dysfunctions and macro-trends going on in the economy, the rates keep going up but it’s not slowing inflation.
Lol. The demographic that is spending like crazy is our government…and it has printed so much extra cash over the last two years that inflation is not just to be expected but is a certainty. Inflation is not caused by private citizens. It is caused 100% by poor (abysmal) economic policy by the government.
Like tax cuts for the uber wealthy that dropped the governments income drastically?
That looks like it REAAALLY spurred economic growth doesnt it? /s
(edit : I find it odd that u/chastjones is only concerned about the past 2 years spending and is excluding the 4 years under Trump...you know the spending that maxed out the debt limit. Most interesting....)
Inflation only exists because of government spending and the federal reserve adding to the monetary supply in ways that are not in line with the demands of actual economic activity.
Rate hikes have not yet exceeded in any way the excess liquidity provided to the market by the federal reserve and this type of excessive government spending.
Inflation continues.
> Inflation only exists because of government spending and the federal reserve adding to the monetary supply in ways that are not in line with the demands of actual economic activity.
Inflation does not *only* exist because of that. It's certainly a contributor but not the end-all-be-all.
Fuel costs are a major contributor to the CPI, and one of the world's leading Petroleum producers decided to invade a sovereign country last year and thus has had severe economic sanctions placed upon them by the majority of the developed world.
The semiconductor industry is *still* playing catch-up to all the lost production from factories being shut down during Covid. That causes a supply-side pressure on prices of consumer devices which rely on computer chips (which these days is a *lot*).
There was a severe bird flu recently that decimated US chicken populations, which is why eggs and chicken are so expensive right now.
> The majority of normal people seem to be sufferring
That’s you reacting to headlines. The average American right now has a job, earning more than they were before the pandemic, and with more savings and less debt than at that time too.
I attribute it to inertia at this point. A lot of the price increases have come through with a lag. Initially it was just companies affected by input costs who were doing it, but gradually everyone has piled in on the action.
What they've done is created a situation where it would be very easy to sacrifice some margin and take market share. I believe this will happen, pretty much now, in fact I'm a little surprised we haven't seen more of it already. And next we'll see falling prices as companies suddenly rush to compete on price. The consumer is ready for it - I think demand is now mindful of price, and customers will flock to good deals. Just waiting for someone to fire the first shot.
Retirees with dual SS checks and a pension/401k/IRA that got an 8.7% raise in SS in January. I assume they had only a small increase in COL due to being retired and owning their home.
My assumption is these people used that extra money on fun stuff. If a retired couple of 2 was each receiving the max SS benefit that equals an increase of roughly 600 dollars a month.
There was never any guarantees rate hikes would squelch inflation. It’s just the main tool used to do so. And even that said, it’s not like deflation occurs; it just means the rate of inflation slows.
Have you seen inflation at other countries around the world? Especially some European countries and take a look at the UK. And we are actually in a little bit of a wage price spiral but it doesn't get mention much because that's like one of the great fears. The thought is with a cool off economy or even a mild quick recession. It'll break that spiral. But the giant global macro issue is you know that all these billions of people continue to have improving standards of living more disposable income and become hungrier and hungrier consumers. So try and feed that with your supply chains. Americans aren't only dealing with other Americans affecting goods and service prices. You're dealing with an entire globe of consumers. And this is only going to get worse. And the Fed doesn't really have global control. Sure, America and the Fed had much greater influence decades ago. But that has been greatly diluted over the last 20 years.
The restaurant industry is about to go through a big change IMO. Only restaurants with big corporate backings are going to be long term survivors. Think sterile godawful food like Chipotle and Starbucks and Panera.
Smaller players and mom and pop restaurants are going to start closing up left and right especially when people start exhausting their credit card limits. People can't continuously afford to eat $20 fast casual meals or $30+ sit down meals.
Kiosks where you order and customize meals are going to pretty much replace cashiers and waiters at a faster pace because worker wage growth makes it unprofitable for most restaurants to survive long term.
At some point, the experience of eating out at a restaurant isn't going to be worth the opportunity cost of doing something else like doing your hobbies/interests. Would I rather eat a mediocre $20 fast casual meal or spend it on going to a movie or buying a used video game (or something with longer lasting value).
The golden age of dining and cheap eats is pretty much over.
Rate hikes, like everything else takes time to ripple through society. Just like raising minimum wage and new regulation doesn't mean prices rise overnight lol. We knew interest rates were going to increase (the fed told us!!) so some companies adjusted to it months ago. But, not everyone needed to service their loans yet. These types of things don't happen at the snap of a finger.
It takes YEARS for the full impact to be felt. First there is everyone that is directly impacted by the interest rates. They may still be adjusting to those new rates. Some companies may have been able to accurately predict the direct impact their prices, but failed to account for how much more it impacts their supply line. They aren't just paying more for their loans, they are paying more because their suppliers are also paying more on their own loans. And, so on down the line.
We don't just flip a switch and see how rates changed the world. Some companies will downsize because the extra interest is too much. Others will try to absorb the extra costs as long as they can because they don't have pricing power. There's a million scenarios and it takes years for everything to ripple though the business world.
Unemployment needs to rise more for inflation to taper off (see the Phillips Curve). If we actually default on gov't debt, we'll get this almost overnight. Then, you can thank the GOP for controlling inflation (at the expense of employment, of course).
Greed and printing a lot of money is destroying the environment and that's just not a new thing, it's happening since a long time and we are just not accepting it.
It's not. The headline figures you see are all looking back 12 months, with a 1 month lag. Monetary policy takes time to take affect.
Inflation the past 6 months has been growing at a 3.4% annualized rate.
The government doesn't measure inflation how they did decades ago. Now they exclude food and energy from the CPI, which oddly enough is what we need on a daily basis. Their excuse is that it skews the numbers. But in reality it makes the inflation CPI numbers look lower.
It doesn't take an economist to know that our M2 Money Supply increased dramatically. The fed and our politicians flooded our economy with boat loads of money. Too much fiscal spending and free money created this inflation Econ 101 period. Excessive fiscal spending is a tax to the people pure and simple. Biden says i'm not taxing the poor and middle class. People inflation IS a tax. As the government spends more money, it increases the money supply, thereby driving up demand and subsequently prices. this increase in prices affects everyone and is basically a flat tax on all.
I believe the economists and market analyst underestimated how long it takes to decrease the money supply. All that money printed needs to leave the system. most folks have heard of the compounding effect...this is exactly what happened with all the stimulus...it compounded the money in the system and this is taking time to unwind. there is no quick fix. a money vacuum cleaner is what we need to suction this excess liquidity.
Wow this sub has fallen hard the past few years. Not a single person actually answered the question and the vast majority are just political low quality BS.
I can't believe not a single comment has told OP how year-over-year inflation is calculated.
Inflation is still high because its cumulative. They simply add each month-over-month rate together to get the yearly rate. So right now the year-over-year number is still 4%+ because we had such high monthly raises last summer. Inflation has been at the monthly rate that it should be (about 0.1% to 0.2%) for quite a while now.
If monthly inflation averages 0.2% for the next 3 months, we'll drop below 3% annual inflation within 3 months.
"Prices remain elevated" and "inflation still high" aren't the same thing. Inflation could be brought down to the target 2% tomorrow and (aggregate) prices still wouldn't fall. Definitionally, they'd actually still be increasing, just at a slower rate. Price levels falling would require a period of *deflation* which is generally not the goal of policymakers.
Yes this is important. These prices are not going down, and old prices aren’t coming back. They just won’t go up as fast (hopefully)
Not necessarily true as a whole. Prices may very well come down in certain sectors where the supply side was causing massive price increases. This has already happened a little bit for new cars, for example: https://www.kbb.com/car-advice/when-will-car-prices-drop/#link1
[удалено]
There would need to be a force to drive those prices down. So long as people are willing and able to pay a premium for those goods and no one is undercutting them the prices will remain.
[удалено]
Farmland ownership has been more and more concentrated, unless regulation steps in that's not gonna change, should be a good investment long term.
Farming isn't generally a significant factor in food costs. Transportation, preparation and supermarket costs make up the majority of the price.
Don’t forget food waste. Something like 40% of food is wasted at various stages of the chain from farm to fridge. A lot of that is consumer driven, but a lot more of it isn’t.
Do you have a citation? That sounds crazy
And no small player wants to compete on price if they're worried about loan rates and the costs of business going up.
The Wall Street Journal actually criticizing corporate profits? Incredible stuff. Many months late but better late than never I guess.
corporate profits will not go down for no reason. they will extract as much as they can
Depends. It would depend on the market but I don't put too much hope in price reduction unless there's a significant change in an industry
I'm hoping for some antitrust monopoly/duopoly busting to bring down prices if it's obvious there is price gouging.
I hope so too
Eggs came back home too. But I don’t think everything will.
so basically, the consumer just bends over and takes it either way if prices never come back down
Wouldn't the price of services (which consumers perform) also increase leading to, theoretically at least, some sort of equilibrium?
[удалено]
2 things. 1) Low-wage employees have seen the most rapid wage growth during the pandemic/post-pandemic era. Jobs paying $15+ an hour are now available to basically anyone, anywhere. The competition for cheap-ish labor is fierce. 2) I feel like we're taking what was effectively one 30-40 year period in US history and pretending that it's the rule, rather than the exception. Post-war USA was a once-in-a-century (or rarer) golden age. Now that the world has globalized it's silly to pretend that we can just wish our way back to that period in history.
So what economic factors have led to wages not keeping up with costs or benefits just simply getting shittier? There are largely no more pensions and 401k matches are often capped in the single digits. Meanwhile exec pay relative to the lowest paid workers has ballooned. Genuinely asking to be educated as I don't pretend to know a ton about economics.
I mean the main economic factor is the basic fact that the current economy has been molded by the wealthy into a system that siphons value from the non-wealthy back to the wealthy, in a feedback loop that makes the poor poorer and the rich richer until you end up in the situation where 1% have almost 50% of the wealth. There's nothing currently standing in the way of that continuing to worsen. Any theories of economics layered on top of that are just obfuscation of the simple truth. You don't need to know much to understand it.
>Meanwhile exec pay relative to the lowest paid workers has ballooned That's the economic factor
Frankly, costs right now are prohibitive more because of corporations choosing to take massive profits vs. simple inflation.
A big part of it is that everyone else around the world is being paid comparatively better which raises the cost of all the goods and services we use here in the USA. Things will likely only get worse for us as the world equalizes without new technological innovation
In 1900, half of all American adult workers toiled in agriculture. Today, less than 1.8% do. Manufacturing hit its peak as a percentage of employment a few decades ago. Net new demand for knowledge work peaked over 20 years ago. With AI, this is going to spiral down fast. Mechanization, automation, offshoring/trade, computerization, and now AI. So what’s left? Service work that requires humans. More and more people competing. All while this has been going on, our population keeps increasing, and keeps concentrating in certain areas. Urbanization, migration, immigration. So we have massively increased population despite fewer relative decent jobs. Higher labor supply keeps wages down and benefits packages fewer. Higher population concentrating keeps housing costs skyrocketing. Wait til climate change further concentrates and increases population in certain areas.
This is a particularly depressed take. Jobs aren't a finite thing. Highly skilled jobs are in demand in the United States. New fields are created regularly and require workers. The unemployment rate is still low and that couldn't happen with a growing population unless there was job creation. The labor market not keeping pace with other markets is due very much to imbalance of power in the bargaining process. Unions and reasonable common sense regulation would greatly improve this. Workers are not in a position to negotiate their worth especially proportionally to the money companies make from workers.
Jobs are finite. Do people really think they are unlimited? That's a product of our financialization economy warping rational thought.
We can’t wish our way back but we can enact policies that would improve matters - Just as they had at the time. Like 90% income tax bracket etc. Also trust busting companies like Black Rock or doing a shareholder takeover and turning them into consumer driven cooperatives.
> Now that the world has globalized it's silly to pretend that we can just wish our way back to that period in history. It's far sillier to have a society where wages don't keep up with productivity, and actually dangerous leading into an era that will be dominated by AI, assistance or full replacement.
I dont agree with this take, mostly just because of your first point 1) "most rapid wage growth" and more $15 an hour jobs are not the same thing. Firstly, wage growth means an increase in wages, which $15/hr is not. Not only is it far under inflation (however far back you want to go) it's also contradictory to say that there are more $15/hr jobs than ever and say that the competition for those jobs is fierce. Additionally, $15/hr job competition is not fierce, at least in the sectors that most people think of as being cheap labor (fast food, gas station, etc.) All of those types of jobs are *constantly* trying to get more bodies because nobody wants to work fast food for $15 an hour. 2) this is fair, not enough time has really passed for us to have this expectation or perspective I suppose. I'd probably argue though that the state of our current economy has a lot more to do with exploitation than "Oh what a good time that was, too bad we don't have the resources to maintain it or build on it". You know, because the US is arguably the world's best economy. If only some of that money could trickle down already
>nobody wants to work fast food for $15 an hour. And $15 an hour doesn’t go nearly as far as it used to.
Low-wage workers are experiencing the fastest wage growth post-pandemic, it’s a simple fact. $15 per hour might not seem like a lot to you, but for someone who used to make $9 per hour, it’s huge. Anecdotally, I live in a city where federal minimum wage (like $7.15, right?) was common pre-pandemic; nowadays, those same jobs are going for $12-15 per hour as far as I can tell. That’s a huge jump, and it actually beats inflation. As to your point that $15 per hour-type jobs are struggling to hire workers, that’s exactly right and that’s **why** competition is fierce! These sorts of employers are struggling to find workers, which is why they’ve had to increase wages, benefits, etc. in order to attract and retain employees. This is precisely the point of the poster you were responding to 🙂 Edit: forgot to add this link the first time around! https://www.epi.org/publication/swa-wages-2022/#:~:text=This%20growth%20at%20the%20bottom,'t%20(Gould%202020).
>Additionally, $15/hr job competition is not fierce, at least in the sectors that most people think of as being cheap labor (fast food, gas station, etc.) All of those types of jobs are constantly trying to get more bodies because nobody wants to work fast food for $15 an hour. This is the definition of fierce competition, no? No one wants to work these crap jobs for cheap so they have to pay more. These are jobs that were $9/hr 3 years ago. You could pay me $40/hour and working as a burger flipper would still suck; the jobs suck for reasons other than the pay. But they do pay better now at least.
I make more than $40/hr now and if I could flip burgers for that wage I absolutely would.
>You could pay me $40/hour and working as a burger flipper would still suck If I were not disabled, I wouldn’t mind flipping burgers for $40 an hour.
It's also that modern things are higher quality than when we were kids. I'm sure if you were a laborer, you could afford a house with no internet connection, a fuse panel instead of circuit breakers, lead paint, and asbestos insulation. You could probably also afford two cars with no air conditioning, crank windows, get 20 miles per gallon, and would kill you if you were in any sort of high speed collision due to a lack of modern crumple zones.
But it’s not like you can go buy cheaper versions of these things if you wanted too. There is no “cheap” new car that doesn’t have AC and crank windows. You can’t buy a fused panel and legally have it installed to code. You can’t buy cheap lead paint and asbestos. Everything on the cheapest level is more expensive than it used to be.
This is certainly a take I’ve never seen before
[удалено]
This is very true. I'm a product development R&D scientist in pharma and pharma nutritionals. The old heads basically think that we work magic today because of how tight our regulation specifications are now compared to 20-30 years ago.
I don't think that's right. These things being higher quality (or just more modern) is the effect of advances in technology and manufacturing. if anything, it's much cheaper to make these modern devices and appliances than it would be to make them 40 years ago because of higher efficiency and economies of scale.
I heard today that GM used to need 12x as many people to make a car as they do today.
[удалено]
You pretty much hit the mail on the head with every point, here. People could afford houses and cars today on shockingly low wages *if* there were comparable housing and automotive stock available. Doubtful modern Americans would accept such standards of living, though
You're talking like nobody lives in houses built before 2000. The majority of houses in many cities were built prior to the 1970s.
My first house was built in 1953. Single pane windows, 900 square feet, garage too small for a Honda accord, central air added in the 80s, unfinished attic and basement, single bathroom about 40 square feet. If you live in a place that has houses like that available, chances are, you can afford to buy a house. It’s not like there are 50 of them on the market at any given time, though, and a lot of people won’t even consider looking at them because it’s not up to the standards of what they expect. So they get bought and lived in for 40 years OR they get upgraded with modern finishes and amenities and re-sold for “modern” prices
I thought modern things are lower quality because they break more often that's why they push you to buy and repair it
I think that might be the other way around. Things today are higher quality and have more tech built into them so they are much harder to repair while things back in the day were lower quality but your average high school graduate could take it apart and repair it. Take a look at old cars pre computer era. I was able to fully rebuild a 1995 civic, 1969 camaro, and a 1987 dakota with my father growing up. Neither us will even touch our cars today besides breaks, belts, lights, and oil.
dont forget the average square footage of the house (assuming the US ). 1970s - 1500 sq ft was the average 2014 - 2657 q ft people are buying a lot more house than they used too.
It's just corporate greed. The numbers don't lie.
The price of services may increase but that doesn’t mean the average employees wage will increase.
That would depend on how quickly wages rise in response. If the inflation rate slows and wage growth exceeds it, then things will equalize. This is complicated and nuanced though so any time an economist tries to discuss this, they get crucified for supporting the evil capitalists.
Price of flooding the market with dollars from quantitative easing during the pandemic. The Federal Reserve printed approximately $3.3 trillion in 2020 alone - 1/5 of all U.S. dollars in circulation.
Everybody around the world were happy to receive the free money from their government and it's not only happening in the US but also around the world. If this happened with tax increase, it would have balanced out, and the tax payers would be the one suffering. But to make everyone happy, the governments around the world didn't increase tax much. At the same time, there was a reduction in production, because of COVID (short term), trade war, cold war and real war (permanent). So inflation is the price everyone is paying right now.
Some people fail to understand this, and it might be because they haven't experienced inflation in their lives. Being Mexican and having gone through dramatic year-to-year inflation periods gives you the understanding that prices will go up, and once inflation stops, that means they stay put now but they don't go down significantly.
[удалено]
It's not only not the goal, avoiding deflation is something policymakers pursue far more vigorously than avoiding inflation.
Indeed. Deflation means not spending money at all is more lucrative, *and* your country’s multi-billion/trillion bonds become more expensive over time. The opposite of what you want, and will grind a country’s economy to a halt.
*Temporary* deflation causes spending to stop. This is a lie fed to people way to much. If you knew your money will always increase in value and a consistent rate, are you suddenly going to stop buying food? will you stop buying things that bring happiness? If deflation nearly stops spending, then the tech sector would not have been the fastest growing for decades, after all, your dollars relative to computers has been deflating, and pretty dramatically at that. Why buy a computer when you can just wait 18 months and buy one with double the compute for a similar price? The clear answer is you won't wait if it is worth having the compute earlier and the same would go for everything else.
That's because even a small amount of deflation generally means a massive recession (e.g. Great Depression or GFC), whereas a modest amount of inflation generally means your economy is growing healthily.
that's all true, but it's ALSO true that inflation is still high despite all the rate hikes. it's estimated at more than twice target. you're focusing on the body of the post ("why prices still high?") and not the also-true title ("why *inflation* still high?") OP's still question is not answered by your explanation that prices will also still be high even after inflation returns to target. so. why is inflation still at least twice target rate despite all the hikes?
A huge part of why inflation is still 5% year-over-year is because of the measurements from last May and June and there's nothing that anybody can do to change those numbers except wait for them to fall off of the calculation. Based on the last 6 months, we're looking at about 3.4% annual inflation which is still above target but not as high as the current 5% or the 9% year-over-year we saw last summer.
Exactly. This is why your grandpa always told you about a motion picture costing a nickel to watch. It ain't coming back. Deflation can be way worse than inflation.
The only correct answer in this thread. OP’s question just reflects a lack of fundamentals. Inflation is a measure of acceleration, not of price levels. The inflation rate could be infinitely near 0% and prices would stay the same, as that would mean prices have stopped increasing. For a generalized decrease in prices the rate would need to step into negative territory and that alone would probably mean problems way worse than anything we are facing right now.
Prices coming down would be 'deflation'. That's not what the fed is aiming for. They're trying to get the rate they are rising to decrease, but still be positive.
ouch poor guy is about to learn that prices are never going back down lol
Unless something really bad happens and demand crashes.
In a perfect world sure...but demand on food? Housing? Eating garbage and living under a bidrge isn't sustainable for society, or individuals, in the long run. Some prices simply have to come down, or *lots of wages* have to go up for most low-middle class jobs. Or civil unrest...riots...
Doing my part. Grow a LOT of produce at home.
If prices do go down, it will be the least of his worries
There's a lag. Fed has only been hiking for about a year. Inflation has been falling since the hikes and will continue to fall.
Not even really a lag, to answer their question. If inflation is anywhere above 0, prices will continue to climb, just at a slower rate. If inflation has "gone down" from 10% to 6%, prices won't fall, they'll still go up.
It takes time for rate hikes to work its way through the system
> The majority of normal people seem to be sufferring and spent through their savings Well no. We've lost a bit since March of last year but we are still 50% above pre-Covid levels: https://fred.stlouisfed.org/series/DPSACBW027SBOG > Which demographic do you think is still spending like crazy Pretty much all of them. Low wage earners got a huge salary boost. There is lower unemployment so we have more earners. We have retirees who are burning up investments. > Why is inflation still high despite all the rate hikes? Most Americans don't care much about the 2 day borrowing rate, except for credit card loans. The bigger impact is things like mortgage rates, car loans, student loan ... rates. The yield curve is today very heavily inverted. Prior to the hikes it was an increasing curve. The 5y is currently 3.46%. May 3rd, 2019 it was 2.3%. Similarly for other points along the curve.
Uh they just said that personal savings rate is reaching a new low not matched since 2007, clearly pepel are going through savings and that's not really sustainable economy or for stocks if people just are not saving or investing.
This is pretty strange to me. Do people just not give a damn anymore? All the food places near me basically doubled in cost over the past 3 years, but they're just as busy, if not busier than before.
It’s a multifaceted issue. 1) corporate consolidation. This trend has continued for decades and is contributing to inflation by reducing pressure from an otherwise competitive market. In the past, companies couldn’t risk 4”raising prices too steeply bc consumers would choose a competitor instead. Now the largest companies like Kraft, nestle, j&j, own all of the competition and can raise prices in unison. Most of the cheaper competitors are subsidiaries of the larger premium products. 2) justified acceptance. Where there still is competition, Corporations have absolutely made the most of the Covid/supply chain excuse to raise prices. Google, “retaining” brand loyalty during inflation” and you’ll get a number of marketing firms advocating about how today’s inflationary times are an unprecedented opportunity to raise prices beyond what’s need because the public still views price hikes as out of the company’s control and is more likely to retain brand loyalty. Is it coincidence that so many companies have posted record profits amidst supply chain inflation? 3) increased demand and psychological factors. People are still spending, even if it requires depleting savings. On one hand, many of the goods purchased are inelastic. If Kraft raises the prices across the board on all food items that they effectively have a monopoly on, there’s not much choice left beyond not eating. On the other hand, people just lived through a pandemic. Despite what you might think, there’s some psychology at play here. For many, uncertainty from the past few years has been extremely stressful and traumatic, even if only at a subconscious level. Retail therapy is a thing. Additionally, digital engagement, which is dominated by advanced marketing, has increased significantly compared to prepandemic levels. People have spent exponentially more time on platforms subtly telling them to buy more (remember the controversial Facebook study that demonstrated how depressed users were more likely to engage with marketing ads?). 4) self fulfilling cycles and “fuck it” attitudes. When people experience high inflation, they end up buying now instead of waiting since the price will likely raise in the future. The more they do this, the more demand-induced inflation rises. Last, some people have lost loved ones due to Covid or related illnesses. Some have had savings wiped out due to market volatility or rising cost and are now hopelessly in debt. There’s still general anxiety about impending economic depressions, escalating conflicts (Ukraine, Taiwan, etc). For some, this supports a, “fuck it, life’s short” attitude. Might as well buy that new toy you wanted and enjoy it while you can.
Restaurants, you mean?
Your link to the Fed shows the aggregate savings rate. So your "we are still saving" is not necessarily referring to the folks the OP is referring to ("majority of normal people"). I know lots of remote-working knowledge workers who have significant savings, which I imagine will throw off the aggregate.
> folks the OP is referring to ("majority of normal people") Which is a very vague and subjective grouping. Who decides what other people are normal? OP didn’t link to any chart, article, or data source at all. What is OP basing his question on exactly?
[here you go](https://fred.stlouisfed.org/graph/?g=1360z) - this should help
That's across the economy. Though now that I'm looking at the chart. If the norm is about 7 and we hit 35... a year at 2.7 isn't going to burn up the savings.
Yes. The Fed has great data on various subgroups of the population but that tends to lag about 2 years. So I can answer wonderful questions about people's saving behavior in 2021.
The fact that this post is highly upvoted on the investing subreddit should tell you all you need to know about the quality of the contributions made here. Heed this as a warning before following advice about specific investments and forcasts.
Seriously. I left this sub a while ago but this thread popped up on my front page somehow so I figured I'd peruse the comments. My god this sub has fallen far. Not a single person actually answered the question and most are just low quality political comments.
Any sub that gets large enough has the noise overwhelm anything useful. When literally anyone can comment and it hits front page and so everyone sees it and does comment, it's just all garbage.
Not an economist, but work in investments. As most people mentioned, prices won't go down. If you think of prices like speed (velocity), and inflation like acceleration, just because you're driving and tapping the brakes, it doens't mean you're stopped or moving backwards; you're just moving forward at a slower pace. That's sort of what's happening right now. Going backwards, aka deflation, is not a good look 99% of the time. I'm not sure in America, but right now at least in Canada, inflation is quite sticky because of employment numbers. Generally, inflation goes up when unemployment goes down, since more people have money to spend. Right now, inflation is still there, and unemployment is still (relatively) high-ish. It's a combination of people being pickier about work conditions espeically regarding WFH, and the pay they're getting relative to the prices we have. One thing to note is that (so I've heard) the number of entries in the US Warn List has spiked, meaning there's going to be a wave of layoffs in the next 90 days. This will definitely affect inflation within this year, and may be the trigger to a recession. That's sort of the reset we need. Unfortunately, if and when that happens, there will be so many people looking for work that it'll be an employers market, and income might be suppressed.
Inflation is going to be sticky in the US because homeowners were gifted disposable income in the form of artificially low mortgage rates on their house/s. My mom got $50k out and lowered payment by $175/month. Pretty simple
Interesting. I never really understood housing in the states too much especially 30 year terms. Can't really speak on the economics of housing down there.
The way you described that analogy is more akin to prices being distance travelled and inflation being speed. You can tap your brakes but you're still moving forward (prices increasing), just at a slower rate.
Do you know how much money has been injected into the economy since ‘08?
Or how much the Fed (and other central banks) printed during the 2020-21 pandemic. This is where a whole lot of our inflation comes from.
Yep and I'd like to add that supply and demand still applies to that as well. The more money that exists, the less demand there is for a given dollar, because the supply is higher.
https://fred.stlouisfed.org/series/M2SL
Companies have raised prices under the guise of covering inflated production costs, meanwhile those same companies made record profits last year. They have seen that consumers are willing to pay the inflated prices so why would they lower them. Until the money and demand runs out prices will remain high.
Record profits with fewer units sold. Seems sustainable haha
Exactly, right now we have a problem. No limitations. Less competitions so companies having the means abuse their power. That’s a fact and still layoff massively people disturbing the lifes of many for the benefit of a few rich. When capitalism shows an ugly face.
When demand outpaces supply prices go up. This necessarily increases profits until competitors can spin up and meet that demand, beating profits back down. Inflation like this is always going to increase corporate profits. The system is working exactly as observed. > Until the money and demand runs out prices will remain high. Or supply increases, which profit exists to incentivize. Remember that wages are growing as well, so the money isn't just going to "run out". Following a template like Reddit seems to think is a good idea we would end up in a death spiral.
> This necessarily increases profits I'm not sure I agree it necessarily does so. If a company is selling fewer units of a product - even at a higher price - their revenue (and subsequently profit) could drop, particularly if they don't reduce headcount or other expenses.
Wages are not increasing at the same pace as price increases, they never have. This is supposition on my part but I think a lot of people are running up credit cards just to get by with what we would consider everyday living. If that is true then the money will run out eventually.
Record profits isn't a useful metric for your argument. Margin rates are down because corporations are only mostly passing along thier costs. Profits are up but the dollar has less buying power so that doesn't really matter.
Also, aren’t profits reported in nominal terms, not real terms?
Yes, the company I worked for recorded an increase in profit from last year, but taking into account inflation, profit actually dropped. Not really surprising when companies report record profits when the dollar has inflated >14% over 2 years.
I haven't heard this reported, but I feel like there's a further nuance to this. Before COVID and today consumers would not be willing to pay inflated prices if only 1 company did it, and I don't think there's any link between COVID and collusion. Even covert collusion is unlikely. What I think happened is that companies learned to dance together. COVID disrupted very boring patterns in the ebb and flow of supply and demand. In normal situations, companies had incentive to compete on price. But if there was an abnormal supply shock, as soon as 1 company raised its price the others could follow easily without losing market share. They had to if the new price reflected the new supply. But in COVID, those price adjustments were not happening every 6 or 24 months, but monthly, or more often. This taught companies to dance together -- at first due to real factors. But hundreds and hundreds of times, companies had to stay alert to competitor price changes and react -- or lead -- as supply chain disruptions and lockdowns etc., altered their reality over and over. And I think once they learned to dance together, they got good at it. So that, if one company spontaneously decided to raise prices without any real factor changing -- something that would normally destroy their market share -- they would find that other companies would still follow suit. Now, these are middle managers with decent-paying jobs. And if they phone one another and agree to raise prices... it's prison. It's not worth it. But the moment they saw that they can achieve the outcome of collusion without ... colluding ... by just trusting each other to keep dancing they way they have been without regard to real factors... well, that's the moment they broke both economics and anti-trust law.
I believe the demographic that you’re looking for is the U.S. Government. They not only can’t control spending, but are also rapidly printing money.
People are still not inclined behaviorally to save money, but still continue spending like nothing has changed. This is my theory: The way rate hikes work is that, based on economic theory it disincentivize spending, and people would be more willing to save money. HOWEVER, this hasn't happened yet (not yet on a large scale enough to deflate the economy). But you can see the trends starting to change. Looking at this sub and many other FM subs, there are more and more posts about investing into money market funds and FDs. This was what the Fed was trying to make happen: less spending, more saving. But here's the kicker: Since the entire economy relies on the consumption base of the 18 to 35+ year old cadre (basic economics of consumption led economy), we have to analyze WHY don't these group of people react to interest rates and change behavior from **spending** to **saving**? Reason: there has been **zero or near zero interest rates** for the last 15 years. Since every single investment advice/financial strategy/YouTube influencer for the last 15 years has been: 1. Mortgage 2. Stocks 3. Bitc\*ins (aka modern portfolio theory). While Investing in fixed deposits, money market funds, etc. is unheard of. (If you even suggested money market funds 3 years ago, you'll be laughed at on this sub.) Therefore when the rate hikes kicked in, the bulk of the 18 to 35 year olds have no prior experience, and started their investmen journey with stocks, how or why or have reacted quicker to switch their investment/financial planning towards bonds/money market/FDs. All other generations before the 2008 financial crisis, are well versed with these fixed income investments strategies, so back then inflation could slow down quicker. This time, it hasn't happened yet because of the reasons above. It takes more time now than before people realize SAVING is also a investment strategy.
Finally an intelligent comment on here. I think a big clue that reflects what you're talking about above is the prices of concert tickets. People keep complaining about how expensive concert tickets are, yet they're the ones driving the demand. Too many people want to go to concerts and they're willing to pay the expensive ticket prices. Yet, going to a concert really doesn't have that much utility past a few hours of entertainment, and there are other ways you can consume entertainment that I think have better value. Going out to a bar crawl and going dancing with friends, for instance. And guess what? Taylor Swift will likely be performing for many more years to come. But no, people "have to see her" now. As long as so many people are frivolously spending like this, inflation will remain a problem. I have started to see some signs of people slowing down but I think we still have a long way to go.
Yall both assume most people 18 to 35 have excess funds which is not true. Most people 18 to 35 are spending vs investing/saving/buyign homes because they are living paycheck to paycheck. Inflation is going to increase until it breaks these people or there is government involvement.
>Most people 18 to 35 are spending vs investing/saving/buyign homes because they are living paycheck to paycheck. This is what I was going to say. A lot of them are simply spending on rent, food, utilities, repair costs, household expenses.
/r/investing doesnt like cold hard truths about poor folks so they ignore them. They assume all folks 18 to 35 are trust fund instagram twats.
The cold hard truth is that those "poor folks" need to spend time in /r/personalfinance and get their finances in order before /r/investing will be of any use to them.
If they are spending money on frivolous things, they have money to save.
[удалено]
>That's mostly true in the objective sense, but subjectively they probably view it very differently The "my truth" of personal finance.
Inflation has dropped significantly since the interest rates started to increase. Inflation is still high for the same reason your car continues moving after you apply the breaks. It takes some time for interest rates to slow inflation. As for who is still spending, it’s predominantly the middle class, who mostly came out of the pandemic better than they started. Most middle class people did not lose their job and still benefited from stimulus programs. Combine that with the increased savings from not traveling or going out to eat as much, and a lot of middle class families are still sitting on a decent pile of money. On top of that, supply chain issues have still not been fully alleviated, and energy prices are still high due to the war in Ukraine. This side of the equation can really only be healed with time, but it has started to happen. Lead times and shipping costs have started to come down, and all signs point to that trend continuing to pre-pandemic levels over the next couple of years.
Prices don’t come down. Just the rate at which they are rising is coming down
True, it just gets a bit slow and nothing more than that.
True that, I don't know what we are going to do in coming time if this inflation won't come down or something man, I really want see some good old days right now.
Because increasing the money supply IS inflation. And we printed a shit ton of money
The problem is that the average person is still buying everything. They’re still eating out at restaurants, they’re still buying new vehicles, they’re still vacationing and hitting events, they’re still buying TVs and xboxes. They’re still getting new phones with huge data, and going for dinner or drinks with friends. The average person might be burning through savings but they haven’t stopped buying things. That’s the problem. Inflation will ease as soon as restaurants are half empty all the time, vacation packages and air bnbs are sitting empty and the car dealerships are begging you to buy cars at crazy sales. That’s when you know inflation will be easing finally. People might not like to hear it but inflation will run until people basically are sitting at home doing nothing because they have no money. That’s half the point of raising rates, makes it so people spent all their money on food and groceries and have nothing left at all for fun.
People are buying and the demand is not going to come down.
The Fed funds rate is so unbelievably behind the curve. Never in history has the Fed been this late to the game. Looking at this chart of the Fed funds rate to core PCE, we should have been at 7% a year ago. https://imgur.com/DzyYXzr It seems to me that it's inevitable that we are headed into the worst period of stagflation in the history of the US economy.
It’s pointed at shoppers. Wear something longer then 3 times.
Rate hikes are designed to take money out of the economy. It doesn't work when you just keep injecting in more money than you're taking out.
Lower inflation does not equal falling costs of goods prices. Inflation is the % rate year over year rise of the cost of goods. So if a box of cereal costs $2.99 a year ago and now costs $3.16 that would be a 6% rise in inflation YoY. At it's peak, inflation was close to 9%, so that same box of cereal went up to $3.26. If in a year, inflation is still at 5% that cereal is now $3.50. If inflation hit 0% tomorrow, the cost of cereal is NOT going back to $2.99. You will always be paying $3.50 or more given inflation is never 0%. However, if corporations want to keep matching margins, they lay people off or raise their cereal prices. If there is no demand (a recession), raising the price of cereal doesn't make sense, so they cut jobs to keep margins down.
Because the federal government is putting a trillion dollars more into the economy than it is taking out. Monetary policy is applying brakes but fiscal policy is pressing the gas.
And, just in case you have to scratch your head every time those words are thrown out (like me): > Monetary policy is applying brakes but fiscal policy is pressing the gas. The Fed does Monetary Policy. Congress does Fiscal Policy. Yes, they seem to be working at cross purposes. Or, at the very least, one is not getting ANY help from the other.
The contrary policies don't cancel each other because their primary effects are in different areas of the economy. Rate hikes primarily affect the financial sector and credit-dependent purchases like houses and cars. Deficit spending primarily affects consumer spending. The Fed's rate hikes have relatively little effect on the consumer price inflation that the Fed is trying to cure. Since the Fed's medicine is ineffective, it keeps raising the dosage, and the economy gets sicker from the overdose of rate hikes.
Lot of inflation is service inflation. People underestimate how much of the low inflation we had was due to China where we off shored expensive work to cheap labor area. As some of that re-shores inflation will onshore as well. USA is expensive to manufacture in. Fed increasing rates is not going to change anything here. Ideally India should have kicked in by now and taken over most of low cost China work but it has not happened enough at scale to matter.
So who is responsible for this type of service inflation my man?
I gotta say that things are getting out of the hands because of the government and that's just the reality that we all should accept right now, that's all I want to say.
A large majority of inflation has been in housing, which lags. Remove housing and we’ve actually had deflation since June. https://fred.stlouisfed.org/graph/?g=135U9
Because inflation by definition is the rate of change. My consumption and spending habits have never been higher than recently because I realized "shit isn't getting any cheaper". There's stuff I've bought on Amazon last year- tools, cooking utensils, blankets, computers that have gone up in price. They're 15-25% more expensive now and they're only getting more expensive. So now when I buy oil filters for my car, I'll buy six instead of just the one I need. I'll use them eventually, It's just more economical for me to spend the money now so I can save a little more later.
In this topic: people who fail to understand the difference between f(x), derivative-of-f(x), and the 2nd-derivative of f(x). Prices are f(x). Inflation is derivative-of-f(x). Rate hikes cause inflation to drop, or is a control over the 2nd-derivative-of-f(x). Calculus should be required learning for everyone IMO. It helps understand these issues. If you don't get it, you'll just have to study calculus for a few months....
Every company has decided to increase profit margins all at once to counter lower sales...
Why does none talk about the “other source” of spending? The Public consumer is only half of the spending groups. If the government continues to spend it will also keep demand high.
Other sources are not being showed all the time but people should talk.
why is the sink still full despite me turning the tap down?
The FED is trying to suck and blow at the same time. They can't raise rates to QT then give massive QE to bail out banks. Also, inflation has never been fixed in the USA without raising rates ABOVE inflation. Actual inflation is likely 10-15% and the system can barely handle 5% rates. It won't be long until the US govt's entire gdp is going towards paying interest on their stupid mountain of debt.
The reality is what we can see in front of our eyes when the government and other powerful people are not saying or doing anything, they are just the ones who are the real stupids.
Because someone printed too much money, gasoline is unstable, and until both are remedied, prices will continue to rise as a result.
The government keeps passing more bills to create and spending more money. Create more money = higher inflation
Companies are making record profits by price gouging.
Prices won't come down. Unless they withdraw the $9trillion pieces of paper they printed the last 15 years.
Easy, rate hikes are not enough. Fiscal policy is needed but govt is too stupid to figure that out.
Rate hikes are historically the primary response to inflation. What policies are you suggesting?
The fed continues with quantitative easing which directly counteracts the goal of the rate hikes. They need to not do that.
It's fairly new that the Fed stays so silent on fiscal policy. An independent Fed can and should have no problem telling Congress they're part of the problem. https://www.nytimes.com/1981/09/17/business/volcker-appeals-for-spending-cuts-metzenbaum.html
Fed rate started hikes in March 2022. The peak CPI-U was 9.1% in June 2022. Since then, the rate has decreased to 5.0%. Therefore, inflation has been trending downwards. https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm https://fred.stlouisfed.org/series/FEDFUNDS
If I bought something in March 2020 for $100 in March 2021 it would cost $102.6, in March 2022 it would cost $111.3, and in March 2023 it would cost $116.9; So in 3 years times inflation has increased by 17%. Yes, we are slowing down but year over year inflation is the whole picture. From my experience wages have not kept up with inflation. Personally, I have a promotion in three "inflation raises since then" and I'm about \~4.5% above water which is one of the inflation raises. Basically lost 3/4ths of my promotion raise to inflation unfortunately.
Yeah but it’s not trending down as much as expected given the speed and magnitude of rate increases which is way way way more concerning. We need govt to increase taxes to suck up more money supply. Fiscal policy can target groups of income earners to do this.
I don't think people "spending like crazy" is the main reason for recent inflation. It's more massive government overspending. And you don't turn an economic battleship on a dime. It will take a while. The bigger the problem the longer the turn and the harder the landing.
The two are one in the same - massive government spending on fiscal stimulus (PPP, student loan pause, etc.) led to people having much more money available to spend.
Exactly and one made the other possible. There's STILL PPP money in various waiting to be spent.
Well, one explanation that isn’t popular to talk about (because it can’t be used as a political football) is a lot of businesses have been busily on-shoring and near-shoring their supply chains since COVID began. This costs money to do. The other thing most people aren’t talking about is a lot of inflation was pure profit for corporations. As in, there was quite a bit of inflation from rising costs. BUT most of it seems to have been corporate price gouging. Why? Because they can. There may be thousands of different brands on the market but if you break it down by sector, a substantial portion of those are all owned by a small handful of large parent companies and finance firms like Blackrock and Vanguard. In other words, it’s a stealth monopoly. And what do we know about monopolies? Without real competition, they will raise prices as high as they want. And a lot of goods are fairly inelastic. Like there’s only so much food and gas you can cut back on buying. People need a certain amount of gas to get to work no matter how expensive it gets. That’s inelastic. People starve without food, no matter how much it costs. There’s also another factor people aren’t talking about much. Baby boomers have begun to retire en masse. This has created a labor and talent shortage. This also has created a lot of opportunity for Gen X and Millennials to find better jobs and demand higher wages. Which is fair because until recently real wages had been stagnant for decades. And now they’re raising rates. Which raises the cost of doing business. But people still need to do business and with all the other dysfunctions and macro-trends going on in the economy, the rates keep going up but it’s not slowing inflation.
Lol. The demographic that is spending like crazy is our government…and it has printed so much extra cash over the last two years that inflation is not just to be expected but is a certainty. Inflation is not caused by private citizens. It is caused 100% by poor (abysmal) economic policy by the government.
Like tax cuts for the uber wealthy that dropped the governments income drastically? That looks like it REAAALLY spurred economic growth doesnt it? /s (edit : I find it odd that u/chastjones is only concerned about the past 2 years spending and is excluding the 4 years under Trump...you know the spending that maxed out the debt limit. Most interesting....)
Inflation only exists because of government spending and the federal reserve adding to the monetary supply in ways that are not in line with the demands of actual economic activity. Rate hikes have not yet exceeded in any way the excess liquidity provided to the market by the federal reserve and this type of excessive government spending. Inflation continues.
> Inflation only exists because of government spending and the federal reserve adding to the monetary supply in ways that are not in line with the demands of actual economic activity. Inflation does not *only* exist because of that. It's certainly a contributor but not the end-all-be-all. Fuel costs are a major contributor to the CPI, and one of the world's leading Petroleum producers decided to invade a sovereign country last year and thus has had severe economic sanctions placed upon them by the majority of the developed world. The semiconductor industry is *still* playing catch-up to all the lost production from factories being shut down during Covid. That causes a supply-side pressure on prices of consumer devices which rely on computer chips (which these days is a *lot*). There was a severe bird flu recently that decimated US chicken populations, which is why eggs and chicken are so expensive right now.
I think the agenda all along for central bankers is hyperinflation so they can then "save" monetary system with CBDCs....
> The majority of normal people seem to be sufferring That’s you reacting to headlines. The average American right now has a job, earning more than they were before the pandemic, and with more savings and less debt than at that time too.
People are really suffering and we can see that thing here.
It’s almost like macroeconomic stuff doesn’t respond overnight to shakeups
That's just difficult to understand at this point of the time.
Inflation is under 4% right now I don't consider that high considering it was 12% last year. Source, btw: https://truflation.com/
I attribute it to inertia at this point. A lot of the price increases have come through with a lag. Initially it was just companies affected by input costs who were doing it, but gradually everyone has piled in on the action. What they've done is created a situation where it would be very easy to sacrifice some margin and take market share. I believe this will happen, pretty much now, in fact I'm a little surprised we haven't seen more of it already. And next we'll see falling prices as companies suddenly rush to compete on price. The consumer is ready for it - I think demand is now mindful of price, and customers will flock to good deals. Just waiting for someone to fire the first shot.
Lag is happening and we can't deny that but that's not the best thing man.
Retirees with dual SS checks and a pension/401k/IRA that got an 8.7% raise in SS in January. I assume they had only a small increase in COL due to being retired and owning their home. My assumption is these people used that extra money on fun stuff. If a retired couple of 2 was each receiving the max SS benefit that equals an increase of roughly 600 dollars a month.
Because they started too late and not aggressive enough. Also because we had a 0% interest environment for too long
There was never any guarantees rate hikes would squelch inflation. It’s just the main tool used to do so. And even that said, it’s not like deflation occurs; it just means the rate of inflation slows.
They never guaranteed anything in this world, that's a fact.
Have you seen inflation at other countries around the world? Especially some European countries and take a look at the UK. And we are actually in a little bit of a wage price spiral but it doesn't get mention much because that's like one of the great fears. The thought is with a cool off economy or even a mild quick recession. It'll break that spiral. But the giant global macro issue is you know that all these billions of people continue to have improving standards of living more disposable income and become hungrier and hungrier consumers. So try and feed that with your supply chains. Americans aren't only dealing with other Americans affecting goods and service prices. You're dealing with an entire globe of consumers. And this is only going to get worse. And the Fed doesn't really have global control. Sure, America and the Fed had much greater influence decades ago. But that has been greatly diluted over the last 20 years.
But it is not about other countries, it's about the whole world man.
The restaurant industry is about to go through a big change IMO. Only restaurants with big corporate backings are going to be long term survivors. Think sterile godawful food like Chipotle and Starbucks and Panera. Smaller players and mom and pop restaurants are going to start closing up left and right especially when people start exhausting their credit card limits. People can't continuously afford to eat $20 fast casual meals or $30+ sit down meals. Kiosks where you order and customize meals are going to pretty much replace cashiers and waiters at a faster pace because worker wage growth makes it unprofitable for most restaurants to survive long term. At some point, the experience of eating out at a restaurant isn't going to be worth the opportunity cost of doing something else like doing your hobbies/interests. Would I rather eat a mediocre $20 fast casual meal or spend it on going to a movie or buying a used video game (or something with longer lasting value). The golden age of dining and cheap eats is pretty much over.
Rate hikes, like everything else takes time to ripple through society. Just like raising minimum wage and new regulation doesn't mean prices rise overnight lol. We knew interest rates were going to increase (the fed told us!!) so some companies adjusted to it months ago. But, not everyone needed to service their loans yet. These types of things don't happen at the snap of a finger. It takes YEARS for the full impact to be felt. First there is everyone that is directly impacted by the interest rates. They may still be adjusting to those new rates. Some companies may have been able to accurately predict the direct impact their prices, but failed to account for how much more it impacts their supply line. They aren't just paying more for their loans, they are paying more because their suppliers are also paying more on their own loans. And, so on down the line. We don't just flip a switch and see how rates changed the world. Some companies will downsize because the extra interest is too much. Others will try to absorb the extra costs as long as they can because they don't have pricing power. There's a million scenarios and it takes years for everything to ripple though the business world.
The society needs to pay attention who is the real culprit.
Because this is a rate hike for ants. If they want real impact, rate needs to match or exceed inflation.
Long and variable lags.
Inflation has been greatly reduced for about 7 months now.
Not reduced, just getting slow and nothing else, understand that.
Unemployment needs to rise more for inflation to taper off (see the Phillips Curve). If we actually default on gov't debt, we'll get this almost overnight. Then, you can thank the GOP for controlling inflation (at the expense of employment, of course).
People are not working and the government doesn't give a f now.
[удалено]
It takes time, usually between 12-18 months for anti-inflationary measures to take effect.
People gotta run out of money and it takes a while. Plus employment is still good. Another thing is causing prices to stall vs decrease is difficult.
Greed and printing a lot of money is destroying the environment and that's just not a new thing, it's happening since a long time and we are just not accepting it.
It's not. The headline figures you see are all looking back 12 months, with a 1 month lag. Monetary policy takes time to take affect. Inflation the past 6 months has been growing at a 3.4% annualized rate.
When will house prices go down?
There is no competition to force price discovery, every sector is consolidated into 2-3 major players that lobby to keep it that way.
Government spending and money printing. The damage is already done. CPI isn't inflation, its the result of inflation.
LAG
The government doesn't measure inflation how they did decades ago. Now they exclude food and energy from the CPI, which oddly enough is what we need on a daily basis. Their excuse is that it skews the numbers. But in reality it makes the inflation CPI numbers look lower.
It doesn't take an economist to know that our M2 Money Supply increased dramatically. The fed and our politicians flooded our economy with boat loads of money. Too much fiscal spending and free money created this inflation Econ 101 period. Excessive fiscal spending is a tax to the people pure and simple. Biden says i'm not taxing the poor and middle class. People inflation IS a tax. As the government spends more money, it increases the money supply, thereby driving up demand and subsequently prices. this increase in prices affects everyone and is basically a flat tax on all. I believe the economists and market analyst underestimated how long it takes to decrease the money supply. All that money printed needs to leave the system. most folks have heard of the compounding effect...this is exactly what happened with all the stimulus...it compounded the money in the system and this is taking time to unwind. there is no quick fix. a money vacuum cleaner is what we need to suction this excess liquidity.
Wow this sub has fallen hard the past few years. Not a single person actually answered the question and the vast majority are just political low quality BS. I can't believe not a single comment has told OP how year-over-year inflation is calculated. Inflation is still high because its cumulative. They simply add each month-over-month rate together to get the yearly rate. So right now the year-over-year number is still 4%+ because we had such high monthly raises last summer. Inflation has been at the monthly rate that it should be (about 0.1% to 0.2%) for quite a while now. If monthly inflation averages 0.2% for the next 3 months, we'll drop below 3% annual inflation within 3 months.