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Thread: The Quick And Dirty On Inflation

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    The Quick And Dirty On Inflation

    Here is a good article about our current inflation and how it will end - great info from Mises.

    The Quick And Dirty On Inflation

    The inflation freight train continues to barrel ahead. Not only are consumer prices at historically high levels; producer prices continue to run ahead of CPI, casting some doubt on the “peak inflation” narrative in the mainstream.

    Despite the fact that inflation has been running hot for over a year, the mainstream pundits, government officials and central bankers can’t seem to nail down what’s going on. First, they said printing trillions wouldn’t cause inflation. Then they called inflation transitory. They said it was the pandemic. They pointed their fingers at supply chains and “excess demand.” Now they’re blaming Putin.


    The problem is the mainstream won’t come to terms with the real underlying cause of rising prices. Mises Institute President Jeff Deist gives a quick and dirty breakdown of the inflation problem.


    But what is really happening?

    • First, consider the two covid stimulus bills passed by Congress in 2020 and 2021. These pumped more than $5 trillion directly into the economy in the form of payments to government, payments to households, unemployment benefits, employer payroll loans, cash subsides to airlines and countless other industries, and a host of grab-bag earmarks which had nothing to do with covid. This new money injected itself straight into the veins of the daily economy.
    • Second, supply chains remain degraded because politicians around the world didn’t think through their lockdown policies. The deeply interconnected global economy does not have an ON/OFF switch. Idle resources and idle workers don’t simply spring to life and produce goods and services on command. But our policy makers have no conception of a structure of production, its temporal elements, or the ravages of malinvestment created by their political decision to shutter businesses.
    • Third, covid allowed the Fed to justify yet another spasm of “extraordinary” monetary policies beginning in March 2020. This gave central bankers an easy out, in a sense, because real trouble was already on the horizon back in September 2019. The repo market, which commercial banks use for short-term (overnight) financing of their operations, suddenly seized up and sent rates spiking. These paroxysms embarrassingly forced the Fed to inject billions of dollars into its “standing” (i.e., permanent) repurchase facility and to consider yet another round of QE (asset buying) even after it had promised to shrink its balance sheet, still bloated with the detritus of the 2007 crisis.

    All of this happened before any of us had heard of covid.
    But the obvious question last fall, screaming to be asked, was this: How on earth, after more than a decade of aggressive asset purchases by the Fed (swelling the central bank’s balance sheet from less than $1 trillion in 2007 to more than $4 trillion by 2019), did commercial banks still experience a liquidity crunch? What the hell was the point of all that money?
    ? Only with pain in the form of a necessary corrective recession or depression. Congress must slash spending, the Fed must stop buying assets and stop tampering with interest rates, and existing US debt must be allowed to mature and roll off the Fed’s balance sheet. We should force the US federal government to sell assets, especially land, to pay off Treasury obligations and fund future Social Security and Medicare entitlements. And if necessary, the federal government should be forced to default or apply a haircut to Treasury investors, who, after all, took a risk like any investor.
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    Thats a good article . The words "printed 20% of all units of currency that have ever been created in 2020 alone" stand out.

    Obvious causation
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    Problem is you can't cure inflation only prevent it from getting worse. Higher Prices are here to stay and with the "excuse" and do nothing idiots under Biden inflation will get much worse before they become stable again.
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    Have you noticed how many processing plants have had fires in the past months. Even the chip factory.

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    Quote Originally Posted by RMNIXON View Post
    Problem is you can't cure inflation only prevent it from getting worse. Higher Prices are here to stay and with the "excuse" and do nothing idiots under Biden inflation will get much worse before they become stable again.
    The current 8%+ rate is not sustainable. By rule of 72 at 8% prices double every 9 years.
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    Quote Originally Posted by RMNIXON View Post
    Problem is you can't cure inflation only prevent it from getting worse. Higher Prices are here to stay and with the "excuse" and do nothing idiots under Biden inflation will get much worse before they become stable again.
    A recession cures inflation.
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    Quote Originally Posted by roadmaster View Post
    Have you noticed how many processing plants have had fires in the past months. Even the chip factory.

    Yes I have. What do you make of that?
    Any time you give a man something he doesn't earn, you cheapen him. Our kids earn what they get, and that includes respect. -- Woody Hayes​

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    This is an interesting article. https://dnyuz.com/2022/04/25/america...n-a-long-time/


    Take the economy, so often the harbinger of election results. From late 2017 until the pandemic, a majority of Americans believed that the economy was strong, and from 2014 until the pandemic at least a plurality believed their personal economic situation was improving. Covid-19 cut sharply into that feeling of well-being; this was initially seen as temporary, though, and trillions of dollars flowed into keeping people afloat. But then near-double-digit inflation hit consumers for the first time in 40 years; 60 percent of voters now see the economy as weak and 48 percent say their financial situation is worsening, according to a Harris Poll conducted April 20-21. Many Americans under 60 have relatively little experience with anything but comparatively low fuel costs, negligible interest rates and stable prices. Virtually overnight these assumptions have been shaken. Only 35 percent approve of President Biden’s handling of inflation.


    Many Americans under 60 have relatively little experience with anything but comparatively low fuel costs, negligible interest rates and stable prices.


    Many Americans under 60 have relatively little experience with anything but comparatively low fuel costs, negligible interest rates and stable prices.
    Any time you give a man something he doesn't earn, you cheapen him. Our kids earn what they get, and that includes respect. -- Woody Hayes​

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    Quote Originally Posted by RMNIXON View Post
    Problem is you can't cure inflation
    That's not accurate, they can 'cure' inflation, just in the same way that they created an expansionary inflationary monetary policy, they can do the reverse and implement a deflationary monetary policy. They could do QT and sell the bonds on the fed's balance sheet and pull money out, they can increase fed funds and even raise reserve requirements.

    "prevent it from getting worse"

    But how would they do that? they would decrease the rate of growth of the money supply and yes, if they do the rate of inflation will come down.

    I don't think they will cause deflation and if they do they will reflate quickly probably, but its still at least a potential policy possibility.

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