Inflation
As gentlemen of means (sorry @Doog_de_Jour ), we? should all have a view on inflation for cocktail party talk. Why will this likely happen or likely not happen? The Economis 101 model we all learned in Kane Hall tells us an excess supply of anything should depress value, but it's not that simple.
- my unsophisticated thought has been that there's no place else to go. the US is still the place people want to be (at least economically); and the US dollar is the official proxy for that economy. someone challenged that the economies of India and China are potential stand-alone economies that might eventually be the alternative that buries us?
- the other no-problem explanation is simple: we've been hearing about this forever, and Ted.Knight.waiting.gif. The economy itself just handles it.
@UW_Doog_Bot , economosist extraordinaire, and @godawgst , Fin Tech master of data, are your huckleberries here. May we reprise this one? And dumb it down a little this tim? Asking for a fren.
Comments
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*Thud*
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I have no idea what you are talking about
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The one thing that has always been great about America has been its stability and slow-moving judicial system. It created an environment of consistency and dependability.
I'm not sure how stable things are going to be going forward, and how that will impact the economy.
If we continue to print money and resume giving billions away to Iran, etc, we can't maintain the predominant position indefinitely. Or can we? -
I've seen a lot of indicators of inflation not lead to inflation over the years.
No party in power every worries about inflation. Worrying about inflation is for the losers, and they regularly do.
At least that's what it looks like to me. -
A recently-deceased academic from Stanford GSB ... nationally known value investor who hung around Munger and Buffet and those guys ... used to say that legal stability in the US was a key differentiator for our country. Of course, it's imperfect and people get away with shit, but generally speaking, powerful people caught fucking around get araigned just like anybody else. But overall it works pretty well and that's why people have confidence in capital markets here. It's a commonly held view with which I tend to agree.DerekJohnson said:The one thing that has always been great about America has been its stability and slow-moving judicial system. It created an environment of consistency and dependability.
I'm not sure how stable things are going to be going forward, and how that will impact the economy.
If we continue to print money and resume giving billions away to Iran, etc, we can't maintain the predominant position indefinitely. Or can we?
The give-away money part is another question. I think that falls into the same category of response. It doesn't matter for the dollar as long as the US economy is still the show and dollar represents a proxy for that economy. Others may disagree. -
It's an important question with which to wrestle, because if @UW_Doog_Bot is wrong and @godawgst is right, we are in for a world of shit.dflea said:I've seen a lot of indicators of inflation not lead to inflation over the years.
No party in power every worries about inflation. Worrying about inflation is for the losers, and they regularly do.
At least that's what it looks like to me.
These DC riots will seem like tame shit if we? wake up one day and bread costs $12.50 / loaf and a single block of ramen noodles goes for $4.50. At that point the pours (the real ones, not the pour-mouth @YellowSnow s) will not be able to adequately feed themselves and the shit will hit the fan.
And nobody, even the riches, will be buying flooring from @RaceBannon and his partner. Flooring? Did you say flooring? In this economy? Flooring? [Mora.gif] -
Inflation was around 18 percent at one point late 70s early 80s
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A partner at the firm I joined out of LS told me that when he and his classmates at UVa law graduated in the 70s, nobody ever imagined owning a house. Imagine. UVa law - top 10 law school - expectations were they'd rent forever because of interest rates.RaceBannon said:Inflation was around 18 percent at one point late 70s early 80s
We'll? never let it go that far again because housing is such a yuge factor in the health of the economy. -
We bought our house at 11 percent in 87
They should have got into carpet laying -
I think rates were fluctuating between 6 and 8 over a few year period when I bought my first and second house. When 15-year money went down to 4.5% I refied and held. It wasn't that long ago when rates dipping into the 5% range was like "Holy Fuck!" Refi-mania.RaceBannon said:We bought our house at 11 percent in 87
They should have got into carpet laying -
I got a 30 year fixed on my White Wakanda house for 2.95 %. Then I got a letter from Amex on my high yield savings account that my interest rate was down to .5 % APR. I need to to nut up like @Swaye and buy more watches.
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@UW_Doog_Bot isn't wrong.creepycoug said:
It's an important question with which to wrestle, because if @UW_Doog_Bot is wrong and @godawgst is right, we are in for a world of shit.dflea said:I've seen a lot of indicators of inflation not lead to inflation over the years.
No party in power every worries about inflation. Worrying about inflation is for the losers, and they regularly do.
At least that's what it looks like to me.
These DC riots will seem like tame shit if we? wake up one day and bread costs $12.50 / loaf and a single block of ramen noodles goes for $4.50. At that point the pours (the real ones, not the pour-mouth @YellowSnow s) will not be able to adequately feed themselves and the shit will hit the fan.
And nobody, even the riches, will be buying flooring from @RaceBannon and his partner. Flooring? Did you say flooring? In this economy? Flooring? [Mora.gif]
hth
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I'm pretty sure inflation topped out at around 13-14% right around 1980. But that's 40 straight years of inflation fear mongering by both sides that hasn't materialized in reality.RaceBannon said:Inflation was around 18 percent at one point late 70s early 80s
This year's events could change things some, but I have faith in our fiat dollar. -
I'm not sure he's posted a single thing with which I have disagreed thus far.dflea said:
@UW_Doog_Bot isn't wrong.creepycoug said:
It's an important question with which to wrestle, because if @UW_Doog_Bot is wrong and @godawgst is right, we are in for a world of shit.dflea said:I've seen a lot of indicators of inflation not lead to inflation over the years.
No party in power every worries about inflation. Worrying about inflation is for the losers, and they regularly do.
At least that's what it looks like to me.
These DC riots will seem like tame shit if we? wake up one day and bread costs $12.50 / loaf and a single block of ramen noodles goes for $4.50. At that point the pours (the real ones, not the pour-mouth @YellowSnow s) will not be able to adequately feed themselves and the shit will hit the fan.
And nobody, even the riches, will be buying flooring from @RaceBannon and his partner. Flooring? Did you say flooring? In this economy? Flooring? [Mora.gif]
hth -
Oil prices doubled twice in the 70s.dflea said:
I'm pretty sure inflation topped out at around 13-14% right around 1980. But that's 40 straight years of inflation fear mongering by both sides that hasn't materialized in reality.RaceBannon said:Inflation was around 18 percent at one point late 70s early 80s
This year's events could change things some, but I have faith in our fiat dollar.
We survived -
I still remember the license plate game. And I was a wee lad.RaceBannon said:
Oil prices doubled twice in the 70s.dflea said:
I'm pretty sure inflation topped out at around 13-14% right around 1980. But that's 40 straight years of inflation fear mongering by both sides that hasn't materialized in reality.RaceBannon said:Inflation was around 18 percent at one point late 70s early 80s
This year's events could change things some, but I have faith in our fiat dollar.
We survived -
Looks like it peaked at 14.4 percent
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Ford wanted to Whip Inflation Now in 75 and 76
The WIN button -
10.25% in 1990 - and that was a deal. Until it wasn't.RaceBannon said:We bought our house at 11 percent in 87
They should have got into carpet laying
And, if I recall, pretty close to 20% down.
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It really was harder - it's hard - to buy a house back in the day. You had to have some capital and your shit together.PurpleThrobber said:
10.25% in 1990 - and that was a deal. Until it wasn't.RaceBannon said:We bought our house at 11 percent in 87
They should have got into carpet laying
And, if I recall, pretty close to 20% down. -
We played the 'gift' letter game from parents for several thousands of dollars of it. And by 'gift', I can still recall the stink eye/you better fucking pay us back look from Ma Throbber who gave no fucks about what the 'gift letter' said.creepycoug said:
It really was harder - it's hard - to buy a house back in the day. You had to have some capital and your shit together.PurpleThrobber said:
10.25% in 1990 - and that was a deal. Until it wasn't.RaceBannon said:We bought our house at 11 percent in 87
They should have got into carpet laying
And, if I recall, pretty close to 20% down.
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I may view inflation differently than others
1) I view the leading indicators more as an early warning system vs an absolute measure
2) Supply and Demand still are big drivers
3) I tend to lean more into the conditions that have driven prior events and look for takeaways
The last big major area of major inflation took place in the late 70s ... what were some of the conditions then?
Government chaos exiting Watergate
Oil shortages/rationing with OPEC
Effectively the collapse of the steel mills, etc
Inflation to me happens when you start having supply shortages (whether in specific goods/services ... in particular energy) or people start hoarding cash reducing supply because they are worried about tomorrow.
Recent political situation is worth monitoring and in particular actions from fully Dem led system that has the ability to put in some policies that could create inflationary pressures.
The one that I’m most interested in paying attention to is energy because while adoption of more green energy is coming (and in some respects way faster than people think), we also need to be very careful at going too fast too quick, forcing the switch at high cost points, etc
Rates will almost assuredly increase over the next 5-10 years but not to crazy levels but more back to standard normalized levels -
I got a gift letter too from Pops. No stink eye. He knew he was never seeing a dime of it ever again.PurpleThrobber said:
We played the 'gift' letter game from parents for several thousands of dollars of it. And by 'gift', I can still recall the stink eye/you better fucking pay us back look from Ma Throbber who gave no fucks about what the 'gift letter' said.creepycoug said:
It really was harder - it's hard - to buy a house back in the day. You had to have some capital and your shit together.PurpleThrobber said:
10.25% in 1990 - and that was a deal. Until it wasn't.RaceBannon said:We bought our house at 11 percent in 87
They should have got into carpet laying
And, if I recall, pretty close to 20% down. -
Thanks. Good post.Tequilla said:I may view inflation differently than others
1) I view the leading indicators more as an early warning system vs an absolute measure
2) Supply and Demand still are big drivers
3) I tend to lean more into the conditions that have driven prior events and look for takeaways
The last big major area of major inflation took place in the late 70s ... what were some of the conditions then?
Government chaos exiting Watergate
Oil shortages/rationing with OPEC
Effectively the collapse of the steel mills, etc
Inflation to me happens when you start having supply shortages (whether in specific goods/services ... in particular energy) or people start hoarding cash reducing supply because they are worried about tomorrow.
Recent political situation is worth monitoring and in particular actions from fully Dem led system that has the ability to put in some policies that could create inflationary pressures.
The one that I’m most interested in paying attention to is energy because while adoption of more green energy is coming (and in some respects way faster than people think), we also need to be very careful at going too fast too quick, forcing the switch at high cost points, etc
Rates will almost assuredly increase over the next 5-10 years but not to crazy levels but more back to standard normalized levels
But do those individual sector/product/commodity scenarios portend overall inflation? I think the inflation people talk about when this comes up ( @UW_Doog_Bot and @godawgst ) is more systemic inflation. That is, the dollar itself loses value, so everything costs more. The ultimate boogie man being post WWI Germany and having to dip into life savings to eat.
Also, connect the dots for me on hoarding cash and inflation. Isn't that taking dollars out of the system and hence reducing supply? I didn't quite understand that one.
Agree with you about rates. This just doesn't seem sustainable, but I can't back that up, and I freely admit it is not consistent with my waiting-for-Godot view on inflation. -
We? have to maintain the world's reserve currency status. The day that ends is the day we are FUBAR.creepycoug said:
Thanks. Good post.Tequilla said:I may view inflation differently than others
1) I view the leading indicators more as an early warning system vs an absolute measure
2) Supply and Demand still are big drivers
3) I tend to lean more into the conditions that have driven prior events and look for takeaways
The last big major area of major inflation took place in the late 70s ... what were some of the conditions then?
Government chaos exiting Watergate
Oil shortages/rationing with OPEC
Effectively the collapse of the steel mills, etc
Inflation to me happens when you start having supply shortages (whether in specific goods/services ... in particular energy) or people start hoarding cash reducing supply because they are worried about tomorrow.
Recent political situation is worth monitoring and in particular actions from fully Dem led system that has the ability to put in some policies that could create inflationary pressures.
The one that I’m most interested in paying attention to is energy because while adoption of more green energy is coming (and in some respects way faster than people think), we also need to be very careful at going too fast too quick, forcing the switch at high cost points, etc
Rates will almost assuredly increase over the next 5-10 years but not to crazy levels but more back to standard normalized levels
But do those individual sector/product/commodity scenarios portend overall inflation? I think the inflation people talk about when this comes up ( @UW_Doog_Bot and @godawgst ) is more systemic inflation. That is, the dollar itself loses value, so everything costs more. The ultimate boogie man being post WWI Germany and having to dip into life savings to eat.
Also, connect the dots for me on hoarding cash and inflation. Isn't that taking dollars out of the system and hence reducing supply? I didn't quite understand that one.
Agree with you about rates. This just doesn't seem sustainable, but I can't back that up, and I freely admit it is not consistent with my waiting-for-Godot view on inflation. -
WWIIIYellowSnow said:
We? have to maintain the world's reserve currency status. The day that ends is the day we are FUBAR.creepycoug said:
Thanks. Good post.Tequilla said:I may view inflation differently than others
1) I view the leading indicators more as an early warning system vs an absolute measure
2) Supply and Demand still are big drivers
3) I tend to lean more into the conditions that have driven prior events and look for takeaways
The last big major area of major inflation took place in the late 70s ... what were some of the conditions then?
Government chaos exiting Watergate
Oil shortages/rationing with OPEC
Effectively the collapse of the steel mills, etc
Inflation to me happens when you start having supply shortages (whether in specific goods/services ... in particular energy) or people start hoarding cash reducing supply because they are worried about tomorrow.
Recent political situation is worth monitoring and in particular actions from fully Dem led system that has the ability to put in some policies that could create inflationary pressures.
The one that I’m most interested in paying attention to is energy because while adoption of more green energy is coming (and in some respects way faster than people think), we also need to be very careful at going too fast too quick, forcing the switch at high cost points, etc
Rates will almost assuredly increase over the next 5-10 years but not to crazy levels but more back to standard normalized levels
But do those individual sector/product/commodity scenarios portend overall inflation? I think the inflation people talk about when this comes up ( @UW_Doog_Bot and @godawgst ) is more systemic inflation. That is, the dollar itself loses value, so everything costs more. The ultimate boogie man being post WWI Germany and having to dip into life savings to eat.
Also, connect the dots for me on hoarding cash and inflation. Isn't that taking dollars out of the system and hence reducing supply? I didn't quite understand that one.
Agree with you about rates. This just doesn't seem sustainable, but I can't back that up, and I freely admit it is not consistent with my waiting-for-Godot view on inflation. -
So think about the conditions of post WW1 Germany ... the surrender conditions were so punitive that effectively conditions were set to be ripe for just disastrous results. And in a vacuum those surrender conditions made some sense because the goal was to build in preventive measures to keep Germany from making future war. Instead what happened is Germany crumbled under the conditions and The Great Depression (which is a subject I need to do some greater reading on as I can see some parallels of post WW1 exuberance and the post COVID world) leading to someone like Hitler having an audience. People like Hitler need favorable conditions to get people to say “what do we have to lose” to really gain power and influence. That’s probably fair to look at with the US if we can’t find a more moderate middle and continue down the polarizing extreme ends of the spectrum ... I don’t see that ending up well.creepycoug said:
Thanks. Good post.Tequilla said:I may view inflation differently than others
1) I view the leading indicators more as an early warning system vs an absolute measure
2) Supply and Demand still are big drivers
3) I tend to lean more into the conditions that have driven prior events and look for takeaways
The last big major area of major inflation took place in the late 70s ... what were some of the conditions then?
Government chaos exiting Watergate
Oil shortages/rationing with OPEC
Effectively the collapse of the steel mills, etc
Inflation to me happens when you start having supply shortages (whether in specific goods/services ... in particular energy) or people start hoarding cash reducing supply because they are worried about tomorrow.
Recent political situation is worth monitoring and in particular actions from fully Dem led system that has the ability to put in some policies that could create inflationary pressures.
The one that I’m most interested in paying attention to is energy because while adoption of more green energy is coming (and in some respects way faster than people think), we also need to be very careful at going too fast too quick, forcing the switch at high cost points, etc
Rates will almost assuredly increase over the next 5-10 years but not to crazy levels but more back to standard normalized levels
But do those individual sector/product/commodity scenarios portend overall inflation? I think the inflation people talk about when this comes up ( @UW_Doog_Bot and @godawgst ) is more systemic inflation. That is, the dollar itself loses value, so everything costs more. The ultimate boogie man being post WWI Germany and having to dip into life savings to eat.
Also, connect the dots for me on hoarding cash and inflation. Isn't that taking dollars out of the system and hence reducing supply? I didn't quite understand that one.
Agree with you about rates. This just doesn't seem sustainable, but I can't back that up, and I freely admit it is not consistent with my waiting-for-Godot view on inflation.
Hoarding cash has a bit of a circular reference because hoarding cash takes down the money multiplier effects. Effectively money is just the medium of facilitating trades. If you reduce the number of trades then goods and services are produced in smaller levels as demand decreases. As people need more for those goods to make ends meet the prices then go up. So you get a big time circular relationship.
Rates will eventual normalize but I think we’ve learned enough to know that letting rates get in the high single digits or higher isn’t healthy and will fight like hell to create policy and conditions to avoid that. -
Inflation is here...look at house prices and the stock market. Hell I bought a new iPad for my kid early this year for $220...cheapest one now is $300. It won’t hit what is measured for inflation (food and disposable goods) until you have supply/demand issues or more likely dollar value issues.
Interest rates can’t get back to normal...govt can’t afford for them two. We print more money and show instability and the market will try, at which point the Fed will step in and try and cap them (probably around 2-3% max) which will drop the dollar value. Which will start showing up In more and more things as inflation which won’t get measured by the CPI.
Fun little cycle we are entering. -
If you haven't been to your local grocery store lately, you should. There are shortages aplenty. Shelves aren't quite 3rd world country decimated (yet) but it ain't every shelf full and faced up. Big holes on lots of items.Tequilla said:I may view inflation differently than others
1) I view the leading indicators more as an early warning system vs an absolute measure
2) Supply and Demand still are big drivers
3) I tend to lean more into the conditions that have driven prior events and look for takeaways
The last big major area of major inflation took place in the late 70s ... what were some of the conditions then?
Government chaos exiting Watergate
Oil shortages/rationing with OPEC
Effectively the collapse of the steel mills, etc
Inflation to me happens when you start having supply shortages (whether in specific goods/services ... in particular energy) or people start hoarding cash reducing supply because they are worried about tomorrow.
Recent political situation is worth monitoring and in particular actions from fully Dem led system that has the ability to put in some policies that could create inflationary pressures.
The one that I’m most interested in paying attention to is energy because while adoption of more green energy is coming (and in some respects way faster than people think), we also need to be very careful at going too fast too quick, forcing the switch at high cost points, etc
Rates will almost assuredly increase over the next 5-10 years but not to crazy levels but more back to standard normalized levels
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This is where I'm at also. Gov't can't afford to calcuklate/tell world what true inflation rate is, nor allow interest rates to ever get back to even 5%.HoustonHusky said:Inflation is here...look at house prices and the stock market. Hell I bought a new iPad for my kid early this year for $220...cheapest one now is $300. It won’t hit what is measured for inflation (food and disposable goods) until you have supply/demand issues or more likely dollar value issues.
Interest rates can’t get back to normal...govt can’t afford for them two. We print more money and show instability and the market will try, at which point the Fed will step in and try and cap them (probably around 2-3% max) which will drop the dollar value. Which will start showing up In more and more things as inflation which won’t get measured by the CPI.
Fun little cycle we are entering.
