Inflation

creepycoug said:

PurpleThrobber said:

RaceBannon said:

We bought our house at 11 percent in 87

They should have got into carpet laying

10.25% in 1990 - and that was a deal. Until it wasn't.

And, if I recall, pretty close to 20% down.

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.

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:

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

Thanks. Good post.

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.

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.

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

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.