Inflation – Has it arrived?

[urbanrealtor]

[quote=ocrenter]there is no doubt that the government is planning and hoping for inflation.

the citizens would prefer it over additional collapse in their home value.

inflation is preferred over deflation.

but the most important thing:

inflation makes the debt less burdensome. and globally we are still in the position to inflate our way out of certain doom.[/quote]

I think you are right that at a micro foundational level, democratic republics are inclined to inflate.

If enough people want it, then their interests will get expressed.

However, the issue here is bit more complex.

Specifically, inflation is generally driven primarily from increased nominal effective demand.

That demand is composed of 2 primary components.
Those are desire (wanting the thing) and capacity (the ability to afford it).
Desire is influenced by capacity because, of course, having money does tend to dictate a certain new interests (money no object, wouldn’t you want a corvette as a commuter car?).

The trick is the capacity.
We don’t (so far as I know) have a truly good metric for capacity.
It used to be that M1 or M2 gave a pretty good indicator.
However, with the advent of innovative consumer leverage (mostly since 1980), I don’t think those measures really work so well.
I think that credit cards, auto loans, mortgage standards, and unsecured lending have a pretty huge effect.
The effective demand for that debt, in turn, has also dropped dramatically.
This is mostly due to higher lending standards and generally decreased sentimental tendency.
That sentiment issue is driven because there is a perceived lack of safety in those lending products.
HELOCS and card shutoffs as well as a general fear of bankruptcy (probably a good fear to have) are the bases of that perception.

In other words, demand is down due to general capacity drop and the demand for increase capacity is down and showing no signs of real change.

Dumping money into banks (thus raising monetary base) can’t really change aggregate demand by itself. If we see inflation, it will be one of 2 distinct animals:

1: as part of the cost-push (reference by CAR above) with commodity and exchange prices pushing us into greater brokeness
or
2: as part of an intentional effort to reduce effective debt burdens

Honestly, I think that the second strategy is more likely in Eurozone. There they have the unenviable role of issuing and managing debt without owning their own printing presses.

I would not be surprised to see the ECB lose relevance over this.

Yes this puts me at odds with many people here.

Flame on if you like.

My 2 bits.

[permabear]

[quote=urbanrealtor]Dumping money into banks (thus raising monetary base) can’t really change aggregate demand by itself. If we see inflation, it will be one of 2 distinct animals:

1: as part of the cost-push (reference by CAR above) with commodity and exchange prices pushing us into greater brokeness
or
2: as part of an intentional effort to reduce effective debt burdens[/quote]

Door #2 is on. There’s an outright currency devaluation war that’s currently playing out. Hence the spike in Gold.

If all the industrialized countries continue on their race to devaluation, we could suddenly see overnight hyperinflationary gap-ups. When this happened in the 1920’s in Europe, it was a major influence on Keynes.

[quote=Wikipedia]John Maynard Keynes: “The inflationism of the currency systems of Europe has proceeded to extraordinary lengths. The various belligerent Governments, unable, or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance.”[/quote]

Geee…. doesn’t sound familiar at all.

If this happens the way governments are trying desperately to make it happen, housing prices could remain where they are, but sudden inflationary gaps could make up the difference.

The system is really, really stacked against the responsible people right now.

[permabear]

[quote=urbanrealtor]Dumping money into banks (thus raising monetary base) can’t really change aggregate demand by itself. If we see inflation, it will be one of 2 distinct animals:

1: as part of the cost-push (reference by CAR above) with commodity and exchange prices pushing us into greater brokeness
or
2: as part of an intentional effort to reduce effective debt burdens[/quote]

Door #2 is on. There’s an outright currency devaluation war that’s currently playing out. Hence the spike in Gold.

If all the industrialized countries continue on their race to devaluation, we could suddenly see overnight hyperinflationary gap-ups. When this happened in the 1920’s in Europe, it was a major influence on Keynes.

[quote=Wikipedia]John Maynard Keynes: “The inflationism of the currency systems of Europe has proceeded to extraordinary lengths. The various belligerent Governments, unable, or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance.”[/quote]

Geee…. doesn’t sound familiar at all.

If this happens the way governments are trying desperately to make it happen, housing prices could remain where they are, but sudden inflationary gaps could make up the difference.

The system is really, really stacked against the responsible people right now.

[permabear]

[quote=urbanrealtor]Dumping money into banks (thus raising monetary base) can’t really change aggregate demand by itself. If we see inflation, it will be one of 2 distinct animals:

1: as part of the cost-push (reference by CAR above) with commodity and exchange prices pushing us into greater brokeness
or
2: as part of an intentional effort to reduce effective debt burdens[/quote]

Door #2 is on. There’s an outright currency devaluation war that’s currently playing out. Hence the spike in Gold.

If all the industrialized countries continue on their race to devaluation, we could suddenly see overnight hyperinflationary gap-ups. When this happened in the 1920’s in Europe, it was a major influence on Keynes.

[quote=Wikipedia]John Maynard Keynes: “The inflationism of the currency systems of Europe has proceeded to extraordinary lengths. The various belligerent Governments, unable, or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance.”[/quote]

Geee…. doesn’t sound familiar at all.

If this happens the way governments are trying desperately to make it happen, housing prices could remain where they are, but sudden inflationary gaps could make up the difference.

The system is really, really stacked against the responsible people right now.

[permabear]

[quote=urbanrealtor]Dumping money into banks (thus raising monetary base) can’t really change aggregate demand by itself. If we see inflation, it will be one of 2 distinct animals:

1: as part of the cost-push (reference by CAR above) with commodity and exchange prices pushing us into greater brokeness
or
2: as part of an intentional effort to reduce effective debt burdens[/quote]

Door #2 is on. There’s an outright currency devaluation war that’s currently playing out. Hence the spike in Gold.

If all the industrialized countries continue on their race to devaluation, we could suddenly see overnight hyperinflationary gap-ups. When this happened in the 1920’s in Europe, it was a major influence on Keynes.

[quote=Wikipedia]John Maynard Keynes: “The inflationism of the currency systems of Europe has proceeded to extraordinary lengths. The various belligerent Governments, unable, or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance.”[/quote]

Geee…. doesn’t sound familiar at all.

If this happens the way governments are trying desperately to make it happen, housing prices could remain where they are, but sudden inflationary gaps could make up the difference.

The system is really, really stacked against the responsible people right now.

[permabear]

[quote=urbanrealtor]Dumping money into banks (thus raising monetary base) can’t really change aggregate demand by itself. If we see inflation, it will be one of 2 distinct animals:

1: as part of the cost-push (reference by CAR above) with commodity and exchange prices pushing us into greater brokeness
or
2: as part of an intentional effort to reduce effective debt burdens[/quote]

Door #2 is on. There’s an outright currency devaluation war that’s currently playing out. Hence the spike in Gold.

If all the industrialized countries continue on their race to devaluation, we could suddenly see overnight hyperinflationary gap-ups. When this happened in the 1920’s in Europe, it was a major influence on Keynes.

[quote=Wikipedia]John Maynard Keynes: “The inflationism of the currency systems of Europe has proceeded to extraordinary lengths. The various belligerent Governments, unable, or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance.”[/quote]

Geee…. doesn’t sound familiar at all.

If this happens the way governments are trying desperately to make it happen, housing prices could remain where they are, but sudden inflationary gaps could make up the difference.

The system is really, really stacked against the responsible people right now.

[CA renter]

[quote=urbanrealtor][quote=ocrenter]there is no doubt that the government is planning and hoping for inflation.

the citizens would prefer it over additional collapse in their home value.

inflation is preferred over deflation.

but the most important thing:

inflation makes the debt less burdensome. and globally we are still in the position to inflate our way out of certain doom.[/quote]

I think you are right that at a micro foundational level, democratic republics are inclined to inflate.

If enough people want it, then their interests will get expressed.

However, the issue here is bit more complex.

Specifically, inflation is generally driven primarily from increased nominal effective demand.

That demand is composed of 2 primary components.
Those are desire (wanting the thing) and capacity (the ability to afford it).
Desire is influenced by capacity because, of course, having money does tend to dictate a certain new interests (money no object, wouldn’t you want a corvette as a commuter car?).

The trick is the capacity.
We don’t (so far as I know) have a truly good metric for capacity.
It used to be that M1 or M2 gave a pretty good indicator.
However, with the advent of innovative consumer leverage (mostly since 1980), I don’t think those measures really work so well.
I think that credit cards, auto loans, mortgage standards, and unsecured lending have a pretty huge effect.
The effective demand for that debt, in turn, has also dropped dramatically.
This is mostly due to higher lending standards and generally decreased sentimental tendency.
That sentiment issue is driven because there is a perceived lack of safety in those lending products.
HELOCS and card shutoffs as well as a general fear of bankruptcy (probably a good fear to have) are the bases of that perception.

In other words, demand is down due to general capacity drop and the demand for increase capacity is down and showing no signs of real change.

Dumping money into banks (thus raising monetary base) can’t really change aggregate demand by itself. If we see inflation, it will be one of 2 distinct animals:

1: as part of the cost-push (reference by CAR above) with commodity and exchange prices pushing us into greater brokeness
or
2: as part of an intentional effort to reduce effective debt burdens

Honestly, I think that the second strategy is more likely in Eurozone. There they have the unenviable role of issuing and managing debt without owning their own printing presses.

I would not be surprised to see the ECB lose relevance over this.

Yes this puts me at odds with many people here.

Flame on if you like.

My 2 bits.[/quote]

Good points, and it is scenario #1 that I fear the most.

IMHO, the kind of inflation we’d get would be asset price inflation. It is the rich who are getting access to all this money, not the wage earners (and I don’t see this trend changing in the U.S. for as long as we pursue an inflationary policy). That means any “inflation” is likely to make the wealth disparity (essentially, the divide between workers and capitalists) even greater, creating tremendous risks WRT social upheaval.

It’s why I favor deflation, which would favor labor over capital and help reverse the wealth disparity that has hobbled us for the past few decades.

Of coures, with all the propaganda regarding the “evil unions,” and the “need to save the financial industry (or else…Armageddon!)”, there is no question which side holds the most power, and which direction they will take.

[CA renter]

[quote=urbanrealtor][quote=ocrenter]there is no doubt that the government is planning and hoping for inflation.

the citizens would prefer it over additional collapse in their home value.

inflation is preferred over deflation.

but the most important thing:

inflation makes the debt less burdensome. and globally we are still in the position to inflate our way out of certain doom.[/quote]

I think you are right that at a micro foundational level, democratic republics are inclined to inflate.

If enough people want it, then their interests will get expressed.

However, the issue here is bit more complex.

Specifically, inflation is generally driven primarily from increased nominal effective demand.

That demand is composed of 2 primary components.
Those are desire (wanting the thing) and capacity (the ability to afford it).
Desire is influenced by capacity because, of course, having money does tend to dictate a certain new interests (money no object, wouldn’t you want a corvette as a commuter car?).

The trick is the capacity.
We don’t (so far as I know) have a truly good metric for capacity.
It used to be that M1 or M2 gave a pretty good indicator.
However, with the advent of innovative consumer leverage (mostly since 1980), I don’t think those measures really work so well.
I think that credit cards, auto loans, mortgage standards, and unsecured lending have a pretty huge effect.
The effective demand for that debt, in turn, has also dropped dramatically.
This is mostly due to higher lending standards and generally decreased sentimental tendency.
That sentiment issue is driven because there is a perceived lack of safety in those lending products.
HELOCS and card shutoffs as well as a general fear of bankruptcy (probably a good fear to have) are the bases of that perception.

In other words, demand is down due to general capacity drop and the demand for increase capacity is down and showing no signs of real change.

Dumping money into banks (thus raising monetary base) can’t really change aggregate demand by itself. If we see inflation, it will be one of 2 distinct animals:

1: as part of the cost-push (reference by CAR above) with commodity and exchange prices pushing us into greater brokeness
or
2: as part of an intentional effort to reduce effective debt burdens

Honestly, I think that the second strategy is more likely in Eurozone. There they have the unenviable role of issuing and managing debt without owning their own printing presses.

I would not be surprised to see the ECB lose relevance over this.

Yes this puts me at odds with many people here.

Flame on if you like.

My 2 bits.[/quote]

Good points, and it is scenario #1 that I fear the most.

IMHO, the kind of inflation we’d get would be asset price inflation. It is the rich who are getting access to all this money, not the wage earners (and I don’t see this trend changing in the U.S. for as long as we pursue an inflationary policy). That means any “inflation” is likely to make the wealth disparity (essentially, the divide between workers and capitalists) even greater, creating tremendous risks WRT social upheaval.

It’s why I favor deflation, which would favor labor over capital and help reverse the wealth disparity that has hobbled us for the past few decades.

Of coures, with all the propaganda regarding the “evil unions,” and the “need to save the financial industry (or else…Armageddon!)”, there is no question which side holds the most power, and which direction they will take.

[CA renter]

[quote=urbanrealtor][quote=ocrenter]there is no doubt that the government is planning and hoping for inflation.

the citizens would prefer it over additional collapse in their home value.

inflation is preferred over deflation.

but the most important thing:

inflation makes the debt less burdensome. and globally we are still in the position to inflate our way out of certain doom.[/quote]

I think you are right that at a micro foundational level, democratic republics are inclined to inflate.

If enough people want it, then their interests will get expressed.

However, the issue here is bit more complex.

Specifically, inflation is generally driven primarily from increased nominal effective demand.

That demand is composed of 2 primary components.
Those are desire (wanting the thing) and capacity (the ability to afford it).
Desire is influenced by capacity because, of course, having money does tend to dictate a certain new interests (money no object, wouldn’t you want a corvette as a commuter car?).

The trick is the capacity.
We don’t (so far as I know) have a truly good metric for capacity.
It used to be that M1 or M2 gave a pretty good indicator.
However, with the advent of innovative consumer leverage (mostly since 1980), I don’t think those measures really work so well.
I think that credit cards, auto loans, mortgage standards, and unsecured lending have a pretty huge effect.
The effective demand for that debt, in turn, has also dropped dramatically.
This is mostly due to higher lending standards and generally decreased sentimental tendency.
That sentiment issue is driven because there is a perceived lack of safety in those lending products.
HELOCS and card shutoffs as well as a general fear of bankruptcy (probably a good fear to have) are the bases of that perception.

In other words, demand is down due to general capacity drop and the demand for increase capacity is down and showing no signs of real change.

Dumping money into banks (thus raising monetary base) can’t really change aggregate demand by itself. If we see inflation, it will be one of 2 distinct animals:

1: as part of the cost-push (reference by CAR above) with commodity and exchange prices pushing us into greater brokeness
or
2: as part of an intentional effort to reduce effective debt burdens

Honestly, I think that the second strategy is more likely in Eurozone. There they have the unenviable role of issuing and managing debt without owning their own printing presses.

I would not be surprised to see the ECB lose relevance over this.

Yes this puts me at odds with many people here.

Flame on if you like.

My 2 bits.[/quote]

Good points, and it is scenario #1 that I fear the most.

IMHO, the kind of inflation we’d get would be asset price inflation. It is the rich who are getting access to all this money, not the wage earners (and I don’t see this trend changing in the U.S. for as long as we pursue an inflationary policy). That means any “inflation” is likely to make the wealth disparity (essentially, the divide between workers and capitalists) even greater, creating tremendous risks WRT social upheaval.

It’s why I favor deflation, which would favor labor over capital and help reverse the wealth disparity that has hobbled us for the past few decades.

Of coures, with all the propaganda regarding the “evil unions,” and the “need to save the financial industry (or else…Armageddon!)”, there is no question which side holds the most power, and which direction they will take.

[CA renter]

[quote=urbanrealtor][quote=ocrenter]there is no doubt that the government is planning and hoping for inflation.

the citizens would prefer it over additional collapse in their home value.

inflation is preferred over deflation.

but the most important thing:

inflation makes the debt less burdensome. and globally we are still in the position to inflate our way out of certain doom.[/quote]

I think you are right that at a micro foundational level, democratic republics are inclined to inflate.

If enough people want it, then their interests will get expressed.

However, the issue here is bit more complex.

Specifically, inflation is generally driven primarily from increased nominal effective demand.

That demand is composed of 2 primary components.
Those are desire (wanting the thing) and capacity (the ability to afford it).
Desire is influenced by capacity because, of course, having money does tend to dictate a certain new interests (money no object, wouldn’t you want a corvette as a commuter car?).

The trick is the capacity.
We don’t (so far as I know) have a truly good metric for capacity.
It used to be that M1 or M2 gave a pretty good indicator.
However, with the advent of innovative consumer leverage (mostly since 1980), I don’t think those measures really work so well.
I think that credit cards, auto loans, mortgage standards, and unsecured lending have a pretty huge effect.
The effective demand for that debt, in turn, has also dropped dramatically.
This is mostly due to higher lending standards and generally decreased sentimental tendency.
That sentiment issue is driven because there is a perceived lack of safety in those lending products.
HELOCS and card shutoffs as well as a general fear of bankruptcy (probably a good fear to have) are the bases of that perception.

In other words, demand is down due to general capacity drop and the demand for increase capacity is down and showing no signs of real change.

Dumping money into banks (thus raising monetary base) can’t really change aggregate demand by itself. If we see inflation, it will be one of 2 distinct animals:

1: as part of the cost-push (reference by CAR above) with commodity and exchange prices pushing us into greater brokeness
or
2: as part of an intentional effort to reduce effective debt burdens

Honestly, I think that the second strategy is more likely in Eurozone. There they have the unenviable role of issuing and managing debt without owning their own printing presses.

I would not be surprised to see the ECB lose relevance over this.

Yes this puts me at odds with many people here.

Flame on if you like.

My 2 bits.[/quote]

Good points, and it is scenario #1 that I fear the most.

IMHO, the kind of inflation we’d get would be asset price inflation. It is the rich who are getting access to all this money, not the wage earners (and I don’t see this trend changing in the U.S. for as long as we pursue an inflationary policy). That means any “inflation” is likely to make the wealth disparity (essentially, the divide between workers and capitalists) even greater, creating tremendous risks WRT social upheaval.

It’s why I favor deflation, which would favor labor over capital and help reverse the wealth disparity that has hobbled us for the past few decades.

Of coures, with all the propaganda regarding the “evil unions,” and the “need to save the financial industry (or else…Armageddon!)”, there is no question which side holds the most power, and which direction they will take.

[CA renter]

[quote=urbanrealtor][quote=ocrenter]there is no doubt that the government is planning and hoping for inflation.

the citizens would prefer it over additional collapse in their home value.

inflation is preferred over deflation.

but the most important thing:

inflation makes the debt less burdensome. and globally we are still in the position to inflate our way out of certain doom.[/quote]

I think you are right that at a micro foundational level, democratic republics are inclined to inflate.

If enough people want it, then their interests will get expressed.

However, the issue here is bit more complex.

Specifically, inflation is generally driven primarily from increased nominal effective demand.

That demand is composed of 2 primary components.
Those are desire (wanting the thing) and capacity (the ability to afford it).
Desire is influenced by capacity because, of course, having money does tend to dictate a certain new interests (money no object, wouldn’t you want a corvette as a commuter car?).

The trick is the capacity.
We don’t (so far as I know) have a truly good metric for capacity.
It used to be that M1 or M2 gave a pretty good indicator.
However, with the advent of innovative consumer leverage (mostly since 1980), I don’t think those measures really work so well.
I think that credit cards, auto loans, mortgage standards, and unsecured lending have a pretty huge effect.
The effective demand for that debt, in turn, has also dropped dramatically.
This is mostly due to higher lending standards and generally decreased sentimental tendency.
That sentiment issue is driven because there is a perceived lack of safety in those lending products.
HELOCS and card shutoffs as well as a general fear of bankruptcy (probably a good fear to have) are the bases of that perception.

In other words, demand is down due to general capacity drop and the demand for increase capacity is down and showing no signs of real change.

Dumping money into banks (thus raising monetary base) can’t really change aggregate demand by itself. If we see inflation, it will be one of 2 distinct animals:

1: as part of the cost-push (reference by CAR above) with commodity and exchange prices pushing us into greater brokeness
or
2: as part of an intentional effort to reduce effective debt burdens

Honestly, I think that the second strategy is more likely in Eurozone. There they have the unenviable role of issuing and managing debt without owning their own printing presses.

I would not be surprised to see the ECB lose relevance over this.

Yes this puts me at odds with many people here.

Flame on if you like.

My 2 bits.[/quote]

Good points, and it is scenario #1 that I fear the most.

IMHO, the kind of inflation we’d get would be asset price inflation. It is the rich who are getting access to all this money, not the wage earners (and I don’t see this trend changing in the U.S. for as long as we pursue an inflationary policy). That means any “inflation” is likely to make the wealth disparity (essentially, the divide between workers and capitalists) even greater, creating tremendous risks WRT social upheaval.

It’s why I favor deflation, which would favor labor over capital and help reverse the wealth disparity that has hobbled us for the past few decades.

Of coures, with all the propaganda regarding the “evil unions,” and the “need to save the financial industry (or else…Armageddon!)”, there is no question which side holds the most power, and which direction they will take.

[poorgradstudent]

2010 has seen inflation in the range of 1-3%. I doubt inflation will be a serious problem until the job market recovers more, and that looks at least a year away.

With wages flat/deflationary, there’s just not a lot of upward demand pressure to drive inflation right now.

[poorgradstudent]

2010 has seen inflation in the range of 1-3%. I doubt inflation will be a serious problem until the job market recovers more, and that looks at least a year away.

With wages flat/deflationary, there’s just not a lot of upward demand pressure to drive inflation right now.

[poorgradstudent]

2010 has seen inflation in the range of 1-3%. I doubt inflation will be a serious problem until the job market recovers more, and that looks at least a year away.

With wages flat/deflationary, there’s just not a lot of upward demand pressure to drive inflation right now.

[poorgradstudent]

2010 has seen inflation in the range of 1-3%. I doubt inflation will be a serious problem until the job market recovers more, and that looks at least a year away.

With wages flat/deflationary, there’s just not a lot of upward demand pressure to drive inflation right now.

[Author]

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