Inflation

[TomasM]

Tariffs don't open the markets, they create more friction across the board. Yes in theory it does incentivize domestic production and manufacturing, but that's "just" taking the capital away that could've gone into stocks lol.

I don’t see the tariffs entirely about tariffs. What I see, is the threat of a global trade war that will collapse everyone’s economy. That’s a good way to get everyone’s attention and have a real discussion. The negotiation can then be whatever is included in the strategy. Everyone wants something and nobody seems to trust China - so destroy the enemy while everyone gets rich doing it seems like something that might gain support.

 

[SlowUpTake]

to my second grade brain, the rhetoric about "Inflation" was really about the price of consumer items. Those prices rose because of a lack of availability due to both a rise in demand post lock down and a rise in consumers wealth due to both not spending during the lock down and the monies that the US gov printed and handed out. That printing and passing out is the inflation of the currency ie number of dollars in circulation.

The tariffs, both actual and potential, are taxes that would absorb dollars and slow economic activity. that would bring down the number of dollars in circulation but may also raise the price of goods and/or mean a loss of employment which could result in a lessening demand for items. What would you call that?

And then there is the loss of wealth in investments, which looks like it will be severe for the retirement minded investor. It will be kinda rough for folks looking to start living off their investments as they turn 65-70 yrs old for then next few years...they will have less money to spend on what they need to buy....What would you call that?

Seems "Inflation" is a catch all term for fucked up shit that happens in capitalism.
I had a boss who used to say that there are no medals for self inflicted wounds (but then I read that John Kerry got his purple heart for shrapnel from a grenade he tossed at the Vietnamese).

 

[TomasM]

to my second grade brain, the rhetoric about "Inflation" was really about the price of consumer items. Those prices rose because of a lack of availability due to both a rise in demand post lock down and a rise in consumers wealth due to both not spending during the lock down and the monies that the US gov printed and handed out.

You seem to be confusing price increases associated with supply and demand with inflation, which is a reduction in the value of the currency per denomination. Both of these things can affect price but they are very different.

Price changes related to supply and demand are specific to the products or services where supply and demand fluctuate.

Inflation, is related to the currency and has an impact on the entirety of products, services, and assets simultaneously.

Inflation is not specific to capitalism. In fact Russia is seeing tremendous inflation atm.

 

[SlowUpTake]

You seem to be confusing price increases associated with supply and demand with inflation, which is a reduction in the value of the currency per denomination. Both of these things can affect price but they are very different.

Price changes related to supply and demand are specific to the products or services where supply and demand fluctuate.

Inflation, is related to the currency and has an impact on the entirety of products, services, and assets simultaneously.

Inflation is not specific to capitalism. In fact Russia is seeing tremendous inflation atm.

I am thoroughly confused by "inflation" as a term used to describe the economy. When we complain about the price of eggs or gas being high it is, and had been, routinely blamed on "inflation". But to my way of thinking inflation is a measure of the increase of discrete units of currency in circulation.

Whenever the term is discussed it is muddled by the various ways it is "measured".

Every piece of us currency has a serial number on it specific to it, but it seems that no one is interested in an inventory of those numbers.

Why not?

I am also perturbed by the idea a bank can create imaginary dollars by giving borrowers money that the bank does not actually possess.
Does that make me an anarchist, or a communist, or a Muslim, or a pre-reformation Catholic what?

edit: "volume of U.S. currency in circulation calculated in billions. As of December 31, 2023, there was $2,259.3 billion in circulation, totaling 54.6 billion notes in volume. Value of currency in circulation, in billions of dollars as of December 31 of each year."

 

[aeon]

Kudos to you if you predicted this, you must be smarter than all of us. I'm not being sarcastic btw.

I’m not. I simply read their agenda statement, then Project 2025 when it was released. There is an old(er) thread here on the forum I created about that.

I did tell a couple of people I know (in person) about Project 2025, and what to expect. One thought it wasn’t real, and one thought I was scaremongering.

¯\_(ツ)_/¯
Ian

 

[TomasM]

When we complain about the price of eggs or gas being high it is, and had been, routinely blamed on "inflation".

Eggs was predominantly related to a supply issue that was induced by a bird flu problem.

Gas is often a supply problem because the government likes to restrict supply through policy. There’s plenty of oil and gas in the US but by restricting the supply through policy they can increase prices. I can’t say I’m completely against it because OPEC is a giant cartel and manipulates prices - so if the US doesn’t play a hand then OPEC would control everyone. The idea is not in line with free markets.

Every piece of us currency has a serial number on it specific to it, but it seems that no one is interested in an inventory of those numbers.

The US Treasury cares. It’s how they track counterfeiting and the use of funds illegally. There could be more reasons, but I really don’t keep up with all of it.

I am also perturbed by the idea a bank can create imaginary dollars by giving borrowers money that the bank does not actually possess.

Yep, it’s a racket. It’s built into the fractional reserve system. It’s part of how a fiat currency is structured. A commercial bank can just create money out of thin air as long as they have a 10% reserve. They call this “expanding the money supply,” and my understanding is that it can expand through commercial banks by up to 900% as the newly created money circulated through commercial banks.

Wouldn’t it be nice if we could all just expand our money by 900%.

volume of U.S. currency in circulation calculated in billions. As of December 31, 2023, there was $2,259.3 billion in circulation, totaling 54.6 billion notes in volume

So about 5% of total currency? I figured it would be a smaller percentage.

 

[philostam]

I’m not. I simply read their agenda statement, then Project 2025 when it was released. There is an old(er) thread here on the forum I created about that.

I did tell a couple of people I know (in person) about Project 2025, and what to expect. One thought it wasn’t real, and one thought I was scaremongering.

¯\_(ツ)_/¯
Ian

Markets went higher when Trump was elected so majority was positioned that way. Trump = good for markets. He may have talked about reciprocal tariffs but no one knew they are gonna be so crazy that they are not reciprocal at all, they are sometimes 10x higher than the actual tariffs from the counterparty. If Trump actually went ahead with reciprocal tariffs, markets would like that.

Zooming out though, this market crash seems much less serious and systemic than 2022. Then we had commodities like oil going up, as well as dollar going up, which is terrible combination for the global economy. Now we have the opposite, dollar down and oil down, and inflation print in USA yesterday was -0.1% m/m. FED and other central banks also have room to cut while in 2022 they were hiking due to inflation.

I am still reserving judgement. If there's some deal made with China, markets could rebound very quickly and even end the year in green. I know I am contradicting myself A LOT, but I can honestly see both outcomes, the distribution of probable outcomes is really wide.

 

[philostam]

I don’t see the tariffs entirely about tariffs. What I see, is the threat of a global trade war that will collapse everyone’s economy. That’s a good way to get everyone’s attention and have a real discussion. The negotiation can then be whatever is included in the strategy. Everyone wants something and nobody seems to trust China - so destroy the enemy while everyone gets rich doing it seems like something that might gain support.

Like I say, I am reserving judgement. I don't think that everyone distrusts China. Places like Indonesia are actually not afraid of China at all, most people don't know that Indonesia bullies China quite a lot when it comes to trade and China just takes it. They have a mutually beneficial relationship. What does USA do for places like Indonesia?

Like I am sure that if it comes to WW3, places like France would fight on the side of the USA vs China. But absent that, I think we are currently in a multi-polar world (something like before WW1) where alliances are less stable. If France is dependent on China for revenues, they are not gonna go against them just because US said so.

 

[aeon]

What does USA do for places like Indonesia?

Beyond a bit of CIA skullduggery and the promotion of genital mutilation, I’m not really sure.

I took your use of USA as the government thereof.

Cheers,
Ian

 

[philostam]

I am also perturbed by the idea a bank can create imaginary dollars by giving borrowers money that the bank does not actually possess.
Does that make me an anarchist, or a communist, or a Muslim, or a pre-reformation Catholic what?

I am more perplexed that you just figured out the concept of fractional reserve banking in 2025 after it's been around for all of our lifetime?

Putting that aside, yeah commercial banks can also increase the money supply along with the central bank. That's why the FED can set interest rates higher (if they want to decrease the amount of commercial bank lending) or lower (if they want to stimulate commercial bank lending). Of course it's not all in their control, ultimately the rates are set on the free market and it all roughly follows US treasury rates (the rate at which US government can finance itself).

When US government borrows money...that also increases the money supply BTW. They are spending money in the economy which they do not have/earn.

 

[TomasM]

I don't think that everyone distrusts China.

Maybe or maybe not. I think we’re going to find out how loyalties are positioned over the next 60 - 90 days.

 

[SlowUpTake]

I am more perplexed that you just figured out the concept of fractional reserve banking in 2025 after it's been around for all of our lifetime?

I apologize for giving you the impression that I am only now contemplating inflation. I have been aware of "fractional reserve banking" for over a decade. I had a neighbor, whose full name escapes me, who was held Phds in both physics and economics who had some fairly radical ideas about the money supply and government funding. I have been searching for is papers.

 

[TomasM]

I apologize for giving you the impression that I am only now contemplating inflation.

That much was obvious. The “first and second grade brain,” was quite the clue.

Apologize? Now you’re just flirting.

 

[philostam]

One of the best things about economics and finance is that while it's not a science, it's actually quite empirical. If you have a bad idea, the market will tell you. The bond market is telling Trump the idea of raising revenues trough tariffs is BS and it's not gonna work. In fact it looks more probable that the tariffs induced recession would blow out deficits even more, far offsetting any potential tariff revenue gain.

The pivot is coming fast.

 

[philostam]

Trump's 3d chess.

 

[aeon]

Eggs was predominantly related to a supply issue that was induced by a bird flu problem.

Cheers,
Ian

 

[TomasM]

Cheers,
Ian

I had heard there might have been price fixing collusion that was blamed on the bird flu but I hadn’t checked the overall egg market performance.

If that’s the case then it wasn’t supply or inflation. Well, maybe a little inflation, but not overall.

 

[TomasM]

“Corporate concentration,” is a non slanderous way of saying collusion - that made me laugh. I guess people learned something from Oprah’s comments about the beef industry.

 

[Wyote]

People will always take advantage of tragedy/misfortune/ignorance because they are self interested
People at the top are humans and will still just do human things despite our hopes that they are striving to be better
Their dumb decisions just have a wider scope of consequences

 

[SlowUpTake]

Collusion is not a crime