read the whole thread to get the second tweet, but the upshot is that the data is showing that wage growth is slowing, which is a counter-indicator to the idea of a wage-price spiral.
But you know, let's pretend that the Fed is being honest.
Right, so the Fed should "be honest" and not move on inflation has ramped up over the past eight months to a 40-year high. Instead they should sit tight because your number shows slowing wage growth, which of course means inflation will come down to 2% in the very hear future.
There are a million and one economic data points out there, you can always cherry-pick one to fit your narrative.
Oy.
Fed is saying we need to avoid a wage-price spiral.
Data shows the opposite of a wage-price spiral.
Maybe you have alternative data. Ha Ha. But I would guess you don't and you just have a thing for the Fed, who of course is never wrong.
Except for late last year when they were wrong by not raising rates because inflation was "transitory". Which I've said a number of times.
Ultimately it's about getting inflation down to near the 2% target. Period. That's the bottom line. Any other stuff is just noise. So cherry-pick away.
The thing about blaming the 2021 COVID relief is that stimulus has well run its course. Those checks were spent last year. It's certainly not stimulating the economy now.
If you're arguing that the US shouldn't have spent so much on covid relief measures, I emphatically disagree. And I'm not even convinced that it made the difference in whether inflation was high enough to be politically significant either. Given the bolloxed supply chains, seems likely inflation was always in the offering once anything approaching normal demand came back, and the prospect of purposely immiserating everyone to forcefully prevent a return of demand seems obviously worse than inflation.
But it seemed from earlier discussions that wasn't what you were saying -- that you were not taking issue with any specific policy, but more the way the Biden admin was talking about inflation? So by that standard, isn't a gas tax holiday precisely the kind of performative "taking inflation seriously" action you were asking for? Or were you just looking for some brows to be more deeply furrowed when the press brought up inflation?
The thing about blaming the 2021 COVID relief is that stimulus has well run its course. Those checks were spent last year. It's certainly not stimulating the economy now.
it has run its course, but apparently it's only recently that the average consumer has spent the savings that they accrued. in 2020-21. Another data point that suggests inflationary pressures could ease without much intervention from the Fed.
Gas prices are already coming down (which usually tends to happen because people don't want to spend as much on discretionary vehicle trips).
read the whole thread to get the second tweet, but the upshot is that the data is showing that wage growth is slowing, which is a counter-indicator to the idea of a wage-price spiral.
Interesting that Baker says a 0.9-point difference in wage growth from the previous quarter is slowing “sharply,” then says a 0.7-point difference from February 2019 is “only moderating higher” (I think he meant “moderately”).
Also, to this layman it seems like he’s comparing apples and oranges with the rates. If you want to see if the growth from Q1 to Q2 was an acceleration, wouldn’t you compare it with the growth from Q4 to Q1, rather than year over year? Or, conversely, compare Q1-Q2 growth YOY with Q4-Q1 growth YOY?
If you're arguing that the US shouldn't have spent so much on covid relief measures, I emphatically disagree. And I'm not even convinced that it made the difference in whether inflation was high enough to be politically significant either. Given the bolloxed supply chains, seems likely inflation was always in the offering once anything approaching normal demand came back, and the prospect of purposely immiserating everyone to forcefully prevent a return of demand seems obviously worse than inflation.
But it seemed from earlier discussions that wasn't what you were saying -- that you were not taking issue with any specific policy, but more the way the Biden admin was talking about inflation? So by that standard, isn't a gas tax holiday precisely the kind of performative "taking inflation seriously" action you were asking for? Or were you just looking for some brows to be more deeply furrowed when the press brought up inflation?
I suppose in 2021 Biden and the Administration could have said inflation wasn't transitory. But that would have been misrepresenting what most economic experts' consensus.
I think there are a lot of people who wanted Biden to freak out and go along with the inflation hawks who were screaming last year about inflation. The problem with that as I wrote a few weeks ago, is that most of those people have been screaming about looming inflation for 20 years that never showed up until now. It's hard to take people seriously when they have been so consistently wrong for so many years. At some point they'll be right, but only by chance, not because they've shown any particular expertise on the topic.
Anyone who thinks that the COVID relief was a major component to our inflation still has to explain why similar rates of inflation are seen around the world.
What countries that have unusually high inflation and didn’t throw money into pandemic relief are you thinking of?
I don't know much about the Tax Foundation, but they collected that type of info.
Those look like countries that threw money into pandemic relief. The question is: If COVID relief isn’t a major component of unusually high inflation rates around the world, what are the example countries where inflation is unusually high even though they didn’t throw money into COVID relief?
And don't forget the U.S. is the world's biggest economy and the dollar is the world's reserve currency. So the U.S. economy has great influence on the world economy and we can actually "export" inflation.
And don't forget the U.S. is the world's biggest economy and the dollar is the world's reserve currency. So the U.S. economy has great influence on the world economy and we can actually "export" inflation.
You google it and try reading some of the results. What they describe has nothing to do with current economic conditions. They're talking about a period of time when our inflation was low.
Good post by economist Stephanie Kelton on inflation and the recent Powell testimony.
But this part struck me, and should give some pause to jimmurphy, cramer, smedley, etc. It undercuts the premise that Covid relief is a major factor for our current inflation, in some cases using the Fed's own data. Leading to the inevitable conclusion that maybe raising rates is not a good solution here and could just make a mess of things.
Economists are busy debating this question. As you might expect, even very smart people doing their best to untangle the conglomerate of potential contributors often arrive at starkly different conclusions. Some economists—most notably Larry Summers and Jason Furman—have consistently placed the lion’s share of the blame on excessive monetary and fiscal stimulus—especially the $1.9 trillion American Rescue Plan Act (ARPA)2 passed by Congress last March. That’s not what researchers at the Federal Reserve Bank of San Francisco found back in October, nor is it consistent with what Mark Zandi and his team at Moody’s Analytics published earlier this year.3 It’s also not consistent with new research, published just this week, by the Federal Reserve Bank of San Francisco. That research finds that “factors other than demand account for about two-thirds of recent elevated inflation.” Specifically, only about a third of the jump—1.4 percentage points—in headline PCE inflation could be traced to demand-side factors.
It’s not a debate that will be settled anytime soon—okay, it will never be settled—but it is an important one.
Why?
Because if we misdiagnose what’s driving the inflation problem, it raises the odds that we we end up choosing the wrong course of treatment. We could do something that’s ineffective or something that makes the situation even worse.
Good post by economist Stephanie Kelton on inflation and the recent Powell testimony.
But this part struck me, and should give some pause to jimmurphy, cramer, smedley, etc. It undercuts the premise that Covid relief is a major factor for our current inflation, in some cases using the Fed's own data. Leading to the inevitable conclusion that maybe raising rates is not a good solution here and could just make a mess of things.
Economists are busy debating this question. As you might expect, even very smart people doing their best to untangle the conglomerate of potential contributors often arrive at starkly different conclusions. Some economists—most notably Larry Summers and Jason Furman—have consistently placed the lion’s share of the blame on excessive monetary and fiscal stimulus—especially the $1.9 trillion American Rescue Plan Act (ARPA)2 passed by Congress last March. That’s not what researchers at the Federal Reserve Bank of San Francisco found back in October, nor is it consistent with what Mark Zandi and his team at Moody’s Analytics published earlier this year.3 It’s also not consistent with new research, published just this week, by the Federal Reserve Bank of San Francisco. That research finds that “factors other than demand account for about two-thirds of recent elevated inflation.” Specifically, only about a third of the jump—1.4 percentage points—in headline PCE inflation could be traced to demand-side factors.
It’s not a debate that will be settled anytime soon—okay, it will never be settled—but it is an important one.
Why?
Because if we misdiagnose what’s driving the inflation problem, it raises the odds that we we end up choosing the wrong course of treatment. We could do something that’s ineffective or something that makes the situation even worse.
Dude, once again, we have not laid the blame primarily on the stimulus or excessive demand in normal conditions, but have just cited it as a contributing, but NECESSARY, factor. Given constrained supply, it didn’t help.
Seems like your cite indicates exactly the same thing.
The cause of inflation is the mismatch between supply and demand. Period. The stimulus was a factor, but not the only, or even the primary factor.
Good post by economist Stephanie Kelton on inflation and the recent Powell testimony.
But this part struck me, and should give some pause to jimmurphy, cramer, smedley, etc. It undercuts the premise that Covid relief is a major factor for our current inflation, in some cases using the Fed's own data. Leading to the inevitable conclusion that maybe raising rates is not a good solution here and could just make a mess of things.
Economists are busy debating this question. As you might expect, even very smart people doing their best to untangle the conglomerate of potential contributors often arrive at starkly different conclusions. Some economists—most notably Larry Summers and Jason Furman—have consistently placed the lion’s share of the blame on excessive monetary and fiscal stimulus—especially the $1.9 trillion American Rescue Plan Act (ARPA)2 passed by Congress last March. That’s not what researchers at the Federal Reserve Bank of San Francisco found back in October, nor is it consistent with what Mark Zandi and his team at Moody’s Analytics published earlier this year.3 It’s also not consistent with new research, published just this week, by the Federal Reserve Bank of San Francisco. That research finds that “factors other than demand account for about two-thirds of recent elevated inflation.” Specifically, only about a third of the jump—1.4 percentage points—in headline PCE inflation could be traced to demand-side factors.
It’s not a debate that will be settled anytime soon—okay, it will never be settled—but it is an important one.
Why?
Because if we misdiagnose what’s driving the inflation problem, it raises the odds that we we end up choosing the wrong course of treatment. We could do something that’s ineffective or something that makes the situation even worse.
Dude, once again, we have not laid the blame primarily on the stimulus or excessive demand in normal conditions, but have just cited it as a contributing, but NECESSARY, factor. Given constrained supply, it didn’t help.
Seems like your cite indicates exactly the same thing.
The cause of inflation is the mismatch between supply and demand. Period. The stimulus was a factor, but not the only, or even the primary factor.
Why can’t you hear that?
My point is that the demand factor is not large enough to justify the dramatic raise in rates by the Fed, which may end up doing more harm than good.;
I hear it and have heard it loud and clear. I and seemingly everyone else here as well as all of the FED believe just that you are very much incorrect.
It’s not about the increase in demand. That’s not why they are raising rates.
Let me say it again. The FED is not raising interest rates because the stimulus created too much demand.
It is principally to to the supply shock creating an imbalance in supply and demand, leading to inflation.
In situations like these, when you can’t rely on politically impossible solutions like raising taxes on the rich, you raise interest rates to reduce demand.
Because the headline isn't very good. It's a one time payment to offset higher gas prices. I personally think it's a bad idea, because most people should be able to figure out how to use a gallon a week less gas. Which might help to bring the price down a bit.
But the headline makes the program sound dumb. Which was probably the aim.
I hear it and have heard it loud and clear. I and seemingly everyone else here as well as all of the FED believe just that you are very much incorrect.
It’s not about the increase in demand. That’s not why they are raising rates.
Let me say it again. The FED is not raising interest rates because the stimulus created too much demand.
It is principally to to the supply shock creating an imbalance in supply and demand, leading to inflation.
In situations like these, when you can’t rely on politically impossible solutions like raising taxes on the rich, you raise interest rates to reduce demand.
Done with this.
Thinking about your post some more, and I'm pretty sure that the general consensus in this thread (other than me) was that Biden's COVID relief was a major cause of inflation. Posts and posts talked about the increase in demand from the stimulus.
That’s my takeaway from your response. So in a broad sense at least, we’re on the same page.
But man, while CA has 55 very important electoral votes, sometimes I think the uber-progressive idiocy that comes out of that state might cost Democrats more than 55 electoral votes in purple states.
It's not that "progressive". Real progressives would have passed a windfall profit tax on all of the corps making record breaking profits.
Speaking of which, good video here. The guy speaking is Canadian and his numbers are Canadian numbers, but I didn't see anything that was out of sync with our experience. Which should tell us something.
That’s my takeaway from your response. So in a broad sense at least, we’re on the same page.
But man, while CA has 55 very important electoral votes, sometimes I think the uber-progressive idiocy that comes out of that state might cost Democrats more than 55 electoral votes in purple states.
It's not dumb because it's progressive. It's dumb because it's reactive.
That’s my takeaway from your response. So in a broad sense at least, we’re on the same page.
But man, while CA has 55 very important electoral votes, sometimes I think the uber-progressive idiocy that comes out of that state might cost Democrats more than 55 electoral votes in purple states.
It's not dumb because it's progressive. It's dumb because it's reactive.
True. It's not dumb because it's progressive. But it is dumb, and it's progressive.
Except for late last year when they were wrong by not raising rates because inflation was "transitory". Which I've said a number of times.
Ultimately it's about getting inflation down to near the 2% target. Period. That's the bottom line. Any other stuff is just noise. So cherry-pick away.