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This is the new baseline, you won't see inflation lower than this long-term until the system completely collapses under its own weight. The only thing keeping t

This is the new baseline, you won't see inflation lower than this long-term until the system completely collapses under its own weight. The only thing keeping things running is cheap money and there will need to be more of it. Any "solution" that looks like austerity will result in destabilizing unrest. In the USA, Republicans will campaign on inflation but make money as cheap as ever as soon as they have control, because it's the only way to keep things afloat. I think this situation is trash, but deflation is much, much worse than inflation. We don't need to revisit 1929, upper middle class will just have to live with dilution of assets if they want a functioning society.

sfe22 4y ago
Deflation being much much worse is a nice joke. You telling me that if gas and food and rent lowered in price over time, I will be worse off? Stuff are supposed to become cheaper as technology advances yet we only either get high or low price increases, all to fund the rich in the government.
- spamizbad 4y ago
  > Deflation being much much worse is a nice joke. Deflation is more of a nightmare than a joke. It basically means the economy has significantly contracted and that wages are going to plummet across the board. This leads to a massive spike in debt defaults.
  - sfe22 4y ago
    Yeah, but not any economy, to be a nightmare requires a nightmarish economy.
  - ramblenode 4y ago
    To what extent is the risk due to a society built on debt?
    - version_five 4y ago
      It's completely due to that, but so is the fact that we can have nice things.
  - credit_guy 4y ago
    Deflation is never a problem in a fiat money economy. You can print your way out of a deflation. In the 19th century and in 1929 currencies were pegged to gold, so you could not just print money. All periods of economic crisis were deflationary, and the central banks did not have a lot of tools to fight that. That’s the origin of the idea that deflation is worse than inflation. This is just bogus nowadays.
- scotuswroteus 4y ago
  'Stuff' should be plural, I agree
  - sfe22 4y ago
    Felt off, but went with it. Looks like I made a new friend too xD.
- rufus_foreman 4y ago
  >> You telling me that if gas and food and rent lowered in price over time, I will be worse off? If you have debt, you will be worse off. Wages get lowered over time, too. Imagine your salary gets cut year after year but your mortgage, car payment, and student loan payment all stay the same. That's deflation. In the same way that unexpected inflation is good for borrowers (since they get to pay back a loan with cheaper money) unexpected deflation is bad for borrowers (since they have to pay back a loan with more expensive money).
  - sfe22 4y ago
    Yeah, but guess who encourages debt.
- hungryhobo 4y ago
  what if your income is also lowered over time?
  - sfe22 4y ago
    Thats also fine, especially if priced drop more. But even in a sane economy I would expect most would get raises as they work faster and better, even as prices fall.
mountainriver 4y ago
Yeah I think that’s the important part to understand, deflation is so much worse and can cause an equity trap which could send us into a severe depression. Inflation sucks but let’s not be drastic
lamontcg 4y ago
This is not what is going to happen. The government is likely to be locked up pretty hard if the Republicans take either the House or the Senate in the fall, and while we might not see hard austerity, we certainly won't see any stimulus. Meanwhile, the Fed has been talking consistently very tough on inflation and is bumping 0.50 basis points every meeting and signalling that they'll do that until inflation is contained. They're talking positively about Paul Volker and keeping rates significantly above what is considered to be neutral. And what they're worried about is the broad wage increases that are being seen (and the whole backlash against shitty jobs and pay and unionization drives). They absolutely will raise rates this time pretty fast -- much faster than the 0.25 basis point tightening and calming reassurances every meeting under Greenspan. They're talking tougher than I've seen them ever talk in the 21st Century. If you believe the economy is a huge bubble, they're talking like they're going to pop it. And they always overshoot and they're talking and looking like they're going to overshoot. That means that meaningfully large areas of the economy are likely to detonate (probably CMBS). Crypto will also probably melt down. And with a Republican congress and a Democratic President the thing to worry about is that if the system needs rescuing that a chunk of the Republicans may be happy to watch it burn and blame it on Biden. Of course that will hurt them, too, but they may realize too late that the Leopards will also eat their face as well. They're going to proceed with waging class war and crash the economy into an iceberg to get wages back under control. And everyone who is screaming at them about inflation is going to cheer them on to do it. Then when the economy hits the wall the people who would put out the fire are going to be paralyzed into inaction. This time it is actually different because the Boomers are retiring, COVID and long COVID has taken people out of the workforce, the pandemic itself has made people very uppity and demanding and there's a huge overhang of jobs compared to job-seekers and we're seeing wage inflation. That's novel compared to the past 30+ years. And they're pretty much freaking out over it. And there's no political pushback, they have a blank check right now politically to get inflation under control. When I try to suggest that a wage-price inflation cycle would be useful to reprice debt and assets like housing people and that "stagflation" is the less-painful path to repricing people act like I should be locked up in the loony bin. QED, the Fed currently has a single political mandate to get inflation under control. We're gonna see deflation. Yield curve is going to be pushed into inverting until something breaks.

sfe22 4y ago

Deflation being much much worse is a nice joke. You telling me that if gas and food and rent lowered in price over time, I will be worse off? Stuff are supposed to become cheaper as technology advances yet we only either get high or low price increases, all to fund the rich in the government.

spamizbad 4y ago
> Deflation being much much worse is a nice joke. Deflation is more of a nightmare than a joke. It basically means the economy has significantly contracted and that wages are going to plummet across the board. This leads to a massive spike in debt defaults.
- sfe22 4y ago
  Yeah, but not any economy, to be a nightmare requires a nightmarish economy.
- ramblenode 4y ago
  To what extent is the risk due to a society built on debt?
  - version_five 4y ago
    It's completely due to that, but so is the fact that we can have nice things.
- credit_guy 4y ago
  Deflation is never a problem in a fiat money economy. You can print your way out of a deflation. In the 19th century and in 1929 currencies were pegged to gold, so you could not just print money. All periods of economic crisis were deflationary, and the central banks did not have a lot of tools to fight that. That’s the origin of the idea that deflation is worse than inflation. This is just bogus nowadays.
scotuswroteus 4y ago
'Stuff' should be plural, I agree
- sfe22 4y ago
  Felt off, but went with it. Looks like I made a new friend too xD.
rufus_foreman 4y ago
>> You telling me that if gas and food and rent lowered in price over time, I will be worse off? If you have debt, you will be worse off. Wages get lowered over time, too. Imagine your salary gets cut year after year but your mortgage, car payment, and student loan payment all stay the same. That's deflation. In the same way that unexpected inflation is good for borrowers (since they get to pay back a loan with cheaper money) unexpected deflation is bad for borrowers (since they have to pay back a loan with more expensive money).
- sfe22 4y ago
  Yeah, but guess who encourages debt.
hungryhobo 4y ago
what if your income is also lowered over time?
- sfe22 4y ago
  Thats also fine, especially if priced drop more. But even in a sane economy I would expect most would get raises as they work faster and better, even as prices fall.

mountainriver 4y ago

Yeah I think that’s the important part to understand, deflation is so much worse and can cause an equity trap which could send us into a severe depression. Inflation sucks but let’s not be drastic

lamontcg 4y ago

This is not what is going to happen. The government is likely to be locked up pretty hard if the Republicans take either the House or the Senate in the fall, and while we might not see hard austerity, we certainly won't see any stimulus. Meanwhile, the Fed has been talking consistently very tough on inflation and is bumping 0.50 basis points every meeting and signalling that they'll do that until inflation is contained. They're talking positively about Paul Volker and keeping rates significantly above what is considered to be neutral. And what they're worried about is the broad wage increases that are being seen (and the whole backlash against shitty jobs and pay and unionization drives). They absolutely will raise rates this time pretty fast -- much faster than the 0.25 basis point tightening and calming reassurances every meeting under Greenspan. They're talking tougher than I've seen them ever talk in the 21st Century. If you believe the economy is a huge bubble, they're talking like they're going to pop it. And they always overshoot and they're talking and looking like they're going to overshoot. That means that meaningfully large areas of the economy are likely to detonate (probably CMBS). Crypto will also probably melt down. And with a Republican congress and a Democratic President the thing to worry about is that if the system needs rescuing that a chunk of the Republicans may be happy to watch it burn and blame it on Biden. Of course that will hurt them, too, but they may realize too late that the Leopards will also eat their face as well. They're going to proceed with waging class war and crash the economy into an iceberg to get wages back under control. And everyone who is screaming at them about inflation is going to cheer them on to do it. Then when the economy hits the wall the people who would put out the fire are going to be paralyzed into inaction. This time it is actually different because the Boomers are retiring, COVID and long COVID has taken people out of the workforce, the pandemic itself has made people very uppity and demanding and there's a huge overhang of jobs compared to job-seekers and we're seeing wage inflation. That's novel compared to the past 30+ years. And they're pretty much freaking out over it. And there's no political pushback, they have a blank check right now politically to get inflation under control. When I try to suggest that a wage-price inflation cycle would be useful to reprice debt and assets like housing people and that "stagflation" is the less-painful path to repricing people act like I should be locked up in the loony bin. QED, the Fed currently has a single political mandate to get inflation under control. We're gonna see deflation. Yield curve is going to be pushed into inverting until something breaks.