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Meanwhile, Gold takes a dump, falling 1%: https://www.tradingview.com/chart/?symbol=NASDAQ%3ATSLA https://www.tradingview.com/chart/?symbol=NASDAQ%3ATSLA Reme

Meanwhile, Gold takes a dump, falling 1%: https://www.tradingview.com/chart/?symbol=NASDAQ%3ATSLA https://www.tradingview.com/chart/?symbol=NASDAQ%3ATSLA Remember how gold was going to protect you from hyperinflation? Something nasty is brewing in the economy. It will be obvious when it hits but until then it will be confusing as hell. The bond and eurodollar markets have been signally for about a year now that the nasty thing will be a recession that will force the Fed back into accommodative mode as early as this year. The funny thing is that both can be true. Inflation can soar and the economy can crater. The Fed can be accommodative while inflation runs hot. It has happened before. If it happened again, it's hard to imagine a scenario that would cause greater confusion. > On a monthly basis, headline CPI rose 1.3% and core CPI was up 0.7%, compared to respective estimates of 1.1% and 0.5%. Here's the number to pay attention to. CPI increases are accelerating. Have a gander at this chart: https://fred.stlouisfed.org/series/CPIAUCSL https://fred.stlouisfed.org/series/CPIAUCSL Also notice how that chart only goes in one direction - up and to the right. There are very brief periods in which it reverses, only to return to trend with a vengeance.

pid-1 4y ago
Professional investors don't use gold as inflation hedge, that's internet wisdom.
cs702 4y ago
> Something nasty is brewing in the economy. It will be obvious when it hits but until then it will be confusing as hell. It could also that in prices will not behave as you'd expect due to large-scale, persistent, quantitative easing: https://news.ycombinator.com/item?id=32083245 https://news.ycombinator.com/item?id=32083245
newaccount2021 4y ago
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api 4y ago
I doubt this is monetary inflation. It's price inflation due to a supply crunch brought on by the pandemic shutdowns (whose effect was delayed) and the Russian invasion of Ukraine. Then throw in other factors like housing undersupply in developed countries, continuing depletion of "easy" oil, and Chinese threats against Taiwan. Gold tends to be (but is not guaranteed to be) a hedge against monetary inflation but not against supply crunch driven inflation. Prices are going up because prices are actually going up.
- ihalip 4y ago
  The Russian invasion isn't what caused inflation. I don't believe in the "Putin's price hike" because inflation was already picking up speed in Q2 2021, well before the invasion.
  - epistasis 4y ago
    It's likely that there are a multitude of causes each contributing a bit. Many many different areas are experiencing "perfect storms" to cause huge disruptions and shortages: https://www.bloomberg.com/news/articles/2022-07-11/thirteen-perfect-storms-that-are-sweeping-the-world-right-now https://www.bloomberg.com/news/articles/2022-07-11/thirteen-...
- Barrera 4y ago
  Define "monetary inflation" and how to measure it. It would also be helpful if you could point to a metric that allows one to distinguish "monetary inflation" from some other kind.
  - JumpCrisscross 4y ago
    > Define "monetary inflation" and how to measure it Core PCE jumping [1]. Core is elevated. But between that and headline is a lot of energy price volatility. [1] https://www.bea.gov/data/personal-consumption-expenditures-price-index-excluding-food-and-energy https://www.bea.gov/data/personal-consumption-expenditures-p...
andsoitis 4y ago
> protect you from hyperinflation? We are not in a hyper inflationary environment. Hyperinflation is when monthly inflation rate is above 50%, or more than 12,800% per year.
mjburgess 4y ago
Gold and what army? People repeat these gold lines like it's the 19th C. Today its a shiny metal sold by ponzi schemers to paranoids.
- LeifCarrotson 4y ago
  It's illuminating to observe the disparity between what gold vendors say they believe and what their actions suggest they believe. They claim that gold is the only safe place for your wealth, so the wise thing to do is give them your risky, value-less paper dollars and receive shiny metal. But their actions are the opposite, they are happy to take all of your paper dollars and give you the shiny metal that used to be theirs... No one would give away something valuable for something less valuable, their actions imply that they ascribe more value to the paper dollars than the shiny metal.
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blantonl 4y ago
* Job markets are still extremely strong * We're seeing June numbers. Gas prices lately have plunged relative to where they were * supply problems are moderating The one thing the fed should be worried about is another unexpected supply shock -either a COVID wave that affects Asia etc, or natural disaster that drastically affects energy. Then, the economy is in a deep bind and the fed has their hands tied.
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- htfuuufhhuff 4y ago
  Financial markets are leading indicators of job markets. The stock price is about expected future performance. When that bad performance materializes they decrease hiring and start layoffs. Then tax income decreases, which leads to public sector budget issues, so they start cutting too.
- adam_arthur 4y ago
  Strong job numbers are negative for the economy and markets now. It implies future inflationary pressures. We're almost certainly below the natural rate of unemployment, meaning even a declining CPI isn't enough for the Fed to stop hiking
- danaris 4y ago
  > Gas prices lately have plunged relative to where they were Have they? Where, and by how much? I'm still seeing ~$5/gal gas around here...
  - mywittyname 4y ago
    Oil prices are down 25% since mid June. Gas prices are down roughly 8% on average in the USA during the same time. But remember, California $6/ga gas is Texas $4/ga gas.
  - sakopov 4y ago
    Crude oil has plunged. Gas prices pretty much remain elevated. I still see a lot of locations in Los Angeles charging preposterous $7+ a gallon with general prices pulling back $0.25-$0.30. That's a not a plunge.
nus07 4y ago
The last few years of zero interest rates has meant that a lot of people made a shitload of money . There is plenty of cash and liquidity around.28 year old FAANG engineers with 600k in savings and a house (as an oldie I am in awe). Inflation is here to stay for the next 5 years at least no matter what the Fed does about it . Plenty of people sitting on cash and multiple houses at 2.x% mortgages . They have plenty to splurge on that trip to Aruba.
- supernovae 4y ago
  I find this disappointing because it basically says "anyone who works for a W2 will cause inflation if they are successful" That shows to me that capitalism is broken if success means inflation. We should be able to swim in cash reserves and safety and not be penalized for it.
  - JumpCrisscross 4y ago
    > it basically says "anyone who works for a W2 will cause inflation if they are successful" Then take comfort in that armchair analysis being wrong. If it were true, if FAANG employees’ pay were driving inflation, we’d expect to see local inflation correlate with FAANG employment. It does not. In fact, almost the opposite is true, with inflation in the interior outpacing that on the coasts [1][2]. (Shipping.) [1] https://www.bloomberg.com/news/articles/2021-11-11/inflation-pressures-are-highest-in-u-s-midwest-and-south-map https://www.bloomberg.com/news/articles/2021-11-11/inflation... [2] https://www.jec.senate.gov/public/index.cfm/republicans/analysis?ID=6D33DAC5-A69A-4577-AB51-878AFEC69ADF https://www.jec.senate.gov/public/index.cfm/republicans/anal...
    - abduhl 4y ago
      Isn’t this a result of inflation in the interior finally catching up to the ridiculous pace that the coasts have had as coastal money flees inward due to WFH and unaffordable housing prices?
    - helen___keller 4y ago
      My armchair analysis is that we have heavy inflation in what were low-mid CoL cities as the big money remote workers cash out of the coasts for cheaper locales Or in other words, the rest of the country catching up to the big cities No idea if this is the truth of course
h2odragon 4y ago
> Gold takes a dump, "gold" or actual physical metal gold? What I hear is that getting gold or silver metal delivered is almost impossible. I think a lot of problems are being aggravated by the failure of the "market makers" and market reports that are more to influence than inform. See also the Nickel market.
- bombcar 4y ago
  Kitco seems to have some ready for delivery https://online.kitco.com/buy/2014RCM/1-kg-Gold-Royal-Canadian-Mint-Bar-9999-2014RCM https://online.kitco.com/buy/2014RCM/1-kg-Gold-Royal-Canadia...
- myth_drannon 4y ago
  Russia was cut off from the gold market, I imagine it would create temporary disturbance in physical gold supplies.
  - sampa 4y ago
    not 'gold market', but 'western gold market' western media tend to omit that it's the west against Russia, not the world
- ProbablyRyaan 4y ago
  Anecdotally, I just purchased some physical gold. Even though it was a holiday, it arrived at my doorstep within 24hrs..
- tablespoon 4y ago
  > "gold" or actual physical metal gold? What I hear is that getting gold or silver metal delivered is almost impossible. What do you mean? That inflation fears caused consumers to clear out the retail channel, or that "investment" gold is often something that just sits in a bank vault and can't reasonably delivered except to a specialist?
  - h2odragon 4y ago
mancerayder 4y ago
Every single shiller was wrong. Gold and crypto protect against inflation. Bonds should be 20-40 percent of a portfolio. Apple and MSFT and the rest of big tech are safe havens. It's always a good time to buy a home, as supply is at a generational low and will remain like that for a decade, we will become like Canada so you shouldn't wait to buy. My favorite one is, you can't time the markets. Quite obviously a lot of people correctly timed the market's trends starting around the end of 2021, and the reasoning was pretty sound. I'm kicking myself today for dismissing them.
- chasebank 4y ago
  Why do you think housing is a safe haven? Interest rates will continue to rise, thus making a monthly mortgage payment more expensive. People can flat out not afford to purchase homes at these levels if interest rates rise. It's simple math.
  - tablespoon 4y ago
    > Why do you think housing is a safe haven? Interest rates will continue to rise, thus making a monthly mortgage payment more expensive. People can flat out not afford to purchase homes at these levels if interest rates rise. It's simple math. But if you get your mortgage now, you don't have to worry about those future increases. IIRC, most American mortgages are fixed rate.
    - ejb999 4y ago
      yes, but you still risk paying too much, and then if you have to sell for any reason, risk taking a huge loss. Lots and lots of people lost a ton of money in real estate during the 2008 downturn by overpaying and then being forced to sell.
    - chasebank 4y ago
      The price of a home doesn't really matter. You're effectively buying yourself a monthly payment. $1M 30 yr loan @ 3% vs 7% is $4,200/mo vs $6,600/mo.
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datadata 4y ago
> Here's the number to pay attention to. CPI increases are accelerating This by itself is not surprising. The fed has a target of 2% inflation which means that even in the best case, CPI will by an exponential that gains 2% per year.
BurningFrog 4y ago
Gold falling 1% relative to the strong USD doesn't invalidate it as a long term savings strategy.
phkahler 4y ago
>> The funny thing is that both can be true. Inflation can soar and the economy can crater. The solution to that is raising interest rates. Possibly a massive rate hike. Look for the Fed to do a full percentage point or more next time. The party is over. They're trying to be gentle so as not to destroy the housing market like last time. But housing is going to drop, no question.
- Barrera 4y ago
  That is the consensus view. But what if it doesn't work? What if the rate hikes keep coming fast and furious and the CPI keeps rising even faster? Recall that until the late 1970's the thought that inflation could persist through a recession seemed absurd. Nobody is ready for that scenario because they think it's impossible. But then again, how many predicted the situation we find ourselves in right now?
  - abduhl 4y ago
    This is fear mongering. If what you say might happen ends up happening we are fucked. There’s no reason to even consider it because there is no way to hedge or protect against it. It’s like showing up to a job site with all the tools in the world and worrying that you’ll need a tool that doesn’t exist. Do not fall into paralysis by analysis.
    - truffdog 4y ago
      The end of that inflationary period coincided with oil prices dropping, which isn't really something Volcker had any control over. Real supply shocks really are real supply shocks.
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  - linuxftw 4y ago
    Many people predicted the situation we're in right now. What perplexed us all is that the ZIRP era lasted as long as it did without having the current effect. We're heading for a consumer debt crisis. Outside of the tech bubble, average people are in a dire situation. > What if the rate hikes keep coming fast and furious and the CPI keeps rising even faster? Same thing that happened with the housing crisis in 2008. Consumers are going to default, and instead of the banks sharing the risk in the market they helped over inflate, Wall Street's going to get bailed out, because entering a deflationary environment is absolutely off the table.
compumike 4y ago
On my Show HN project https://news.ycombinator.com/item?id=32081943 https://news.ycombinator.com/item?id=32081943 I've downloaded this CPI-U series and plotted the inverse of it, showing the reduced real wealth by carrying a dollar forward (green line on homepage), or go directly to it: https://totalrealreturns.com/s/USDOLLAR https://totalrealreturns.com/s/USDOLLAR (but there is some explanatory text about "baguettes" only on the homepage if you find the y-axis confusing!). You can plot other assets too, such as gold https://totalrealreturns.com/s/GLD https://totalrealreturns.com/s/GLD
xwdv 4y ago
Crypto also going down the shitter, the next $10k drop in price will probably arrive before the end of the month.
whatever1 4y ago
We cannot make sense of it because we try to assess a global problem with American data. It would be an easily explainable problem if the US and only the US printed a ton of money and got overheated market. The problem is that virtually every country printed a ton of money during the pandemic. So the demand overheated globally. On the supply side we have: a) Chinese factories working intermittently due to COVID restrictions b) Russia who cannot participate freely in the gas market anymore and their threat to cutoff Europe during winter c) The supply chains are experiencing full scale bullwhip effects working overtime to satisfy demand that is not there anymore. These incur huge import costs to any country. So even if the US had printed zero additional dollars the past two years, we would still be experiencing inflation due to the vast raises of the cost of our imports.
- nightski 4y ago
  Supply issues can be alleviated with less demand, which is precisely what the fed attempts by raising interest rates. So your logic about not printing dollars not having an effect isn’t spot on imo. You also ignore the fact that USD is the reserve currency making it difficult to compare to other countries.
  - whatever1 4y ago
    Inflation metrics don’t care about demand levels. It’s just a basket of goods. The question of how many people can afford this basket is a different question.
    - JumpCrisscross 4y ago
      > question of how many people can afford this basket is a different question And that question’s name is demand.
      - whatever1 4y ago
        Let’s assume that we over reaching 10% of the global oil market, meaning that due to high demand we extended the supply by adding 10% expensive sources of oil. To get the prices back to the original we need to bring down by 10% the *global* demand. That means that the US needs to cut 50% their oil consumption (demand) if they are to act alone. These are not realistic things.
jliptzin 4y ago
This is a boon for anyone with a fixed mortgage, aka a big chunk of the middle class. Other than gas prices increasing I don’t understand what the average person is worried about. Their biggest monthly expense (mortgage) is effectively plummeting month by month, while the value of their home has increased significantly. Even if the stock market is plummeting, most people have the bulk of their net worth tied to their home, not stocks. Their wages are keeping up with inflation anyway. All that is well worth the ~$100 extra per month in gas. That can be mitigated somewhat anyway by driving less, taking public transit, or getting a hybrid/electric car. The main losers seem to be renters, and bankers.
- throwawaymaths 4y ago
  Your argument only makes sense if you are getting pay raises that are commensurate with inflation. Not everyone is. Some people might lose jobs (or not get one amidst a hiring freeze) because the nominal non labor cost of operating the business might go up than they can increase prices (or labor costs could go up because other employees are demanding raises). >the value of their home has increased significantly This causes their property taxes to go up, too, adding to the pressure. > The main losers seem to be renters Home ownership rates are decreasing; and you really forgot people on fixed incomes or no incomes (living on the street).
  - jliptzin 4y ago
    Of course, no one ever expects renters to do well in the long run economically in a capitalist system, regardless of what the inflation rate is. And same is true for people living on the street. Those groups don't do that well in any economic cycle, that's why the conventional wisdom has always been try to own a home. I am talking about middle class mortgage holders, people who do own homes. For the first time ever it seems like they are the ones coming out on top in this economic "crisis" but they seem to be the ones complaining about it the loudest.
    - throwawaymaths 4y ago
      I was complaining about inflation when I was making 26k and working more hours than was "legally allowed". I was also complaining about inflation when I was Lyft driver. I promise you other Lyft drivers were worried about inflation too.
iamricks 4y ago
Gold is not a good hedge against inflation https://www.nber.org/system/files/working_papers/w18706/w18706.pdf https://www.nber.org/system/files/working_papers/w18706/w187...
titzer 4y ago
> Something nasty is brewing in the economy. It will be obvious when it hits but until then it will be confusing as hell. It's only confusing because of FUD from governments who know damn well we've entered a world-wide inflationary death spiral driven by the debt created to perpetuate the idea of infinite growth, even in the face of the system repeatedly trying to correct by popping bubbles. Turns out that reinflating the very bubbles that just popped is exactly the wrong strategy. Also, in the US we are facing the fact that the vast majority of emergency debt created to combat economic shocks from COVID was embezzled by corporations and fraudsters. Record profits across the board for corporations, highest CEO pay ratios ever recorded, massive housing bubble; the monied class is making off with their spoils and cashing the stock market in. Meanwhile they are sticking it to consumers with inflation (even shrinkflation) and then complaining about worker shortages!
- sokoloff 4y ago
  > vast majority of emergency debt created to combat economic shocks from COVID was embezzled by corporations and fraudsters I would at least expect that to be less inflationary than that same amount of money ending up in consumers’ hands and being rapidly spent without an offsetting increase in production. When the government opens up the feeding trough, it should expect pigs to show up. I agree that it probably can’t be blocked up front, but fraud needs to be prosecuted aggressively after the fact.
  - jjoonathan 4y ago
    They printed 10x as much money into asset markets, but I am sure they will blame stimulus checks.
    - xyzzyz 4y ago
      You’re missing the parent’s point: in a counterfactual scenario, if as much money was handed directly in stimulus checks as was used to pump assets, the actual inflation would be even worse, because velocity of stimulus money is much higher than velocity of asset.
caeril 4y ago
Markets price in the future, not so much the present. Right now the gold market is pricing in a Volcker-style freakout by central banks. If Powell pivots, this will surely reverse.
missedthecue 4y ago
Worth noting that the dollar has been on a major rip due to certain circumstances. If you compare gold to euro or yen, it's doing quite well.
paulpauper 4y ago
Here is what I think is happening: the assumption that stocks hedge inflation has clearly been borne out of false over the past year Inflation is not a tax as commonly assumed. This is why people who are dumping revenue-generating assets and bonds and are content with 'losing' 8%/year by being in cash, because they aren't really losing anything. You only get 'taxed' by inflation if your consumption habits or preferences are aligned in such a way as to match the components of the CPI, which for the wealthy/rich they aren't. The rich don't need millions of dollars of food, healthcare, or gasoline. If you already own a home, then your hedging needs are already mostly fulfilled. For someone who has much less money, then inflation is more like a tax, because your will be spending a lager % of your income on essentials, such as food and gas, which are tracked by the CPI.
- JumpCrisscross 4y ago
  > assumption that stocks hedge inflation has clearly been borne out of false over the past year There are no short-term hedges to inflation outside the money markets. (And even they are highly imperfect.) Real assets broadly hedge against inflation in the long term, almost by definition.
  - paulpauper 4y ago
    it's taking a long time though.
cm2187 4y ago
Historically the fed has prioritised managing inflation over unemployment. My bet is that we will go through a recession without monetary easing until the CPI gets back in line.
FollowingTheDao 4y ago
Since gold has not been pegged to the US dollars since 1971 you will not see any quick changes in gold prices. It will come, but it will be delayed by several months if not a year. Since the dollar is really a petrodollar now what you’ve been seeing in oil prices has been the hedge against inflation.
bko 4y ago
I'm not optimistic about our future because no official will say the obvious, the $14 trillion injected into the US economy is driving this inflation. To put this in scale, US GDP is $23 trillion. This is helicopter money on a scale we've never seen in the US, much of it going to large banks and corporations. What did people think was going to happen? Raising rates marginally isn't going to soak up all this money, and even when it does and inflation eventually goes back to 1-3%, we'll still see the higher cost of living that has accumulated over the last few years. That means the typical American will be at least 10% poorer. But at least they got those checks for a few thousand dollars a few years ago. https://www.covidmoneytracker.org/ https://www.covidmoneytracker.org/
- seneca 4y ago
  Dead on. Helicopter money while at the same time forcefully shutting down production lead us where we are right now. Constraining actual economic output while pumping up demand with cheap money. "Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output." - Milton Friedman
- Aunche 4y ago
  That website double counts money creation. When the Federal Reserve buys government bonds as part of quantitative easing, they aren't "creating money." They're converting bonds into cash. It's an equivalent exchange.
  - refurb 4y ago
    That is new money. When a government bond is first sold, the buyer gives the government money. Then when the Fed buys it back, it creates news money for the purchase.
    - Aunche 4y ago
      When the Fed buys the bonds back, they remove the bonds from circulation, so it's an equivalent exchange. Likewise, when they sell their bonds as part of raising interest rates, they're removing money from circulation, which is also an equivalent exchange. The only time something is created from nothing is when the Treasury issues new bonds to fund increasing government spending.
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roenxi 4y ago
raises hand Proud bullion owner. The published CPI might not be that important - any small trader who cares about gold probably doesn't care too much about inflation. It isn't like the amount of money printing is a secret, when I care to check I measure the gold price vs the monetary aggregates. And any big trader probably has better data available than the government statistics.
- mywittyname 4y ago
  > And any big trader probably has better data available than the government statistics. Government data is the gold standard. Traders spend money trying to predict what the government numbers will be. It can be difficult to emulate, since it involves talking to real people, but there are brokers out there for consumer spending data.
credit_guy 4y ago
> The Fed can be accommodative while inflation runs hot. The Fed will not become accommodative before the inflation is beaten. The Fed will keep increasing rates, recession be damned. They won't do the mistake that the '70s Fed did.
seattle_spring 4y ago
> Remember how gold was going to protect you from hyperinflation? I remember some particularly catastrophising conspiracists claiming it would, but I don't remember giving the idea credibility.
kk6mrp 4y ago
From what I understand, Gold is a hedge against government, not inflation.
bern4444 4y ago
> The bond and eurodollar markets have been signally for about a year now that the nasty thing will be a recession that will force the Fed back into accommodative mode as early as this year. I've heard this quite a bit but I don't think it's true. The FED is raising rates purposefully, knowing this will cause a negative turn in the economy possibly (and likely) leading to a recession. Their goal is (perhaps indirectly but still intended) to cause a (controlled?) recession by raising interest rates. It doesn't make sense they would they seek to undo a recession that they induced. Eventually they will once inflation is back down but the FED can (and should) keep raising rates until inflation comes back down. I wouldn't be surprised to see interest rates at 6, 7 or even 8% if inflation continues at its current level or continues to rise.
fny 4y ago
> Gold takes a dump falling 1% *You can't buy fire insurance when your house is on fire. Insurance prices also skyrocket when everyone is freaking out about the need to buy insurance.* And guess what you do when inflation hits hard and you need to pay for things? You sell your gold. It's happening in Sri Lanka[0], I'm sure its also happening else where across the developing and even in the developed world. Gold is still up 15% since before the pandemic in USD, in every other currency its up even more. If you're buying now you're buying as a hedge against whatever inflation will come in the future. Even in 1975 when inflation was at 9% gold prices collapsed by 30%!!! Unfortunately, you need to time markets to some extend to get the full benefit of any hedge since you necessarily only profit when someone else is willing to buy at a higher price. [0]: https://theprint.in/world/sri-lankans-selling-gold-amid-economic-crisis/909491/ https://theprint.in/world/sri-lankans-selling-gold-amid-econ... [1]: https://www.nytimes.com/1975/12/31/archives/gold-rush-in-us-didnt-plan-out-buyers-have-lost-as-much-as-30-on-in.html https://www.nytimes.com/1975/12/31/archives/gold-rush-in-us-...
LeifCarrotson 4y ago
> Notice how that chart only goes in one direction - up and to the right. Up and to the right does not imply that CPI increases are accelerating, which I agree is the problem. You can have a perfectly healthy economy with linear, constant inflation, that's been the case for most of history. Some small, relatively consistent amount seems to be good for a society, it encourages reinvestment rather than hoarding. Straight lines are good, parabolas are dangerous, they usually turn into hyperbolas as an economy collapses. Is it going up and to the right faster and faster? Here's a chart of the month-to-month delta of that chart since May 2020: https://i.imgur.com/Id8tGSE.png https://i.imgur.com/Id8tGSE.png It's noisy like all real data, but a linear fit says y = 0.0028x - 123.44, R² = 0.476. That suggests that CPI is going up and to the right about 1.5 points per month, equal to 0.5% monthly or 6.2% annually, but that each month the rate of increase gets larger by 0.0028 points. That's what we need to bring back to 0.
silicon2401 4y ago
Nobody has a crystal ball, but would you expect housing prices to increase or decrease in the next year? I missed out on the low interest rates due to just not being ready to buy a house yet, but I think I'll be ready to buy sometime within the next year. Thankfully I've seen a couple of houses lately that we would be able to afford, but I can't help wonder whether our options would be even better as the recession and inflation continue.
powerslacker 4y ago
If you bought gold at spot before the COVID debacle you're still ahead. I'd call that protection from inflation.
wbsss4412 4y ago
> Here's the number to pay attention to. CPI increases are accelerating. That’s what it means to go from a 2% inflation rate to a 9% inflation rate. The inflation rate is literally the slope of that chart. It’s a price chart, not an inflation chart. > Also notice how that chart only goes in one direction - up and to the right. There are very brief periods in which it reverses, only to return to trend with a vengeance. Yes, because deflation is generally considered a bad thing.

pid-1 4y ago

Professional investors don't use gold as inflation hedge, that's internet wisdom.

cs702 4y ago

> Something nasty is brewing in the economy. It will be obvious when it hits but until then it will be confusing as hell. It could also that in prices will not behave as you'd expect due to large-scale, persistent, quantitative easing: https://news.ycombinator.com/item?id=32083245 https://news.ycombinator.com/item?id=32083245

newaccount2021 4y ago

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api 4y ago

I doubt this is monetary inflation. It's price inflation due to a supply crunch brought on by the pandemic shutdowns (whose effect was delayed) and the Russian invasion of Ukraine. Then throw in other factors like housing undersupply in developed countries, continuing depletion of "easy" oil, and Chinese threats against Taiwan. Gold tends to be (but is not guaranteed to be) a hedge against monetary inflation but not against supply crunch driven inflation. Prices are going up because prices are actually going up.

ihalip 4y ago
The Russian invasion isn't what caused inflation. I don't believe in the "Putin's price hike" because inflation was already picking up speed in Q2 2021, well before the invasion.
- epistasis 4y ago
  It's likely that there are a multitude of causes each contributing a bit. Many many different areas are experiencing "perfect storms" to cause huge disruptions and shortages: https://www.bloomberg.com/news/articles/2022-07-11/thirteen-perfect-storms-that-are-sweeping-the-world-right-now https://www.bloomberg.com/news/articles/2022-07-11/thirteen-...
Barrera 4y ago
Define "monetary inflation" and how to measure it. It would also be helpful if you could point to a metric that allows one to distinguish "monetary inflation" from some other kind.
- JumpCrisscross 4y ago
  > Define "monetary inflation" and how to measure it Core PCE jumping [1]. Core is elevated. But between that and headline is a lot of energy price volatility. [1] https://www.bea.gov/data/personal-consumption-expenditures-price-index-excluding-food-and-energy https://www.bea.gov/data/personal-consumption-expenditures-p...

andsoitis 4y ago

> protect you from hyperinflation? We are not in a hyper inflationary environment. Hyperinflation is when monthly inflation rate is above 50%, or more than 12,800% per year.

mjburgess 4y ago

Gold and what army? People repeat these gold lines like it's the 19th C. Today its a shiny metal sold by ponzi schemers to paranoids.

LeifCarrotson 4y ago
It's illuminating to observe the disparity between what gold vendors say they believe and what their actions suggest they believe. They claim that gold is the only safe place for your wealth, so the wise thing to do is give them your risky, value-less paper dollars and receive shiny metal. But their actions are the opposite, they are happy to take all of your paper dollars and give you the shiny metal that used to be theirs... No one would give away something valuable for something less valuable, their actions imply that they ascribe more value to the paper dollars than the shiny metal.
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blantonl 4y ago

* Job markets are still extremely strong * We're seeing June numbers. Gas prices lately have plunged relative to where they were * supply problems are moderating The one thing the fed should be worried about is another unexpected supply shock -either a COVID wave that affects Asia etc, or natural disaster that drastically affects energy. Then, the economy is in a deep bind and the fed has their hands tied.

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htfuuufhhuff 4y ago
Financial markets are leading indicators of job markets. The stock price is about expected future performance. When that bad performance materializes they decrease hiring and start layoffs. Then tax income decreases, which leads to public sector budget issues, so they start cutting too.
adam_arthur 4y ago
Strong job numbers are negative for the economy and markets now. It implies future inflationary pressures. We're almost certainly below the natural rate of unemployment, meaning even a declining CPI isn't enough for the Fed to stop hiking
danaris 4y ago
> Gas prices lately have plunged relative to where they were Have they? Where, and by how much? I'm still seeing ~$5/gal gas around here...
- mywittyname 4y ago
  Oil prices are down 25% since mid June. Gas prices are down roughly 8% on average in the USA during the same time. But remember, California $6/ga gas is Texas $4/ga gas.
- sakopov 4y ago
  Crude oil has plunged. Gas prices pretty much remain elevated. I still see a lot of locations in Los Angeles charging preposterous $7+ a gallon with general prices pulling back $0.25-$0.30. That's a not a plunge.

nus07 4y ago

The last few years of zero interest rates has meant that a lot of people made a shitload of money . There is plenty of cash and liquidity around.28 year old FAANG engineers with 600k in savings and a house (as an oldie I am in awe). Inflation is here to stay for the next 5 years at least no matter what the Fed does about it . Plenty of people sitting on cash and multiple houses at 2.x% mortgages . They have plenty to splurge on that trip to Aruba.

supernovae 4y ago
I find this disappointing because it basically says "anyone who works for a W2 will cause inflation if they are successful" That shows to me that capitalism is broken if success means inflation. We should be able to swim in cash reserves and safety and not be penalized for it.
- JumpCrisscross 4y ago
  > it basically says "anyone who works for a W2 will cause inflation if they are successful" Then take comfort in that armchair analysis being wrong. If it were true, if FAANG employees’ pay were driving inflation, we’d expect to see local inflation correlate with FAANG employment. It does not. In fact, almost the opposite is true, with inflation in the interior outpacing that on the coasts [1][2]. (Shipping.) [1] https://www.bloomberg.com/news/articles/2021-11-11/inflation-pressures-are-highest-in-u-s-midwest-and-south-map https://www.bloomberg.com/news/articles/2021-11-11/inflation... [2] https://www.jec.senate.gov/public/index.cfm/republicans/analysis?ID=6D33DAC5-A69A-4577-AB51-878AFEC69ADF https://www.jec.senate.gov/public/index.cfm/republicans/anal...
  - abduhl 4y ago
    Isn’t this a result of inflation in the interior finally catching up to the ridiculous pace that the coasts have had as coastal money flees inward due to WFH and unaffordable housing prices?
  - helen___keller 4y ago
    My armchair analysis is that we have heavy inflation in what were low-mid CoL cities as the big money remote workers cash out of the coasts for cheaper locales Or in other words, the rest of the country catching up to the big cities No idea if this is the truth of course

h2odragon 4y ago

> Gold takes a dump, "gold" or actual physical metal gold? What I hear is that getting gold or silver metal delivered is almost impossible. I think a lot of problems are being aggravated by the failure of the "market makers" and market reports that are more to influence than inform. See also the Nickel market.

bombcar 4y ago
Kitco seems to have some ready for delivery https://online.kitco.com/buy/2014RCM/1-kg-Gold-Royal-Canadian-Mint-Bar-9999-2014RCM https://online.kitco.com/buy/2014RCM/1-kg-Gold-Royal-Canadia...
myth_drannon 4y ago
Russia was cut off from the gold market, I imagine it would create temporary disturbance in physical gold supplies.
- sampa 4y ago
  not 'gold market', but 'western gold market' western media tend to omit that it's the west against Russia, not the world
ProbablyRyaan 4y ago
Anecdotally, I just purchased some physical gold. Even though it was a holiday, it arrived at my doorstep within 24hrs..
tablespoon 4y ago
> "gold" or actual physical metal gold? What I hear is that getting gold or silver metal delivered is almost impossible. What do you mean? That inflation fears caused consumers to clear out the retail channel, or that "investment" gold is often something that just sits in a bank vault and can't reasonably delivered except to a specialist?
- h2odragon 4y ago

mancerayder 4y ago

Every single shiller was wrong. Gold and crypto protect against inflation. Bonds should be 20-40 percent of a portfolio. Apple and MSFT and the rest of big tech are safe havens. It's always a good time to buy a home, as supply is at a generational low and will remain like that for a decade, we will become like Canada so you shouldn't wait to buy. My favorite one is, you can't time the markets. Quite obviously a lot of people correctly timed the market's trends starting around the end of 2021, and the reasoning was pretty sound. I'm kicking myself today for dismissing them.

chasebank 4y ago
Why do you think housing is a safe haven? Interest rates will continue to rise, thus making a monthly mortgage payment more expensive. People can flat out not afford to purchase homes at these levels if interest rates rise. It's simple math.
- tablespoon 4y ago
  > Why do you think housing is a safe haven? Interest rates will continue to rise, thus making a monthly mortgage payment more expensive. People can flat out not afford to purchase homes at these levels if interest rates rise. It's simple math. But if you get your mortgage now, you don't have to worry about those future increases. IIRC, most American mortgages are fixed rate.
  - ejb999 4y ago
    yes, but you still risk paying too much, and then if you have to sell for any reason, risk taking a huge loss. Lots and lots of people lost a ton of money in real estate during the 2008 downturn by overpaying and then being forced to sell.
  - chasebank 4y ago
    The price of a home doesn't really matter. You're effectively buying yourself a monthly payment. $1M 30 yr loan @ 3% vs 7% is $4,200/mo vs $6,600/mo.
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datadata 4y ago

> Here's the number to pay attention to. CPI increases are accelerating This by itself is not surprising. The fed has a target of 2% inflation which means that even in the best case, CPI will by an exponential that gains 2% per year.

BurningFrog 4y ago

Gold falling 1% relative to the strong USD doesn't invalidate it as a long term savings strategy.

phkahler 4y ago

>> The funny thing is that both can be true. Inflation can soar and the economy can crater. The solution to that is raising interest rates. Possibly a massive rate hike. Look for the Fed to do a full percentage point or more next time. The party is over. They're trying to be gentle so as not to destroy the housing market like last time. But housing is going to drop, no question.

Barrera 4y ago
That is the consensus view. But what if it doesn't work? What if the rate hikes keep coming fast and furious and the CPI keeps rising even faster? Recall that until the late 1970's the thought that inflation could persist through a recession seemed absurd. Nobody is ready for that scenario because they think it's impossible. But then again, how many predicted the situation we find ourselves in right now?
- abduhl 4y ago
  This is fear mongering. If what you say might happen ends up happening we are fucked. There’s no reason to even consider it because there is no way to hedge or protect against it. It’s like showing up to a job site with all the tools in the world and worrying that you’ll need a tool that doesn’t exist. Do not fall into paralysis by analysis.
  - truffdog 4y ago
    The end of that inflationary period coincided with oil prices dropping, which isn't really something Volcker had any control over. Real supply shocks really are real supply shocks.
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- linuxftw 4y ago
  Many people predicted the situation we're in right now. What perplexed us all is that the ZIRP era lasted as long as it did without having the current effect. We're heading for a consumer debt crisis. Outside of the tech bubble, average people are in a dire situation. > What if the rate hikes keep coming fast and furious and the CPI keeps rising even faster? Same thing that happened with the housing crisis in 2008. Consumers are going to default, and instead of the banks sharing the risk in the market they helped over inflate, Wall Street's going to get bailed out, because entering a deflationary environment is absolutely off the table.

compumike 4y ago

On my Show HN project https://news.ycombinator.com/item?id=32081943 https://news.ycombinator.com/item?id=32081943 I've downloaded this CPI-U series and plotted the inverse of it, showing the reduced real wealth by carrying a dollar forward (green line on homepage), or go directly to it: https://totalrealreturns.com/s/USDOLLAR https://totalrealreturns.com/s/USDOLLAR (but there is some explanatory text about "baguettes" only on the homepage if you find the y-axis confusing!). You can plot other assets too, such as gold https://totalrealreturns.com/s/GLD https://totalrealreturns.com/s/GLD

xwdv 4y ago

Crypto also going down the shitter, the next $10k drop in price will probably arrive before the end of the month.

whatever1 4y ago

We cannot make sense of it because we try to assess a global problem with American data. It would be an easily explainable problem if the US and only the US printed a ton of money and got overheated market. The problem is that virtually every country printed a ton of money during the pandemic. So the demand overheated globally. On the supply side we have: a) Chinese factories working intermittently due to COVID restrictions b) Russia who cannot participate freely in the gas market anymore and their threat to cutoff Europe during winter c) The supply chains are experiencing full scale bullwhip effects working overtime to satisfy demand that is not there anymore. These incur huge import costs to any country. So even if the US had printed zero additional dollars the past two years, we would still be experiencing inflation due to the vast raises of the cost of our imports.

nightski 4y ago
Supply issues can be alleviated with less demand, which is precisely what the fed attempts by raising interest rates. So your logic about not printing dollars not having an effect isn’t spot on imo. You also ignore the fact that USD is the reserve currency making it difficult to compare to other countries.
- whatever1 4y ago
  Inflation metrics don’t care about demand levels. It’s just a basket of goods. The question of how many people can afford this basket is a different question.
  - JumpCrisscross 4y ago
    > question of how many people can afford this basket is a different question And that question’s name is demand.
    - whatever1 4y ago
      Let’s assume that we over reaching 10% of the global oil market, meaning that due to high demand we extended the supply by adding 10% expensive sources of oil. To get the prices back to the original we need to bring down by 10% the *global* demand. That means that the US needs to cut 50% their oil consumption (demand) if they are to act alone. These are not realistic things.

jliptzin 4y ago

This is a boon for anyone with a fixed mortgage, aka a big chunk of the middle class. Other than gas prices increasing I don’t understand what the average person is worried about. Their biggest monthly expense (mortgage) is effectively plummeting month by month, while the value of their home has increased significantly. Even if the stock market is plummeting, most people have the bulk of their net worth tied to their home, not stocks. Their wages are keeping up with inflation anyway. All that is well worth the ~$100 extra per month in gas. That can be mitigated somewhat anyway by driving less, taking public transit, or getting a hybrid/electric car. The main losers seem to be renters, and bankers.

throwawaymaths 4y ago
Your argument only makes sense if you are getting pay raises that are commensurate with inflation. Not everyone is. Some people might lose jobs (or not get one amidst a hiring freeze) because the nominal non labor cost of operating the business might go up than they can increase prices (or labor costs could go up because other employees are demanding raises). >the value of their home has increased significantly This causes their property taxes to go up, too, adding to the pressure. > The main losers seem to be renters Home ownership rates are decreasing; and you really forgot people on fixed incomes or no incomes (living on the street).
- jliptzin 4y ago
  Of course, no one ever expects renters to do well in the long run economically in a capitalist system, regardless of what the inflation rate is. And same is true for people living on the street. Those groups don't do that well in any economic cycle, that's why the conventional wisdom has always been try to own a home. I am talking about middle class mortgage holders, people who do own homes. For the first time ever it seems like they are the ones coming out on top in this economic "crisis" but they seem to be the ones complaining about it the loudest.
  - throwawaymaths 4y ago
    I was complaining about inflation when I was making 26k and working more hours than was "legally allowed". I was also complaining about inflation when I was Lyft driver. I promise you other Lyft drivers were worried about inflation too.

iamricks 4y ago

Gold is not a good hedge against inflation https://www.nber.org/system/files/working_papers/w18706/w18706.pdf https://www.nber.org/system/files/working_papers/w18706/w187...

titzer 4y ago

> Something nasty is brewing in the economy. It will be obvious when it hits but until then it will be confusing as hell. It's only confusing because of FUD from governments who know damn well we've entered a world-wide inflationary death spiral driven by the debt created to perpetuate the idea of infinite growth, even in the face of the system repeatedly trying to correct by popping bubbles. Turns out that reinflating the very bubbles that just popped is exactly the wrong strategy. Also, in the US we are facing the fact that the vast majority of emergency debt created to combat economic shocks from COVID was embezzled by corporations and fraudsters. Record profits across the board for corporations, highest CEO pay ratios ever recorded, massive housing bubble; the monied class is making off with their spoils and cashing the stock market in. Meanwhile they are sticking it to consumers with inflation (even shrinkflation) and then complaining about worker shortages!

sokoloff 4y ago
> vast majority of emergency debt created to combat economic shocks from COVID was embezzled by corporations and fraudsters I would at least expect that to be less inflationary than that same amount of money ending up in consumers’ hands and being rapidly spent without an offsetting increase in production. When the government opens up the feeding trough, it should expect pigs to show up. I agree that it probably can’t be blocked up front, but fraud needs to be prosecuted aggressively after the fact.
- jjoonathan 4y ago
  They printed 10x as much money into asset markets, but I am sure they will blame stimulus checks.
  - xyzzyz 4y ago
    You’re missing the parent’s point: in a counterfactual scenario, if as much money was handed directly in stimulus checks as was used to pump assets, the actual inflation would be even worse, because velocity of stimulus money is much higher than velocity of asset.

caeril 4y ago

Markets price in the future, not so much the present. Right now the gold market is pricing in a Volcker-style freakout by central banks. If Powell pivots, this will surely reverse.

missedthecue 4y ago

Worth noting that the dollar has been on a major rip due to certain circumstances. If you compare gold to euro or yen, it's doing quite well.

paulpauper 4y ago

Here is what I think is happening: the assumption that stocks hedge inflation has clearly been borne out of false over the past year Inflation is not a tax as commonly assumed. This is why people who are dumping revenue-generating assets and bonds and are content with 'losing' 8%/year by being in cash, because they aren't really losing anything. You only get 'taxed' by inflation if your consumption habits or preferences are aligned in such a way as to match the components of the CPI, which for the wealthy/rich they aren't. The rich don't need millions of dollars of food, healthcare, or gasoline. If you already own a home, then your hedging needs are already mostly fulfilled. For someone who has much less money, then inflation is more like a tax, because your will be spending a lager % of your income on essentials, such as food and gas, which are tracked by the CPI.

JumpCrisscross 4y ago
> assumption that stocks hedge inflation has clearly been borne out of false over the past year There are no short-term hedges to inflation outside the money markets. (And even they are highly imperfect.) Real assets broadly hedge against inflation in the long term, almost by definition.
- paulpauper 4y ago
  it's taking a long time though.

cm2187 4y ago

Historically the fed has prioritised managing inflation over unemployment. My bet is that we will go through a recession without monetary easing until the CPI gets back in line.

FollowingTheDao 4y ago

Since gold has not been pegged to the US dollars since 1971 you will not see any quick changes in gold prices. It will come, but it will be delayed by several months if not a year. Since the dollar is really a petrodollar now what you’ve been seeing in oil prices has been the hedge against inflation.

bko 4y ago

I'm not optimistic about our future because no official will say the obvious, the $14 trillion injected into the US economy is driving this inflation. To put this in scale, US GDP is $23 trillion. This is helicopter money on a scale we've never seen in the US, much of it going to large banks and corporations. What did people think was going to happen? Raising rates marginally isn't going to soak up all this money, and even when it does and inflation eventually goes back to 1-3%, we'll still see the higher cost of living that has accumulated over the last few years. That means the typical American will be at least 10% poorer. But at least they got those checks for a few thousand dollars a few years ago. https://www.covidmoneytracker.org/ https://www.covidmoneytracker.org/

seneca 4y ago
Dead on. Helicopter money while at the same time forcefully shutting down production lead us where we are right now. Constraining actual economic output while pumping up demand with cheap money. "Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output." - Milton Friedman
Aunche 4y ago
That website double counts money creation. When the Federal Reserve buys government bonds as part of quantitative easing, they aren't "creating money." They're converting bonds into cash. It's an equivalent exchange.
- refurb 4y ago
  That is new money. When a government bond is first sold, the buyer gives the government money. Then when the Fed buys it back, it creates news money for the purchase.
  - Aunche 4y ago
    When the Fed buys the bonds back, they remove the bonds from circulation, so it's an equivalent exchange. Likewise, when they sell their bonds as part of raising interest rates, they're removing money from circulation, which is also an equivalent exchange. The only time something is created from nothing is when the Treasury issues new bonds to fund increasing government spending.

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roenxi 4y ago

raises hand Proud bullion owner. The published CPI might not be that important - any small trader who cares about gold probably doesn't care too much about inflation. It isn't like the amount of money printing is a secret, when I care to check I measure the gold price vs the monetary aggregates. And any big trader probably has better data available than the government statistics.

mywittyname 4y ago
> And any big trader probably has better data available than the government statistics. Government data is the gold standard. Traders spend money trying to predict what the government numbers will be. It can be difficult to emulate, since it involves talking to real people, but there are brokers out there for consumer spending data.

credit_guy 4y ago

> The Fed can be accommodative while inflation runs hot. The Fed will not become accommodative before the inflation is beaten. The Fed will keep increasing rates, recession be damned. They won't do the mistake that the '70s Fed did.

seattle_spring 4y ago

> Remember how gold was going to protect you from hyperinflation? I remember some particularly catastrophising conspiracists claiming it would, but I don't remember giving the idea credibility.

kk6mrp 4y ago

From what I understand, Gold is a hedge against government, not inflation.

bern4444 4y ago

> The bond and eurodollar markets have been signally for about a year now that the nasty thing will be a recession that will force the Fed back into accommodative mode as early as this year. I've heard this quite a bit but I don't think it's true. The FED is raising rates purposefully, knowing this will cause a negative turn in the economy possibly (and likely) leading to a recession. Their goal is (perhaps indirectly but still intended) to cause a (controlled?) recession by raising interest rates. It doesn't make sense they would they seek to undo a recession that they induced. Eventually they will once inflation is back down but the FED can (and should) keep raising rates until inflation comes back down. I wouldn't be surprised to see interest rates at 6, 7 or even 8% if inflation continues at its current level or continues to rise.

fny 4y ago

> Gold takes a dump falling 1% *You can't buy fire insurance when your house is on fire. Insurance prices also skyrocket when everyone is freaking out about the need to buy insurance.* And guess what you do when inflation hits hard and you need to pay for things? You sell your gold. It's happening in Sri Lanka[0], I'm sure its also happening else where across the developing and even in the developed world. Gold is still up 15% since before the pandemic in USD, in every other currency its up even more. If you're buying now you're buying as a hedge against whatever inflation will come in the future. Even in 1975 when inflation was at 9% gold prices collapsed by 30%!!! Unfortunately, you need to time markets to some extend to get the full benefit of any hedge since you necessarily only profit when someone else is willing to buy at a higher price. [0]: https://theprint.in/world/sri-lankans-selling-gold-amid-economic-crisis/909491/ https://theprint.in/world/sri-lankans-selling-gold-amid-econ... [1]: https://www.nytimes.com/1975/12/31/archives/gold-rush-in-us-didnt-plan-out-buyers-have-lost-as-much-as-30-on-in.html https://www.nytimes.com/1975/12/31/archives/gold-rush-in-us-...

LeifCarrotson 4y ago

> Notice how that chart only goes in one direction - up and to the right. Up and to the right does not imply that CPI increases are accelerating, which I agree is the problem. You can have a perfectly healthy economy with linear, constant inflation, that's been the case for most of history. Some small, relatively consistent amount seems to be good for a society, it encourages reinvestment rather than hoarding. Straight lines are good, parabolas are dangerous, they usually turn into hyperbolas as an economy collapses. Is it going up and to the right faster and faster? Here's a chart of the month-to-month delta of that chart since May 2020: https://i.imgur.com/Id8tGSE.png https://i.imgur.com/Id8tGSE.png It's noisy like all real data, but a linear fit says y = 0.0028x - 123.44, R² = 0.476. That suggests that CPI is going up and to the right about 1.5 points per month, equal to 0.5% monthly or 6.2% annually, but that each month the rate of increase gets larger by 0.0028 points. That's what we need to bring back to 0.

silicon2401 4y ago

Nobody has a crystal ball, but would you expect housing prices to increase or decrease in the next year? I missed out on the low interest rates due to just not being ready to buy a house yet, but I think I'll be ready to buy sometime within the next year. Thankfully I've seen a couple of houses lately that we would be able to afford, but I can't help wonder whether our options would be even better as the recession and inflation continue.

powerslacker 4y ago

If you bought gold at spot before the COVID debacle you're still ahead. I'd call that protection from inflation.

wbsss4412 4y ago

> Here's the number to pay attention to. CPI increases are accelerating. That’s what it means to go from a 2% inflation rate to a 9% inflation rate. The inflation rate is literally the slope of that chart. It’s a price chart, not an inflation chart. > Also notice how that chart only goes in one direction - up and to the right. There are very brief periods in which it reverses, only to return to trend with a vengeance. Yes, because deflation is generally considered a bad thing.