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Comment by thorwasdfasdf | Hacker News Reader

but we're not having deflation. With fewer and fewer people working, there's less and less supply with even larger demand, now that they're printing money like never before. As a result, we're going to get really really serious inflation of over 2%, 3%, maybe even more than 3%.

It doesn't sound like much because we've become innured to it. But, it's really bad. Just think, you earned 100K in 1 year and 1 year later it's only worth 97K. That's a tax of 3K just for holding on to your money, on top of all the taxes that already exist (Govt spending is 40% of GDP ~ and that's just nationwide.)

After just 20 years of 3% inflation, your money is worth half of what it was when you earned it. What's the point of government if they can't even provide a stable currency? Is the expectation that everyone must now buy equities and real estate? Are we to go back to bartering?

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1) Once again, inflation does not work that way. If it did, it would have been out of control in 2009. Instead, it was near zero. The same thing is happening right now.

2) The idea that 2-3% inflation is "really really serious" is completely absurd. I'm guessing you're young because historical US inflation prior to the ridiculous post-2009 financial situation had long periods of being well above 3% and the sky didn't fall. Inflation above what we've seen in the last decade is not necessarily a bad thing.

For context, the inflation goal set by the Swedish national bank is 2%. That's what they're aiming for, so clearly it's not "really really serious". CNBC also states that:

>The Fed considers a 2% inflation rate to be a sign of sustainable growth and a level that keeps interest rates high enough to allow for mobility in the event of an economic downturn.

1-3% is also the Bank of Canada's target range: https://www.bankofcanada.ca/rates/indicators/key-variables/k...

I agree that 2-3% inflation is nothing to worry about. But what's happening now is not quite the same thing as in 2009.

For the first time in a very long time we actually have a shortage of supply. We didn't have that in 2009.

But I think/hope it will be short lived, and depending on how we act now it could easily turn into a shortage of demand once again.

Do we really have a shortage of supply? For what products? The only shortages I have seen are for toilet paper and a few random grocery store products that maniacs decide to stockpile next. (in my community, there is all the sudden a run on ice cream now that bread is back in stock).

We have a shortage of farm labour for instance, which may soon turn into a shortage of fresh produce and into massive food price inflation. We have a shortage of home delivery capacity.

If stuff doesn't get manufactured for months, we will have a shortage of many other things as well. Obviously we have a lack of demand for other things at the same time.

I don't think there is that much unreasonable stockpiling. People are no longer eating out. Kids are no longer eating at school. So people buy more at supermarkets. They also buy for a week, quite sensibly, to avoid making a trip to a crowded supermarket every day.

Combine that with finely tuned just in time logistics and you get a bit of a crunch. There's simply a misalignment of capacity right now, but there could be a real shortage of some essentials soon.

Where did the restaurants and the school get their food from? I know that means a great disruption, but I’m still not convinced that means a shortage.

Sysco and the like. It's probably a distribution rather than a supply issue.

Exactly. Typical container size in foodservice distribution is a #10 can, packed 6 to a case. Each #10 can is 3 quarts.

Fairly few households are interested in buying canned tomatoes 18 quarts at a time.

VR systems and Nintendo Switch systems are also out of supply, they were bought up quickly when the quarantine started and China hasn’t been making any new ones for a couple of months now.

Hoarding is a small aspect of current shortages. I'll pick one example at random:

Gyms are closed, so go try to find a squat rack, a bar, and some bumper plates for a home gym. Or dumbbells. Or even some crappy resistance bands. You can't. Nobody is hoarding 45lb plates for future use, they're demanding them for use now. Expand this for every industry impacted by shutdown orders. It wouldn't take long to think of hundreds of examples of non-hoarding shortages.

Inflation is coming. Shortages are the market telling you that price MUST increase to equalize demand. And it will.

A personal example. Gym equipment: barbells, weight plates, squat racks, etc are either sold out or way overpriced right now because gyms are closed. I bought a barbell set the week before my gym closed, and now that I went to look to buy new weights for it Im looking at "out of stock until May"

> historical US inflation prior to the ridiculous post-2009 financial situation had long periods of being well above 3% and the sky didn't fall

True, but misleading; again, it's real rather than nominal rates that matter to most people. Before the GFC you could get interest on savings above the rate of inflation, even after tax. Not spectacular gains, but saving was at least possible.

After the GFC your choices are to either a) join the long queue of ever-greater fools piling into the casino, or b) watch central banks confiscate your money, year after year, forever.

i was well aware of the 70s and 80s, that doesn't make it right.

Anyone else have a hard time believing the official inflation numbers? Housing, food, restaurants, electricity, hotels,... anything I can think of that I buy regularly all seems significantly more expensive than it did 10 years ago - much higher than the official numbers would lead me to expect.

This is my experience as well ... and healthcare and education costs have also gone up much faster than the stated rate of inflation. There are a few areas --- like consumer electronics and maybe food --- where this isn't the case or prices have actually gone down, but only a very few.

There's less supply of what? We still have plenty of food, plenty of homes, plenty of water. Yeah, we have less Airbnbs getting booked, and Ubers being called, but does that really fucking matter? It only matters to the VCs who have invested in these companies.

Americans don't need to buy their 6th iPhone to save this economy, we just need to focus on what's important. It's very telling of the state of current US politics that when a crisis emerges, everyone says we have to help rich corporations stay rich.

There was this joke running on Twitter:

If aliens invaded us today our first reaction would be to lower interest rates.

> but we're not having deflation.

We are going to have deflation. The stock market already "deflated". Just wait for the rest. Food prices are going to go through the roof (and maybe medical procedures) but everything else is going to get cheaper.

Given that food and medicine make up a large portion of spending, I think we'll see something more like, "some prices go up and others go down."

Another big chunk is housing, which as far as I know, shouldn't expect much difference in supply or demand in the short term, though demand may increase (at least as measured by square footage) if people are staying home for a long enough time. That may be countered by the reduction in demand for real estate by businesses, though zoning will probably limit the short term effects that has on housing.

Stocks are deflated because they aren’t expected to earn because people aren’t out buying and companies aren’t earning. Same for oil. Same for airline tickets. It seems obvious that there is deflation. If you have a good paying job right now, you can buy a lot for less.

> get really really serious inflation of over 2%, 3%, maybe even more than 3%

Really serious inflation is when prices in supermarket change twice a day like in Brasil in the old times. It is Weimar style hyperinflation where everyone want to get rid of paper money right away.

Inflation of 2-3% is actually desirable - it is a sign of healthy, growing economy. Additionaly it is good for public finances as most expenditures is fixed and tax recipes are over the target. Yes it is a kind of tax on people but in healthy economy who cares?

Most central banks and banks in general (also insurers) dread deflation not small inflation.

> Inflation of 2-3% is actually desirable - it is a sign of healthy, growing economy.

Why 2-3% and not 5-7% or -1-1%? Source for this assertion?

Inflation target for most CB..

At the moment, foreign demand for the dollar is so high that we are experiencing deflation (liquidity is still too low which is entirely why the fed is moving towards negative interest rates), in spite of the money printer going "brrrrr"

> the money printer going "brrrrr"

For those who have yet to have the enjoyment of the experience: https://brrr.money/

Can someone explain the 'going brrrrr' meme to me?

I've seen it used in other contexts but can't quite fully grasp what is meant by it.

It's a tongue in cheek reference to the Federal Reserve "running the printing presses", generating as much fiat as necessary to support the US and global economy. With the US dollar not on the gold standard [1], or tied to something physical resource, the Federal Reserve can create money out of thin air without constraint. Ergo, the "money printer goes brrr".

https://www.nytimes.com/2020/03/23/upshot/coronavirus-fed-ex... (The Fed’s Message: The Money-Printing Presses Are Fired Up and Ready to Go)

[1] https://en.wikipedia.org/wiki/Gold_standard

The sound of a lot of paper money being processed:

https://www.youtube.com/watch?v=ehFImqzVWos

https://knowyourmeme.com/memes/money-printer-go-brrr

This is actually more true than people realize. Gold is down to flat even after the the huge Fed announcements. The CRB index has been getting crushed in the last month. But this short-term liquidity demand is going to go away. The real inflation story is going to be when it does and the economy settles down. Then we will have all these programs that pumped huge amounts of money into the system, and unless they are sanitized watch out. I've seen people losing a lot of money on gold calls, but i think the proper time for that is going to be when this short-term credit demand has dried up and business starts returning to normal.

The crucial question is when does business return to normal? Credible experts have put the time to a vaccine at 18-24 months. Until then, what sort of "normal" is plausible for say, an airline, or a dentist?

This seems true, every currency pair against the US dollar that I checked is down substantially. Yen, Cad, Eur, Gbp, among others.

You may be right, but as Lord Keynes said, the market can stay irrational longer than you can stay solvent.

That printing money necessarily leads to inflation is not true in a situation like this. Inflation happens when there's more and more money being used to chase a finite amount of goods. In our current economic situation, there's a huge pile of money that's not chasing any goods at all.

Like like after the 2008 crisis that didn't lead to inflation, this won't either, as long at they turn off the money printer when people start investing again.

They aren't really printing money. They are buying up debt, both private and government that will eventually be sold back to the market or will mature this returning that money back, with appreciation, to the fed. Which will then make it disappear just as easily as they created it.

Sure. The Fed doesn't even own printing presses, the Department of Treasury does. However, in this context, "printing money" doesn't mean making physical pieces of paper. It means creating money out of thin air. It does that by buying debt, which, as you note, can be destroyed just as fast as it is created.

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