That shows the limits of a single number. It also shows up the "transmission mechanism" has been damaged; it doesn't affect wages or prices largely because so much effort has been expended over the last 40 years to prevent wages going up at all.
This is unfortunate since it's essentially helping relatively wealthy asset holders as opposed to those most likely to be affected negatively by covid.
[0] https://mleverything.substack.com/p/where-did-the-12-trillio...
It’s interesting to me that software developers don’t intrinsically realize this more than your average person. Nobody knows better than us that making changes to a complex system can have catastrophic downstream effects and has to be extensively tested first.
But in reality, economics is more akin a complex biological system. We have a very rudimentary understanding of how it actually works. Sure, we can create drugs that calm us down or excite us, but we have very limited understanding of the underlying biological system. For instance, we still can't agree what the optimal diet for humans is with wildly contradictory regiments.
Economists like to pretend it's a science, and there are certainly scientific and experimentally-valid findings, but the innermost terms and interactions will always be obsfuscated. Like psychology, except with higher stacks of layered complexity.
It's not as bad as steel deciding to change its tensile strength on a whim (because it heard other steel say so!), but it's not far off.
The average person doesn't understand what inflation is, why it happens, how it affects them and how the government uses inflation to reduce the significance of its debt. The average person also tends to believe government inflation numbers which, IMO, are manipulated and do not represent what is actually happening in the world. For instance, home prices (and thus rents) are rapidly increasing, and housing costs, for most people, are the biggest expense they have to think about, accounting for sometimes more than 50% of their take home pay.
From what I've seen, there are a lot of right-wing people in tech circles expressing a support for capitalism. However, very few of these people know or care how the economy works.
(A particular subgroup understands finance/trading pretty well, and mistakes understanding weather for understanding climate.)
Fair point. Most people don't know or care how the economy works, left or right. My main point was: it's to your advantage to know how the system works, and it's maybe even more important to understand how it works if you hope to change it.
If you don't understand what is inflation and its impact, or basic economics, then politicians can take advantage of your lack of knowledge, in the same way a shady car mechanic can take advantage of uninformed customers. They might pretend that certain policies will help lower-income people when what they are doing is most beneficial to the ultra-rich.
Sure, like, for instance, they might pretend that reducing fiscal stimulus that both redistributes wealth downward and fuels inflation (but does the former more than the latter) helps the lower-income by reducing inflation when it really lowers their real post-transfer income while raising it for those in the higher income classes that benefit less or not at all from the transfer but are still effected by price levels.
now this is just downright seductive. bravo
What if the stock market is up because revenue and growth are up?
Most people only think of real estate as local, so if you look for returns in nyc or SF, you’ll be disappointed. But if you are willing to invest in property across the US you can find areas with much lower prices and higher rents.
I doubt this comment will age well. Macroeconomic effects don't happen instantly.
(Because banks also control credit supply and only give it to creditworthy borrowers... The Fed can drop rates to zero and give banks limitless money and they still won't lend it out to deadbeats.)
Printing money and sending it to people does. Refer to the chart below.
https://www.federalreserve.gov/releases/h6/current/default.h...
Also in a lot of ways M2 on its own is meaningless (money sitting under a mattress not being used doesn’t affect the economy) - velocity of money is more useful. Of course, inflation is complex and multicausal so this isn’t the whole picture, but it’s more useful than raw M2 supply.
If I have $1k under the mattress I probably won't risk $100 on a share of CORP. If I have $100k under a mattress, I'm more willing to take a swing.
>Printing money and sending it to people does.
That money wasn't printed, it was borrowed because the Fed cannot do that. Only the US government can do that. The Fed may have bought treasury bonds but those still have to be paid back.
Do you mean that when securities owned by the Fed mature, the Fed will destroy the money that it had created to buy them?
In practice, I don't think that has really been happening. They have just been reinvesting proceeds in new securities (at least the principal; they send some (all?) interest to the Treasury).
This may change at some point, but so far the Fed has periodically increased its balance sheet while never substantially reducing it [1]. If that continues long term, the Fed's "temporary" money is effectively permanent.
That is new money. Trillions of it.
It's been maddening watching economists whom I respect making proclamations (one way or the other) with high degrees of confidence that inflation is or isn't a problem. They have no idea, because anyone who actually knows what they are doing knows that there isn't enough data yet.
It is way, way too early, based on my experience, to make any formal claims about why a given number is X instead of Y based on Z theory.
People who are claiming there is going to be runaway inflation don't have enough data to suggest this, and your assertion is equally lacking in data to justify it.
As always, economics gets contaminated by political biases, because so many prominent economists, including a hero of mine in college, Paul Krugman, have followed the profitable path of becoming full time political hacks. Likewise for Lafferty on the right and many others.
Inflationary pressures typically, in historical terms and yes, in the simulations I used to model, have a lag and then start to build upon each other. We haven't had nearly enough time to properly assess any of this.
Rest assured, if/when it does manifest, each side will have very firm talking points blaming the other, informing their sycophants exactly how to talk out of their rear ends about how it's the other team, and how their policies would have prevented it.