Hacker News Reader

Comment by tootie | Hacker News Reader

Yeah, this is an odd take. 8% inflation is not great, but it's hardly a historic disaster. Especially given the even odder take that they think the corresponding rise in wages somehow makes it worse. The fiscal stimulus of the pandemic was perhaps too large, but it was extremely effective at forestalling catastrophe in the wake of a black swan event. The mistake was probably tightening too slowly from the 2007-era stimulus that left us without a lot of room to maneuver.

If you want to point a finger, maybe point it at the politician who threatened the Fed chair for not setting negative rates 2 years ago.

View on HN

Agreed. The Fed is racing to raise rates so they have something to cut when the economy turns south.

We can also blame the politicians who cut taxes in the longest, largest bull market for financial assets in history.

At the time, every commentator not in Congress or the Republican party said it was a bad choice to stimulate the economy with a sugar-high unneeded stimulus. But once that's in the system, correcting it hurts the next guy in charge, thus we don't get anywhere till we hit a crisis point.

It is a single month of single year over year inflation measurement that is comparing to a year with a global pandemic in full swing. Inflation and gas prices are Republican talking points to "own the libs". Give it the proper context.

Is inflation really 8 % though? Real number is probably closer to 20 %.

No. There is no "real" number. 8% is the indicator we use. When it hits 8% we know it's higher than when it's at 3%. You can't ever take that number and extrapolate what things are actually going to cost you day to day. Some things are way more than 8%. Some prices are going down.

Yes, most likely. By the definition in use, unquestionably. Cost of living feels like it is up 20% (albeit location dependent), which may be what you are thinking of, but inflation and cost of living are decidedly not the same thing.

Inflation seems really spotty to me. Like, dunno, some brands got very expansive while some not. Some restaurants raise prices alot while others lag. It is strange.

That is 100% normal. Inflation isn't a magic force that is applied evenly to the economy. It is an emergent property characterized by decreased purchasing power of money. There is a misconception that inflation is caused by a policy or by some other hidden force. It is actually caused by the same laws of supply and demand that govern every other economic calculation. Right now, demand for almost everything (including labor) is very high and supply is very low. Conversely, the supply of money is high. So prices and wages all go up. Currently at different speeds. Energy and food supplies are being pinched by the war in Ukraine which is causing them to inflate faster than other products. Supply chains are affecting imported goods in a lot of places more than domestically produced. Things like food and energy are largely "inelastic" which means that demand can't go down even when price goes up. You can slow down your purchases of new phones or shoes or other stuff, but you can't eat less or stop heating your house. Things where demand is more elastic, you may just see people buy less in response to high prices until it hits equilibrium.

Location-dependent variance is normal.

IIRC, CPI inflation metrics do tricky things with rents versus mortgages, so cost of living can appear very different for renters versus homeowners, even in the same neighborhood.

What do you mean by 'real number'?

CPI is well defined and has a clear construction, as does PPI and GDP deflator. The 'real number' is something people seem to bring up as a signal that the beaurocrats an politicians are lying to us, but it is not well defined or defined at all, so it's impossible to disagree with.

Inflation as measured by CPI or Core CPI are objective measures. You are comparing that against a subjective measure but pretending like it is objective.

There are reasonable arguments to make that CPI is insufficient for measuring everything that we spend on (it underweights healthcare, gas, college costs, and lots of luxury investments like stocks and artwork). There are also reasonable arguments that cost of living in some regions is growing faster than 8% (the actual CPI number obviously isn’t homogeneous across the entire country).

Also important to note that there is no “intrinsic value” in dollar terms for any good. Everything is a negotiation of how much we want a thing. If you insist on Quaker Oats oatmeal instead of generic oatmeal (a personal preference), you might experience a higher rate of inflation than others who are more amenable to substitutes.

Reply on news.ycombinator.com