Inflation rose 9.1% in June, even more than expected | Hacker News Reader

Inflation rose 9.1% in June, even more than expected

cnbc.com

288 pointsmfiguiere549 comments

Meanwhile, Gold takes a dump, falling 1%:

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

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.

> 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!

> 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

That's a lot to parse, but I'll give it a try.

"Record profits across the board for corporations" - Record profits is exactly what you would expect with lingering low interest rates + lowered rates from COVID response + unleashed demand post-COVID. This was by design, because profitable companies don't fire everyone and create a recesssion from unemployment. Or tank the stock market and thus housing market and thus create a recession.

And you're a quarter out of date. Profits and margins have been compressing in Q1 2022 and look to continue.

"Highest CEO pay ratios ever recorded" - Exactly what you'd expect with a roaring stock market, given equity-biased compensation. That will correct, as it always does.

And furthermore, talent compensation is already increasing and on every HR department's priority list. [0]

"Massive housing bubble" - Low interest rates + stimulus + lack of supply + sudden demand spike = price spike. Fed rate hikes will cool this off fairly quickly.

"The monied class..." - You mean, everyone?

"... making off with their spoils and cashing the stock market in..." - Reallocating and diversifying assets?

"Meanwhile they are sticking it to the consumers with inflation..." - Who is "they"? Some generalized bourgeoisie who control the means of production and arbitrarily set prices?

See earlier point (and google for statistics) and margin compression for what's actually happening: companies are passing along less than all of their own cost increases.

[0] https://www.pwc.com/us/en/library/pulse-survey/executive-vie... (I hate big-4 management consulting pablum, but it's a quick distillation)

I'm following along with your breakdown, but I'm not clear what point you're trying to make here?

> "The monied class..." - You mean, everyone?

Are you asserting that you believe the parent is using "The monied class..." to mean everyone? Which doesn't seem to be the case.

Or are you asserting everyone belongs in "The monied class", if so, that seems so overly broad as to be a bit ridiculous?

The monied class isn’t everyone, the fact that you would suggest such implies you aren’t aware of the distribution of wealth in the US.

10% of households own 90% of the stocks held by households. Close to half hold none at all.

I think the dollar is just fine. The problem is that there’s a war in Europe that’s making food and energy more expensive. And also China is just off on its own facing a real estate collapse + the fallout of idiotic lockdowns.

Things will cost more. That’s hardly surprising. Energy is really important.

My memory reaches further than February 2022, and I clearly remember the prices were going up already before then.

My gut feeling is that you’re correct and this is money printing coming home to roost. But lots of folks say that isn’t what it is. And I’m not an economist. What sources have you found helpful to explain what’s going on?

It seems to me traditional the story of supply side constraints (lots of places cut capacity for COVID, China is shut down) plus pent up demand (from savings and all the government spending) caused inflation.

When looking at TIPS and inflation expectations it looks like it's not quite self reinforcing yet.

Given the Fed doesn’t even know what’s going on your gut is probably just as good a source: https://www.foxnews.com/media/fed-chairman-powell-admitting-...

There is this from Dalio who suggests money printer go brrr policies sank the Dutch and Brits: https://youtu.be/xguam0TKMw8

While all the fancy math is great for drawing geometric shapes, human intuition and basic arithmetic run the economy; human intuition for quantity has been evolving for millions of years whereas our fancy languages are only 5,000 years old (so says historians). We annotate our arithmetic operators differently for calculus and the rest of higher level math, but at the end of the day with only 13% of the adult public possessing an “advanced degree” most people make pretty basic arithmetical decisions.

Smart people used their education to get ahead but the rest of the world has caught up and caught on as <50% believe in higher powers now; elites are just people, not specials to be kowtowed by.

So what’s happened is again elites tried to form concrete agency habits into the masses (like religion did) but the masses agency does not concretely conform to rigid mathematical objects and the elites are now out of touch; either by stubbornness or age, they can’t handle they’re the ones losing ground all this time.

So they tinker with official math to keep us in line: https://www.nytimes.com/1997/02/27/business/job-insecurity-o...

So in the end economic policy was always politically motivated power consolidation for the elites, and the public, probably thanks to the meta awareness of our communities the internet provides, has caught onto the big picture game. Like Assange said; only the highly numerate will be able to see. I like to think it’s because such minds are not as swayed by cable group think.

So here we are saving like the Fed said and emotionally normalizing to a recession coming because that’s what we talk about, and so we’ll create a self fulfilling prophecy of it because like the number say, only 13% have an advanced degree; the masses will go along with Jerome Powell and the cable news channels telling them; stop spending, save, because a recession is coming. And stopping that simple arithmetic spending at scale will trigger a recession.

Subs will get cut to services. Services die off. What’s left is the new “real economy”, and off we go again. Conveniently not giving a toss about general public who got hurt while the elites look smart for getting us to believe they saw the future, and ignore that listening to them really just modified our economics behavior to make it all true.

I've asked here in another thread but didn't get an answer.

What can the average _not_a_billionaire_ investor do to weather this out (not knowing exactly what _this_ is)?

In my example I have most of my money on Index funds (with a 60/20/20 split between US markets, China markets, and sector specific ETFs) plus an emergency fund that lasts me about 12 months and I (unfortunately now) earn in Euros.

My best guess: * You can invest in covered call funds[1] (like QYLD) and equity-linked notes (like JEPI) as a hedge. This will lose out to index funds in the long-term, but should be better during volatile periods. * The US has I-bonds[2]. An equivalent may exist in your country. * Having an emergency fund is good. * Diversified investments is good.

[1] - https://www.blackrock.com/us/individual/literature/investor-... [2] - https://www.treasurydirect.gov/indiv/research/indepth/ibonds...

There is no good answer. I think Lyn Alden said the same in a tweet recently. You will most likely lose no matter what short term.

My conclusion is that long term it's probably good to be in stocks. The problem is that stocks might go down a lot before recovering, years from now. And of course you cannot time it.

If you expect inflation and continual shortages, the best bet is probably to invest in commodities.

They're already pulling back this year though:

https://finance.yahoo.com/quote/DJP

If you believe in factor investing, value stocks have historically performed ok in inflationary times.

I've been using AVLV and AVUV, but they've been down since I bought them in May.

We've had massive deficits for decades. It requires pretty strong evidence to claim that the problem is something that is common to the past few decades rather than the things that are unique to the last couple of years.

As much as I know that governments and central banks are to blame for inflation in a general sense, it can’t be understated that A LOT of this inflation is due to starting and stopping factories, ports, etc. in response to Covid over the past two years. There’s a long chain to finished products and when one link in the chain has an issue, everything else downstream suffers and price increases compound.

In short, a lot of what’s happening comes back to the debate we had during the early part of the pandemic... one side said shutting down the world would have major consequences down the line and we’re seeing that now.

This bothered me during those discussions everyone who pointed out the potential impacts to the economy were shouted down for "caring more about money and people" and "putting the rich ahead of grandma" like the economy was some nebulous abstract betting ring that only effected the powerful and wealthy.

No one seemed to understand that those kinds of things were going to have much more drastic effects for everyday people as well. This same thing goes for the stock market, sure I don't have a ton of money it it, but I do keep putting money in my 401k and so do a lot of other people that are depending on it for their retirement, when the stock market takes hits it effects me just as much as the "elite".

> [...] we've entered a world-wide inflationary death spiral driven [...]

Not all countries are experiencing high inflation at the moment.

https://www.ft.com/content/088d3368-bb8b-4ff3-9df7-a7680d4d8...

Vast majority.

The real problem is the labor market.

With boomers retiring and deaths and disability due to covid taking workers out of the pool, along with suppression of immigration, there's a large overhang of jobs compared to workers. This is giving average workers negotiating power which is creating wage growth.

That is what the Fed and the business pages are really most concerned about and the sternest warnings from the Fed are about the labor market. Not the headline CPI numbers.

The fact that the "man on the street" now believes that inflation is purely a monetary phenomenon, though, means that every time wage inflation rears its head that people will clamor for the Fed to punish the economy.

The Fed is going to have to crash the economy to create a recession and thereby cause deflation. There will almost certainly be detonations elsewhere in the economy (commercial and residential real estate most likely) that will further cause deflation. High CPI will be transitory because this Fed doesn't care about tanking the economy. Billionaires also don't care about tanking the economy, the past 20 years have taught them they always wind up even more on top than before.

What will be interesting though is to see what happens when they've had enough of pain and start to support the economy again, then inflation will probably come roaring back, since its causes are now the structural conditions of the wage market. Then there will be renewed calls to tank the economy again and people will object to the Fed doing anything to try to support the economy with exactly the same rhetoric here. In the near term future (~10 years) any time the inflation numbers tick up the stock market may crash on its own now.

I suspect we're now in for a decade or more of stagnation, although alternating periods of inflation and recession should average out. I might be wrong though if the billionaires decide it is too painful and want the Fed to turn the money spigot back on. But as a lot of this comment section shows, the managerial class has now been taught to really deeply hate the Fed doing that, and believes it to be the root cause of all that is ill.

I suspect the massive money printing going on for years has had no impact because most of that money never actually landed in the hands of actual people and just existed to be sucked up by wall street and elites. And they dont spend in a way to impact prices.

But enter covid money printing actually reaching normal people (even if alot of it got soaked up too), plus the elites using the money to buy things normal people want instead of rich people nonsense (buying housing as "safe" investment during covid), plus all the money that was going towards servicing student loans getting spend in the economy, plus normal people using their power to get more wages due to worker shortages and here we are.

> 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.

They printed 10x as much money into asset markets, but I am sure they will blame stimulus checks.

The irony of this statement is that it's so often the case that people argue for lower taxes with "I know how to spend my money better than the government!" Then when it comes to stimulus money, it's the complete opposite: "Don't give it to consumers, that'll cause inflation! Give it to corporations, they know how to spend it! They'll make jobs or something!"

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.

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.

The demand curve hasn’t changed

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.

Japan doesn't have high inflation.

neither does China, the second largest economy

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.

Yeah I'm in my 40s and I don't have that much in savings. Of course, working in failed tiny startups without 401k plans for most of my 20s didn't help. I've been doing my best to make up for lost time the past few years, but I've still got quite a ways to go before I get to that point.

But 600k in the bank is still not the norm for Americans, only a small percentage of them. Most are really struggling right now.

Having it as debt instead of in the bank sounds even better as inflation eats your debt away.

Others are discussing that the 28 yo FAANG engineer is such a small population that it's not relevant to the larger picture, which may be true, but misses the larger point that _lots_ of people had extra money of which the FAANG engineer is just one example. Home owners refinanced. Parents got the child tax credit. Federal and state-level stimulus checks. And businesses took 75% of PPP dollars for purposes other than wages.

https://www.stlouisfed.org/publications/regional-economist/2...

It may be "a lot of people" in an absolute sense, but it's still only a small fraction of the population. Specifically, the fraction that was already very wealthy.

The poor are getting worse off, with wages not rising nearly fast enough to keep pace with inflation (not to mention being basically sacrificed to keep the great money machine running during COVID).

And they're already starting to do something about it: the unionization push is accelerating (I saw several weeks ago a figure that at the beginning of the year, there were zero unionized Starbucks, and at the time of that posting, they had just unionized the 150th), and if inflation continues at this rate—or higher—without some significant changes in wages, etc, we might start to see bigger problems before long.

> 28 year old FAANG engineers with 600k in savings and a house

This is truly such an exxagerated strawman. It’s such a minuscule number of people, and they’re definitely not 28. Plus, the sky high salaries are for senior engineers, not juniors.

600k in savings, not a 600k salary which I agree would be exceptionally rare and not the norm for 28 year olds (but definitely possible in the finance world for the top performers)

A FAANG engineer that joined just out of school (~22 years old) and spent 6 years getting regular promotions, awards, maybe a move into management, etc. and all of their initial stock awards vested could very well have 600k saved over that time. Doubly so if they're married and their spouse is in the same situation.

I know plenty of folks who this describes? FAANG workers who got in at 20, no kids, own homes and have hundreds of thousands in the bank.

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.

> 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...

[2] https://www.jec.senate.gov/public/index.cfm/republicans/anal...

That is not at all what is going on here…it’s not the people with all the money, it’s the underlying monetary policy(little to no interest rates for a decade combined with money printing) that led to those people having that money. If a tech company couldn’t borrow cheap money early on, they couldn’t afford those wonderful compensation packages.

I would not describe it as broken.

It could simply be a consequence of the parameters of nature not offering humans unlimited energy and resources.

Since when capitalism is defined as a system where governments intevene into the market forces to bail out losers by unbacked printed money?

The argument is about zero interest rates, not success or capitalism.

The moment a centralised institution controls interest rates, and has the ability to buy government debt (in other words finance government spending without the market buying bonds), you are NOT talking about capitalism, but about government controlled markets.

> 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.

* 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.

"Job markets are still extremely strong"

It seems like that is only true if you're in a niche (like skilled tech) or if you're <$20/hr. I see tons of openings for shit jobs (low wage and/or bad environment).

Even being in tech and making under the national average for devs, I don't see many good jobs posted that fit with my experience. I'd like to switch industries, but that would generally require a significant pay cut and other downsides with things like working construction, warehouse, driving a truck, etc.

> I see tons of openings for shit jobs (low wage and/or bad environment).

This is evidence of a strong job market.

There is a desperate need for auto technicians, starting $60hr in small towns.

Amazon, Walmart, Publix are paying pickers $30/hr

Buckey's, Loves, all paying over $20hr with benefits

> 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...

Here in Dallas I was seeing gas for $4.85 a couple weeks ago and sub $4 today.

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.

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.

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.

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

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.

> My favorite one is, you can't time the markets. Quite obviously a lot of people correctly timed the market's trends...

Whoa. Think about it, there are constantly people thumping their chests and posting their theories about how things are under and over-valued, and pretty much everything else (like the world ending). If you think that because some people made a winning bet with their money that timing the market in general is a good strategy, I'd suggest you never play poker seriously.

Remember, every single shiller is selling you their product. A few additional thoughts:

> Gold and crypto protect against inflation.

No insurance policy pays when the house is already on fire.

> Bonds should be 20-40 percent of a portfolio.

If you believed in inflation north of 3%, why the hell would you own bonds?

> Apple and MSFT and the rest of big tech are safe havens.

Megacap tech is still up tremendously from the 2020 lows. Not saying they're going higher, but they've weathered the recent storm pretty well.

> 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.

This was good advice if you were planning to live in your home you could have locked in rates at generational lows. Sure you were paying up for the house, but your mortgage payments would have been absurdly low. And yes, I'm almost positive over a 15-30 year period you'd be able to recoup your principle.

I'm not sure how you can confidently make any conclusions about any of this while we're in the midst of it. We're not through to the other side of this downturn yet, so who knows what could win?

My casual observation that I'll probably forget about in a few years and maybe remember the next time a real downturn (I'm too young to have ever paid attention to the economy, economic news, etc. during a downturn) happens is that, most likely, everyone gets scared of the uncertainty and dumps their assets in to cash so they're ready to pay off any debts they have. What happens next is unknown.

> Quite obviously a lot of people correctly timed the market's trends starting around the end of 2021

How many incorrectly timed the markets in 2020? In 2019? Etc.

I felt real smart when I sold my BTC at the ~$18k peak way back when. I even told myself I'd wait til it dropped to $2k before I bought more. Seemed smart back then. Not so smart now. Granted, I still made money, but I left a lot on the table.

"You can't time the markets" doesn't mean it's not possible. It means if you do, it's luck

> Quite obviously a lot of people correctly timed the market's trends starting around the end of 2021, and the reasoning was pretty sound.

Surely at any time somebody correctly timed the market.

Super low rates and a bunch of time on peoples' hands caused the biggest zero sum game in years. Pump and dump.

No new value created, just people playing musical chairs until the music eventually stopped.

I feel your pain, I was deep in it too and my gut was telling me the way forward. But I ended up listening to the shills, mostly because I'm relatively young and wanted to lean towards more exposure than less.

If it isn't clear to anyone right now. There are no safe assets, there haven't been a lot of options for the last year. Your best bet is to minimize your losses. Hold cash- lose ~7-8% real value. Safe bonds are probably your best bet for the short term or owning a inflation protected business however those are rare and a recession is coming along. I guess there's a case for some risky short bets but that makes the problem worse.

It just feels like there is about to be an asset wipeout across the spectrum - like a forest fire clearing out the forest for new growth.

Don't run to the exits because that's an even worse outcome unless your holding leveraged stock bets.

I've been around since before the dot-com crash, and while "you can't time the markets" is true to some extent, some people take it as an excuse to turn their brains off entirely and ignore fundamentals.

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.

>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.

Sadly, this one hasn't been disproven yet (I hope it will be soon). All we've seen is record home cancellations which may or may not be a leading indicator [0]

[0] https://www.cnbc.com/2022/07/11/homebuyers-are-canceling-dea...

> Quite obviously a lot of people correctly timed the market's trends starting around the end of 2021, and the reasoning was pretty sound.

You mean when some of the Fed officials sold? Sound reasoning, indeed.

The "not timing the markets" is an incredibly privileged take: for many people they are getting hired and fired cyclically -- when markets are high they are getting paid and when markets are low they might not be, and might be taking money out of their savings investments; so if they are doing their best to cost average when they have cash flow that permits they might be losing money.

> you can't time the markets

What is generally meant by this is that you cannot know the future so you cannot know when is the most optimal time to buy or sell.

Now, you can react to trend (eg your “trends starting around the end of 2021”) and sell, for instance. But when are you going to buy again (ie can you know when the bottom is?).

It seems like the only inflation hedge was to short the entire market (Stocks, Crypto, Gold...)

gold and crypto protect against inflation? gold i kinda understand, but crypto? how?

yeah, every single "hedge' except oil/gas and real estate failed

real estate has a lot of lag though so you are probably paying above market price for homes today

Bonds were not a good idea because rates were historically low. If you can't time the market then why bonds should not be 20-40 percent of a portfolio?

Thinking you can't time the markets is a fallacious story that buy and hold investors believe in. It may be beneficial, as many tend to sell low and buy high, but it's nothing further from the truth for me.

> My favorite one is, you can't time the markets.

Exactly. My favorite one was about Cloudflare stock. Look at the responses in [0] when it was more than $210 per share, For Bitcoin reaching >$60K 'This isn't even close to what will be the all time high.' [1] and I suggested many to run away from the market [2] and one said 'Stock market up 1% today on both this news and decades-high inflation.' which that obviously didn't age well.

So as you can see, it looks like so far I (and many others) were able to time the market and predict the 2022 crash, especially in crypto. [3]

[0] https://news.ycombinator.com/item?id=29355360

[1] https://news.ycombinator.com/item?id=26840880

[2] https://news.ycombinator.com/item?id=29508238

[3] https://news.ycombinator.com/item?id=29752372

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/

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

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.

On my Show HN project 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 (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

>> 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.

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?

> 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-econ... [1]: https://www.nytimes.com/1975/12/31/archives/gold-rush-in-us-...

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.

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).

"Their wages are keeping up with inflation anyway" - That's absolutely not true. At best they get 1% percent negotiated by a contract.

> 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.

Kitco seems to have some ready for delivery https://online.kitco.com/buy/2014RCM/1-kg-Gold-Royal-Canadia...

Anecdotally, I just purchased some physical gold. Even though it was a holiday, it arrived at my doorstep within 24hrs..

> "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?

Russia was cut off from the gold market, I imagine it would create temporary disturbance in physical gold supplies.

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.

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.

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.

>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.

Pandemic, probably yes. Ukraine? Probably not. The supply problem is over-optimized supply chains, which means "we build everything in China, and they're not producing." I just got a time estimate of 52 weeks for a 1200A distribution panel, and things like breakers >600A have similar restrictions.

All of this compounds up and down the chain. But luckily, a lot of suits on Wall Street are making tons of money, so everything will be fine, right?

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

> I doubt this is monetary inflation. It's price inflation due to a supply crunch brought on by the pandemic shutdowns

Take a look at M2 money supply [0]. Pumping huge amounts of fiscal stimulus into the global economy caused this. Inflation has been driven by poor policy decisions.

> Then throw in other factors like housing undersupply in developed countries

There has been a housing stock shortage for over a decade, that's not new, so it's hard to argue that's a proximate cause [1].

> continuing depletion of "easy" oil

There's plenty of oil available [2]. New technology (hydraulic fracturing, horizontal drilling, etc.) allows for accessing reserves that were too expensive previously. There has been structural underinvestment in O&G thanks to misguided green/ESG policy.

> Chinese threats against Taiwan

How does this drive inflation? If anything, China has reduced inflationary pressures by decimating economic activity with Covid lockdowns.

> Gold tends to be (but is not guaranteed to be) a hedge against monetary inflation

Gold has been a great hedge against inflation in the long run. When measured in gold, a soldier today earns a similar salary to a Roman soldier 2000 years ago [3]. However, gold is not a good hedge against inflation in the short term. When inflation goes up, interest rates go up. When interest rates go up, the opportunity cost of owning gold increases. It should be noted that interest rates have steadily declined throughout history.

[0] https://fred.stlouisfed.org/series/M2REAL

[1] https://smile.amazon.com/Shut-Out-Shortage-Recession-Univers...

[2] https://bettermeetsreality.com/how-much-oil-is-left-in-the-w...

[3] https://www.mining.com/what-a-roman-centurions-pay-says-abou...

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.

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.

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

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.

> 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.

> 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

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.

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.

> 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.

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

> 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.

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

> 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.

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.

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.

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.

> 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

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.

> 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.

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

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

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

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.

> 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.

> 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.

As others have mentioned, it's confusing if you don't know anything about how CPI works or how the reporting works

To bystanders it looks like inflation is up 8-9% every month, which is obviously false

If the growth of inflation resembles a step function, then the YOY change will be reported as being very high each month even if inflation is not changing on a monthly basis.

https://greyenlightenment.com/2022/07/03/sensationalism-and-...

Headlines that read "inflation rose 9% in $month$" are liable to cause a lot of confusion. A .5-.8 % monthly change looks way less bad than a 8-9% YOY change. The psychological implications of this are potentially huge because probably a lot of people think that inflation is rising 8%/month.

> The psychological implications of this are potentially huge because probably a lot of people think that inflation is rising 8%/month.

It does not help that all the big ticket items people are interested in purchasing (land, healthcare, education) have all been increasing at far greater rates than official statistics for 10+ years now.

Who cares if bread is inflating at 0.5% per year if the house you are saving for goes from $300k to $600k and the education you got for $20k/year is now $60k/year for your kids.

My pet theory is that the rising cost of housing is responsible for the vast majority of economic disruption over the last 20 years (for everyone, even home owners.)

Service/factory/teaching/childcare/eldercare jobs don't pay enough to buy a house and renting has become highly predatory, so anyone who can get out of those professions and into finance/tech/marketing (often useless but high paying jobs) will do it. The people who stay in those professions get burnt out and deeply frustrated.

It feels like most of the jobs that provide inherent, tangible benefits to society don't pay enough to provide a stable life.

This talk by Elizabeth Warren, before she was a US Senator, talks a lot about this problem of essentials like housing, education, and healthcare going up much faster than, say, a new TV price: https://youtu.be/akVL7QY0S8A

In case anyone is curious, the following are the seasonally-adjusted monthly changes for the past twelve months, from the oldest to the newest: 0.5%, 0.3%, 0.4%, 0.9%, 0.7%, 0.6%, 0.6%, 0.8%, 1.2%, 0.3%, 1.0%, 1.3%.

https://www.bls.gov/news.release/archives/cpi_02102022.htm https://www.bls.gov/news.release/archives/cpi_07132022.htm

To highlight a couple of things in particular: The monthly rates do not resemble a step function. The increase for this latest reported month is the highest for the past year, at 16--17% annualized.

The whole headline is wrong, not just because they're talking about a yearly increase not a monthly one.

_Prices_ rose 8-9% YoY, not inflation. Inflation is by definition the increase in prices, so inflation was 8-9%.

Prices also went down during covid so if something had a price of $1.05 in 2020, $1.00 in 2021, then $1.08 in 2022, YOY shows the price went up 8% but it’s only gone back to normal. In the 70s it was several years in a row of 10% inflation which I doubt we’ll see.

Edit: it would also be interesting to see if the basket of goods the CPI uses shifts during that time. If people were using less transportation, perhaps transportation costs should have been weighted less for 2020 even though we know the price increased due to supply constraints.

What prices went down during covid? Housing? Vehicles? Food? I recall only gas was cheaper.

"If the growth of inflation resembles a step function"

Did you mean 'growth of prices'?

(If you did, your comment makes perfect sense to me. If you didn't, then I have misunderstood your point.)

Unless you live in Argentina, where inflation increases around 5/6% per month

People generally know what it means. The impact is from the fact that they know real inflation is worse than what is reported, and if the reported inflation is more than expected that’s a pretty bad sign.

Also, any rise in prices, while small, is likely permanent at this point.

Given that the headline of the article is clearly wrong, as another commenter pointed out, I don't think people generally know what it all means. They have feelings associated to the topic, certainly, and those shouldn't just be dismissed. But humans are in general famously bad at dealing intuitively with numbers. Why should inflation be the outlier to this rule?

Key point: “ Much of inflation rise came from gasoline prices, which increased 11.2% on the month and just shy of 60% for the 12-month period. ”

This has nothing to do with monetary policy.

> This has nothing to do with monetary policy.

How can you be so certain? Gasoline prices started rising well before the war:

https://fred.stlouisfed.org/series/GASREGW

I would agree that the war has made a bad situation worse. But to say this has "nothing to do with monetary policy" seems like a stretch.

There's more than just monetary policy and war. Monetary policy would imply demand for gas is up, driving prices up. But demand for gas is still lower now than it was pre-covid.

Oil is on its way out the door. Oil companies all have projections that show demand for oil increasing in the short term and decreasing in the long term. The list of their options to (1) increase their profits by (2) increasing the supply of oil are all investments that only pay off in the long term. Hence, even as prices rise in the short term, they are making calculations off the long term and finding it not very profitable to increase supply. Simple economic theories of corporate response to supply and demand don't work nearly as well with this long-term, short-term incentive difference.

Refinery capacity has shrunk in the US, so even with more crude, we would likely still have price increases.

Correct me if I'm wrong but that chart shows gas prices on feb 21 being as high as in 2014, that upward trend just looks like a recovery from the $1 gas we had at the begging of the US "stay at home order"

Most of the pre-war rise was recovering from the covid crash of gas prices. The price overshot its pre covid level a bit, but that can be explained through supply issues (you can't increase production on a dime; demand was difficult to predict; and suppliers prefer to under produce than over produce)

I wish people would stop acting like the world is fine aside from gasoline. Food at home is up 12% from a year ago

- cereals and bakery products up 13.8%

- Flour and prepared flour mixes up 19.2%

- fruits and vegetables 8.1%

- Canned vegetables 14.3%

- Dairy and related products 13.5%

- Fresh whole milk 17.1%

- Meats, poultry, and fish 11.7%

- Eggs 33.1%

- Nonalcoholic beverages and beverage materials 11.9%

- Roasted coffee 16.8%

- Other Foods 14.4%

- butter and margarine increasing 26.3 percent.

As a community HN has a strong normalcy bias to the point where they will flag and down vote comments and articles that challenge it too much. The worst something can be admitted to be is "not great now, but we'll have a fix in soon". In general this community is blind to any of the major systemic issue we are facing that are likely to forever decrease our quality of live.

I'm reminded of an interview with a few years back with the mayor of Tangier, an island which is visibly sinking off the coast of Virginia. In one instance the mayor points to a part of the sea where a community playground used to be, and when asked about climate change, without skipping a beat, replies that he just doesn't see any evidence for it.

That was a few years back now, and it was then I realized that for a certain subset of the population, no matter how real the decline of our civilization is, they will never see it. The Hoover dam could stop running from the emptying of lake mead, we could have global crop failures and being living with intermittent power outages, all of us living lives that are unquestionably worse off than 10 years ago and people in the community would still be decrying that everything was media sensationalism (even though the media rarely reports on anything being as dire as it is).

All this products require energy resources to produce. Energy resource prices are volatile thus everybody has to add safe margins. Not really a lot more to say - world is not fine, there is a war in northern parts which is rare. There are additional factors contributing to inflation (covid spending etc.)

It's not surprising that food prices rise when gasoline and natural gas prices rise. You need the gas for transporting and producing food, and you need natural gas for manufacturing fertilizer.

Perhaps worth noting poultry and especially chicken eggs are subject to truly transitory inflation due to the current avian flu outbreak: https://en.wikipedia.org/wiki/2020%E2%80%932022_H5N8_outbrea... Have not checked up on it for a while, but in the US it hit laying hens much harder than any other poultry category.

You are of course generally correct, food inflation for what I buy is roaring and significantly above topline CPI.

> I wish people would stop acting like the world is fine aside from gasoline.

The reason why is there an (appropriate in my opinion) focus on gasoline and other crude-oil products is that other commodities and services relies on this commodity. We're not yet in a state where we can use other resources as substitute for it (either because green energy is not that scaled-up or because crude oil directly contains what is needed - for example fertilizers and plastics).

It's still 6% inflation even if you take out food and energy: https://www.bls.gov/charts/consumer-price-index/consumer-pri...

Obviously Russia is making it worse, but I think it's naïve and simplistic to say monetary policy has nothing to do with it. I would still argue monetary policy must comprise a slight majority of the blame.

Don't forget very handsome and ever-rising corporate profits. They've been taking advantage of headlines to raise prices, reduce quality/quantity and cut expenses.

Core inflation, which excludes energy, rose at a 8.8% annualized rate. The current YoY figure is 5.9%

So no, it's not just about gas. If you look at the numbers it's across the board and broad based.

The Fed made a historic and pretty obviously needless mistake in delaying their response. Now we get to enjoy the fruits of either a severe recession or unchecked inflation if they decide to chicken out

Which elements of CPI aren't indirectly tied to the cost of energy?

> This has nothing to do with monetary policy.

Monetary policy right now. It has everything to do with monetary policy for the past few years, which created trillions of new dollars.

Perhaps not, but energy is the "everything killer" of inflation since it's a major input to nearly every business that happens in the physical world (and it's non-trivial for the virtual world as well).

I'm in Europe and I had a very favorable energy contract for the last couple of years. Well, that contract ended and my rates got hiked 800%.

It sure put everything I do on a daily basis inside of the house into perspective.

>It's just gasoline

>It's just housing

>It's just plywood

>It's just food

Humans are biological, liebig's law of minimums applies.

Yeah unfortunately “energy” is a significant cost for most economic activity. Yours beginning to see “we’ve tried to hold back increases as much as possible but we can’t any more and we’re raising prices”.

Yet core inflation is 5% which is also very high.

Wonder if the Fed will start paying for solar and heat pumps to help curb inflation /s

There are existing Federal subsidies for solar installs.

Or bike lanes or public transit...

If you're right, next months CPI print should be 20-25% less because gas prices decreased by that amount. Willing to place a bet?

Wonder how bad natural gas prices will be this winter.

European countries are preparing for (energy) rationing. Record heat does not help either.

Consumers in neighboring countries, like Norway, are experiencing almost 100-fold increases in energy prices as a lot of energy is being exported. I'd be amazed if American energy firms aren't exporting LNG hand over fist to EU countries, as the situation is as dire as ever.

Fed’s expected to raise interest rates in response, so perhaps it does.

They're still very far off actually making a difference, ie. you'd want the rate within 2% of the observed inflation, so c. 7%

I think they'll stop long before that because even at 10%, they're not going to be able bring inflation down -- most of the causes being supply-side

But bear in mind also that the price of gasoline is not directly tracking the price of oil: it's much more expensive now than it was a few years ago when oil was about the same price.

A lot of the "inflation" we're experiencing right now is straight-up price gouging. There have been a number of reports of record profits amid all of this.

That’s called supply and demand - global refined product demand is at/above pre-Covid levels, global refining capacity has been reduced (partly due to Russian war/covid/feedstock conversions). That’s why you see historically high crack spreads.

> But bear in mind also that the price of gasoline is not directly tracking the price of oil

There's always been a substantial lag. Production/shipping always takes time, plus you've got the sticky price effect to contend with. The falling price of crude today will result in cheaper prices at the pump later this year, but not immediately.

Dollars are dollars so if a companies profit is up 9% yoy and inflation is 9% yoy, real profit increase is 0%.

Imagine if we had a fully electrified economy instead of this petrol-economy crap.

There was a period where prospectors tried to hurry up and hoard all the uranium deposits they could find only to discover the stuff occurs at a rate to not be economical.

(And supposedly covering an area the size of NM with solar would provide all the worlds energy needs.)

This is how you get the electrified (or whatever else) economy.

Without the pain of higher fossil fuel prices, there is little incentive to change.

Some things to consider

* 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.

> We're seeing June numbers. Gas prices lately have plunged relative to where they were

This doesn't match what I am seeing. Gas prices seem just as high as they were a month ago, if not slightly higher.

Over US Gasoline prices have dropped almost 7% in the past 30 days, in the middle of the summer. That's a pretty drastic drop.

https://ycharts.com/indicators/us_gas_price

They are down about 7% over two weeks in my New England city. A bit moreso in the rural areas. OP can call it a "plunge" but it's down from literally the highest I've seen it in recent history to just slightly less of the highest I've seen it in recent history.

> Gas prices lately have plunged relative to where they were

Where I am I wouldn't really call it a plunge. It was $5.50-6 a month ago, now it's $4.90-5.50 but it was $3.50-3.90 in 2020-2021.

> * Job markets are still extremely strong

Less so in Silicon Valley (which should be relevant to the HN crowd), as far as I can tell working at one of the relatively few Silicon Valley tech companies that hasn't slowed hiring yet.

I've still not heard of any engineers failing to find jobs. There's just less desperation by recruiters.

There have been a sharp uptick in layoffs...but it seems like those folks are getting snatched up almost as soon as they're let go the market is so hungry for talent.

The market has cooled off but the prior market was ridiculously hot. Still many good jobs to be had in tech

> Inflation rose 9.1% in June, even more than expected

No, prices rose 9.1% over the year ending in June, not 9.1% in June—why is all inflation coverage (or, at least, headlines) so bad, even in outlets that are notionally business/finance focussed either reporting annualized monthly or quarterly inflation as being the actual inflation in the month/quarter or reporting annual inflation through a month as being actual inflation in the month?

This will be the 3rd once in a life-time crash since I left school. This time I finally also have savings that I can lose in the crash.

The economy always has cycles. Expecting constant upward growth is unrealistic.

I went through 2008 and lost 30% of my portfolio. It’s up 300% since then.

You’ll survive.

Surviving isn't the issue, I'm doing fine. Affording a house is. Reaching the standard my parents had.

Same here. I graduated college during the financial crisis. It's been a wild ride.

Same here. I was meaning to buy an apartment, but that's not going to happen.

During Covid, the price of real estate went up so much, that the increase of the 20% down payment, which is recommended in my country, is more than I can save in year. I'm saving 60% of my income and I'm in the top 20% income bracket.

If you have cash savings, then you’re ideally positioned to take advantage of lower real estate prices without suffering (as much) from the impact of higher interest rates.

If these monthly numbers are year-over-year, and if most of the inflation uptick happened within the last 12mo, then we're likely to see 8-9% every month now until we get a year of 8-9% months in no? After that, if inflation has stopped rising, it should in theory drop down fast.

Very true.

But prices dropping? Not happening.

So inflation might 'return' to 2% or whatever for the year, but the damage is done, prices are much higher now.

I think the OP's point is that as prices aren't dropping and the comparisons are with this time last year before the fuel price spike, a year of "8-9% YoY inflation" headlines is prices having risen 8-9% once, not some compounding effect. Which doesn't mean central bankers wouldn't be happier if the rate was 0.3 points below expectations rather than 0.3 points above it, but the June YoY figure being way ahead of the 2% we used to see reflects stuff that happened earlier in the year, not a spiral that needs addressing asap.

If the YoY figure was around 2% in June, that wouldn't imply a reversion to normal economic conditions, it would imply stores had run round slashing prices.

A return to 2% YOY inflation would be awesome beyond belief. the damage would be done, but the market would probably recovery fast, like in the 80s when inflation fell from the peak in 1979-1980.

Prices are dropping or being moved around.

For example - amazon goods - prices haven't really changed much but its so affordable to buy at amazon because of the negligible shipping. 5 years ago it would have cost you $150 bucks to same day/overnight a package. Today i can order batteries, dog food and cleaning supplies and have it show up by 3pm. So pricing has "changed" if you ask me - you don't get the cheapest goods compared to other stores but the overall price is low because it shows up to my front door super quick and saves me time/money in other places.

Beyond that - i'm seeing pricing settle. I build lifepo batteries, prices were way up but coming down. Construction goods are trending down. Lumber is up and down variable on supply but coming down.

Dining out prices have gone through the roof though... just had a terrible meal the other day and for crappy food it was 48 bucks for 2 people. So I'm just gonna cut out dining out unless i know i'm paying for premium. I'd rather spend 150 bucks for a meal i'll never forgot that is a 3 hour experience than 50 bucks for something thrown in a microwave and slapped on the table. So there is the value vs reward thing to think of here..

but other things - 3d printing is cheap, hobbies are cheap... cars? expensive, I invested in an EV bcause electricity is cheap and speaking of electricity Solar and home battery systems are so cheap now compared to before that i offset some costs of cooling by just buying new AC, new efficient appliances and using new panels.

what prices are you seeing stay up? even fuel is below 4 bucks a gallon and struggling to stay up

> until we get a year of 8-9% months

Why until then? I think it would be until we have reached one year past the Fed's decision to raise rates [enough to 'fight' inflation]. But that's just a guess, since their stated reason for raising rates is to fight inflation. The economy is too complex for me to understand, but I suppose that turning down the spigot of monetary stimulus should probably have its intended effect.

As a side note, I still find it wild that we're talking about sub-2% rates as NOT stimulative. It really does seem analogous to drug abuse, where the user needs larger and larger amounts of the drug to feel its effects.

Otherwise, yeah I think you're right, we'll see this for a while because these are all YoY comparisons, not MoM.

Headline inflation rose at a 17% annualized rate MoM in this report.

Core at 8.8%

The headline is quite confusing, and I think should be 'Inflation rose TO 9.1% year-on-year in June' or something like that.

I agree. That phrasing always gives me a moment of "9.1%? Is that vs. last month or last June?" before it kicks in and I realize it's YTD phrased in as sensational a way possible.

I think it’s year over year (same date as last year) , not ytd (since January 1st)

Why would CNBC write a headline that clearly doesn't make sense? Would people not understand if they just added the word "to" to the headline? Or does it just sound more alarmist this way? It just makes me think that part of the reason why people don't understand inflation is because the reporting is of poor quality.

the monthly change should be reported instead of the annual

Monthly is harder to measure because consumer preferences and behavior change from month to month, based on eg weather and holidays

Prices are up, wages are up, but last I checked (admittedly a month or two ago) profits were doing just fine. That profits are still solid under so many adverse conditions indicates to me that there is a lack of competition in the market, very little competitive pressure on pricing. The Fed isn't going to fix that with rate hikes, and there doesn't seem to be any interest in enforcing the anti-trust laws that we have on the books. I think we're in for an exciting ride, though I'm happy to hear why I'm wrong. :-)

Profits or profit margins? Because a change in profits commensurate with price and wage changes is pretty logical.

Supply shocks caused the lack of competition. It's a seller's market.

Wages are not up.

https://twitter.com/paulkrugman/status/1530257168078974976

Paul Krugman just can’t stop being wrong. How this guy has any credibility anymore is beyond me.

Paul Krugman produced some quality work in the past but he has been a partisan pundit for quite some time now.

Some pundits are valuable in that you can fairly reliably go in the opposite direction they advise.

Jim Cramer FTW

These are June’s numbers which don’t show the recent drop in gas and food. Inflation may have peaked, in which case he was only off by a few weeks.

Releasing millions of barrels from a strategic reserve to make the gas price drop 5% while overall gas is still up 70+% is not a sustainable action. We don't have an unlimited strategic reserve. Its a stunt to get people to temporarily believe the administration is doing something so they will go support them on the internet.

Mainstream media teaches sheep to listen to anyone on everything they say and agree with them, because the article is from the New York Times.

Don't be one and listen to people like Paul Krugman, who isn't keeping up.

He's paid precisely to be wrong, he's just a gaslighting agent at this point.

Remember when he said the internet would have no greater economic impact than the fax machine?

https://twitter.com/ggreenwald/status/1395549665765040130

Correct, it's just the fax machine basically ran the second half of the 20th century.

He’s a propagandist

Isn't this the “economist” who promised good economic times under Biden because Biden wasn’t Trump?

He also predicted a global recession under Trump in 2016: https://www.nytimes.com/interactive/projects/cp/opinion/elec...

Headline is misleading:

- it wasn't inflation that rose, but prices (inflation is the first derivative of prices wrt time)

- the rise wasn't 'in june' (a single month) but 'in the 12 months to june' (a year)

The common assumption was that stocks would hedge inflation, this is wrong.

nothing is a good hedge except real estate it would seem.

Very curious if real estate can hold value in the hottest markets in the US, though. I recently moved from Denver, where housing prices doubled or even tripled in the last couple of years. In the mountains of CO, there's places where prices quintupled.

I suspect that those price trends aren't sustainable, and have to deflate or stagnate at some point. In the LONG term, decreased immigration and birth rates in the US eventually have to result in lessened real estate demand. But that's probably going to happen on the order of decades, not months or years. Real estate in a lot of the US is at least a fairly stable investment (especially for wherever you want to live anyway!).

I don't think that's a common assumption, inflation means stricter monetary policy which slows growth for companies so stocks go down.

Real estate is not a good hedge against inflation, check out this video to see how there is no real proven hedge against inflation[1] (supporting papers in the videos description)

1. https://www.youtube.com/watch?v=1a3XnvRCcVo

> nothing is a good hedge except real estate it would seem.

This is similar to the best arguments I've seen for gold as well. It isn't a fortress against inflation and should only be part of a portfolio, but at the end of the day owning a physical object is better than a paper IOU

It's amazing how much all of the responses so far seem to be missing why this is the case. Assuming you have no choice but to live somewhere and pay for it, already owning at a 30-year locked in monthly payment benefits you as long as average monthly payments for comparable housing for new home buyers and renters keeps going up. Whether that is because of price increases or interest rates going up doesn't matter. If interest rates rise and home prices fall, but your monthly payment stays lower than what new buyers and renters are paying, you still benefit.

Someone said above that the only real hedge was to short the entire market. I think within a year, if interest rates rise, house prices will drop inversely.

I never understood that logic. Like, why would risky assets rise their prices when central banks are paying more interest?

It might make sense if stocks were not overvalued. Which they clearly are. As realistically valued if the companies can keep increasing prices in line with inflation the underlaying value should match the economy in general. So the value of companies would inflate too... Thus inflation not having effect.

But, we are now at least in my mind dealing with overinflated stock market. Propped up and pumped by cheap debt. And with rising rates that can't go on.

real estate is not that good of a hedge, as it will tank after rates raises.

Imagine being paid to do a single job - keep inflation under control - and then being so horribly wrong that you conclude a year ago that inflation was transitory.

If it were a single job, it would be easy, but: The Federal Reserve System has been given a dual mandate—pursuing the economic goals of maximum employment and price stability.

And on the employment front, they’re doing very well! Continued very low unemployment.

Imagine telling someone how bad they are at their job without even realizing their actual job. It’s literally called a “dual” mandate.

No part of that dual mandate requires pumping up the markets.

Unemployment is at record low. Inflation is at record high. Then why these measly hikes? Inflation has been in an uptrend for 18 months. Unemployment has been robust for nearly a year.

Current federal rates? 150bps.

The dual mandate has been overtaken by Wall Street addicted to the cheap money punch bowl.

Imagine being given a job, but very very few tools with which to accomplish that job, none of them adequate to the task at hand.

And the last ditch tool is to cause a recession. Instead, if we had tools for more localized fixes to supply chains, we would greatly increase our wealth, instead of spending recessionary quarters with people idle and destitute.

It shouldn't be that surprising, the economy is too complex to be able to accurately predict. It's impossible to succeed at their job.

and as usual all the promised inflation hedges: gold, bitcoin, oil, all falling.

They're not reacting to CPI inflation, but rising interest rates. Markets expect monetary policy to keep tightening in response to CPI inflation.

When Fed is expected to ease monetary policy, these assets will start going up. It depends on how the economy reacts more broadly to rising interest rates.

These assets can be seen as a hedge to easy monetary policy, rather than a hedge to CPI inflation.

Gold hasn't fallen dramatically year over year. It spiked last in Feb and March this year which isn't terribly surprising given that Russia had just invaded Ukraine and could possibly go down in history as having fired the first shot of WWIII.

A year ago gold was about $1800/oz, now its $1717/oz. Thats a drop of around 4.6% while inflation is up 9.1%. Good is priced in dollars, it hasn't lost value so much as it hasn't been hit as hard by inflation.

I guess we can expect the Fed to raise rates even higher in a few weeks now? This'll really be interesting for the ramifications on the PE/VC community given how they live off of low interest rates but of course, I worry more for everyday consumers who get hurt by this. But how this affects homebuilding will also be interesting, I know anecdotally from friends who have been searching for houses for a while that now people are actually listening to offers and things are even getting knocked down in price but I hope that homebuilders still go out and build new houses even if the market slows a bit.

A builder near us has had a deal fall through 2x in the past 3 months, and each time, they relist the house with an extra $100k tacked on. crazy times.

75bps increase went from ~30% probably to ~80% based on the moves in the bond market based on these number.

So, probably so.

To the economists out there: how much is inflation a self-fulfilling prophecy? Are people who set prices known to think: "hey, we're in an inflationary market, let's jump our prices too!"?

Yes, has already been happening. Companies have been increasing prices just because they know consumer sentiment expects prices to be increased.

That alone does not allow them to increase prices and maintain market share.

Lack of competitors able and willing to sell at lower prices is also necessary, i.e. low supply.

The "open" markets will tend to fix this issue, over time - the problem is that the markets can stay irrational longer than you can stay solvent.

This is exactly whats happening. No one (private citizens seeking raises, nor corporations setting prices) is willing to be the one to take the hit.

Everyone wants a 9% raise, everyone wants more for their products because operations cost more, inflation rises even more next month, rinse repeat

In Hungary the gov uses similar reasoning for not raising the wages of public workers too much, in order to avoid this feedback loop.

https://en.wikipedia.org/wiki/Wage-price_spiral

Unfortunately people who set prices are known to have to eat and seek shelter too. They're not some formless bogeyman.

People is the important word in the question.

> Excluding volatile food and energy prices, so-called core CPI increased 5.9%, compared to the 5.7% estimate.

I'm not an economist, and as a layman I'm confused why they exclude something as 'core' as food and energy from core CPI; apparently 'core' is commodities like apparel, new vehicles, used vehicles, medicine, alcohol, and tobacco, and services like shelter, medical care, and transportation. Food is up 12% year-over-year, so not much more than the overall stat, the big contributor is petroleum products: Piped natural gas service is up 38%, gasoline commodities are up 60%, and fuel oil commodities up a whopping 98%.

The chart at BLS.gov [1] is a decent way to explore these parameters; before submission to /r/dataisbeautiful I'd ask that the sub-levels should have slightly different colors for each bar (keep the 'green' for 'other' distinction, but use multiple shades of green), and that there was some indication at upper levels of the fraction from each sub-category. For example, energy services are listed at 19.4%, but only have two categories of electricity at 13.7 and natural gas piping at 38.4. The average of those two is 26%, which is larger than 19.4...for what reason?

[1] https://www.bls.gov/charts/consumer-price-index/consumer-pri...

Which means the Fed will continue to let ~$90B out of its $9T portfolio of treasuries and agency-sponsored mortgage-backed bonds mature and be paid off every month, without recycling the proceeds back into newer holdings to replace the old ones. The innocuous-sounding name for this process if "quantitative easing," but its impact may be far from innocuous.[a]

Consider: Every treasury that matures must be refinanced by the US Treasury by issuing new treasuries, and most mortgage-backed bonds are paid off before maturity via home sales financed with new mortgages. Therefore, bond investors other than the Fed -- that is, mutual funds, ETFs, sovereign wealth funds, pension plans, individuals, etc. -- will have to buy an additional ~$90B of newly issued treasuries and mortgage-backed bonds, give or take, every month, going forward.

And that means all investors other than the Fed must find ~$90B/month x 12 = ~$1.1T/year to buy newly issued treasuries and mortgage-backed bonds. In practical terms, they will have to withdraw ~$1.1T/year in aggregate from all other financial assets they own. The price of all such other financial assets, including "safe havens" like gold and Bitcoin, may not behave as predicted by any model!

[a] You can see it has already started here: https://fred.stlouisfed.org/graph/?g=RINc

No PHD needed, just a ruler.

https://tradingeconomics.com/united-states/money-supply-m2

Switch to 10 Year view. Put your ruler on the line. You should get a bit under 18,000.

It's actually 22,000. So pretty simple maths. It's 22% inflation from simple 'printed too much money'. This is monetary policy gone wrong. Though if you zoom it, they did stop printing money and have been pulling out a minuscule amount in the last few months.

So there's 22% inflation just from monetary policy. Then you have inflation from various other sources like cancelling oil projects causing supply issues. You have carbon taxes causing pretty big harm to the food industry. Afterall I'm not familiar with any combine harvesters or tractors that get good mileage. Long story short, there's about 40% inflation locked in. If it doesnt rise above 9.1%, then it's years more of this.

One would want a log scale on the vertical axis, right?

It's relative to population growth and an artificial inflation rate funding the government. They matched the natural gold inflation due to mining.

The line I was pointing out was totally fine pre-2009. Not the case anymore.

What is the primary way to remove the extra money? Higher rates? If so that seems like its taking a bit of money from everyone that needs more money than they have, whether that is to buy a house, start a business, or... Is there some way to remove the extra money from those who has more money than they need instead?

Thanks for this, today I learnt something new. Compared this to China, Germany and India - neither of these countries have weird graph as USA!

So, what should the average retail investor do about it?

Something I don’t see a lot is the postponement of Student Loan debt. It’s $1.6 trillion, and people that owe the money (me included) are living lives like they aren’t ever going to pay it back. That’s a huge monetary injection into the economy, and will probably have major shocks when the payments continue.

Writing is on the wall. The recession (depression?) is already here. The housing market has already taken the hit - it crashed upward in price this time around and now activity is grinding to a halt in most markets around the United States. Contract activity is down 20% or more in most major areas, both YoY and QoQ. The fed rate hike spooked buyers and most activity is institutional, many of whom are going to offload when the short-term rental market bottoms out. The question most people should be asking is what should I park my assets in to weather this. My opinion is that there isn’t much that’s going to be safe this time around. Burry’s water meme might come true finally.

Ugh. Second derivative again. Haven't seen a headline like that since the 1970s.

One of the Fed's key charges is to maintain price stability by maintaining inflation at around 2% YOY.

It should be clear by now that the Fed is unable to achieve its goals and is a failure according to their own stated goals.

As are most other (or all?) OECD countries at the moment. It would be better to compare with other countries inflation instead of the 2% target at this point.

In case anyone is curious, the second-largest economy in the OECD (which also has a 2% inflation target) reports inflation of 2.1--2.8%: https://www.reuters.com/markets/asia/japans-may-consumer-inf... https://tradingeconomics.com/japan/inflation-cpi

The Fed's charter is based on comparing against our own targets though. If the whole building is on fire, it isn't useful to say the person in apartment 3b is doing well because their place is less on fire than down the hall

Fed is to a certain degree the central bank of the whole world. Other country faring worse does not absolve the Fed, because the Fed is the culprit for all of them.

“One of”

It’s called a “dual mandate” for a reason. They try to maintain 2% while also lowering unemployment as much as possible. Unemployment is fine while inflation is hot, thus the 75 bps raises you’re seeing every month.

But, understand that economic conditions can arise where they have to balance both hot inflation and high unemployment, neither of their ideals but involve figuring out the best trade-off.

The reality of the situation is that we need a double-digit rate increase to soak up all this inflation (at least 14% according to Taylor Rule) which will promptly crater the markets and throw us in a long recession just like in the 80s. So instead we're getting half a percent every other month which is one of those things that the FED does to pretend they're working on a solution. It seems like the question going forward is going to be whether Jerome Powell is going to be saving the economy or his seat and so far it's looking like the latter.

This is more relevant than ever: https://benoitessiambre.com/macro.html

I’ve been re-reading John Kenneth Galbraith’s “The Affluent Society” recently. Originally published in 1958, but some sections were updated by Galbraith in 1998. Here are some interesting and relevant paragraphs:

"The public response to inflation is interesting. It is widely deplored and condemned. Politicians of both parties have taken a strong position against it. Conservatives, anciently the self-designated custodians of the 'honest dollar,' have continued to stress this tenet of their faith. Businessmen, bankers, insurance executives and nearly every type of professional public spokesman at one time or another have warned of the dangers of continued inflation. Meanwhile, liberals have deplored failure to take effective action while often proposing none themselves. Next only to the virtues of competition, there is nothing on which the conventional wisdom is more completely agreed than on the importance of stable prices. Yet this conviction leads to remarkably little effort and, indeed, to remarkably few suggestions for specific action. Where inflation is concerned, nearly everyone finds it convenient to confine himself to conversation. All branches of the conventional wisdom are equally agreed on the undesirability of remedies that are effective. [...]

Monetary policy [that is: a rate increase at the Fed] collides with the process of consumer-demand creation and, since it works on business investment, is in conflict with our emphasis on growth. It is also ineffectual, discriminatory and, possibly, dangerous. Fiscal policy [that is: gov’t taxation to reduce the money supply] is sharply at odds with the commitment to a level of output that ensures full employment and the accompanying economic security. Direct controls [that is: price controls on things like oil/gas], which in theory might reconcile high employment with price stability, are under a heavy ideological cloud. [...]

... [1998 update from Galbraith:] The United States has seen some years of relatively low unemployment and very mild inflation, though no diminished fear thereof. The new situation reflects the declining power of unions and the growing importance of industries -- consumer services, entertainment, the arts, professions and much advanced technology -- where they are absent or unimportant. Here the wage/price interaction and spiral is not a factor. As often in economic life, change in controlling circumstances has brought appreciable economic change, how permanent one does not know."

Curious what effects this will have on capital holders deployment of capital. From my loose understanding, in a low rate environment, capital holders try to control for risk. It’s hard to make up a loss on .5%.

On the other side, if inflation is near 10% - then why wouldn’t you spend the capital you have on a productive asset? Your cash is going to zero from simply doing nothing.

This goes along with record profits, so maybe this more of a example of how currently the US market is not competitive. Companies can just raise prices and there is no counter-balancing market forces where competing companies offer lower prices and get the business.

Good thread by Paul Krugman: https://twitter.com/paulkrugman/status/1547202926149378048?t...

How much longer can we really exclude food and energy?

They have been excluding these for years, but I think they have real impacts on people's lives.

I get they are hoping to smooth things out, but who are they really helping here?

This is bad and they need to turn it around quickly but it’s not going to be painless. People will suffer the consequences of easy money coming home to roost.

What’s sad is the third world dictatorship pandering we see with regards to dealing with inflation via fuel subsidies and other exacerbating gimmicks.

First you do all you have in your power to deprioritize fossil fuels and then you accuse fossil fuel companies AND franchisees of being thd culprits in order to hide bad policy decisions.

In addition they say this is the cost of transitioning to green energy. So, what is it. A cost we need to bear, bad policy decisions or bad service stations?

We need actual people who on know what’s they’re doing in appointed positions.

I don't understand why there's so much support for stimulus checks right now. Isn't their effect the exact opposite of what you'd want during high inflation?

what these stats don't mention at times, that it's more than 9% they quote here month on month on a relative dollar basis.

Do we have trustworthy media that analyzes the cause of inflation? I find it insulting that Biden government first denied everything and then blamed Russia for everything even before the war started. I mean, really? Russia has the GDP of a single city in China, and they have their own shit to deal with. On the other hand, I'm curious why Biden government does not blame Trump government, at least to some degree. Trump's government expanded credit for trillions of dollars too, right?

Somehow people got really partisan when it came to issues like inflation, when I just wanted to know the truth.

P.S., I also find it insulting that Biden blames gas station owners and corporates for their greed. I thought "hoarding and profiteering" is the term that communist countries used to justify their tyranny. Case in point, that is exactly the reason that Chinese government used to nationalize millions of business back in the 1950s, and tens of thousands of people were executed for being "greedy" or "anti-revolution".

I also find it insulting that politicians were advocating price control. They didn't know that price only reflects the value of goods or how price control played out in the Nixon era? Somehow the left in the US are really receptive to the idea of price control and punishing companies. Did I miss something obvious, or the Democrat base are really into the communist shit?

> Did I miss something obvious, or the Democrat base are really into the communist shit?

Yes. Communists in particular analyze and judge people, not as individuals, but on group identity (like proletariat and bourgeoisie). One's group can be just about anything. Have you noticed how hard Democrats have been pushing race and sexual identity issues over the past 10+ years?

Meanwhile the Nasdaq is opening positive and the S&P and Dow are only slightly negative.

We are attempting to evaluate the situation based upon past experience which, in all likelihood, will not apply as we move forward. Things are changing, and economics, sociology and the like are not of the immutable laws realm like physics. We have built a world predicated upon vast supplies of cheap energy with comparatively very high energy density which will not be replaced like-for-like. What must change is how we function, what we depend upon and what we value as a global community.

We - i.e. all of us who inhabit the place we call earth - need to really come to terms with all that is happening and stop hanging on to the antiquated belief that, at some point, all will be “normal” again. It won’t. And that doesn’t mean we have to give in or give up. But we do have to change - our habits, our beliefs, our worldview. When you look at, discerningly look, scrutinize and acknowledge, all that is going on, all the crises (or perhaps you prefer cataclysms, catastrophes, calamities ... - pick your favourite) including climate, energy, water, food, economic, justice, humanitarian, authoritarian, autocratic, diplomatic, political, geopolitical, … we absolutely must see the forest and the trees and step out of the comfortable illusions and delusions we tenaciously embrace. We must begin to deeply adapt to changes coming and ruggedize our lives.

In some ways it astonishes me that people are so deeply certain of their certainties, of the “can’t happen” mentality, but in other ways, I get that we have been groomed to believe that capitalism, companies, governments, and technology will solve all of our problems if we just continue to be good little consumers and not rock the boat.

But massive and sustained discontinuities are coming. And fast.

With gold being down oddly enough, I read somewhere that some banks like Citi and another (trying to find source rn, but on mobile) have large short positions on paper gold, artificially pushing it down.

Gold price just doesn’t make sense, especially with a near record interest in it during the last few years.

"Inflation swindles everybody"

- Warren Buffet

Dumb question: If last month was 9% inflation, and the month before that was 7% inflation - does that mean we’ve experienced a 16% inflation?

No, it's YoY, meaning from May 2021 - May 2022 prices rose 7%. From June 2021 - June 2022 prices rose 9%.

People are getting confused by this

The YOY is 7-9%

The monthly change is around .5-.8% , so nowhere close to 16%

16% inflation in 2 months would be very, very bad!

In case anyone is curious, the monthly change was 1.3%: https://www.bls.gov/news.release/archives/cpi_07132022.htm

It depends are you discussing percentage points or percentage.

From 7% 10% rise is 0.7%.

Putting aside the fact that the numbers are year over year and not month to month, that isn't how percentage increases work. If you have a quantity that goes up 9% and then goes up another 7%, it has then gone up (1.09 * 1.07) - 1 ~= 16.63%. This is how compounding works. In a single period, it doesn't make much of a difference, as you can see, it's barely more than 16%, but over many periods, compounding results in much greater cumulative growth than if you simply added the increases together.

There’s only one truth you need to know about capitalist economics, the bigger the boom the bigger the bust.

Hold onto your diapers because it has only just started.

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