And it’s another good demonstration of the top-to-bottom uselessness of a deflationary currency.
The thing about competition is that no one needs to pretend or believe anything. If Bitcoin were competitive then it’d be competitive. It’s not, because it’s not.
These levels of irrationality caught me and many others off guard. I did not at all expect the central bank to wait an entire year in what seemed like no brainer rate hike. I'm not sure what they were stalling for, but I already lost my trust in fiat then. Inflation isn't going back down until people are sure that central banks aren't going to be weak again. By the way, just look at the markets. They are all calling the Fed's bluff right now. The markets are screaming "the Fed is weak, he'll pivot".
Nobody believes the current Fed has the stomach to fight stagflation. Everybody knows he has to, but everyone already saw him chickening out of raising rates for a full year with "transitory inflation" narrative.
EDIT: A full year isn't "few months". It's a whole year. A whole year during which the Fed has completely eroded the trust in the central bank. Inflation was already 4.1% at April 2021, continuing to climb, up to 7% in December 2021, yet only in April 2022 the rate hikes started. That's not rounding error. It's a full year during which the problem transformed from somewhat manageable to full blown economic disaster and this train wreck isn't even close to stopping.
I would be very careful of ascribing a motive or singular opinion to “the market.” It’s way too easy to just project your own theses onto it.
Edit: Replying to your edit in an edit of my own... I'm very curious to hear what you think is the "full blown economic disaster" that we're in right now?
Not OP, but I think to crypto people who got in at the peak, they are in the midst of a full blown economic disaster. Trillions in “value” distorted from garbage coins and exchanges crashing.
If it's meant to be a tool for control and manipule society, then yes it's a marvel that an entire shutdown resulted in asset valuations to grow by around 30% in 2021.
Trying to control the economy by manipulating money supply is like trying to control climate change by manipulating thermometers
Also, in response to the GP, we actually had a direct comparison between the “inflationary” economics the US followed and a more conservative approach right after the 2007-2009 financial crisis.
The Fed “printed money”. The EU didn’t. And the U.S. economy grew faster with lower inflation and a stronger dollar than the EU. Several EU countries are still suffering from the non printing austerity policies the EU followed.
Also I’m really struggling to understand the claim that “printing money” has caused massive inflation. I think we can all agree that no entity has “printed” as much money as the US and the Fed have. And still inflation in the U.S. is lower than inflation in the EU or pretty much any other country in the world.
It’s almost as if “money printing” isn’t the primary driver of inflation in the world right now.
Thus you hear among crypto zealots how if 21 million units is not enough they could simply start referring to the unit of currency by successive powers of 1/10.
Imagine what these people would say if the government answer to inflation was to start gradually pressuring citizens to accept ten-thousandths of pennies as legal tender, the way that coiners advocate switching the bitcoin reference unit to satoshis. Infuriating to hear people advocate this nonsense, as if they think no one is clever enough to realize that expecting later adopters of their scheme to use microscopic shards of the tokens they themselves hold entire, isn't a shameless admission that they're only in this to grossy enrich themselves at everyone else's expense.
in what world is the economy pulling through 'relatively unscathed'? It's quite literally teetering between hyperinflation and deflationary collapse monthly
FWIW I agree, the v i b e s are extremely weird right now. But it’s pretty hard to say what’s wrong exactly?
No it's actually a less alarming way to say "we're at a point where the economy could collapse overnight (not exaggerating here, I quite literally mean it would take one night where very feasible events occur) and almost has on multiple occasions in the past 3 years"
>But it’s pretty hard to say what’s wrong exactly?
No it's not hard actually. Real inflation is still extremely high despite very high interest rates and despite job losses, consumer debt is insanely high, several banks have collapsed, the economies of several countries have collapsed, there is a growing anti-US economic block and monetary velocity is running off a cliff in an uncontrolled manner.
Would be curious to hear what critical path you have in mind is likely enough to happen in one night so as to put the entire economy in a position of “teetering.”
[0] SVB’s risk model flashed red. So executives changed it. https://www.washingtonpost.com/business/2023/04/02/svb-colla...
The inflation _rate_ has been coming down, inflation is still high.
>Interest rates are not “very high” by any historical measure
They're at 2008 levels and the situation is still not under control.
>The labor market is ridiculously strong
The labor market is not strong, the numbers don't include people who've dropped out of the market, and the people who are working are being pushed to breaking point and cannot afford their lifestyles (hence why we look at consumer debt, and the polling that shows people are putting groceries on credit cards).
>The “several banks” that collapsed should have collapsed due to their own poor risk management
I'm not discussing whether they should or shouldn't have. I'm discussing the fact that they did.
>and the systemic risk was mitigated effectively and quickly.
This was recent enough that the systemic risk is still in play. The FDIC isn't infinite.
>Would be curious to hear what critical path you have in mind is likely enough to happen in one night so as to put the entire economy in a position of “teetering.”
Interest rates hike to control inflation -> nobody wants to lend to consumers because of interest rates -> [money stops moving -> consumer mass default (this is the 'oh shit' overnight moment) -> mass business bankrupcy -> nobody to hire said consumers] (loop) -> risk of uncontrollable deflation -> fed needs to starts money printing again to meet obligations to paper over the fact real productivity is annihilated -> erratic hyperinflation
Employment rates: You can find this data and it doesn't really seem all that alarming to me. In 2013 there were ~2.5MM marginally attached and 800k discouraged workers. Today there are 1.5MM marginally attached and 400k discouraged workers. https://www.bls.gov/webapps/legacy/cpsatab16.htm (I picked 2013 only since it was the earliest data shown on the chart.)
That scenario is plausible at any point in time, no? We have to do what we have to do and yes, it could definitely turn out poorly, but so far there's been a whole lot more talk of doom and gloom (for years) than actual doom and gloom.
It's not clear there's another path of action anyway. If you know of a "slow inflation but don't risk spooking lenders" button, I'd love to hear about it.
Long term yes.
>but I suppose you'd still be worried that it's high relative to some other arbitrary point in history
Ideally the inflation rate should be around 0.1% and stay consistent with real economic output, instead of going towards feeding a parasitic financial sector.
>Employment rates
I think you might be right on this point.
>That scenario is plausible at any point in time, no?
No, recent stresses have made it much more likely.
>If you know of a "slow inflation but don't risk spooking lenders" button, I'd love to hear about it.
In an ideal world I would spook the lenders more aggressively, and cause the immediate systemic failure of the banking system, and just accept the fallout, but unfortunately such things are relegated to the realm of fiction for now.