Inflation/Price Increase

[Todd]

Anti-inflationary measure should be formulated in the framework of 'overall' cost-benefit analysis, rather than the inflation Kamikaze- policy for deflation at any price.

The Fed is mandated by law to pursue policies that maximize US employment and promote US price stability.  If it does not do so, then it must answer to Congress.  (It should anyway.)  If by inclusion of the word "overall", you mean the economic well-being of other countries should be considered to be either on par with US economic interests, or taken as material considerations that may require otherwise violating the law, then that is not the intent of the law.  Congress would need to pass new legislation.  It should pass new legislation since the immediate post-war law on the books basically leads to policy schizophrenia.

If by "Kamikaze" policy you mean the Fed's recent rate raises, then you grossly mischaracterize the too slow incremental rate increases.  Inflation became a serious, measurable issue no later than mid-2021, with inflation well above the Fed's long-term target of 2%.  It should have started raising rates last year.  Instead, it clung the then fashionable and blatantly wrong notion that inflation was "transitory", something pointed out by academic economists, business economists, and Fed economists at the time.  The Fed is still acting too slowly.  It should have gone for one or two full point increases in its last two FOMC meetings precisely to emphasize the primary objective of lowering inflation while U3 remains (misleadingly) low.

The only way to end current inflation is with a recession.  The idea of a "soft-landing" is false.  Current inflation is the direct result of fourteen years of lax monetary policy and two years and roughly $5 trillion of fiscal stimulus - just in the US.  Estimates of global fiscal stimulus since the beginning of 2020 put the total at about $25 trillion.  Sustained, inflated aggregate demand leads directly to inflation.

[DaveF]

I learned recently on a visit to the Haydnhaus Museum in Vienna that, when Haydn's estate was wound up in 1809, his pet parrot sold for more (in purely monetary terms) than he had paid for the whole house 16 years earlier, thanks to the inflation caused by the Napoleonic wars.  War seems to equate to inflation, now or then.

[Dry Brett Kavanaugh]

The Fed is mandated by law to pursue policies that maximize US employment and promote US price stability.  If it does not do so, then it must answer to Congress.  (It should anyway.)  If by inclusion of the word "overall", you mean the economic well-being of other countries should be considered to be either on par with US economic interests, or taken as material considerations that may require otherwise violating the law, then that is not the intent of the law.  Congress would need to pass new legislation.  It should pass new legislation since the immediate post-war law on the books basically leads to policy schizophrenia.

If by "Kamikaze" policy you mean the Fed's recent rate raises, then you grossly mischaracterize the too slow incremental rate increases.  Inflation became a serious, measurable issue no later than mid-2021, with inflation well above the Fed's long-term target of 2%.  It should have started raising rates last year.  Instead, it clung the then fashionable and blatantly wrong notion that inflation was "transitory", something pointed out by academic economists, business economists, and Fed economists at the time.  The Fed is still acting too slowly.  It should have gone for one or two full point increases in its last two FOMC meetings precisely to emphasize the primary objective of lowering inflation while U3 remains (misleadingly) low.

The only way to end current inflation is with a recession.  The idea of a "soft-landing" is false.  Current inflation is the direct result of fourteen years of lax monetary policy and two years and roughly $5 trillion of fiscal stimulus - just in the US.  Estimates of global fiscal stimulus since the beginning of 2020 put the total at about $25 trillion.  Sustained, inflated aggregate demand leads directly to inflation.

I partly agree with you and partly disagree with you. I'm divided myself as I don't know about the future. As you say, the soft-landing maybe a myth. However, there is a danger that a recession may not lower the price much, or at all. Ie, is an 8 percent unemployment in the USA worth for reducing inflation rate by 2 percent? It is an ideological question rather than scientific or sociological question. The bottom line is that it's difficult getting out of recession a lot more than getting out of inflation.

[Dry Brett Kavanaugh]

We're big fans of Lidl, particularly the German and Polish produce e.g. meats and cheeses.  Also their mini-Stollen, which around this time of year we consume by the bucketload.   They used to do tubs of a delicious potato salad which was identical to the one that Figlmüllers in Vienna serve with their Schnitzels, but lack of demand meant they stopped stocking it.

The only issue we've encountered is that their fresh fruit and veg often seems to have a very short shelf life - absolutely fine if you're going to use it today or tomorrow, but things like melons seem to go off a lot faster than those from elsewhere.

Have you tried wrapping fruits/veggies with paper towel and keep them in plastic/vacuum bags?

[vandermolen]

Any chance of burst pipes come winter?

And what is an open fire?

And, yes, I've been trying to be more economical re food too; you're not alone there.Do you have access to locally caught seafood DB?  That would be sweet!

PD

Open fire:

[vandermolen]

We're big fans of Lidl, particularly the German and Polish produce e.g. meats and cheeses.  Also their mini-Stollen, which around this time of year we consume by the bucketload.   They used to do tubs of a delicious potato salad which was identical to the one that Figlmüllers in Vienna serve with their Schnitzels, but lack of demand meant they stopped stocking it.

The only issue we've encountered is that their fresh fruit and veg often seems to have a very short shelf life - absolutely fine if you're going to use it today or tomorrow, but things like melons seem to go off a lot faster than those from elsewhere.

I notice that shopping there is much cheaper than expected. I met the Headmistress of the school where I teach there recently (in the wine section) which convinced me that it was socially acceptable to shop there. 

[vandermolen]

We're big fans of Lidl, particularly the German and Polish produce e.g. meats and cheeses.  Also their mini-Stollen, which around this time of year we consume by the bucketload.   They used to do tubs of a delicious potato salad which was identical to the one that Figlmüllers in Vienna serve with their Schnitzels, but lack of demand meant they stopped stocking it.

The only issue we've encountered is that their fresh fruit and veg often seems to have a very short shelf life - absolutely fine if you're going to use it today or tomorrow, but things like melons seem to go off a lot faster than those from elsewhere.

Good to know! Thanks 

[Todd]

The bottom line is that it's difficult getting out of recession a lot more than getting out of inflation.

That's debatable.  The US has generally favored comparatively low inflation and has experienced more damaging bouts of true deflation than inflation.  That's why the Volcker Fed and the JPow Fed caused and cause so much discomfort when taking necessary steps.  (Greenspan did as well in the early 90s when he jacked up rates, but he had a different and friendlier fiscal and geopolitical environment to work in, and so he avoided recession then, gained a reputation as some type of superguru, and then pursued more questionable policies later.)  The means for countering recession are very well known - increase demand through some combination of tax cuts, government expenditure, and/or expansionary monetary policy.  Ideology typically drives policy preference.  The US is somewhat constrained on the fiscal side, of course, since it now has $31 trillion in national debt and a weighted average duration for Treasuries of about five years, meaning debt service outlays will start to increase sooner than hoped.  And the Fed, by acting slowly in raising rates and unwinding QE, has fewer tools at its disposal than it could to act as expansionary tools.  Based on data and analyses I have seen (all in publicly available sources), the current economic situation indicates that the coming recession will be more like 90/91 or 2001 than the great recession, sticking with the most recent examples.  Unfortunately, that means recovery will take a long time, but that is the secular trend anyway.

Inflation must be reduced more than two points.  Inflation is currently ~8%, though forecast to be lower, while wage growth is around ~4%.  That is a recipe for stagnation for the general population, further accelerated income and wealth inequality, and ultimately political instability.  Inflation must be brought down even at the expense of recession. 

Of course, there are a couple wildcards in this, namely the Russo-Ukrainian War, and the latest, rather familiar announcement by OPEC+ that it will cut oil production.  Short of full-scale war mobilization in the US, which seems unlikely to say the least, the policy choices will end up changing in magnitude rather than type.  Europe, Japan, and much of the developing world will be hit harder than the US.  How China and India respond to recession will also help set their growth trajectories and therefore geopolitical ambitions into the next decade. 

[Pohjolas Daughter]

Open fire:

So, when you are saying an "open fire" do you just mean having a fireplace in your home?  Or is this an outdoors fire place?

If you're referring to it being inside a home, here in the States, we just refer it to as being/having a fireplace (with chimney of course).

PD

[Todd]

An amusing anecdote: The local, low brow Winco I shop at for groceries, where the parking lot has historically been filled with older cars and newer cars topping out at around the $40K range, has recently become frequented by higher income sorts.  The proportion of fancier cars in the lot has increased, with multiple European makes popping up.  At the same time, the fancy New Seasons store at the other end of the mall now has a markedly less full parking lot.  (New Seasons is a formerly local, and now South Korean owned competitor to Whole Paycheck Foods.)  It seems organic chow can't overpower inflation. 

[Dry Brett Kavanaugh]

An amusing anecdote: The local, low brow Winco I shop at for groceries, where the parking lot has historically been filled with older cars and newer cars topping out at around the $40K range, has recently become frequented by higher income sorts.  The proportion of fancier cars in the lot has increased, with multiple European makes popping up.  At the same time, the fancy New Seasons store at the other end of the mall now has a markedly less full parking lot.  (New Seasons is a formerly local, and now South Korean owned competitor to Whole Paycheck Foods.)  It seems organic chow can't overpower inflation.

I checked Dollar Tree and Family Dollar last month. I still prefer Dollar General. Have a great weekend, Todd.

[Karl Henning]

My sense is that prices here haven't spiked particularly.

[71 dB]

My sense is that prices here haven't spiked particularly.

It is much worse in Europe. A lot of people have barely survived before this so prices going up just a little bit is already bad. If Your income has been 2000 euros and all of it has gone, 10 % increase in the cost means you need to cut spending 200 euros, but what if you can't because all of it is necessary (food, rent, electricity etc.?) Next winter will be horrible in Europe. People will get violent, because they are literally fighting to survive. Crime will spike. People have no choice but to rob to have food. I am fine for now, because I have savings, but I will lose those savings so that in the future I will be broke. It is horrible! Next spring will get right-wing goverment (FUCKING ASSHOLE FINNS voting for ASSHOLE RIGHT_WINGERS) and they will cut social security so my benefits will go down. I am screwed. THIS SUCKS SO MUCH!!! All this crap after the crappy covid years! Unbelievable!

[Dry Brett Kavanaugh]

My sense is that prices here haven't spiked particularly.

Some states. And also it did for low-income people.

https://www.jec.senate.gov/public/index.cfm/republicans/2022/8/state-inflation-tracker-july-2022

[Todd]

Some states. And also it did for low-income people.

One must factor in gas and food price increases as well.  Western states have seen a rapid increase in gas prices recently due to refinery capacity issues.  Oregon, specifically, has the fastest rising gas prices in the US.  Prices are pushing $6/gallon in the suburbs of the Portland metro area and are higher in some other areas.  Technically, rapid price increases are not classified as inflation, particularly as it pertains to food and fuel.  Rapid price changes do change consumer behavior, though. 

Handy gas price link: https://gasprices.aaa.com/state-gas-price-averages/

[Todd]

US producer price inflation eases to still-high 8.5%

[Pohjolas Daughter]

Open fire:

As in you have a fireplace in your home?  I have some here, but never use them.  A relative has a fire pit on their deck (It's made of metal and is raised off of the ground with appropriate fireproof materials under it.  Some friends have a propane-burning stove in their house for extra heat plus they have a beautiful old (and huge) wood-burning stove in their kitchen (a nice big Victorian one).  They sometimes use it for baking though the results are a bit uneven.  Another friend only uses his wood stove (not a cooking one) during the wintertime as he has electric heat and it's too expensive to use it.

PD

[Karl Henning]

Some states. And also it did for low-income people.

https://www.jec.senate.gov/public/index.cfm/republicans/2022/8/state-inflation-tracker-july-2022

Thanks! The pizzeria across Main Street has inched up their prices, perhaps, but that's not a situation which creates any squeeze for me, and they're neighbors, so we're in it together.

[Dry Brett Kavanaugh]

It appears that unexpectedly many small businesses were born and expanded during the pandemic years.

https://www.bbc.com/news/business-62894499

[Todd]

Consumer inflation rose 8.2% over the past 12 months, keeping pressure on households