[mariojv]

I'm not saying I agree or disagree given mild inflation trends over the past decade, but how long do you think inflation takes to really get in gear if you're right? We experienced deflation last month according to the consumer price index despite fiscal stimulus and Fed buying assets. [0]

The consumer price index is definitely flawed. However, one thing I've heard is that the massive drop in demand and velocity of money is necessary to consider when analyzing inflation. I also was initially worried about inflation given the massive stimulus numbers we're seeing but have been reconsidering this.

I'm not well-versed in this at all, but demand-pull inflation under Keynesian economics [1] or a drop in V (velocity of money) in the equation of exchange in the monetarist theory of money [2] seem to be what is supporting why folks are worried about deflation. I would venture to guess that this is part of why the Fed is doing these massive buys right now, too.

Tangentially, pointers to good econ learning resources from anyone would be helpful. I've only started with Khan Academy and what I remember from old classes so far.

[0] https://fred.stlouisfed.org/graph/?g=qH1p [1] https://en.wikipedia.org/wiki/Inflation#Keynesian_view [2] https://en.wikipedia.org/wiki/Inflation#Monetarist_view

[skrtskrt]

It's worth noting that part of the reason that inflation statistics are so "low" is that there's an official adjustment done when things cost more but (supposedly) have increased quality, called a "Hedonic quality adjustment"

This adjustment has been made multiple times in recent decades for housing, which is a large part of any given adult's spending.

So the Fed economists keep saying "wow inflation is so low even after we pump gazillions of dollars in during QE", while ignoring the fact that easy money has lead to massive multinationals consolidating control of real estate and jacking prices up.

So even if it is somehow true that houses have gotten better in some ways (I'm not really convinced), that doesn't matter to people lower on the income scale where the price of housing is the difference between having a roof over their head and not - they can't really afford to care about the latest greatest improvements in housing. They have a different demand curve - be homeless or spend most of their income on rent.

Rent vs income since 1960: https://www.apartmentlist.com/rentonomics/rent-growth-since-...

Skepticism about the application of hedonic adjustments https://www.sgtreport.com/2019/12/what-worries-me-about-hedo...

"The theory is that the vast majority of that 70% price increase of a Camry since 1990 is due to quality improvements, with buyers today getting a far superior Camry; and that only a smaller part of that 70% price increase is due to monetary inflation, namely the dollar losing its purchasing power"

[TheFlyingFish]

Just anecdotally, I wouldn't be surprised if a Camry really were "more valuable" (as measured by some sort of ideal fixed value-marker not subject to inflation) than in 1990. I seem to recall when I was growing up that the average expected lifetime of a car if well-maintained was about 100k miles; now it seems to be about 200k.

Housing may be a more debatable case, though.

[skrtskrt]

I agree that’s an opinion many people familiar with cars would share.

However the usefulness of that improvement is going to be a lot lower to someone who just needs a car to get somewhere rather than someone who can afford to buy a car with the long view of how it will affect their finances over many years.

The “purchasing power of the dollar”, even if you accept the accuracy of hedonic adjustments, is an extremely limiting view of the value many participants in the economy are deriving from that dollar.

I agree housing is a better example because the cost floor is much higher.

[perl4ever]

"the usefulness of that improvement is going to be a lot lower to someone who just needs a car to get somewhere rather than someone who can afford to buy a car with the long view of how it will affect their finances over many years."

I don't understand how a longer lifespan could not affect TCO regardless of how long you keep your car or what portion of its life you use. What does it mean to say people can't afford to spend less money?

[esoterica]

> So the Fed economists keep saying "wow inflation is so low even after we pump gazillions of dollars in during QE", while ignoring the fact that easy money has lead to massive multinationals consolidating control of real estate and jacking prices up.

This is not remotely grounded in fact. The majority of real estate is controlled by homeowners and small-time landlords, not massive multinationals. Landlords don't have monopoly pricing power, rents have gone up (in specific cities) because anti-development policies restrict supply.

[skrtskrt]

If you only look at home rentals, yes corporations make up less than 10% of ownership. But even the small percentage of ownerships really affect things, in Chicago we can see it has repeatedly taken just a few new luxury high rises to blow up cost of living in entire neighborhoods - it has a follow-on gentrifying effect where stores rush in to serve the new monied residents and the people living there can no longer afford to participate in their local micro-economy.

Again, real, actual lived experiences tell the store more than the super-super high level macro numbers might suggest.

There's still the effects on non-home real estate too, in which there is significant consolidation:

https://cxre.co/houston/commercial-property-management/the-b...

"During the past ten to twelve years, Blackstone has grown tremendously. Since going public in 2007, it has quadrupled in size. On top of that, Blackstone’s real estate division has exploded from a $17.7B venture to a $100B portfolio. According to BizNow, since 2009, it has spent more than $50 billion on commercial real estate. In addition, Blackstone closed a real estate fund worth about $16B in 2015. As a result, Blackstone now has the crown of ‘Largest Real Estate Owner in the World.’ Business Insider has even called the group’s Chairman and CEO Steve Schwarzman, ‘America’s landlord.’"

[esoterica]

> If you only look at home rentals, yes corporations make up less than 10% of ownership. But even the small percentage of ownerships really affect things, in Chicago we can see it has repeatedly taken just a few new luxury high rises to blow up cost of living in entire neighborhoods - it has a follow-on gentrifying effect where stores rush in to serve the new monied residents and the people living there can no longer afford to participate in their local micro-economy.

You are confusing cause and effect. The luxury high rises are the result of rising demand and rising prices, not the cause. If you could magically cause prices to increase by building luxury apartments, you would see luxury apartments sprouting up all over the impoverished parts of the South side. But you don't, because the demand is not there. If you stop luxury apartments from being built in desirable neighborhoods and desirable cities, people will just bid up the prices of crappy older housing stock and drive poorer people out anyway (see: San Francisco).

Building new housing decreases the price of existing housing by expanding supply. It does not increase it. People who have a vested interest in seeing housing costs go up (landlords, existing homeowners) understand that fact, which is why NIMBYs keep voting against development. Unfortunately many people who do not want housing costs to go up do not understand the basic economic fundamentals and are motivated by reflexive hate of wealthy developers, so they sabotage their own interests by voting against new housing to the delight of their landlords.

[skrtskrt]

I think it's a bit more complex than this. No, you can't magically create a yuppie utopia in the middle of the Southside, but you can start on the northwest side and expand it just a couple blocks west, then a few more blocks west. It's a coordinated effort from the large-scale developers and the city - look at Lincoln Yards for the most large-scale and egregious example.

Housing supply absolutely needs increased, but we must require developers to build mixed-income housing. The wealthy developers can afford to leave many units empty to maintain the luxury cache of the building or area. The relationship between supply and price in housing is not that sweet sweet smooth curve - it's lumpier than that in reality.

Additionally while the increase in supply can hurt your local landlords, it can also raise the average income of the clientele of an area, which then benefits them. In practice these landlords have not been staunch opponents of all the new luxury buildings.

[esoterica]

> but you can start on the northwest side and expand it just a couple blocks west, then a few more blocks west.

Again, you are confusing cause and effect. The luxury apartments are popping up because of rising demand and rising prices; they are not the cause the rising prices. San Francisco refuses to build new housing stock and rents are still soaring there because people just bid up the prices of crack shacks.

> The wealthy developers can afford to leave many units empty to maintain the luxury cache of the building or area.

That is completely false. Real estate developers don't intentionally leave a large fraction their buildings empty to project an image of luxury. No renter is going to pay 2x as much rent because they see that the building is half empty and they think that makes it more exclusive. If they wanted an excuse to pay 2x the rent they would just get a larger apartment or move to a more expensive zip code. Deliberately leaving part of a building empty would be an extraordinarily financially dumb move. If a building is substantially empty then the developers screwed up their market research and are losing money on the project.

> Housing supply absolutely needs increased, but we must require developers to build mixed-income housing.

Building luxury housing frees up existing cheaper housing stock for lower income households. You don't have to build cheap housing to make more cheap housing available. Blocking the construction of luxury housing is counter-productive because it just means people will bid up worse housing stock.

[thomashobohm]

That's not how any of this works; inflation statistics are calculated by the Bureau of Labor Statistic, independently of the Federal Reserve.

There's no conspiracy among Fed economists to try and hide inflation.

[skrtskrt]

I didn't say the Fed calculated it. I did say they reference it to say their policies (or whoever's policies) aren't causing inflation.

When a majority of leading economists subscribe to economic views that don't reflect the lived reality of an average person, it may not be a conspiracy, but the effect (groupthink) is similar.

[fuzzybear3965]

I had the same question a few weeks ago! Apparently, the delay between monetary stimulus and the time we'd notice inflation is estimated to be greater than 12 months. I found one of the sources whose abstract I scanned when I had this question[0].

Hedge: I'm not saying it's true or that I've verified any of the research, only saying that economists have studied the effects of central bank stimulus action on inflation rates and the economic response seems to take a while.

[0] https://www.google.com/url?q=https://www.lancaster.ac.uk/sta...

[toomuchtodo]

Direct link: https://www.lancaster.ac.uk/staff/ecajt/inflation%20lags%20m...

[neffy]

It's complicated. Hyperinflation occurs generally when the banking system's regulation is gets out of control and goes into a lending/money creation spiral. That can happen very quickly - within several month. All things considered what's more likely to happen at the moment though is a monetary implosion, as massive debt defaults occur destroying the money in the banking system. Which is why people are muttering about Great Depressions.

[IanDrake]

You can print money indefinitely and not cause inflation as long as there is an equal demand for what you're printing.

USD demand is very high globally and domestically right now. Let's hope that doesn't change over night.

[thedudeabides5]

Demand for dollars won't evaporate overnight. The thing about being a reserve currency is in a crisis, the entire levered world is short your currency.

That, combined with the fact that it's not like any major developed economy is doing that much better, means US goods, services and financial assets are still pretty competitive with the rest of the world.

The dollar is up 40% vs the lows of 2008. When DXY is back at 70, it's time to worry about a crack in the dollar reserve system.

https://www.tradingview.com/symbols/TVC-DXY/

[OscarCunningham]

The worry isn't demand dropping over night, since in that case the Fed could just sell the assets it's been buying. The worry is that the value of the Fed's assets will drop overnight.

[thomashobohm]

This is inaccurate; most economists think we're most likely to see deflation over the next several months as demand collapses. Considering the position of the dollar, a "monetary implosion" like you're describing is still exceedingly unlikely.

[andreilys]

Most economists also thought we had banished volatility, until 2008 happened.

I wouldn’t put too much trust in that expert class given their track record.

[thomashobohm]

"Most economists" never believed that. Lots of people in finance did, sure, but they're not economists.

[Qasaur]

"Well, unquestionably, housing prices are up quite a bit; I think it's important to note that fundamentals are also very strong. We've got a growing economy, jobs, incomes. We've got very low mortgage rates. We've got demographics supporting housing growth. We've got restricted supply in some places. So it's certainly understandable that prices would go up some. I don't know whether prices are exactly where they should be, but I think it's fair to say that much of what's happened is supported by the strength of the economy." - Ben Bernanke, Chairman of the Fed, in 2005.

https://mises.org/library/ben-bernanke-was-incredibly-uncann...

What I don't understand is how people find it very difficult to admit that economists can be wrong sometimes and that their word is not gospel.

[thomashobohm]

I don’t understand how your quote from Ben Bernanke is relevant. Where in the quote does Bernanke say that we’ve fully eliminated volatility? And how is he representative of “most economists?”

I’ve said in other parts of the thread that economists can, in fact, be wrong sometimes. I just find the people making completely unjustifiable assertions about the economy, while simultaneously castigating the economics profession as some cabal of out-of-touch elites who can’t be trusted, unconvincing, when I know that the vast majority of economists are simply researchers trying to understand the world and how to improve it.

[neffy]

Most economists don't understand how banks write off debt.