[ODILON_SATER]

Claudia Sahm? Krugman? I rather listen to the hedge fund guys, at least they have skin in the game, don't they? Claudia Sahm is extremely partisan, and so is Krugman. You know it's going to be bad when we are starting to hear from the media that inflation is actually a good thing --because people have more disposable income to spend on things. First, it was just a blip, then they told us it would go away in half a year, now it is here to stay --but it is a good thing, see?

The reality is that the explosive demand, alongside with a lagging supply can lead to an inflationary pressure not seen since the 1970s. At least in the 70s the information technology revolution was just around the corner. Right now, it feels like the supply issue cannot be remedied or solved because of heavy regulations and a stagnant productivity.

[PaulDavisThe1st]

> Claudia Sahm? Krugman? I rather listen to the hedge fund guys, at least they have skin in the game, don't they? Claudia Sahm is extremely partisan, and so is Krugman.

"Hedge funds guy" are extremely partisan, in that they will fight hard to prevent any kind of legislative or other systemic change that would threaten their rent-seeking. They invariably favor the status quo and/or anything that increases their ability to profit, regardless of other consequences it may have.

I'm not going to claim that Krugman isn't "partisan" (although I think using this term to describe him undermines the meaning of the term), but I'm also not willing to accept that "hedge fund guys" are not.

[qPM9l3XJrF]

Ray Dalio, billionaire founder of Bridgewater, has recently written a book "Principles for Dealing with the Changing World Order" where he advocates systemic change, including effective government action to address inequality.

[PaulDavisThe1st]

Ray Dalio is one of the exceptions that prove the rule, and even then, he's deeply committed to the fundamental "bestness" of capitalism even if he thinks it needs some government tweaking around the edges.

[ODILON_SATER]

You are correct.

To be honest, I am not a huge fan of hedge funds either. But in this specific case, I'd rather take their advice. In my opinion, for this specific case --discussing inflation trends--, I don't see a lot of room for hedge funds to be partisan? No new legislation, no wrinkles in the system, etc. And they may be wrong, and Krugman may be right after all. Economics, especially Macroeconomics forecasting analysis, should be treated with some reservation. I just find the particular post quite convincing given what I've observed in the last few months.

[shapefrog]

> I don't see a lot of room for hedge funds to be partisan

They have billions of dollars of bets on where interest rates go. Inflation trends and how they are interpereted are what drives interest rates.

If the fed took on board this particular interpretation at the next meeting Bridgewater would make low double digit billions on those trades.

Doesnt make them right or wrong, but anytime you see a talking head on cnbc or putting out a research note - they are talking up their positions.

[jolux]

Nobody thinks inflation is a good thing ceteris paribus. The main questions are whether it’s better than the alternative, and whether it will be transient or not. “Any inflation at all is bad” is not a view held by any serious economist these days, especially not after the Fed has been below target for so long.

I described Sahm and Krugman as dovish and I think that’s more than fair to people who disagree about what inflation means right now. I don’t like pieces like this one that speak authoritatively on so little evidence.

[01100011]

First off you have to define 'transient'. Fed supporters seem to define it as the level of inflation going up for a while and then reverting to a historical norm, leading to permanently higher prices. Fed critics define it as a temporary rise in prices followed by deflation back to pre-inflation prices.

Fed critics like that definition because it lets them more easily paint the fed in a bad light. They claim the fed is crazy because prices never fall. I think that's disingenuous because of the improper definition of 'transient'.

Will inflation be transitory? Probably yes, if you use the first definition. I don't think there has been a situation in modern history where prices in America have backed off significantly. Prices are sticky, especially when labor shortages combine with inflationary pressures to drive up wages and therefore the costs of production. I suppose you could take a few hits off Cathy Woods' pipe and claim robots will take all of our jobs and send us into a deflationary spiral next year, but I think that's likely several years away at best.

[jolux]

I take the first view of transience, and I would be a lot more concerned about the current level of inflation if we weren’t seeing significant wage growth and job growth. What made the 1970s a nightmare was inflation without wage growth. I think as of yet there’s little evidence that we risk such an eventuality, but at the end of the day I’m just a programmer reading econ papers, not a professional economist.

[jjeaff]

No need to guess. Fed officials have openly stated that by transient, they mean they will go up a bit, then stabilize.

[ODILON_SATER]

What evidence do you need? It's been already spelled out. High demand coupled with lagging supply, which does not have the capacity to adjust to new behaviors in the short and medium run. Especially if you consider the regulatory barriers, such as ramping up energy production. What little evidence do you speak of?

[jolux]

It’s clear that demand is up. What’s not clear is the argument at the end of this article, that this will lead to an inflationary cycle with no clear way out in the long run. This is what they claim is their opinion. It is not widely accepted, and I find it insufficiently supported. It’s mostly just tucked away at the end.

[ODILON_SATER]

That's a fair take actually

[JamisonM]

"I rather listen to the hedge fund guys, at least they have skin in the game, don't they?"

Not really, right? They make a lot of money even after they get it wrong?

"Right now, it feels like the supply issue cannot be remedied or solved because of heavy regulations and a stagnant productivity."

This supply issue has existed for, what, a few months? We can literally see the containers piled up on the coasts, is there a good reason to believe that once the backlog is cleared there will be some kind of permanent problem? I have not seen a compelling argument, the original article here doesn't make much of an argument for sustained issues although they give that impression with the headline and the intro.

I will be very shocked if heavy sustained demand doesn't induce productivity gains (which have evaded the US economy for quite some time), but I will also be very surprised if the level of demand we are seeing from pent-up COVID-19 cash sustains itself much longer, a lot of goods demand is going to convert into services demand - if only because of shipping delays.

[qPM9l3XJrF]

>Not really, right? They make a lot of money even after they get it wrong?

If they get it wrong clients may move their money elsewhere

[tsimionescu]

If the 2008 crisis taught us anything, it is that hedge funds can get it arbitrarily wrong and still profit tremendously overall.

[fallingknife]

What are you even talking about? Bet you can't give even one example.

[JamisonM]

Heavily lopsided upside risk means they are never in danger of personal financial calamity. Nicholas M. Maounis looks like he is doing just fine even though he seems to have lost enough money for a hundred lifetimes.

All the incentives are aligned to go big on a theory and talk it up, and then if you are wrong just dust yourself off and try again- all the while cashing your paycheques.

[mellosouls]

I rather listen to the hedge fund guys, at least they have skin in the game, don't they?

A significant role in bringing the world economy to its knees in the financial crisis - that sort of thing?

[tubby12345]

>I rather listen to the hedge fund guys, at least they have skin in the game, don't they

Haven't you ever heard of "talking your book"?

[Bud]

Before attacking Krugman (who has a Nobel Prize in this subject, btw) and dismissing him out of hand in favor of random hedge fund guys, please cite evidence, any evidence, that his supposed "partisan" attributes have affected his work or made it less reliable or accurate.

From where I sit, Krugman has been right a lot more often than the competition over the last few decades.

[ODILON_SATER]

Krugman does not have a nobel prize in the subject. Krugman's nobel prize is in another area in Economics, not monetary policy. His contributions are mainly in trade, which were very important no doubt. But it doesn't make him an expert on monetary policy and inflation. I understand that Economics may look like a single-blob to outsiders, but Economics has a wide range of topics and sometimes they barely intersect.

[throwaway34241]

If I remember correctly, I think Krugman's view is less that there won't be sustained inflation pressure (he's speculated it's transitory, but expressed a lot of uncertainty about it), but rather that the Fed tightening to address that pressure won't necessarily lead to a recession (although of course getting the timing right is tricky).

(I remember him discussing it in detail in this [1] debate with Larry Summers, although it's been a while since I watched it).

That view doesn't seem to contradict the original article, which says prices will increase "unless there is a significant boost in productivity so supply can catch up with demand, or policy makers shift to a tighter stance".

[1] https://www.youtube.com/watch?v=EbZ3_LZxs54

[phreeza]

> least they have skin in the game, don't they?

They do, but not in the game of writing truthful blog posts. If you think the market consensus on future inflation is wrong, you can buy TIPS, maybe even with leverage. People buying and selling those literally have skin in the game for future inflation.

[naveen99]

> supply issue cannot be remedied or solved because of heavy regulations and a stagnant productivity.

Atleast the labor supply is artificially constrained in the usa by immigration restrictions. All they have to do is loosen some (they wouldn’t need to be completely removed).