[aggronn]

The definition of inflation is nominal changes in prices. This can be caused by supply/demand shocks, which is where the term "transitory" comes from--inflation during a period of economic transition. The alternative to this is persistent inflation, which is largely the result of monetary or fiscal policy, and not due to supply/demand "issues" (well, or you could say, the only market where there is an issue is the currency market)

If we had high persistent inflation, we would expect long term, consistent increases in prices. This is compared to "normal" persistent inflation, which we typically target around 3%. This target is set by the Fed.

If we wanted, we could target 10% inflation on a persistent basis by using monetary policy that was deliberately inflationary.

The argument being made by the government and by the media is that our current inflation (40% for cars, etc) that weighs out to 7.5% is the result of a supply/demand shock, and which must be resolved by working out these short term market inefficiencies/failures.

There are real arguments for monetary inflation (especially wrt asset inflation), but the fact that cars are up 40% and housing vacancy rates are so low and our supply chain is so backed up makes a very tangible case for us being in a transitory period of inflation which can not be dramatically improved by monetary or fiscal policy.

[notch656a]

Housing vacancy rates will go up. Landlords and those selling houses just need to keep pushing the price higher until the market will no longer bear it; there is some price at which people will no longer occupy such a high fraction of houses.

I think widespread disbelief of inflation, and hesitancy to embrace the 'new normal' has lead to sticky prices. These sticky prices means some goods and labor is 'cheaper' than it would otherwise be, leading to 'shortages.' In part I explain such low unemployment rate at present due to labor being a couple percentage points cheaper than it was a year or two ago.