[throwaway5Am1k]

>"government spending" does not cause companies who are making record profits to increase their prices. That's just greed.

It absolutely does. If people have "extra" money (e.g. COVID payments), they can bid higher on limited resources (i.e. inflation). If there's more employed (i.e. government jobs), that's again, more people with more money, for limited resources (i.e. inflation).

While I'm sure companies are taking advantage of the fact, they must also realise that there's more demand for their limited resources, which causes them to raise prices.

These companies are making "record profits", but you also need to consider that the purchasing power of your dollar is being debased, and these companies are (at least partially) trying to keep up with inflation.

[shagie]

So, between three years and two years ago I got a pre tax total of $2200 (some states had them as taxable income).

How is that amount still causing inflation?

You say "While I'm sure companies are taking advantage of the fact" - that's a present continuous tense... I used the past tense for when I last got a stimulus check.

So why present continuous? Why not say "while I'm sure companies took advantage of the fact?"

Lets try another take on it...

https://www.nytimes.com/2023/04/21/business/procter-gamble-3...

> Another round of price increases on household products like Gillette razors, Dawn dish soap and Swiffer dusters bolstered Procter & Gamble’s bottom line last quarter, the company said on Friday, a sign that stubborn inflation may linger as companies defend their profit margins.

> Procter & Gamble, a consumer goods bellwether, said its profit grew in the first three months of the year after it raised prices 10 percent across its brands. That rise was the company’s second consecutive quarter of double-digit increases. Its profit margin expanded in the quarter, with price increases more than offsetting the rise in what it paid for raw materials.

> Revenue rose 4 percent last quarter from a year earlier, even as sales volumes — the number of rolls of Charmin toilet paper and boxes of Tide detergent — fell 3 percent as consumers traded down to less expensive alternatives or bought less. In other words, Procter & Gamble made more money even though it sold fewer products. Sales volumes at the company have declined in the past four quarters.

So, can you explain why my $2000 two years ago is still contributing to the increase of dish soap today, and why the prices are going up, and why the company is making even more?

[throwaway5Am1k]

>How is that amount still causing inflation?

I can't tell if this is a disingenuous question. Your $2200 is a very, very small amount of the total pie. Have a look at how the money supply changed during the pandemic. At the very start of the pandemic, when money was being printed there were experts saying "we will see inflation in the next 2 years", that's what we're seeing now.

Here's a Deloitte paper published in 2020 (see page 9: https://www2.deloitte.com/content/dam/insights/us/articles/6...)

>According to Friedman’s view, the United States will experience very significant inflation in 2022

[shagie]

I'm taking issue with "If people have "extra" money (e.g. COVID payments)" and that you're saying that this is now a very small amount of the total pie.

I additionally take issue with "If there's more employed (i.e. government jobs)" - and here's the total government jobs numbers: https://fred.stlouisfed.org/series/USGOVT and those numbers are lower than the value in January 2019.

And yes, we were going to have inflation. I believe it is fair to criticize the fed for not raising rates sooner.

> With the Fed’s main tool for stimulating the economy—interest rates—virtually useless right now, the problem becomes one of how to help the economy recover without it. But there is a solution. Under current conditions, fiscal policy— government deficit spending—is likely to be a very powerful tool for stimulating the economy. After all, with interest rates likely to stay at record lows, more federal borrowing is not going to affect investment spending by raising the cost of capital. That means that government spending financed by borrowing is likely to be particularly effective, since it won’t be offset by lower investment spending.

> The bottom line: To help cushion the crisis’s impact, the Fed has done its job and done it well. Now it’s up to the rest of the government to act to support the US economy.

And that's been weathered. So, the next question: why is inflation not responding well to the monetary policy?

In part, that appears to be that companies are locking in the higher prices (and increasing them) at a higher rate than inflation is growing while at the same time recording record profits on even lower sales.

That is the continuing part.

Let's look at the fewer jobs part. https://www.census.gov/library/stories/2022/12/net-internati... - you will note a substantial drop in the number of immigrants to the US.

Also https://www.cnbc.com/2023/01/30/long-covid-has-underapprecia... "About 18% of people with long Covid hadn’t returned to work for more than a year, according to a report by the New York State Insurance Fund, state’s largest workers’ compensation insurer."

So lets not blame government jobs for the tight labor market but rather a substantial decrease in the number of immigrants for the prior half decade and an estimated 4M US citizens that have left the labor market as part of long covid.

[autoexec]

The problem is that people don't have "extra" money, they have record amounts of debit and rising homelessness. The depressingly small amount of money people got in aid from the government kept their lights on, kept food on the table, and helped them transition to working/schooling at home at a time when they couldn't go to work and had no income at all.

What little "extra" money made it into the hands of regular Americans isn't and never was the problem and while most people here are well insulated from the hardships, Americans are seeing their quality of life decline and are having to struggle in ways they never had to before. The American people are not sitting on huge piles of free government money while bitching about the price of eggs. The middle class is struggling (and sliding into poverty) and poorer Americans are even worse off.

[Rury]

You're right in that (some) people don't have "extra" money. Most people can't print themselves money.

However, some people do have "extra" money, particularly people who have access to the money printer, or who are bailed out by the people with the money printer. Guess who buys most of the government debt, allowing the government to overspend? The Fed.

Government spending isn't in a vacuum either. Every dollar the government spends goes into someone else's pocket, who they go on to further spend it. And the government doesn't spend it's money equally, meaning not everyone gets that "free money" equally, which means, some people are getting the short end of the stick, as others are getting richer because of it.

If you want to know how the rich get richer, while the poor get poorer, this is how.

[autoexec]

I can't argue that government spending isn't a problem. It really is. In particular it's where the money is going, how it's being accounted for, and how much benefit the average American sees from that which is way out of whack.

The pandemic had the government printing a ton of money and handing it out to some very rich people, but does giving more money to a person who already had enough money to afford whatever they want really drive up the prices on a gallon of milk?

[Rury]

It does. Think for example, if you had worked hard 30 years to acquire a $250,000 house, and the government just gave everyone $500k overnight. Would you think it's fair they could pay $250k for your house for not having worked for 30 years, while you had to? Probably not. Instead you'd likely raise the selling price of your house to protect the value of your hard work. Same goes for companies that produce milk.

Obviously an oversimplified example, as again not everyone is benefitting the same amongst other reasons, but that's basically the principle behind it.

[arcticbull]

People don't save money, they save value. I don't know anyone who would recommend saving up $250K to make a down payment entirely as cash, because of course you're losing money to inflation. Given the huge run-up in equities over the last 30 years chances are you'd only have had to save up a small fraction of that had you invested it. And the more fiscal stimulus that went out, the more stocks went up.

[Rury]

I never mentioned about saving up $250k to buy a house entirely in cash. I said working 30 years to acquire a $250k house. It's about protecting value of your hard work - your equity. And regardless, it was hyperbole to show why prices rise when money is freely given out.