Inflation: What's happening

[Uncle Ted]

[

8.5% inflation in March

my old employer gave 4.5% raises this year. That’s basically like getting a 4% base salary reduction.

8.6% in May.

Stoopid shipping companies and Exxon... making more that God!

Biden blasts ‘ripoff’ by shipping companies, attacks Exxon as inflation hits a fresh 40-year high

President: ‘Exxon made more money than God this year’


[....]

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https://www.marketwatch.com/story/bi...gh-11654871145

[Moliere]

Buckle up, Buttercup. Probably getting worse before it gets better.

Definitely getting worse. Guess we are all paying the piper now. I’m wondering how we avoid a recession at this point.

[USUC]

Definitely getting worse. Guess we are all paying the piper now. I’m wondering how we avoid a recession at this point.

Isn't a recession really the only way to get inflation down at this point? Interest rates will have to go up significantly. Didn't Paul Volcker essentially do this in the early 80s? My understanding of the history of fiscal policy leaves a lot to be desired though.

[BigFatMeanie]

Definitely getting worse. Guess we are all paying the piper now. I’m wondering how we avoid a recession at this point.

We are unlikely to avoid a recession. Some recession isn't a bad thing overall at this point (but it does suck for individuals that are impacted and struggle to weather the storm). The housing market is way too hot, unemployment is exceedingly low by historic norms, the stock market as a whole is still heavily overvalued...

[Uncle Ted]

We are unlikely to avoid a recession. Some recession isn't a bad thing overall at this point (but it does suck for individuals that are impacted and struggle to weather the storm). The housing market is way too hot, unemployment is exceedingly low by historic norms, the stock market as a whole is still heavily overvalued...

Yeah, that is going to all change... maybe even this week:

Fed Likely to Consider 0.75-Percentage-Point Rate Rise This Week
Officials had signaled plans to raise interest rates in half-point increments before recent deterioration in data

A string of troubling inflation reports in recent days is likely to lead Federal Reserve officials to consider surprising markets with a larger-than-expected 0.75-percentage-point interest rate increase at their meeting this week.

Before officials began their pre-meeting quiet period on June 4, they had signaled they were prepared to raise interest rates by a half percentage point this week and again at their meeting in July. But they also had said their outlook depended on the economy evolving as they expected. Last week’s inflation report from the Labor Department showed a bigger jump in prices in May than officials had anticipated.

Two consumer surveys have also shown households’ expectations of future inflation have increased in recent days. That data could alarm Fed officials because they believe such expectations can be self-fulfilling.

The Fed raised rates by a half-percentage point at its meeting last month, the first such increase since 2000, to a range between 0.75% and 1%. The Fed last raised rates by 0.75 percentage point at a meeting in 1994, when the central bank was rapidly raising rates to pre-empt a potential rise in inflation.
[...]
“It’s a one-two punch,” said Diane Swonk, chief economist at Grant Thornton. “They’ve got to go now with 75. The Fed is behind the curve, and they know it.”
[...]

https://www.wsj.com/articles/bad-inf...ek-11655147927

But we have the "fastest growing economy in the world"!

[BlueK]

You need a couple of weeks to figure this out? Come on, removing tariffs is about as no-brainer a decision as there could be right now.

https://www.cnn.com/2022/06/15/polit...omy/index.html

[Moliere]

You need a couple of weeks to figure this out? Come on, removing tariffs is about as no-brainer a decision as there coud be right now.

https://www.cnn.com/2022/06/15/polit...omy/index.html

He has to consult with the CEOs and labor unions to get their approval before he does it

[Joe Public]

You need a couple of weeks to figure this out? Come on, removing tariffs is about as no-brainer a decision as there could be right now.

https://www.cnn.com/2022/06/15/polit...omy/index.html

Without taking time to think this through:

Seeing as how much of the inflation problem comes from pandemic-related decreases in supply, would a decrease in tariffs not be absorbed by Chinese exporters who can still sell at current market prices due to demand outstripping supply? I’m wondering what would incentivize sellers to pass any of that savings on to customers under current conditions.

[BlueK]

Without taking time to think this through:

Seeing as how much of the inflation problem comes from pandemic-related decreases in supply, would a decrease in tariffs not be absorbed by Chinese exporters who can still sell at current market prices due to demand outstripping supply? I’m wondering what would incentivize sellers to pass any of that savings on to customers under current conditions.

How much difference it would make, who knows, But in high inflation it makes no sense to maintain something which its only purpose is to make a product more expensive. It's an unnecessary tax and taxes always are a drain on market efficiency. Also the exporter isn't getting the benefit of the higher price that the tariff is responsible for, so removing it would only make their product sell for the true price they're already willing to accept. Might they raise their prices, sure, but not so much to completely remove the pricing advantage they would suddenly gain. Also don't forget it would help US manufacturers who are also being forced to pay for the tariff for the materials to make what they are producing.

[Uncle Ted]

But, but, but that bad dude Putin is the cause of inflation... Not Joe!

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[LVAllen]

What's Biden's "job" on inflation, Ted?

[USUC]

What's Biden's "job" on inflation, Ted?

Keeping the idiots within his administration from trying to pump more money into the economy (student loan forgiveness, gas cards, etc) for one thing.

[LVAllen]

Keeping the idiots within his administration from trying to pump more money into the economy (student loan forgiveness, gas cards, etc) for one thing.

Even if he succeeds, these sort of policies take quite a long time to affect anything. To quote The West Wing, "We wanted to inject money into retail and tourism." "Why not wait until people were supposed to have the money?" "The economy might have improved on its own by then."

The most powerful weapon in the inflation toolbox is monetary policy, which by definition is intended to be handled by the central bank, independent of any influence by the current administration.

[Uncle Ted]

What's Biden's "job" on inflation, Ted?

To spend yet another 2T.

[Moliere]

What's Biden's "job" on inflation, Ted?

Every economist worth a grain of salt has admitted that the Biden stimulus is one of the drivers behind the current increase in inflation. It’s not the only driver, but absent the stimulus we’d be in a different situation.