When and how does inflation abate?

[DemocratSinceBirth]

And does it abate without a recession?

[Wounded Bear]

1. Probably right after repubs take over the House and Senate...

[Voltaire2]

2. Here is a fun fact: nobody really knows.

[roamer65]

4. Quote by Voltaire.

“All paper money eventually returns to its intrinsic value…nothing.”

[roamer65]

3. Problem is the M1 money supply.

Last edited Fri Jun 10, 2022, 02:10 PM - Edit history (1)

It was inflated by at least 50 percent by Jerome Powell, a Dump appointee.

Inflation will slow when we reach a supply/demand equilibrium with the new M1.

[MichMan]

5. Why was he reappointed then?

[roamer65]

6. That's a good question.

I didn’t want him for another term as Fed Chair.

I wanted Lael Brainard.

I think she is way more qualified.

[uponit7771]

17. +1, he caved to TFGs pressure and kicked the can. He should be out ...

[MichMan]

19. He was just re appointed last November

[uponit7771]

25. Understood, firing fed chiefs isn't a stabalizing factor for big economies though. Look at Russia's

... fed chief wanting to quit, she couldn't ... it would be too destabilizing to Russia and well ... they'd poison her if she ran off.

[keep_left]

21. Wasn't one of the money supply numbers classified/made secret during the GW Bush years?

I remember something like that happened during Gulf War II because of the oil shock it caused. I don't know if subsequent administrations unclassified it at some point later.

[roamer65]

28. Federal Reserve discontinued the M3 money supply measurement in 2006.

https://fred.stlouisfed.org/series/M3

As you can see why from the graph.

[Amishman]

31. they still put out an estimated / unofficial version

https://fred.stlouisfed.org/series/MABMM301USM189S

[unblock]

7. there are several causes of the current inflation, so... it's complicated.

raising interest rates is a crude method to broadly make business activity more expensive, which is reduces demand for the goods and services that businesses buy, reducing upward price pressure on those items and therefore reducing inflation.

this is reasonable when dealing with structural inflation, which is broad inflation due to things that affect the entire economy. this was very effective in the late 70s - early 80s, when we had inflation due high oil prices (back when the economy was mainly manufacturing) and at that point, inflation expectations (which become a self-fulfilling prophecy as businesses raise prices in anticipation of future inflation), with a backdrop of still reasonably strong unions who could negotiate pay raises.

note that you don't specifically need a recession, you just need to raise interest rates enough to dial back demand enough to tame inflation. it's hard to do that without triggering a recession, but it's not strictly necessary.


now, if inflation is not broad-based and focused on a few specific commodities and sectors, then raising interest rates may be problematic as then you're then dampening economic activity across the entire economy, even the parts that didn't have inflation.

some of the causes of the current inflation are specific to china lockdowns, chip shortages, port delays, and temporary effects related to the post-pandemic restart.

so in theory, a more targeted approach would be better, but the fed can't really do that on its own. a more functional congress might pass legislation imposing targeted, temporary charges and surtaxes and incentives to address the specific issues.


so yeah, there are other ways, but they require objective economists who really understand the situation on a technical level, and a congress willing to act on that. even in normal political times, that process usually takes too much time. so the fed raising interest rates is the normal solution even when it's not the best, because at least they can act in real time.

[BlueIdaho]

9. I wonder how a windfall profits tax

On key industries like oil would impact inflation?

[unblock]

13. A windfall profit tax strikes me as a useful tool

to combat industry-specific inflation.

As noted though, a functioning congress is required...

[BlueIdaho]

16. Without a doubt.

That includes a Congress freed from the undue influence of corporations my friend.

[GoodRaisin]

24. Taxing windfall profits on oil and other companies would be an excellent way to impact inflation.

Whitehouse and Khanna have proposed a bill to do this on oil companies. Unfortunately it would be killed by Senate Republicans who want the inflation to continue through the mid terms. It also conflicts with Biden's request for oil companies to make new investments to produce more oil.

[unblock]

32. It should work well with stimulating investment

Investment means spend now on research and development and exploration and profit later. They avoid the windfall profit tax by reinvesting profits in r&d and profit later, after the inflation problem is over and the windfall profit tax expires.

[TigressDem]

8. When the Senate passes their portion of H.R.7688 AND/OR Oil Companies stop price gouging.

IF the oil companies raked in record profits in order to "Buy Out" of Russian Oil...

THEN the price of gas should soon go down. Because the oil companies made a TON of money this year.
(IF they didn't use these profits to get away from Russian Oil, then they need to do that first.)


BECAUSE

THE PRICE OF EVERYTHING goes up when gas prices and diesel especially go up because of how much we depend on trucking industry to get supplies where they need to be.

Getting those prices back in line or taxing windfall profits to get the oil companies to self regulate, should help.

HOUSE has done their part. H.R.7688 - Consumer Fuel Price Gouging Prevention Act


https://www.usatoday.com/story/money/economy/2022/05/07/oil-company-record-profits-2022/9686761002/

BP paid off their stake in Russian Oil

BP PLC also said its net loss in the first quarter totaled $23 billion, after accounting for a write-off of its nearly 20% stake in Russian oil producer Rosneft in response to the Ukraine war.

Exxon took a significant hit by abandoning Russian operations due to the war, writing down $3.4 billion of their $5.48 billion in profits during the first quarter of 2022

Chevron reports $6.26 billion profit, over four times its earnings of $1.4 billion in the first quarter of last year. Revenue for the San Ramon, California-based energy producer surged 41%, to $54.37 billion.

Sinopec totals $3.45 billion net profit under Chinese accounting standards for the first quarter of 2022, compared to 17.93 billion yuan ($2.69 billion) last year, a 25% surge in net income.

Phillips 66 reported first-quarter earnings of $582 million, with adjusted earnings of $595 million.

In 2021, Phillips 66 reported a first-quarter loss of $654 million, with an adjusted loss of $509 million.

[dchill]

10. Lower the gas prices and see what happens.

[uponit7771]

23. +1, IINM over 3.50 gallon national avg gas starts to be an inflationary factory in total price index

[Voltaire2]

27. How?

Biden has no way to do that.

[dchill]

33. I know. Only greedy CEOs...

...with no reason to do anything of the kind could do that.

[TigressDem]

11. The current crises is being used to drive up gas prices which affects everything else.

If it costs more to get your supplies here, you have to charge more for them.

NOW there may be MANY other reasons for inflation, BUT THIS ONE we can SEE and take care of quickly.

AS SOON as their excessive profits get subject to a WINDFALL tax, the oil companies will self regulate to not have to pay those.


IT WILL MAKE THEM LOOK SO WONDERFUL.

WE ARE LOWERING PRICES, aren't you SO grateful?

(After they jacked them up in the first place.)


Like a HUGE SALE on items that are 200% - 400% over priced to begin with. Even 50% off is a drop in THAT bucket.

[uponit7771]

22. +1, this is 33% of the *REAL* price inflation IMHO. UK is pondering a windfall tax we should follow

[TigressDem]

26. Oil companies did this Partially to deflect the cost of breaking off with Russian oil

BUT if they continue, it's BS

I think they will lower prices so they can be seen as the "good guys" after their initial greedy grab.

[ShazamIam]

12. I think one important step is to break up the near monopolistic retailers, like Walmart, Amazon, the

now mostly private equity owned grocery retailers. Notice, clothing and entertainment are very cheap but all the necessities are up,

Energy/utilities and food production and distribution are controlled by a few corporate leaders. Almost no public housing investment since 1981.

[LexVegas]

14. Recession. How bad / long of a recession...

[Dave says]

15. Steep recession

It’s coming.

[uponit7771]

20. Maybe, I don't see the recession being steep with near negative unemployment which is one of

... the reasons inflation is higher in US the M$M doesn't want to report on.

It might be steep in GDP or other alphabet metrics but Americans care about JOBs and even a 50% increase in UE rate (knock on wood) wouldn't be catastrophic.

[roamer65]

29. Stagflation is back.

It’s going to be like 1979 all over again.

Time to bring back disco!

[uponit7771]

18. Deficit reduction and pricing/wage equilibrium. America also is near negative unemployment which ..

... is also an upward pressure on prices but butter have that than positive unemployment.

[WarGamer]

30. Q2 GDP numbers released a month from now will show a negative GOP.

We will officially be in a recession in July.

But we already knew that, we're living it.

Not a chance inflation abates this year... we're probably looking at next year to see noticeable improvement.