Inflation? And then what?

[MrPrena]

Although Ron Paul talks obvious stuff, many do not take him seriously. People wants something cheap and easy loan now. We will probably heading to direction similar to Greece (debt ratio) very soon.

[Vic Tory]

And of course, now the government wants to deal with inflation by throwing more money at people. Hmmm....prices are high, we give people more money so they can spend. What could possibly go wrong?

A BIG part of the problem is too many of the Millennial voters do not even know what inflation really is. Inflation is the creation (We used to say "printing".) of more fiat money [Latin for "let it be done." There's nothing "backing" fiat money but "the good faith and credit of the Federal Reserve."] by the Fed. Flooding the economy with more dollars "helps" only temporarily.

When wholesalers A, B, C, D through J realize they're being paid with dollars which are WORTH LESS than they were three months ago they (naturally) raise prices. Those wholesalers' customers -- the retailers and service industries -- (naturally) raise THEIR prices. The consumer / taxpayer takes it in the wallet.

Remember, CORPORATIONS DO NOT PAY TAXES. Their customers pay their taxes -- in the form of increased prices.

Where do you think the 2.2 TRILLION dollars of Covid relief (Trump administration) came from? The Fed electro-magically CREATED those dollars.

My question to the group: At what point does inflation start putting a damper on economic growth? As in, when do people have to spend all their $$ on NECESSITIES so they start cutting back on luxuries like eating out, travel, recreation, etc?
<Snip>
My inclination at this point is to cut back on my "discretionary" spending and try to ride out the storm. If others do the same, we might see prices start to drop, but if the Feds just start throwing money at anybody with a pulse, we'll see crazy inflation get even worse.

You answered your own question.

Because hundreds of thousands of American families are already reducing discretionary spending, economic growth is already being impacted. (Don't look at the Stock Markets to recognize this impact. Look at the prices of ... groceries, tires, home repairs, AMMO, etc..)

If your family isn't ready for *asinine* hyper-inflation, you'd better hurry and get ready.

• PRAY!!!
• Pay off your credit cards. Interest is financial DEATH.
• Stock up on Beans, Bullets and Band-Aids.
• Get to know your neighbors. In a crisis, if you haven't formed a group of people on whom you can depend, your neighbors are probably "it".

[hollohas]

Well. The so-called infrastructure bill passed thanks to some turncoats. And it's 1 point whatever trillion dollars "doesn't cost anything" so that gonna jack inflation even more. These dipshits actually think it will HELP the economy.

The constantly super low interest rates haven't helped this all either. As much as I hate paying interest on anything and don't want it to go up, money isn't free. When we act like it's free with crazy low or no interest, this sorta shit happens. Add unlimited gov spending on top of nearly interest free money to everyone, this was a long time coming.

[MrPrena]

I highly respect people/consumers during Nixon to reagan admin.
One of the fight against inflation is higher rate and Paul volker did a good job. Sadly the rate was very high.
I remember my family friend had 12% loan on the house.

I know this comment is not popular and we should be at around 4 to 6% rate at this time.

I

[Gman]

Civics hasn't been taught in public schools for quite some time. From what I understand, neither has 'Personal Finance' or similar subjects that teach one how to manage your own money after high school. Wouldn't surprise me that many of the younger voters have no concept of how our government is supposed to function. Also doesn't surprise me that many folks that just focus on making minimum monthly payments have any clue as to the long-term negative impact to our economy with this bottomless spending.

[Circuits]

A BIG part of the problem is too many of the Millennial voters do not even know what inflation really is. Inflation is the creation (We used to say "printing".) of more fiat money [Latin for "let it be done." There's nothing "backing" fiat money but "the good faith and credit of the Federal Reserve."] by the Fed. Flooding the economy with more dollars "helps" only temporarily.

Inflation, like interest, is a reflection of the time value of money. Money in hand now is worth more than the same amount of money in hand later, reflecting liquidity and opportunity cost.

If our money were on a precious metal standard, money now is still worth more than the same amount of money a year from now, even if it will still buy all the same things, because for a year you didn't have the money to buy those things, so couldn't buy the things or use them for the intervening year.

[Delfuego]

We're talking Venezuela levels of inflation,

The Venezuela hyperbole has gotta stop. This is a not-so-clever sound bite. The USA and Venezuela have zero things in common. Period.

[Delfuego]

Yep...first house I bought in 1983 was with a VA loan at 12.95%. A typical car loan for someone with good credit was 17 to 19 percent. A passbook savings account was earning around 10%.

On Tues the lender locked in our rate on the new house in Ada at 2.247% for a 30 year VA loan.

I am no economist and this is not financial advice This is just my perspective so take it with a grain or 2 of salt.

I believe this is the illusion. I think we are paying less interest on inflated prices. It makes us feel like we are getting a better deal. The Fed is printing imaginary money and loaning it for zero percent (or less) to banks and they loan it to people. US bonds often have a negative yield/return. They are flooding the market with cheap capital and they say it's good for everyone. Prices of property keep going up and wages simply don't. The middle class is disappearing and the USA seems to be slide into a 2nd world country with the "have" and the "have not". Remember the banks are still making extra money on the back-end too with CDS (credit default swaps) or whatever the have renamed them too after 2008.

Please take a look at the 2 loans below. One is a $300k home loan at with high interest, the other is a $600k home with low interest. I simply don't see much difference for the homeowner in the end. This encapsulates how I feel and what I see. Maybe I am way over simplifying things, but I have watched home prices here in CO double and triple and it seems like people are more house poor than ever before. I feel like everything is sold at a "discount" now. Nothing has a price, it's always some sort of a discount, coupon, introductory price, limited time special, member price, etc, etc.

I simple get the feeling that we are getting duped. It's like when car sales men write arbitrary numbers on paper and keep circling them and assuring you you are getting a great deal and they are loosing money on this.. The banks and lenders are making more money now than in the history of mankind, but somehow I'm getting 0% interest. What a deal!

I am off my soapbox. Feel free to flame me on my ignorance.

Attachment 88295Attachment 88296

[MrPrena]

Lets take a look at elasticity relative to income and demand

-The fastfood dollar menu is now about 1.50 to 2.50.
- dollar tree finally finally finally decide to sell items more than $1.
-store and genetic brand price is rising like crazy.


eom

[Martinjmpr]

The Venezuela hyperbole has gotta stop. This is a not-so-clever sound bite. The USA and Venezuela have zero things in common. Period.

Yeah the Venezuela comparisons make no sense. Same for those who want to compare inflation to what happened in Weimar Germany after WWI.

I don't see this as any kind of sinister plot, but just a "perfect storm" of different events all having a similar effect:

Think about where we were in mid 2020 when it seemed like large sectors of the economy (particularly in the service and entertainment industry) were on the verge of collapse due to COVID.

If you think about it, last year there were a lot of things that people typically spend money on - dining out, movies, sporting events, concerts, etc - that were not available to them. So that money was saved and often not spent on other things.

Travel - for much of 2020 people couldn't travel outside the US, and even travel IN the US was restricted, and often the things that people might travel to see were closed. So, again, that money wasn't spent and it was saved.

People unsure about the economy also pulled their spending back, not sure if they'd have a job or if the economy itself would collapse (as some predicted it might early on in the COVID days.)

COVID shutdowns causing manfacturing of key components causing inventories of available products to plunge.

And finally, the government pumped out money to people in the form of stimulus checks.

Simple supply and demand: More dollars (demand) chasing fewer goods (supply) = inflation.

In theory, at least, once people burn through that money that's burning holes in their pockets, demand will drop and supply will catch up which should slow inflation.

Unfortunately I see some people saying "we need moar stimulus checks!" which would be like trying to fight a raging fire by spraying gasoline on it.