Are you feeling Biden's inflation yet?

Discussion in 'Economics & Trade' started by kazenatsu, May 16, 2022.

  1. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    But that should be over by now, shouldn't? How long will it take that to end?
     
  2. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    I keep repeating this again and again and again: The issue is not the Fed "raising" interest rates, but rather the Fed not continuing to artificially keep them down.

    Do people understand the difference?

    It can cost a lot of money to keep them down, and that can lead to inflation.

    When there is inflation, obviously natural interest rates want to rise. Which costs even far more money if you want to try to keep them "down".

    The Fed is NOT "raising" rates in this situation. They are just not actively lending out "free money" to keep them down. There is a difference between the active and passive role. The Fed "raising" interest rates really means they are just not doing anything.
     
    Last edited: Jun 1, 2022
  3. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    Yes, which again just contributes to more inflation. If the assets on their balance sheet are worth less, then that's going to contribute to inflation, since in a theoretical sense the value of the dollar is tied to the assets on the balance sheet.
     
    Last edited: Jun 1, 2022
  4. gfm7175

    gfm7175 Well-Known Member

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    Is there some common thing... some common energy-related goal... that all "Western nations" are chasing after that all "Eastern nations" are not chasing after?
     
  5. cristiansoldier

    cristiansoldier Well-Known Member

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    Certain areas are alleviating but businesses take a lot of time to transition. Just as you asked why was it all happening now instead of earlier it took markets time to adjust. Supplies still existed in warehouses even when production slowed. Companies horded components because they knew the tariff was coming. The full impact took time to trickle through the system. Things like the China tariffs will not go away until someone removes them and I can't see a democrat president giving up free tax money especially when they can't be blamed for it. Production overseas still has not reached full capacity yet. China only recently ended the covid shutdown in Shanghai. There is still huge shipping problems because of the lack shipping containers in China. Part of this now is a logistics problem.

    I was talking to an old friend who works for a small start up tech engineering company. She was complaining how it is still crazy trying to get components because everyone is bidding up the prices. The demand is world wide so suppliers will sell for the highest price they can get. They have reached a point where they cannot raise prices anymore and reasonably expect their clients to buy their equipment.
     
  6. Zorro

    Zorro Well-Known Member

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    I get it and it's an important point. Thank you.
    I have at best a fuzzy grasp of this, so I'm just trying to think it through, I'm not claiming knowledge, but, Selling:
    • Private investors take money out of other other assets and give the money to the fed.
    • That would seem to reduce dollars in circulation, which should put upward pressure on the dollar and downward pressure on inflation.
    When I look at the change in both, I read:

    [​IMG]

    2008/2009 - Dollar started to strengthen, which the fed counterbalanced by adding to the balance sheet.
    2014 - mid 2019 - They were trying to unwind, then shifted directions - hard.
    2022 - They are ready to try again, but burned by the mid 2019 experience, they are moving much slower and more deliberately.

    Your thoughts?
     
    Last edited: Jun 1, 2022
  7. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    Keep in mind a lot of those "assets" are just more debt that the Fed is buying from the US Treasury, that will never really be fully repaid, due to inflation. Which is why Fed "asset levels" can change in this situation without affecting value of the dollar.

    You can also expand the supply of dollars so long as the assets expand in proportion to that, without causing inflation. (Theoretically)

    To get into the actual details of it, rather than just the basic overview, is very complicated, more complicated than this thread will allow.
     
    Last edited: Jun 1, 2022

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