Maybe if the economy tanks we can borrow some funds from Ukraine to finance a stimulus program per the Madoff School of Public Policy Financing.
These statements about transitory inflation are bs, it is INFLATION!
- Thread starter wildchild
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Maybe if the economy tanks we can borrow some funds from Ukraine to finance a stimulus program per the Madoff School of Public Policy Financing.
According to your chart, earlier prices rises “Ate like an elephant” while recent price declines are “Shitting like a bird”, making it hard to characterize recent data as any sort of win in the big picture.
Actually, this looks to be a chart of freight rates between two specific ports, not maritime freight rates in general, although the dry baltic freight index has dropped. In addition, rates between these ports may have been adversely affected by China’s Covid lockdowns.
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Of course, the answer to fighting inflation is never reining in inefficient Government spending, right?
I’ll agree with you on the Fed being too aggressive with rate hikes. After over a decade of extraordinary low interest rates, the relative status quo of consumer spending habits gets taken for granted. A doubling of mortgages and other consumer rates profoundly affects the affordability of homes and will crush consumer discretionary spending, more so than the net of inflation between wages and consumer prices. This in turn will adversely affect capital spending and hiring in other industries, including tech. Regulatory concerns, including the ramping up of IRS enforcement, will likely adversely affect capital investment. The strong US dollar makes US produced goods more expensive relative to foreign produced goods, increasing competitive pressures on US companies that will likely reduce new orders. Once factory backlogs are caught up, we will really start to feel this. In other words, it is becoming increasingly unlikely a soft landing will be achieved. There is more to this story, but enough for now.
government spending will never be reigned in as it has expanded under both dem and gop leadership....so its a done deal. Inflation will be fought in the private sector for the most part which takes time and natural flows no matter what the fed or election cycles want.
when demand is strong and supply is tight like we had for almost 2 years...prices go through the roof and suppliers don't just chop prices down at the same velocity. It comes down bit by bit to release excess inventory.
You seem to be describing a free market system, however, large amounts of inefficient Government spending and subsidies causes pricing dislocations, including an increase in general inflation rates, that can last for years, if not decades. US government spending has been increasing as a percentage of GDP for a long time, seemingly accelerating in recent years. This is changing the nature of our economic system where the end result is productivity gains become harder to come by resulting in a lower standard of living for more people. This manifests in shortages of goods and higher prices even without sudden shocks to our supply chain. Long term distribution of income statistics seem to support these contentions. So while the long term adjustment mechanism regarding allocation or goods may ultimately be price, subsidies can impact that adjustment process for a long time. Subsidies can also hide some of the adverse effects of Government spending for a long time as well.
Let’s discuss inefficient Government spending in a little more detail. Imagine what could happen if the Government invested or encouraged the investment in multiple, large energy infrastructure projects that ultimately reduced the cost of energy by stabilizing supply and reducing price shocks. The cost of producing energy is more than just the cost of exploration. There are financing costs which can be affected by inflation due to potential changes in monetary policy as recently seen, there are regulatory costs that can affect willingness of energy companies to undertake exploration, and there are public resources that includes Government owned land that can also lower the risks and costs of exploration. Stable energy prices can reduce energy price risk premiums leading to a lower average price of energy needed justifying capital spending in energy projects. Given that current energy costs in manufacturing, transportation, and household expenses are rather high now, what would happen to inflation if these costs were reduced? Now consider the effect of inefficient Government spending such as subsidizes to foreign companies and excessive defense spending for a guns versus butter type of argument.
Bottom line, inefficient Government spending interferes with price discovery, often reduces productivity leading to reduced standard of living for most, and is inherently inflationary in proportion to the amount of spending. No free lunch for everybody, but if we get our energy policy right, we will all benefit.