Talk about the last time the US , UK and elsewhere had bad inflation. What was happening then . Maybe similar demand is necessary. Year 2005 .
I had a guy quoting a bathroom remodel. He quoted $65 hour and $35 hour for his
helper/son. I asked if his son was to become a master plumber. He said no, he was a
Software engineer student. I said no. Point is , that he could GET $100 hour . There was high demand for his service. South American labor was everwhere in the trades sending USD across borders. A seamstress i knew was the owner, landlord and potential flipper of three properties in my town. A friggin sewing lady!
Everyone had virtial home equity ATM in their living room to fund anything.
Unemployment 4.4% or rather, what was considered full employment .
Government was doing their part, borrowing, spending.
A commodity bubble with WTI at $140 with forcasts north of $200. Food shortages
and subsequent food price infation with civil unrest and riots in some countries.
Price of rice was very high.
Steel, ore, coal, potash/fert, copper, gold were also bubbles. Farm, engineering, construction and mining products and industries were in high demand mostly driven
by China. Maybe Canada and Aus. were the only majors not in super malinvestment frenzy.
Only in the face of this scenario did the Fed start tightening with 7 rate hikes preceding the crisis.
Sure the Fed is always slow, " behind the curve" , unable to recognize a bubble but my point is this. I think the fed loves those bubble times. Doing a fine job.
That is high inflation. A bubble. It is caused by shortages and high consumer demand/spending. Does anyone see this now?
A couple generations were burnt. The boomers are de leveraging/saving .
The younger folks, most, really unaware of the above, have poor debt/equity ratios due to shool and car loans. People dont want or cant qualify for the vast monies available at low rates and, as someome has said, there is no money velocity.
-1 gdp. 1 data point but this is a tepid growth and expansion. Structural unemployment with no wage pressure(used to be fed enemy number 1).
Consumers are levered with low paying jobs and that is why inflation is low.
Theory aside.
I do realize inflation in my goods and services are high relative to my rate of pay increases amd i dont like it either. So, my purchasing power is worse this year than it was last year so i wont be inflating anything.
Big week in central bank land. I guess euroland has low inflation as well.
I know the subject of this thread is LOW inflation but ijust dont understand
how some think rates will soar and prices will inflate anytime in the next few years.
I think it is required spin/optimism of tightening in 2015 of the fed funds rate similar to the mantra " the expansion will pick up speed" next year. Bullshit.
Really , can anyone see a tightenimg cycle to reduce the demand for credit?
By the way, wasnt Bernanke quoted to the effect that he could stop inflation in fifteen minutes? Some reverse repo thing. I would have to google that or ask Martin, who i hear sips Cognac with French bankers.
