Inflation

[divs4ever]

unless the market ( and possibly bond market ) have a 'taper tantrum ' ( and ruin the Democrat chances of a mid-term victory ) they ideally need a rate above 2% ( whether that is 4% , 6% or more ,time will tell )

but the government needs to inflate all that easy money away , because no way US tax-payers will tolerate the tax hikes necessary

AND the RINO Republicans probably only have war as an answer as well

but i guess time will tell world war or civil war ??

 

[divs4ever]

Rapid rise in mortgage rates startles homebuyers, who blame inflation fears​

Rapid rise in mortgage rates startles homebuyers, who blame inflation fears

The average 30-year rate was 3.08% in November but shot up to 3.54% by mid-January. The speed is a bit startling, but so was the spike in inflation.

www.usatoday.com

DYOR

( they may be right , or they may be wrong )

 

[over9k]

Take and apply for all kinds of stuff and then you'll understand why we're seeing so much inflation. It's all supply side.

 

[Knobby22]

View attachment 136538

View attachment 136539

Take and apply for all kinds of stuff and then you'll understand why we're seeing so much inflation. It's all supply side.

Yes, that's my problem. It's mainly supply side.
And any rate hikes in the present fragile environment will bring a recession. So many businesses are in debt due to Covid. Home buyers also. A small rise is likely to send the economy over the cliff.

The inflation feels transitionary to me.

 

[sptrawler]

unless the market ( and possibly bond market ) have a 'taper tantrum ' ( and ruin the Democrat chances of a mid-term victory ) they ideally need a rate above 2% ( whether that is 4% , 6% or more ,time will tell )

but the government needs to inflate all that easy money away , because no way US tax-payers will tolerate the tax hikes necessary

AND the RINO Republicans probably only have war as an answer as well

but i guess time will tell world war or civil war ??

Capitalism doesn't work without inflation, a business can't operate over the long term, if its income doesn't increase and its input costs keep rising IMO.

 

[waterbottle]

Yes, that's my problem. It's mainly supply side.
And any rate hikes in the present fragile environment will bring a recession. So many businesses are in debt due to Covid. Home buyers also. A small rise is likely to send the economy over the cliff.

The inflation feels transitionary to me.

Agreed. Supply side problems as employees have died or production shut down due to restrictions/lockdowns.
Now we're adding higher costs of debt to the mix? That will only exacerbate the problem....

If the issue is supply side, then what credible solutions do they have?

 

[over9k]

Yes, that's my problem. It's mainly supply side.
And any rate hikes in the present fragile environment will bring a recession. So many businesses are in debt due to Covid. Home buyers also. A small rise is likely to send the economy over the cliff.

The inflation feels transitionary to me.

Agreed. Supply side problems as employees have died or production shut down due to restrictions/lockdowns.
Now we're adding higher costs of debt to the mix? That will only exacerbate the problem....

If the issue is supply side, then what credible solutions do they have?

Hence me saying stagflation is coming

 

[waterbottle]

P

Hence me saying stagflation is coming

It's possible. Do we have the right components though?
Unemployment is low, growth is up. Sure, that may reverse if interest rates increase but that would be a reason for reserve banks not to increase them.

 

[waterbottle]

Just to add, PBOC has been reducing rates with plans for further policy easing, despite being exposed to the same inflationary pressures as the US

 

[over9k]

P

It's possible. Do we have the right components though?
Unemployment is low, growth is up. Sure, that may reverse if interest rates increase but that would be a reason for reserve banks not to increase them.

Demographics, debt.

 

[waterbottle]

Demographics, debt.

Demographics is inevitable and being addressed via automation (if you're referring to its impact on production).
Debt is also inevitable. Zero debt is a pipe dream.

 

[divs4ever]

automation brings it's own issues ,(try to explain to your lender or lessor ) that you want to cut back on the machines/payments during the tough cycles , ( sadly it is MUCH easier to lose jobs )

Capitalism doesn't work without inflation, a business can't operate over the long term, if its income doesn't increase and its input costs keep rising IMO.

i disagree capitalism ( although they call it entrepreneurial spirit ) works fine in such times , productively is increased , costs lowered , new markets and strategies found , it sorts the ambitious and intelligent , from the rest

unfortunately currently capitalism is ham-strung, red-taped and crippled , and incentive has been sucked from the workforce ( which IMO makes it a great time to be retired .. or a 'rag and bone man ' )

BTW all that automation is removing CONSUMERS from the economy

it is the Super investments propping up the markets and capital investments

 

[sptrawler]

automation brings it's own issues ,(try to explain to your lender or lessor ) that you want to cut back on the machines/payments during the tough cycles , ( sadly it is MUCH easier to lose jobs )


i disagree capitalism ( although they call it entrepreneurial spirit ) works fine in such times , productively is increased , costs lowered , new markets and strategies found , it sorts the ambitious and intelligent , from the rest

What I was meaning by the statement was, a lot of the inputs into a business can't be controlled they are regulatory or influenced by outside forces e.g rates, rents, electricity, insurance, shipping costs, port handling charges, increased price of the product from the source.

I would assume those costs continually rise ( I know my rates, rego's, insurance etc have), a point must be reached where those costs erode a businesses margins to the point they either have to pass on those costs or go broke.

If a business buys in a product to sell and can't sell it for enough profit to cover their outgoings they will go broke eventually, so in reality the price of that product must go up as a function of increased costs, or the system fails.

Well that's my working out, the capitalist system we in Australia work in, whereby the private sector provide the countries trade and industries and the Govt provides services, unless the private sector can make money the system fails.

Which is why the Govt had to pour so much money into jobkeeper, otherwise there wouldn't be any goods available, when shoppers came out to shop, because the businesses wouldn't have been able to pay their suppliers and it would have imploded.

So really unless you can stop the price of statutory costs, energy costs, insurance costs etc rising, inflation is a naturally occurring event in the capitalist system.
I we had a socialist system, where the Govt owned everything, that's different. The Govt can just regulate the prices and take the loss into consolidated revenue, but that ends up with a dilemma when the taxes have to be so high to cover the loses, there is no point in striving to get ahead because you taxes become too onerous.
Just my thoughts.

 

[Smurf1976]

So really unless you can stop the price of statutory costs, energy costs, insurance costs etc rising, inflation is a naturally occurring event in the capitalist system.

Agree with the rest but it could be argued that the existence of central banks with their tendency to debase the currency is not something that naturally occurs in a capitalist system.

As a case in point, in a true free market interest rates would go wherever the market sends them. They'd never be "announced" and certainly not by someone appointed by government.

 

[sptrawler]

Agree with the rest but it could be argued that the existence of central banks with their tendency to debase the currency is not something that naturally occurs in a capitalist system.

As a case in point, in a true free market interest rates would go wherever the market sends them. They'd never be "announced" and certainly not by someone appointed by government.

That's true but we don't live in a true capitalist system, we actually have a hybrid system which works extremely well and why we in Australia enjoy such an affluent lifestyle.
In a true capitalist system, the Govt wouldn't be involved in providing services, services would be a private sector user pays system, rather than a system that is taxpayer subsidised.
Unfortunately many don't appreciate how well our system works IMO.
The central bank has to debase the system to try and maintain relitivity with our trading partners as far as I know. Which became a huge problem in the GFC, when the U.S used its advantage as the reserve currency, to make its product cheaper than currency linked competitors, well that's what I read into it.

 

[divs4ever]

What I was meaning by the statement was, a lot of the inputs into a business can't be controlled they are regulatory or influenced by outside forces e.g rates, rents, electricity, insurance, shipping costs, port handling charges, increased price of the product from the source.

I would assume those costs continually rise ( I know my rates, rego's, insurance etc have), a point must be reached where those costs erode a businesses margins to the point they either have to pass on those costs or go broke.

If a business buys in a product to sell and can't sell it for enough profit to cover their outgoings they will go broke eventually, so in reality the price of that product must go up as a function of increased costs, or the system fails.

Well that's my working out, the capitalist system we in Australia work in, whereby the private sector provide the countries trade and industries and the Govt provides services, unless the private sector can make money the system fails.

Which is why the Govt had to pour so much money into jobkeeper, otherwise there wouldn't be any goods available, when shoppers came out to shop, because the businesses wouldn't have been able to pay their suppliers and it would have imploded.

So really unless you can stop the price of statutory costs, energy costs, insurance costs etc rising, inflation is a naturally occurring event in the capitalist system.
I we had a socialist system, where the Govt owned everything, that's different. The Govt can just regulate the prices and take the loss into consolidated revenue, but that ends up with a dilemma when the taxes have to be so high to cover the loses, there is no point in striving to get ahead because you taxes become too onerous.
Just my thoughts.

yes many of those cost rises are indexed ( plus the GST shell game )

HOWEVER an adaptable business will find ways to cope ( which may or may not please the government ) , and yes passing on costs is always an ( unpleasant ) option , you would rather produce more ( IF you can be sure of profitable sales )

the Socialist system ( notice the capital 'S' ) is coming with all it's flaws and repercussions , prepare for oligarchs and cottage ( probably illegal ) industries and a super-bloated bureaucracy

option B. is close ( or sell ) the business while you can without having crippling debt , and plan your next step ( maybe migrate , maybe retire while you still have some Super , maybe become a professional student .. Leftists adore them )

remember if the government could do a good job running a business , it would still own CBA , TLS , CSL ,AZJ., MPL , Australia Post ,to name a few and have a very nice regular income ( so it would need to raise less in taxes ) you don't have to guess here , we have a track record

 

[sptrawler]

Absolutely @divs4ever the system which has served Australia so well, can only cope with so much, eventually the point is reached where the few who contribute are overwhelmed by those that don't.
The funny thing is, those that contribute say little, those that don't complain endlessly.
As you say the socialist system will eventually succeed and then there will be happiness, everyone will be equal as is the case in China and the USSR, I mean Russia. ?

 

[divs4ever]

actually North Korea was springing to mind , remember there will be Cancel Culture as well so only beautiful people will be allowed to live in the cities ( out to the sticks with you when you are a little old and not connected enough for cosmetic surgery )

i do NOT see equal 'as in Cuba ' after all we are already over-spending in fancy war machines , so no pretense of self-sufficiency

China will still want entrepreneurs they plan to expand to the Moon and beyond

 

[mullokintyre]

last night the Fed fessed up and admitted that inflation is " slightly worse " than expected, though still transitory.
So now they expect a rate rise in March.
From Kitco News

(Kitco News) Federal Reserve Chair Jerome Poll described the current inflation situation as "slightly worse" than in December, stating that there is …. Without hurting the labor market.
"There's quite a bit of room to raise interests without threatening the labor market. This is by so many measures a historically tight labor market — record levels of job openings, quits, wages are moving up at the highest pace they have in decades," Powell told reporters.
All eyes were on the Fed chair Wednesday afternoon after the U.S. central bank held rates steady but singled a rate hike in March.
Powell clarified the Fed's thinking around the March rate hike, stating: "The committee is of the mind to raise the federal funds rate at the March meeting."
In response to Powell's message, gold plunged more than $35, with February Comex gold futures last trading at $1,815.70, down 2% on the day. The U.S. stock market also reversed gains following Powell's press conference, with the Dow falling 0.9%, the S&P 500 down 0.8%, and the Nasdaq dropping 0.6%.

So the markets response was to drop everything and run to the USD.
A fiat currency that has been severely devalued by QE and inflation.
Makes so much sense.
Mick

 

[waterbottle]

last night the Fed fessed up and admitted that inflation is " slightly worse " than expected, though still transitory.
So now they expect a rate rise in March.
From Kitco News


So the markets response was to drop everything and run to the USD.
A fiat currency that has been severely devalued by QE and inflation.
Makes so much sense.
Mick

The flight to USD is transitory