It's different this time...?

[living sounds]

Was it not believed in Milton's day that emerging 1st world nations continually increase their export of goods out of self interest? With respect to China, that appears to no longer be true when reviewing shipping container tracking apps.

What exactly do you mean?

 

[shabtek]

Me too.

I had to pay it back

 

[john12ax7]

Considering borrowing to not be inflationary may be correct in a long term average sense,

It is correct in the aggregate sense. Suppose money is borrowed and spent in one area, yes that could increase demand and prices in that area. But the person loaning the money has now given up purchasing power, which will then lower demand and prices in another area. When both sides are considered in total aggregate demand and aggregate prices would be stable.

Regarding interest rates, they are part of same cloth as money supply.

 

[john12ax7]

I'm still eager to understand how a $600 check 18 months ago caused such lasting worldwide economic damage.

It might have had a small impact depending where the money came from. But one only needs to look at M2 and the Fed balance sheet to see the real culprit. Something like $6T, that's about $20k per US person. So if you didn't get $20k you are in the negative and will be paying for it for years to come. On top of that most of the money went to the wealthy and a good part was to criminals who committed outright fraud. These fine folks then in turn used the handouts to price many hardworking people out of home ownership, and then endlessly complain when workers ask for higher wages to make ends meet.

Basically you can take $20k, subtract any money you got, and then consider the delta a forced personal donation to the wealthy to be paid off in monthly installments through inflation. One of greatest swindles in history. For some reason it is ok to force people to give money to the wealthy, but should a few dollars go to the poor it causes great outrage.

 

[shabtek]

yeah but ,trickle down

 

[JohnRoberts]

The president of Mexico has a suggestion for how to help reduce our inflation, allow more migration from Mexican workers.

If this can be traded for improved border security I'm in...

American industry is short of workers.

JR

 

[living sounds]

The president of Mexico has a suggestion for how to help reduce our inflation, allow more migration from Mexican workers.

If this can be traded for improved border security I'm in...

American industry is short of workers.

JR

It's the de-globalization that so many people wanted... or didn't they?

 

[JohnRoberts]

I am seeing a deflationary counter trend at least for imported merchandise... during the supply chain interruptions, merchants over ordered inventory to make sure they would have something to sell. Now all those extra orders are arriving with no need for the excess inventory. Some vendors are transferring incoming shipments directly to inventory liquidators. It might be a good time to buy big screen TV from secondary merchants.

I don't expect this to significantly change any major market trends but might make short term goods inflation look less bad than it is and will return to.

It's the de-globalization that so many people wanted... or didn't they?

IDK?

Mexico is our single largest trade partner. They too are suffering from high inflation. Not sure how this would help inflation beside increasing GDP (economic output).

This could be a win-win for both countries. US-Mexican relations have not been good lately, but what else is new.

JR

 

[living sounds]

IDK?

?

I meant the shortness of workers.

 

[JohnRoberts]

?

I meant the shortness of workers.

That may be a stereotype they aren't all short.
===
The US industry clearly needs more workers, and Mexican citizens need jobs so that much is a good fit.

Globalization is complex topic with multiple interacting factors. In general increased world trade is a good thing raising millions(?) out of poverty world wide. Of course economic power is at play in world relations.

JR

 

[Soundwaves]

Around our town, everywhere you look there are help wanted signs.

 

[shabtek]

criminals, rapists, walls etc

i have been hearing more and more about people going to mexico from US to receive medical care for various serious and not so conditions.
I am not really pleased with my personal experiences in that sector (US medicine) lately

 

[living sounds]

Inflation was higer again in the US (9.1%). But gas prices actually went down in recent weeks, the supply issue is fading somewhat due to China exporting more again and there are signs of an impending contraction of the housing market (in turn lowering demand for many other products and services from furniture to travel). So the FED might change its course in a few months...

 

[JohnRoberts]

criminals, rapists, walls etc

i have been hearing more and more about people going to mexico from US to receive medical care for various serious and not so conditions.
I am not really pleased with my personal experiences in that sector (US medicine) lately

Mexico is notorious for allowing consumers to self-prescribe prescription drugs. I knew people in SOCAL who would day trip to TJ for buying prescription drugs without the script.

Inflation was higer again in the US (9.1%). But gas prices actually went down in recent weeks,

that was the administration talking point yesterday when they saw this high inflation number coming.

the supply issue is fading somewhat due to China exporting more again

There are positive trends indicating supply chain is easing. One indicator is ocean shipping rates that had risen quite a bit, are now falling, suggesting excess ocean shipping capacity. Coincidentally mass covid testing in shanghai and zero covid policy could result in new delays. Right now the supply chain has excess goods inventory, so relatively quiet for now.

and there are signs of an impending contraction of the housing market (in turn lowering demand for many other products and services from furniture to travel).

This is fully expected from rising mortgage rates, that increase monthly cost for home buyers. I am not sure how interest rates could significantly impact travel?

So the FED might change its course in a few months...

That is the trillion dollar question... whether the fed will blink again.

IMO to break the back of inflation they need to keep withdrawing liquidity and raising interest rates from here, insuring a deeper recession. So far they have bailed out the stock market every time in the recent past so market expectations are mixed.

I only know that I don't know but it seems different this time.

JR

 

[living sounds]

that was the administration talking point yesterday when they saw this high inflation number coming.

It's just a fact.

There are positive trends indicating supply chain is easing. One indicator is ocean shipping rates that had risen quite a bit, are now falling, suggesting excess ocean shipping This is fully expected from rising mortgage rates, that increase monthly cost for home buyers. I am not sure how interest rates could significantly impact travel?

People will have to cut down on any non-essential spending like vacations in order to be able to pay higher mortgages. Or like furniture, which incidentally will also suffer because fewer houses are build/sold. My sources tell me that some furnuture dealers have sold hardly anything in the past six months.

Less spending will mean less revenue which in turn will mean business will have to let people go or even close etc. Recession. At that point the FED, which has the unsolveable task of keeping inflation as well as unemployment in check (unlike our central bank, which only looks at inflation) may decide that it's time to change course.

 

[JohnRoberts]

It's just a fact.

They were arguing that the "fact" (their own inflation number) should be discounted because it doesn't reflect recent sagging energy prices. They are arguing for a hypothetical lower next inflation number. Expert opinions vary about that (no I am not the expert, but above average).

People will have to cut down on any non-essential spending like vacations in order to be able to pay higher mortgages. Or like furniture, which incidentally will also suffer because fewer houses are build/sold. My sources tell me that some furnuture dealers have sold hardly anything in the past six months.

Less travel perhaps for future home buyers, not sure how much that will help. Homebuilders have been challenged with materials cost increases, lack of labor, etc. Rising interest rates will price many marginal buyers out of the market. Some might just decide to take a vacation, but the airlines are having trouble keeping up too.

Less spending will mean less revenue which in turn will mean business will have to let people go or even close etc. Recession. At that point the FED, which has the unsolveable task of keeping inflation as well as unemployment in check (unlike our central bank, which only looks at inflation) may decide that it's time to change course.

Huh? This has been very publicly discussed. The low unemployment rate means that the fed off the hook wrt that, while we still suffer from low workforce participation rates. The FED are telegraphing another 75 basis point increase (3/4%) later this month.

The target inflation rate is 2% while the recent reported number is 9%. The central bankers have been trying to talk down rising inflation expectations. The test will be to see how the fed acts after they see the stock market react to the next rate increase (and the 2nd quarter GDP number will be final making the recession we are already in official. )

or not...

JR

 

[living sounds]

They were arguing that the "fact" (their own inflation number) should be discounted because it doesn't reflect recent sagging energy prices. They are arguing for a hypothetical lower next inflation number. Expert opinions vary about that (no I am not the expert, but above average).

Less travel perhaps for future home buyers, not sure how much that will help. Homebuilders have been challenged with materials cost increases, lack of labor, etc. Rising interest rates will price many marginal buyers out of the market. Some might just decide to take a vacation, but the airlines are having trouble keeping up too.

Huh? This has been very publicly discussed. The low unemployment rate means that the fed off the hook wrt that, while we still suffer from low workforce participation rates. The FED are telegraphing another 75 basis point increase (3/4%) later this month.

The target inflation rate is 2% while the recent reported number is 9%. The central bankers have been trying to talk down rising inflation expectations. The test will be to see how the fed acts after they see the stock market react to the next rate increase (and the 2nd quarter GDP number will be final making the recession we are already in official. )

or not...

JR

Obviously not now. When the economy has actually gone into a recession and the job marked has turned. Now they are expected to further increase interest rates. But there might be a very hard fall (not the season) ahead forcing them to reverse course.

 

[JohnRoberts]

Obviously not now. When the economy has actually gone into a recession and the job marked has turned. Now they are expected to further increase interest rates. But there might be a very hard fall (not the season) ahead forcing them to reverse course.

A number of experts (not me) have forecast a severe recession for 2023....

It is politically unpopular to squash an inflationary cycle with high interest rates (Like Volker did in the 80s)

So like I said before, the question IMO is will the FED blink when markets react. Going into a midterm election I would expect political pressure to avoid hurting the economy short term even if it is the correct medicine long term. The administration is publicly saying the right things (they will give the FED a free hand to manage inflation).

I still can't read minds or predict the future, but I am watching this sitch closely.

[Edit- an old economist joke is that economists have predicted 12 of the last 4 recessions... /edit]

JR

 

[living sounds]

I predict that things get worse before they get better.

And it isn't the 80s, were in a much different world now. I expect more fundamental changes down the road.

I'll start buying Bitcoin again at 15k...

 

[living sounds]

13-wk avg M2 moneysupply goes negative for the first time since the GFC