Never Seen Inflation Like This

Discussion in 'Politics' started by Mopar Dude, Jul 29, 2021.

  1. Mopar Dude

    Mopar Dude Well-Known Member

    Quite literally, I am receiving memo's in my email like the memo below daily. Twenty years in business and I plan for 3%-5% inflation when I bid projects. The inflationary increases you see below range from 5% to 30%. Figures that are not sustainable in a business environment. These are the challenges I am facing daily as a businessman right now.

    My wife buys the groceries. Those weekly costs have increased more than 30%. Gas at my local station is a dollar more a gallon than it was this time last year. Heck, the dog treats I buy for the office dog have doubled in cost in the last three months.

    Here's the reality folks..... Businesses are seeing unprecedented cost increases all across the board. Not some business... All business. And in order to remain viable, those costs simply have to be passed on to the consumer. And that is only if that business is able to source the products for his customer base.

    We are at a critical juncture here and nobody is talking about it. Why???

  2. FryDaddyJr

    FryDaddyJr Well-Known Member

    1970s-style inflation isn’t coming back - Vox

    Financial history doesn’t repeat itself, but it tends to rhyme.

    In 2008, the kinds of excessive risk-taking and speculation on Wall Street that had sparked the Great Depression in 1929 contributed to another massive global downturn.

    Now some economists are voicing concern that 2021 could see a rerun of another economic calamity: the Great Inflation of the 1970s.

    For those of us not alive then and who have never lived through a period of debilitating inflation, the fears voiced by baby boomer economists like Larry Summers and Olivier Blanchard that massive price increases could be coming might ring hollow. But their worry, which many economists share, reflects a real history. The Great Inflation, which began in the late 1960s and finally ebbed in the early ’80s, was a genuine calamity that worsened living standards for years.

    Understanding the warning that figures like Summers and Blanchard are issuing is important. But equally important is understanding the key differences between what happened in the 1970s and what’s happening today.

    Summers, Blanchard, and many mainstream economists have internalized a story about the 1970s Great Inflation, and inflationary phenomena more generally, that informs their outlook.

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    The story goes like this: President Lyndon B. Johnson spent a lot of money on the war in Vietnam. Wartime spending flooded the economy with money; prices crept up. LBJ’s profligacy — and the Federal Reserve’s willingness to tolerate it — led the whole economy to lose faith in the idea that prices would remain stable. Once everyone expected inflation, it became a self-fulfilling prophecy: because workers expected prices to increase, they demanded higherwages; because businesses expected wages to rise, they raised their prices; and so on, in an ever-escalating “wage-price spiral.”

    By the end of the 1970s, the inflation rate was nearing double digits, or even higher, depending on the measure.

    The experience came to an end thanks to a new, radical approach by the Federal Reserve. Now, a quick primer on how the Fed affects the economy: Broadly speaking, the Fed is in charge of how much money is circulating in the economy at any given time. If there’s too much money, then you can get inflation; too little might mean low inflation — but that might also mean businesses and households have trouble borrowing money, grinding the economy to a halt.

    In 1979, grinding the economy to a halt was the path the Fed chose to take to tame inflation. Paul Volcker, installed as Fed chair by Jimmy Carter that year, raised interest rates, effectively shutting off the money spigot at the Fed, and signaling to markets that more rate hikes would follow until the problem was fixed.

    What resulted was a gradual decline in inflation — but also two deep recessions in the early ’80s that drove the unemployment rate to its highest level since the Great Depression. The process worked, Reagan adviser Michael Mussa later said, because the Fed proved it was willing “to spill blood, lots of blood, other people’s blood” to get inflation under control.

    That story now looms over the economy today. The high-spending Biden administration and its very cooperative partner in economic policy, Federal Reserve Chair Jerome Powell, feel to inflation-worriers like the story of ’70s inflation repeating itself.

    Less than two months into office, Biden signed a $1.9 trillion stimulus bill, much of which went toward $1,400 checks to most Americans. Powell is accommodating this policy by continuing to keep rates near zero and buy up Treasury bonds, effectively financing the stimulus with printed money; moreover, he urged Congress to pursue stimulus during the debate over Biden’s bill, and dismissed concerns this could cause inflation.

    With inflation reaching 3.4 percent in May, its highest level in 30 years, worries about a ’70s flashback appear to have some grounding. But there’s good reason to think that this worry of a replay is overblown. New economic research suggests that the story mainstream economics has been telling about the Great Inflation of the ’70s might not be entirely accurate.

    The new story looks at other policies and conditions, previously understated in narratives of the period, that could have contributed to the calamity of the ’70s. This story emphasizes specific challenges, like an oil shortage and turmoil in world food markets, that drove the 1970s inflation and that are just not relevant today.

    In other words, this time really might be different. And understanding that might help steer policymakers toward novel solutions and away from unnecessarily spilling “other people’s blood.”
  3. JoeNation

    JoeNation Patron Saint of Idiots

    This inflation is temporary. There is a ton of pent-up demand because of the pandemic at the same time there is little product out there to buy. If you love Capitalism, and I know you do, then this is part and parcel of basic Capitalism, Supply and Demand. You can only blame the pandemic for this situation but this is also a basic tenet of our economic system. It really wouldn't matter what created any shortage of goods and services, if there is a shortage, and there is high demand, you will inevitably see inflation in pricing.

    I'm not blaming Capitalism. It is simply how the system is supposed to work.
  4. Mopar Dude

    Mopar Dude Well-Known Member

    Thing is... I don't see the temporary model working with commodity type things. I can see real estate, new houses and the like easing back down. But once you raise the price on a loaf of bread, does it ever really go back down?.... And I am echoing what happens with my specific industry here. The materials that I supply are built into every public building that goes up. I have never, not once seen material costs lowered in my twenty years of paying attention.

    I can see the logic here. Absolutely Covid has impacted costs. Absolutely stimulus checks have impacted costs. I do agree that these should have a temporary impact. What I don't see is anything being done to address the problem and these inflationary costs affect everyone. It's like we are sitting idle hoping that ugly rash goes away when we need to be seeing the doctor to remedy the rash.
    Last edited: Jul 29, 2021
    JoeNation likes this.
  5. JoeNation

    JoeNation Patron Saint of Idiots

    Good points and I hear your frustration. What really can be done in the short-term to alleviate this problem? I have no idea.
    Mopar Dude likes this.
  6. toughcoins

    toughcoins Rarely is the liberal viewpoint tainted by realism

    I always wondered what construction materials you sold / installed and now, after reading your memo, I've got to ask. Do you sell school gymnasium furnishings?
  7. Mopar Dude

    Mopar Dude Well-Known Member

    I do. That's my primary market. Sadly, we will have schools opening this fall without some basic necessities that can't be sourced currently.
  8. toughcoins

    toughcoins Rarely is the liberal viewpoint tainted by realism

    This bout with inflation will be far more serious than that in the 1970's. Not only because of the Biden-exacerbated demand-side of the ledger, but also because supplies are seriously depleted, and not just temporarily.

    Too many businesses, and too much production capacity have / has already been irreparably damaged by COVID shutdowns and restrictions and, now that supply chains are broken everywhere one looks, the end is nowhere in sight. No one has start up capital saved up, so entrepreneurs can't buy up those dusty, decommissioned business assets and start new businesses and recreate that lost capacity.

    Furthermore, all businesses that miraculously are still holding on at this point must strike that precarious balance between meeting expenses and alienating their customer base.

    When Trump (don't go down that rabbit hole again . . . I'm not a Trumper) said, "The Cure must not be worse than the disease", this is precisely what he was referencing.

    The inflationary impact of both influences in combination is unprecedented, and something not to simply acknowledge the possibility of, but to prepare for. This is going to get uglier than most care to imagine.

    Blinders anyone?

    Sorry, I forgot . . . you're already wearing them.
    Mopar Dude likes this.
  9. FryDaddyJr

    FryDaddyJr Well-Known Member

    tuffy has been hanging out with stacking preppers again
  10. JoeNation

    JoeNation Patron Saint of Idiots

    Well, to be honest, that is total nonsense. This is artificial inflation caused by a once in a hundred years pandemic. But if you feel like you have to politicize everything, there is always the fact that Trump and all those supporting him downplayed a serious infectious disease for political gain and made the pandemic far worse than it had to be contributing significantly to the economic impact and case numbers and deaths.

    The cure, was simple masks and social distancing which Trump and the rest of the Republican sycophants fought tooth and nail. You don't get to re-write history again. We're not buying it.
    Last edited: Jul 29, 2021
    FryDaddyJr likes this.
  11. toughcoins

    toughcoins Rarely is the liberal viewpoint tainted by realism

    Quincy's been hanging with cadavers again . . . no wonder he's learned so much over the years.
  12. FryDaddyJr

    FryDaddyJr Well-Known Member

    Dont post.
  13. toughcoins

    toughcoins Rarely is the liberal viewpoint tainted by realism

    There's no such thing as artificial inflation . . . you either reduce the purchasing power of the dollar or you don't. There's nothing artificial about Biden's actions . . . wrong-headed for sure, but not artificial.

    The broad-brush characterization of republicans as fighting masks and social distancing tooth and nail is an extremist's expression, but expected of you.

    Trump at least advocated for safe ways to reopen the economy and schools, while liberals cheered the whole time schools were closed, businesses were closed, and the government was cutting checks.

    I don't view Trump's downplaying the severity of the crisis as being politically-motivated. I think he legitimately wanted to avoid having the economy shut down to the extent it has.

    If you want to talk about political-motivation behind bad decisions, let's talk about Biden's concealment of all of the COVID-ridden illegal immigrants held at the border.
  14. FryDaddyJr

    FryDaddyJr Well-Known Member

    that's about the most "naïve" thing I've read today
  15. JoeNation

    JoeNation Patron Saint of Idiots

    Blame Biden but never see your own culpability. Must be nice to live in your universe.
  16. toughcoins

    toughcoins Rarely is the liberal viewpoint tainted by realism

    Within the context of this discussion, exactly how did I create this inflationary environment? It's not like it was hard to see it coming . . . Biden's just the puppet of economic ignoramuses.
  17. JoeNation

    JoeNation Patron Saint of Idiots

  18. FryDaddyJr

    FryDaddyJr Well-Known Member

    Tuffy, go die for the economy.
  19. FryDaddyJr

    FryDaddyJr Well-Known Member

  20. Mopar Dude

    Mopar Dude Well-Known Member

    Same diarrhea…. Different day. Everyone playing political dodgeball and not a soul cares to get their hands dirty and do any damn thing other than throw around blame. This is like watching two toddlers on the sofa. He did it. No, he did it. Freaking pathetic. I’m just thankful that I didn’t have to share a foxhole with you.

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