Really this strange period of economic activity is one for the history books. All I know is my wallet is thinner than ever and the reporting on inflation always feels out of touch.
Prices aren’t dropping and wages aren’t rising to keep pace. That is the reality on the ground. These reports aren’t meaningful at all, and I don’t think the government is taking enough meaningful action to address issues of inequality that these things cause.
EDIT: I know inevitably someone will ask "so what should be done?" and thats a valid question.
I'm not a trained economist, but I know a few people who are (perk of working in fintech!) and their general consensus seems to be that holding rates steady is smart but the political pressure to lower them will inevitably mean they are likely to get lowered earlier than they likely should be. They also seem to agree that there are components of our current economic system that simply can't be addressed through monetary policy alone and are driving some forms of price inflation but are hard for the government to quantify, such as excess fees becoming common place across many economic activities, for example. Beyond that, its alot of theories and opinions, which I don't think would add more value to this particular post.
EDIT 2: I'm not conflating how inflation works. I know it means things go up less not prices come down (thats a different word - deflation - after all), what I'm saying is observational. I am observing this: prices aren't coming down and wages aren't keeping up. That doesn't mean I think nor posit that lowering inflation === lower prices. I think lower inflation as its being presented to via the US media (driven by press releases from the white house and other government agencies) is misleading.
Not to mention, there's entire classes of things that their own indicators don't track. For example, calculated inflation excludes housing costs.
I'm originally from Nevada, but spent the first chapter of my adult life in San Francisco. I've been home for the past few months. Prices here are tantamount to what I grew accustomed to in SF, but I'm sure people here still make small ranch town wages. Coffee is $7. A meal is $20+. They used to be fractions of that, and that doesn't even touch the runup in real estate where crappy houses in nice areas can be $1MM+. A local sandwich shop has a flyer on the wall pleading with customers to understand that their cost of ingredients has grown astronomically in recent years.
I legitimately don't understand how this is working for the people who have local incomes.
Real estate is insane. Land I was scouting in anticipation of buying to build a retirement home have become unaffordable. I'm talking increases of 300% in value between 2020 to today. The spike in value came out of nowhere, I honestly cannot explain it.
I'm from Carson City. It's between Reno and Tahoe, but on the other side of the mountains. It's not terribly popular for tourism, although Bay Area refugees have bid housing here up every time there's been a tech boom/pandemic/etc.
Strange, I’m very much on the other end. Inflation reporting feels extremely exaggerated to me. My wallet is doing just fine. I have also experienced disinflation recently where my morning coffee has gone down in price and I can now get it literally at my morning bus stop.
I was about to make exactly this post. We have a WinCo grocery store in town that never got the inflation memo and prices there seem as cheap as always, unlike the Safeway which has, for some reason, exploded in cost. (Things that make you go hmmm.)
Meanwhile I'm working 3/4 time (25% retired! Woo!) earning less than ever in an overpriced tourist town. And yet the bank accounts are doing just fine. Sure, gas is pricier, but not as pricey as it was at the peak, and not enough that I pay attention.
But that's just me. My bicycle-commutin' self.
One place I think is really hitting people, is real estate and rentals. I'm unaffected because I'm well into paying off this house that I got cheap after the bust at a tiny interest rate; the rental value of my home is about double the mortgage payment.
We can't build houses quickly enough in this town--and we are doing it, with lots of new houses and apartment blocks going up everywhere. I think they get snatched up by families and investors immediately, something that would probably still keep happening even if we were building inventory 10x faster. (Why wouldn't you, an investor, buy everything we built?) And if you have a big rental or mortgage payment and (God help you) decide to shop at Safeway, you are certainly feeling it.
Inflation could fall to 0% and people would still be feeling the pain of their housing prices.
> Inflation could fall to 0% and people would still be feeling the pain of their housing prices
Idk how CPI is calculated in the US, but in France the way housing cost is taken into account in the inflation calculation is ridiculous, so it doesn't help.
(Basically what they do is that they don't count people that buy houses, because “it's an investment you know”, and then they count how much the people who rent pay as a fraction of their revenues, and divide that fraction by two because “it's only half the population”, and also they do hedonic price adjustment on the average housing quality even if existing people's home aren't improving and the price of newly built homes isn't being accounted in in the first place because of the previously mentioned “investment” characterization)
New shop opened up that has oddly cheap prices for cold brew. My 12oz nitro cold brew is now $1.09. I am told this is just the normal price and they have no plans to change it.
Real wages have been growing faster than inflation since the beginning of last year. I think it will take a bit of time for everyone to feel the effects.
This is what everyone forgets. What’s worse is “inflation” showing maybe that wage growth catching up to prices maybe what is slowing. It takes some finesse to see what is really happening
I'm saying prices aren't dropping and wages aren't keeping pace not as saying inflation isn't coming down but as a statement of observation. IE, the reality on the ground is prices are in fact, not falling (or falling enough) and wages aren't keeping pace with that fact, as an observation that these reports on inflation feel entirely meaningless to the challenges US citizens face economically right now.
> I'm saying prices aren't dropping and wages aren't keeping pace not as saying inflation isn't coming down but as a statement of observation. IE, the reality on the ground is prices are in fact, not falling (or falling enough) and wages aren't keeping pace with that fact.
But they are though.
The median wage is now higher than Q4 2019 in both real and nominal terms.
Maybe this particular group isn't feeling it because there's been a lot of layoffs, and we're still swinging back from the 2021-2 over-hiring specifically in tech. But the for the median American this simply isn't true.
The purchasing power of the median American wage has been on a broad up-trend since Q4 1997.
> IE, the reality on the ground is prices are in fact, not falling (or falling enough)
But your expectations are misplaced, prices won't fall in any case. If the success you expect from a monetary policy is to see price failing, you'll remain disappointed forever.
It's almost as if you complained that despite consecutive announcements in battery efficiency your laptop battery still isn't infinite.
Wage are catching up, with overall CPI, but some goods have grown so high in prices it's going to be long before the purchasing power for then reach it's previous level.
This makes sense but job hopping seems to be much harder now considering the competition for laid-off workers.
There’s a Bloomberg article on the homepage now about how more people are retiring due to stock gains - so how is unemployment low (and going lower with more people dropping out of the workforce) while LinkedIn is filled with (formally?) white collar people on the verge of homelessness?
> while LinkedIn is filled with (formally?) white collar people on the verge of homelessness?
You can fill a LinkedIn feed with about 500 people. Instagram would give you the impression that we are all travelling in business class to new destinations every week.
3.6% unemployment means job hopping is easy for those at the bottom. They're the ones that usually have problems job hopping, and they're the ones doing so now. Since they're so numerous, they're the ones that are affecting the average wage statistic. I see "help wanted" signs on pretty much every store & restaurant I visit.
OTOH, skilled labour varies by sector. Tech is in a bubble-deflation stage, so while we've had a good 15 years of easy job hopping, it's not so easy now.
>Prices aren’t dropping and wages aren’t rising to keep pace. That is the reality on the ground. These reports aren’t meaningful at all, and I don’t think the government is taking enough meaningful action to address issues of inequality that these things cause.
wages not rising contributes to lower inflation. If prices fall, thats deflation, arguably worse than inflation. When prices fall, people stop buying in anticipation of prices falling further. When people dont buy, economy basically stops.
> arguably worse than inflation. When prices fall, people stop buying in anticipation of prices falling further. When people dont buy, economy basically stops.
The idea that 2% inflation is good for the economy, and deflation is bad smacks of the government selling the idea because increasing government spending via inflation is a way to raise taxes without raising taxes.
As for deferring spending because prices will be lower in the future is not economically any different than deferring spending because you want the gains from investing the money. The economy doesn't collapse when people invest for the future, so I'm skeptical of that theory.
> The idea that 2% inflation is good for the economy, and deflation is bad smacks of the government selling the idea because increasing government spending via inflation is a way to raise taxes without raising taxes.
I think the premise is that deflation is much much worse (and not amenable to the available controls that the Fed has available) and it is pretty impossible to reliably target < %2 inflation, so effectively the idea of "2% inflation" is the minimal possible amount of inflation.
>The economy doesn't collapse when people invest for the future, so I'm skeptical of that theory.
Investing is different from storing cash in your mattress for a rainy day. Investment is effectively buying things now (labor, machines, supplies, property) in order to produce something more valuable later. So that money stays active in the economy. Even if you're buying stock from somebody unrelated to the company behind the stock, that person might use your cash to buy a house, pay donate to charity, or start a company.
But again, people are delaying purchases because they'd have more money later. With people not buying, the economy collapses according to your theory. But that doesn't happen.
BTW, all the money you have on deposit is invested back into the economy by the bank, less the reserve requirement.
> all the money you have on deposit is invested back into the economy by the bank, less the reserve requirement.
Please read how the money system works before talking on the topic, you really are embarrassing yourself here Mr Bright.
Banks aren't lending their customers' deposits (because you can't lend your liabilities…) and reserve requirements are in federal funds, which is a specific type of currency, it's not the same dollar as the one their customers have in deposits (which again, are on the liabilities side of banks balance sheet).
And yet you have all the crypto tokens being used as securities instead of the currency they were supposed to be, and that's because of this exact reason!
you are not going to defer on everyday necessities, but you can defer on big item purchases. If you are in the market for an EV, and the report is that EV's are getting cheaper every year. You may just defer that purchase as long as you can. If you are in the market for a house and the report is that housing prices are increasing by 10% every year, you regret not buying that house yesterday.
Quoting: "The idea that 2% inflation is good for the economy..."
Two goods (A and B) both were aviable for US$100 in 2019.
First A: 2020 inflation added +1.4% so good A cost $101.40
2021 added another +6.8% so good A now aviable for $108.30
2022 adds um ~8% A now costs $117,-
2023 added another ~3.6% buy good A now for $121,- (!!!)
Wow! Some may think, the price is up 20%
Now take good B everyear inflation adds +2
so good B costs also $100,-
[Liste:]
2020 = $102,-
2021 = $104,-
2022 = $106.10
2023 = $108.24
"quoting": "Government selling an idea to raise spending -cos inflation is a way to raise taxes without raising taxes."
...or -marketing-(crossed) to sell stability over "Control" ?
now that became political...(wayback)
hint: //wiki/Starve_the_beast
"Starve the beast" is a political strategy employed by American conservatives to limit government spending by cutting taxes. Economist Paul Krugman summarized: "Rather than proposing unpopular spending cuts, Republicans would push through popular tax cuts, with the deliberate intention of worsening the government's fiscal position. Spending cuts could then be sold as a necessity rather than a choice, the only way to eliminate an unsustainable budget deficit.
Look at the time price of goods, its easy to dispell this myth. The price of news tvs goes down in time price constantly, and it shows in the overabundance of TVs. You have been totally deceived regarding economics, unfortunately.
How many people are buying pizzas in bitcoin nowadays? That's what you get when a currency is deflationary: everyone hoards it. (For bitcoin it's not a big deal, when it was Reichmarks we got the worse economic crisis of the continent and questionable people reaching power…)
Are you asking how much money is transacted on the bitcoin network every day? Have you heard about the treaty of Versailles? You think it was a shortage of Reichsmark's?
> Are you asking how much money is transacted on the bitcoin network every day?
No I'm talking about the amount of bitcoin that's being used for actually buying things, like what money is doing.
> Have you heard about the treaty of Versailles?
The rise of Hitler is as related to the Treaty of Versailles as it is related to the Jews having backstabbed Germany: absolutely not except that it was part of the Nazis' populist discourse [0].
> You think it was a shortage of Reichsmarks?
In 1930-1933 definitely, and it's a well documented[1] fact that the memory of the hyperinflation of the decade before pushed the government to a destructive deflationary monetary and fiscal policy that cause way more economic damage than in neighboring countries and led the Nazis to power.
[0] the US Congress not having ratified the treaty, and the influence of Keynes book *The economic consequences of peace” in the UK made the treaty kind of moot anyway, as Germany really never really respected it in the first place (especially, they weren't paying what the treaty said they should) and France alone had little leverage to enforce it.
Currency isnt money. Your money, believe it or not, is gold. In 1971 the gold window closed, the price (of this gold) is controlled centrally, its supply is relatively unknown, but the global banking standard was formed under the gold standard, and a few policies were enacted to abstract the dollar away from the gold underneath. Today, governments and banks do a lot to obfuscate this fact, but it is evidenced in the fact that currency cannot be created without a corresponding debt. This is fiduciary credit, implicitly not explicity backed, and created in quantities that are politically acceptable.
The deflation you speak of is the natural consequence of this system. It is inherently unstable; dollars are created when a loan is issued, that loan must eventually be repaid with interest, but there was only ever enough currency to repay the principle. The only way to keep any amount of currency in circulation is to take on more debt, and that requires willing buyers who are continuously devalued, but if you dont then of course everything collapses, only thing is, you cant compare that to gold or bitcoin.
When times turn sour and people hold their money, you see interest rates rise, unprofitable ventures get washed out of the market. Those companies capital goods return to market creating opportunities for profitable companies. As conditions stabalize around companies that pull their own weight, rates go down and new ventures form. Not so with fiat, when conditions go bad and people save money, the blast radius is everyone with debt, for which there is not enough currency to pay, and cascading defaults emerge as an existential threat to the economy.
I liken it to playing with explosives. Whatever you think you gain by cheap credit, I would point to the disastrous effects of WWI, the prolonging of the great depression, the housing bubble of 2008, and the overall inflation of the last few years. There is far more, but in terms of major events its easy to point to these as examples of how much damage fiat causes.
Let me teach you something: you know this interesting factoid that everything that you've know as a child appears to be obvious whereas everything that comes after is regarded as being somewhat unnatural (in good or in bad though)?
Well that's exactly how this idea of gold being the money was born: gold as the money standard is a pretty recent idea, it only took of in the late 19th century[0], when bimetallism (gold + silver, which had been ubiquitous for hundreds of years[1]) died because of the massive improvement in silver extraction capacity (thanks industrial revolution, yet another good ol' thing you destroyed!). But lots of folks grew up during the short period of time where the gold standard had existed, and then it appeared to some of them that “money equals gold” was obvious and everything that came after was bad.
But the truth is, money is whatever people use to pay stuff, although it's better if it can be stored in some fashion for a certain time without losing all value (that's why overinflation is bad, even though people routinely live fine with low double digit inflation).
(Also, everything else I read from your comment is QAnnon-level of “dude WTF”… I quited reading after too many yikes, sorry)
If you really want to learn stuff about money, free from contemporary ideologies, you should go read Allynn Young, he's from a century ago and he talks brilliantly about the history of money in the US before the Fed was created. And, spoiler alert, it's not the kind of “rosy sound money” fantasy: it was a bloody mess.
But you can also keep parroting conspiracy theories if that's your thing, who am I to judge.
[0]: though most money was debt-based fiat already, but at least there was some kind of pegging.
[1]: even then, the metal itself was only really used for international trade, for domestic trade the face value was commonly used, and debasement was routine)
> All I know is my wallet is thinner than ever and the reporting on inflation always feels out of touch.
Prices aren’t dropping and wages aren’t rising to keep pace.
It's not inflation figures that are out of touch, it's your understanding of them: inflation being low means the prices have (mostly) stopped increasing, not that they've declined back to where it was, this second option is never going happen.
I made a separate observation about why I feel they're out of touch with how they affect every day US citizens. Prices aren't falling, and wages aren't keeping up.
That's an observation of the situation.
Its not conflating the differences of inflation and deflation. I'm merely positing that all I know is, despite their efforts to reduce inflation and then trying to trumpet that as a win, we still have these issues, which monetary policy is failing to address meaningfully, but all the reporting has an out of touch tone to these realities.
Its nice that prices are rising slower, but that isn't the only meaningful metric of economic indicators.
It's so funny seeing tech worker anecdotes on here passed as fact. The FACT is that wages are rising for most Americans, you appear to be in an industry that hasn't see it. Regarding prices, I don't think you understand what reductions in inflation means, are you wanting negative inflation? These reports are meaningful for anyone interested in macro economics and not just "no_wisards" personal finances.
Here in the real world; healthcare, manufacturing, education, retail, service is all seeing great wage increases and prices have stabilized.
Exactly. This will be hyped for political reasons, but it's too-little, too-late. I'm making less in real terms than a few years ago, and some regular things are starting to feel unaffordable.
I'm really not sure why the tech industry needs a union. Adding a giant layer of bureaucracy in between people would wreck the whole industry. Plus we get paid a shit-ton of money with perks not seen anywhere in any other industry. I'm really not sure where this push for unionising tech is coming from, but it feels really misguided.
because open office floor plans suck and there aren't enough conference rooms to go around, and whining about it to each other isn't going to change that.
Yes. Unfortunately, the tech industry has too many people who have been seduced by libertarian talking points and fail to realize they're not actually capitalists.
Throughout my career I have made the decision to take union jobs for less pay and it has paid off many time over by now. My retirement funding is solid, health insurance about as good as it gets for the US, student loans all paid off, working conditions are reasonable. Sure I get paid significantly less and don’t have a Tesla, but overall I’m pretty happy with my quality of life and have a hard time seeing how it could be much better. Thank you Union jobs!
Generally, prices that have gone up will not come down according to any policy-driven plan. If that was the plan presented to the public, then people would slow their spending and wait. And that would not be what the economists want.
Really? You feel the price increase from 2021-2023 seems the same as 2023-2024 to you. I see the prices have been elevated in the prior period ('21-'23) but they haven't moved much in the last few quarters. Perhaps everyone assumes prices will go back to 2021, for that we need deflation which is another ball of wax.
The CPI is not calculated by morons. It is calculated by the government with a strong incentive to come up with as low a figure they can get away with.
Sort of like the Soviet industry production figures, which included phantom industries pumping out imaginary products. GDP looked great!
The top line CPI that gets reported usually isn’t the core one anyway. Generally core is preferred by the Fed so they can make long term money supply decisions without worrying about short term volatility. No one is saying that core reflects what consumers experience.
according to https://www.bls.gov/cpi/ For the past 12 months, energy actually was negative. While food at home rose 1.3%. These wouldn't contribute significantly to the overall numbers
I am an independent voter and I've voted for both parties in the past...this sounds like a bunch of election-year pumping to me. Compared to many I have no room to complain, but I used to be able to put quite a of money aside prior to the pandemic, and now we're taking from those savings (and now that the kids are old enough to be left alone, my wife is working too!) I don't believe this happy horseshit for one minute.
I think you either have a great grocery store near you or you didn't notice. Flour, sugar, eggs, meat, snacks, just about everything has gone up by 50% or more. Food in most restaurants has gone up too. Go look at https://shadowstats.com if you want to see how the government cooks their inflation numbers.
Prices aren’t dropping and wages aren’t rising to keep pace. That is the reality on the ground. These reports aren’t meaningful at all, and I don’t think the government is taking enough meaningful action to address issues of inequality that these things cause.
EDIT: I know inevitably someone will ask "so what should be done?" and thats a valid question.
I'm not a trained economist, but I know a few people who are (perk of working in fintech!) and their general consensus seems to be that holding rates steady is smart but the political pressure to lower them will inevitably mean they are likely to get lowered earlier than they likely should be. They also seem to agree that there are components of our current economic system that simply can't be addressed through monetary policy alone and are driving some forms of price inflation but are hard for the government to quantify, such as excess fees becoming common place across many economic activities, for example. Beyond that, its alot of theories and opinions, which I don't think would add more value to this particular post.
EDIT 2: I'm not conflating how inflation works. I know it means things go up less not prices come down (thats a different word - deflation - after all), what I'm saying is observational. I am observing this: prices aren't coming down and wages aren't keeping up. That doesn't mean I think nor posit that lowering inflation === lower prices. I think lower inflation as its being presented to via the US media (driven by press releases from the white house and other government agencies) is misleading.
Not to mention, there's entire classes of things that their own indicators don't track. For example, calculated inflation excludes housing costs.