General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsDid Capitalism Kill Inflation? The disappearance of the age-old bogeyman confounds central banke
Did Capitalism Kill Inflation?
The disappearance of the age-old bogeyman confounds central bankers and economists.
By Peter Coy at Bloomberg Businessweek
https://www.bloomberg.com/news/articles/2019-04-17/did-capitalism-kill-inflation?utm_content=business&utm_campaign=socialflow-organic&utm_medium=social&utm_source=twitter&cmpid=socialflow-twitter-business
"SNIP....
As Powell acknowledges, persistently low inflation is hard to explain using standard macroeconomic theory. Price pressures were weak in the aftermath of the global financial crisis because there was a lot of slack in the economy, including underutilized factories and workers. Whats surprising now is that even after one of the longest economic expansions in U.S. history, and with the unemployment rate hovering around half-century lows, inflation is still subdued. The Fed has repeatedly missed the target it set in January 2012 of 2 percent annual change in the price index for personal consumption expenditures. Once you strip out volatile food and energy prices, inflation by that measure has reached 2 percent just one month (July 2018) in the past seven years.
As recently as January, Powell was declaring that the economy seemed strong enough to sustain two quarter-point interest-rate increases in 2019, on top of the four the Fed orchestrated last year. But inflation has again come in below the Feds expectations, and both 2019 rate hikes have been erased from the median forecast of the banks policymakers.
While five-digit, Venezuelan-grade inflation is destructive, a little bit greases the wheels of commerce. It makes it easier for companies to give stealth pay cuts to underperformers, because keeping their pay flat is tantamount to a reduction in real wages. Some inflation is also useful to central banks because it helps them fight recessions. To spur borrowing, they like to cut their policy rates to well below the rate of inflation. But they have no room to do so if the rate is barely above zero. A surprise decline in inflation also punishes borrowers by making their debts more burdensome.
So who, or what, slayed inflation? Theres increasing evidence that the killer wasnt the Fed or the European Central Bank or the Bank of Japan, even though the central bankers have tended to believe in Milton Friedmans dictum that inflation is always and everywhere a monetary phenomenon. Researchers are finding that low inflation is in large part a consequence of globalization or automation or deunionizationor a combination of all threewhich undermine workers power to bargain for higher wages.
.....SNIP"
democratisphere
(17,235 posts)the inflation number is doctored BS. The widely reported employment numbers are hatched from the same rigged crap.
Drahthaardogs
(6,843 posts)Old money HATES inflation; it makes the riches they didn't work for worth less. They have been fighting hard for 20 years keep inflation down.
democratisphere
(17,235 posts)The millionaires became billionaires while their actual net value remained the same.
riverine
(516 posts)Oil is $65/bbl - half of its 2008 peak. Natgas is low, coal is low, etc.
Dairy and grain are well off their highs. Corn, wheat, rice, etc are all low.
Milk is only $3 gallon (and is price supported like sugar)
Inflation has not hit food/energy.
democratisphere
(17,235 posts)Prices have and continue to rise.
riverine
(516 posts)that isn't inflation.
That is merchandising.
democratisphere
(17,235 posts)Playing with the numbers and definitions is typical of our very corrupt government to achieve their manipulated end.
riverine
(516 posts)That is what wingnuts accused the Obama BLS of doing when the UE numbers kept improving every month since 2010.
democratisphere
(17,235 posts)revised the following month, often downward.
Nay
(12,051 posts)have become, and stayed, quite high. Housing prices are quite high in areas where there are jobs.
But, IMHO, the reason there is no inflation is that there are few consumers chasing goods with their money because they don't HAVE any money just lying around. From boomers who lost half their retirement $$ in 2008 to kids with outsize student loans to people working 3 part-time jobs to millennials who just don't want so much stuff to new workers who are working for non-union wages, they have tightened up their budgets permanently because they are basically living paycheck to paycheck already.
marybourg
(12,631 posts)drivers of inflation, food and energy . . .
BSdetect
(8,998 posts)Or look at the rate banks pay for your savings then subtract tax and see your cash is actually declining in value.
riverine
(516 posts)on its two mandates (price stability being one of them) through Bernanke, Yellen, and Powell.
Now President Numbnuts wants his minions on the Board and all that could go to hell.
Wounded Bear
(58,656 posts)the one that addresses wages and incomes.
And yes, Trump's nominees would probably finally initiate the 2d Great Depression they were so sad that we avoided in 2008.
riverine
(516 posts)"promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates"
UE is very low thanks to Obama's actions during the Great Recession.
30 year mortgages are very low.
the Fed hit it out of the park (for now)