What do you think will happen when the pot blows and inflation takes over?

fac191

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Thing is you try to put things right, make some better rules, then the new guy comes in and rips them up, and hey presto a banking crisis.
 

Eville Rich

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Even Google doesn't want to you see how bad things are right now. "The last 5 years" apparently doesn't include 2021, 2022, and YTD 2023.
If you click on 106 more rows, you'll see that 2021 is 4.7 percent. The estimate for 2022 is 8.6 percent, but it's likely that all the data hasn't come in or been analyzed yet. By definition, 2023 can't show an annual rate and Q1 isn't even done, so likely a little premature for much, if any data, being available.

Going back in history was interesting (I made a chart of the whole data series). I remember the late 70s and early 80s, where the CPI inflation was over 10 percent. From the mid 80s until roughly 2021, we had much more stability than prior and also maybe lower, than the long term average. So it's not clear to me that our expectations for inflation, based on the last 30 to 40 years, is necessarily "normal." And the current inflation, while not a great thing, isn't as bad as it's been. It'll be interesting to see how it unfolds over the next few years. But our expectations for how government spending and market behavior may impact inflation may not be based on a "normal." (whatever normal may be for our economy).

It's my belief that globalization has kept inflation down. As more production shifted to developing economies, US prices were kept down due to lower production costs for overseas goods. Many of those economies have matured and the inexpensive labor and other production costs would naturally increase, reflecting higher prices. It's a broad macro look and only part of the puzzle, but may contribute to us thinking that the last several decades represented some "normal" we should continue to expect.

Eville Rich
 

MattR

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There are ups, there are downs, and life is normal. What matters is your attitude and how you choose to be calm in the conditions of the moment.

From NYTimes:
"Has the world ever been at peace? Of the past 3,400 years, humans have been entirely at peace for 268 of them, or just 8 percent of recorded history."
War has been tightly related to inflation since Biblical Times: "“There was a great famine in the city [of Samaria]. The siege lasted so long that a donkey’s head sold for eighty pieces of silver, and a cup of dove’s dung sold for five pieces of silver”

As for inflation [& interest rates], my first house had a (iirc) 14% mortgage back in the 1980s. We've gotten used to inflation being lower than the historic average. This stuff goes back to Biblical times:
Book of Haggai: "Ye have sown much, and bring in little; ye eat, but ye have not enough; ye drink, but ye are not filled with drink; ye clothe you, but there is none warm; and he that earneth wages earneth wages to put it into a bag with holes."
Proverbs: "Cast but a glance at riches, and they are gone, for they will surely sprout wings and fly off to the sky like an eagle"

As for the banks, this [at least so far] is pretty minor, and four small to mid size banks taking risks is sure not like 2008 when Lehman and the biggest banks were failing.

We hadn't paid for our squandering money thru 25+ years of Afghan & Iraq wars (Bush, Clinton, Bush, Obama) when Covid hit and debt went through the roof (Trump), then Russia led the world back to war by invading Ukraine (Biden). BOTH parties got us here and BOTH are equally guilty at blowing the budget year after year, largely because they increasingly won't compromise. The one and only way to pay down massive debt thru ALL of history has been to devalue money - meaning inflation.

So again my friend, life is normal. What matters is your attitude and how you choose to be calm in the conditions of the moment.
But this is not how economics works. Governments can just print new money if they choose to. The idea that an economy is similar to a credit card account is not correct but has been used by many governments to justify austerity which disproportionately affects those with less to the advantage of those who have more. Covid produced many more billionaires than ever before.


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Sierra1

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Even Google doesn't want to you see how bad things are right now. "The last 5 years" apparently doesn't include 2021, 2022, and YTD 2023.
View attachment 99898
Yeah, I didn't know if that was a bias comin' thru or not, but you're right, they don't want to show the next couple of years on that list.
 
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OldRider

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You can look back at history all you want, but there is something different this time. It's the national debt of $32,000,000,000,000.00. The interest on the ND is about three billion a day. We almost never have a budget surplus and if we matched the biggest annual surplus ever for the next thousand years, we couldn't pay off the debt. It's different this time and it has to blow up one day.

I look at this every few days for a dose of reality. https://www.usdebtclock.org/
 

hulkss

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Interest expense on the national debt is why interest rates will not remain elevated for long.
 

Checkswrecks

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... It's different this time and it has to blow up one day.
Only for we who don't look outside of our own borders or to history. Just like in those Bible passages and because of their debt catching up, in 1923 it cost 4.6 MILLION marks to buy a loaf of German bread.
Venezuelan cash lost 90% of its value in 2018, showing this is NOT all just ancient history.
etc

This is why the price of gold has been shooting up.

WE - both left and right - did this and got here by trying to keep cutting income (taxes) and increasing spending on all sort of toys and programs without keeping the books balanced.
 
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Wallkeeper

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Balanced Budget? What a concept! As much as it pains me to say it, the last balanced budgets were in the Clinton years. What we should also be concerned about is the ratio of Debt to GDP. In 2014 it passed 100% for the first time (101%) and it peaked in 2020 at 129%. It currently stands at ~123%. Rest of the story? We have been generating debt faster than the income to pay it off.

For context, in FY 2001 the ratio stood at 55%. In FY 2009, 82% and FY 2016 105%

For the last 22 years, we have been spending govt money like we are at a BOGO sale for Booze.

IMHO, the polarizing politics of the last 30 years is the cause
 

Eville Rich

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Balanced Budget? What a concept! As much as it pains me to say it, the last balanced budgets were in the Clinton years. What we should also be concerned about is the ratio of Debt to GDP. In 2014 it passed 100% for the first time (101%) and it peaked in 2020 at 129%. It currently stands at ~123%. Rest of the story? We have been generating debt faster than the income to pay it off.

For context, in FY 2001 the ratio stood at 55%. In FY 2009, 82% and FY 2016 105%

For the last 22 years, we have been spending govt money like we are at a BOGO sale for Booze.

IMHO, the polarizing politics of the last 30 years is the cause
I agree that polarized politics have had a huge impact. My basic challenge to a deficit hawk (which I am to a degree), is that you have to indicate which things that benefit you in some way you are willing to give up. Every bit of government spending has a constituent and it's easy to point out what you don't like that others may benefit from. But if someone isn't willing to accept a reduction in sonething that benefits themselves or increased taxes, they are just part of the problem. I have limited patience with deficit hawks that aren't willing to give up what they like, and just point to others.

Eville Rich
 
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Wallkeeper

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I agree that polarized politics have had a huge impact. My basic challenge to a deficit hawk (which I am to a degree), is that you have to indicate which things that benefit you in some way you are willing to give up. Every bit of government spending has a constituent and it's easy to point out what you don't like that others may benefit from. But if someone isn't willing to accept reduction that benefit themselves or increased taxes, they are just part of the problem. I have limited patience with deficit hawks that aren't willing to give up what they like, and just point to others.

Eville Rich
Sadly, I think that is happening right now. It is looking like Brinksmanship with the debt ceiling will be the Spring time game.
 

Fennellg

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Well it seems to have come full circle ⭕. When I was first starting out my mortgage was at 10 % with good credit. In the 80s. Now the pandemic put its own special twist to all this but we Have seen this movie before. Product shortages ( World War II.) We have seen inflation, higher interest, higher gas prices and rationing of gas in the 70s. Higher interest rates in the 80s.

For all our whining I say we have had it pretty good. How would you like to roll out of the Great Depression into World War 2.
 

Checkswrecks

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...
For all our whining I say we have had it pretty good. How would you like to roll out of the Great Depression into World War 2.
Yep - My/Our folks really understood the effort it took as a society to have a good life. Now, WE all want what we WANT and we want it NOW.
 
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Checkswrecks

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Sadly, I think that is happening right now. It is looking like Brinksmanship with the debt ceiling will be the Spring time game.
Wally -

I'm with you and THIS is what I'm actually fearful of because a few whackos can push the US into default. Think inflation and interest rates are bad now? Look into what a US default would do!!!

Our Constitution and system are entirely based in negotiation and compromise and there will always be extremists at both ends of the spectrum. But there's always been enough in Congress to at least keep things moving.

As we all know, it took McCarthy an unprecedented 15 votes to become Speaker and as a result a few extremists have unprecedented control. It is those few extremists who are pushing for no compromise on the debt ceiling and it's their refusal to negotiate that really can push us over a cliff.
 

Madhatter

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CW, who moderates the moderator?
Wally -

I



As we all know, it took McCarthy an unprecedented 15 votes to become Speaker and as a result a few extremists have unprecedented control. It is those few extremists who are pushing for no compromise on the debt ceiling and it's their refusal to negotiate that really can push us over a cliff.
 
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