The low inflation mystery


#1

Janet Yellen:

“This year the shortfall of inflation from 2 per cent, when none of those factors is operative, is more of a mystery,”

“I will not say that the committee clearly understands what the causes of that are.”

bloomberg.com/news/articles … -rate-hike
ft.com/content/9918be9e-9e7 … 2067fbf946

10 years of money printing, why aren’t we going around with wheelbarrows and buckets full of worthless money?
What is this mystery


#2

because it’s not chasing goods? Isn’t that the schoolbook definition of inflation, too much money chasing too few goods? It’s not finding its way into peoples pockets, IMO.


#3

I’m no expert but I believe the money was printed and given to the banks to replace the money they lost in GFC, they are also buying assets with it. There has been rampant asset inflation. The only thing that hasn’t been inflated are peoples wages therefore no price inflation.


#4

Well some of that money that was pumped into the system merely sent oil to $150 a barrel so that’s gone into someones pocket, the rest probably kept empty developments shuttered across the globe but patience for hoarding is wearing thin with rising homelessness not going away etc…


#5

What mystery?

US stock market at record highs and property bubbles around the world.

Are they that dumb?


#6

Whats the end game though? Is it impossible for stock markets to crash with this much printed money sloshing around?


#7

Well the Chinese buying property all over the world has kept up the appearance of local functioning markets but when they run out of greater fools then the bubbles they’ve helped sustain and inflate further will stagnate, then as they try to exit the market they’ll start a stampede and then like a hollywood set the facade falls flat.


#8

Yep. Trickle down isn’t just broken. The increased wealth of the top layer has been used to secure the means of wealth generation in the future and it’s now in the hands of people who by rights should have been liquidated last time round.


#9

This article from a while back asks the question, but doesn’t really get to the heart of it. It’s also a bit Australia-centric but has some generally applicable points. It hints that low inflation (in spite of apparent economic growth and low unemployment) is the result of structural changes in the economy and the creation of large numbers of low paid jobs.

theguardian.com/australia-n … tting-away


#10

At this point there must be some realisation that low interest rates themselves are in several ways responsible for low inflation. Counter-intuitive maybe, but low rates have facilitated over investment in all kinds of production, particularly commodities. They also allow inefficient and marginal producers to survive when higher rates would have caused them to fold. Undermining the pricing power of other market participants. Barriers to entry are also lower as debt is cheaper and easier to roll over.


#11

Structural changes in the economy is a polite way of saying that the unions were crushed, so low skill jobs also became low paying. Indeed, not just low skill, but many jobs with large numbers doing them - nurses, for example.

Monetarism is a heap of shit. Inflation is not always a monetary phenenom. Sometimes it is a wage problem. We are in a wage-deflation death spiral… borne out of the misery of the FIRE economy, the misallocation of resources and the decline of real innovation.

Only the chinese and the germans seem to get this, with their concentration on ‘stuff’. We think we’re ‘stuffed’ out, yet the housing stock of Ireland is still poorly insulated, we still pump raw sewage into rivers and seas and the electrical grid can’t take a storm. There’s plenty of opportunity to spend money on stuff all over the world.


#12

There must be inflation of money somewhere. All the printing that went on in America and the Europeans could not keep up, so they decided to enter the printing game. Mario dragging is an Italian and the Italians have a lot of debt everywhere, particularly their banks. It is a spin off of ‘the creature from jeckel island’, where printing presses became banks instead of gold being the security to printing. I saw inflation everywhere in America, just look at the inflation prices of houses here! It has to be the value-esness of money.


#13

Cheap goods from overseas is making the west poorer, not richer. It really is a ‘race’ to the bottom. Race isnt the right word because its happening slowly over several generations.
Insular economies are not the solution and neither are totally wide open economies/free trade agreements with despotic regimes like China unless you have a magical way to ensure their living standards are comparable and that ours will not go down to meet theirs as we compete on an even footing.

news.xinhuanet.com/english/2017- … 332689.htm

here is some inflation for you (UK)

ons.gov.uk/employmentandlab … sedresults

Australia is similar, how does Ireland fare or the US


#14

The *consumption *of the cheap goods is making the West poorer - not the goods themselves


#15

Cheap Asian goods are also making them poorer as well. Not in the financial sense of course, but China’s comparative advantage in manufacturing over the west is not entirely a low labour cost story. They’ve also been happy up to now to ignore the near catastrophic damage they’ve caused their environment in the name of economic growth targets. Western companies are rightly forced to absorb many of the extra costs of doing things in a cleaner way in a way that Chinese equivalents never have.

It’s reached a tipping point as your more affluent Beijinger is no longer willing to accept the apocalyptic skies of a polluted winter’s day. Nor should they. So there’s plenty of noise lately about pollution crackdowns. So perhaps we should expect some China driven inflation as the true costs of production begin to be reflected in Chinese exports. Or else the work gets moved to the next cheapest place to turn a blind eye.


#16

has anyone considered the increase in price of their broadband/telephony in the past 10 years?

€800-1200 a year seems to be the price for a normal package these days. where are the €240/year deals now?


#17

I would imagine that a lot of the increased costs is due to the infrastructure replacement projects that are currently ongoing in the datacoms industry.


#18

800 sounds high unless you’re getting TV as well. 50-60 per month is typical. Don’t remember it ever being 20 per month all in for fixed broadband; was that excluding line rental or something?


#19

Fifteen years go I was paying twice as much for 0.5 Mbps as I do today for 240 Mbps, a nearly thousand-fold improvement.


#20

reuters.com/article/us-usa- … SKBN1D225C

More of the same