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 Post subject: The low inflation mystery
PostPosted: Mon Sep 25, 2017 7:06 am 
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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.”

https://www.bloomberg.com/news/articles ... -rate-hike
https://www.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


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 Post subject: Re: The low inflation mystery
PostPosted: Mon Sep 25, 2017 9:30 am 
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Old Time Landlord

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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.


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 Post subject: Re: The low inflation mystery
PostPosted: Mon Sep 25, 2017 10:14 am 
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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.

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 Post subject: Re: The low inflation mystery
PostPosted: Mon Sep 25, 2017 2:15 pm 
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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...

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 Post subject: Re: The low inflation mystery
PostPosted: Mon Sep 25, 2017 3:07 pm 
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What mystery?

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

Are they that dumb?


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 Post subject: Re: The low inflation mystery
PostPosted: Mon Sep 25, 2017 7:19 pm 
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Whats the end game though? Is it impossible for stock markets to crash with this much printed money sloshing around?


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 Post subject: Re: The low inflation mystery
PostPosted: Mon Sep 25, 2017 7:57 pm 
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Thargor wrote:
Whats the end game though? Is it impossible for stock markets to crash with this much printed money sloshing around?

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.

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 Post subject: Re: The low inflation mystery
PostPosted: Mon Sep 25, 2017 10:51 pm 
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taipeir wrote:
What mystery?

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

Are they that dumb?

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.

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 Post subject: Re: The low inflation mystery
PostPosted: Tue Sep 26, 2017 2:47 pm 
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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.

https://www.theguardian.com/australia-n ... tting-away

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 Post subject: Re: The low inflation mystery
PostPosted: Wed Oct 25, 2017 11:19 am 
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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.


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