It looks like inflation is here

[Elixir]

Which wouldn't be inflationary if those billions were being recovered from the banking sector and its high earning executives (and other wealthy beneficiaries of this largesse) in taxes.

Low taxes are inflationary.

This is eat-the-rich thinking.

Those billions aren't particularly going to the banking sector and certainly not to it's executives.

Well they sure as fuck aren't going to homeless people or those living in poverty. And it's not difficult to see where the money is going - it's going to those people whose net worth is rapidly increasing. So those are the people to tax. I'm not suggesting a special tax to target a particular subset of high income earners, I am saying increase taxes on ALL high income earners. And on ALL of their sources of income, particularly the fringe benefits.

Regardless, money put into the economy and not removed via taxation is inflationary, if it doesn't cause growth sufficient to absorb it.

Taxes in the US, particularly on the very high income earners, are ridiculously low. The US government is derelict in its duty to prevent unreasonable increases in wealth inequality. Nobody works hard enough to deserve a suborbital joyride. Particularly not while people are sleeping in the streets.

Dumb regurgitation of right-wing soundbites doesn't change that. Nobody's saying "eat the rich". Make the fuckers pay a reasonable and equitable amount of tax.

I agree, but income tax has to be accompanied by a wealth tax. At some point accumulating wealth is just a competitive game. As long as the playing field is level, I don't care if there's a 90% tax on wealth increases beyond what one person can reasonably spend in a lifetime.

 

[Jason Harvestdancer]

I think bilby's observation was once conventional wisdom. But now the world economy is afloat in uncharted waters. Old financial indicators no longer make sense. The "money supply" has skyrocketed but Trillions of this "new money" is held at the Fed in excess reserve accounts. Banks are being paid Billions in interest by the government for these useless accounts.

There are two types who say inflation is the result of low taxes. One of them is very right, the other is very wrong.

One type says that deficit spending is done by having the Federal Reserve create new money which is then lent to the Federal Government which spends it. This new money decreases the value of existing money. Given federal spending of X, having taxes equal to X results in no borrowing, no new money, and therefore no inflation.

The other type says that money comes from the government, and that taxation is only done to soak up excess funds to keep inflation down to a manageable level.

 

[bilby]

I think bilby's observation was once conventional wisdom. But now the world economy is afloat in uncharted waters. Old financial indicators no longer make sense. The "money supply" has skyrocketed but Trillions of this "new money" is held at the Fed in excess reserve accounts. Banks are being paid Billions in interest by the government for these useless accounts.

There are two types who say inflation is the result of low taxes. One of them is very right, the other is very wrong.

One type says that deficit spending is done by having the Federal Reserve create new money which is then lent to the Federal Government which spends it. This new money decreases the value of existing money. Given federal spending of X, having taxes equal to X results in no borrowing, no new money, and therefore no inflation.

The other type says that money comes from the government, and that taxation is only done to soak up excess funds to keep inflation down to a manageable level.

I fail to see any substantive difference between the two descriptions you give here. "Having the Federal Reserve create new money which is then lent to the Federal Government which spends it" is just a long winded way of saying "money comes from the government"; and in both your descriptions, taxes offset this by taking that money back out of circulation. Either both are right, or both are wrong. And in fact, both are right.

Money isn't a commodity. It's not property, either, though most people mistakenly think it is (leading to the absurd idea that taxation is similar to, or even identical with, theft). The fact that money can be reduced in value by inflation shows that it's not property. The actions of bureaucrats miles away can't influence the number of days the food in your larder will sustain you; But they can influence the number of days the money you 'own' can sustain you.

The dollars in your wallet or bank account don't belong to you in the way that a can of beans belongs to you; rather they are yours in the same way that points on the scoreboard during a game are yours. They are subject to the rules of the game, and the decisions of the referees. The rules are necessarily and always arbitrary, and the identity of the arbiters is determined by the system that is in place in a given jurisdiction - it might be a king or dictator; or an elected prime minister, president, committee, parliament, or congress; or a board of directors elected or appointed by some other authority; or a combination of these, with different arbiters having control over different parts of the rule-book. And like points on a scoreboard, the absolute number is entirely irrelevant - the value of your points is entirely dependent on how many points the other participants have.

Money is a service, usually provided by a government or government agency, by which the level of indebtedness of society to the holder of the money is monitored.

Taxes are one of the ways that the scores in the game can be adjusted, and they can be used either to reduce the total number of dollars to raise the value of each; or to limit unfair and unreasonable concentration of money in the hands of entities to which society doesn't, in fact, owe the debt that the money implies; or both.

Insufficient taxation causes wealth disparities that don't accurately reflect the debt, owed to the holders of that wealth, by the rest of the society in which they live.

Equally, excessive taxation could cause the elimination of deserved disparities of wealth, whereby those to whom society is indebted are stripped of their access to the goods and services they deserve.

And of course, tax rates in some circumstances can be negative - either in the sense of tax credits, or of payments by the government to those who are not adequately provided with access to the goods and services they deserve.

Where ideologies differ, it's more often in terms of what constitutes being 'deserving' or 'undeserving'; or in what forms the arbiters of the rules should take, and how they should be selected.

The strikingly dumb thing about libertarianism is that it rejects all of this, in favour of the pretense that if we played the game without referees it would be fairer for everyone. Anyone who has seen a schoolyard soccer match with no referee knows that this doesn't work in practice - the kids with the most leverage get to decide when a rule has been broken, and the ability for the game to be played at all is completely dependent on those kids not cheating too much. That leverage might be ownership of the match ball, or the support of powerful adults from outside the game, but usually it boils down to physical strength.

 

[Jason Harvestdancer]

You see no difference?

Wow.

One is balanced budgets. The other is Magic Money Tree.

 

[bilby]

You see no difference?

Wow.

One is balanced budgets. The other is Magic Money Tree.

No, both are the same. One uses innuendo to hint that governments shouldn't create money under any circumstances, which is blatantly absurd as we know that economies aren't static; The other is a more straightforward statement of the same underlying principle, that money creation by governments needs to be balanced not only against taxes, but against the need for money in the economy - ie against growth and against velocity.

But I am not surprised that you think there are two very different options here despite their being indistinguishable in fact, but subtly different in tone. And I am even less surprised that you feel a passionate love for one, and hate for the same one in different guise. That's American politics in a nutshell.

Outside the US, there's more than one economic theory, so we needn't have ours wear two hats. And real economics is far more complex than your cartoonish non-options account for.

 

[Loren Pechtel]

Which wouldn't be inflationary if those billions were being recovered from the banking sector and its high earning executives (and other wealthy beneficiaries of this largesse) in taxes.

Low taxes are inflationary.

This is eat-the-rich thinking.

Those billions aren't particularly going to the banking sector and certainly not to it's executives.

Well they sure as fuck aren't going to homeless people or those living in poverty. And it's not difficult to see where the money is going - it's going to those people whose net worth is rapidly increasing. So those are the people to tax. I'm not suggesting a special tax to target a particular subset of high income earners, I am saying increase taxes on ALL high income earners. And on ALL of their sources of income, particularly the fringe benefits.

Regardless, money put into the economy and not removed via taxation is inflationary, if it doesn't cause growth sufficient to absorb it.

Taxes in the US, particularly on the very high income earners, are ridiculously low. The US government is derelict in its duty to prevent unreasonable increases in wealth inequality. Nobody works hard enough to deserve a suborbital joyride. Particularly not while people are sleeping in the streets.

Dumb regurgitation of right-wing soundbites doesn't change that. Nobody's saying "eat the rich". Make the fuckers pay a reasonable and equitable amount of tax.

But the people you have in mind are not bankers.

And what we are seeing is stock appreciation, not income.

 

[bilby]

Well they sure as fuck aren't going to homeless people or those living in poverty. And it's not difficult to see where the money is going - it's going to those people whose net worth is rapidly increasing. So those are the people to tax. I'm not suggesting a special tax to target a particular subset of high income earners, I am saying increase taxes on ALL high income earners. And on ALL of their sources of income, particularly the fringe benefits.

Regardless, money put into the economy and not removed via taxation is inflationary, if it doesn't cause growth sufficient to absorb it.

Taxes in the US, particularly on the very high income earners, are ridiculously low. The US government is derelict in its duty to prevent unreasonable increases in wealth inequality. Nobody works hard enough to deserve a suborbital joyride. Particularly not while people are sleeping in the streets.

Dumb regurgitation of right-wing soundbites doesn't change that. Nobody's saying "eat the rich". Make the fuckers pay a reasonable and equitable amount of tax.

But the people you have in mind are not bankers.

And what we are seeing is stock appreciation, not income.

If you have more dollars today than you did yesterday, that's income. If you didn't do anything to earn it, that's not a reason to pay less tax on it.

 

[Loren Pechtel]

Well they sure as fuck aren't going to homeless people or those living in poverty. And it's not difficult to see where the money is going - it's going to those people whose net worth is rapidly increasing. So those are the people to tax. I'm not suggesting a special tax to target a particular subset of high income earners, I am saying increase taxes on ALL high income earners. And on ALL of their sources of income, particularly the fringe benefits.

Regardless, money put into the economy and not removed via taxation is inflationary, if it doesn't cause growth sufficient to absorb it.

Taxes in the US, particularly on the very high income earners, are ridiculously low. The US government is derelict in its duty to prevent unreasonable increases in wealth inequality. Nobody works hard enough to deserve a suborbital joyride. Particularly not while people are sleeping in the streets.

Dumb regurgitation of right-wing soundbites doesn't change that. Nobody's saying "eat the rich". Make the fuckers pay a reasonable and equitable amount of tax.

But the people you have in mind are not bankers.

And what we are seeing is stock appreciation, not income.

If you have more dollars today than you did yesterday, that's income. If you didn't do anything to earn it, that's not a reason to pay less tax on it.

So you pay negative tax when the stock market goes down??

That would be a bad thing for the economy!

Note that the massive "gains" they keep talking about are being measured from the bottom of the dip caused by the pandemic. About as honest as the climate deniers are in measuring warming from the record high year rather than the average.

 

[Jimmy Higgins]

Well they sure as fuck aren't going to homeless people or those living in poverty. And it's not difficult to see where the money is going - it's going to those people whose net worth is rapidly increasing. So those are the people to tax. I'm not suggesting a special tax to target a particular subset of high income earners, I am saying increase taxes on ALL high income earners. And on ALL of their sources of income, particularly the fringe benefits.

Regardless, money put into the economy and not removed via taxation is inflationary, if it doesn't cause growth sufficient to absorb it.

Taxes in the US, particularly on the very high income earners, are ridiculously low. The US government is derelict in its duty to prevent unreasonable increases in wealth inequality. Nobody works hard enough to deserve a suborbital joyride. Particularly not while people are sleeping in the streets.

Dumb regurgitation of right-wing soundbites doesn't change that. Nobody's saying "eat the rich". Make the fuckers pay a reasonable and equitable amount of tax.

But the people you have in mind are not bankers.

And what we are seeing is stock appreciation, not income.

And they are living via that stock appreciation. It isn't like it is in a lockbox and they can't loan money against it. Bezos doesn't have billions in cash, yet he can live like he does.

 

[Jimmy Higgins]

Meanwhile in temporary inflation we discuss the issues of supply and demand, or more specifically how supply reaches demand.

Union Pacific is temporarily suspending eastbound service from West Coast port terminals to its Global IV intermodal facility in Chicago to help ease "significant congestion" at inland terminals, especially Chicago, and at the ports.

UP (NYSE: UNP) hopes this suspension, which will start on Sunday and last for about seven days, will not only help relieve port backlogs for Chicago-bound container traffic but also ultimately help address backlogs for containers destined to other markets.

The suspension applies to UP-served terminals at the ports of Los Angeles, Long Beach and Oakland, California, and Tacoma, Washington.

"This week we reached out to the ocean carriers to take more positive steps to improve fluidity and throughput in the Los Angeles Basin and our Global IV facility in Chicago. ... We believe this change will allow the transportation supply chain to begin working off the backlog of Global IV-destined trains while freeing up railcar assets to support import loading needs on the West Coast," UP said in an advisory provided to FreightWaves. "We are working closely with the ocean carriers and collaborating wherever possible to improve the health of the supply chain."

Consolidation has made things more expensive as there are almost no options or choices for large scale intermodal shipping. On the other hand, makes one wonder how much easier it is when there are fewer cogs in the machine to get things moved. I'm sure there will be papers.

 

[Playball40]

You can already offset gains against losses, so......

If you have more dollars today than you did yesterday, that's income. If you didn't do anything to earn it, that's not a reason to pay less tax on it.

So you pay negative tax when the stock market goes down??

That would be a bad thing for the economy!

Note that the massive "gains" they keep talking about are being measured from the bottom of the dip caused by the pandemic. About as honest as the climate deniers are in measuring warming from the record high year rather than the average.

 

[Swammerdami]

The Economist has this take on the global economy:

... But today's booming economy is also a source of anxiety, because three fault lines lie beneath the surface. Together, they will determine who prospers, and whether the most unusual recovery in living memory can be sustained.

The first fault line divides the jabs from the jab-nots....

The second fault line runs between supply and demand. Shortages of microchips have disrupted the manufacture of electronics and cars just when consumers want to binge on them. The cost of shipping goods from China to ports on America's west coast has quadrupled from its pre-pandemic level. Even as these bottlenecks are unblocked, newly open economies will create fresh imbalances . In some countries people seem keener to go for a drink than they do to work behind the bar, causing a structural labour shortage in the service sector. House prices have surged, suggesting that rents will soon start to rise, too. That could sustain inflation and deepen the sense that housing is unaffordable.

The final fault line is over the withdrawal of stimulus. ... Rich-world central banks have bought assets worth over $10trn since the pandemic began and are nervously considering how to extricate themselves without causing a flap in capital markets by tightening too fast. China, whose economy did not shrink in 2020, offers a sign of what is to come: it has tightened credit policy this year, slowing its growth.

Meanwhile, emergency government-aid schemes, such as unemployment-insurance top-ups and eviction moratoriums, are beginning to expire. ... Deficits will contract rather than expand, dragging down growth. So far, economies have largely avoided a wave of damaging bankruptcies but nobody knows how well firms will cope once emergency loans come due and workers can no longer be furloughed at taxpayers' expense.

... Pessimists worry about a return to 1970s-style inflation, or a financial crash, or that capitalism's underlying energy will be drained by state handouts. Such apocalyptic outcomes are possible, but they are not likely. Instead a better way to think about the unusual outlook is to examine how the three fault lines interact differently in different economies.

Start with America. With abundant vaccines and enormous stimulus, it is at the biggest risk of overheating....

Elsewhere in the rich world the picture is less exuberant. It includes some jab-nots, like Japan, which has fully vaccinated less than 15% of its population. ... In [Europe] the risk is that policymakers overreact to temporary, imported inflation, withdrawing support too quickly. If so, their economies will suffer, just as the euro area suffered after the financial crisis of 2007-09.

Low- and middle-income countries are in a bind. ... In 2021 the poorest countries, which are desperately short of vaccines, are forecast to grow more slowly than rich countries for only the third time in 25 years.... Even as covid-19 weakens their recoveries, emerging markets face the prospect of higher interest rates at the Fed. That tends to put downward pressure on their currencies as investors buy dollars, raising the risk of financial instability....
[to avoid copyright complaint, I've snipped much more than I'd have liked.]

 

[Jason Harvestdancer]

Well they sure as fuck aren't going to homeless people or those living in poverty. And it's not difficult to see where the money is going - it's going to those people whose net worth is rapidly increasing. So those are the people to tax. I'm not suggesting a special tax to target a particular subset of high income earners, I am saying increase taxes on ALL high income earners. And on ALL of their sources of income, particularly the fringe benefits.

Regardless, money put into the economy and not removed via taxation is inflationary, if it doesn't cause growth sufficient to absorb it.

Taxes in the US, particularly on the very high income earners, are ridiculously low. The US government is derelict in its duty to prevent unreasonable increases in wealth inequality. Nobody works hard enough to deserve a suborbital joyride. Particularly not while people are sleeping in the streets.

Dumb regurgitation of right-wing soundbites doesn't change that. Nobody's saying "eat the rich". Make the fuckers pay a reasonable and equitable amount of tax.

But the people you have in mind are not bankers.

And what we are seeing is stock appreciation, not income.

If you have more dollars today than you did yesterday, that's income. If you didn't do anything to earn it, that's not a reason to pay less tax on it.

When those more dollars have just as much purchasing power than the fewer dollars of yesterday, you didn't really advance at all. It is the Red Queen, running as fast as you can just to stay in place.

The inflation is going to hurt the Biden administration. Among those who are paying more attention to the economic news instead of being distracted by "Look, we have new stuff on Kavanaugh" comparisons are being made to Carter, which is unfortunate as Carter is much better than Biden. Inflation is a highly regressive tax, hurting those on the bottom far more than those on the top.

The new money is held by the government, shifting the balance of wealth held in the private sector versus the public sector. The government could simply hold onto that money and thus not inject it into the economy, but it won't. What it does is distribute it at pre-inflation prices, getting goods on the cheap, while those who receive the funds in exchange for items of real value are the end losers. It isn't the politically connected wealthy who lose in this game.

Comparisons to Carter indicate hard times for the Democrats in the short term. When gas is a dollar higher than a year ago, those who commute to work (even those who use public transit) feel the pinch. The upper-middle class doesn't feel it as much, and the upper class not at all. When food prices go up, it is those who actually have a food budget who notice it the most.

 

[Canard DuJour]

But the people you have in mind are not bankers.

And what we are seeing is stock appreciation, not income.

If you have more dollars today than you did yesterday, that's income. If you didn't do anything to earn it, that's not a reason to pay less tax on it.

When those more dollars have just as much purchasing power than the fewer dollars of yesterday, you didn't really advance at all. It is the Red Queen, running as fast as you can just to stay in place.

Then the people in question needn't worry because they have accumulated dollars, and their assets have accumulated dollar value, at rates far higher than inflation.

The new money is held by the government, shifting the balance of wealth held in the private sector versus the public sector. The government could simply hold onto that money and thus not inject it into the economy (etc)

Nope. The new money is created in the process of spending. Treasury instructs the Fed to credit payees' banks' reserve accounts along with instruction for those banks to credit payees' accounts. The payees' transactions will then clear. Govt does not first print a heap of money it "could simply hold onto" (which would be utterly pointless) or instruct the Fed to credit Treasury's reserve account (which would be illegal).

The govt's deficit is thus the private sector's (households' and firms') surplus. Look:

What it does is distribute it at pre-inflation prices, getting goods on the cheap, while those who receive the funds in exchange for items of real value are the end losers. It isn't the politically connected wealthy who lose in this game.

Also wrong. If the govt spends additional money into circulation, there are no fewer goods and services available to buy, so no net loss of purchasing power, but a redistribution of it to the recipients of govt spending or their creditors. They might or might not be "the politically well-connected", depending what the spending is on.

Or, if the additional demand for goods and services stimulates additional production, there is growth rather than inflation.

There'd only be a net loss of purchasing power - even with inflation - if additional money spent into circulation causes fewer goods and services to be produced. That could happen if the economy were already producing at capacity and additional govt spending were to "crowd out" more productive private sector investment. All the evidence suggests that we are not in that world. Far from it.

 

[Jason Harvestdancer]

Apparently the American Public are blaming Biden for the ongoing inflation.

For a long time i pondered why Kenyesians, Politicians, and Central Bankers all think some inflation is good but deflation is always bad. I've come to a conclusion - inflation helps the rick, deflation helps the poor.

 

[ZiprHead]

Apparently the American Public are blaming Biden for the ongoing inflation.

For a long time i pondered why Kenyesians, Politicians, and Central Bankers all think some inflation is good but deflation is always bad. I've come to a conclusion - inflation helps the rick, deflation helps the poor.

Who's Rick? He sounds like a dick.

Inflation driven by demand because more people have money to spend can be good if it doesn't get out of hand.

 

[bilby]

Apparently the American Public are blaming Biden for the ongoing inflation.

For a long time i pondered why Kenyesians, Politicians, and Central Bankers all think some inflation is good but deflation is always bad. I've come to a conclusion - inflation helps the rick, deflation helps the poor.

Who's Rick? He sounds like a dick.

Inflation driven by demand because more people have money to spend can be good if it doesn't get out of hand.

Inflation helps those with negative net worth, who see their debts reducing in value. Deflation helps those with positive net worth, who see their savings increase in value.

Inflation is good for the poor, and bad for the rich.

 

[SimpleDon]

The biggest long-term problem isn't inflation, it is the growth in private debt, primarily corporate debt. Public and private debt create an increase in the money supply. Corporations borrowed to sustain operations during the lockdowns. Individuals went into debt to stay alive.

Paying down this debt will create deflation that will counter any threat of long-term inflation.

Money is created by debt. Money is destroyed when the debt is paid back. It is really that simple.

However, the money to pay the interest on the debt has to be created by new debt. Therefore you have an ever-increasing spiral of debt. The most desirable so-called natural interest rate from a macroeconomic point of view is close to 0% as possible. This means that fighting inflation by raising interest rates is counter-productive in the long term. The most effective way to battle inflation is to raise taxes and to encourage savings or its modern equivalent, paying down existing debt.

This is what we learned in the recovery from the Great Recession when we didn't provide as much stimulus as was needed primarily because the "Washington Consensus" of the supply-side neoliberal economists thought that money is not created by debt but by the government putting the money into bank's reserve accounts. It was decided that one-half of the shortfall in the economy would come from the stimulus and the other half from putting money in the bank's reserve accounts. What happened is telling to those willing to listen, the money in the reserve accounts stayed in the reserve accounts. It wasn't loaned out because there was no demand for loans.

The economy is lead by demand, not by supply.

 

[SimpleDon]

Apparently the American Public are blaming Biden for the ongoing inflation.

For a long time i pondered why Kenyesians, Politicians, and Central Bankers all think some inflation is good but deflation is always bad. I've come to a conclusion - inflation helps the rick, deflation helps the poor.

Who's Rick? He sounds like a dick.

Inflation driven by demand because more people have money to spend can be good if it doesn't get out of hand.

Inflation helps those with negative net worth, who see their debts reducing in value. Deflation helps those with positive net worth, who see their savings increase in value.

Inflation is good for the poor and bad for the rich.

Inflation is good for the rich too. What is characterized as "capital gain" is really inflation. The rich don't have their money in savings accounts, they have it in stocks and bonds and in real estate. Or in collectibles, art, vintage cars, etc. These are savings that increase in value due to inflation. These are savings that the rich call investments to muddy the waters, but they aren't the economy-pleasing investments that grow the economy. The economy-pleasing investments are investments in production facilities that are in short supply in this time of offshoring production.

 

[Jason Harvestdancer]

Apparently the American Public are blaming Biden for the ongoing inflation.

For a long time i pondered why Kenyesians, Politicians, and Central Bankers all think some inflation is good but deflation is always bad. I've come to a conclusion - inflation helps the rick, deflation helps the poor.

Who's Rick? He sounds like a dick.

Inflation driven by demand because more people have money to spend can be good if it doesn't get out of hand.

Inflation helps those with negative net worth, who see their debts reducing in value. Deflation helps those with positive net worth, who see their savings increase in value.

Inflation is good for the poor, and bad for the rich.

Sure, the upside to inflation is that wages eventually go up as well.

No, inflation is good for the rich, and bad for the poor. Deflation is the reverse. That's why politicians and bankers say deflation is the worst thing that could possibly happen to the country.