Where will inflation stop?

Don't make it political please. But things are going up. I have given my customers a 20 per cent temporary price increase and they happily paid it to get product, and I have told them when the price drops again it will be about 6 to 7 per cent above the old rate. I need a new washing machine. What is available is fifty per cent more than last year. But there is not much to choose from. I see I can sell my old Rover if I choose for a lot more than I paid 3 years and 75000 km ago.  Economists (paid guessers) say five per cent but that its temporary. I say 7 or 8 per cent and for years. What do you guys think? Are you making changes to compensate? Cutting back? Stocking up? Do not mention any political figures in your comments.

I know who our hosts voted for.  I'm not touching this thread for anything.

[edit]  Not that it is entirely his side's fault.  [/edit]

Inflation will stop when the economic system of our society completely collapses.

Beer Baron said:

Inflation will stop when the economic system of our society completely collapses.

If only there were another option

It'll slow down and stabilize a bit when we can actually build and ship and deliver enough products to catch up to the demand. Right now everything's basically being auctioned and the high bidder's the most desperate to get it. It's all price signalling right now, and the signals say "don't buy if you can avoid it"

If we have a quiet Christmas and an easy winter for weather, and wages for truckers actually go up enough that they can be recruited and kept, most low-tech goods should stabilize at a 10-15% premium over 2019, sometime in Q1 2022. If semiconductor manufacturing catches up to demand in Q2-Q3 2022 then most equipment should do the same. 

IT's tough to say. The inflation is because of supply chain interruption that is still happening. It's nothing that the US can control honestly because we no longer own the supply chain. There will be a point in time probably about a year from now when we are "caught up" and see price drops and it will go down some. But the question is will the prices drop. I bet a lot less than people think. 

It's not going to. Not unless it is stopped by force, and there's entirely too much tribalism these days for that to happen. 

There are big things that could be done and changes that could be made that would certainly help, but the people who can make those decisions and changes aren't negatively affected, so they have no reason to do so. 

But I'm still pissed we left the gold standard so yea. 

I'm still wondering if prices will actually go down when things "stabilize" or if $9/lb for store brand bacon is just the new normal.

As soon as the Fed stops printing more money than they decommission and stop loaning it to the government with interest.  Until that happens, inflation cannot stop.  It is an impossibility.

The things we're talking about here are affecting the RATE of inflation, but general inflation is a given with our current economic structure.  It's also not entirely a bad thing.  Money is paper and electrons attached to a perceived value.  Every time a market opens or closes, the general assumptions of something's value changes, and therefore its cost.  We have to give up the whole "value of the dollar" concept as it is relative and constantly decreasing as the relationship between the Fed and the Banks/government continues to operate on an insolvent loan paadigm.  The real nature of the world economy is the value of the commodity and how it interplays with how many pieces of paper the Fed tells the mints to print, and how many electrons flow into your bank account on payday.  One only needs to look at GameStop/Reddit to see how perception is the driver of monetary value.

But a physical piece of currency is nothing but a promissory note with nothing but intangible perceptions behind it.  The $5 bill in your hand differs from Bitcoin ONLY because it exists as a physical entity instead of bits of data on a hard drive.  Otherwise, they are the same concept.

In reply to BlueInGreen - Jon :

Still $4 at Aldi. 

It will never stop, unless we change the way that global commerce works. 

Right now, we're in a situation that can't be compared to anything except possible a world war. We can't stop it, the government can't stop it, though they (and the fed) have some levers that they can (and have) pulled to impact it in one direction or another, ultimately there are far too many variables to control. 

One of the problems is that any actions that seem like they're doing anything are going to be too catastrophic in the short term; long term options take too long to see. The blatant mismanagement of the pandemic here and around the world necessitated the stimulus checks, but too many people didn't actually need them, which caused the price of everything to go up - and that doesn't even mention the idea of just throwing free money at people to see what it does. Meanwhile supply for everything has dropped like a rock due to the pandemic and other causes (insert Evergreen Suez Canal meme here), demand has mostly stayed the same or gone up, so... prices go up, but we can't go back in time. 

So, we have to see if it really is out of control or not... In the short term, yeah, it is. On a more macro sense, it isn't. It will eventually balance out, though I expect it will take longer this time around*.

And to look at the big picture... On the long term, the rate of inflation is actually decreasing. Through September, the annualized rates of inflation since:

• 1950: 3.45% to 3.5%
• 1960: 3.7% to 3.75%
• 1970: 3.9%
• 1975: 3.55%
• 1980: 2.9% to 2.95%
• 1985: 2.6% to 2.65%
• 1990: 2.35% to 2.4%
• 1995: 2.15% to 2.2%
• 2000: 2.2%
• 2005: 2.05%
• 2010: 2.1% to 2.15%
• 2015: 2.4%
• 2016: 2.65% to 2.7%
• 2017: 2.65% to 2.7%
• 2018: 2.9% to 3.05%
• 2019: 3.35% to 3.65%
• 2020: 4.5% to 5.45%

Now, the things that have me concerned about this are C-suite wages compared to worker wages, the enormous transfer of wealth TO the wealthy over the past year and a half, and health insurance/medical costs - I think that nurses are going to be demanding more and more money; they can't fill overtime slots paying 3x their base rate. Something is going to break here, and this is what makes me think that the "system" is going to break and that could break inflation in the short to mid term.

As soon as employers don't need to keep increasing wages to find workers. Although this is really working out well for the blue collar working class actually getting a much needed pay increase. Maybe one day people who have jobs won't qualify for government assistance. The current issue with not having enough workers is that we are burning out the ones that are working because of not having enough people to fulfill demand. I know several people have been doing front line work, delivering and packaging products that own $5-100+million dollar companies.

Just talked to someone working at a warehouse that pays $23+incentives that was offering $100 bonus for showing up and $100 for completing the shift every day as an order selector.     

Inflation will always be better than deflation. 

Investing more in shale oil in West Texas and Colorado would help drop gas prices. That would also require admitting we are not going to convert every car to an electric as fast as they think they will. Lithium-Ion batteries are another issue. We should shoot for maybe half of the cars being EVs and counting on needing oil for a while longer.

The supply chain should be shortened. Not everything has to be made in the US, but moving cheap manufacturing back to Mexico from China would cut the need for so many barges and ports. Just put the stuff on a truck heading north. And if we have to keep the supply chain from China, build a new port in Mexico East of Baja in the Gulf of California and improve the roads to get the stuff up through New Mexico or Texas to the rest of the country. The ports of Los Angeles and Long Beach have been running over capacity since before Covid hit. We need to expand.

Modern Monetary Theory.    Says we can borrow and spend forever.    Somehow ignores the resulting devaluation of the currency.

 History does not support MMT but some "very smart people" are pushing it so here we are.

Inflation?  My compressor tops out at 155psi.  However I think the heaviest tire I have maxes out at 80. 

In reply to jharry3 :

And to tie it all back to our world, MMT was first elaborated by Warren Mosler, creator of the Consulier. True story.

Margie

As Curtis said, inflation will never stop because of the way the fed and government are designed. Heck, even in the feudal eras we had inflation, it was just extremely slow. We also kinda expected to just, stop capitalism to contain the varus, which it really can't do. At least now more and more are realizing modern economic systems are like these huge, lovecraftian monsters no one person could hope to grasp.

I think I heard it from "economics explained" YT a few days ago, but whats occurring now is a "cold money" problem where people could spend dosh but don't, because of the aforementioned supply issues and constraints.

I'm full time student and full time work. Like the rest of the younger generations, I can only fall back on my parents if I don't have enough.

I admit that money theory has me very confused. It it seems completely divorced from any reality I was ever taught. I am Canadian and we are also spending unearned dollars as fast as we can print them. The economists (paid to guess as I mentioned) say that because the debt is tied to long term bonds it is no big deal. But to me that's like putting your credit card debt on the end of your mortgage and claiming it no longer exists. 

Japan has been printing money for decades, their banks pay depositors zero interest or charge them to park money, they are an import or starve country that rely heavily on ports and shipping, and yet their inflation rate is still near zero, even today. 

bearmtnmartin (Forum Supporter) said:

I admit that money theory has me very confused. It it seems completely divorced from any reality I was ever taught. I am Canadian and we are also spending unearned dollars as fast as we can print them. The economists (paid to guess as I mentioned) say that because the debt is tied to long term bonds it is no big deal. But to me that's like putting your credit card debt on the end of your mortgage and claiming it no longer exists. 

If you put your credit card debt on the end of your mortgage and die before your mortgage is paid off, does it really exist?

In reply to Snowdoggie (Forum Supporter) :

Mortgage does mean death tax.....

chaparral said:

It'll slow down and stabilize a bit when we can actually build and ship and deliver enough products to catch up to the demand. Right now everything's basically being auctioned and the high bidder's the most desperate to get it. It's all price signalling right now, and the signals say "don't buy if you can avoid it"

If we have a quiet Christmas and an easy winter for weather, and wages for truckers actually go up enough that they can be recruited and kept, most low-tech goods should stabilize at a 10-15% premium over 2019, sometime in Q1 2022. If semiconductor manufacturing catches up to demand in Q2-Q3 2022 then most equipment should do the same. 

 

Alternatively, reducing demand has the same effects. At some point, consumers balk at paying high prices on discretionary goods.

On an individual level, the easiest way to combat rising inflation is to quit buying stuff. The more you consume, the more impacted you'll be by high prices. We all have to eat, and a warm, well lit place sure is nice, but reducing consumption across the board will be the most impactful thing you can do. Locking in payments at a relatively low rate wherever possible can help in this regard too (mortgage, pre-paid utility bills, etc can all help).

Things will balance out but they are quite turbulent across a broader segment of the supply chain than I have ever seen.

I'm still on team transitory. The largest driver of inflation right now is the lack of goods because of supply chain issues (used car prices have skyrocketed because there aren't enough microchips). When the supply chain un-borks itself we'll drop back down to roughly what the Fed target is-2%. 

However! The bond market is betting that the average annual inflation over the next 5 years is closer to 3%:

https://www.nytimes.com/2021/10/27/business/long-term-inflation-expectations-in-the-bond-market-have-shot-higher.html

If I'm wrong then the Fed will take progressively harsher steps to reign it in. That could get ugly, especially if we're still not at full employment yet (whatever you take that to mean). 

Instead of asking, "When will it stop" a better question might be, "What can I do to make sure it doesn't harm me if things go nuts?" Having a business with pricing power (ability to raise prices) is a pretty good place to start.

chandler said:

Beer Baron said:

Inflation will stop when the economic system of our society completely collapses.

If only there were another option

Saw an interesting video about how a lot of Japan's economic issues are because they, societally, refuse to allow inflation to happen.

I can get a mortgage or other secured loan at 1.9% APR.  If you believe inflation will be 7-8%, would it not be wise to borrow as much money as possible and buy something that will maintain or increase in inflation-adjusted value?  Inflation is good if you owe money.

Well, never. Inflation is part of the monetary policy of the Fed to grow the money base and what's in circulation. Their goal 3% per year.

Now do you mean HIGH inflation? Yes, it's coming. And at this point the only thing saving the US economy is that oil is traded in dollars. If it begins to be traded in Rubles or Yuan. 

Brace yourselves for a loaf of bread costing $75.