Where will inflation stop?

Beer Baron said:

In reply to SV reX :

Are you suggesting our economy is complicated and affected by multiple factors?!?

I'm agreeing that the economy is complicated, but am of the opinion that this specific inflation problem could have been avoided or greatly minimized if irresponsible spending for political gain wasn't so prevalent.  

SV reX said:

Beer Baron said:

In reply to SV reX :

Are you suggesting our economy is complicated and affected by multiple factors?!?

I'm agreeing that the economy is complicated, but am of the opinion that this specific inflation problem could have been avoided or greatly minimized if irresponsible spending for political gain wasn't so prevalent.  

If politicians weren't politicians, things might be less bad.

Are you suggesting that if politicians weren't politicians - people's consumption habits wouldn't have changed drastically during lockdowns, people in lockdown would have produced just as many goods, international supply chains wouldn't have been disrupted, and there would be just as much grain coming out of Ukraine and gas coming out of Russia?

Are you honestly suggesting that with... ::gestures wildly:: everything... going on in this world, you can narrow down the cause of unrest to a single primary source?

I wonder if this is going to be seen as the canary in the coalmine looking back in 6-12 months:

“SVB’s institutional challenges reflect a larger and more widespread systemic issue: The banking industry is sitting on a ton of low-yielding assets that, thanks to the last year of rate increases, are now far underwater — and sinking,” wrote Konrad Alt, co-founder of Klaros Group.

Alt estimated that rate increases have “effectively wiped out approximately 28% of all the capital in the banking industry as of the end of 2022.”

"inflation" as we are experiencing it will end when corporate greed ( need for perpetual stock price increases, goes away).

There is no such thing as a free market economy when there is a single provider for all the essential needs that a population consumes. That is where we live. 

Other than contrived stories, there are no shortages of anything it is all made up to make us buy water and toile paper.

(pick your commodity...houses, car, food,  micro-chips, air travel.... whatever can be made into a news-cycle crisis if you can afford to pay for the news cycle story).

As we were just told by one of the most powerful men on the planet: its a matter of GREEN. ( ironically close to "GREED" aint it?)

While the latest generation has been cut out of th housing marekt and any possibility of retirement, The Mega Yacht and Private Jet industry is booming like never before. Tells you something.

SV reX said:

Beer Baron said:

In reply to SV reX :

Are you suggesting our economy is complicated and affected by multiple factors?!?

I'm agreeing that the economy is complicated, but am of the opinion that this specific inflation problem could have been avoided or greatly minimized if irresponsible spending for political gain wasn't so prevalent.  

It's just too easy to vilify politicians.   Just point to the party you disagree with and say; It's their fault. 
    But those of us who understand the real need for both parties  understand the nuances and complications.   
       We as a nation have been trained that way.  Wedge issues no longer can be discussed with the goal of finding common ground.   
    I'm not saying all politicians are above using such issues to gain support.   No party is perfect.  
  Yet listening is more important than shouting.  Or dismissing another's views or input. 
      Statesmanship is that ability.  Yielding on some matters  and achieving on others without party membership vilifying that politician.   
      

In reply to NOHOME :

Well said.   One segment of our population has done exceedingly well  to the cost of the rest of us.   
  They can easily afford to purchase politicians.   The rest of us can't.  
      So for now only money gets free speech.  Until and unless all of those not in the top 10% of wealth ( some say 1%.)  join together and out vote  that  money.     
  It's not going to happen.   Some wishing and hoping to get to that point  support them forgetting that what they are doing is preventing them from that achievement.  

Some politicians are more concerned about banning books in high schools that kids can still find on their phones than they are failing banks and overpriced housing.

Flynlow (FS) said:

I wonder if this is going to be seen as the canary in the coalmine looking back in 6-12 months:

I was thinking the same thing earlier today.  I wonder if this is the equivalent of the Bear Stearns failure, or is it just a momentary blip?  Not going to remove all my retirement money from the stock market, but wondering if it is time to reduce my exposure for a little while.

I can tell you that smaller banks aren't the only one  concerned.  
   Typically at this point a larger bank swoops in to absorb the smaller one. Or puts it in it's control  for future absorbing.  
    Not knowing the make up of SVB's  balance sheets. It may be that there isn't enough meat on the bone to bother absorbing.  
   Or it's possible that the whole industry is getting a little lean.  

In reply to frenchyd :

From what I've read, SVB is holding a large amount of mortgage backed securities from when interest rates were lower.  If so, I'm guessing they have fallen in value.

NOHOME said:

"inflation" as we are experiencing it will end when corporate greed ( need for perpetual stock price increases, goes away).

There is no such thing as a free market economy when there is a single provider for all the essential needs that a population consumes. That is where we live. 

Other than contrived stories, there are no shortages of anything it is all made up to make us buy water and toile paper.

(pick your commodity...houses, car, food,  micro-chips, air travel.... whatever can be made into a news-cycle crisis if you can afford to pay for the news cycle story).

As we were just told by one of the most powerful men on the planet: its a matter of GREEN. ( ironically close to "GREED" aint it?)

While the latest generation has been cut out of th housing marekt and any possibility of retirement, The Mega Yacht and Private Jet industry is booming like never before. Tells you something.

I... Ummmmm, I... I...

I can't even.

Forget I even started trying to say something.

eastsideTim said:

In reply to frenchyd :

From what I've read, SVB is holding a large amount of mortgage backed securities from when interest rates were lower.  If so, I'm guessing they have fallen in value.

In reply to NOHOME :

Oh look it's another "it's somebody else's fault my life sucks" thread. 

I was kind of hoping we could resurrect this without the finger pointing/politics, and just focus on the economics.

That may have been optimistic, if so I apologize :).  I have genuine interest in this topic, and today's headlines really caught my eye.  Being able to talk about it with my extended (crazy) family (you guys) brings a variety of perspectives.

In reply to Duke :

Save your typing time. This is the world and economy that we live in.  The most powerful man in the nation has admitted it under oath. 

In reply to eastsideTim :

This is pure speculation on my part.  But isn't that the case any time interest rates climb?

  OK let's assume the value of the asset has gone down significantly. The only thing I can imagine is retail sales.  I do see a lot of commercial buildings available for sale or lease.  
      Since the pandemic internet sales have flourished while brick and motor sales have dropped?   Actually that started before the pandemic.    
   So if we are talking about an adjustment in retail establishments? Why would that be the canary in the coal mine?   

In reply to frenchyd :

From a home mortgage standpoint, let's say a year ago, you buy $100 of MBS at 3% APY, but today, you can buy a new MBS at 6% APY.  The older one has to be discounted by a certain amount to make it pay as well as what you can buy now.  Couple that with the risk of the underlying assets dropping in value due to affordability issues (so far this either isn't happening or is only happening to a small degree in most markets, but hey, got to anticipate the future), and the older security is potentially even less valuable, and needs an even greater discount, so its value goes down.

So, if a significant portion of the bank's assets are held in these older MBS, then their balance sheet looks uglier.  I think a lot of this info is supposed to be publicly available, but I'm not ready to dig in too deep.  I have been reading that 90-93% of the deposits are uninsured (over the FDIC 250k limit), but I don't have a frame of reference for if that is worse than the norm.  I know the bank deposits do tend towards west coast tech companies and the VCs who help fund them, and this has caused some places to be unable to meet payroll, because they either had all their eggs in one basket, or their payroll systems weren't able to change sources quickly.

For the most part, the bigger banks should be diversified enough, and hold enough reserves, for this to not cause a contagion, but I heard a rumor earlier this week that Credit Suisse might be having trouble.  I dismissed it as BS at the time, but might go back and do a little digging over the weekend.

NOHOME said:

In reply to Duke :

Save your typing time. This is the world and economy that we live in.  The most powerful man in the nation has admitted it under oath. 

That isn't why I'm going to save the typing.

In reply to NOHOME :

Here, let me help you. 

"inflation" as we are experiencing it will end when corporate greed ( need for perpetual stock price increases, goes away).

There is little connection between inflation and stock prices. Investors like to see growth. It's hard to grow when you are short products to sell. Sure, increased margin per sale helps keep the books out of the red, but that doesn't drive growth and stock prices. Interestingly, a big part of why the stock market is performing differently that is has historically is because trading is much more accessible to the average person. 

There is no such thing as a free market economy when there is a single provider for all the essential needs that a population consumes. That is where we live. 

Well, I'm sure glad that it's not like that in my country. That sounds bad. Where do you live? 

Other than contrived stories, there are no shortages of anything it is all made up to make us buy water and toile paper.

Unfortunately, this is far from the truth. Our supply chains are still severely messed up. There is a lot going on behind the scenes that isn't visible at the consumer level. There are still a lot of component shortages that don't look to be resolved any time soon. Lots of manufacturers that rely on these components are losing lots of sales, and they need to balance that by charging more for the goods that they can ship. Water and TP had temporary shortages because people bought much more than their needs and hoarded them. People aren't buying extra cars or electrical switchboards and hoarding them. 

(pick your commodity...houses, car, food,  micro-chips, air travel.... whatever can be made into a news-cycle crisis if you can afford to pay for the news cycle story).

It seems like it would make more sense to just sell more goods than to needlessly cut production and bribe the news to mis-report? Kind of a gamble, considering competitors could just take your market share instead? 

As we were just told by one of the most powerful men on the planet: its a matter of GREEN. ( ironically close to "GREED" aint it?)

Not quite sure what you are talking about, but I can guess, and I'll leave politics alone. 

While the latest generation has been cut out of th housing marekt and any possibility of retirement, The Mega Yacht and Private Jet industry is booming like never before. Tells you something.

No one is cut out. Same rules for everyone. Earn money, save money, buy house. Retirement is just a math problem. One that is easy to solve if you start early and show a little financial discipline. Ironically supported by the same process that the "greedy" people above use to build wealth. Or you can not do those things and cry about it later instead. That's the beauty of freedom, you get to choose. The last couple generations had the same gripes, they were fine. 

SVB was a mess, they made terrible decisions and lost money.  Went long on the wrong things and short on worse choices.  Too much crypto, etc.  Thanks to FDIC no one with deposits over 250K will be hurt.  If you have a deposit over 250K with one bank you are stupid and deserve to lose money.  

Controlling inflation is like driving a bus looking at the rear view mirror.  Wall street and main street are not reacting the same way for a good reason.  The "problem" is supply and demand changes and capitalism.  Republicans are more concerned with making the other side look bad and catering to the way upper echelon of income brackets.  Democrats are trying to correct the path but not all ideas have been good.

In spite of all this most of us are employed and able to meet bills.  Things have been worse in my lifetime and probably yours too.  

NOHOME said:

"inflation" as we are experiencing it will end when corporate greed ( need for perpetual stock price increases, goes away).

So, this implies that corporate greed wasn't a real problem between 2011 and 2021?  Inflation was pretty flat and well under 3% most of that time.

Can we think of anything that DID take a dramatic upturn across the nation in 2020-2021?  Hmm?

Hint: it wasn't corporate greed.

In reply to Duke :

Are you speaking of interest rates?

In reply to Duke :

To blame it on politicians is to ignore everything preceding a certain time.  
  The 7 Trillion dollar increase in national debt between 2016 and 2020 simply had to be dealt with.  
   There is a general pattern where one group in an attempt to get elected. Makes a big deal about reducing  taxes when anyone looking at debt levels will tell you it's a foolish  time to attempt that.  
       The lowest debt to GDP  occurred under one group. And then was dramatically raised by the other group. From 22% Debt to GDP  to 78% debt to GDP. Following that group it was lowered back down to 55%  and the first balanced budget Since Eisenhower  was achieved with a surplus.  Look then at who achieved a lowering of debt to GDP  and who drove it up.  Yes the same group that always promotes lowering of taxes. 
    Others here have pointed out the interest cost of the National Debt.  
 If you simply follow the Debt to GDP ratio you will see where inflation comes from and why it has to be dealt with.  

NOHOME said:

In reply to Duke :

Are you speaking of interest rates?

Not to speak for him, but it's probably government spending. Anyone who has studied basic macroeconomics will tell you that increasing the money supply (especially when the supply of goods is restricted) will cause inflation.

NOHOME said:

In reply to Duke :

Are you speaking of interest rates?

Not even remotely.  Think back 6 months or a year before that.