i think you are missing the point. it does not matter if the expetations are tainted by political affiliation. nor does it matter if people don't understand the concept of centson the dollar. or if they expect (only) what they have recently experienced. the expectation will tend todrive certain behaviors (both ways)... a tiny percent difference between those who do and those who don't increase their spending to get ahead of the curve or reduce their spending because they can't afford the high prices will affect the expectations/behavior of others and therefore the net rate of inflation,
A question that's NEVER asked in inflation surveys: Would you rather buy eggs for $8/dozen any time you want or only be able to buy them once a month for $2/dozen? In other words, no one wants to know how consumers would react to price controls if it meant scarcity for at least a short period of time.
Here's the problem no one wants to address. Tax cuts for the rich don't cause inflation because the wealthy will simply sock their newfound money away in a savings account or in the stock market. They're not driving up the price of necessities because they've already bought all the toothpaste and toilet paper they need. And if their new wealth drives up the price of a summer cottage on Martha's Vineyard, who cares?
But if you provide the bottom 80% of Americans with a financial windfall, they are going to spend it. This sudden demand will temporarily outstrip supply and cause prices to rise. And that's not even taking price gouging into account. And so this ensuing inflation will erase the financial gains of any windfall. The not-so-lucky 80% can never get ahead unless financial assistance provided by the federal gov't is paired with price controls that may create temporary scarcity of goods and services but give consumers a chance to creatively manage their household finances until a new economic equilibrium becomes established.
not quite: the rich will use their money to buy property, pricing the less rich out of the market. they will also use their money to buy congress, pricing the less rich out of that market. and if you take price gouging into account the poor will either pay more, or spend less on other things ..driving prices down?
it's complicated, but easy to find theories that explain everything as long as you don't look at the complications. Paul Samuelson thought inflation was caused by workers demanding wages in excess of what their work was worth. he did not seem to notice supply chain disruption by oil cartel. just as, i think, Fed did not notice, or have a way to deal with supply chain disruption (by the very rich monopolists) in dealing with the recent/current inflation. olease note i do not claim to have an answer; i am just skeptical that you do.
"...and if you take price gouging into account the poor will either pay more, or spend less on other things...driving prices down?"
I don't know what this sentence means. The poor will spend "on other things"...other than necessities? The fact that you can only spend on necessities is the definition of what it means to be poor.
You write that "it's complicated." That's what everyone who doesn't want to solve any problem will say. This is pretty simple. If you have a heartbeat, you want to get more money into the hands of the less fortunate among us. But because you can be guaranteed that they'll spend it, if the economic stimulus is large enough it will spur inflation--unless you slap on price controls until the economy can adapt to this new reality of the bottom 80% having newfound spending power.
very few are so poor they have no choice in what they spend money on.{some things are more necessary than other things) the liars [boskin commission] like to say there is no inflation because if the cost of steak goes up people will switch to chicken..they might, but that does not mean there is no inflation. all i meant is that if prices go up people will not buy some things but they will buy other things they value or need more than the things they don't buy...Not that they will switch to other things would not otherwise buy. on the other hand, they might not buy some things and try to save more of their money so they will have enough to cover "emergencies" or just last them a little longer..resulting in less spending overall. or, i suppose, they might decide to save more in order to take advantage of the higher interest the Fed thiks will stop inflation. I am afraid this is not as pretty simple as you think it is. an economic stimulus does not necessarily mean inflation...it could mean people are spending more and drawing more production into the marketplace...that is more spending on more things, not more spending on the same things. and the bottom 80% are not "poor." and i do want to solve the problems..both of poverty and of inflation.
We know that if high inflation takes hold for a time, there is an incentive to purchase earlier rather than later. I thought that was why expectations play an important role in economics, and why the Fed wants to keep inflation expectations at bay.
While the partisan charts are of course very striking, additional data from the University of Michigan Surveys of Consumers make it abundantly clear that the current divergence in inflation expectations is shaped by beliefs about future policy, rather than a form of political expression divorced from economic factors. Today's data included a question on whether consumers think higher tariffs would be better for the economy, or lower tariffs would be better, or if tariff policy would make no difference for the economy. As seen in the chart on their webpage (http://www.sca.isr.umich.edu/), about 19% of consumers reported higher tariffs would be better for the economy, while 62% favored lower tariffs. Strikingly, those favoring higher tariffs had much lower inflation expectations than those favoring lower tariffs and those who believed tariff policy has little economic impact. Furthermore, this question doesn't perfectly align with political affiliation; less than half of Republicans believe that higher tariffs are better for the economy.
Unfortunately economists have not perceived the primary reason for inflation which is the human civilization-long monetary paradigm of Debt Only as the sole form and vehicle for the creation and distribution of new money wed to the largely delusional body of free market theoretics which is a complete misnomer for what it actually is which is alternately goosed and strangled and continually dominating monetary/financial chaos. The proof of this, which has been repeated many times historically according to Ms Kelton's colleague Michael Hudson and others, is the great financial recession of 2008 where finance's "innovation" screws up the economy and then they are bailed out while the individual is forced to "go scratch".
With a new monetary paradigm of Direct and Reciprocal Monetary Gifting strategically integrated into the Debt Only system with the same accounting operations the banks use to create money only as debt of equal debits and credits that sum to zero specifically at retail sale with a 50% Discount/Rebate policy and a 50% Gift of Interest/Debt Jubilee at point of loan signing the spell of finance's monopoly monetary paradigm is ended while the individual's purchasing power is mathematically doubled, chronic erosive inflation is transformed into beneficial price and asset deflation and the delusion of free market theorietics is replaced by truly abundant monetary free flowingness. A few more regulatory and taxation tweeks with real teeth, and the new monetary paradigm is a temporal universe reality observed and experienced by all.
The Michigan survey results reflect the desired effects of 45 years of public education under the Rockefeller curriculum. It was instituted as government policy in conjunction with neoliberalism, and to no surprise has achieved the desired end of having a population of workers totally obedient to authority who know only as much as is necessary for them to perform their jobs efficiently. Critical thinking, long-range planning and strategy aren't considered necessary.
This is highly unscientific double think doubletalk. Consumers do not set prices, producers do. The Fed doesn't control inflation it controls the cost of borrowing to both consumers and producers. The Fed increasing borrowing costs can't explain the price of eggs going up $1 a dozen, nor can demand explain the real cause of recent inflation---a post Covid supply squeeze and monopoly pricing power. While supply has been addressed, pricing power is completely off the table. The only thing that will address demand significantly is a recession. That is where the Trump tariffs come in. Will it reduce demand? Will it reduce corporate sales in growth areas of the economy? If Nvidia can't sell to China or worse off Intel can't assemble its products from now tariffed imported parts then who buys them at what price. Instead of reading consumer sentiment tea leaves it would be better if economists focused on the inflationary effects of higher costs of production.
I have long thought, Stephanie, that the unappreciated reason inflation took off in 2021 was because Jerome Powell said it would. As you know, in his 2020 Jackson Hole speech he *said* the Fed would let inflation run hot. As far as I can see, no Fed chairman had ever so bluntly said they were going to just let inflation rise. It really runs counter to their entire reason for being.
Lo and behold, people heard that speech, and responded accordingly, and inflation did indeed rise. The Fed officials are right, expectations drive inflation, and once Powell raised the expectations, inflation rose right alongside them.
How much would you pay for any Fed forecast ? ZERO. They are worthless. However, we entrust them with an infinite balance sheet. We need a market mechanism for rates. We can't have that being determined by a set of backward looking bureaucrats.
"the stuff I no longer have any hope of affording again"
I have yet to see *any* economist come to terms with the distinction. It's the key reason why any economist, orthodox or not, is incapable of comprehending "vibeflation" or even history.
No matter the reason, inflation is a differential between income and cost of living to people.
Those that study or have studied COL understand the fact. Yet I can expect CPI "inflation" or GDP "growth" to be trotted out in models and arguments, despite being mathematical garbage.
Nice overview of consumer survey measures! This paper (https://www.federalreserve.gov/econres/feds/files/2021062pap.pdf) by a Federal Board economist offered a complementary perspective.
i think you are missing the point. it does not matter if the expetations are tainted by political affiliation. nor does it matter if people don't understand the concept of centson the dollar. or if they expect (only) what they have recently experienced. the expectation will tend todrive certain behaviors (both ways)... a tiny percent difference between those who do and those who don't increase their spending to get ahead of the curve or reduce their spending because they can't afford the high prices will affect the expectations/behavior of others and therefore the net rate of inflation,
A question that's NEVER asked in inflation surveys: Would you rather buy eggs for $8/dozen any time you want or only be able to buy them once a month for $2/dozen? In other words, no one wants to know how consumers would react to price controls if it meant scarcity for at least a short period of time.
Here's the problem no one wants to address. Tax cuts for the rich don't cause inflation because the wealthy will simply sock their newfound money away in a savings account or in the stock market. They're not driving up the price of necessities because they've already bought all the toothpaste and toilet paper they need. And if their new wealth drives up the price of a summer cottage on Martha's Vineyard, who cares?
But if you provide the bottom 80% of Americans with a financial windfall, they are going to spend it. This sudden demand will temporarily outstrip supply and cause prices to rise. And that's not even taking price gouging into account. And so this ensuing inflation will erase the financial gains of any windfall. The not-so-lucky 80% can never get ahead unless financial assistance provided by the federal gov't is paired with price controls that may create temporary scarcity of goods and services but give consumers a chance to creatively manage their household finances until a new economic equilibrium becomes established.
not quite: the rich will use their money to buy property, pricing the less rich out of the market. they will also use their money to buy congress, pricing the less rich out of that market. and if you take price gouging into account the poor will either pay more, or spend less on other things ..driving prices down?
it's complicated, but easy to find theories that explain everything as long as you don't look at the complications. Paul Samuelson thought inflation was caused by workers demanding wages in excess of what their work was worth. he did not seem to notice supply chain disruption by oil cartel. just as, i think, Fed did not notice, or have a way to deal with supply chain disruption (by the very rich monopolists) in dealing with the recent/current inflation. olease note i do not claim to have an answer; i am just skeptical that you do.
"...and if you take price gouging into account the poor will either pay more, or spend less on other things...driving prices down?"
I don't know what this sentence means. The poor will spend "on other things"...other than necessities? The fact that you can only spend on necessities is the definition of what it means to be poor.
You write that "it's complicated." That's what everyone who doesn't want to solve any problem will say. This is pretty simple. If you have a heartbeat, you want to get more money into the hands of the less fortunate among us. But because you can be guaranteed that they'll spend it, if the economic stimulus is large enough it will spur inflation--unless you slap on price controls until the economy can adapt to this new reality of the bottom 80% having newfound spending power.
wally
very few are so poor they have no choice in what they spend money on.{some things are more necessary than other things) the liars [boskin commission] like to say there is no inflation because if the cost of steak goes up people will switch to chicken..they might, but that does not mean there is no inflation. all i meant is that if prices go up people will not buy some things but they will buy other things they value or need more than the things they don't buy...Not that they will switch to other things would not otherwise buy. on the other hand, they might not buy some things and try to save more of their money so they will have enough to cover "emergencies" or just last them a little longer..resulting in less spending overall. or, i suppose, they might decide to save more in order to take advantage of the higher interest the Fed thiks will stop inflation. I am afraid this is not as pretty simple as you think it is. an economic stimulus does not necessarily mean inflation...it could mean people are spending more and drawing more production into the marketplace...that is more spending on more things, not more spending on the same things. and the bottom 80% are not "poor." and i do want to solve the problems..both of poverty and of inflation.
A conclusion from SK based on the discussion contained in the posting would have been enlightening.
We know that if high inflation takes hold for a time, there is an incentive to purchase earlier rather than later. I thought that was why expectations play an important role in economics, and why the Fed wants to keep inflation expectations at bay.
While the partisan charts are of course very striking, additional data from the University of Michigan Surveys of Consumers make it abundantly clear that the current divergence in inflation expectations is shaped by beliefs about future policy, rather than a form of political expression divorced from economic factors. Today's data included a question on whether consumers think higher tariffs would be better for the economy, or lower tariffs would be better, or if tariff policy would make no difference for the economy. As seen in the chart on their webpage (http://www.sca.isr.umich.edu/), about 19% of consumers reported higher tariffs would be better for the economy, while 62% favored lower tariffs. Strikingly, those favoring higher tariffs had much lower inflation expectations than those favoring lower tariffs and those who believed tariff policy has little economic impact. Furthermore, this question doesn't perfectly align with political affiliation; less than half of Republicans believe that higher tariffs are better for the economy.
Unfortunately economists have not perceived the primary reason for inflation which is the human civilization-long monetary paradigm of Debt Only as the sole form and vehicle for the creation and distribution of new money wed to the largely delusional body of free market theoretics which is a complete misnomer for what it actually is which is alternately goosed and strangled and continually dominating monetary/financial chaos. The proof of this, which has been repeated many times historically according to Ms Kelton's colleague Michael Hudson and others, is the great financial recession of 2008 where finance's "innovation" screws up the economy and then they are bailed out while the individual is forced to "go scratch".
With a new monetary paradigm of Direct and Reciprocal Monetary Gifting strategically integrated into the Debt Only system with the same accounting operations the banks use to create money only as debt of equal debits and credits that sum to zero specifically at retail sale with a 50% Discount/Rebate policy and a 50% Gift of Interest/Debt Jubilee at point of loan signing the spell of finance's monopoly monetary paradigm is ended while the individual's purchasing power is mathematically doubled, chronic erosive inflation is transformed into beneficial price and asset deflation and the delusion of free market theorietics is replaced by truly abundant monetary free flowingness. A few more regulatory and taxation tweeks with real teeth, and the new monetary paradigm is a temporal universe reality observed and experienced by all.
The Michigan survey results reflect the desired effects of 45 years of public education under the Rockefeller curriculum. It was instituted as government policy in conjunction with neoliberalism, and to no surprise has achieved the desired end of having a population of workers totally obedient to authority who know only as much as is necessary for them to perform their jobs efficiently. Critical thinking, long-range planning and strategy aren't considered necessary.
This is highly unscientific double think doubletalk. Consumers do not set prices, producers do. The Fed doesn't control inflation it controls the cost of borrowing to both consumers and producers. The Fed increasing borrowing costs can't explain the price of eggs going up $1 a dozen, nor can demand explain the real cause of recent inflation---a post Covid supply squeeze and monopoly pricing power. While supply has been addressed, pricing power is completely off the table. The only thing that will address demand significantly is a recession. That is where the Trump tariffs come in. Will it reduce demand? Will it reduce corporate sales in growth areas of the economy? If Nvidia can't sell to China or worse off Intel can't assemble its products from now tariffed imported parts then who buys them at what price. Instead of reading consumer sentiment tea leaves it would be better if economists focused on the inflationary effects of higher costs of production.
peter
i am inclined to agree with your second sentence.
I have long thought, Stephanie, that the unappreciated reason inflation took off in 2021 was because Jerome Powell said it would. As you know, in his 2020 Jackson Hole speech he *said* the Fed would let inflation run hot. As far as I can see, no Fed chairman had ever so bluntly said they were going to just let inflation rise. It really runs counter to their entire reason for being.
Lo and behold, people heard that speech, and responded accordingly, and inflation did indeed rise. The Fed officials are right, expectations drive inflation, and once Powell raised the expectations, inflation rose right alongside them.
https://moslereconomics.com/wp-content/uploads/2024/08/A-Framework-for-the-Analysis-of-the-Price-Level-and-Inflation.pdf
How much would you pay for any Fed forecast ? ZERO. They are worthless. However, we entrust them with an infinite balance sheet. We need a market mechanism for rates. We can't have that being determined by a set of backward looking bureaucrats.
Actual people define inflation as
"stuff I can no longer afford"
and
"the stuff I no longer have any hope of affording again"
I have yet to see *any* economist come to terms with the distinction. It's the key reason why any economist, orthodox or not, is incapable of comprehending "vibeflation" or even history.
No matter the reason, inflation is a differential between income and cost of living to people.
Those that study or have studied COL understand the fact. Yet I can expect CPI "inflation" or GDP "growth" to be trotted out in models and arguments, despite being mathematical garbage.