https://ritholtz.com/2022/06/inflation-blame-15/?utm_source=…
Inflation Blame
1. Covid-19
2. Congress
3. President Biden CARES Act 3
4. President Trump CARES Acts 1+2
5. Consumers (overspent without regard to cost)
6. Consumers (shift to Goods)
7. Russian Invasion of Ukraine
8. Just in Time Delivery (supply chains)
9. Fed/Monetary Policy
10. Wages/Unemployment Insurance
11. Home Shortages
12. Semiconductors/Automobiles
13. Corporate Profit Seeking
14. Tax Cuts (2017) / Infrastructure (2022)
15. Crypto
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- Too much money
The Captain
Feel free to start returning some of yours at any time.
4 Likes
I return some every day but then I collect some more.
Money has to flow to be useful, like rivers!
The Captain
16. Too much money
The simple solution to that would be to raise taxes. So you’re in favor of higher taxes.
–Peter
2 Likes
The simple solution to that would be to raise taxes.
The people who raise those taxes not only spend it but print some more! Need a better solution.
So you’re in favor of higher taxes.
As long as I don’t have to pay them.
The Captain
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You omitted the big one: Supply chain failures up-and-down the entire world economy. May or may not be tied to sole-source supply policies based on price.
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Need a better solution.
You said there’s too much money. I gave a solution.
So what’s your better solution?
So you're in favor of higher taxes.
As long as I don’t have to pay them.
NIMBYism at its best. Higher taxes are OK as long as it’s not me. That attitude won’t get us anywhere.
What you seem to be missing is that while inflation is technically a problem of more money than goods+services, the problem is not always on the money side. Sometimes it’s too much money. Sometimes it’s not enough goods/services.
This particular time, it appears to me that the problem is not enough goods/services. For multiple reasons - 15 of which were listed above - we don’t have the good/services we need. The economy WANTS to grow, but we lack the ability to produce more and work more to allow the economy to grow. So until we can fix those supply side problems, we get a stagnant economy. And until that can be fixed, the only way to prevent inflation is to reduce demand.
And a good way to do that is to raise taxes.
Further, if Congress and the Fed could coordinate fiscal and monetary policies in even the most basic ways, the increased taxes could be used to reduce the demand for US Treasury borrowing, thereby allowing the Fed to engage in quantitative tightening without having a huge effect on longer-term borrowing rates.
And all of that might, just might, keep us out of the horrible stagflation that seems to be on the horizon.
–Peter
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This is from the link.
Covid-19: The global pandemic – and the response by governments to the deadly and unknown pathogen – created a unique moment in history. A majority of the workforce was unable to go to their offices or workplaces. Essential workers scrambled to service 100s of millions of people stuck at home. This began a cascade of reactions that dramatically changed the structure of the economy, with lasting ramifications.
Without the pandemic, there is no massive fiscal stimulus, no WFH, and no **supply chain disruption.**
my bold
1 Like
Without the pandemic, there is no massive fiscal stimulus, no WFH, and no supply chain disruption.
One benefit of the pandemic is that aged and addled business leaders who “managed” by watching workers at their desks, finally learned that employees could be more productive at home. That reduces the need for the company to maintain expense real estate for office space, traffic congestion is eased as fewer people commute, and the time spent on commuting itself can be channeled to more productive pursuits.
This is a major productivity improvement that likely wouldn’t have happened without the pandemic.
intercst
2 Likes
So what’s your better solution?
My solution is not very popular in these parts. Taking care of Number 1.
And a good way to do that is to raise taxes.
That’s an opinion which I don’t share.
Further, if Congress and the Fed could coordinate fiscal and monetary policies in even the most basic ways,
Unicorns would fly…
Reality is what we can individually control. This might be a macro board but the idea that we can somehow directly influence the macro is just absurd. But we have control of the micro and it adds up. The White Cliffs of Dover were built by billions or more tiny sea creatures. That is how we can shape the macro.
Every month I support a number of merchants. Today I supported Rose, the owner of a self service laundry. If the government takes my money I won’t be able to support Rose the next time I have dirty clothes. Instead the Giverment will support someone else who is of no use to me. The money sloshing around in the economy did not change, only the beneficiaries changed.
You take my money and you hurt Rose. Rose has seven year old twins. You take my money and you hurt two innocent children! You, indeed, hurt my back yard! Why don’t you just burn your money?
The Captain
2 Likes
Then you may want to read this.
https://www.propublica.org/article/billionaires-tax-avoidanc…
Ten Ways Billionaires Avoid Taxes on an Epic Scale
After a year of reporting on the tax machinations of the ultrawealthy, ProPublica spotlights the top tax-avoidance techniques that provide massive benefits to billionaires.
2 Likes
Ritholtz left of
16. Trump era tariffs that has made imports more expensive
17. Spiraling cost of prescription drugs. Lawmakers are letting pharmaceutical companies set and keep prices as high as they want. Monopoly power to price gouge has made Big Pharma one of the most profitable industry in America even as ordinary people can barely afford their prescriptions.
Jaak
2 Likes
Good points; he should have included those.
1
2 FED
3 Supply lines
4 fiscal policy
What is 1? The necessary jolt to take us right out of all that screwed up supply side economics. All of it leads us there.
The simple solution to that would be to raise taxes. So you’re in favor of higher taxes.
–Peter
I used to believe this. I have been calling for this for months.
Yes the well off are bidding things up. Our culture has changed.
The rub is profit margins are up. This is really a good sign that manufacturers will really prefer being in the US. We’d be crazy to tear down the well off.
The issue is optimizing the US economy with much better moderated inflation levels. That is done through fiscal spending as we come out of this period of steeper inflation.
I still see inflation as getting under 5% by November. The public and the employers are going to be in better shape.
The down side is in our financials. Depending on their exposure to Chinese debt instruments and swaps some will be wiped out.
Most of us smell opportunities. That is the reality of this entire economy.
Without the pandemic, there is no massive fiscal stimulus, no WFH, and no supply chain disruption.
Without the <blank 1> on/about/in <blank 2>, the <blank 3> would not have happened.
Fill in the blanks.
The problem? There are ALWAYS “blanks” to be filled in…
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My solution is not very popular in these parts. Taking care of Number 1.
Unabashed selfishness is rarely popular. And it is just as rarely a good idea for society.
My country - which, for the record, is the USA and is NOT your country - was founded by people who were willing to sacrifice their fortunes and their lives to create a better life for ALL of their fellow countrymen*** and not just themselves.
Benjamin Franklin summed it up quite eloquently when, at the time of signing the Declaration of Independence, he said, “We must all hang together, or, most assuredly, we shall all hang separately.”
Selfishness was the problem in the other side of the Atlantic, too. George III and parliament created the situation by acting selfishly and refusing to allow the colonists a say in their government. British monarchs learned their lesson over time, and now are far more inclined to act charitably to their subjects and to the world at large, allowing them to maintain both their significant influence as a royal family and their considerable wealth.
As I explained in my previous post, selfishness is not going to solve our current economic problems, either. The way out of our current macroeconomic problems (inflation and stagnation) requires shared sacrifice, not an “every man for himself” approach.
—Peter
*** OK. It was just white men at that time, although the cause of racial equality was already well under way. Gender equality wasn’t far behind. Both are now the law, even if acceptance and enforcement is less than perfect.
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So what's your better solution?
My solution is not very popular in these parts. Taking care of Number 1.
PS - For the record, that isn’t a solution. It’s anarchy.
–Peter
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One benefit of the pandemic is that … business leaders … finally learned that employees could be more productive at home. That reduces the need for … real estate for office space, traffic congestion is eased as fewer people commute, and the time spent on commuting itself can be channeled to more productive pursuits.
Traffic in Boston still sux…(despite the Big Dig)
'38Packard