It's a glimmer of good news, but don't get too excited.... The Fed is going to engineer a recession until PCE comes down to 3%. The Fed cares more about PCE but that wont be out until Jan 27. PCE...
It's a glimmer of good news, but don't get too excited....
The fed also prefers inflation measures without food and energy. CPI is not down month over month if you exclude food and energy
Year over year CPI is still an eye watering 6.4%, so it still has a ways to go before American consumers notice prices stabilizing.
But again, the Fed wants unemployment up to reduce inflation that producers pay. Which is all they can really do, but it's completely fucked, they are not only shooting for 2% inflation when they could just as easily target 3% and have less severe impact on consumers, but worldwide, legislators should really be taxing abnormal corporate profits.
one effective way to prevent corporate power from being channeled into higher prices in the coming year would be a temporary excess profits tax.
Don't fuck over consumers because producers have been hiking prices due to shortages. Increase taxes during the good times. It's like no one read the story of Joseph in the Christian Bible.
Core CPI is higher since gas dropped so much, but it's still at 0.3% MoM. Last 6 month annualized is just above 3% on Core CPI. I'd argue the reverse, with MoM inflation pretty much completely...
Core CPI is higher since gas dropped so much, but it's still at 0.3% MoM. Last 6 month annualized is just above 3% on Core CPI.
Year over year CPI is still an eye watering 6.4%, so it still has a ways to go before American consumers notice prices stabilizing.
I'd argue the reverse, with MoM inflation pretty much completely plateauing over the last half year, consumers will have noticed the price stabilization by now, far ahead of an extremely lagging indicator like YoY inflation.
The Fed unfortunately only has monetary policy, and therefore demand, as their lever. We'll have to see when they decide to slow down. Inflation has slowed down significantly, but the job market does seem very resilient so far if Powell still fears undershooting on inflation.
The "corporate profit" dialogue is mostly just misleading imo. If margins can increase, that's entirely off of market dynamics. It's not as if companies were any less profit seeking in the past.
I guess it depends on what you mean by notice. It's only in the Q4 that inflation was running at 3.1% annualized. Before then it was 5.6% annualized (based on Q3's inflation.) While that doesn't...
I'd argue the reverse, with MoM inflation pretty much completely plateauing over the last half year, consumers will have noticed the price stabilization by now, far ahead of an extremely lagging indicator like YoY inflation.
I guess it depends on what you mean by notice.
It's only in the Q4 that inflation was running at 3.1% annualized. Before then it was 5.6% annualized (based on Q3's inflation.)
While that doesn't sound too terrible, wages still have not caught up to inflation, so people are still feeling the pain. The fed wants to suppress wages, because with a tight labor market wages should catch up and that can drive higher inflation.
The Fed unfortunately only has monetary policy, and therefore demand, as their lever. We'll have to see when they decide to slow down. Inflation has slowed down significantly, but the job market does seem very resilient so far if Powell still fears undershooting on inflation.
The market also expects the Fed to lower rates in late 2023, which is a clear sign the market expects a recession around then.
The "corporate profit" dialogue is mostly just misleading imo. If margins can increase, that's entirely off of market dynamics. It's not as if companies were any less profit seeking in the past.
It is unlikely that either the extent of corporate greed or even the power of corporations generally has increased during the past two years. Instead, the already-excessive power of corporations has been channeled into raising prices rather than the more traditional form it has taken in recent decades: suppressing wages. That said, one effective way to prevent corporate power from being channeled into higher prices in the coming year would be a temporary excess profits tax.
In short, the rise in inflation has not been driven by anything that looks like an overheating labor market—instead it has been driven by higher corporate profit margins and supply-chain bottlenecks. Policy efforts meant to cool off labor markets—like very rapid and sharp interest rate increases—are likely not necessary to restrain inflationary pressures in the medium term.
Profits is entirely relevant. Also FTA:
Evidence from the past 40 years suggests strongly that profit margins should shrink and the share of corporate sector income going to labor compensation (or the labor share of income) should rise as unemployment falls and the economy heats up.
It's this economic theory that is driving the Feds fears. Profits are up. Labor market is tight. Prices have increased. Workers are going to rightly demand higher pay. But historically that drives higher inflation. So now we have an engineered recession to suppress wages so that corporate profiteering doesn't result in run away inflation. Where I disagree with the author is I think this was sadly necessary and will unfortunately work. I simply find it morally offensive.
It seems like the Fed can look at whatever numbers they want and they don't have a formal algorithm for deciding things, so predicting their decisions is always going to be pretty hard when...
It seems like the Fed can look at whatever numbers they want and they don't have a formal algorithm for deciding things, so predicting their decisions is always going to be pretty hard when there's a reasonable argument to be made for deciding either way. So I don't put high confidence in outside predictions of Fed actions, just on general principle.
These predictions are based on future bond yields. The same bond yields that when inverted reliably predict recessions in the USA. If you think you know something the bond market does not, you...
These predictions are based on future bond yields. The same bond yields that when inverted reliably predict recessions in the USA. If you think you know something the bond market does not, you stand to make a lot of money.
I'm still skeptical. How well did the bond market predict the pandemic? (Admittedly, I lost an opportunity there to be ahead of the game. Braver people than me shorted the S&P 500.) Also, how well...
I'm still skeptical. How well did the bond market predict the pandemic? (Admittedly, I lost an opportunity there to be ahead of the game. Braver people than me shorted the S&P 500.)
Also, how well did it predict the Ukraine war in advance?
Also, I didn't say I know which direction it will be wrong, just that surprises happen.
And also, if I did know which direction, I would guess that predicting interest rates only works if you have huge amounts of money to play with, or I suppose leverage? Too risky for me.
This is also a slight distraction from predicting Fed actions, which is not quite the same as predicting how the economy will do.
I was thinking specifically of the Pharaohs dreams (Seven fat years followed by seven skinny years) that Joseph interpreted to mean the Pharaoh should basically store food (tax the rich) during...
I was thinking specifically of the Pharaohs dreams (Seven fat years followed by seven skinny years) that Joseph interpreted to mean the Pharaoh should basically store food (tax the rich) during the seven years of plenty and dispense free food (welfare) during the seven years of famine. The story explains how Israel came to become slaves in Egypt, because they traveled to eat the Pharaohs free food (immigrants taking advantage of social welfare, but ultimately becoming wage slaves.) It relates to the current situation as corporations have unusually fat profits that should be taxed. Does that make sense?
More good inflation numbers coming in. With this, the last 6 months had a net headline inflation of 0.95%, which annualized is already at the 2% target the Fed has. You don't see MoM deflation...
More good inflation numbers coming in. With this, the last 6 months had a net headline inflation of 0.95%, which annualized is already at the 2% target the Fed has. You don't see MoM deflation very often!
There's going to be a lot of focus on the next Fed meeting. Another big hike would probably be seen pretty cataclysmicly by asset markets.
The thing I keep thinking is, the "tweak the rate" game isn't going to be a silver bullet to fixing things smoothly. One miscalculation (or another unexpected war) could spiral things badly. Food...
The thing I keep thinking is, the "tweak the rate" game isn't going to be a silver bullet to fixing things smoothly. One miscalculation (or another unexpected war) could spiral things badly.
Food prices aren't going to stay down. Money supply is not the only thing driving food cost inflation. Crop failures are becoming more frequent. If it gets bad enough, it won't matter if prices go up if there is none to buy.
Congress really needs to get it together, raise some taxes, bolster rent/food relief. Reducing deficit spending via raising more taxes also reduces money in circulation. Providing a stronger safety net in the face of a weakening job market needs to be part of the equation.
It's a glimmer of good news, but don't get too excited....
The Fed is going to engineer a recession until PCE comes down to 3%.
The Fed cares more about PCE but that wont be out until Jan 27.
PCE hasn't moved much yet as of November 2022.
The fed also prefers inflation measures without food and energy. CPI is not down month over month if you exclude food and energy
Year over year CPI is still an eye watering 6.4%, so it still has a ways to go before American consumers notice prices stabilizing.
But again, the Fed wants unemployment up to reduce inflation that producers pay. Which is all they can really do, but it's completely fucked, they are not only shooting for 2% inflation when they could just as easily target 3% and have less severe impact on consumers, but worldwide, legislators should really be taxing abnormal corporate profits.
Corporate profits have contributed disproportionately to inflation
Don't fuck over consumers because producers have been hiking prices due to shortages. Increase taxes during the good times. It's like no one read the story of Joseph in the Christian Bible.
Core CPI is higher since gas dropped so much, but it's still at 0.3% MoM. Last 6 month annualized is just above 3% on Core CPI.
I'd argue the reverse, with MoM inflation pretty much completely plateauing over the last half year, consumers will have noticed the price stabilization by now, far ahead of an extremely lagging indicator like YoY inflation.
The Fed unfortunately only has monetary policy, and therefore demand, as their lever. We'll have to see when they decide to slow down. Inflation has slowed down significantly, but the job market does seem very resilient so far if Powell still fears undershooting on inflation.
The "corporate profit" dialogue is mostly just misleading imo. If margins can increase, that's entirely off of market dynamics. It's not as if companies were any less profit seeking in the past.
I guess it depends on what you mean by notice.
It's only in the Q4 that inflation was running at 3.1% annualized. Before then it was 5.6% annualized (based on Q3's inflation.)
While that doesn't sound too terrible, wages still have not caught up to inflation, so people are still feeling the pain. The fed wants to suppress wages, because with a tight labor market wages should catch up and that can drive higher inflation.
The market is very clear that it expects a 25 basis rate hike in 19 days.
The market also expects the Fed to lower rates in late 2023, which is a clear sign the market expects a recession around then.
That is exactly the longer quote from the linked article says FTA:
Profits is entirely relevant. Also FTA:
It's this economic theory that is driving the Feds fears. Profits are up. Labor market is tight. Prices have increased. Workers are going to rightly demand higher pay. But historically that drives higher inflation. So now we have an engineered recession to suppress wages so that corporate profiteering doesn't result in run away inflation. Where I disagree with the author is I think this was sadly necessary and will unfortunately work. I simply find it morally offensive.
It seems like the Fed can look at whatever numbers they want and they don't have a formal algorithm for deciding things, so predicting their decisions is always going to be pretty hard when there's a reasonable argument to be made for deciding either way. So I don't put high confidence in outside predictions of Fed actions, just on general principle.
These predictions are based on future bond yields. The same bond yields that when inverted reliably predict recessions in the USA. If you think you know something the bond market does not, you stand to make a lot of money.
I'm still skeptical. How well did the bond market predict the pandemic? (Admittedly, I lost an opportunity there to be ahead of the game. Braver people than me shorted the S&P 500.)
Also, how well did it predict the Ukraine war in advance?
Also, I didn't say I know which direction it will be wrong, just that surprises happen.
And also, if I did know which direction, I would guess that predicting interest rates only works if you have huge amounts of money to play with, or I suppose leverage? Too risky for me.
This is also a slight distraction from predicting Fed actions, which is not quite the same as predicting how the economy will do.
Could you elaborate? It has been many years and hearing your take on how it relates would be interesting.
I was thinking specifically of the Pharaohs dreams (Seven fat years followed by seven skinny years) that Joseph interpreted to mean the Pharaoh should basically store food (tax the rich) during the seven years of plenty and dispense free food (welfare) during the seven years of famine. The story explains how Israel came to become slaves in Egypt, because they traveled to eat the Pharaohs free food (immigrants taking advantage of social welfare, but ultimately becoming wage slaves.) It relates to the current situation as corporations have unusually fat profits that should be taxed. Does that make sense?
It does, thanks!
More good inflation numbers coming in. With this, the last 6 months had a net headline inflation of 0.95%, which annualized is already at the 2% target the Fed has. You don't see MoM deflation very often!
There's going to be a lot of focus on the next Fed meeting. Another big hike would probably be seen pretty cataclysmicly by asset markets.
The thing I keep thinking is, the "tweak the rate" game isn't going to be a silver bullet to fixing things smoothly. One miscalculation (or another unexpected war) could spiral things badly.
Food prices aren't going to stay down. Money supply is not the only thing driving food cost inflation. Crop failures are becoming more frequent. If it gets bad enough, it won't matter if prices go up if there is none to buy.
Congress really needs to get it together, raise some taxes, bolster rent/food relief. Reducing deficit spending via raising more taxes also reduces money in circulation. Providing a stronger safety net in the face of a weakening job market needs to be part of the equation.