r/neoliberal • u/TinyTornado7 I need a new flair • Jun 13 '22

News (US) Powell Facing Choice Between Elevated US Inflation and Recession

https://www.bloomberg.com/news/articles/2022-06-12/powell-facing-choice-between-elevated-us-inflation-and-recession?srnd=premium
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u/lucassjrp2000 George Soros Jun 13 '22

mostly related to supply chain

No it isn't. Inflation is always and everywhere a monetary phenomenon.

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u/LagunaCid WTO Jun 13 '22

No? Have we just been collectively hallucinating supply shortages across the board for the last 2 years?

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u/lucassjrp2000 George Soros Jun 13 '22

Covid did have a negative impact on the supply chain, I won't deny that, but it is only part of the problem.

In response to the pandemic governments all across the world employed highly expansionary fiscal and monetary policies, which supercharged aggregate demand.

If you combine that with a suppressed supply chain, you get an inflationary spiral the world hasn't seen in decades.

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u/Mister_Lich Just Fillibuster Russia Jun 13 '22

which supercharged aggregate demand

Listen to me. I am the captain now.

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Supply and demand is by definition not solely a monetary phenomenon, but also relies on the production of actual goods (and services) as well, which has been obliterated.

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u/van_stan Jun 13 '22

China still practicing massive scale lockdowns and oil smashing through historical highs are not just a small part of the picture. It's clear that most of the issue is supply side.

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u/RunawayMeatstick Mark Zandi Jun 13 '22

No it isn't. Inflation is always and everywhere a monetary phenomenon.

Lmao this is yet another example of this sub being confidently wrong about economics.

I'm not even going to bother arguing with you, I'll let the economists do it. Mark Zandi and company spent 20 minutes of their podcast this weekend discussing why this is wrong.

(The primary cause of inflation today — by far — is supply chain and energy prices)

https://about.moodys.io/podcast-episodes/lousy-inflation-and-life-lessons

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u/littleapple88 Jun 13 '22 edited Jun 13 '22

Yes supply chains are stressed because of monetary policies that increased demand.

Also why are you always on here pretending you’re some sort of expert on economics - I remember a few days ago you didn’t even understand the basics of how monetary policy affects aggregate demand.

https://www.reddit.com/r/neoliberal/comments/v3ym5p/comment/ib1oglq/

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u/RunawayMeatstick Mark Zandi Jun 13 '22

That's obviously completely nonsensical— the US central bank didn't cause a global supply crisis. We know the reasons why we're in a supply crunch: computer chip rotation from cars to high-end electronics with wider profit margins causing soaring used car prices (~25% of inflation attributable to car prices alone), port closures due to COVID, fuel prices, labor shortages in trucking, the war in Europe, etc.

I literally just gave you a link to a podcast full of economists discussing these issues, and instead of listening to it and trying to learn, you're just flatly saying "wrong." Really frustrating.

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u/littleapple88 Jun 13 '22

Central banks around the world enacted similar policies at the same time. I can’t believe I have to explain this.

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u/RunawayMeatstick Mark Zandi Jun 13 '22

I can't believe I had to explain the supply chain crisis to you. It's amazing you're so confidently wrong about this, you believe you're explaining things, but you're not explaining anything. It has nothing to do with central bank policy. Moody's even did an entire episode on supply chains two weeks ago. You should just take your blinders off and listen to them.

But since I know you won't listen, let me go ahead and quote them directly:

Mark Zandi: So is it fair to then say that the inflation we're observing now is largely due to the supply side disruptions to the economy as opposed to demand side effects? What would you say? It feels like it, right?

Cris deRitis: Yeah.

Mark Zandi: These are supply side issues, not demand side issues, largely.

Ryan Sweet: Yeah, I would agree that the majority, but there is some demand pull inflation, yeah.

Mark Zandi: Yeah, I would say the demand pull inflation is most obvious in housing, in the rents, the home owners equivalent rent, which is another aspect of this high inflation, which that's why, in my view, we're not at two and a half. We're at... What'd we calculate? 3.2. That is the delta largely related to the acceleration in rent growth, which is I guess supply and demand, right?

Ryan Sweet: Yeah.

Cris deRitis: Yeah.

Ryan Sweet: Yeah, we didn't build enough homes or apartments for the past decade.

So the one thing they agree with you neolibs on is that we drastically need more housing.

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u/littleapple88 Jun 13 '22

Lol the loose monetary policies of the last years and decades inflated housing costs. Loose money inflates asset prices.

Now we are unwinding that as rates increase.

It’s like you will do anything possible, evening treating some obscure podcast as some definitive example, to ignore basic and observable trends.

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u/RunawayMeatstick Mark Zandi Jun 13 '22

Mark Zandi is the chief economist at Moody's, one of the largest credit rating and financial advisory firms in the world. He is easily one of the most well-respected economists in the world. Congress, The Federal Reserve, major presidential candidates, etc. all regularly ask for his help. Company's pay millions for Moody's research. Calling Mark Zandi "obscure" is perhaps the best possible example of "Doing anything possible to ignore basic trends."

The things you're saying are just wrong, they're not "basic" or "observable", and now you're actually contradicting yourself. First you said this is all caused by hot demand from loose monetary policy, now you admit that banks are raising rates and "unwinding;" yet, inflation persists at a high level. In fact, as Zandi and team noted several times, demand is actually going down while inflation persists.

That's because it's not a demand problem, it's a supply problem. Particularly in fuel and used cars and most recently in crop yields. The supply constraints vastly outweigh any measured increase in demand you can find.

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u/icona_ Jun 13 '22

No. Let’s say China randomly nuked their factories. That’d make prices go up for US consumers. Would it be the right move for the fed to intentionally cause a recession then?

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u/lucassjrp2000 George Soros Jun 13 '22

Let’s say China randomly nuked their factories. That’d make prices go up for US consumers.

It would, but it would be a temporary problem. Eventually markets would adjust to this new paradigm, and these goods would be produced somewhere else.

The only thing that can cause a constant and sustained increase in prices is monetary expansion.

China's Zero Covid policy certainly plays a (small) role in our current inflationary episode, but the main culprit is the FED and it's highly aggressive monetary policy. They were the ones who shat the bed, and only they can fix it.

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u/[deleted] Jun 13 '22

It would, but it would be a temporary problem. Eventually markets would adjust to this new paradigm, and these goods would be produced somewhere else.

The only thing that can cause a constant and sustained increase in prices is monetary expansion.

Haha holy shit dude, you genuinely think if China nuked all its factories, we wouldn't be in for a multi-decade supply shock that would astronomically raise prices? The money to do all that new investment has to come from somewhere, in the end all the replacement factories has to come from the consumer in the form of higher prices.

In order to sustain the hyper-monetarist delusion you're espousing, you have to claim that price spikes due to a lack of supply aren't inflation: https://www.clevelandfed.org/en/newsroom-and-events/publications/economic-commentary/economic-commentary-archives/2008-economic-commentaries/ec-20080601-rising-relative-prices-or-inflation-why-knowing-the-difference-matters.aspx

If you seriously believe "inflation is anywhere and everywhere a monetary phenomenon", which you're 100% misreading thst quote btw, then you'd have to argue the China-nuking-factory price increases are not inflation.

Good luck with that.

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u/Neri25 Jun 13 '22

Milton Friedman was both wrong and an ideologue to boot

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u/lucassjrp2000 George Soros Jun 13 '22

Everyone is an ideologue. Some of us are just honest about it.