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Did you realize that inflation was “functionally over”? — 33 Comments

  1. Powerline linked to an article the other day that quoted Neel Kashkari the chairman of the Minneapolis Fed that talked about him meeting with some people about how inflation is worse than a recession in many ways. Mainly because inflation affects everybody but a recession doesn’t usually affect everyone.

    I can’t find the article at the moment but it was really good and might be worth adding on to your article.

  2. Barry Meislin:

    I managed to get your original comment out of hibernation. I think it got stuck because of too many links.

  3. Oh boy. I recall very recent financial news talking about a 2.9% inflation rate. A CNN article I just pulled up says 3.0%… and it says it was 4.0% one month ago. Talk about moving goal posts. Are we talking about overall CPI or core CPI, or PCE numbers?? Sheesh.

    Of course, neo nails the fundamental point. It’s the 30+% overall increase accumulated over the last couple or few years that really matters. Or the doubling of gasoline prices that began not long after Joe hamstrung the US energy industry with his “On day one…” executive orders.

  4. I only by meat on sale. In 2020, 1 lb package of 80% hamburger was $1.99. Today in 2024, the same store has the same 1 lb package of 80% hamburger on sale for $4.99. I was able to get and freeze some before at $3.99 but only 2 left.

    In 2020, pork steak was $1.49 per pound. Today in 2024, the same store has pork steak on sale for $2.99 per pound.

    Inflation only looks at regular prices, not the sale prices.

  5. Given that the double-digit inflation of the Carter administration is four decades in the rear-view mirror, the argument that “inflation isn’t that high” seems pretty weak, unless you want to imply that falling prices are just around the corner. That may be true, but I’m betting that this is more of a carrot dangled in front of the voters to keep Biden’s approval numbers from slipping further.

  6. “According to the Federal Reserve’s preferred measure, prices rose just 2.7 percent between April of 2023 and April of 2024” There is nothing magic about that one-year measurement interval. If you’re trying to perceive long-term trends, you generally want a longer-term look to average out random fluctuations.

    What people are perceiving, and accurately so, I believe, is that government policy is such that there will be persistent and significant inflation basically forever, except for periods of recession and unemployment.

  7. I think neo is describing the problem accurately but a lot of right-leaning media is not.

    We had sub 3-ish percent inflation for 35 years and didn’t care. In that time prices rose about 2.4-fold. But so did our incomes. 3-ish percent inflation is not the problem.

    The 2021-2023 inflation was too fast for our incomes to adjust, and that’s why there’s suffering. It’s not the price level, it’s that prices haven’t risen on both sides of the equation of income and expenditure.

    The prices are probably never coming back down. When Reagan “ended inflation” in the 1980s prices never went back down, they kept climbing up, almost every year. And we mostly didn’t even notice. And when Reagan ended inflation he got an economic boom around the same time–I’m not sure of the cause-effect relationship–and so there was nothing for people to blame him about, they didn’t care that the price level never went back down.

    Is there some way that elites can prevent incomes from going up in tandem to offset the higher prices? Well, letting people flood across the border is a good start.

  8. One thing that is not well-understood is the interaction between inflation and capital gains taxes. If you hold an investment for say 10 years–while the inflation effect is a total of 30% and the value of your investment increases by 50%…then you are paying taxes on those inflationary increases, as well as on the real increase.

    There are actually scenarios in which you can be required to pay ‘capital gains’ taxes, even though in real terms you lost money.

  9. I never cease to be amazed at the mental gymnastics Biden supporters perform in order to excuse his poor performance. I imagine them to be akin to some fo the passengers in one of the Titanic’s lifeboats excusing the captain for hitting the iceberg, because akshually, there was no iceberg, so it could not possibly be the captains fault for hitting it. Must be something else. Something. Anything. Look! A squirel!

  10. Let them announce what they will. They’re giving people a choice; believe them or believe their ‘lying’ wallets.

  11. What exactly is the point of articles like Carter’s (and I’ve seen many in a similar vein, of late)? And who is the intended audience?

    My assumption is the intended audience is affluent liberals/progressives who feel a twinge of guilt/worry about the fact that Brandon is in the toilet on economic matters. And the point certainly not to offer any solution to the above or to lay any blame on Brandon and his administration. Rather it is to provide succor for these anxious souls, and stoke their already massive sense of superiority.

    “Biden has saved the economy! This is a brilliant, compassionate administration, as are all of its supporters. But too many deplorables are just too damn stupid to realize it!”

    It’s not a wise campaign strategy but man, it makes the Democrat base feel good.

  12. Biden did the same thing Obama did. He flooded the economy with money. Obama’s monetary policies didn’t cause inflation because the mortgage crisis of 2007 had plunged the nation into deflation.

    Obama’s years were filled with zero interest rates and heavy spending coupled with a lot of regulation. We had no inflation because supply and demand were pretty much in balance, and unemployment rates ranged from 5 – 9%, which also decrease inflationary effects.

    Biden’s big spending, reducing the supply of energy in the name of fighting AGW, and the reduction in supply due to the lingering effects of Covid supply chain malfunctions were guaranteed to cause inflation.

    Jobless numbers are mysterious since Covid. Though many people have returned to work, many businesses are finding it hard to find employees. Though job growth seems to have been relatively strong, a large number of new jobs have been in government, which adds to inflation because they add no new production to the economy – only more money.

    I am mystified by what I see locally.
    People seem to be spending and seem to have a lot of money. The economy here is primarily based on Boeing and its suppliers/sub-contractors. I see people hauling lots of non-perishables out fo the local Costco and wonder if they are trying to buy now to beat the coming price increases or if they just have big families. Anyway, I see no indicators of people being cautious with their spending.

    I lived through the Carter inflation years but had an upwardly mobile job. We suffered, but eventually my pay grew enough to get us ahead of the curve. Right now, a large number of baby boomers are retired or retiring. Most will be living off their savings and some pensions. Inflation is a nasty thing for retirees. I’ve been retired 33 years now and it’s been a job trying to maintain our standard of living on a fixed pension coupled with Social Security and investments.

    Groceries are the most obvious measures m of how prices have gone up. But look at property taxes, homeowners’ insurance, auto insurance, gasoline prices, cable/internet/phoner bills, gas/electric bills, landscape maintenance costs, etc., etc. – all pretty much unavoidable.

    Biden and his advisers have no idea of what to do. It’s just not in their DNA to cut government spending, drill, baby, drill, and reduce regulations. Can’t do that. Someone might get rich.

  13. Zachary carter is a biographer of keynes in resident at the carnegie endowment

  14. Niketas Choniates:

    The 2021-2023 inflation was too fast for our incomes to adjust, and that’s why there’s suffering. It’s not the price level, it’s that prices haven’t risen on both sides of the equation of income and expenditure.

    Two comments:

    1. Inflation outstrips wages more easily than wages can outpace inflation because inflation is primarily caused by governments printing money.

    2. While wages can keep pace with inflation, this disguises the erosion of the dollar’s value. We pay more, for example, for a gallon of milk because dollars are worth less, not because milk has become a superfood on a par with Popeye’s spinach.

  15. The inflation was mild in this country but it touched off the arab spring in the 10s

  16. The question is, why isn’t inflation higher given the amount of deficit spending since COVID?

    Why has the dollar remained strong? We are the best of an ailing global economy? Is this contributing?

    Has record levels of personal debt contributed? Is the government spending masking the recession most thought was coming? I know that’s credited to the rise in interest rates which also affects disposable income.

    How much has draining the strategic petroleum reserves brought inflation down? Biden sold nearly half of the reserve, bringing it to the lowest levels since the 1980’s.

    The economy seems to be defying the data. Maybe it’s the data. I know we’ve changed some of the ways inflation is measured.

    The Biden administration is touting the low unemployment, but if you look at the labor participation rate is below the Trump years and nothing like historical average over the last 50 years.

  17. Measuring inflation is very difficult, even for those with high professional standards and the best intentions. How do you adjust for the fact that car in 2024 is very different from a car in 2010? How do you factor in grocery prices at Costco versus Walmart versus Safeway, given that one of them required a membership fee, one of them is further away and takes more time to park and walk around, and one of them is closer?

    What about housing prices?…how should mortgage interest rates be factored in?

    Very difficult work.

  18. Eph that crap. We have high single digit, if not double-digit, inflation. We have high single-digit, if not double-digit, unemployment.

    That the government is using statistical tricks to lie to us is not in question, any more than Clinton’s little budget trick to “balance the budget” by “paying off the deficit using a credit card”, in essence, was valid.

    They’re lying assholes, and anyone who isn’t a total partisan hack knows this, just from going to the supermarket.

    There’s a meme floating around about the purchases made by Kevin, in Home Alone, at the supermarket.

    They were supposedly about $12 bucks in 1990. They were about $44 bucks last year. They are $77 this year. And the year ain’t over yet…

    I haven’t verified the meme, but it sounds about right.

  19. Correction: I’ve been retired 31 years. It’s been a long time. And I’m not complaining about that. 🙂

  20. “Biden and his advisers have no idea of what to do…”

    I’d have to take issue with that sentiment.

    (Kinda like sayin’ “Muhammad Atta and his pals had no idea of how to land a plane…”)

    Would be more accurate to say, “Biden and his advisers have no idea of how to effectively perfume their meticulously—and lovingly—cultivated mega-inflationary pig…” (with profuse apologies to pigs…).

    …IOW how to effectively COVER UP that their Neo-Marxist Nirvana is actually Hell on Earth (or getting there “gradually then suddenly”…)

    File under: Why can’t those darn rubes understand the paradise we’re creating for ‘em???

  21. Bar in exceptional circumstances (1931-47, 2008-12) inflation in excess of 2% per year is too much.

  22. Brian E mentions housing inflation, which has a huge impact on everyone, but especially on young families. And housing inflation leads directly to rental inflation, which is also enormous.

  23. “Brian E mentions housing inflation, which has a huge impact on everyone, but especially on young families.” – J

    Yes. During the Carter years owning a home was a hedge against inflation. It’s the same today. However, the demand for homes has outstripped the supply. Two main reasons.
    1. No one is selling who has a low interest rate mortgage. Selling and exchanging a 3% mortgage rate for a 6-7% mortgage rate is a losing proposition unless you’re sure you can re-fiancé at a much lower rate very soon.

    2. Here in Washington state, we have a “Growth Management Act.” This legislation was passed in the 1990s. The purpose was to force people to build on smaller lots closer to urban centers, and force people out of their cars. It has not forced people out of their cars, 🙂 but it has forced the costs of building homes up considerably. 🙁

    Twenty-five years ago, it took about a month and maybe $300 dollars to get the permits to build a new home. Today, that runs two years and $25,000. So, it appears that developers here are not producing enough new homes to meet the demand.

    When interest rates come down, no one knows what’s going to happen, but realtors are expecting a lot more inventory. Whether that will result in prices moderating, is any one’s guess. For first time home buyers it would help their situation. With lower interest rates they could qualify for a higher price than the can with the present rates.

    Home ownership is the bulwark of the American dream. Somehow, we need to keep it available to young families.

  24. My understanding is that the inflation numbers were cooked long ago by taking food and fuel out of the core inflation statistics. The latest unemployment statistics reveal that jobs are going to non-citizens, not to citizens.

    Biden’s team will tell you that lowered inflation for two or three quarters means that inflation is over, but that high unemployment and low growth for two or three quarters doesn’t mean that a recession has started.

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