OlinBost Loc: Marietta, Ga.

Over a month ago I changed my strategy to more bonds and less stocks. It was easy to see this coming.

Fotoartist Loc: Detroit, Michigan

First of all and foremost you have to understand that by definition, the Only cause of inflation is the Fed printing too much money and increasing the money supply (M-1). Higher wages and rising prices are Not inflation. They are just rising wages and prices. That stuff happens all the time in an economy. News or govt. sources that say this is causing inflation are not technically correct unless they mean that these forces are holding a gun to the Fed's head forcing them to print money. Inflation is a decision by the Fed to increase the money supply thereby controlling the economy. Nothing else is inflation. Look up the legal and technical definition.

Why the Fed inflates the way they do is too long and involved to go into here. It involves gobbledegook speak as you referenced in your opening comment and is the way they control our fiat money system.

gerdog

The real reason why the government prints money is an imperfect attempt to replace the money lost through cumulative trade deficits, which is over $10 trillion since 1980. That figure does NOT include interest. If you recalculated the amount with compounding interest, even at a low interest rate it would match the national debt very closely, which DOES include interest. The situation is so out of control now that if they stopped increasing the money supply, it would crush the economy. They use "gobbledegook speak" to try to explain it away, but the root cause is too much money leaving the country. By analogy, the EU country that has been enjoying the most success in recent years (Germany) is also the only member running a trade surplus.

Dbl00buk Loc: Orlando

Perfect analogy!!

JamesCurran Loc: Trenton ,NJ

That's just so much conspiratorial nonsense.

Does Investopedia's definition qualify as the "legal & technical" one?



https://www.investopedia.com/terms/i/inflation.asp#ixzz5UxyeZkpg

(About five paragraphs down, they do mention your theory, but don't give much credence to it.)

traderjohn Loc: New York City

If you as a business have a level of expectation towards expansion. You are not going to build a factory to accommodate that thought. The cost of the new construction would be outrageous. You will lease existing empty buildings or contract to have an existing factory/business produce your product. There are many businesses that outsource their product and have their labels applied at those different sites.

markngolf Loc: Bridgewater, NJ

That sure clears that up!! Any questions, Steve?
Beautiful, Bob!!!
Mark

Diocletian

....intervene at the most inopportune times.... do you get the feeling they are watching you to make sure those times are the absolute WORST EVER for you personally???

I feel that way, too.

But maybe we’re just paranoid?

Diocletian

What the effe is the ‘deep state’?

CaptainBobBrown

Surely many UHHers were sentient during the Great Inflation of the mid 1970's to mid 1980's when mortgage rates floated above 14%, the CPI was up around 10%, and Ronald Reagan lamented in his stump speeches that inflation was the silent thief stealing from older people on Social Security. I was at the U.S. Treasury during the period when Paul Volker was rising to ascendency as an Under Secretary of Treasury, head of the New York Fed and then head of the Federal Reserve Board of Governors. He introduced what many considered draconian measures to bring down the extraordinary inflation of prices and interest rates that crippled the economy and made popular the expression "stagflation" of no real growth but lots of inflation. Fed policy since then has been schizophrenic trying to decide whether real growth with "full employment" or higher interest rates to prevent inflation from exploding again.

I remember in 1980 having to add a "no greater than x%" clause in a Purchase and Sale Agreement to buy a house only to have my maximum rate limit exceeded before the end of the week so that I had to back out of the house purchase because I wouldn't have been able to afford mortgage payments based on 15+% rates. At the beginning of that week some banks were demanding (and getting) 14+% for 15 year mortgages and by the end of the week they were demanding over 15%. At that time the IRS set a minimum interest rate of 8% on intra family loans to legally classify a loan as a "legitimate" loan for which one could deduct interest payments on income tax returns.

It all came crashing down when S&L's couldn't compete with retail banks for savings and "disintermediation" (i.e. S&L account holders pulled all their money out of the S&L's because they could get so much more in retail bank savings accounts). There are many other stories from that era that underpin the idea of an "overheated" economy due to inflation. What puzzles me about current Fed policy is the notion that we should have an inflation rate target of 2%. This benefits borrowers (like Donald Trump) who get to pay back loans with cheaper dollars and disadvantages fixed income folks and folks whose income can't keep up with inflation. Our economic history going clear back to the colonial era has been a story of trying to find the right balance between lenders' and borrowers' interests and it seems to me a zero inflation rate with full employment is the ideal but rarely achieved except in passing from one to the other.

pendennis

Another cause of the downfall, was the limit on what Federally, and most state chartered S&L's could put their money. While home loans were primary, they also invested in commercial property loans, which carry more risk that home or real estate. Commercial banks could hedge a bit, even with higher levels of investment in real estate portfolios.

Many S&L's were state chartered, and the state S&L regulators were really lax in their oversight, far worse than the Feds. When they started failing in the 80's, it was like a torrent.

Peter Braun Loc: Los Angeles, California

Just remember Jimmy Carter and his overheated economy, created the inflation factor where the value of the dollar went down almost front of your eyes. The GDP was high people were making good money, he was still not re-elected even though the economy was booming. There came Ronald Reagan with the new Federal Reserve chief and interest rate went to 18% to slow the overheated economy. It was fun if you had lots of cash. We went into recession, but six month later the economy stabilized and we had a decent run for many years. Interest rate is a great tool to make the economy go on a solid pass. My opinion

JamesCurran Loc: Trenton ,NJ

Zero percent inflation is only slightly better than deflation, and deflation is the death to an economy: If something costs $10 today, but will cost $9 next week, you'd be a fool to buy it this week. And you'd be a fool to buy it next week if it's $8 the week after. Eventually no one buys anything, and the economy collapses.

gerdog

Mostly the cause during Carter's term was the first sudden rise in oil prices by OPEC. People panicked because they didn't know if it would stop. Wasn't really poor Jimmy's fault, but he was saddled with the blame. That's the price of being in charge.

htbrown Loc: San Francisco Bay Area

It means that if they don't put on the brakes, there is real danger that some of the money will go to the little guys.