Latest Inflation Numbers and Discussion

[Fermion]

Everything kills you in California. Bottles of water come with a warning they may cause drowning.

 

[NW-Bound]

Yes, I know about bigclive and have watched some of his videos. I like this guy. He is not a charlatan.

 

[CaptTom]

...If it's LED, it's not going to get hot enough to burn down the house, right?

Well, I had one batch of Chinese LED bulbs almost burn down my boat. Fortunately the overhead fixtures they were in were designed for incandescent bulbs, which get hot. They had a metal shield/reflector above the bulb. One of them actually caught fire, another just smoldered and smoked. I've used lots of LEDs, so far that's been the only batch with a problem. Then again, it only takes one time...

That said, if it's a plain ol' light fixture, I'd have no problem making sure it was wired safely myself. I don't expect Chinese companies to go through US certification. I can only imagine the paperwork and expense!

We all have to decide when we want "quality" and when we want the lowest price. And we all define quality differently.

 

[JoeWras]

That said, if it's a plain ol' light fixture, I'd have no problem making sure it was wired safely myself. I don't expect Chinese companies to go through US certification. I can only imagine the paperwork and expense!

Sure, we all differ on our expectations, and that's OK.

Even though we sometimes excoriate Big Box (Lowes, Home Depot, Menards) for some of their poor quality products, they at least make an attempt to engage manufacturers who do get the certifications. Someone in purchasing is paying attention, for now.

Amazon seems to have no gates at all. It is a free for all. And honestly, sometimes that's good because I've found some odd knock off stuff there I could never find anywhere else.

 

[ExFlyBoy5]

As I have mentioned, DW is in the residential rental business. At last check, the company she works for has homes in nearly every single state. Inventories of rental homes is growing by the day and as a result, the large investor groups are beginning to lower their prices. Some of the biggest reduction are in Florida of all places.

I am also noticing that credit card debt is at an all time high. A friend of mine who in the recent past has made some good money reselling concert tickets isn't doing so well since some popular acts aren't selling out anymore. This tells me that credit limits are being reached and people are starting to slow their spending (perhaps unwillingly?). I don't have a crystal ball, but I am thinking that retailers may have a disappointing holiday sales season.

 

[CarbonaNotGlue]

As I have mentioned, DW is in the residential rental business. At last check, the company she works for has homes in nearly every single state. Inventories of rental homes is growing by the day and as a result, the large investor groups are beginning to lower their prices. Some of the biggest reduction are in Florida of all places.

I am also noticing that credit card debt is at an all time high. A friend of mine who in the recent past has made some good money reselling concert tickets isn't doing so well since some popular acts aren't selling out anymore. This tells me that credit limits are being reached and people are starting to slow their spending (perhaps unwillingly?). I don't have a crystal ball, but I am thinking that retailers may have a disappointing holiday sales season.

Interesting anecdotal information. The 3month/10 year treasuries have been inverted for over 2 weeks, which has always been a good indicator of upcoming recession. We shall see.

 

[jldavid47]

I am also noticing that credit card debt is at an all time high. A friend of mine who in the recent past has made some good money reselling concert tickets isn't doing so well since some popular acts aren't selling out anymore. This tells me that credit limits are being reached and people are starting to slow their spending (perhaps unwillingly?). I don't have a crystal ball, but I am thinking that retailers may have a disappointing holiday sales season.

I don't know about an all time high but the Fed reported today that credit card use has surged and household debt increased at the fastest rate in 15 years. Product of or cause of inflation? (Chicken or egg scenario?)

https://www.cnbc.com/2022/11/15/hou...s-credit-card-use-surges-fed-report-says.html

 

[MichaelB]

I don't know about an all time high but the Fed reported today that credit card use has surged and household debt increased at the fastest rate in 15 years. Product of or cause of inflation? (Chicken or egg scenario?)

https://www.cnbc.com/2022/11/15/hou...s-credit-card-use-surges-fed-report-says.html

Could be both product and cause. If increased use of credit is the result of growth in jobs and wages, it’s positive for the economy, but also inflationary. If it’s because wages are not keeping up with inflation and consumers want to keep spending, more credit will become unaffordable and spending / credit will start to fall off. Delinquencies are starting to rise, but from very low levels.

Here’s the Fed report, which always makes good reading … https://www.newyorkfed.org/newsevents/news/research/2022/20221115

 

[Koolau]

I don't think anyone disputes the effect of various stimulus injections of money during the pandemic on the recent rise in inflation. The following WSJ video pointed out another factor: people could not spend money during the lockdown period, and they are now spending it down. The amount of extra savings during the pandemic is said to be $2.3 trillion.

We also know that many workers retire early. With fewer workers, the production of goods and services is reduced while the pent-up demand is released. Bingo, high inflation.

So, the Fed can be excused for thinking that this is "transitory". Perhaps it is, but it just stretches out longer than people expect. When people spend up their savings, there's no more where that comes from. No more inflation.

Here hoping that we will get back to normal in a year or so.

If there were any savings during the pandemic, it was probably from all the "free money" the gummint kept heaping on us.

Regarding credit card usage: I've seen several news articles suggesting folks are using CCs because they can't make ends meet without them due to inflation. That will feed upon itself. Once addicted to credit, it's difficult to ever get out of it. Just ask my BFF who even did the "credit write-down" thing with his CCs and is now back to maxed out CCs MORE than he was before the write-down. It's a vicious circle that is easy to get into and almost impossible to get out of. YMMV

 

[NW-Bound]

If there were any savings during the pandemic, it was probably from all the "free money" the gummint kept heaping on us...

The free money added to the savings, but was not all of it.

I saved the following excerpt from either a WSJ or Bloomberg article, I cannot recall.

Just before the pandemic, in the fourth quarter of 2019, American households held about $1 trillion in what was effectively cash—currency and accounts against which checks could be written. By the second quarter of this year, the most recent period for which these statistics are available from the Federal Reserve, the amount had leapt to $4.7 trillion. As should be clear from the accompanying chart (which is adjusted for inflation and also includes a couple hundred billion dollars in nonprofit organization holdings because the combined statistics go back much further), nothing like this has happened in the past 70 years—though consumer spending statistics point to something similar having occurred during World War II.

It’s clear what started the cash buildup: The federal government put almost $1.5 trillion directly into Americans’ pockets over the course of 2020 and 2021 in the form of stimulus checks and supplementary unemployment benefits, with other aid programs indirectly funneling more. Those who kept their jobs and/or were above the stimulus-check income limits enjoyed windfalls from the stock and housing markets. Spending options were few, especially early in the pandemic, and until recently interest rates were so low that there wasn’t much point in moving money out of one’s checking account (or from under the mattress).

 

[NW-Bound]

It's scary on the other side of the pond. The Brits are back to the early 1980s. Which country is next?

From CNBC:

London - Nov. 16, 2022 - U.K. inflation jumped to a 41-year high of 11.1% in October, exceeding expectations as food, transport and energy prices continued to squeeze households and businesses.

Economists polled by Reuters had projected an annual increase in the consumer price index of 10.7%, and October’s print marks an increase from the 40-year high of 10.1% seen in September.

 

[Koolau]

It's scary on the other side of the pond. The Brits are back to the early 1980s. Which country is next?

From CNBC:

Is their higher inflation based on their need (as an island nation) to import more goods than other European nations? We see that here in the Islands. Anything imported is vulnerable to the ravages of energy costs as it's mostly brought in on container ships (think massive diesel/electric engines going through megatons of diesel to get here from a minimum of 2400 miles away.)

We in the Islands have tried for years to grow food, but it's actually more expensive than importation because of land and labor costs. Also, "food crops" such as corn and wheat aren't suited for growing here for the most part.

Sometimes, we go to farmers markets where small time growers bring their produce. It costs about the same as the food chain stores but more than Costco/Sams. The difference is that it's fresher and we get to know the sellers.

An interesting fact that many do not know is that the Island of Lana'i (now, 98% owned by Larry Ellison) used to be planted in (wait for it) pineapple. That's all gone now. Even much of the central part of Oahu was planted in pineapple at one time. Now, only "tourist" pineapples are grown on Oahu and farmers are struggling to make ends meet by trying coffee, macadamia, and cacao (heh, heh, and pakalolo now and then.) The point being, that pineapple was once a main crop in the Islands and now it's too expensive to grow and export. Only the tourists pay enough locally to make it worth the effort.

Returning you now...

 

[38Chevy454]

Regarding credit card usage: I've seen several news articles suggesting folks are using CCs because they can't make ends meet without them due to inflation. That will feed upon itself. Once addicted to credit, it's difficult to ever get out of it. Just ask my BFF who even did the "credit write-down" thing with his CCs and is now back to maxed out CCs MORE than he was before the write-down. It's a vicious circle that is easy to get into and almost impossible to get out of. YMMV

That favored long term wealth building strategy, compounding, works both ways. Increasing savings or debt, depending on which side you are on.

 

[audreyh1]

It's scary on the other side of the pond. The Brits are back to the early 1980s. Which country is next?

From CNBC:

I’d like to hear Alan’s point of view. He recently mentioned that the UK had ruined their own economy. I have no idea what the supply situation is, but things like their energy prices definitely seem out of whack.

 

[explanade]

Brexit reduced trade with Europe.

Slowed or stopped flow of certain goods.

That probably didn’t help.

 

[W2R]

The point being, that pineapple was once a main crop in the Islands and now it's too expensive to grow and export.

+1

When I was a kid, in the late 1950's to early 1960's, you could get all the delicious, sweet, fresh pineapples you wanted at roadside stands on Oahu (by the pineapple fields) for (get this!) 2 cents apiece. My mother used to put pineapple in EVERYTHING she cooked because it was so cheap. I ate so much that to this day, I cannot stand fresh pineapple.

 

[Koolau]

+1

When I was a kid, in the late 1950's to early 1960's, you could get all the delicious, sweet, fresh pineapples you wanted at roadside stands on Oahu (by the pineapple fields) for (get this!) 2 cents apiece. My mother used to put pineapple in EVERYTHING she cooked because it was so cheap. I ate so much that to this day, I cannot stand fresh pineapple.

I know what you mean. I OD'd on pineapple when we moved to the Islands. Now, I'll eat it 2 or 3 times/year.

 

[W2R]

I know what you mean. I OD'd on pineapple when we moved to the Islands. Now, I'll eat it 2 or 3 times/year.

And here I thought I was the only one!

 

[Koolau]

And here I thought I was the only one!

Heh, heh, as toursits, we toured the Dole cannery (now, long gone) and they took fresh pineapple off the line for the huddled masses. That satisfied me for the whole trip - and we even let our "room" pineapple go bad. I guess I like pineapple like I like turkey. 2 or 3 times a year is great - beyond that is too much.

 

[audreyh1]

The next Fed meeting is Dec 13-14.

This dovetails with the November CPI report which is released early Dec 13.

Ron Insana (former CNBC anchor) had an interesting opinion piece where he complains about the Fed members talking about 7%. https://www.cnbc.com/2022/11/18/ins...d-come-back-to-haunt-the-federal-reserve.html

 

[daylatedollarshort]

The next Fed meeting is Dec 13-14.

This dovetails with the November CPI report which is released early Dec 13.

Ron Insana (former CNBC anchor) had an interesting opinion piece where he complains about the Fed members talking about 7%. https://www.cnbc.com/2022/11/18/ins...d-come-back-to-haunt-the-federal-reserve.html

The only action that has worked to tame persistently high inflation in the past has been raising interest rates higher than the federal funds rate. Unless someone comes up with a brilliant alternative solution that all living and dead economists throughout history have never thought of before, The Fed is going to keep raising interest rates until inflation starts coming down at least closer to their 2% goal. This was pretty obvious from the beginning of the year, whether or not The Fed members wanted to publicly admit it or not until now.

 

[Montecfo]

The only action that has worked to tame persistently high inflation in the past has been raising interest rates higher than the federal funds rate. Unless someone comes up with a brilliant alternative solution that all living and dead economists throughout history have never thought of before, The Fed is going to keep raising interest rates until inflation starts coming down at least closer to their 2% goal. This was pretty obvious from the beginning of the year, whether or not The Fed members wanted to publicly admit it or not until now.

Of course, interest rates can exceed inflation if inflation gradually falls lower than the level of interest rates.

This is the Fed's strategy.

 

[NW-Bound]

Of course, interest rates can exceed inflation if inflation gradually falls lower than the level of interest rates.

This is the Fed's strategy.

Is it not natural that the interest rate should be higher than inflation?

When you don't spend your money but save it and lend it to someone, you should be entitled to some small remuneration, and the only way you actually get some is if you are paid an interest above inflation.

When you are penalized for saving and lending money, something is awfully wrong. I am not an economist to know all the ramifications, but that would not be natural.

 

[aja8888]

Is it not natural that the interest rate should be higher than inflation?

When you don't spend your money but save it and lend it to someone, you should be entitled to some small remuneration, and the only way you actually get some is if you are paid an interest above inflation.

When you are penalized for saving and lending money, something is awfully wrong. I am not an economist to know all the ramifications, but that would not be natural.

The FED is ignoring the Taylor Rule.

https://www.investopedia.com/terms/...lor Rule is a,above the annual inflation rate.

 

[Gumby]

The FED is ignoring the Taylor Rule.

https://www.investopedia.com/terms/...lor Rule is a,above the annual inflation rate.

From your source:

The Taylor Rule has tended to serve as a fairly accurate guide to monetary policy during relatively calm periods marked by steady growth and moderate inflation, but much less so during economic crises.

Arguably, we haven't been in a "relatively calm period" free of "economic crises" in almost three years.