Economy GOP back to Inflation worries. "Hyperinflation" (Update: 2022 Inflation Highest in 40 Years)

hitcher said:
@Jack V Savage Just wondering, are you still confident in that bet?
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Weakened a little, but I'd still call myself the likely winner. I think a key underrated point is that the Fed could put a stop to it if they decide that inflation is a bigger problem than slowing growth. We're also going to lap the first jump (i.e., the YOY number will include it) before the bet period is over. So there's a lot of wind at my back, though it's not trending in my direction so far.

BTW, very good recent piece on the bigger issue:

https://www.slowboring.com/p/monetary-mechanism

I endorse Yglesias' view on expectations vs. mechanics.
 
Rob Battisti said:


Despite touting his perfect bet record at the beginning, he’s been a good, albeit quiet, sport about the inevitability of the L.
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It is not over yet, I think. I do not remember the details and the period, but I think it is supposed to end in 2022?

Jack V Savage said:
Weakened a little, but I'd still call myself the likely winner. I think a key underrated point is that the Fed could put a stop to it if they decide that inflation is a bigger problem than slowing growth. We're also going to lap the first jump (i.e., the YOY number will include it) before the bet period is over. So there's a lot of wind at my back, though it's not trending in my direction so far.

BTW, very good recent piece on the bigger issue:

https://www.slowboring.com/p/monetary-mechanism

I endorse Yglesias' view on expectations vs. mechanics.
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Cheers for the link, unfortunately the main part seems to be Subscribers only.
 
Rob Battisti said:


Despite touting his perfect bet record at the beginning, he’s been a good, albeit quiet, sport about the inevitability of the L.
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Just haven't really been around much. I'll be a good sport about it if I lose, and I generally think betting is good because it helps you learn--moreso if you're wrong. Loss is far from inevitable.
 
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hitcher said:
Cheers for the link, unfortunately the main part seems to be subscribed only.
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Oh, damn. OK:

Even experts who broadly agree about directions can disagree about mechanisms. Roughly speaking:

  • One view is that the impact of central banks on the economy is hydraulic. They do things (buying bonds, setting interest rates) that mechanically influence the economy by changing credit conditions.

  • The other view is that central banks impact the economy primarily by coordinating expectations — they say things that lead to financial market reactions, which in turn influence the real economy.
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To people who hold the hydraulic view, inflation is a big problem because the process of reversing it is slow and painful (because the Fed has to set things in motion and then watch them play out, and stopping inflation requires slowing economic growth--and note that this burst has been caused by extremely strong growth), and you want to start fighting it sort of in advance of it actually showing up. On the expectations view, as long as the Fed is seen as credibly committed, just announcing the intention to take action is generally sufficient to tame inflation, and it's not necessary to act in advance of inflation actually becoming a problem. That wasn't the case in the '70s, as the Fed had long tolerated very high inflation. But it is the case now.
 
BTW, @hitcher, a lot of this should be understood in light of the GFC and the response to it. When it hit, a lot of people opposed a sufficient fiscal policy response to get us to a quick recovery out of fear that it would lead to inflation (and, if we're being honest, Republicans in Congress feared a strong fiscal policy response because they figured the public would blame Obama if the recovery was slow). The result of that is that we got a relatively mild stimulus and then further action was blocked, and we had a decade-long recovery, during which time many people were predicting hyperinflation any day now if we didn't have austerity to reverse the deficit spike caused by the crisis. Inflation remained extremely low the whole time, and we had a huge amount of unnecessary pain as a result of fear of it. So after the COVID recession, inflation doomers were totally discredited (plus a Republican initially was in the WH so no one saw a need to try to deliberately sabotage the economy--in fact, he would have won re-election if not for Republicans in Congress blocking an even better initial response), and we actually got a sufficient fiscal-policy response to drive a fast recovery and a booming economy. The fact that inflation has gone up as a result of that boom is not in itself that surprising, but if the Fed tries to fix it and can't, that would be a big shock, and would cause people to re-evaluate (though since the alternative view was discredited much worse, that leaves us in a jam!).
 
Jack V Savage said:
Weakened a little, but I'd still call myself the likely winner. I think a key underrated point is that the Fed could put a stop to it if they decide that inflation is a bigger problem than slowing growth. We're also going to lap the first jump (i.e., the YOY number will include it) before the bet period is over. So there's a lot of wind at my back, though it's not trending in my direction so far.

BTW, very good recent piece on the bigger issue:

https://www.slowboring.com/p/monetary-mechanism

I endorse Yglesias' view on expectations vs. mechanics.
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Whoa whoa whoa, there is no lapping. It’s not going to be 12 months of above 5% and then one month of .4% to get you out if it. The bet was for a year(12 months) from May 2021 onward. Can’t be getting off on an unsportsmanlike technicality.

May 2021 5%
June 2021 5.4%
July 2021 5.4%
August 2021 5.3%
September 2021 5.4%
October 2021 6.2%
November 2021 6.8 %
December 2021
January 2022
February 2022
March 2022
April 2022

current running average: 5.64%
 
Fed is in a tough spot. They really can not raise interest rates by much. Raising rates in the 80s was doable. With our current debt, it's damn near suicide.

We either live with inflation or destroy our economy, stock market and housing market.
 
Rob Battisti said:
Whoa whoa whoa, there is no lapping. It’s not going to be 12 months of above 5% and then one month of .4% to get you out if it. The bet was for a year(12 months) from May 2021 onward. Can’t be getting off on an unsportsmanlike technicality.
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Yeah, the jump was in April. So there will be two lapped months. Since it's not much over currently, that will be significant, particularly if the Fed responds sooner.
 
SBJJ said:
Fed is in a tough spot. They really can not raise interest rates by much. Raising rates in the 80s was doable. With our current debt, it's damn near suicide.

We either live with inflation or destroy our economy, stock market and housing market.
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As long as we don't inexplicably refinance at higher rates, there's no issue. And raising rates in the '80s caused a massive recession. Raising rates now won't do that.
 
Jack V Savage said:
Yeah, the jump was in April. So there will be two lapped months. Since it's not much over currently, that will be significant, particularly if the Fed responds sooner.
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Uh no. I just complimented you for being a good sport. Now you’re suggesting the deal wasn’t for 12 months starting in May 2021? I honestly wasn’t going to give you a terrible sig but … really? This is the move?
 
@Lead the bet was for 12 months starting in May 2021. The whole spirit of the bet was a year of review.

You can’t let him worm out if this.

The review period is below:


May 2021 5%
June 2021 5.4%
July 2021 5.4%
August 2021 5.3%
September 2021 5.4%
October 2021 6.2%
November 2021 6.8 %
December 2021
January 2022
February 2022
March 2022
April 2022
 
Looking back at the bet thread I mistakenly agreed to a 13 month review which essentially sabotaged myself. Goes against the heart of the bet. I take ownership of the technical error on my part, but it’s against what we were wagering and will possibly let him off the hook even though he was dead wrong.
 
If @Jack V Savage had any class he’d agree to the terms of the heart of the matter vs the technical error. Prove everyone wrong that you’re incapable of humility.
 
Rob Battisti said:
@Lead the bet was for 12 months starting in May 2021. The whole spirit of the bet was a year of review.

You can’t let him worm out if this.

The review period is below:


May 2021 5%
June 2021 5.4%
July 2021 5.4%
August 2021 5.3%
September 2021 5.4%
October 2021 6.2%
November 2021 6.8 %
December 2021
January 2022
February 2022
March 2022
April 2022
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Rob Battisti said:
Looking back at the bet thread I mistakenly agreed to a 13 month review which essentially sabotaged myself. Goes against the heart of the bet. I take ownership of the technical error on my part, but it’s against what we were wagering and will possibly let him off the hook even though he was dead wrong.
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Yea, I think you’ve already looked at what got posted. I try to tighten up the language and get each to review/ approve so there isn’t much wiggle room. I thought 13 months was weird at the time but it got okayed by all parties so it is what it is. Still seems like a competitive bet at this point in time though.
 
Lead said:
Yea, I think you’ve already looked at what got posted. I try to tighten up the language and get each to review/ approve so there isn’t much wiggle room. I thought 13 months was weird at the time but it got okayed by all parties so it is what it is. Still seems like a competitive bet at this point in time though.
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You wrote it up well, and I agreed to it, mistakenly. I admit that. One thing to clarify which isn’t clear which he is now arguing. When we say May 2021 - 2022, that is the May report for April. Not two overlapping months which he is now claiming it is.
 
Also, the bet was made in the middle of June so we already knew May 2021 was 5% by the time it got finalized. If the bet was June 21 to May 22, it would’ve been the same victor I believe since 5 is the line
 
Rob Battisti said:
You wrote it up well, and I agreed to it, mistakenly. I admit that. One thing to clarify which isn’t clear which he is now arguing. When we say May 2021 - 2022, that is the May report for April. Not two overlapping months which he is now claiming it is.
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April 2021 on the table referenced in the bet notes wouldn’t be used. It’s May 2021 to May 2022. The notes even reference May 2021 was 5%. I don’t think you guys are that far apart in what you said aside from being disappointed about the lap month.

Edit, I think Jack is just saying inflation spiked in April so he expects both April 2022 and May 2022 to be favorable in helping him win the bet.
 
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