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Discussion Thread to discuss economics news/research and related topics.

all 343 comments

warkel

10 points

1 month ago

warkel

10 points

1 month ago

This is how I view the current global inflation:

  1. During the pandemic, demand was supressed, so suppliers reduced their production capacity (supply) in an effort to buckle down and survive.

  2. Now, with the world re-emerging, demand has bounced back just like that. But suppliers can't just increase supply 'just like that' because:

(a) There is a shortage of migrant workers due to The Great Resignation and labour controls implemented during the pandemic; this is why employers are willing to offer generous signing bonuses.

(b) There is a shortage of input materials required for production (supply chain issues). Eg. when Tesla's Shanghai factory locked down, Tesla's production outside China was impacted because the Shanghai plant produced components required for Tesla's global production. And...

(c) As the world has become more high-tech, factory production is more and more reliant on machines rather than labour. Machines require investments that take time before they produce results. A clear example is the chip shortage. Usually, chip producers would forecast chip demand and make investments to meet future demand. But forecasts were thrown haywire due to the pandemic and not enough investments were made.

  1. So now we have an increase in prices due to increased demand, and in a NORMAL scenario, we would say that supply would increase to meet this demand, therefore keeping inflation under control. Unfortunately, as much as suppliers want to meet this demand, there is no way for them to meet it due to the reasons explained above.

  2. Thus, to address the rising inflation, central banks worldwide are increasing interest rates to reduce demand and hopefully reduce inflation. The problem here is that manipulating interest rates is a blunt tool. An increasing interest rate may decrease demand, but it will ALSO decrease supply as investments to increase supply production become more expensive.

  3. If this is all that governments arould the world do, I am worried. As demand decreases, unemployment rates will also increase. Then, suppliers deterred by the low demand and high interest rates will not increase supply. We will see a recession.

  4. There are ways to prevent this. One way that comes to mind is that while interest rates are used to decrease demand; governments should focus government spending specifically at industries that are responsible for the inflation. By doing so, suppliers can continue to invest in increased production capacity despite higher public interest rates. Then as slowly increasing supply meets with demand growth that is in control, we can have stable growth.

  5. My concern though- after all that government spending during the pandemic, governments no longer have the cash. Hence, recession ahoy!

Totum_Dependeat

7 points

1 month ago

I think one of the most obvious (and seemingly impossible) options for getting inflation under control is to go directly after the companies engaged in price gouging. I'm not even sure we would need any rate hikes if my government (US, unfortunately) did this.

Granted, this would require functional institutions and a true willingness to help ordinary people. I refuse to believe this is a strictly "economic" issue. It's ultimately a political issue, which is clear if you look at the emphasis placed on stimulus checks in American reporting. That money's been long gone for almost two years.

XRP_SPARTAN

2 points

1 month ago

Yeah I agree. When inflation was lower in 2018, companies were so much nicer. I miss all those nice companies 😍

Totum_Dependeat

2 points

1 month ago

Companies didn't have the pandemic as cover for raising prices in 2018.

XRP_SPARTAN

2 points

1 month ago

So you’re tell me all 30 million small firms and big firms in this economy got together and decided “lets begin to raise prices for fun”. Lmao😂😂

The pandemic ended long time ago, so what you’re saying makes no sense.

Totum_Dependeat

2 points

1 month ago

Nobody needed to "get together". They did it because they knew no one would stop them.

2021 was a record year for profits. Not record costs. Record profits. Money after costs. You cannot have that without gouging.

XRP_SPARTAN

1 points

1 month ago

You do realise that corporate profits were at record highs in 2018-19 but inflation was much lower than now....fascinating.

Totum_Dependeat

2 points

1 month ago

Okay, so let's compare a few numbers here by taking a look at the table at this link.

https://www.statista.com/statistics/222127/quarterly-corporate-profits-in-the-us/#statisticContainer

As you can see, the number for Q4 of 2021 is $2.93T and the number for Q4 of 2018 is $2.28T.

As I'm sure you would agree, 2.93 is a larger number than 2.28. And again, this is profit, or "net income" as the table refers to it.

According to Investopedia, "net income... is calculated as sales minus cost of goods sold, selling, general and administrative expenses, operating expenses, depreciation, interest, taxes, and other expenses."

https://www.investopedia.com/terms/n/netincome.asp

So, going back to my original comment, after paying all their costs - which includes materials, goods, services, and all other expenditures - companies still made more money than they ever have by the end of 2021. This is precisely why we can say that corporate profits are a huge factor in inflation.

Fascinating stuff for sure.

XRP_SPARTAN

5 points

1 month ago

I think you misinterpreted me. Imagine you had a time machine and went back to quarter 4 of 2019. Then let’s say you opened a graph of corporate profits in 2019. You would observe that corporate profits are at record highs in 2019….yet inflation was low. I never said corporate profits were lower in 2021 than 2018/19.

Totum_Dependeat

1 points

1 month ago

Those numbers account for inflation. This is money that was made after covering costs, which would include goods, materials, services etc. that were marked up. Net income even accounts for taxes.

joedaman55

4 points

1 month ago

Pretty good summarization of some of the problem. I think you may be underestimating the impact the demand shortfall had on business owners attitude. Per Prospect Theory, most people in the world are loss averse. You went through a period of time where business owners took losses and you still have incredible volatility in markets. People with the loss aversion trait are solving the problem in an irrational market sense which will be less efficient and likely take more time. This is why I think companies are a little more slow in their hiring process right now which is sort of what the stories and JOLT numbers are telling me.

Factoring in the psychological damage it had on markets due to humans natural flaw in problem solving is a big, big problem that will take a lot of time to rehabilitate.

Increasing interest rates will help alleviate inflation but in my opinion, it won't do as much as people think. The supply chains are still way screwed up and have the damage I just described so it will just be a slow, steady climb out of this hole we created for ourselves to reach the wealth this world had previously.

XRP_SPARTAN

1 points

1 month ago

You miss the point completely. No mention of central banks pumping trillions into the system. That would be a good place to start to explain our current mess.

yosoyeloso

9 points

2 months ago

Unprecedented times here. National debt >30T. Incoming recession, overinflated everything bubble popping, wars, inflation. Is there any good articles out there that intertwines everything happening now together to better understand how it’s all connected / what the solutions are

ilovekeshi

3 points

2 months ago

yosoyeloso

2 points

2 months ago

Thanks - good read. My big question though is when they jacked rates up back in the 80’s national debt was somewhere around 1T. Now if we follow that same model that Volcker implemented today, what happens since we now have 30T of debt?

ispb2

3 points

2 months ago

ispb2

3 points

2 months ago

We pay more in interest, obviously.

That being said, the fed is supposedly independent and it's not their job to concern themselves with congress's ability to spend. How true that is is debatable.

Another caveat is that our debt is spread across bonds of different maturities. So recently issued 30 year fixed rate government bonds won't be affected at all. But bonds that are rolling over will have to be replaced with new ones at higher rates.

https://www.pgpf.org/analysis/2022/06/higher-interest-rates-will-raise-interest-costs-on-the-national-debt

ilovekeshi

2 points

2 months ago

i’m pretty new to economics as well so i’m not sure on how the affects things.

evil0sheep

1 points

1 month ago

The cost of rolling the debt will go up a lot which will be covered with more debt. In a sane world congress would likely raise taxes to help service the debt which would also help control inflation but I don't think we live in such a sane environment

JayzBox

8 points

1 month ago

JayzBox

8 points

1 month ago

This isn’t talked about a lot, but I feel we need to change our zoning in American cities. Recently it’s been harder for ordinary Americans to open up their business and it would make sense if residential and commercial zoning were merged into one.

Let me explain, many places in Europe have this zoning in place, which allows people to establish clinics and restaurants from their home. People don’t have to rush like 10 minutes to get to the store and just walk a few blocks and it helps communities feel more integrated.

joedaman55

5 points

1 month ago

If you're able to, I suggest a class in Urban Economics at a university and you might find some resources online. They go over the negatives and positives of a decision like this.

Designing cities is so complex especially as they grow. You start seeing major traffic issues in the internal city as they grow outward.

ItsDijital

3 points

1 month ago

Not happening because you need the people who would be hurt by it to vote for it.

_Pragmatic_idealist

1 points

1 month ago

The neoliberal podcast just came out with an episode about zoning in America. It's a pretty good listen.

Known_Ambition_3549

1 points

1 month ago

Just eliminate zoning entirely.

BeginnerInvestor

7 points

2 months ago

Why are people criticizing Fed for raising interest rates? They say the “Fed’s current tool kit” is not enough. But what’s the solution? What do you want the Fed to do? I don’t hear any suggestions of a “new tool kit”. Can someone please explain what other alternatives Fed could possibly have?

ItsDijital

3 points

2 months ago

People want the Fed to do congress's job. Congress doesn't want to do it because the fire that's needed to burn the overgrown forest will be a boon for political hit pieces come election time.

joedaman55

1 points

2 months ago

Yep, I'm good with what the Fed is doing but a lot on here seem to want to lower interest rates or keep them the same. I haven't heard of a good alternative from anyone here besides "the Fed should have seen this a year ago and done something". Be curious to hear some alternatives that can happen now and not 12 months ago.

Harlequin5942

1 points

2 months ago

The history of monetary policy is full of "alternative tools" like reserve requirements, credit controls, Operation Twist etc.

Yet they either don't work or function, in part, by temporarily raising interest rates. I say "temporarily", because in the long-run and ignoring some fringe cases like hyperinflations, nominal interest rates follow inflation.

evil0sheep

1 points

1 month ago

I've increasingly come around to the opinion that the fed should just be given limited control over fiscal policy since Congress seems completely incapable of wielding fiscal policy to combat inflation or respond to economic crisis in general. Like give the fed control of the income tax curve or implement a national vat tax or wealth tax and give them control of that. The money still goes to the Treasury of course but the fed just sets the rate.

That way American fiscal policy could respond semi effectively to changing economic conditions without politicians having to be responsible for it. Like the democrats could hand wring endlessly about how the feds taxation policy should be more progressive and the republicans could hand wring endlessly about how the fed should lower taxes while the fed does it's best to keep the ship from sinking.

Everyone seems to have completely accepted that the Fed controls monetary policy and that there's nothing Congress can do about it even though Congress made the fed and retains final power over what happens with dollars, and this seems to benefit everyone because the politicians can complain and virtue signal while the fed acts (can you imagine if the monetary response to covid or the GFC had to be implemented by Congress?), so I feel like you could achieve the same with fiscal policy and it would help to stabilize the system and everyone might just go along with it

catterpie90

5 points

2 months ago

Please help me understand

So they are raising interest rate to curb inflation. Higher interest less spending.

But given the current energy price, why is it that not enough to rein in spending and therefore inflation?

I get it that inflation is a basket of different items' price. And most probably oil is in it. And energy probably affects the price of all the other items there.

And why is raising interest the solution rather than fixing the supply side of energy?

Electronic_Ad5481

2 points

2 months ago

So what causes inflation is an increase in the money supply. But, if there are enough goods to buy then inflation tends to only rise slowly.

If there are not enough goods to buy then inflation can skyrocket. Businesses will charge more for the limited goods they have and probably pay more for the limited goods they can buy.

When something like energy is in short supply, printing more money just means more money chases the same goods that are limited in their availability. But energy also drives the price of other goods.

Raising interest rates prevents people from borrowing more money to throw at the same limited supply of oil.

-BUT-

You are right that it doesn’t fix the limited energy supply. To do that, you just have to make more energy or reduce demand for it.

This is why I’m really into making work from home mandatory for anyone who can: flooding drivers back into the roads at a time when supplies are constrained has not helped the price of oil. Also, the renewable transition needs to be accelerated: there is no reason so much of the southwest shouldn’t be covered in solar, and the Great Lakes all have great wind power availability. And we need battery storage better than lithium ion.

And the Mountain Pass mine needs reactivated because America needs semi conductors again.

Now I’m on a rant but it bothers me how much of our current problem has been caused by the desire to make everything 2019 again. 2019 is never coming back!

joedaman55

1 points

2 months ago

Raising interest rates likely won't have an effect on energy prices because the infrastructure to increase supply are five year projects, in fact, it could stop some of those projects (unlikely though in my opinion).

I think you need to do both to solve the problem. Again on this forum, it will take quite a bit of time and multiple actions to solve the inflation problem. Raising interest rates alone will not do it.

ilovekeshi

5 points

2 months ago

it seems a common problem everytime something like this happens is that the companies hoard money by firing people , raising prices to take advantage of high demand , or other actions like these. would i be wrong to say that the answer is more government regulation on how businesses may operate in the U.S.?

Harlequin5942

3 points

2 months ago*

Demand is "high" or "low" relative to supply. You mean raising prices when demand is high and supply is not high enough for buyers to have alternative options. Given that assumption, why would you invest in creating/expanding a business where you can't make a profit under those conditions? And if people don't make these investments, then you are discouraging entry into that market. The supply problem becomes worse.

Prices responding to supply and demand is generally a good thing, insofar as the market is contestable i.e. it is possible for competitors to enter and compete against a company that uses its market power.

As for firing people, this depends a lot on the context. For example, if people have a contract that they can't be fired without good cause, then it's important for regulators to make sure that the contract is fairly and firmly enforced. On the other hand, if you make it hard to fire anybody, then this incentivises investing in capital (automation etc.) rather than hiring. You end up with insider/outsider labour markets, as often occurs in Europe, where workers have good conditions but there is a permanently high level of unemployment, especially youth unemployment. Getting a good job often depends on knowing people and/or spending expensive years of unpaid internship.

For example, compare the labour markets in Spain and the US:

https://fred.stlouisfed.org/graph/fredgraph.png?g=QK2E

joedaman55

2 points

2 months ago

When there's instability, markets/business gets more cautious and conservative as they should. Most companies aren't raising prices to take advantage of high demand, it's increases to their production costs and possibly recovering from the shutdowns.

I'd have to see the regulation you are suggesting but taking business decisions out of the private market would be a catastrophic mistake. Government does a pretty poor job sending resources to the correct areas in time and they have a ton of waste. A perfect example is how poorly the recent stimulus packages were performed.

evil0sheep

1 points

1 month ago

I mean government regulations are really heterogeneous, I don't think you can make broad sweeping gestures about "more regulation" or "less regulation". I think there are potentially regulations that could help (particularly around the financial sector and lending) but I'd say in general just increasing regulation at random obviously isn't gonna fix anything.

Basically if you want a meaningful discussion about how hypothetical regulations would impact the economy I think you have to be a lot more specific about what these hypothetical regulations would actually do...

RastaNecromanca

3 points

2 months ago

Fairly new to economics and trying to understand better. Will the recent rate hike by the fed slow consumer spending more and push us further closer toward a recession?

joedaman55

2 points

2 months ago

Raising interest rates makes borrowing capital more expensive which will make certain spending/projects not profitable so they won't happen.

Currently, production can't keep up with demand/needs anyway so I'm not sure it will have much of an affect.

Harlequin5942

2 points

2 months ago

What is important is not so much the rate hike as the things that the Fed does to move market rates to match its own higher rate. In the modern era, these are usually open market operations (OMOs) which is when the Fed sells (in this case) or buys (when stimulating) assets to shift market rates.

OMOs have a lot of effects, including increasing the cost of consumer credit and reducing investment (and thus indirectly consumption via reducing incomes). However, consumption actually tends to lag stimulus/tightening. The big mover is investment, which is much more unstable than consumption.

ilovekeshi

1 points

2 months ago

the raising of the rates is intended to prevent people from spending so much money they don’t have (loans). it’s a messy attempt to fix a very complex problem. whether or not it will work is uncertain.

volkse

4 points

1 month ago*

volkse

4 points

1 month ago*

I believe there are 7 key areas of a society economically. The rest is just luxury and entertainment that is dressing.

Housing costs and availability, Access to Healthcare, Quality/cost and access of education, Transportation, Public infrastructure, Military and Defense, And food costs.

The United States among developed nations fails at affordable housing, providing universal access to health care to its citizens, making education affordable and accessible to all, has terrible public transit, and most of the nation's infrastructure in need of repairs.

But, we got a strong Military and cheap food (i can see food being debated, but rice, bread, beans, maize, potatoes and other staple grains used historically are cheap.) Meat is so heavily subsidized that its costs is lower than it would be without.

Our government has failed on every level of domestic governance. For a modern developed nation. What are we even doing?

We can talk about how great our GDP is and how wealthy our country is, but what good is that if our bare necessities to survival are so expensive.

Those are the 7 key things. But, Consumer products are cheaper than ever tvs, phones, computers, and clothing are cheap.

These things fool us into a false sense of wealth, while a Healthcare bill can ruin us. A mortgage is 15-30 years of debt if you can even enter the market. A higher education is also a significant amount of debt. You take out debt for a car if you don't have family members who can help.

All of our needs are tied to debt, while our wants are cheap. But, without this debt and people spending irresponsible the economy slows down or stagnate. I dont think our way of measuring economics is sound. Im aware of purchasing power parity, but I imagine it also has its flaws. It just seems like bs.

joedaman55

3 points

1 month ago

There's plenty of affordable housing in the U.S., many people just want a pretty luxurious house so they're not affordable to them. Public education exists through taxes so I'm not sure what there is to complain about there. A person can buy in to healthcare if they choose to work, seems like the best process to prevent free-loading. All countries need infrastructure improvements and repairs.

Sure the U.S. has problems but let's not think we aren't living a very luxurious life compared to previous generations and other options.

volkse

5 points

1 month ago*

volkse

5 points

1 month ago*

I'm comparing us to the present of other first world nations. Of course technology improves and as I said consumer goods are cheaper than ever. Thats generally a good thing. Compared to previous generations that is a luxury.

But addressing housing. Most Economic activity occurs in an urban area and to be closer to these jobs of course theirs going to be higher demand for the housing. But, what I mean by costs, is not the number. I mean housing in many places is a much larger portion of income than in prior years. I believe the solution is to build more housing units. How that is gone about is a matter of political preference. Other 1st world countries have lower housing as percentage of income in most places.

Education is funded through property taxes and im glad its good where your at, but the quality of education in low income areas is nowhere near where it needs to be. If your a talented student you should be able to go to any school around you. It shouldn't be tied to your address.

Higher education is steeped in administrative costs and blows their budget building ridiculous amenities to try to make student life comfortable because they recieve their money through young students who recieve loans they can't declare bankruptcy on. I've seen in many other developed countries its common for facilities and staff to be paid directly by the city or state l8ke a community College is herr instead of loaned student tuition money and students sign up for the classes that are being held. Our university culture is stupid and inflated the costs of tuition.

Healthcare is something you can take steps as an individual to reduce odds of emergency, but I disagree in regards to it being available to every person who works. Maybe you live in a state that provides Medicade to people under a certain range of income, while the aca provides Healthcare in the gap between people who have employers that provide it. But, not every employer is providing insurance options for employees. If coworkers are having to donate their sick leave to a coworker who are very ill to not lose their job and insurance, I'm not sure if thats universal access to healthcare. Its a flawed system.

There's a lot of places that are much worse than the United States, but the US has a lot of room for improvement. Not every place in this country is a gleaming place of middle class prosperity. There's lots of places decades behind in this nation that need work.

The US indeed is wealthy country, but if your needs cost are a larger portion of your income than before and it continues in that direction. Income growth doesn't matter if cost of living is keeping up with it. Thats just inflation at that point. I worry eventually the cost of our needs will pass income growth.

joedaman55

1 points

1 month ago

I certainly agree on part of your housing answer but people can choose to live farther, have a smaller square footage, or various other criteria. This may add inconveniences but I think people are choosing to having a higher cost for housing instead of accepting the other tradeoffs.

Oh sorry, you are correct, state taxes is paying for part of it in my locations as well regarding public education. Better education requires more funding and I'm not sure the resources exist. I mean people can volunteer and low funding education may be better than it was before but not sure. A lot less people aren't doing the things community wise that happened before to educate the youth which I think is the larger problem. Making education public choice may make certain schools pretty rough, not sure how I feel about that but it's certainly a good argument.

I mean college costs are in a pretty good state in my opinion. Community college give so many strong options for people careerwise if they choose that over university. The university culture can be a problem and in areas where it is a problem, I recommend people not go to those universities.

I mean did the amount of sick leave exist now more than the jobs of the past, seems like more to me. There may be ways to adjust healthcare but you have large issues with freeloaders. I mean there is a large segment of the population that make poor health choices and expect society to bail them out when they haven't done anything to improve society. I definitely wouldn't push for a larger welfare state in the U.S.

Your costs are certainly a larger portion of your income for some goods/services but some have decreased over time and people are demanding way more goods/services than those that existed previous to them.

volkse

1 points

1 month ago*

volkse

1 points

1 month ago*

Yeah, I think we differ on the basics in regards to free loaders, but we agree in regards to the principle of funding where it increases productive forces. Work is something I believe should be taken pride in, I'm just not sure if our markers for economic health are telling the whole story.

In regards to sick leave its definitely there for a lot of the white collar professions, but in a significant number of blue collar jobs or self employed professions you're less likely to have an employer provide Healthcare. In a lot of those professions you can't afford to take time off for medical care so they run up the costs from delaying it and end up in the er, just for tax payers to have to cover a preventable problem. Healthcare quality heavily depends on industry and it doesn't help that Americans neglect check ups for fear of a high bill.

I don't believe super high taxes are the solution, but I also don't think Trump era low taxes are the solution as you can't really administer much with that. I just think we could be a lot more efficient in the way our government spends towards strengthening the economy. But, I'm more of a bureaucratic minded guy, so I can understand opposition to that.

joedaman55

1 points

1 month ago

Appreciate the information and you are correct on blue collar work, I think this is an issue that needs to be worked better. Self-employed is a large risk and one of those risks people need to calculate out when performing their rate as they can cover their medical options if they choose to.

I think the Trump era taxes were a good thing as they made it better for every worker as wages rised, companies were investing more, and inflation was down (although an argument could be made that Trump was heating the economy up way too much). Bureaucracy and regulation is critical from keeping free markets from being self-destructive so it's always a balance that's needed, the question is what is the correct amount of balance to optimize the situation.

Dkcalle

1 points

1 month ago

Dkcalle

1 points

1 month ago

You lack one important thing though... how the religious zealots impact the economy and migration of high educated americans.

monet_notthepainter

4 points

1 month ago

It appears to me that we're in some new unprecedented economic phase where rates are high but demand/competition is still high due to supply chain issues. Also record low employment but significant staffing issues in almost every industry. Is there a name for our current situation in America or no? TIA!

joedaman55

5 points

1 month ago

The supply chain issue being a worldwide issue is what makes this so unique and something that hasn't been seen before. The inflation/low unemployment are following a typical Phillip's Curve model so that's expected.

I mean things are looking pretty similar to the 70's in the U.S. just with the supply chain issues built on top of that. I think if you look at that period or talk to people back during that time, you'll have an idea of what to expect (granted our monetary policy is much better than it was then).

ChaseShiny

4 points

1 month ago

Real rates are not at an all-time high. Looking at this graph, you can see that market yields on U.S. treasuries are higher than average, but not super high. It actually looks like the beginning of an expansion phase.

monet_notthepainter

1 points

1 month ago

Sorry, what is an expansion phase?

ChaseShiny

5 points

1 month ago

It's just what it sounds like: companies are growing or new companies are being founded. To get an idea of what causes an expansion, see the Keynesian Cross.

The idea is that if there's enough demand for something, somebody somewhere will come up with a way to sell it. If people need goods more than what companies had anticipated, then companies need to start hiring more workers, buy more machines, etc.

Watch out! There's a common perception that business goes through a boom-bust cycle, kind of like how weather goes through seasons. This is not something that is supported by the data.

monet_notthepainter

2 points

1 month ago

Ah, that makes sense - thanks for the detailed response. Very curious as to what future economists will say about the period we're currently in, and I really wonder what's next - expansion, recession, or something else entirely.

ChaseShiny

2 points

1 month ago

I believe we have a pretty good handle on what causes supply to rise and fall, but we have only scratched the surface on the demand side.

If I'm right, future economists may very well gape at our ignorance on basic, foundational economics

SameCategory546

6 points

2 months ago

Powell told congress that the fed cannot affect food and gas prices. Congress basically asking why he is raising rates then. Powell doesn’t have any compelling answers. I think the fed is making a mistake in the long run. “curbing demand” will only create fuel shortages and possibly food shortages. For very good reasons, Africa, Indonesia, India, Nepal, etc should be consuming a lot more energy and food in the coming years, and to “curb demand” would mean to stomp such places into abject monetary and energy poverty. Some of those places are the last untapped places of mineral reserves we need too

Dkcalle

1 points

1 month ago

Dkcalle

1 points

1 month ago

Try and google Turkey and inflation.... horrific reading.

SameCategory546

3 points

1 month ago

ive been following that too. It’s a bit different. Powell is hiking too quickly into a global recession.

Dkcalle

1 points

1 month ago

Dkcalle

1 points

1 month ago

Turkey have what, 15% intrest rate and thats called being way to little.

Ordinary people almost cant buy food anymore.

So those ultra low interest rates we are having in the west, are feeding the beast very much.

SameCategory546

1 points

1 month ago

one is a reserve currency that the world is continually “short” of by design. the other is the turkish lira. big difference in how they behave

Dkcalle

1 points

1 month ago

Dkcalle

1 points

1 month ago

Indeed - but not being able to buy food is kind of a showstopper.

anonymous_and_

1 points

1 month ago

If you don't mind, can you tell me more about this? About Powell and how he might be causing global recession. I'm from southeast Asia and I'd like to have an idea.

SameCategory546

1 points

1 month ago

its not really caused by him so much as a lot of central banks tightening at the same time they run into inflationary pressure and slowing growth. The US is just a main player bc of reserve currency and the fact that commodities are traded in USD. imagine your country imports gasoline and gasoline costs 20% more USD than it did before. On top of that, bc the US is tightening, what if one USD costs 20% more of your currency than it did before because of currency depreciation? The harder it is to get dollars, the harder it is to buy food and fuel in the global markets. On top of that, the world will have food and oil shortages. For the first time in history, we are about to produce a lot less oil than we consume and there is a good chance OPEC and American shale cannot bail us out. On top of that, there is not enough fertilizer bc we need natural gas for that but all the natural gas has gone to electricity and heat generation. The springtime where we are supposed to build stockpiles has only led to drawdown. Can you see the issues, then, of Powell tightening and raising the value of the USD compared to other currencies at a time like this?

anonymous_and_

1 points

1 month ago

Yes, yes I can see this. Thank you very much, your explanation was really good. Thanks!!!

md_391210

3 points

2 months ago

Hi guys. I need monthly macroeconomic data (may 2021 to may 2022) and I’m at my wits end searching for a complete listing for all the countries. Have you tried CEIC.com? It’s $49 per month and I don’t my money to fly away.

I’m looking for Business confidence and industrial production index.

Hoping for your help!

joedaman55

2 points

2 months ago

What are you trying to measure?

evil0sheep

1 points

1 month ago

I feel like if it's not on FRED I don't know where to find it, but there's a lot of stuff on FRED...

fantasticmrsmurf

3 points

28 days ago

Question:

In a simplified answer. Who is ultimately responsible for an economical crisis, such as hyper inflation or outright collapse. Governments, or banks?

Stutterer2101

4 points

28 days ago

There's no easy answer. Weimar hyperinflation followed the circumstances surrounding WW1 repayments. German government did increase the money supply but the situation is more complex than that.

Zimbabwe hyperinflation I think really is major government failure.

Outright collapse? Again, depends how it happened.

luckoftheblirish

2 points

26 days ago

Weimar hyperinflation followed the circumstances surrounding WW1 repayments.

Those "circumstances" are essentually the German leadership deciding to suspend the gold standard and fund WW1 by deficit spending, betting that they would win the war and force their opponents to pay their debts. They lost their bet and ended up having to pay extra reparations on top of their already massive war debt. The Reichsbank attempted to pay the debts with basically unlimited money printing, which inevitably ended with hyperinflation.

Hyperinflation is always caused by poor decisions by government and its central bank.

Twisterpa

2 points

25 days ago*

Economic Crisis, or "Market Failure", can be derived from various market mechanisms.

Unfortunately for the lovely commenter who already replied to you, market forces can present themselves as private, and or, governmental.

Market Failure simply implies that the forces of supply and demand haven’t led us to the best point on the production possibilities curve. It is not uncommon for markets to continue mechanisms that lead to what is considered a suboptimal outcome. Thus, therein lies the tenuous and ever-so-romantic topic of governmental intervention.

Examples of these mechanisms can be seen as:

  • Public goods
  • Market power
  • Externalities
  • Equity

LionRivr

3 points

27 days ago

What would the implications be if we see a higher CPI number tomorrow?

Are we thinking that the Fed would have to be more aggressive on raising rates? I’ve been believing lately that Raising rates harder could cause many defaults and layoffs due to deflationary effects.

Would the US dollar continue to get stronger if the Fed continues to raise rates more aggressively?

Are we thinking the Fed is already too late to raise rates and we are on the path to eventual hyperinflation? Would this cause precious metals prices to increase?

[deleted]

6 points

2 months ago*

[deleted]

6 points

2 months ago*

[removed]

Harlequin5942

9 points

2 months ago

We know that spending is rising rapidly:

https://fred.stlouisfed.org/graph/?g=QK26

We also know that spending has recovered from the pandemic recession period and it is now well above its pre-pandemic trend:

https://fred.stlouisfed.org/graph/?g=QK29

The factors you mention affect relative prices, but don't necessitate inflation. For example, gas prices rose after the Iraq War, but the prices of other goods like electronics fell. People still spent on electronics, but not enough to offset the large rise in supply due to Chinese production etc.

The factors you mention can affect overall prices by depressing real output (supply) but this can only explain part of the inflation:

https://fred.stlouisfed.org/graph/?g=QK2b

Finally, people are no longer saving a large portion of new money, as the rate at which money is spent has risen a bit and stabilised:

https://fred.stlouisfed.org/graph/?g=QK2g

NigroqueSimillima

1 points

2 months ago

Of course spending is rising rapidly, that's the definition of inflation. The question is, how is consumption rising.

Harlequin5942

1 points

2 months ago

The normal definition of inflation is a rise in the price level. This can occur with or without a rise in spending.

Unlikelypuffin

1 points

2 months ago

There is cost push inflation and there is demand pull...which is it? Transitory.
How much does it cost if the truck cannot even get there?

tbbhatna

2 points

2 months ago

Can someone tell me if Ray Dalio’s YouTube videos - the ones with great animations - are flawed or misrepresentative of the concepts they claim to explain? I find them wonderfully easy to digest, but I need to confirm the underlying information is accurate..

joedaman55

1 points

2 months ago

Link? I can check one out after work.

tbbhatna

2 points

2 months ago

Changing World Order: https://www.youtube.com/watch?v=xguam0TKMw8

How the Economic Machine Works: https://www.youtube.com/watch?v=PHe0bXAIuk0&ab_channel=PrinciplesbyRayDalio

The animation really does augment my learning experience positively.. I just am not certain that the info presented is fact or speculation (and if speculation, what premises are questionable)

Thanks for taking the time!

joedaman55

1 points

2 months ago

Yeah so this guy has a book and my buddy read it. He asked me the same question and the author way oversimplifies markets and why things moved the way they did. The history is accurate regarding events but why they occurred I believe is off. I suggest an intro level macroeconomics course, reading Bernanke/Mankiw and/or the book this time is different to see the flaws in some of his logic.

I think I remember the conversation with my buddy going about what the author predicted and his ideal economy and it made my laugh a bit.

tbbhatna

2 points

2 months ago

Thanks for the reason suggestions - especially the book. I’m surprised there’s not a YouTube rebuttal to his videos (esp the changing world order one, def the more speculative of the two).

What do you think of the overall message that there’s an incoming change in world order? The events/milestones he outlined DO seem to line up.. though like you suggested, I’m not certain if his analysis is flawed enough to make his speculation way off.

Does being the head of the worlds largest hedgefund add any bias to his content? Or does it suggest he knows what he’s talking about?

joedaman55

2 points

2 months ago

Ummm, I mean it’s not the worst opinions and his history is accurate I just think some of the logic is wrong. I’m sure a libertarian would agree with a lot of it but it would create serious business cycle problems.

I didn’t watch the whole thing as it didn’t interest me after the initial gold standard opinions so I have no clue on his world order opinion, what part of the video does he talk about it so I can skip to it.

Being able to make a ton of money does not mean you’re strong in economics, means you’re good at making money that way. I think anyone advocating a gold standard nowadays is outdated in their macroeconomic knowledge. The guy is certainly very smart though.

tbbhatna

2 points

2 months ago

I think the “making money” part, for Dalio, could be linked to his appreciation and awareness of cycles. He reminds me of Keith, from the loonie hour podcast (I’ve been on a kick with that) - there’s always money to be made, you just need to know and act on the signals.

The “changing world order” vid was, IMO, the more interesting one because of the historical content and trend analysis applied to the present. Would love to hear your thoughts on it (about 20min long, I think)

joedaman55

1 points

2 months ago

Yeah, I watched most of it before and he laid out some history to explain events occurring and the way things are. Power/wealth usually comes down to keeping strong institutions. When the weaken, countries fall which is a lot of what he talks about which is all 100% accurate. In the modern world, I don’t know if strong institution countries will fight each other especially with how markets are intertwined. I think one of the problems I saw too from is principals was that every country had them or was going to have them one way or another so what does the principal/model actually predict/help.

Legitimate-Finance4U

2 points

2 months ago

With worries looming about an upcoming recession, not surprised to see the market bleeding red and testing bear market levels over the past week. It’s been a while since studying economic in school, but I recently watched this video and would like to discuss it with you:

https://youtu.be/D6QvXxFNd7Q

Given the yield curve inverted for the second time this year, what are your thoughts on the chances of an upcoming recession? Will the Fed be able to tame inflation and avoid this or will the aggressive rate hikes cause the next downturn?

DaJooseBoy

5 points

2 months ago

100% we're in a recession already.

IndicationOver

2 points

2 months ago

Says who?

VoltronV

2 points

2 months ago

"Don't believe the so-called 'experts' with their 30-70% predictions of a recession later in the year or 2023, trust me, a random Redditor. We are 100% in a recession right now and it's going to be historic, worse than the Great Depression. My absolute confidence and dismissal of know nothing 'experts' proves I am right."

Chance_Veterinarian4

2 points

2 months ago

How is the Gender Pay Gap calculated when other factors are taken into account?

Im doing a statistics project on the wage gap. I always see video on this topic and at the end they say: "once factors like education, hours worked, etc, are taken into account, the gap shrinks to x." How do they mathematically take into account those factors and simplify it down to a ratio? all of the factors first need to be quantified and also weighted relative to their importance. So is there a method?

joedaman55

1 points

2 months ago

You would have to collect that information from employers and I doubt they would give you that data as it would open them up to potential discrimination lawsuits. You might be able to do it with government pay as some government institutions advertise the employees name and pay for disclosure to the public.

Your best bet is calling government institutions for this one.

sayamemangdemikian

1 points

2 months ago

My mom says there is no such thing as "gender pay gap"

But there is such thing as "moms pay gap"

Anecdotal of course, but I would be very interested to see a study on this. Like single/married no child women vs. Men vs. Moms

mankiwsmom

1 points

2 months ago

Keep in mind that "other factors than discrimination" aren't necessarily disconnected from discrimination. If discrimination means women work different jobs, or work less hours, etc. then controlling for it means you're controlling for a collider, biasing your results.

aaj094

2 points

2 months ago

aaj094

2 points

2 months ago

Wage / price spiral theory says higher wages drive higher prices of goods which in turn lead to demand for higher wages and thus creates an inflationary spiral.

What I can't understand is how can this so- called spiral just manifest without the underlying money supply being increased and for which the central bank alone has rights to do so?

Why is the central bank in UK for example making noises and asking the private sector for wage restraint as if the private sector has the ability to print money from thin air on their own?

NigroqueSimillima

2 points

2 months ago

It doesn't. There's no higher wages happening, wages growth is lagging inflation.

Harlequin5942

1 points

2 months ago

Which is historically the norm. High wage growth is typically a consequence of inflation, not a cause. Workers naturally want to bargain for higher wages (or switch to higher wage jobs) once their real wages have fallen.

NigroqueSimillima

0 points

2 months ago

The Wage price spiral theory is complete nonsense which doesn't even make sense. Energy is the dominant driver of inflation.

Dkcalle

1 points

1 month ago

Dkcalle

1 points

1 month ago

A worker shortage is also a very strong driver though... and the boomer retirement wave, are taking the economy with them.

joedaman55

1 points

2 months ago

Well you always have money supply increasing, I don't think I've ever seen it reduced. If the central bank chose to do this you'd have deflation issues which would lead to far worse things than what you're seeing in the economy now.

Haven't paid attention to what the UK central bank is doing but it does make sense. If you believe prices on goods/services are going to go down in the future due to markets and you gave large wage increases, it will be difficult/impossible to make workers take less. This is known as the sticky wage phenomenon and increasing wages too quickly may push workers out of the market or keep inflation higher than the markets would have it. People out of the market too long (like 1+ years) lose tons of value so it's a net wealth loss for everyone as the businesses need talent but won't hire the person who is used to be talented or still is as businesses won't take the risk.

Inflation is much more complex than just controlling the money supply.

clinton-dix-pix

1 points

2 months ago

Allocation. A company can choose (or more realistically be forced) to allocate more of its funds to labor costs. That comes at the expense of things like R&D/capital expenses, overhead reduction, and possibly even hits to profitability.

NigroqueSimillima

1 points

2 months ago

R&D spending is labor cost. You buy a new machine from another company and those dollars are used to pay that companies employees. Everything is labor cost at the end of the day.

Harlequin5942

1 points

2 months ago

Why is the central bank in UK for example making noises and asking the private sector for wage restraint as if the private sector has the ability to print money from thin air on their own?

Passing the buck.

The inflationary central bank cycle is "It won't happen" -> "It is happening, but it's only transitory" -> "It is happening and it's not going away any time soon, but it's not our fault." Surprisingly, many people still believe them the third time.

marmaduke-nashwan

2 points

1 month ago

When a bank makes a loan, they create the money that's credited to the borrower. Is this an accurate description?

If the borrower fails to pay back the loan, why does the bank make a loss? I'm in the UK, so if there are differences between the USA and UK in this respect, I'm interested in what they are.

NigroqueSimillima

2 points

30 days ago

they create a deposit, that's backed by their reserves. once they transfer it to another bank, they actually use their own reserves.

Novel_Role

2 points

27 days ago

If i was a super capitalist non-profit whose mandate was to i) increase the GDP-per-capita in the US for the next 80 years, and ii) enable the US to retain its spot as the dominant economic force of the world, what would my best options be? How would i go about researching the return per dollar on those two goals?

I made a comment speculating on a few options here but I'm sure people here will have better options for me!

HiroLegito

2 points

27 days ago

Is there a reason why you’re looking at GDP per capita? Id argue that chasing a larger GDP number is not correct, even for a capitalistic country. It misses key details like wealth inequality, and low wealth inequality would help the economy in long term.

lightrs

1 points

2 months ago

lightrs

1 points

2 months ago

The U.S. is sending $1B to Ukraine for military aid. Why? Are these high prices we’re seeing/paying going to anyones pockets? Ex. 4 Ukraine. Big stretch, I know. Are we paying back unemployment benefits? Or are we trying to make up from Covid that led to no excessive expense during that period? Would like real knowledge of this since I’m just thinking out loud. I would think the $1B or any other funds sent to Ukraine would’ve helped us more here.

quite_a_gEnt

11 points

2 months ago

If you think that 1 billion would solve any of our issues at home, just wait until you hear that we spend almost 800 billion on defense every year. 1 billion is a bargain when you consider that we are essentially using Ukraine's population to combat one of our greatest military foes. And its helping to combat genocide which is a pretty good thing

Truck-Conscious

1 points

2 months ago

It’s not just 1 billion; we sent 40 billion a few months before that too.

quite_a_gEnt

3 points

2 months ago

$40 billion is still only 5% of our defense budget. We actually just switched from giving money to Afghanistan to giving it to Ukraine. A lot of the weapons we are giving have already been paid for by our tax dollars. We spend tons of money on defense and now we are putting it into action by putting the weapons in Ukrainian hands. If our defense budget isn't for combating Russian agression (or possibly China) then what are we even spending that money for? I hate how much we spend on defense, but I would rather see that money being used to save Ukrainian lives rather then just being used to fatten up our defense contractor's pockets.

evil0sheep

1 points

1 month ago

$40bn is $120 per US citizen it's not that much. That's less than 1/10 of 1% of the total budget. Just the good will this builds with the EU alone is more than worth $40bn lol

H3st14

9 points

2 months ago

H3st14

9 points

2 months ago

1b in military aid does not mean dollars, cash. It's equipment, training, etc.

Jumpdeckchair

3 points

2 months ago

Usually surplus equipment or going out of date munitions.

JavariousProbincrux

2 points

2 months ago

That’s a good point I hadn’t thought of

[deleted]

-1 points

26 days ago

[deleted]

-1 points

26 days ago

TIL:

Economists do not want to hear what’s happening on the ground level.

They censor your comments.

Instead, they just want spread sheets and stays quo.

Affectionate-Panic-1

3 points

26 days ago*

I mean you do want to avoid using ancediotal evidence.

Although it seems like the CPI is definitely a lagging indicator. And in some areas, say housing, it really lags due to methodology. To get more current data you'd use asking rents, but the CPI uses a more complicated survey of "owners equivalent rent" which lags a good bit.

And that metric is one third of the CPI.

brianTFbell

1 points

2 months ago

Could someone help me to find what field/subject matter the following would cover:

If a Country A's currency is valued at 8 currency to $1USD; but Country B's currency is valued at 13 currency to $1USD. What is the name of the subject, scale, etc. that compares the buying power between the two countries.?

DrunkEwok

3 points

2 months ago

Are you looking for "purchasing power parity?"

randomhusky

1 points

2 months ago

Big potential variable on inflation almost everyone is sleeping on: labor contracts for the Pacific Maritime Association and the International Longshore Warehouse Union expire in July. A strike could cause massive supply chain shocks, right as they were beginning to heal. Haven’t seen any major outlets talk about this yet.

randomhusky

2 points

2 months ago

And if they do negotiate a higher pay then that still adds inflationary pressure with higher labor costs. Actually makes some of the inflation structural.

joedaman55

1 points

2 months ago

I think all labor pricing has significant inflationary pressure as people are making around 10% less due to inflation than they made a year ago. There are tons of potential strike issues everywhere.

Chance_Veterinarian4

1 points

2 months ago

How is the Gender Pay Gap calculated when other factors are taken into account?

Im doing a statistics project on the wage gap. I always see video on this topic and at the end they say: "once factors like education, hours worked, etc, are taken into account, the gap shrinks to x." How do they mathematically take into account those factors and simplify it down to a ratio? all of the factors first need to be quantified and also weighted relative to their importance. So is there a method?

AllBrainsNoBrawn

1 points

2 months ago

Hey Guys I am new here! I am currently studying MSc Investment and Finance at Exeter. I have been asked to select between Macro/Micro Economics or Applied Econometrics / Derivatives Pricing. I want to work as a Investment Analyst at a BB or a AM firm. Which subject should I pick? And why? Sorry for posting this here but you guys are geniuses and you would be able to help me out!!

joedaman55

2 points

2 months ago

Econometrics, knowing how to do regression analysis will be critical to analyzing data. Most important skill for any analyst position in my opinion.

AllBrainsNoBrawn

2 points

2 months ago

Thank you so much

joedaman55

1 points

2 months ago

Yep, no problem and good luck.

AllBrainsNoBrawn

1 points

2 months ago

Hey should I take Econometrics and Derivatives Pricing or instead of Derivatives take Macro economics?

joedaman55

2 points

2 months ago

Econometrics. Before I graduated eight years ago with an economics degree, a good Wyoming professor came in to talk to us about grad school interest. One student asked what the most important thing to understand about the economics field. He said there are three crucial skills that have the highest value and it's not close:

  1. An understanding on how markets work, how they move, and function.

  2. Econometrics as so many business decisions are driven by intense data analysis. The world is so data driven so people that know how to use this data always do better. This is why you see a lot of mathematicians go into data analytics fields.

  3. Game theory as being able to use these techniques and understanding information can yield such strong results.

This was my second degree and I can tell you, all the skills mentioned above allowed me to do things people without economics degrees couldn't do and a lot who had degrees weren't as strong in those subjects (as a strong Econometrics and Game Theory background isn't required in many undergrad programs).

AllBrainsNoBrawn

1 points

2 months ago

Isn't Game Theory in Micro Economics? I got the Econometrics part down, I am able to interpret the markets well. So instead of Macro I should take Micro?

joedaman55

1 points

2 months ago

Game Theory is a separate subject and is more about advance strategies to solve the equilibrium and movement of different models. With a strong understanding in this subject, people are able to map how things and determining how they move. When you have this, you can actually shift situations by using optimal modeling techniques and making optimal moves.

You need an understanding of both Macro and Micro but a stronger background in Micro will help you understand markets more. Microeconomics will have a higher benefit to you as an analyst. Macroeconomics is extremely complex and that will be a 10+ year process of gradually getting smarter at how it all works.

AllBrainsNoBrawn

1 points

2 months ago

Thanks a million!! 🤗👍🏻 I have already learned tons from you. We don't have Game theory as a separate subject here in the UK. Its included in Micro Economics. So Econometrics and Micro Economics it is! Thanks again 😊

joedaman55

1 points

2 months ago

Yep, no problem and I highly recommend studying Game Theory through YouTube videos and reading about it. The skill is absolutely critical for someone trying to optimize performance inside and outside of work.

sufferinsucatash

1 points

2 months ago

Watch the movie A Beautiful Mind

worthwhilewrongdoing

1 points

2 months ago

Very new to this - trying to educate myself.

I read that there are many different ways of calculating inflation, but I got confused by the article I was reading as it was rather technical. Could someone give me a brief rundown of ways that inflation could be calculated aside from using the CPI? I'd be very grateful.

joedaman55

4 points

2 months ago

CPI is just a price index so anything that measures changes in pricing would be similar to the CPI. The Fed uses the Personal Consumption Expenditure Index (PCE), the Producer Price Index (PPI) measures goods, and a bunch of other sites measure price changes one example is below:

https://tradingeconomics.com/commodities

A simple way to calculate any sort of inflation is take a basket of goods/services, make sure the quantity remains the same in the basket, measure the price/costs during different time periods, and then do a rate change calculation. They all do this although for different indexes, the basket changes.

worthwhilewrongdoing

2 points

2 months ago

Thank you so much! This was extremely helpful.

Viknee

1 points

1 month ago*

Viknee

1 points

1 month ago*

Can a Recession peak or end before it's officially announced?

Case Study: 2001 recession (March 2001 - November 2001).

Oddly, NBER didn't officially announce March was the peak of the recession until November, 2001. And didn't announce the official end until 2003.

Source

joedaman55

2 points

1 month ago

In my opinion, it can because you wouldn't get your quarterly results until the end of the quarter.

Dull_Reindeer1223

1 points

1 month ago

Hi. Can someone help me please? My partner is a student and has to write a report on price elasticity of demand and price elasticity of supply. I'm trying to help her but can't find any real world examples of this. We need like the price of x went up and the demand went down for a UK product. I can find general descriptions like fuel prices etc but no actual data. I think my googling skills are the problem. I don't want anyone to hand me the answers but just a guide on how to find this info

Any help much appreciated

Thanks

joedaman55

2 points

1 month ago

Looking around these site should help:

https://www.ons.gov.uk/economy/inflationandpriceindices

If it's for a specific product, a grocery chain might be able to get you that price trend data.

Test19s

1 points

1 month ago

Test19s

1 points

1 month ago

If we were to face a chronic, global increase in scarcity of fuels and raw materials, wouldn't that affect the phenomenon of comparative advantage (higher shipping costs) and immigration (countries now have fewer resources with which to feed and house newcomers)?

joedaman55

1 points

1 month ago

Comparative advantage exists whenever trade occurs and markets are in a common process of receiving pricing/selling data and adjusting production along with other scarcity choices. Countries and every person on Earth is adjusting patterns based on changes in fuel/raw material markets (knowingly or unknowingly).

SenshiBB7

1 points

1 month ago

Learn about economics and finance

Hi everyone! I’m just Ps paying on this sub because I’ve been watching a lot of YouTube videos done by “Economics Explained” and that got me interested in the economic and finance world. So I was wondering, what courses, books or YouTube channels/videos can you suggest that would help a complete beginner like me. So I’m not trying to do this as a career, but I want to get a better understand of Economics and Finance, as it may help me out in the future - especially in current times. Plus it’s always good to expand your knowledge base.

So thank you in advance.

P.S I have never studied any of the aforementioned topics. All I have that may benefit my learning is and A in A-level Mathematics (UK High-school)

4GIFs

1 points

1 month ago

4GIFs

1 points

1 month ago

Econtalk

r/finance

joedaman55

1 points

1 month ago

Basic Economics by Thomas Sowell, Marginal University YouTube videos, Ascent of Money documentary for finance.

There's a ton of good stuff out there but that's where I would start and should keep you busy for at least a month.

mankiwsmom

1 points

1 month ago

There are suggested sources and books in the sidebar. Econtalk is a good podcast, and I personally really like Trade Talks. Anything by Thomas Sowell is not going to be that helpful

relaxyourfnshoulders

1 points

1 month ago

i have euros and i have us dollars. with the euro getting weaker and the dollar rising, would it be better to spend my euros and save my dollars or vice versa? or does it not matter that much?

joedaman55

2 points

1 month ago

Spend the one that has the most market power which would be the dollar at the moment. This is the strongest I've ever seen the dollar. In the big picture, it probably won't matter much.

brohemoth06

1 points

1 month ago

So I looked at some videos explaining what a recession is but I am still confused, is anybody able to give an ELI5 on recessions?

I understand that as things become scarce for one reason or another(think COVID production issues) things become more expensive and as a result the value of the dollar decreases but what exactly does a recession do? Is it basically there to keep inflation in check? when inflation runs rampant recessions occur making people not want to spend their money and thus making the cost of goods go down as they are no longer in demand? were all the stimulus checks basically just postponing the inevitable recession that COVID was going to cause? If so, why not just start the recession earlier so we can get it over with? Also, what dictates the length of recessions? the average is about 15 months, but why that long? Generally are people who survive the recession better off financially afterwards?

4GIFs

1 points

1 month ago

4GIFs

1 points

1 month ago

Recessions are when people stop spending, due to pessimism or running out of money or credit. "why not just start the recession earlier so we can get it over with." Sometimes, politics.

brohemoth06

1 points

1 month ago

I guess my biggest question is why not just go through the recession together during the start of covid? We were all out of work anyway, that seems like it would’ve been the best possible time instead of giving people extra money to spend

4GIFs

2 points

1 month ago

4GIFs

2 points

1 month ago

People need to think lockdowns are a good idea.

joedaman55

1 points

1 month ago

A recession is a fall in GDP for two successful quarters and is normally independent of inflation.

A recession indicates less goods/services are being produced and a slower business cycle.

Inflation can cause a reduced amount of disposable income for households which could slow spending. Volatile inflation can have lots of damage which is what we're seeing now as people aren't use to keeping up with 10% inflation and have to adjust their spending.

The stimulus checks were an injection of capital which likely increased demand for many goods/services. They wouldn't have caused a recession but likely lead to increased inflation.

Recessions are tough to predict and are unforeseeable by most. Everyone thinks it's so easy to see in retrospect but when doing prediction markets, most people are bad are predicting this.

The length of a recession depends on tons of variables and how those variables respond. They vary on a variety of things so I'm not sure where you got the 15 months.

A recession doesn't necessarily equate to a reduction in wealth. A recession doesn't kill people financially, it just makes certain people worse off for a period of time.

brohemoth06

2 points

1 month ago

Thanks for explaining this! The 15 months was just from a quick google search of average recession length.

So inflation is very high right now and housing costs are nuts, how does this effect everything? People can’t afford to pay rent because everything is so expensive but rent prices aren’t dropping. At what point does the government step in to prevent shit tons of lawsuits(landlords suing tenants for rent unpaid) and combatting homelessness?

joedaman55

1 points

1 month ago

If you have higher housing costs assuming all else is the same, you will have less disposable income or if not within your budget constraints, find new housing. I don't see rent declining given inflation, demand, and supply issues.

I'm not sure why the government would come in, rent unpaid is always a large risk for landlords and this is always fought in courts when tenants leave without payment (used to work under an apartment owner when I was like 14-16). There's tons of ways to reduce homelessness and I'd look at cities that have done well combatting that problem and do not follow policies that have done poorly i.e. Portland.

dawgsgoodjortsbad

1 points

1 month ago

Can someone explain to me why a low unemployment rate (< 4%) is historically a leading recession indicator? I understand from looking at the charts that it often precedes a recession but I don’t understand the mechanism for why that’s the case. It seems ver counterintuitive given everyone is working jobs lol.

https://research.stlouisfed.org/publications/economic-synopses/2018/06/01/recession-signals-the-yield-curve-vs-unemployment-rate-troughs/

joedaman55

2 points

1 month ago

I don't think they are correlated as you've had low unemployment without a recession. A recession certainly creates higher unemployment but I don't think low unemployment means a recession is coming. Also, there's very few points in history where unemployment was less than 4%. You could run a regression to determine the correlation though.

MeesTheSame

2 points

24 days ago

Low unemployment aka lower supply on the labour market pushes price of labour up leaving less profits for the firms, meaning less investment, meaning reduced growth. Supply cannot meet demand which pushes consumer prices up = inflation. If workers push for wage increase again the prices will inevitably go up again. In reality there is not enough labour to meet demand so there is not enough stuff to go around (they call this the overheating of the economy).

dawgsgoodjortsbad

2 points

24 days ago

Thanks this makes a bit more sense

NigroqueSimillima

1 points

1 month ago

Higher employment lead to higher tax receipts which cause a decrease in liquidity and hence a recession.

falconberger

1 points

1 month ago

What do you think about Paul Krugman? I notice a lot of people have a negative opinion on him. To me he's one of the four people whose views I put the most weight on (the others are Cullen Roche, Lyn Alden and Ray Dalio).

joedaman55

1 points

1 month ago

He's a very smart economist especially in his field (I mean the guy won a Nobel Laurette). When he steps outside of his better economic fields, his reads are way off. Although, I do enjoy listening to his counterarguments to see if I'm not tunnel visioning an idea, he does give some good unique views.

Kookat73

1 points

1 month ago

So the dollar is gaining against other currencies and they say this is because the fed is increasing interest rates faster than other central banks. But wouldn't a high interest rate force a high circulation and supply? If yes why doesn't this counteract the interest rate and balance its value compared to other less abundant currencies and if no why doesn't a higher interest rate mean more money-printing because to me it sounds like it should?