The Tug of War is a great metaphor. There is no "market", just people, buyers & sellers. Or, a buyer (price too high) and a seller (price too low) who agree to invest according to their beliefs (which often include inside knowledge) (and lots of fake news.), for each transaction. The "market" is a word that means the sum of all the transactions, total buyers tugging up against total sellers tugging down. The price is what is discovered about the aggregate.
I don't believe in huge labor shortage, because a) the employment is high, but not so high, and b) wage growth has been high, but not so high (in most lower paid jobs). Funny how US says employment rate is slightly lower now at 60%
If rich country economists can't agree on a definition and what the actual facts are, it's certain that there will not be consistent forecasts about financial future trends.
Despite Libertarians talking about regulations, I don't yet read the Fed talking about regulations and restricting supply is part of what is driving inflation.
This is wrong. The first part of the post is wrong about a price being right. No price is right even in textbooks teaching the forces conditioning prices over time for different goods, services, and assets. In textbooks, "solving for the equilibrium" is just a tool to explain how people interact and how people may respond differently to changes in those forces. In the case of financial assets, bitcoin in particular, we can argue that one important force is the expectation of changes in the assets' purchasing power and we argue it recognizing how people differ, especially about that expectation.
All that is very entertaining --at least for serious economists. But the post's second part is very frustrating for serious economists because everybody hardly knows which prices are changing and how much. Also, we rely heavily on the fake clowns reporting prices and spreading rumors. Yes, the financial press can report how the prices of financial assets are changing and how their purchasing power (measured by baskets of goods and services) has been been changing but reporters cannot infer how prices will be changing even in the next few hours, much less tomorrow. Serious economists know that even their best models can hardly predict well prices' path, and by definition they cannot anticipate "shocks", including what a senile President will do, re-do, and then deny/confirm he had done it. Serious economists know that price indexes may differ a lot because of large differences in the relative weights of the goods, services, and assets actually included in their estimation. Serious economists know that shocks in energy markets will affect price indexes differently --first by their direct impact if energy is included in the estimation, then indirectly because of how many other prices may change due to the shock in energy prices. Yes, Milton Friedman called inflation any continued, generalized increase in the price index of broad basket of goods and services, and made clear that his monetary theory of nominal income assumed that the demand for M was stable and the supply of M was controlled by its only supplier. But there is no M which meets Milton's two conditions. Indeed, it's difficult to explain recent increases in a price index by looking only at past increases in any M (that was why Milton liked to talk about lags). So, don't be surprised that we cannot explain increases in several price indexes in the past 3 years by reference to M0 or M2 or any other M. Worse, some Ms may have increased but in response to the increases in prices (this is what passive money models assume to prevent the shock's negative impact on people's demand for most goods and services). If we work hard, maybe by 2030 we will have a good idea of what happened the past 3 years.
I find grotesque how media economists in the U.S. participate in the show about what is going on with the world and the U.S. economies. They didn't have much to say in 2020-21 when the barbarians were grabbing power but now they are struggling to get high positions. It reminded me of something Tom Sowell wrote long ago and later expanded in the preface to the 1996 edition of his Knowledge and Decisions ("One of the patterns in the history of many insurgent movements has been a disappointment in the direction that the movement has taken after victory...").
I liked Tom's idea because it reminded me of what had been happening in Argentina since Perón's victory in 1946. For the past 60 years, I have been saying that inflation is a symptom of the struggle between the insurgent coalition's factions about how much of national income should/can be redistributed to benefit and expand the coalition's membership. Yes, I still remember the early rounds of that struggle in the 1950s, in particular the year 1959 when inflation was higher than 50%, and how the struggle has later evolved and the media economists talking about high inflation (and in the 1980s about hyperinflation). Yes, Argentina's experience is a good reminder of how wrong media economists may be: we all know how much the large majority of ordinary people is concerned about inflation but only a small minority understands that is a consequence of that struggle. In the many political rounds of the past 60 years, I have observed how media economists have been proposing all sorts of policies to control/repress inflation but all failed (including the current one).
U.S. politics has changed drastically and rapidly in the past 6 years. Obama failed grossly (he enriched himself but did nothing to meet the expectations of the growing but still small coalition of the new insurgents -- the barbarians willing to do anything to grab power). His failure was first shown in the choice of Hillary and then in Hillary's loss despite what she did (yes, she did it). Today, the U.S. political struggle within the insurgency is like Argentina's: how much national income should/can be redistributed to benefit and expand the barbarians' coalition. We will know soon how far the coalition is willing to go to consolidate the power grabbed in the past 16 months but the coalition's internal struggle will continue for ever and Larry Summers and other media economists will continue discussing inflation.
I know very well the work of those 17 laureates, in particular Joe Stiglitz. Their scientific work on economics has nothing to do with the proposed spending by the senile President. I bet you that if the proposal were executed, it'd amount to income redistribution to the benefit of Hunter and other members of the political coalition that has been supporting him. For that spending to have serious economic consequences, the robbers' marginal propensity to consume would have to be significantly higher than taxpayers' propensity. BTW, I'm still laughing at how Joe's performance in DC during the 1990s, and recently at his advice to Argentina's minister of finance (also, I'm not surprised that Pope Francis appointed Joe as one of his advisers to condemn capitalism and push for a new world economy).
Arnold lives in the real world. That's the difference. I have to say that I'm frustrated. I've been arguing with my (very left leaning) financial advisor for the last year and a half that inflation would be bad. I also told him that oil and gas investments would lead the markets, he disagreed, and even recommended crypto. His ESG portfolio underperformed. I am the idiot though, as I still let him manage a chunk of my portfolio.
The Tug of War is a great metaphor. There is no "market", just people, buyers & sellers. Or, a buyer (price too high) and a seller (price too low) who agree to invest according to their beliefs (which often include inside knowledge) (and lots of fake news.), for each transaction. The "market" is a word that means the sum of all the transactions, total buyers tugging up against total sellers tugging down. The price is what is discovered about the aggregate.
I don't believe in huge labor shortage, because a) the employment is high, but not so high, and b) wage growth has been high, but not so high (in most lower paid jobs). Funny how US says employment rate is slightly lower now at 60%
https://tradingeconomics.com/united-states/employment-rate
While OECD stats say US employment rate is at 71%
https://data.oecd.org/emp/employment-rate.htm
If rich country economists can't agree on a definition and what the actual facts are, it's certain that there will not be consistent forecasts about financial future trends.
Despite Libertarians talking about regulations, I don't yet read the Fed talking about regulations and restricting supply is part of what is driving inflation.
This is wrong. The first part of the post is wrong about a price being right. No price is right even in textbooks teaching the forces conditioning prices over time for different goods, services, and assets. In textbooks, "solving for the equilibrium" is just a tool to explain how people interact and how people may respond differently to changes in those forces. In the case of financial assets, bitcoin in particular, we can argue that one important force is the expectation of changes in the assets' purchasing power and we argue it recognizing how people differ, especially about that expectation.
All that is very entertaining --at least for serious economists. But the post's second part is very frustrating for serious economists because everybody hardly knows which prices are changing and how much. Also, we rely heavily on the fake clowns reporting prices and spreading rumors. Yes, the financial press can report how the prices of financial assets are changing and how their purchasing power (measured by baskets of goods and services) has been been changing but reporters cannot infer how prices will be changing even in the next few hours, much less tomorrow. Serious economists know that even their best models can hardly predict well prices' path, and by definition they cannot anticipate "shocks", including what a senile President will do, re-do, and then deny/confirm he had done it. Serious economists know that price indexes may differ a lot because of large differences in the relative weights of the goods, services, and assets actually included in their estimation. Serious economists know that shocks in energy markets will affect price indexes differently --first by their direct impact if energy is included in the estimation, then indirectly because of how many other prices may change due to the shock in energy prices. Yes, Milton Friedman called inflation any continued, generalized increase in the price index of broad basket of goods and services, and made clear that his monetary theory of nominal income assumed that the demand for M was stable and the supply of M was controlled by its only supplier. But there is no M which meets Milton's two conditions. Indeed, it's difficult to explain recent increases in a price index by looking only at past increases in any M (that was why Milton liked to talk about lags). So, don't be surprised that we cannot explain increases in several price indexes in the past 3 years by reference to M0 or M2 or any other M. Worse, some Ms may have increased but in response to the increases in prices (this is what passive money models assume to prevent the shock's negative impact on people's demand for most goods and services). If we work hard, maybe by 2030 we will have a good idea of what happened the past 3 years.
I find grotesque how media economists in the U.S. participate in the show about what is going on with the world and the U.S. economies. They didn't have much to say in 2020-21 when the barbarians were grabbing power but now they are struggling to get high positions. It reminded me of something Tom Sowell wrote long ago and later expanded in the preface to the 1996 edition of his Knowledge and Decisions ("One of the patterns in the history of many insurgent movements has been a disappointment in the direction that the movement has taken after victory...").
I liked Tom's idea because it reminded me of what had been happening in Argentina since Perón's victory in 1946. For the past 60 years, I have been saying that inflation is a symptom of the struggle between the insurgent coalition's factions about how much of national income should/can be redistributed to benefit and expand the coalition's membership. Yes, I still remember the early rounds of that struggle in the 1950s, in particular the year 1959 when inflation was higher than 50%, and how the struggle has later evolved and the media economists talking about high inflation (and in the 1980s about hyperinflation). Yes, Argentina's experience is a good reminder of how wrong media economists may be: we all know how much the large majority of ordinary people is concerned about inflation but only a small minority understands that is a consequence of that struggle. In the many political rounds of the past 60 years, I have observed how media economists have been proposing all sorts of policies to control/repress inflation but all failed (including the current one).
U.S. politics has changed drastically and rapidly in the past 6 years. Obama failed grossly (he enriched himself but did nothing to meet the expectations of the growing but still small coalition of the new insurgents -- the barbarians willing to do anything to grab power). His failure was first shown in the choice of Hillary and then in Hillary's loss despite what she did (yes, she did it). Today, the U.S. political struggle within the insurgency is like Argentina's: how much national income should/can be redistributed to benefit and expand the barbarians' coalition. We will know soon how far the coalition is willing to go to consolidate the power grabbed in the past 16 months but the coalition's internal struggle will continue for ever and Larry Summers and other media economists will continue discussing inflation.
I know very well the work of those 17 laureates, in particular Joe Stiglitz. Their scientific work on economics has nothing to do with the proposed spending by the senile President. I bet you that if the proposal were executed, it'd amount to income redistribution to the benefit of Hunter and other members of the political coalition that has been supporting him. For that spending to have serious economic consequences, the robbers' marginal propensity to consume would have to be significantly higher than taxpayers' propensity. BTW, I'm still laughing at how Joe's performance in DC during the 1990s, and recently at his advice to Argentina's minister of finance (also, I'm not surprised that Pope Francis appointed Joe as one of his advisers to condemn capitalism and push for a new world economy).
You can buy 2 year puts on TLT. That is a not infinite time, but worth a little action.
Arnold lives in the real world. That's the difference. I have to say that I'm frustrated. I've been arguing with my (very left leaning) financial advisor for the last year and a half that inflation would be bad. I also told him that oil and gas investments would lead the markets, he disagreed, and even recommended crypto. His ESG portfolio underperformed. I am the idiot though, as I still let him manage a chunk of my portfolio.