Stock market soaring under Democratic leadership.

Inflation isnt from M1....lol

Tell me WHY inflation isnt from M1 and why M1 is a dinosaur...and also how asset inflation can be seen WITHOUT a move in M1...educate me I need your brilliance.

So if I am the FED and I increase my balance sheet but I give it to other countries, to Bank of America to Citadel the HF to financial institutions who use these instruments but do NOT pass it on further down the chain, will M1 move? 

Why did M1 not leap to the same magnitude from 2008 to 2020 even though the FED balance sheet was up 200% during that time?

I think you need to hit up the right wing message boards for some answers because I need some education right wing style...my left wing brain does not get how this all works.

Why didn’t we have inflation as assets were soaring? 

The balance sheet you keep talking about is the Feds ASSETS. Of course the feds asset balance sheet went up as assets soared. 

I’m starting to think that you have no idea what you’re even talking about. 

Asset inflation can be seen without a move in M1 due to incredibly low rates. 

But it did increase from 1500 to 4000 from 09 to 20. It then exploded under Biden from 4000 to 20,710. 

Any other questions? 

When the Fed began quantitative easing in 2008, many thought that inflation would follow. The data don’t show that. (the FRED websitehas easy-to-access data).

 The idea that this has been building for a while should be considered in light of the time lags. Statistical analysis from several directions (the structural models of the 1970s and 80s as well as the DSGE models of recent years) show a roughly two-year time lag between changes in monetary policy and inflation.

Inflation had been steady for many years, leading the Fed to assume it would not be a problem in the future, and they turned to other issues, primarily running the economy hot to enable the most disadvantaged people to find jobs. They are now seeing the results of that approach.

We did..

Economists look at many different measures of inflation.

The Fed, however, focuses more on the ‘core inflation rate’ when determine policy to control inflation.  This takes out gas and food prices, which can be too volatile for an accurate assessment.

There are a few measure of this rate as well.  The two main ones are the Consumer Price Index and the Personal Consumption Expenditures index.

The PCE is the one the Fed will normally use to adjust its interest rates.

They see this as a more accurate measure of what is affecting the consumers that can be quantitatively measured without the volatility of food and gas.

“The personal consumption expenditure price index in the United States climbed 6.6% year-on-year in March of 2022, quickening from a downwardly revised 6.3% increase in February. It was the steepest rise since the series began in 1959, reflecting increases in goods and services. Energy prices increased 33.9%, while food prices increased 9.2%. Excluding food and energy, the PCE price index rose 5.2% from one year ago.

Pce Price Index in the United States averaged 60.70 points from 1959 until 2022, reaching an all time high of 121 points in March of 2022 and a record low of 16.04 points in January of 1959.”

Your boy only knows M1 and your cut and paste stuff isnt helping him understand the concept of monetary policy. The reason why M1 worked as I mentioned 50 yrs ago is that the creation of reserves was passed to the consumer, that is how M1 is shown. It also explains how the increase in reserves from the FED did not show up in M1 because they were not CIRCULATED. if you create reserves and liquidity as the FED did for 15 yrs and those are not CIRCULATED it will not show in M1, it is also why the 2020 spike in M1 is not directly correlated to the change in FED assets at the same time.

Yikes...

Show me when we had inflation like this prior to Joe Biden … as assets soared. 

An old article prediction of this:

Feb 25, 2021

Inflation is muted, but not for long. Inflation is coming in the next two years, then will be followed by a boom/bust business cycle, or maybe two.

Over the past 12 months, consumer prices excluding food and energy have increased 1.5%, right in line with the average since the last recession. Including food and energy produces a slightly lower figure. We economists like to exclude food and energy because they cycle up and down separately from the overall inflation trend. These short-term changes usually reverse themselves in a year or two.

Individual prices also change a great deal more than the average, reflecting supply-demand imbalances in specific parts of the economy. These eventually work themselves out and do not change the overall inflation rate.

The inflation that is dangerous is broad-based and long-lasting. It robs people of value. They may have as many dollars as before, but the dollars are worth less. Inflation also biases decisions as consumers and businesses adjust their affairs to reduce their damage. Inflation can cause businesses to show fake profits that would be subject to taxation. For example, a retailer usually earns a markup, the difference between wholesale price and retail price. With inflation, the retailer also collects the amount by which prices rose while the product was on the shelf. But this is fake profit because when the product is sold, the retailer will have to replace it at a high price. This fake profit is fully taxable. Businesses can mitigate this damage, but that involves doing things that otherwise would be unprofitable. The overall economy is damaged.

Similarly, investors may sell an asset at a dollar profit but not an economic profit. If prices rise 10%, and my investment goes up 13%, then I’m only up 3% in purchasing power. The government, though, will tax me on my entire 13% profit, leaving me with less purchasing power than I had started with.

Persistent high inflation also correlates with a more volatile economy, with more recessions and rebounds than during eras of low inflation. This result is not inevitable, but it’s common. The period from 1965 through 1985 illustrates the phenomenon. The episode began with Presidents Kennedy and Johnson spending more on the Vietnam War and on Great Society social programs here at home. The Federal Reserve accommodated fiscal policy by increasing the money supply rapidly.

Then the Fed tightened sharply in 1970, triggering a recession. To get out of that recession, they pushed the money supply up sharply. As inflation rose, the Fed tightened again, causing the 1973-75 recession. Then more easing and another round of tightening that sent the economy into the very severe double-dip recession of 1980-82. Something like this could be our future.

The monetary base, which is the raw material from which dollars are made, has jumped over 50% in the past 12 months. The actual stock of money, counting paper currency and balances in bank deposit accounts, has increased 26%. Usually the relationship is one-to-one, but much of the monetary base is sitting idle as reserves that commercial banks hold at their Federal Reserve Bank. The extra monetary base is dry tinder or a ticking time bomb, choose your own metaphor.

The increased money supply has not yet triggered inflation, largely because the money’s owners have chosen not to spend. Consumers have used their stimulus checks and extra unemployment insurance largely to pay down debt and to build up their checking accounts. Similarly, many businesses took Paycheck Protection Program loans not because they needed the money immediately, but as a buffer in case things got worse. Outside of leisure and hospitality, things didn’t get much worse. With the loans being forgiven now, the cash in sitting in business checking accounts.

Having money that does not get spent is unusual. As a joke, I sometimes say it’s unamerican. But large cash deposits, along much credit card debt having been paid down, is dry tinder or a ticking time bomb, again choose your metaphor. Bank loans to consumers have dropped 5.0% in the past 12 months. Bank lending often drops in recessions, because banks are more cautious and also because consumers are more cautious. The lower debt burden enables consumers to ramp up their spending when their jobs and confidence improve. The composition of debt has also moved in a dry tinder direction. Credit card balances have dropped, while automobile lending has increased. With those car loans mostly at low fixed interest rates, consumers enjoy low payments and are protected from rising interest costs.

At some point, probably late in 2021, consumers will feel more confident about their finances, and they will resume spending growth. They will have substantially more resources to do that. Businesses will see their customers spending more and will invest in equipment, computers and real estate to serve them. Both consumers and businesses have now, and will have even more in the future, the capacity to spend.

The traditional formula for inflation is too many dollars chasing too few goods and services. The extra spending that will come would be fine if the country’s productive capacity increased proportionately. That has not been the case, however. Our productive capacity is, at first approximation, based on the available labor force and on productive equipment, machinery and computers. Retirements surged in 2020, running twice the growth as in recent years. Many parents left the workforce when schools closed or went virtual, but most parents will return to work when the schools normalize in September. Still, the extra retirements will reduce our productive capacity.

Investment in capital equipment for nonresidential use dropped in 2020, both for structures and for equipment. We don’t yet have estimates of depreciation, so we don’t know if the total productive capacity grew or shrunk, but it certainly did not grow as fast as it had in recent years, The Federal Reserve estimates a small loss of industrial capacity over the 12 months ending January 2021, though their data sources are still incomplete. Production capacity certainly did not grow so fast that we kept up with potential consumer spending. Much of the business spending that did occur was for goods not previously needed, but necessary in a pandemic: laptop computers, webcams and audio gear. Throw in some partitions and other social distancing tools, and companies spent more just to do the same old things.

Inflation will result from the upcoming expansive spending amidst limited increases in production of goods and services. There is no avoiding it unless the Federal Reserves begins sopping up excess liquidity in mass amounts.

That won’t happen, because the Fed changed its approach to monetary policy last year by focusing on “outcomes based policy.” For example, their latest statement includes this:  “With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved.”

In plain English, the Fed wants to get inflation above two percent for a while. Then they will think about whether inflation has been too high for too long, compared with an average of two percent over a long period. Inflation in 2018 was just a hair above target, then we had two years well below target. That would easily justify continued easy money policy through the end of 2022 and well into 2023. Monetary policy operates with long time lags, though, so inflation would likely continue to accelerate through 2024 and into 2025. At that point, if my forecast is correct, they would feel the need to tighten sharply. The odds of the Fed getting their tightening exactly right in both timing and magnitude are very low. The next recession is too far away to predict exactly when it will begin, or how harsh it will be, but a recession is almost inevitable given the existing stimulus and the Fed’s new policy.

Those who worried about inflation a decade ago have been proved wrong. But that does not mean invulnerability of our economy to inflation. With all of the stimulus being poured in, inflation is inevitable, and boom bust cycles will likely follow the rising inflation.

Your measure of inflation is not the only type, asset increase IS inflation, there was inflation which is an increase in prices in the stock market, in the bond market in the real estate market in crypto in MANY MANY areas.

The measure of inflation is not CPI only, but the point is that inflation was created from the expansion of the FED balance sheet it gave the environment for asset inflation.

What you are referring to is commodity and CPI inflation, that is not because of Biden. OPEC is a monopoly there is a supply shock which was borne from the oil crash, but we discussed that already.

The supply shock in food prices is due to a supply disruption not M1 and not demand, the supply curve has been moved, that has little to nothing about M1

M1 exploded at the same time inflation exploded. 

It’s really pretty simple. 

Well maybe it isn’t for most people. I don’t know many people that played the markets as well as I have over the last 13 years. I even have threads all over the place documenting it. 

2011 buy real estate.  

2020 go all in on crypto. Documented selling at the right time. 

2022 short German companies … let’s see how that plays out. 

For someone that knows everything I haven’t seen many correct predictions from you. 

Why is that? 

Raiders, how about less cut and paste and more discussion...that would be groovy.

@wallstreetcappers

My words are at the beginning.  The copy and paste are in quotes.  

Lots of folks have been saying this since 2008ish — they have been wrong.  Now you have a confluence of factors that have brought on inflation like we haven’t seen in decades.  You can make it political, if you like, but it can be directly linked to policies, absolutely.  

But, as I pointed out earlier — just because you hear about gas on TV doesn’t mean the FED is looking at that.  For example, the PCE or other core measures are not looking at gas.  

This has not really been building for decades like some pundits would lead the public to believe.   Economically, we always see the lag as 1-2-3 year timeframe.  

I will post another article on this that maybe will help clear this up.  

Another article that may help with this:

Feb. 16, 2022

Supply chain issues, surging demand, production costs, and swaths of relief funds all have a role to play, they say, but politics tend to cause one to point the finger at the supply chain or the $1.9 trillion American Rescue Plan Act of 2021 as the main culprits. 

A more apolitical view may suggest that all have a role to play in shrinking the distance a dollar can travel. 

“There’s a confluence of factors — it’s both,” said David Wessel, the director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution. “There’s a lot of things that pushed up demand and a lot that’s kept supply from responding accordingly, as a result we have inflation.”

He said it is inarguable that demand in a pandemic economy surged because of very aggressive fiscal and monetary policies in response to Covid-19. The Obama administration’s stimulus package to respond to the 2008 recession was $787 billion; the pandemic stimulus packages, between the Trump and the Biden administrations, reach around $5 trillion.

That huge sum of money has helped demand come back, but unfortunately the supply chain remains hampered. Hindsight, Wessel said, is 20/20 but he believes the policy was necessary for an even recovery. 

The correlation of M1 and inflation actually show how your point is wrong, the flow through for the theoretical move in M1 to it showing up via inflation is LONGER than a direct overlay...

What does M1 show anyway....what does it represent?

Dean Baker, the co-founder of the left-leaning Center for Economic and Policy Research, agrees. To build an even recovery across the country, that aid was necessary. 

Still, he said, while the stimulus has had a positive effect on the economy, it came as the pandemic drove people to buy products rather than services. Those purchases of couches, cars, refrigerators and other items came as the country's supply chain remained beleaguered, which drove up demand.  

“I see it as secondary,” he said, “but there’s no doubt it was a factor in driving inflation.”

There remains about $300 billion from the act that is destined to go to states. Experts argue that the Biden administration overheated the economy and ignored signs it was bouncing back. 

“Fiscal policy has been extraordinarily aggressive, and the main example was the American Rescue Plan that was enacted last March, which shot a $1.9 trillion bazooka into a $420 billion output gap,” said Brian Riedl, a senior fellow at the Manhattan Institute and a former chief economist for Sen. Rob Portman, R-Ohio. 

It appears February’s inflation numbers of 7.5 percent have changed the dimensions of that conversation, particularly after Manchin — a pivotal vote in the Senate to pass any Democratic package — said so-called “inflation taxes” were “draining the hard-earned wages of every American.

“It’s beyond time for the Federal Reserve to tackle this issue head on, and Congress and the administration must proceed with caution before adding more fuel to an economy already on fire,” Manchin said after the most recent inflation numbers were released. “As inflation and our $30 trillion in national debt continue to climb, only in Washington, D.C., do people seem to think that spending trillions more of taxpayers’ money will cure our problems, let alone inflation.”

The Federal Reserve, meanwhile, has signaled its intent to raise interest rates to address inflation. That would likely help tamp down consumer spending on large purchases and further aid in cooling down the economic situation.

Just stating its intention, Riedl said, will begin to help. It remains to be seen, however, how high the central bank will raise interest rates.

"They need to be careful because we're still pretty weak coming out of a recession and the economy could pretty easily be pushed back downward," he said.

"Additionally, raising interest rates doesn't fix the supply chain. Until we get that resolved, we're not going to be able to fully solve inflation."

People who use old theory were proven wrong, Ive been saying on this very site that inflation is not correlated to the increase in asset prices which do not flow through to the consumer, but that does not mean it ISNT inflation. It is a non-consumer focused inflation. Inflation is not only consumer based.

I warned you about personal attacks...if you cant debate without making it personal then please dont debate/discuss.

What would be groovy is if you would read them and learn from them.  These are leading guys that are pretty succinct and I have known for years.  

It is not worth going back and forth with someone that is not well-informed or is set on what they have in their mind.  

You must first learn what the FED uses.  You did not seem to realize the gas and food are not what they really use to determine. 

You do not seem to realize what caused this sudden inflation spike.  It was not policies that were built up over 10 years ago.  

These simple things I could have pointed out.  But, then it is just my word. 

So, I therefore, support my stance and words from experts in the field.