(11-12-2021 06:43 AM)miko33 Wrote: In what world is having a concern over deflation the same as actually seeing deflation in the numbers? You cannot equate these 2 as being equivalent. Yes, there was a concern that we MIGHT slip into a period of deflation and therefore had a lax monetary policy with ultra low interest rates. That said, the YOY inflation numbers were still between 1% - 2%. The YOY inflation goal is around 2% - 2.5%. Deflation never actually happened and it was staved off with a low interest rate environment WITHOUT major gov't spending levels as proposed by the BBB and the "infrastructure +" bill (with some nastiness not related to infrastructure...).
All of the extreme stimulus spending the Biden admin proposes could do what you suggest IF there was sufficient supply of goods and services but the demand simply isn't there. We are not in that type of environment. We're in an environment where the demand is there, people are willing to spend their money and have been even before Biden's first bailout checks directly to the people. Unfortunately the supply of goods and services are not available in sufficient quantities to meet demand. Why is that? Some of this has to do with supply chain problems with China. Also, the vaccine mandates are causing workers to quit so that domestically we aren't providing the same goods and services (production and logistics). Also - specifically to hydrocarbons - there is zero incentive for oil and gas producers to produce more given the hostile environment the Biden admin has created over the future of most of our energy companies.
Given all of this, the grossly high inflation rates lead us to this conclusion: You do not inflate the money supply when the supply of goods and services have contracted.
I did not see this until now.
Inflation was below 0% for much of 2015. And has been well below the target 2% for well over a decade until this year. It will likely in my view revert back to this once the supply chain issues clear and we get through this oil price cycle. Here is what you're missing:
We're just getting through the worst world supply chain shock since probably WWII. This caused oil prices to effectively go negative last year. First time this has ever happened. This resulted in oil investment to halt. Once investment halts, it takes years for it to rebound, and thus explains why oil is in short supply now. This has a huge influence on inflation.
However, reality is the growing influence of technology on the supply chain is what has resulted in low inflation the past decade despite massive government deficits. Once supply chains clear up, we'll be right back in that environment, even more so since this pandemic has boosted the influence of technology.
I'd like to know what color the sky is in your world where simply catching up with the rest of the industrial world in infrastructure and government services (as provided in the infrastructure and BBB bills) is considered "extreme stimulus spending"?
If you're so worried about the deficit, then explain to me where Bush and Trump paid for their tax cut bills or unnecessary wars in Iraq and Afghanistan? Once you can explain that, then you MIGHT be able to complain about spending bills that simply catches us up with the rest of the world. But that complaining is only valid to the extent that it is "paid for" through a shell game that falls back on reversing unpaid for tax cuts from Republican administrations.
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