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Purple Nurple said:
Here’s a question I have. How does a softening economy, and a weaker job market, not put a cap on inflation. Look at McDowells. They just rolled out a new value menu in response to lower same store sales in an effort to regain traffic. I think I have an idea here, but I’ll hang up and listen.
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The current economy has nothing to do with the late, great John Amos.
 
Purple Nurple said:
Here’s a question I have. How does a softening economy, and a weaker job market, not put a cap on inflation. Look at McDowells. They just rolled out a new value menu in response to lower same store sales in an effort to regain traffic. I think I have an idea here, but I’ll hang up and listen.
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It probably would. But a softer economy and higher unemployment and less wage growth seems like an incredibly counterproductive way to combat inflation. I'm more than happy if the Pubs want to take that gamble, though.
 
CFordUNC said:


Trump is destroying our ability to afford red meat. Thanks, Trumpers.
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TBF, there are a lot of inflationary pressures on red meat — the tariffs are exacerbating longer term issues.

nycfan

Off-Topic Post in thread 'Return of the Screw Flies'

The screw worms are already a key cause of the skyrocketing beef costs in the USA — we tried to prevent importing infection by prohibiting buying cattle from Mexico and points south, which makes sense. But western ranchers have been under immense drought pressures, forcing them to replace virtually free grazing with costly feed, and the COVID inflation on feed and ultimately worker pay led to culling of herds. Then herds could not be resupplied with a lot of foreign cattle due to the screw worm risk.

Meanwhile, demand for beef continues to rise in the USA, especially as high protein...
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nycfan said:
Compared to 2022, the inflation rate is only a third of that spiked rate, but it does look like we are seeing wholesale impact of the tariffs settling and being factored into pricing (the portion attributable to tariffs is not true inflation from an economic perspective — increases attributable to tariffs are an artificial increase from tax/government policy, not truly inflationary supply/demand pressure, though beef certainly has separate supply/demand inflation issues).
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1. I disagree with your discussion of "true inflation." I say this as someone who has puzzled over the question "what is true inflation" for quite a while, and generally I don't think economists have arrived at a useful definition of inflation -- at least not that I'm aware of; it's possible that advanced papers on monetary policy of which I'm unaware define it well. But I would say the following:

If the central bank dropped interest rates to zero and inflation skyrocketed, would you call that true inflation? It would be a result of monetary policy. Well, if the fiscal authority put a system of sales taxes on goods, that's a result of fiscal policy. Which one is more artificial?

2. Inflation isn't really about supply and demand. The idea is that the dollar becomes less valuable, so it can't be supply demand mismatches on individual items. There's an old theory in which inflation is determined by supply and demand for dollars, but that theory was ripped to shreds by the great "secular stagnation" of the 2010-20 period. Remember the wags predicting hyper inflation from QE and Obama's stimulus? That didn't happen. So supply of dollars is not what determines inflation.

3. As for tariffs: my initial model of the tariffs -- as were most peoples' I think -- was a steep one-time increase in price when the tariffs took effect, with nearly immediate pass-through. Now, maybe my mental model was simply naive; I'm not an expert on prices or price theory, and in much the same way that economists didn't predict the duration of Covid supply chain disruptions, maybe us non-dirty-hands types also don't have good insight into how the prices actually get determined in a situation of exogenous shock.

But I also think that the slow pass-through was the result of the tariff uncertainty. I don't think it's a coincidence that the prices started really rising in July. That's when "the deals" started to be announced -- the deals meaning just tariff levels would stay at Trump's chosen level. In other words, TACO became TUACO (Trump Used to Always Chicken Out), and now producers are starting to treat them as semi-permanent.

4. And the implication from paragraph 3 is that Trump has managed to take a one-time tariff effect and turn it into persistent inflation. That is, the inflation being imposed gradually makes it indistinguishable from other types of inflation -- unlike, say, a one-time pop of 10%. Well, whatever else is responsible for inflation, inflation expectations are definitely a huge factor. And people have to be expecting something like 4-5% inflation now. If the economy wishes it, it will come. And next year, if inflation came in at 4-5% this year, why won't people predict 4-5% for next year? Or 5-6%? Or more. And so it shall come to pass.
 
Purple Nurple said:
I just heard one of the hosts on CNBC say that 80% of this increase was attributable to services (haven’t verified). That wouldn’t seem to be driven by tariffs.
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Which host said that ? Ranger Rick ? Larry Kudlow ?

If a 1% spike in the PPI is not being driven by tariffs, what will the impact be on inflation once the tariffs fully kick in ?
 
Purple Nurple said:
Here’s a question I have. How does a softening economy, and a weaker job market, not put a cap on inflation. Look at McDowells. They just rolled out a new value menu in response to lower same store sales in an effort to regain traffic. I think I have an idea here, but I’ll hang up and listen.
Click to expand...
You're sort of right here. A "cap" isn't the right way to think about it. That's a binary concept. Rather, the overall state of aggregate demand is one factor in determining economic equilibrium -- i.e. an equilibrium that defines prices as well as output.

This is why policy makers used to believe quite rigidly that unemployment and inflation couldn't increase together. If unemployment went up, inflation would go down and vice versa. It was called the Phillips Curve and it was adherence to that curve that led the Fed astray in the 1970s. These days, the Phillips Curve is thought of like Newton's laws: a useful enough approximation so long as you don't look too closely.

In any event, there is something of an inverse relationship between inflation and unemployment, but it's neither hard-and-fast nor inviolable. It is vulnerable to exogenous shocks. Let's go back and think about the oil embargoes of the 1970s. Oil prices go way up. What does that do? Well, it pushes prices up, because most products are directly or indirectly downstream from oil. Now businesses can become insolvent, because the oil costs are being pushed on them faster than they can pass it on. So unemployment rises as a result of that oil price shock. And inflation stays high because oil prices stay high. Bang! Stagflation.

The key point there is the absence of the equilibrating factor. In the case of oil, it would be the oil price itself. As businesses fail, demand for oil should decline and thus would the price of oil fall; in addition, the high price would induce supply and that too would decrease the price. But that's not what happened, because the oil prices weren't high for economic reasons; they were high because some governments were using oil as a political weapon. If demand shrank, they would shrink supply.

And that's the parallel to the tariffs. Tariffs are not like a price increase that could rachet down with collapsing demand. They are politically determined, and as such, aren't affected by weakening demand.
 
Purple Nurple said:
Here’s a question I have. How does a softening economy, and a weaker job market, not put a cap on inflation. Look at McDowells. They just rolled out a new value menu in response to lower same store sales in an effort to regain traffic. I think I have an idea here, but I’ll hang up and listen.
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have you had your questions answered to your satisfaction? I won't claim that everything is 100% true, as there's a lot of uncharted water here and anyway I'm not a professional economic forecaster. But I think my responses to you capture the main trends and factors, at least to the best of my knowledge.
 
superrific said:
You're sort of right here. A "cap" isn't the right way to think about it. That's a binary concept. Rather, the overall state of aggregate demand is one factor in determining economic equilibrium -- i.e. an equilibrium that defines prices as well as output.

This is why policy makers used to believe quite rigidly that unemployment and inflation couldn't increase together. If unemployment went up, inflation would go down and vice versa. It was called the Phillips Curve and it was adherence to that curve that led the Fed astray in the 1970s. These days, the Phillips Curve is thought of like Newton's laws: a useful enough approximation so long as you don't look too closely.

In any event, there is something of an inverse relationship between inflation and unemployment, but it's neither hard-and-fast nor inviolable. It is vulnerable to exogenous shocks. Let's go back and think about the oil embargoes of the 1970s. Oil prices go way up. What does that do? Well, it pushes prices up, because most products are directly or indirectly downstream from oil. Now businesses can become insolvent, because the oil costs are being pushed on them faster than they can pass it on. So unemployment rises as a result of that oil price shock. And inflation stays high because oil prices stay high. Bang! Stagflation.

The key point there is the absence of the equilibrating factor. In the case of oil, it would be the oil price itself. As businesses fail, demand for oil should decline and thus would the price of oil fall; in addition, the high price would induce supply and that too would decrease the price. But that's not what happened, because the oil prices weren't high for economic reasons; they were high because some governments were using oil as a political weapon. If demand shrank, they would shrink supply.

And that's the parallel to the tariffs. Tariffs are not like a price increase that could rachet down with collapsing demand. They are politically determined, and as such, aren't affected by weakening demand.
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I know the rate of tariff is constant, but doesn’t collapsing demand effect the ability to pass the increase along and thus keep prices from rising as much as they would absent the collapsing. I’m relating this to the fed and the decisions they have to make juggling their dual mandate.

I think the consumer was weakling and thus the economy is softening. I think that would be the case whoever the president is. Trumps just thrown a huge wrench in the order of operations.
 
Purple Nurple said:
I know the rate of tariff is constant, but doesn’t collapsing demand effect the ability to pass the increase along and thus keep prices from rising as much as they would absent the collapsing. I’m relating this to the fed and the decisions they have to make juggling their dual mandate.

I think the consumer was weakling and thus the economy is softening. I think that would be the case whoever the president is. Trumps just thrown a huge wrench in the order of operations.
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Would it be the case whoever the president is ?

What if another president had decided to continue the economic recovery from the previous administration ? What if another president had not threatened and implemented tariffs attacking our major trading partners and alienating our allies ? What if another president had not increased the country's anxiety that the stability of our democratic republic was in question ?

Would consumer confidence be sinking ? Would the economy be softening ?
 
BlueSmoke said:
Looking at the swing states, it would appear Nevada is a bit more not happy with the Trump tariffs. Is that because Hispanic voters are catching on, or is it simply a side affect of tourism being down?
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The latter. Trump is killing Nevada right now. If things don’t turn around in the Fall, Nevada will be in recession.
 


“[reading]We’re also fighting the menace of inflation to make life more affordable for American seniors and we’ve ended Biden’s inflation nightmare[/reading]

IMG_8863.jpeg

[riffing] So we had the worst inflation in the history of our country and now our inflation is down to a perfect number, a beautiful dumber, hardly any at all. [considers reason but decides to keep riffing] and yet our country is taking in tens of billions of dollars and Trillions of dollars actually, Trillions of dollars in uh tariffs and you know all about it, it’s uh been amazing they say why are we taking in so much money? Last week they found 29 billion dollars and they couldn’t figure out where it came from? I said check the tariff shelf. And they said how did you know that’s where it came from? [seems to back to reading] We’re taking in billions [riff]and even trillions of dollars in tariffs uh paid by other countries who frankly were taking advantage of us for many many years and they were doing that to us but our people didn’t know it. We didn’t have smart business people.”
 
nycfan said:


“[reading]We’re also fighting the menace of inflation to make life more affordable for American seniors and we’ve ended Biden’s inflation nightmare[/reading]

IMG_8863.jpeg

[riffing] So we had the worst inflation in the history of our country and now our inflation is down to a perfect number, a beautiful dumber, hardly any at all. [considers reason but decides to keep riffing] and yet our country is taking in tens of billions of dollars and Trillions of dollars actually, Trillions of dollars in uh tariffs and you know all about it, it’s uh been amazing they say why are we taking in so much money? Last week they found 29 billion dollars and they couldn’t figure out where it came from? I said check the tariff shelf. And they said how did you know that’s where it came from? [seems to back to reading] We’re taking in billions [riff]and even trillions of dollars in tariffs uh paid by other countries who frankly were taking advantage of us for many many years and they were doing that to us but our people didn’t know it. We didn’t have smart business people.”
Click to expand...

Thank goodness Trump has taken the perfect inflation number down to where it was on election day when inflation was running rampant and destroying the economy...
 
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