The US could see inflation drop like a rock without hitting a recession, Bank of America says

This could be a tragedy for Republican political ambitions.

https://finance.yahoo.com/news/us-could-see-inflation-drop-002359113.html

 

Depends on your definition of inflation. What they say makes sense for positive news about prices although "drop like a rock" is nonsense. The major problem is the loss in the value of the U.S. dollar caused by government spending money it didn't have to spend. That, unfortunately, is permanent as it has been for the past 80 years or so. That is the real inflation.

 

There may be an interesting analogy between the location of the CG in a conventional airplane [think Piper Cub,] and the Fed insistence on a 2% inflation/devaluation [they're essentially the same thing,] rate. In both cases, it provides the necessary conditions for control of up and down to be effective. A plane with the CG behind the CL is unstable.

Regards, stay safe 'n well.

 

Well, how could this NOT be good news for every American as well as the world economy.....

 

The 2% is nothing more than a fear of actually deflating the money supply making the debt repayment more expensive. Unfortunately they use that 2% and more all the time. If they hit it then they think they can inflate the money supply and nobody will notice. Most people don't notice. It is a con. All they need to do is live within their means like the rest of us have to do.

 

Hi, fmw.

It's been said that economics is a subject in which the questions are the same from year to year but the answers change.

Given what our sociologists and economists tell us, a slow inflation/devaluation level is much to be preferred in terms of the disruption it causes the business world -- and hence the society -- than deflation.

Regards, stay safe 'n well.

 

Economics is a social "science." That means it is a study of human behavior and human behavior is anything but consistent. It is hard to get economists to agree on much beyond the "law" of supply and demand. Of course that means that the answers are opinions and opinions are what you want to make of them. I tend to ignore what economists say and choose my own analysis of human behavior. Like economists sometimes I'm right and sometimes I'm wrong.

 

We seem to be doing better in terms of both growth and inflation than most similar countries. I don't typically credit or blame Presidents for the economy, but it will take some of the wind out of the Trump-supporter sails. Actually, I take that back. I have yet to debate a Trump supporter about economics who is actually willing to look at economic metrics. They will believe what they are told by Trump to believe.

 

It is calculated on year over year basis. Last year it was an inflation peak at this time that is why it dropped significcantly this year.
Next month numbers will not be that great.

 

Economic "metrics" are generally opinion because they are developed with a purpose in mind. Nevertheless I don't argue what you said. Presidents can't affect the economy positively because they don't drive the economy. Congress can hurt the economy but it can't fix a bad one. The economy is better now than it was last year. The reason is the end of covid and the spending of money not spent during the outbreak. Government hurt the economy by shutting down businesses or causing them to shut themselves down in 2020 and 2021. When they stopped doing it the economy declined then began recovery through 2022. Now it is rebounding from the covid mess. It has nothing to do with Biden or Trump or any other president. Only the economy itself can improve a bad economy. Business and consumers drive the economy, not government.

The economy under Trump wasn't caused by him. It was the private sector opening up investment because the anti-business attitude of the former administration was replaced. The economy had very slow growth during Obama's tenure and it heated up when he was gone. The economy manages itself. It has always been that way and always will be as long as we practice capitalism.

 

Metrics are metrics. We've used the same basic metrics for decades, regardless of the political party in power, and the math works the same way. But at least we agree that the President has little to do with the economy, whether crediting or blaming them.

 

The US dollar has lost it's value using what metric?

Gold to USD is about the same as it was 3 years ago.

USD to Euro is about the same as it was 3 years ago.

USD to a barrel of oil is the same as it was about 15 years ago.

How do you decide that the USD has lost value?

 

When I was a youngster a gallon gasoline was 25 cents. A loaf of bread was 10 cents. A mass manufacured new car was between $1500 and $3000. A new house was arount $20,000 to $40,000. The dollar has lost more than 90% of its value over my lifetime. It was all caused by government spending money it didn't have to spend. We aren't talking about the Euro or the price of crude oil or even the price of gold. We are talking about the value of the currency itself.

 

What was income at that same time?

 

We agree for the most part. My opinion is that government statistics are flawed and inaccurate. I can't explain that because I have never developed those statistics myself. It is a basic distrust of government on my part.

 

That isn't the point. incomes have to increase to meet the lower value of the dollar. It is called the wage/price spiral by economists. It has nothing to do with the devaluation of the dollar. It is a symptom of it.

 

yea, how do you measure the value of a currency? You have to have some sort of baseline.

You are talking about the cost of final goods. Much more than the value of a currency goes into the price of goods. It's not like there is some other currency out there where things cost the same today as they did 50 years ago.

 

I gave you a measure. It takes 10 times the number of dollars to buy today what you bought mid century. It isn't a loss of value in the products. It is a loss in value of the currency. It is plain old common sense. Just give it some thought.

 

Is it actually a problem, though? It is a vital part of what fuels economic growth. The only way you get hurt by inflation over the long run is if you hide cash under your mattress (i.e. fail to invest it and earn some kind of return).

 

you hope

 

If we could get back down to a 2% inflation rate without a recession that would be a remarkable achievement. I'm not aware of a historical example of that however.

 

Thanks Mr Economist. LOL. You think devaluing the currency fuels economic growth. Well it does fuel growth in government so you did get close to the truth.

 

The US has seen mighty economic growth and a corresponding growth in personal wealth and standard of living over those 80 years, and inflation has been a key part of it. Economists could certainly explain it to you better than I could, though.

 

Sorry, mighty is hyperbole. Economic growth is measured in dollars and dollars are worth less than 10% of what they were 80 years ago. So that is why the numbers are bigger. Cheaper dollars, bigger numbers. Inflation does nothing positive for the economy. It does serious harm to some people. It is wondrously positive for government, however. If you like government growth then you can celebrate. in the meantime, give some thought to your economic theories. They are unrealistic.

 

Who cares if the dollar is worth less now than it was 80 years ago when we earn and hold more dollars? It's all relative. Materially, we are much better off now than we were 80 years ago, and as I have stated repeatedly, inflation is a major part of what makes stable economic growth possible. It is an unavoidable reality, in fact. You will not find one example of an economy that grew and thrived without monetary inflation, in fact. You need an expanding money supply to support growth and to help ensure liquidity and avoid hoarding of money. It's hard to have growth if everyone sits on their cash instead of spending it, for instance.