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EnricoPallazzo on 08 November 2024
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sc94597 said:
EnricoPallazzo said:

I have the "benefit" of participating in discussions in both fields, which allows me to have some kind of insight on what both sides think. My ignorant and non scientific view would be:

1) Inflation, Inflation, Inflation. I won't go into specifics as it would require a book instead of a post, but people cannot correlate the increase in GDP and low unemployment with the absurd loss of purchase power the average Joe suffered. A lot of economic growth has come from huge government spending and debt (since Obama 2 but it got much worse under Trump 1 and Biden) which creates inflation. Due to several factors, this does not necessarily reflects on the official government numbers, so Joe Doe looks at "official" inflation rates of 3% but his rent, food, gas, mortgage, everything is WAY more expensive than a few years ago, when Trump was in power. Saying "we have the strongest economy" or "USA GDP is really growing" says nothing to Joe Doe if now he needs to go into credit card debt to pay for everyday stuff.

The inflation of 2021-2024 was caused directly by Covid stimulus. If it was just a matter of the U.S having a more generous stimulus spending during the Obama and pre-Covid Trump periods, then the U.S would be a leader in the pack among developed countries (as most countries took more austere positions after the Great Recession.) But the U.S was about middle of the pack when it came to inflation. 

So yes, increasing the money-supply and injecting it into the economy through stimulus packages is definitely the cause of the 2021-2024 inflation, but what other choice did the U.S government (or any other national government) have? Remember, both Democrats and Republicans voted for the Covid stimulus packages, including the PPP loans, robust unemployment insurance, and the stimulus checks. People were locked down with not much to do, so they went into a spending frenzy. Supply chains couldn't keep up without their former workforce. You were bound to get inflation. But the alternative situation would've been much, much worse. We would've entered a severe recession with unemployment rates in the double-digits and a slow recovery. More people would have died from Covid than those who did. So the inflationary spending was a lesser of two evils, and nobody really was questioning it (other than a few fiscal hawks) in 2020. It's only after Biden was elected that you started to see the rest of conservatives (other than fiscal hawks) start to question it. 

You are 100% correct and I agree with you, but that has been happening for much longer than 2021.

Inflation (as a % of price increase) had been happening long before that but people could not see it through the official number because how the inflation official number is calculated, which does not take into consideration the increase in prices for assets and some other stuff. The money printing machine has been going crazy since 2008 and this is why you see this unnatural increase in stocks and real state. There is where the money ends up going. You know this, but average joe does not. 

The effect just got worse since then, as trump 1 and Biden just went even crazier with spending. Usually it would be the republicans asking for more spending control but even they dont care anymore, it doesnt win votes anymore. Stock market and real state markets do not make sense anymore, and for a long time. But at least the impact was concentrated in these areas.

Then with covid and the stimulus packages and supply chain disruptions shit just hit the fan, because now the money was going straight into average joe pockets, real cash instead of QE, for an economy that just didnt exist for a period. Inflation just exploded all over the world. And I agree with you, the other option would be MUCH worse. In the end all countries in the world except for a few went for the same approach. Monster inflation. Trump elected again.

And he will keep on spending like crazy I am sure. Inflation wont go down. Prices wont go backwards without a recession. Salaries wont magically go up to compensate for it. Average Joe got fucked and there is no going back and in short term. We used inflation to save the economy in 2008 and 2019. It worked. But if fucked most people in different ways and it opened the way for Trump to come back.

Btw I like your analysis, always nice to see a nice discussion