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Old 13th April 2022, 06:59 AM   #81
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The definition of M1 changed in May 2020 to include savings accounts. Since 2020 M2 has risen by about a third. That's a lot, but nothing like the number from the redefinition of M1.
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Old 14th April 2022, 06:54 AM   #82
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Originally Posted by Startz View Post
The definition of M1 changed in May 2020 to include savings accounts. Since 2020 M2 has risen by about a third. That's a lot, but nothing like the number from the redefinition of M1.
Thanks, I missed that. It looks like M1 probably isn't a good indicator for what I was trying to show.
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Old 14th April 2022, 01:13 PM   #83
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Ohmigod, people are talking about M1 again? I can remember when it was the hot topic of conversation around 1982-1983.
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Old 14th April 2022, 05:52 PM   #84
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A change in definition creating a dramatic jump on a graph tends to get discussion going.
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Old 14th April 2022, 05:57 PM   #85
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I filled my car today, as it was down to 3 litres. 52l cost $145.

That's 40% more than only months ago, and includes a $0.25 c/l deduction by the government cutting tax.
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Old 15th April 2022, 06:55 AM   #86
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Originally Posted by Brainster View Post
Ohmigod, people are talking about M1 again? I can remember when it was the hot topic of conversation around 1982-1983.

Milton Freedman:

Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output. ...

Supply chain issues or other production issues can't produce inflation on their own, they just limit production. Inflation happens when money supplies increase and there is more money chasing a limited supply of goods.
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Old 15th April 2022, 01:02 PM   #87
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Originally Posted by lomiller View Post
Milton Freedman:

Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output. ...
Milton certainly said that. And it is certainly true in hyperinflations and in some long-run sense true more generally. But the connection is not so simple. Here's a graph of annual inflation and M2 growth.


The correlation in the monthly data is -0.05.
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Old 15th April 2022, 01:38 PM   #88
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Cross correlation would be more appropriate there is a delay between monetary changes and inflation. Even then, what you see may not really be indicative as inflation isn't really changing much because the Fed is actively targeting 2%, so changes in inflation over this period are going to be dominated by noise.
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Old 15th April 2022, 04:19 PM   #89
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Originally Posted by Startz View Post
Milton certainly said that. And it is certainly true in hyperinflations and in some long-run sense true more generally. But the connection is not so simple. Here's a graph of annual inflation and M2 growth.
https://www.econ.ucsb.edu/~startz/in...and growth.png

The correlation in the monthly data is -0.05.
Is M2 inclusive of M1? It looks like it isn't because I see the drop in M2 that corresponds with the rise in M1 due to reclassification.

So I feel like this would be more indicative if it was changed to a combined M1+M2 chart.
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Old 15th April 2022, 06:26 PM   #90
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Originally Posted by gnome View Post
Is M2 inclusive of M1? It looks like it isn't because I see the drop in M2 that corresponds with the rise in M1 due to reclassification.

So I feel like this would be more indicative if it was changed to a combined M1+M2 chart.
M2 does include M1.
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Old 15th April 2022, 06:30 PM   #91
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Originally Posted by lomiller View Post
Cross correlation would be more appropriate there is a delay between monetary changes and inflation. Even then, what you see may not really be indicative as inflation isn't really changing much because the Fed is actively targeting 2%, so changes in inflation over this period are going to be dominated by noise.
I completely agree that a cross-correlation, or some kind of dynamic model, is more appropriate. As Milton used to say "long and variable lags."

I don't understand the argument about the Fed actively targeting 2%. I agree that's pretty much what they did, but if that breaks down the relation between money growth and inflation then it's pretty much saying that inflation is not due simply to money growth.
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Old 15th April 2022, 06:35 PM   #92
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Originally Posted by Startz View Post
M2 does include M1.
Ohh, it's a growth and not a quantity chart.
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Old 16th April 2022, 12:38 AM   #93
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Originally Posted by lomiller View Post
Milton Freedman:

Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output. ...

Supply chain issues or other production issues can't produce inflation on their own, they just limit production. Inflation happens when money supplies increase and there is more money chasing a limited supply of goods.
If you want to blame it on Trump, go ahead, but there is a rather obvious reason for the insane bump in M1 in April 2020, and actually I do agree that the giveaway was excessive and inflationary.
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Old 17th April 2022, 12:21 AM   #94
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Originally Posted by Brainster View Post
If you want to blame it on Trump, go ahead, but there is a rather obvious reason for the insane bump in M1 in April 2020, and actually I do agree that the giveaway was excessive and inflationary.
I think you missed it earlier, that the "Insane bump" was a reclassification, not an actual change in supply.
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Old 18th April 2022, 05:09 AM   #95
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Originally Posted by JoeMorgue View Post
Yes the 1,200 dollars poor people got to survive is obviously the problem.
The kneejerk assumption that inflation this time is caused by a glut of money (which is often the case) is searching for evidence to reach this conclusion.

It seems much more likely to me that there is simply a shortage of stuff, raw materials and finished goods of all sorts, because of the massive disruptions of the global supply chain caused by covid and further exasperated (to a lesser extent) by the current war in Ukraine.

I doubt there's any way to polish this turd of a situation. There simply isn't enough stuff to meet demand, so prices rise. We're probably going to be in this situation until covid is finally gone, plus for a bit after, so supply lines can re-establish themselves.

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Old 30th April 2022, 03:49 PM   #96
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Look on the bright side - 70% of mortgagees are still up to date with payments: https://www.stuff.co.nz/business/128...ise-in-arrears
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Old 30th April 2022, 05:34 PM   #97
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Not that it matters...but the article is pretty clear it's not about mortgages. It's unsecured personal loans.

(Still a pretty big change.)
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Old 30th April 2022, 05:42 PM   #98
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Originally Posted by Startz View Post
Not that it matters...but the article is pretty clear it's not about mortgages. It's unsecured personal loans.

(Still a pretty big change.)
So it is!

That'll teach me not to read the article and just look at the headline!

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Old 1st May 2022, 01:57 PM   #99
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It's silly not to recognize a lot of money was pumped into the country during the COVID restrictions. So inflation following is a no brainer.

What irks me are people (latest poll somewhere) who think the Republicans can manage inflation better. That's bull ****. Sure, they can block some spending on things we all need like fixing the bridges and forgiving student loans. That's a drop in the bucket compared to the money both parties pump into the bottomless pit that is military spending.
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Old 3rd May 2022, 01:48 PM   #100
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Originally Posted by Skeptic Ginger View Post
It's silly not to recognize a lot of money was pumped into the country during the COVID restrictions. So inflation following is a no brainer.
Nope.

As much or more money has been being pumped in since the GFC and inflation didn't move, and this bout of inflation is more about covid than monetary easing.

The inflationary aspect of QE has been hidden in real estate and shares, neither of which count towards inflation.

Originally Posted by Skeptic Ginger View Post
That's a drop in the bucket compared to the money both parties pump into the bottomless pit that is military spending.
And that's only going to grow thanks to Mr V Putin.
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Old 13th May 2022, 01:35 AM   #101
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China's zero covid approach is having supply chain effects in Japan:

Toyota to halt 12 plants in Japan due to Shanghai COVID lockdown

Quote:
Toyota Motor Corp. plans to pause production at more of its plants in Japan as it struggles to procure parts from China because of the prolonged COVID-19 lockdown in Shanghai.

. . .

China's zero-tolerance COVID-19 policy has hurt companies operating there. Toyota's Tianjin plant temporarily suspended its operations in January. Its Changchun plant was also forced to close for about a month and a half from mid-March.

The strict COVID-19 lockdown in Shanghai is affecting other major auto companies as well.
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Old 9th July 2022, 05:46 AM   #102
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Even Japan is fighting inflation now
Quote:
By US standards, Japan’s inflation rate in May might feel paltry. Year on year, the consumer price index rose 2.5%, compared to a heated 8.6% in the US that same month.
Luckily, not too huge a problem here, but the yen is quite weak right now.

Strong support validates Kishida's world-defying inflation policy ahead of vote

Quote:
As politicians around the globe rush to tamp down inflation, Prime Minister Fumio Kishida is betting instead that older voters in particular will look past surging prices in a crucial election on Sunday.

Kishida has endorsed the Bank of Japan’s unorthodox stance of keeping borrowing costs at rock-bottom levels even as inflation heats up, and the yen has slid to a 24-year low. During the campaign for the Upper House election, Kishida has made the case that higher interest rates would hurt mom-and-pop shops and homeowners even more.
There's also some talk about the election tomorrow, but you'll have to follow the link if you want to read about that. Basically, it looks like good news for the LDP.

The BoJ is for now maintaining low interest rates and continuing to buy up JGBs. The yen is getting weaker, but that should help Japanese exports, so I think the net effect is probably OK for the economy. We'll see. Depends how long this war in Ukraine lasts.
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Old 9th July 2022, 09:51 PM   #103
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if this was a real inflation, company profit margins wouldn't be so high.
This is a case of price gouging.
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Old 11th July 2022, 04:46 PM   #104
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Originally Posted by The Great Zaganza View Post
if this was a real inflation, company profit margins wouldn't be so high.
This is a case of price gouging.
Keynes once spoke on that. He believed that profiteering was an easy target for public outrage, but that it was more a consequence of inflation than a cause. Could he have a point?
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Old 11th July 2022, 10:23 PM   #105
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Originally Posted by The Great Zaganza View Post
if this was a real inflation, company profit margins wouldn't be so high.
This is a case of price gouging.
United States Corporate Profits
Quote:
Corporate profits in the United States fell 4.9 percent to USD 2.40 trillion in the first quarter of 2022, following a 0.2 percent gain in the previous period and compared with preliminary estimates of a 4.3 percent drop. Net cash flow with inventory valuation adjustment, the internal funds available to corporations for investment, fell 2.2 percent to USD 3.16 trillion, while net dividends rose 0.8 percent to USD 1.48 trillion. Meanwhile, undistributed profits slumped 12.8 percent to USD 0.93 trillion...

Corporate Profits in the United States is expected to be 2400.00 USD Billion by the end of this quarter, according to Trading Economics global macro models and analysts expectations. In the long-term, the United States Corporate Profits is projected to trend around 2070.00 USD Billion in 2023, according to our econometric models.
Does that make you feel better?

For reference: in 2019 it was ~2.1 trillion, while the peak in late 2021 was ~2.5 trillion. Not a huge difference, especially when looking at profit margins:-

The General Public Thinks the Average Company Makes a 36% Profit Margin, Which Is About 5X Too High
Quote:
When a random sample of American adults were asked the question “Just a rough guess, what percent profit on each dollar of sales do you think the average company makes after taxes?” for the Reason-Rupe poll in May 2013, the average response was 36%...

How do the public’s estimates of corporate profit margins compare to reality? Not surprisingly they are off by a huge margin. According to this NYU Stern database for more than 7,000 US companies (updated in January 2018) in many different industries, the average profit margin is 7.9% for all companies and 6.9% for more than 6,000 companies excluding financials... more than 72% of industry profit margins were single-digits and the median industry profit margin is 6%....

For the general retail sector, the average profit margin is only 2.3% and for the grocery and food retail industry, it’s even lower at only 1.6%...

Interestingly, for nearly 100 industries analyzed by NYU Stern, there’s only one industry that had a profit margin as high as 36%... tobacco at 43.3%.

So if you don't want to be 'price gouged', give up smoking. But most of the stuff you buy is already about as cheap as it can realistically be.
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Old 11th July 2022, 10:37 PM   #106
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The profit margin on tobacco products is probably dwarfed by tax component in the retail price though.

ETA: I also wonder whether that profit margin also accounts for the costs of the Tobacco Master Settlement Agreement?

https://en.wikipedia.org/wiki/Tobacc...ment_Agreement

Quote:
The states settled their Medicaid lawsuits against the tobacco industry for recovery of their tobacco-related health-care costs.[1]: 25  In exchange, the companies agreed to curtail or cease certain tobacco marketing practices, as well as to pay, in perpetuity, various annual payments to the states to compensate them for some of the medical costs of caring for persons with smoking-related illnesses. The money also funds a new anti-smoking advocacy group, called the Truth Initiative, that is responsible for such campaigns as Truth and maintains a public archive of documents resulting from the cases.

The settlement also dissolved the tobacco industry groups Tobacco Institute, the Center for Indoor Air Research, and the Council for Tobacco Research. In the MSA, the original participating manufacturers (OPM) agreed to pay a minimum of $206 billion over the first 25 years of the agreement.
Since this is an unusual arrangement, it's conceivable that the profit margins would be lower after you subtract these payments.

Interestingly, the original 25-year period will expire next year.
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Old 11th July 2022, 11:03 PM   #107
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I think the confusion comes from the assumption that I meant that all companies that have increased prices are price gouging, or that this is something that only started recently.

What I meant was that companies critical to the supply chain and energy production are price gouging, which forces companies depended on them to raise prices, too.
The shipping industry is a near monopoly, and the oil market is a cabal.

Most companies can take a hit if a few critical ones are profiteering, which makes this an inflation caused by Market Failure, not by underlying economic conditions.
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Old 9th August 2022, 07:43 AM   #108
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I thought I could come here and learn why do I have the same amount of money, but I can buy less, instead my head hurts.
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Old 9th August 2022, 06:50 PM   #109
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Originally Posted by johny76239 View Post
I thought I could come here and learn why do I have the same amount of money, but I can buy less, instead my head hurts.
Prices are higher. Now you can stop taking pain killers.
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