Grey
1.7K posts
@yieldsearcher 2.5-3% growth is why we call it the stagflationary era?
You must be thinking of nominal. The 2.5-3% is real
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@pseudostokastic Real GDP avg’ed at 2.5-3.0% during the 70s. You must be looking at the nominal thanks to the inflation.
There is a reason we call that stagflationary era, not a super growth era.
Thanks for your attention to this matter.
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Check how high growth was in the 70s before you post lmfao
Mr. VIX@yieldsearcher
Why the 1970s oil shocks were stagflationary? Nominal wages rose 6-9% even with high UR (6-8%) during the era. Strong unions and COLA kept wages tracking inflation, creating a vicious cycle. We do not have that kind of labor market today. Wage growth is lowest since COVID.
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The market is begging for higher rates. If the Fed accommodates the market, it is giving in to the pressure to accelerate.
Low rates will lower credit availability by reducing the total risk budget in the system
Matthew C. Klein@M_C_Klein
New at THE OVERSHOOT: The Fed is Misreading the Inflation Risks theovershoot.co/p/the-fed-is-m… Inflation was getting worse *before the war* across a broad range of categories. Yet Fed officials are still blaming "one-time things".
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@kingofthecoastt The Fed does not acknowledge any situation where higher rates can ease access to credit
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@pseudostokastic Make it harder (easier) to borrow = less (more) inflation seems about right
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Every person I know who supports nominal wage targeting (as an alternative to inflation targeting) also believes that “nominal wages not moving around enough” is the source of the business cycle.
I.e. The prescription is to stabilize something that doesn’t move a lot?
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The only way this is possible is if you get asset-accommodation
Ie more assets, or higher velocity (longer ie more assets, or higher velocity (longer collateralization chains)) to support higher prices
Tommaso Monacelli@monacelt
➡️True: inflation effect of oil price shocks is today smaller than in the past. ➡️Yet even today, with high supply chain uncertainty and disruption, oil shocks can have large and persistent effect on general inflation.
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@M_C_Klein @TheStalwart But no one questions whether the stability of expectations even matters
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@TheStalwart explicit expectations have remained stable at ~2%...implicit expectations embedded in wage growth etc have also remained stable over the past few years, at around 3% (apparently)
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The problem with dismissing all the shocks as "one-time things" is that they all have the same directional impact on inflation and underlying inflation was already running around 3%, which means that in practice you will never hit a 2% target with that attitude.
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@tylermacro10 At this point I think rates are headed higher. But why are you so confident they will slow the economy
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Hike rates already and end this charade
Wasteland Capital@ecommerceshares
$MU Largest beat & raise of all time. +196% revenue growth at an insane 69% EBIT margin. Never, ever been done at this scale. 3Q revenue guide of $33.5bn midpoint vs $23.3bn consensus. WTF??? Absolute bananas numbers. Unprecedented. Even the Memory Whisperer has to gasp.
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Grey retweetledi
It seems Powell confirmed the Kaldor-Verdoorn Law. The recent productivity boom was a result of a tight labor market, although he seems to assert that there will be long-term gains from AI that will contribute to future growth. This is very doubtful, as wages have been weakening.
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If oil goes up and other prices do not go down. There can only be one explanation.
That income to asset ratios have increased. This is the endogenous borrowing rate set by the market, and we know it has moved up.
Matthew C. Klein@M_C_Klein
Someone needs to ask about what happens if sustained high oil prices leads to *higher investment and hiring*
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Powell missing the point that yes there are more supply shocks, but not anywhere near government debt levels and fiscal deficits where they are.
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Grey retweetledi
Over the last 4 weeks the seaborne global trade was :
1/ Short a million barrel day of light ends, gasoline mainly
2/ Short a million barrel day of middle distillates, that is gasoil & jet fuel/kerozene
3/ Short 3 million barrel day of crude/condensate
The issue is entirely coming from the supply side.
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Fed has no mechanical lever to economic flows.
Fed can shift NPV of asset stocks, and can also guide credit creation. But no mechanical lever unlike fiscal
Danny Dayan@DannyDayan5
Powell said this two years ago. He will soon leave the Fed with the biggest stagflation shock in 40 years.
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I think whether you agree or disagree with central bankers is less important then understanding how central bankers think
nber.org/papers/w34200
Happy FOMC meeting day everyone!
tylermcclellan@tylermacro10
You guys do know the Taylor principle—the justification for lowering rates as inflation fell in order to keep real rates from rising—also works in reverse?
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@tylermacro10 If all prices remain higher for the same number of assets in circulation, it means that something else had to change
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Can the #deflationists please explain their world view?
Asking for a friend
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