inflation for november is out. 3.1%. a tick down from October.
looks like inflation is under control. for now.
Allan
The fed to the surprise of many has largely achieved its objectives of slowing down but not crashing the economy.
Inflation has also been tamed without having to raise rates at the degree they did back in the 80’s.
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I have.
I am more like a trader than an investor and I never stay in one position, (long or short) very long.
Here is a two-year picture of what your Axios Op-Ed describes in excited glowing bullish terms
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.
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I always say “When in doubt zoom out,” so, here is the big picture:
In case you are wondering, the answer is “No. I don’t blame Joe Biden (much.)”
This article from CNN
describes today’s GDP and CPI reports.
It uses the word “stagflation” four times.
https://www.cnn.com/2024/04/25/markets/wall-street-reaction-gdp-report/index.html
My instinct says “just one quarter does not count,”
but maybe the World Bank prediction was right after all.
snip
snip
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Speaking of Stagflation:
Despite low unemployment and reasonably strong growth in 2023, the federal government has continued to deficit spend as though the U.S. is in the depths of a massive recession. That spending, and the tranches of debt issuance that accompany it, crowds out private economic activity. It dries up private access to capital and increases pressure on interest rates, which pushes up borrowing costs for businesses looking to build and expand and for individuals looking to buy cars and homes.
It also adds inflationary pressure to the economy, which the Fed is supposed to counteract with higher interest rates. Fiscal policy continues to work against monetary policy. The money supply as measured by M2 began to decline in April 2022 as the Fed tightened. It has since flattened out. The long and variable lags of monetary policy might mean that the decline in economic performance one would expect from such a decline in the money supply is finally starting.
Here’s more on this potential stagflation:
“It’s not so much that we risk stagflation as we’re already there,” E.J. Antoni, a research fellow at the Heritage Foundation’s Grover M. Hermann Center for the Federal Budget, told the DCNF. “We have basically pulled forward trillions of dollars of economic growth by borrowing from the future, but that must be repaid at some point. And it is highly inefficient as well.”
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consensus prediction for 2q2024 is 1.5% growth in GDP.
what happens in slow growth economy?
Allan
Typically in a slow growth economy inflation is low.
I think this chart bears repeating:
- The US has never, for a prolonged period held more than 60% of GDP in the form of cash and cash equivalents (M2)
- It is not likely to do so now,
- It is a reasonable hypothesis that as today’s “excess cash” comes off the sidelines, it will go into things like, consumer demand, business expansion, and investment/speculation.
- How much inflation and how much GDP growth that causes depends on the (inverse) elasticity of what they buy.
economy keeps chugging along.
2.8% in 2q2024. 1.4% in 1q2024 (revised downwards)
no recession on the horizon.
@gaius what is your take on the GDP surprise?
Allan
Except I just watched the stock market meltdown like it hasn’t in years, due to disappointing quarterly earnings. And that was just yesterday.
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my company (att) had a good earnings report i am glad to say.
keep on buying those IPhones, people.
Allan
Better hope this doesn’t catch on at ATT. 
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Same as it has been.
Measuring the GDP is measuring consumption.
The raw GDP number does not distinguish between
a.) a farmer consumes corn that he grows
b.) a farmer consumes the seed corn he needs for next year
c.) a farmer consumes corn from an emergency truck sent earlier by UNICEF.
You and I both know these are three very different scenarios,
but GDP does not distinguish between them. We are in scenario “c.” right now.
but how long can this continue? indefinitely?
personal spending up again.
wont people run out of money and cease to buy?
Allan
Historically the US has never kept more than 60% of its annual income in the form of cash, bank balances etc. (aka M2). Currently, M2 is 75.4% of income and dropping.
During the COVID-bailout madness, the Fed made the big mistake of paying for all of the President/Congress plans by printing money. That money is still sitting in cash, bank balances, etc. At the current rate (NOTE: the Fed can easily change the rate) we will burn through that excess cash and return to the 60% (ceiling) approx. late 2027.
Meanwhile,
- If that cash goes into real estate, real estate will rise.
- If it goes into stocks, stocks will rise.
- If it goes into “stuff counted as GDP,” GDP will rise
- If it goes into crypto, crypto will rise etc..
balloons and flying carpets…
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To your questions
No not indefinitely. At the current rate (which can change)it will last until late 2027.
Yes personal spending is up again. Yes, because we are in scenario 3 and noting scenario 1, people will run out of money and cease to buy.
Now that you know that what would a good gov’t response be?
so the next POTUS will be facing some major economic problems 3 years hence.
Allan
As long as we keep pushing 2 trillion dollar deficits every year GDP doesn’t mean all that much.
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According to Fed Chair Powell the fiscal path we are on is unsustainable: