2) The idea that 2-3% inflation is "really really serious" is completely absurd. I'm guessing you're young because historical US inflation prior to the ridiculous post-2009 financial situation had long periods of being well above 3% and the sky didn't fall. Inflation above what we've seen in the last decade is not necessarily a bad thing.
>The Fed considers a 2% inflation rate to be a sign of sustainable growth and a level that keeps interest rates high enough to allow for mobility in the event of an economic downturn.
For the first time in a very long time we actually have a shortage of supply. We didn't have that in 2009.
But I think/hope it will be short lived, and depending on how we act now it could easily turn into a shortage of demand once again.
If stuff doesn't get manufactured for months, we will have a shortage of many other things as well. Obviously we have a lack of demand for other things at the same time.
I don't think there is that much unreasonable stockpiling. People are no longer eating out. Kids are no longer eating at school. So people buy more at supermarkets. They also buy for a week, quite sensibly, to avoid making a trip to a crowded supermarket every day.
Combine that with finely tuned just in time logistics and you get a bit of a crunch. There's simply a misalignment of capacity right now, but there could be a real shortage of some essentials soon.
Fairly few households are interested in buying canned tomatoes 18 quarts at a time.
Gyms are closed, so go try to find a squat rack, a bar, and some bumper plates for a home gym. Or dumbbells. Or even some crappy resistance bands. You can't. Nobody is hoarding 45lb plates for future use, they're demanding them for use now. Expand this for every industry impacted by shutdown orders. It wouldn't take long to think of hundreds of examples of non-hoarding shortages.
Inflation is coming. Shortages are the market telling you that price MUST increase to equalize demand. And it will.
True, but misleading; again, it's real rather than nominal rates that matter to most people. Before the GFC you could get interest on savings above the rate of inflation, even after tax. Not spectacular gains, but saving was at least possible.
After the GFC your choices are to either a) join the long queue of ever-greater fools piling into the casino, or b) watch central banks confiscate your money, year after year, forever.
Americans don't need to buy their 6th iPhone to save this economy, we just need to focus on what's important. It's very telling of the state of current US politics that when a crisis emerges, everyone says we have to help rich corporations stay rich.
If aliens invaded us today our first reaction would be to lower interest rates.
We are going to have deflation. The stock market already "deflated". Just wait for the rest. Food prices are going to go through the roof (and maybe medical procedures) but everything else is going to get cheaper.
Another big chunk is housing, which as far as I know, shouldn't expect much difference in supply or demand in the short term, though demand may increase (at least as measured by square footage) if people are staying home for a long enough time. That may be countered by the reduction in demand for real estate by businesses, though zoning will probably limit the short term effects that has on housing.
Really serious inflation is when prices in supermarket change twice a day like in Brasil in the old times. It is Weimar style hyperinflation where everyone want to get rid of paper money right away.
Inflation of 2-3% is actually desirable - it is a sign of healthy, growing economy. Additionaly it is good for public finances as most expenditures is fixed and tax recipes are over the target. Yes it is a kind of tax on people but in healthy economy who cares?
Most central banks and banks in general (also insurers) dread deflation not small inflation.
Why 2-3% and not 5-7% or -1-1%? Source for this assertion?
For those who have yet to have the enjoyment of the experience: https://brrr.money/
I've seen it used in other contexts but can't quite fully grasp what is meant by it.
https://www.nytimes.com/2020/03/23/upshot/coronavirus-fed-ex... (The Fed’s Message: The Money-Printing Presses Are Fired Up and Ready to Go)
Like like after the 2008 crisis that didn't lead to inflation, this won't either, as long at they turn off the money printer when people start investing again.
It doesn't sound like much because we've become innured to it. But, it's really bad. Just think, you earned 100K in 1 year and 1 year later it's only worth 97K. That's a tax of 3K just for holding on to your money, on top of all the taxes that already exist (Govt spending is 40% of GDP ~ and that's just nationwide.)
After just 20 years of 3% inflation, your money is worth half of what it was when you earned it. What's the point of government if they can't even provide a stable currency? Is the expectation that everyone must now buy equities and real estate? Are we to go back to bartering?