On the flip side the costs of many essentials are going up and the fewer people employed at the higher prices will be buying less with their 2021 $15 than they could've with their 2019 $15, but if people are satisfied with simply seeing a higher numerical value on their paycheck so be it.

https://www.wsj.com/articles/consumers-adjust-to-higher-pric...

> 2021 $15 than they could've with their 2019 $15

Still far more than they would have been buying with the $7.25/hr of course.

These wage increases are almost certainly net welfare enhancing due to diminishing marginal utility of the dollar.

Not to mention, the Fed has tools to counter inflation, which they will almost certainly deploy.

Not if Powell refuses to acknowledge inflation is happening, or will be soon. https://www.pbs.org/newshour/economy/chairman-powell-says-fe...

Ah yes, the perennial HN "secret inflation" theory

It's no secret my friend. Look around, prices for pretty much anything you want to purchase are higher. Gas, houses, lumber, CPUs, food, cars.

Unilever: https://www.just-food.com/news/unilever-experiencing-worst-i...

https://www.bloomberg.com/news/articles/2021-05-04/inflation...

https://finance.yahoo.com/news/here-are-17-food-companies-th...

You're not going to convince me about macroscale inflation by linking to price increases by individual firms.

https://fred.stlouisfed.org/series/T10YIE

Did you notice inflation 5x'd in the past year, according to the link you just posted?

Just look at a larger timescale. All of this is consistent with average inflation targeting of 2%, ie. The fed mandate.

Prices now are entirely consistent with average 2% inflation during the course of the last two years, it only increased so much due to prior sharp decreases in inflation.

Riiiight... supply shocks, labor shortages, free government money, panic buying, shipping constraints, raw input prices, energy instability, all have nothing to do with the highest inflation print in nearly a decade. It's all just "prior sharp decreases." Gotcha.

Supply shocks definitely have to do with the month-over-month phenomenon. But I don't see how you can look at that graph and not see the obvious correction for a massive downtrend in inflation pretty much exactly a year ago.

Whatever, the more people who have a bad mental model of what's going on, the more I make on the stock market, so it's NBD. I would actually encourage you to bet lots of money on your beliefs, it's just another opportunity for arbitrage for me and the institutional investors who know how markets work.

Markets, especially equity markets, "work" when all available information is taken into account. Information, like first-party reports from the world's leading consumer goods companies, that they are planning to raise prices, or have already begun to do so. But you've already said you don't pay attention to that nonsense. Arb works great, until it doesn't. Go ask LTCM.

Inflation has been capital's Boogeyman for the middle class since the 80s

CPI is the benchmark against which inflation is measured. It's the definition, so if CPI isn't going up, there's nothing to acknowledge. IMO it will go up, there will be a transient spike that will dissipate.

You're at least half-right, CPI did go up...

https://news.ycombinator.com/item?id=27129927

Yup but the 2% target is over a long timeframe. Transient spikes are fine. There was a big drop last year.

Whether the current spike is "transient" is yet to be seen

I always found inflation to be this arbitrary intangible number. Consumer price index is probably a better metric here than inflation for majority of Americans. Basically comparing how much the price of stuff people spend money on is increasing vs how much their income is increasing.

Noob question: What does that consist of (other than halting currency printing)?

The Fed doesn't print currency - thats Treasury, although the Fed holds and distributes it to depository institutions! They control the money supply by reducing the fractional reserve lending rate at banks (reducing supply of loans), increasing interest rates (reducing demand for loans) and unwinding their balance sheet by selling back purchased assets (largely t-bills, reducing circulating supply directly).

The money supply of centrally banked economies is mostly debt/demand driver, not supply driven. Money is created when lent, and destroyed when repaid. By tweaking parameters, the Fed is able to manage circulating supply.

It's actually a really elegant system, IMO.

The last sentence is only true if you believe the Fed will actually sell back the assets. When I look at this chart, https://fred.stlouisfed.org/series/WALCL, I have very little confidence that the Fed will sell a meaningful portion back (notice the Fed already gave up BEFORE covid when we supposedly had one of the best economies in recent times). In fact, it looks to me that the assets held by the Fed are growing exponentially and definitely growing faster than our productivity growth.

2018 to 2019 was a 15% decrease of the Fed's balance sheet. That was actually quite a decent pace.

At $0.6 trillion/year it would take 12 years to unwind the 2021 balance sheet. That's worrying but not impossible.

Paradoxically, the default state of fiat currency is deflation, because the primary means of money creation is debt. If inflation is 2% every year that means future debts must overshadow past debts. If you raise interest rates people stop borrowing money because it becomes too expensive. The interest rate itself acts as a productivity gate. "You must be this productive to obtain financing." If you stop borrowing money, then the only place for the money to go is to pay off debts, which contracts the money supply and you get deflation which is strong enough to counteract past inflation. The vast majority of dollars were "printed" this way.

It seems to me that printing money must at some point cause significant inflation. I might be right or wrong.

But I see no connection between that and generous unemployment benefits, since they are a drop in the bucket compared to the trillions spent on other things.

Consider this. The maximum possible pay Person Y can obtain in the current market is $20 per hour. However, cutting unemployment pressures this Person to get a $15 per hour job immediately.

For the sake of the argument lets assume that unemployment benefits give $15 per hour. Those $15/h represent $15/h of pure waste because they have to be paid by employed people.

However, someone using unemployment benefits to obtain the $20/h job implies that taking the $15/h job wastes $5/h of your potential and unemployment increases your future potential by $5/h.

Those $5/h are pure waste, nobody gets them, not even your boss because an employee working in a fast food restaurant can generate less economic value than an employee in a warehouse.

However, unemployment generally lasts as long as necessary. Only a handful of individuals live on unemployment benefits over the long term. If you are unemployed for 6 months you cost the state $14400 (assuming $600 in benefits per week and 4 weeks per month for simplicity). It takes $14400/$5/h = 2880 hours of the warehouse job to break even from a macro economic perspective or 1.6 years with 1800 working hours per year. Of course this is not the actual tax revenue, assuming 27% of GDP is evenly taxed it would take 6 years to break even for the government.

This is just a potential benefit from the "unemployment benefits cause a worker shortage" perspective. If you go one step further there are even more situations in which unemployment benefits can help the economy. For example, what if those people will stay unemployed anyway, even if you cut benefits? They still buy products and services that generate business revenue and the business can use the additional money to hire previously unemployed people.

Of course the ultimate underlying assumption behind everything I wrote is that the economy has an abundance of goods and high inequality. None of this would work in an economy with long term scarcity like a developing country. As it is right now, full employment in the US is a "bonus", the economy doesn't depend on it. Other countries are willing to do almost everything the USA can do but they do it cheaper, which negates the need for low skill jobs to be done in the US.

How is it good for the economy? We claim we need all this help from Mexico but then we have to pay people here to? The reason why dems deny it is because they also know it’s a horrible idea.

We claim what now? Mexico didn't ever pay for the wall, if that's what you mean.

I think the economy should be good for society, and that people should be able to prosper if they work, having enough money to pay the costs of the things they need, like food, medical care, etc. I don't feel like there should be a permanent underclass of people who can never get ahead because they are living paycheck to paycheck.

I do not know what “good for the economy” means, but reducing the income/wealth gap is good for society. The upper deciles have had a nice few decades where they have been able to reap the rewards of productivity gains and cheaper prices due to lower wages.