Every time you talk about inflation or the economy I get less and less convinced that you know anything about either. First of all, the fact that we had rampant inflation at all is a big issue. Yes, the rate of inflation has stopped, and that's a good thing. But what's also stopped is the Biden administration passing multi-trillion dollar spending bills under the banner of "COVID relief" and the Fed has made it a point to actually address inflation after too many years of easy money policy. Heck, the fact that we can tie rising inflation to right when those things happened (and again, I'm including Trump's COVID relief bill in December 2020 that was also highly unnecessary and also harmful to inflation - just on a lower scale than Biden's boondoggle) and then we can see the lessening of the rate of inflation the further we get away from those policy blunders the more the case is made that Biden and the Fed blew it big time when it comes to letting inflation get away from us.JohnStOnge wrote: ↑Wed Oct 26, 2022 5:34 pm Now more on the inflation rate thing. I went ahead and projected what would happen with the year over year inflation rate as it is reported if the inflation rate during October 2022 through June 2023 works out to the resulting in the 2% annual rate the Fed targets. What you will see is that, in June 2023, the year over year rate that is widely reported would fall below 2%.
it looks likely that the Republicans will take over the House and very possibly the Senate as well. If that happens and an inflation scenario similar to the one I depict plays out, i have no doubt that people in general will perceive the decline as associated with the Republicans taking power. But it wouldn't be. The change would clearly have occurred between June and July, 2022; well before the Republicans will have taken over the Congress.
Another example of why I lament the fact that people vote based on what they perceive as happening with the economy at the time. One thing I'll always remember, because I was for George H. W. Bush at the time, is that people thought Bill Clinton ended a recession. But the recession actually ended in March 1991. That was almost 2 years before Clinton took office in January, 1993. I also don't think Bush was the reason for the recession to begin with. But that's how it goes. People perceive a direct cause and effect relationship between who is in power and what the economy is doing even though there isn't one. It is what it is.
Here's the table:
You can see that, if something like that scenario plays out, unacceptable inflation would have stopped between June and July, 2022. But that won't really show up in the year over year numbers that people see in a way that most people will notice until around early 2023 when the Republicans will presumably be taking power in at least the House.
Not that it's QUITE a done deal yet. As of now, according to 538, it's at 81% confidence that the Republicans will win the House. So they are favored by more than Clinton was over Trump on election eve 2016 but not by as much as Biden was over Trump on election even 2020.
Second, yes, the rate of inflation has stalled, but we're not anywhere out of the woods yet. We're still seeing the ripple effect of letting the biggest economy in the world (the US) blow it on inflation as the echoes of that are still bouncing back and in forth in the rest of the world. Just like how COVID would hit one part of the world and then take a couple of months to make its way to other parts initially not impacted, we see the same things with rampant inflation. The rate may have stalled here, but other, smaller economies highly impacted by what happens in the US are still dealing with it. And how they deal with it will have potential repercussions on us.
Furthermore, even here in the US, we're not out of the woods yet. Real income of pretty much everyone in the US is still far behind what it should be as wages still lag inflation. That doesn't get fixed right away (if it did, it would create even more inflationary pressure). So we have a couple of years, at least, of people's real spending power being negatively impacted by the bad economic decisions of Biden and the Fed. And lastly, we still have the issue of making sure inflation doesn't continue, and the way that's accomplished is by limiting the money supply - that's why the Fed is jacking up rates and that's why the government can't pump out new spending because they already did that to cause inflation to get away from us.
The Fed will keep jacking up rates for another 6 months - maybe not the 75 point jumps we've seen recently, but we'll see 50 point jumps probably well near the end of 2023. That means sustained high interest rates for another 1-3 years, and the pain that comes along with that. So yes, we should be happy that inflation isn't still growing at crazy amounts month to month, but it still takes quite a while to fix the tracks and to get the train back on those tracks so we still have a fair amount of work to do. On the bright side, a GOP held Congress, in at least one house, and a Dem in the White House means we won't see the blow-out spending again that got us into this mess in the first place.
The Fetterman/Oz choice might be worse than trump/Hillary or trump/Biden. Fortunately, the winner will only be 1 of 100 senators rather than POTUS.
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