US Import Demand is Dropping Off a Cliff

[JayBee]

York1

 

8% can be considered as rising up to the moon.

In the late 1960s, inflation began to hit those levels, while many experts predicted it was not long-term.

Even though many thought it was short-term, it wasn't until the 1980's recession that inflation was put under control.

There are a lot of parallels in the way that long-term inflation began then, and what is going on now.

 

And it wasn't the recession that killed inflation, it was the interest rate hikes instituted by the Federal Reserve that killed demand, and thus inflation. I was part owner of a car dealership at the time. We paid 20% interest on new vehicle floorplan. You can readily understand why we stopped ordering new cars for inventory. We even cut down on the number of used cars on the lot. The manufacturers subsidized new car interest rates to keep them sane, but used car loan interest rates for the average joe hit 15.9% for a few months.

[Euclid]

I get the impression that most people believe that any time a price is increased by the retailer, that price increase is inflation.  And if such increases become widespread, then we start talking about it as being a trend, and referring to it as “inflation.”  At the same time, the cause for this sense of inflation is that retailers have veered off the path of honesty, and are suddenly cheating in the game of retail sales.  This leads to suspicion of price fixing or collusion. 

 

Recently, I read an essay on this, and it said that price increases caused directly from a product shortage that has been caused by some type of adversity affecting only one or maybe few related products is not considered to be inflation.  Such adversity could be a shortage of truck drivers or some type of regulatory change for instance.  It is just a price increase caused by a localized supply shortage.  An example would be our current fuel shortage.  Another condition that places such a price increase in the non-inflation-caused category is that the price increase is likely to be temporary or seasonal until local supply conditions improve and cause the price to fall. 

 

The primary and classic cause of inflation is also related to supply and demand, but not the supply and demand of goods and services, such as is the case with fuel.  The classic cause of inflation is monetary policy that inflates the money supply.  With that, the item that becomes in short supply is the value of money. 

 

So the actual commodity in play of supply and demand is money itself.  And in the case of causing inflation by a changing money supply, the increase of money supply causes a decrease of money value.  So everyone selling goods and services is receiving a decreasing return on their sales.  Therefore, they raise the selling price.  Our monetary policy actions have set the stage for this inflationary reaction, and now the results must play out.  There will be more to come and it will come on an accelerating basis.

 

There are conflicting opinions as to whether the money supply expansion could or would have caused this.  Obviously, those who set this into motion believe that it cannot happen.  They told us over and over that their top economists all agreed with them that this inflation spike was only transitory.  Yet, at this point, we see that it was not transitory, and furthermore, the rate of inflation is still accelerating.

[Murphy Siding]

Euclid

I get the impression that most people believe that any time a price is increased by the retailer, that price increase is inflation.  And if such increases become widespread, then we start talking about it as being a trend, and referring to it as “inflation.”  

Well, they're not wrong.
  2.ECONOMICS

a general increase in prices and fall in the purchasing value of money.

[Convicted One]

Euclid

I get the impression that most people believe that any time a price is increased by the retailer, that price increase is inflation.  And if such increases become widespread, then we start talking about it as being a trend, and referring to it as “inflation.”  At the same time, the cause for this sense of inflation is that retailers have veered off the path of honesty, and are suddenly cheating in the game of retail sales.  This leads to suspicion of price fixing or collusion. 

We are too much accustomed to attributing to a single cause, that which is the product of several, and the majority of our controversies come from that - - Marcus Aurelius

I'm sure there are just as many sainted capitalists out there doing only what they must to cover their margins,.. as there are bold opportunists squeezing every drop of profit out of the moment, as they can. (and a full range in between) One does nothing to validate the other. 

And yes, throttling the money supply is long over due.

[Euclid]

Murphy Siding

 

 

Euclid

I get the impression that most people believe that any time a price is increased by the retailer, that price increase is inflation.  And if such increases become widespread, then we start talking about it as being a trend, and referring to it as “inflation.”  

 

 

 

Well, they're not wrong.
  2.ECONOMICS

 

a general increase in prices and fall in the purchasing value of money.

 

My point is that every time a price is increased by the retailer, that increase may be caused by inflation, but not necessarily.  There are many other factors besides inflation that can cause a price increase. So yes, people that believe every price increase is an example of inflation are indeed wrong. 

 

I don’t know if your item #2 is intended as a definition of inflation, although the conditions it cites are certainly effects of inflation.  But inflation is about inflating the money supply first.  And from that, comes a lowering of the value of money.  Then from that comes a need for sellers to raise their prices to compensate for the lower value of the money used by the buyers of goods and services.  So there is that factor of prices being raised due to inflation.   But there are also many other reasons why prices get raised without it being caused by inflation. 

 

The key is that inflating the money supply lowers the value of money.  This basic origin is something that I think many people are not aware of.  Instead people are injured by inflation and they need a villain to blame.  It is most intuitive to blame the seller of goods and services for unfairly raising the price. 

 

There is a lot of information about this on the Internet, but it takes the right search terms to find it.  Otherwise the search will sweep you into the most popular information about inflation.  And with that, there is hardly a clear consensus about anything.

 

Here is a good article on this: 

 

Rising Relative Prices or Inflation: Why Knowing the Difference Matters

 

https://www.clevelandfed.org/en/newsroom-and-events/publications/economic-commentary/economic-commentary-archives/2008-economic-commentaries/ec-20080601-rising-relative-prices-or-inflation-why-knowing-the-difference-matters.aspx#:~:text=Almost%20everyone%20uses%20the%20word,changing%20supply%20and%20demand%20conditions.

 

From the link:

 

“Almost everyone uses the word inflation to refer to any increase in prices, but it ought to be reserved for a just one kind of price increase.”

 

“True inflation has a different cause—and a different cure—than the price increases of goods and services caused by constantly changing supply and demand conditions.”

 

“Inflation is one of the most misused words in economics. As economist Michael Bryan carefully explained a few years back, the word originally described currency and money, not prices.”

[SD60MAC9500]

 

Backshop

Economists are like meteorologists--they never get it right beforehand but are great at explaining after-the-fact why something happened.

 

It could be they intentionally mislead as well. With QE(Quantitative Easing) over the past decade. Only one not infromed of monetary policy wouldn't see the train wreck that was coming.... You can't keep lending money at low to zero interest rates over that period of time, and NOT see the inflation coming...

Add in the pork barrel of stimulus and now you just put the frosting on the cake...

I recall about 2016-2017 ..A buddy of mine and I were having a conversation about this. I'm no market or monetary expert by any means. I told him the banks can't keep lending money at these low interest rates. This is going to come back and bite us down the road..

 

 

 

 

 

 

 

[Murphy Siding]

Euclid

 

 

Murphy Siding

 

 

Euclid

I get the impression that most people believe that any time a price is increased by the retailer, that price increase is inflation.  And if such increases become widespread, then we start talking about it as being a trend, and referring to it as “inflation.”  

 

 

 

Well, they're not wrong.
  2.ECONOMICS

 

a general increase in prices and fall in the purchasing value of money.

 

 

 

 

 

 

I don’t know if your item #2 is intended as a definition of inflation, although the conditions it cites are certainly effects of inflation. 

I don't know if it could be any clearer, but since we're splitting hairs, etc., it's #2 because I shortened what I had cut and pasted. For clarity, I guess, here's the rest of it. You're free to make it mean whatever you want it to mean. 

noun

 

 

1. 1.

   the action of inflating something or the condition of being inflated.

   "the inflation of a balloon"
   
   

    
2. 2.

   ECONOMICS

   a general increase in prices and fall in the purchasing value of money.

   "policies aimed at controlling inflation"

[Murphy Siding]

Any chance that import demand is dropping off in part, because more products are being supplied domestically?

[Euclid]

Murphy Siding

 

 

Euclid

 

 

Murphy Siding

 

 

Euclid

I get the impression that most people believe that any time a price is increased by the retailer, that price increase is inflation.  And if such increases become widespread, then we start talking about it as being a trend, and referring to it as “inflation.”  

 

 

 

Well, they're not wrong.
  2.ECONOMICS

 

a general increase in prices and fall in the purchasing value of money.

 

 

 

 

 

 

I don’t know if your item #2 is intended as a definition of inflation, although the conditions it cites are certainly effects of inflation. 

 

 

 

I don't know if it could be any clearer, but since we're splitting hairs, etc., it's #2 because I shortened what I had cut and pasted. For clarity, I guess, here's the rest of it. You're free to make it mean whatever you want it to mean. 

 

noun

 

 

1. 1.

   the action of inflating something or the condition of being inflated.

   "the inflation of a balloon"
   
   

    
2. 2.

   ECONOMICS

   a general increase in prices and fall in the purchasing value of money.

   "policies aimed at controlling inflation"

 

As a dictionary definition of “inflation,” there is nothing wrong with it.  As it pertains to economics, the characteristics it mentions are indeed observable effects of monetary inflation.  

 

And of course everyone is free to call it any name they want just like naming a baby. 

 

However, I am not splitting hairs.  I bring this up for a reason. 

 

That is that if everyone misunderstands inflation to be simply a matter of retail merchants succumbing to greed, they will never realize the actual cause.  And if society follows this course, it will never have an ability to prevent inflation.

 

Everyone I have talked to believes that inflation is simply price gouging.  I would say that this is the most popular interpretation of the cause of inflation. 

 

As the article I linked above points out, there are two basic causes for price increases.  One is a shortage of goods and services and the other is an oversupply of money.  But only the oversupply of money is inflation.  The article goes into great detail about this point.

 

The term “inflation” actually refers to that oversupply of money.  So even just in the verbal sense, the shortage of goods is not an oversupply or any sense of anything being inflated.  Shortage is the opposite of inflation. 

 

This shows that the shortage of goods and services is only a result of inflation, but not a cause.  This is important because inflation can only be prevented if we know what it actually is in terms of the root cause. 

[Gramp]

I agree with you about inflation, Euclid. We've had a bunch of years of profligate government spending. Money created without a corresponding increase in productive value. The smoke and mirrors of "quantitative easing". We've been through it before. We've had the party. Now the hangover. 
It's gonna take a Paul Volker/Reagan combo to wrest it out of the system. People who have the guts to weather the criticism. 

[NKP guy]

JayBee

And it wasn't the recession that killed inflation, it was the interest rate hikes instituted by the Federal Reserve that killed demand, and thus inflation. I was part owner of a car dealership at the time. We paid 20% interest on new vehicle floorplan. You can readily understand why we stopped ordering new cars for inventory. We even cut down on the number of used cars on the lot. The manufacturers subsidized new car interest rates to keep them sane, but used car loan interest rates for the average joe hit 15.9% for a few months.

   When buying my house and shopping for a mortgage in 1982, the friendly small town bank president told me, "IF I had any money to lend you, which I don't, the rate would be 18%."  Yep, it was the Federal Reserve's interest rates, prudently and courageously applied, that eventually killed inflation.

   Worth remembering is that while mortgages were 18%, bank CD's were paying 8%.  I well recall the Vestry at my church investing in Treasury Bills and Notes at about 18%.  Most of the Vestry were bankers, lawyers, businessmen and such, and they knew the rates wouldn't last, so they invested as much as they could and then watched the money roll in for the next few years.  

 

 

[tree68]

NKP guy

bank CD's were paying 8%.

Nowadays it seems like we're lucky they aren't charging us for holding our money...

[jeffhergert]

tree68

 

 

NKP guy

bank CD's were paying 8%.

 

 

Nowadays it seems like we're lucky they aren't charging us for holding our money...

 

Many do if you don't maintain a certain amount in your account.

Jeff

[Psychot]

SD60MAC9500

 

 

 

Backshop

Economists are like meteorologists--they never get it right beforehand but are great at explaining after-the-fact why something happened.

 

 

 

 

It could be they intentionally mislead as well. With QE(Quantitative Easing) over the past decade. Only one not infromed of monetary policy wouldn't see the train wreck that was coming.... You can't keep lending money at low to zero interest rates over that period of time, and NOT see the inflation coming...

Add in the pork barrel of stimulus and now you just put the frosting on the cake...

I recall about 2016-2017 ..A buddy of mine and I were having a conversation about this. I'm no market or monetary expert by any means. I told him the banks can't keep lending money at these low interest rates. This is going to come back and bite us down the road..

 

 

 

 

 

 

 

 

 

And yet, there were a number of economists who, until very recently, were positing that inflation was essentially a thing of the past.

[charlie hebdo]

Gramp

I agree with you about inflation, Euclid. We've had a bunch of years of profligate government spending. Money created without a corresponding increase in productive value. The smoke and mirrors of "quantitative easing". We've been through it before. We've had the party. Now the hangover. 
It's gonna take a Paul Volker/Reagan combo to wrest it out of the system. People who have the guts to weather the criticism. 

 

Interesting how you fail to mention huge tax cuts which poured money into overheated markets?

 

[kgbw49]

Here is a link to the official CPI report for December 2020 regarding inflation:

https://www.bls.gov/news.release/archives/cpi_01132021.pdf

 

[Euclid]

According to references, inflation can only be caused by the over-supply of money, which causes the value of money to drop.  Then with the drop of money value, producers of goods and services will raise their price to compensate for the drop in money value. 

 

It is hard to predict how much inflation will result from a given amount of money over-supply.   But this cause and effect relationship is well known.   As a test of the principle, we have produced a robust sample of money over-supply in the last couple years.   The size of this money over-supply rivals or exceeds any previous money over-supply.  We now are experiencing a cycle of prolonged inflation, which the effect of money over-supply predicts. 

 

Another part of the principle is that the rate of inflation over an inflation cycle will rise, then level off, and then fall back to a point of equilibrium.  A key question during this cycle is:  How far will it rise? 

 

The answer can only begin to emerge once the rate of increase begins to slow.  All we know now is that the rate of increase is still rising several months after the inflation cycle emerged.  Where it stops, nobody knows.  However history has shown the principle of being capable of inflation rising to catastrophic levels, which has been named, Hyperinflation.  The potential of hyperinflation is that people can lose all of their money as its value falls.  And since the process of the inflation rate tends to rise exponentially, it becomes more and more difficult to cause it to end.  So when it gets into the range called hyperinflation, it can destroy a person’s life savings in a very short time. 

 

It seems that the public discourse on current inflation completely lacks any attention to this terrible destructive potential of inflation as it increases and becomes harder and harder to stop. 

[charlie hebdo]

Your post is simplistic, misleading and without a source.

In the other hand, according to Investopedia:

There are three main causes of inflation: demand-pull inflation, cost-push inflation, and built-in inflation.

Demand-pull inflation refers to situations where there are not enough products or services being produced to keep up with demand, causing their prices to increase.

Cost-push inflation, on the other hand, occurs when the cost of producing products and services rises, forcing businesses to raise their prices.

Lastly, built-in inflation (which is sometimes referred to as a wage-price spiral) occurs when workers demand higher wages to keep up with rising living costs. This in turn causes businesses to raise their prices in order to offset their rising wage costs, leading to a self-reinforcing loop of wage and price increases

[Euclid]

charlie hebdo

Your post is simplistic, misleading and without a source.

In the other hand, according to Investopedia:

There are three main causes of inflation: demand-pull inflation, cost-push inflation, and built-in inflation.

Demand-pull inflation refers to situations where there are not enough products or services being produced to keep up with demand, causing their prices to increase.

Cost-push inflation, on the other hand, occurs when the cost of producing products and services rises, forcing businesses to raise their prices.

Lastly, built-in inflation (which is sometimes referred to as a wage-price spiral) occurs when workers demand higher wages to keep up with rising living costs. This in turn causes businesses to raise their prices in order to offset their rising wage costs, leading to a self-reinforcing loop of wage and price increases

 

There is a source for every conceivable thought about inflation.  And most of them leave conflicting conclusions.  What I have stated is as clear as a bell, and I do indeed provide the source where I started to develop my thoughts in my original postings in this thread.  The point is that not every price increase is inflation.  Yet this is almost a universal false assumption.

 

While it is true that inflation causes price increases due to “printing money” in a way that inflates the money supply, there are many other causes of inflation that relate only to supply and demand of goods and services and not to an over-supply of money. 

 

For instance, our current inflation has been triggered by massive deficit spending during 2021 and 2022 which inflated the money supply.  As a consequence, the value of money is falling.  Not only is this raising the price of all goods and services, but also it is lowering the value of all personal savings.

 

At the same time, a regulatory attack on fossil fuels has discouraged investment needed to sustain the oil industry.  This effect, and its intent has been clearly stated by our Administration as being the objective to end the use of fossil fuels in order to force people into using renewable green energy.  The resulting price increase of price on fossil fuels is not inflation.   So we have true inflation raising prices on everything by lowering the value of money, and we have a price increase in oil products being caused by a shortage of supply intentionally created for the purpose of killing the fossil fuel industry.

 

When I say that there is a source for every conceivable thought about inflation, that also includes the belief that the way to end inflation is to print a lot more money.  Many also regard massive money printing as a way to prevent or end a recession or depression. 

[BaltACD]

Figures Lie, Liars Figure

Life is determining which is which.

[Murphy Siding]

charlie hebdo

Your post is simplistic, misleading and without a source.

 

You missed the part about agenda.

[tree68]

How long before we need a wheelbarrow to carry the money for a loaf of bread???

[charlie hebdo]

Murphy Siding

 

 

charlie hebdo

Your post is simplistic, misleading and without a source.

 

 

 

 

You missed the part about agenda.

 

 

I was being diplomatic!  Haha.

[York1]

As my father worked his way into Germany with the 3rd Army in WWII, he picked up some German money in the ruins.

He brought back a two-hundred-million Mark bill.  He said that at that time, it wouldn't buy a loaf of bread.

[Euclid]

Needing a wheelbarrow to haul the cash required to buy a loaf of bread would certainly be inconvenient.  But think about the problem of your life savings rapidly depleting as you buy your last few loaves of bread.  I don’t know that our present inflation will get that bad, but neither does anybody else. 

[Backshop]

Euclid

Needing a wheelbarrow to haul the cash required to buy a loaf of bread would certainly be inconvenient.  But think about the problem of your life savings rapidly depleting as you buy your last few loaves of bread.  I don’t know that our present inflation will get that bad, but neither does anybody else. 

 

I very highly doubt it.

[Gramp]

Inflation is part and parcel a tool of a pol's toolkit. It monetizes the debt created from iladvised decisions and natural catastrophe. Taxes the citizenry (usually) stealthily. A good example of it in action is how over the years manufacturers have had to reduce consumer package sizes to maintain retail price points that consumers are willing to pay. I imagine there have been similar actions taken by transportation companies. 

I think most politicians today use government service to feather their own nests. Like being able to pile up and spend millions for an oceanview from Martha's Vineyard while having spouted about the dangers of sea level rise because of climate change. 

The U.S. and its Constitution were not created in this spirit to my mind. Those people risked everything to come here to escape tyranny and oppressiveness. They fought it to the teeth to be free.  I hope we don't have to replay the 1700's. I'm a pretty old geezer so may not be around. Maybe the states' right to amend the constitution that's building can serve to limit govt. careering. 

[BaltACD]

Gramp

Inflation is part and parcel a tool of a pol's toolkit. It monetizes the debt created from iladvised decisions and natural catastrophe. Taxes the citizenry (usually) stealthily. A good example of it in action is how over the years manufacturers have had to reduce consumer package sizes to maintain retail price points that consumers are willing to pay. I imagine there have been similar actions taken by transportation companies. 

 

I think most politicians today use government service to feather their own nests. Like being able to pile up and spend millions for an oceanview from Martha's Vineyard while having spouted about the dangers of sea level rise because of climate change. 

The U.S. and its Constitution were not created in this spirit to my mind. Those people risked everything to come here to escape tyranny and oppressiveness. They fought it to the teeth to be free.  I hope we don't have to replay the 1700's. I'm a pretty old geezer so may not be around. Maybe the states' right to amend the constitution that's building can serve to limit govt. careering. 

Inflation is no just a USA issue - it is a WORLD issue.  The USA alone cannot solve it.

[Euclid]

BaltACD

Inflation is no just a USA issue - it is a WORLD issue.  The USA alone cannot solve it.

The USA can solve the inflation problem in the USA.  Other countries can solve theirs.

 

If our Country’s leaders and Federal Reserve make the right decisions about U.S. inflation, it can be brought down to an acceptable normal range, or prevented from rising above that range.  We have total control if we use it. 

 

However, there is a great attraction to not using our control over inflation because the over-spending that produces an over-supply of money is so tempting.  And it is also so easy to fool the public and get away with the money borrowing and spending schemes.  All they have to do is tell us that other countries have inflation problems far worse than ours, and that ours is only transitory.  They may even tell us that inflation is a good sign of a recovering economy, or that the cause of inflation is not borrowing and spending enough money. 

 

In effect, inflation is a mortgage placed on each of us to pay for borrowing in our names, ostensibly to improve our lives.  It is much easier than the messy business of raising taxes to pay for things.  It replaces the old fashioned belief in pay as you go. 

[BaltACD]

Euclid

 

BaltACD

Inflation is no just a USA issue - it is a WORLD issue.  The USA alone cannot solve it. 

The USA can solve the inflation problem in the USA.  Other countries can solve theirs.

 

If our Country’s leaders and Federal Reserve make the right decisions about U.S. inflation, it can be brought down to an acceptable normal range, or prevented from rising above that range.  We have total control if we use it. 

 

However, there is a great attraction to not using our control over inflation because the over-spending that produces an over-supply of money is so tempting.  And it is also so easy to fool the public and get away with the money borrowing and spending schemes.  All they have to do is tell us that other countries have inflation problems far worse than ours, and that ours is only transitory.  They may even tell us that inflation is a good sign of a recovering economy, or that the cause of inflation is not borrowing and spending enough money. 

 

In effect, inflation is a mortgage placed on each of us to pay for borrowing in our names, ostensibly to improve our lives.  It is much easier than the messy business of raising taxes to pay for things.  It replaces the old fashioned belief in pay as you go. 

The 21st Century world is interconnected in most all facets of human activity.  While Newton wasn't a economist, his laws of motion apply to all things financial.

The USA can tune itself up, to a degree, it cannot tune up the world by itself.  The World's components will have to tune themselves up - in a number of cases the components have no desire to 'tune up'.