Dan Crawford | May 18, 2021 7:31 am
Inflation Is Here. What Now?
NY Times – Neil Irwin – May 13
The central fact of the American economy in mid-2021 is that demand for all sorts of goods and services has surged. But supplies are coming back slowly, with the economy acting like a creaky machine that was turned off for a year and has some rusty parts.
The result, as underlined in new government data this week, is shortages and price inflation across many parts of the economy. That is putting the Biden administration and the Federal Reserve in a jam that is only partly of their own making.
Higher prices and the other problems that result from an economy that reboots itself are frustrating, but should be temporary. Still, the longer that the surges in prices continue and the more parts of the economy that they encompass, the greater the chances that Americans’ psychology about prices and inflation could shift in ways that become self-sustaining.
For the last few decades, companies have resisted raising prices or paying higher wages because they felt that doing so would cost them too much business. That put a damper on inflation across the economy. The question is whether current circumstances are evolving in a way that could change that.
“Now the genie’s out of the bottle,” said Kristin Forbes, an economist at M.I.T. and a former official at the U.S. Treasury and the Bank of England. “If everybody else is raising prices, it becomes a lot easier for you to do that, too.”
To understand the bewildering mix of forces at play, consider what’s going on at your nearest used-car lot.
The price of used cars and trucks rose 10 percent in April, according to the latest federal data, one major factor in pushing the Consumer Price Index to its steepest year-over-year jump in 13 years. People in the car business say that this has not one cause, but several — each with different implications for the economy and for policy.
Some involve the microeconomic decisions made by companies and consumers many months ago that are still rippling through the automobile market.
Rental car companies reduced their fleets during the pandemic-induced collapse in travel, and are now struggling to rebuild their inventories — and therefore are not selling the used cars that in a normal market they would continually be unloading. New car sales fell last year during the pandemic, resulting in fewer trade-ins finding their way into the used-car market, and now new car sales are being held back by a shortage of microchips.
There isn’t much that government policy can do to fix those problems, unless it involves a time machine. But government policies are part of the story.
The combined $2,000 per-person stimulus checks most Americans received in the early months of the year amount to a healthy down payment for many families. Generous unemployment benefits are helping contain the number of delinquent auto loans, and in turn the supplies of repossessed cars on the market. Low interest rate policies from the Fed have made financing cheap.
But let’s imagine that, in response to the problem, the Fed raised interest rates or that Congress increased taxes to claw back stimulus payments.
Those actions alone wouldn’t create more microchips or let rental car companies undo decisions from a year ago. Higher interest rates or taxes might even make things worse, if the actions led suppliers to hold back on investing in new capacity for fear demand would fall in the future.
The used-car market may start to stabilize late this year, but the problems are unlikely to be fully worked out until 2022, said Jessica Caldwell, an auto industry analyst with Edmunds.
“The only winners here are people that have a vehicle they want to get rid of,” she said. “If you have a car to sell that you don’t need, it is bonkers what you can get for it.” …
The result, as underlined in new government data this week, is shortages and price inflation across many parts of the economy. …
Jump in Consumer Prices Raises Stakes in Inflation Debate https://www.nytimes.com/2021/05/12/business/inflation-consumer-price-index-april.html?smid=tw-share
The horned loon who went to a riot at the capital; “Chansley’s”attorney, Albert Watkins spoke to TPM about what he sees as larger culprits:
“A lot of these defendants, and I’m going to use this colloquial term, perhaps disrespectfully, but they’re all fucking short-bus people,” Watkins told TPM. “These are people with brain damage, they’re fucking retarded, they’re on the goddamn spectrum.”
“But they’re our brothers, our sisters, our neighbors, our coworkers — they’re part of our country. These aren’t bad people; they don’t have prior criminal history. Fuck, they were subjected to four-plus years of goddamn propaganda, the likes of which the world has not seen since fucking Hitler.”
C&P from “Crooks and Liars:” It’s no justification for taking part in an insurrection, but you’ve gotta admit, Watkins has a point about the propaganda!
Run yes. and Lincoln had the best answer. let them keep their horses and go home to their farms, mercy is always the best policy. i’d give them a stern warnin, ask then to atend classes in civics and lie-detection, but i wouldn’t let the keep their sidearms. meanwhile i’d keep an eye on their “leaders”, especially those in the Senate.
A divided House votes to create a commission to investigate the Jan. 6 Capitol riot.
A sharply divided House voted on Wednesday to create an independent commission to investigate the Jan. 6 Capitol assault, overcoming opposition from Republicans determined to stop a high-profile accounting of the deadly pro-Trump riot.But even as the legislation passed the House, top Republicans locked arms in an effort to doom it in the Senate and shield former President Donald J. Trump and their party from fresh scrutiny of their roles in the events of that day.The final vote in the House, 252 to 175, with four-fifths of Republicans opposed, pointed to the difficult path ahead.The vote came hours after Senator Mitch McConnell, the minority leader, declared his opposition to the plan. Mr. McConnell had said just a day earlier that he was open to voting for it, and had previously been vocal both in denouncing Mr. Trump’s role in instigating the assault and in decrying the effort by some Republicans on Jan. 6 to block certification of the election results. …Proponents, including 35 Republicans, hailed the move to establish the commission as an ethical and practical necessity to fully understand the most violent attack on Congress in two centuries and the election lies from Mr. Trump that fueled it. Modeled after the body that studied the Sept. 11, 2001, terrorist attack, the 10-person commission would take an inquiry out of the halls of Congress and deliver findings by Dec. 31. …
Among the Republicans voting in favor of the commission were a familiar group of moderates and stalwart critics of Mr. Trump, but also several longer-serving members from safe conservative districts who were rattled by the attack. The most notable was Representative Liz Cheney of Wyoming, who was run out of the party leadership last week because she refused to stop criticizing Mr. Trump for his attempts to overturn the election.But the prospects for Senate passage dimmed substantially after Mr. McConnell joined his House counterpart, Representative Kevin McCarthy of California, and Mr. Trump in panning the proposal crafted by Democrats and a moderate House Republican as overly partisan and duplicative of ongoing Justice Department criminal prosecutions and narrow congressional investigations. …
58% voted for the January 6 commission;40% voted against; 8% did not vote.If the same percentages hold inthe Senate, that will at leastbe a moral victory.
… The 252-to-175 vote in the House, with four-fifths of Republicans opposed, pointed to the difficult path for the proposal in the Senate. Thirty-five Republicans bucked their leadership to back the bill. …
So, 80% of Republicans put Party before Country.