Tag Archives: inflation

Housing Prices Are Booming in Southern California

by FrancisOLN Posted on May 24, 2017

Mother Jones

<!DOCTYPE html PUBLIC “-//W3C//DTD HTML 4.0 Transitional//EN” “http://www.w3.org/TR/REC-html40/loose.dtd”>

From the LA Times today:

The median home price in Los Angeles County has reached the all-time high set in 2007, a milestone that follows five years of steady recovery but comes amid renewed concerns over housing affordability. Home prices rose nearly 6% in April from a year earlier, hitting the $550,000 level where the median plateaued in summer 2007 before a sharp decline that bottomed out in 2012.

….Orange County surpassed its pre-bust high last year, and in April set a new record of $675,000. San Diego County also exceeded its pre-bust peak for the first time last month, as the median price — the point at which half the homes sold for more and half for less — climbed 7.4% to $525,000.

Inflation has risen 20 percent since 2007, so this means home prices in Southern California haven’t really set a record. They’re still 20 percent away from that. Here’s how CoreLogic scores the current housing market compared to its bubble peak:

So things look OK. Loan delinquencies are low, credit scores have remained high, and national housing prices are high but not stratospheric.

And yet…Southern California, Arizona, and Florida are all overvalued. That’s three out of the four states that led the bubble in 2006. Even Texas, which avoided the last bubble, is looking high. And anecdotally, homes are selling pretty fast around here.

This is the kind of thing that makes me think we might be back into a recession by 2018. The expansion is nine years old, unemployment is about as low as it can get, housing prices are increasing at a good clip, auto sales are anemic, and corporate profits are rising steeply. On the other side of the ledger, economic growth and wage growth are pretty modest, and there are no signs of an oil price spike around the corner.

I dunno. Things just feel a little fragile right now. But maybe I’m off base.

See the original post:  

Housing Prices Are Booming in Southern California

Posted in FF, GE, LG, ONA, Uncategorized, Venta | Tagged , , , , , , , , | Comments Off on Housing Prices Are Booming in Southern California

Inflation Finally Starting to Hit Healthy Levels

by TraceeCothran Posted on March 31, 2017

Mother Jones

<!DOCTYPE html PUBLIC “-//W3C//DTD HTML 4.0 Transitional//EN” “http://www.w3.org/TR/REC-html40/loose.dtd”>

It’s finally happened. The PCE measure of price inflation has breached the 2 percent barrier:

Over at the Wall Street Journal, Eric Morath comments: “That is a healthy signal for the economy, showing excess capacity and high unemployment that long held inflation near historically low levels have finally abated. Firmer inflation could give Fed policy makers leeway to consider additional interest-rate increases this year.”

That’s a refreshing change from the usual reaction of “ZOMG! Inflation is nearing 2 percent!” Nonetheless, like a broken record, I’ll point out that (a) core inflation is still under 2 percent and barely increasing at all, and (b) 2 percent is not a “target.” Not in the sense of something you should never exceed, anyway. It’s a target for average inflation, and the average since the end of the Great Recession has been 1.5 percent. More recently, the average over the past two years has been 0.8 percent. It’s going to be a while before we make up for so many years of too-low inflation.

Of course, it’s also true that the Fed’s target probably should be 3-4 percent, but that’s a post for another day.

Link:  

Inflation Finally Starting to Hit Healthy Levels

Posted in FF, GE, LG, ONA, Uncategorized, Venta | Tagged , , , , , , , , , , | Comments Off on Inflation Finally Starting to Hit Healthy Levels

As Always, Inflation Is Yet Again Right Around the Corner

by LeolaGeach156 Posted on December 13, 2016

Mother Jones

<!DOCTYPE html PUBLIC “-//W3C//DTD HTML 4.0 Transitional//EN” “http://www.w3.org/TR/REC-html40/loose.dtd”>

The Wall Street Journal has annoyed me again today. See if you can spot how they got my dander up:

A rallying stock market, rising bond yields and the return of inflationary pressures are creating new challenges for the Federal Reserve….Many Fed watchers see the prospect of tax cuts and fiscal spending under Donald Trump, as well as rising oil prices and inflation expectations, pointing to a pickup in the pace of rate increases.

….Many money managers say an upsurge of inflation throughout 2017 ranks among the top risks to a continued advance in U.S. stocks….On the bond market, meanwhile, a gauge of 10-year inflation expectations rose to the highest level in more than two years and edged above the Fed’s 2% inflation target….The fiscal stimulus Mr. Trump has proposed could boost demand and send inflation higher. Expectations of higher inflation have firmed further after the agreement by oil-producing nations boosted crude prices.

Sigh. Here’s a chart of all the commonly used inflation measures:

The ordinary measures of inflation (in red) are rising, but only to the level of two years ago—and well below the Fed’s target of 2 percent. The core measures of inflation (in blue) are pretty steady at well under 2 percent. And the 10-year-breakeven (in brown), which is a measure of inflation expectations, has been on a steady downward march for three years.

The only measure that’s both rising and breaking past the 2 percent target is the 10-year-breakeven—but only if you look at the daily change over just the past five weeks. So which measure does the Journal show in its chart? The daily change of the 10-year-breakeven over the past five weeks.

Inflation is always right around the corner, isn’t it? No matter how you have to twist things to make it come out that way, it’s always right around the corner.

But maybe we should turn the corner first before we panic. After all, 2 percent is a target, not a ceiling. After years of sub-2-percent inflation, surely we can wait until we’ve had at least a few months of 3 percent inflation before we break out the hammer and shatter the punch bowl?

More here: 

As Always, Inflation Is Yet Again Right Around the Corner

Posted in FF, GE, LG, ONA, Uncategorized, Venta | Tagged , , , , , , , , | Comments Off on As Always, Inflation Is Yet Again Right Around the Corner

Who’s Afraid of an Itsy Bitsy Bit of Inflation, Anyway?

by LydaMcCorkindal Posted on July 10, 2014

Mother Jones

<!DOCTYPE html PUBLIC “-//W3C//DTD HTML 4.0 Transitional//EN” “http://www.w3.org/TR/REC-html40/loose.dtd”>

Why are so many people obsessed with “hard money”? Why the endless hysterics about the prospect of inflation getting higher than 2 percent? Paul Krugman, like many others, thinks it’s basically a class issue. If you have a lot of debt, inflation is a good thing because it lowers the real value of your debt. But if you’re rich and you have lots of assets, the opposite is true. Here’s Krugman using data from the Census Bureau’s SIPP database:

Only the top end have more financial assets (as opposed to real assets like housing) than they have nominal debt; so they’re much more likely to be hurt by mild inflation and be helped by deflation than the rest.

Now, it’s true that some of these financial assets are stocks, which are claims on real assets. If we only look at interest-bearing assets, even the top group has more liabilities than assets.

But the SIPP top isn’t very high; in 2007 you needed a net worth of more than $8 million just to be in the top 1 percent. And since the ratio of interest-bearing assets to debt is clearly rising with wealth, we can be sure that the truly wealthy are indeed in the category where they have more to lose than to gain by a rise in the price level.

Brad DeLong isn’t buying it:

It is true that the rich do have more nominal assets than liabilities….But it is also true that America’s rich have a lot of real assets whose value depends on a strong and growing economy.

I find it implausible to claim that the net gain is positive when we net out the (slight) real gain to the rich from lower inflation with the (large) real loss to rich from lower capital utilization. It’s not a material interest in low inflation that we are dealing with here…

I don’t think I buy Krugman’s claim either. He’s basically saying that hard money hysteria is driven by the material interests of the top 0.1 percent, but even if you grant them the clout to get the entire country on their side, do the super rich really love low inflation in the first place? Do they own a lot of long-term, fixed-interest assets that decline in value when inflation increases? Fifty years ago, sure. But today? Not so much. This is precisely the group with the most sophisticated investment strategies, highly diversified and hedged against things like simple inflation risks.

Plus there’s DeLong’s point: even if they do own a lot of assets that are sensitive to inflation, they own even more assets that are sensitive to lousy economic growth. If higher inflation also helped produce higher growth, they’d almost certainly come out ahead.

So what’s the deal? I’d guess that it’s a few things. First, the sad truth is that virtually no one believes that high inflation helps economic growth when the economy is weak. I believe it. Krugman believes it. DeLong believes it. But among those who don’t follow the minutiae of economic research—i.e., nearly everyone—it sounds crazy. That goes for the top 0.1 percent as well as it does for everyone else. If they truly believed that higher inflation would get the economy roaring again, they might support it. (Might!) But they don’t.

Second, there’s the legitimate fear of accelerating inflation once you let your foot off the brake. This fear isn’t very legitimate, since if there’s one thing the Fed knows how to do, it’s stomp on inflation if it gets out of control. Nonetheless, there are plenty of people with a defensible belief that a credible commitment to low inflation does more good than harm in the long run. After all, stomping on inflation is pretty painful.

Third, there’s the very sensible fear among the middle class that high inflation is just a sneaky way to erode real wages. This is sensible because it’s true. There are several avenues by which higher inflation helps weak economies that are trapped at the zero bound, and one of them is by allowing wages to stealthily decline until employment reaches a new equilibrium. I think that lots of people understand this instinctively.

Fourth, there’s fear of the 70s, which apparently won’t go away until everyone who was alive during the 70s is dead. Which is going to be a while.

It’s worth noting that hard money convictions are the norm virtually everywhere in the developed world, even in places that are a lot more egalitarian than the United States. Inflationary fears may be irrational, especially under our current economic conditions, but ancient fears are hard to deal with. As it happens, the erosion of assets during the 70s was unique to the conditions of the 70s, which included a lot more than just a few years of high inflation. But inflation is what people remember, so inflation is still what they fear.

Bottom line: Even among non-hysterics, I’d say that hardly anyone really, truly believes in their hearts that high inflation would be good for economic growth. It’s the kind of thing that you have to convince yourself of by sheer mental effort, and even at that you’re probably still a little wobbly about the whole idea. It just seems so crazy. Until that changes, fear of inflation isn’t going anywhere.

Read more: 

Who’s Afraid of an Itsy Bitsy Bit of Inflation, Anyway?

Posted in FF, GE, LAI, LG, ONA, Uncategorized, Venta, Vintage | Tagged , , , , , , , , | Comments Off on Who’s Afraid of an Itsy Bitsy Bit of Inflation, Anyway?

At the Moment, Inflation Is Our Friend, Not Our Enemy

by ImogeneEnright Posted on June 23, 2014

Mother Jones

Atrios makes a point today that’s been on my mind as well. So instead of writing it myself, I’ll just let him say it:

I think more people need to make the point regularly (even Krgthulu!) that the lack of inflation risks isn’t simply because we don’t have any actual inflation, it’s because if there’s one thing the major central banks know how to do — and are biased in favor of doing — is killing inflation. If we do wake up and discover that we’ve had sustained inflation at, say, the unimaginable level of 3% for several months, ushering in the Zombie Apocalypse, our great and glorious central banks will actually step on the brakes. Genuine inflation risk isn’t about a few months of too high inflation (which we should have but that’s another discussion), it’s about “irresponsible” central banks that will keep stepping on the gas even as hyperinflation is destroying the world. But that isn’t going to happen and no one with half a brain really believes it’s going to happen. Are those who fret about inflation evil or stupid? I have no idea, but…

In addition, I’d expand a bit on his aside that a few months of high inflation would be a good thing. That’s true, and it’s the primary reason we shouldn’t let inflation fears overwhelm us. If the CPI rises by 4 or 5 percent for a few months, that’s not a problem. It’s happened before, and then reverted back to the mean. Even a year wouldn’t be a problem. In fact, it would probably be helpful since it would implicitly reduce real interest rates and act as a spur to the economy. And if inflation stays at an elevated level for more than a year? Then Atrios is right: if there’s one thing the Fed knows how to do, it’s kill inflation. There’s a ton of controversy over whether and how the Fed can influence other things (growth, employment, strength of the dollar, etc.), but there’s no question about its ability to curb inflation if it wants to. This is something that left and right both agree about.

So yes: we should tolerate higher inflation for a while. With the economy still as weak as it is, there’s a lot of potential upside and very little potential downside.

See original: 

At the Moment, Inflation Is Our Friend, Not Our Enemy

Posted in FF, GE, LG, ONA, PUR, Uncategorized, Venta | Tagged , , , , , , , , , , , | Comments Off on At the Moment, Inflation Is Our Friend, Not Our Enemy

Low Inflation Continues to Disappoint Inflation Hawks

by JurgenCisco Posted on June 18, 2014

Mother Jones

<!DOCTYPE html PUBLIC “-//W3C//DTD HTML 4.0 Transitional//EN” “http://www.w3.org/TR/REC-html40/loose.dtd”>

Perhaps you’ve read that inflation is up recently. Last night, for example, NBC News breathlessly told me that the price of eggs had gone up 13 cents over the past year. Does this mean that the inflation worries we’ve been hearing about continuously for the past four years are finally coming true?

I’d be happy if they were, since I think higher inflation would do the economy some good. Sadly, though, inflation remains well anchored. Despite the higher numbers of the past two months, the Fed’s latest projections have increased by….one tenth of a percentage point. Or, if you take the average of their range, by one twentieth of a percentage point, from 1.55 percent to 1.6 percent.

And how about 2015? They’re projecting 1.75 percent. And 2016? A whopping 1.8 percent. In other words, they believe that we’ll continue to undershoot our inflation target for at least the next three years.

At the same time, their projection of GDP growth has plummeted from 2.9 percent to 2.2 percent. And their projections for 2015 and 2016 continue to hover around an anemic 3 percent.

So: we have low growth, low price inflation, low wage inflation, and unemployment is still high. This is really not an environment in which spending cuts and lower deficits are the answer. More here from Mark Thoma.

View article: 

Low Inflation Continues to Disappoint Inflation Hawks

Posted in Anchor, FF, GE, LG, ONA, Uncategorized, Venta | Tagged , , , , , , , , , | Comments Off on Low Inflation Continues to Disappoint Inflation Hawks