Car & Truck Insanity, Hamster Wheel of Work & Inflation, Do Price Controls Work? And Wading into Commercial Real Estate

And much more. Wolf Richter on This Week in Money, recorded Nov 10.

Enjoy reading WOLF STREET and want to support it? Using ad blockers – I totally get why – but want to support the site? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.

Classic Metal Roofing Systems, our sponsor, manufactures beautiful metal shingles:

  • A variety of resin-based finishes & colors
  • Deep grooves for a high-end natural look
  • Maintenance free – will not rust, crack, or rot
  • Resists streaking and staining

To reach the Classic Metal Roofing folks, click here or call 1-800-543-8938

  102 comments for “Car & Truck Insanity, Hamster Wheel of Work & Inflation, Do Price Controls Work? And Wading into Commercial Real Estate

  1. Cobalt Programmer says:

    As a well known expert in writing comments I will give my two cents,

    1. May be a “liquidity trap”. People understand the inflation will increase the prices sooner. So, I will buy today. Do not hang on to cash. Buy car, home and assets.
    2. Gas prices will soon hit $6 a gallon (outside cali) before the food inflation eats people. Probably, loans will be given to pump gasoline. That will hurt more than car prices.
    3. I am seeing so many articles related to how inflation is “good”. Only good i see is finally after omission, denials and wrong calculations, inflation is admitted as the truth.Inflation cannot be contained this time. So, the only way is to ride the modern monetary theory and print more and more. There is no way out.
    4. Regarding Canada, If a man is fool enough to buy car for >100,000 then he deserve to pay the luxury tax. There is a reason money is called “loonie” there.
    5. Lot of local counties and cities placed hold on the rent increases for a while may be Summer 2022. The increase may be 1 or 2% not more.
    6. If you do-not get a 6% pay raise, your pay is cut this year.
    9. Given cheaper rent, I will stay in the office building converted.I do not need any atmosphere. Its Ok.
    9. we reserve the constitutional right to post unrelated comment without reading the article (or hearing podcast).

    • DawnsEarlyLight says:

      If gas prices hit $6 a gallon nation wide, then it’s all over. All over for those that rely on the government/media to lead them by the nose on a daily basis.

      • Thomas Roberts says:

        Gas prices are significant, but are vastly less important than food prices. Food prices are the thing that have historically, collapsed many many countries.

        Food inflation is definitely the thing to watch. Over the last 2 years, I’ve seen alot of specific grocery items, go up by 50%. Most others have gone up by at least 15% to 20%. Unlike gas prices, which go up and down, I’ve never seen food prices go down en masse.

        The base ingredients like grain and rice are still very cheap, but, between everyone in the food chain above base ingredients wanting more money, to the store jacking up the price by percentages, the inflation has skyrocketed. There is very little competition at the grocery store.

        • Wisoot says:

          Pull back and see food inflation as a problem statement. Apply the who what why when how. As food is most nutritious in a fresh state logic says distribute food locally. Now look at the existing model and what is broken. Multiple choice of supply is a nuance citizens didnt ask for but royalty did. A plane containing food. Why. Hydroponics in deserts and solar wind offgrid powered poly tunnels have enabled food to be grown anywhere. Ear in season only. Quality of life due to increased nutririon and better immunity may go up.

        • Paulo says:

          interlinked. The more energy costs rise the more food prices rise. Fuel increases for tractors and parts, transportation, fertilisers, workers, ventilation,everything that increases production costs is transferred to the consumer. Same for any product.

        • Joe Saba says:

          we’re at point of adding fuel surcharge or just paying workers $5 an hour more(no we’re not low wage and never have been)
          actually will likely do BOTH
          therefore RENTS must go up 10% annually until ‘inflation’ genie(devaluation of fiat $dollar) subside
          rent control = NOTHING FOR RENT FOR LOW INCOME

        • Thomas Roberts says:

          Fuel costs are a part of it, but it’s only a small part at this time. Fuel costs were much higher 10+ years ago and food was way cheaper, for instance.

          When there is a lack of competition, companies can charge much higher prices that cause their profits to be slightly higher. Each segment in the supply chain can do this, causing much higher costs to the end consumer. Figuring out an entirely new food processing and distribution system is one of the many things America needs to do.

    • BuySome says:

      As opposed to an “unwell known expert”? 🤔 Or did you mean “well-known expert”? 😹😹

      • Michael Gorback says:

        An “unwell known expert” would be an expert who is sick, i.e., unwell.

        Personally I thought it was a brilliant and hilarious commentary on the billions of gobbledygookers we see on the internet.

        • BuySome says:

          Not a reference to the content, which I also had a good chuckle over (including going from 6 to 9 and adding a repetitive 9). It’s that first line that makes you stop and re-read it. This would probably be more the way it should appear….”As a well-known expert in writing comments, I will give my two-cents:”…but, of course, the given line supports the entire format of the humor concerning self-made experts.

    • ridgetop says:

      Wolf is right cars will come down next year.
      From a friend:
      A few days ago I spoke with my car dealer friend, he said they have started seeing car shipments from Toyota, Honda and Chevrolet. Not all models but solid shipments. He mentioned that he was recently at a Toyota dealer meeting in Las Vegas with over 2000 dealers present. The president of Toyota North America stated that they have started to remove all manufacturing from China and ramp up other vendor facilities throughout the world. He stated that Toyota will never again be held hostage to China (HE RECEIVED A STANDING OVATION FROM THE TOYOTA DEALERS PRESENT). He went on to say that Toyota’s goal was to have product shipments back to normal by 1-1-22

    • Morty Mc Mort says:

      During the last major Inflation cycles…
      An interesting effect rose up.. that few are discussing today..
      (It is still very early in the cycle)..
      Inflationary Expectations set in. Citizens get used to inflation and corporations expect prices to rise.. everyone starts “Pre-Emptive” Price increases and shrink sizing..
      The price increases lead to price increases that lead to Pre Emptive price increases..
      Soon.. the cycle is made worse and worse by these expectations..

    • Morty Mc Mort says:

      Watch (Buckle Up)
      Continue Debt and Inflation…
      Stir the mixture gently and add more debt..
      Simmer Population Gently and less Gently..
      Bring to a Boil..
      Collapse economy and currency..
      Rescue with massive intervention (Population Begging for Rescue)
      Reset all currency with Central Bank Digital Currency
      Ta Da!!
      Total Central Control.

  2. Harry Houndstooth says:

    Wolf has persistently opined that inflation is not transitory, but persistent and now approaching 10 %. He was right. There is no way out except to raise interest rates. This will reverse the asset bubble.

    It is astounding to me that market participants apparently believe the Fed that this inflation will reverse on its own. This bubble is bigger than 1929 or 2000. There has never been a bubble with inflation until now.

    How long until the Fed is forced to raise interest rates? Wolf has pointed out the huge wholesale inflation that is going to hit like a tsunami.

    The bottom is going to fall out. Everyone is going to head for the exit at once. You will be very happy you followed the wisdom on Wolfstreet.

    • AdamSmith says:

      The inflation rate is actually 20% or more….
      And, it is going up even more and faster….
      I am seeing all forms of business using the inflation/supply hype to justify all manner of price increase and fake shortage and size reduction inflation….
      The inflation statistics in the media are not real time at all

      • Joe Saba says:

        at least 20% = many items are 50-100% MORE
        gotta go now and shop HIGH PRICES at Lowe’s(lumber and paint)

      • Swamp Creature says:

        Agreed, Inflation is at least 15 to 20%. Even with my frugal lifestyle I’m seeing price increases on everything. Luckily I don;t need much stuff, so I’m not as affected as most people. Government figures on inflation are total BS. They are deliberately kept lower than reality so as to avoid COLA increases that would bankrupt SS and other retirement programs. Anyone with a third grade education could see that.

    • DV says:

      “There is no way out”
      This is the framing of an ideologue like Margaret Thatcher.

      The feds or the states could raise taxes to suck up the extra liquidity sloshing around.
      They could make sure the domestic market is a competitive environment with low barriers to entry. Even a market ideologue would tell you competition would lower prices.
      The Feds could have reduced military spending to offset the budget. (Wolf won’t mention that one)
      Biden could end the China Trade War, unrestrict the immigration policy, and let cheap stuff and workers flow into the country again. And let the dollars flow out.
      Crimininy, individual people could simply sit on their cash instead spending it and bidding up the prices on all these goods and services. But that’s a collective action problem, and the US doesn’t know how to solve those…

      There are tons of options, but you (and Wolf) would rather bang on about a boogieman bureaucrat because it makes for such a good narrative that shifts monetary policy out of the hands of the state and into the hands of the banks.

      • Sams says:

        There is one catch with high interest rates, they are monetary inflationary. Raising the amount money the banks have to hold at the central bank and set the interest rate on this well into the negative would deflate the amount of money.

        Do change the regulation to threat shares, deposits and loans the same way in case a bankruptcy and the amount of money would really deflate quickly the moment a few large banks was pushed to default. That is, make loans be zeroed as shares and deposits are in a bankruptcy.

      • Augustus Frost says:

        There isn’t a single option that won’t result in a future decline in living standards for the majority of the population. No free lunch in life.

        Tightening fiscal or monetary policy, whether by tax increases of spending cuts, will reduce “growth”. That’s one source of the mostly fake “growth” especially over the last 13 years.

        Tighten monetary policy noticeably and it risks collapsing the asset mania, though it’s ultimately dependent upon psychology.

        • DV says:

          Are you really doubling down on the “There is no alternative” ideology?
          Halting price increases (a.k.a inflation) would improve living standards, de facto.
          And if that was in the cards, there are many way to take liquidity out of the system without declining living standards.
          There are a series of companies sending rockets into space without making profit.
          Apple is sitting on 100 billion in cash they spend at will.
          Many of the fortune 500s are back on their share buyback programs.
          Imagine if banks had their minimums for fractional reserves upped just a smidge.
          It doesn’t all come down singularly to interest rates and the Federal Reserve, and that’s the point.

    • Bob says:

      Since govies pay principal at maturity, the “secret” Fed plan is to repay the trillions of new debt with quarters and not dollars. Accordingly, the Fed will not stop QE and raise rates until there is a massive public outcry that forces their hand. You have to give the Fed credit for using people who do not want to return to work as an excuse for not accelerating tapering and raising rates. What’s even more amazing is the fact that the corporate media is not calling them out on this foolishness.

    • GORAN RAKITA says:

      Interest rate increase? They will try and that will only increase the inflationary pressure as it will bankrupt over leveraged producers ( of essential goods and services) therefore constraining the supply. As cost of money goes up for the surviving producers, they will simply pass it on and then some. So no, higher rates are absolutely a no go and these are not Paul Walckers 70ies when we abandoned gold standard and credit barely existed.

  3. phil says:

    what if i hang on to cash and buy stocks at a much lower price, looking farther out? is that a stupid approach?

    • Harry Houndstooth says:

      Wolf is telling us that the asset bubble will have to reverse. That means cars, houses, stocks, bonds, etc. will all be selling at much lower prices in the “not too distant” future. Because this bubble is so huge you must be careful about trying to catch a falling knife. It is better to wait until the knife hits the ground and vibrates. History has shown that extremes in overvaluations overshoot the mean and drop to levels well below what you might think as fair value. I would recommend looking beyond just stocks and consider residential real estate or other assets close to you that you can monitor. Here, at the top of the bubble Zillow is trying to reverse house purchases around $400,000 (at a loss). At the upcoming bottom, houses may be going for a small fraction of that number.
      If it is foolish to hold cash now (perhaps of the fear of losing to 10% inflation), remember that the winner in an asset crash is the human that loses the least.

      • Augustus Frost says:

        The collapse of this asset mania won’t be a single event but almost certainly a long term process. Numerous suckers rallies in between all the way down with false hope due to government’s and central banks “doing something” to “help”, attempting to prevent price discovery. That’s what central banks do by distorting interest rates through monetary policy.

        • Harry Houndstooth says:

          The largest rallies are during crashes. That gives the nimble plenty of chances to profit on the way down.

          Bulls make money.
          Bears make money.
          Pigs go to slaughter.

    • Sean says:

      My impression is that many people have been holding cash for quite a long time (i.e., years) because they saw how overvalued the stock market was in the past, and couldn’t image it continuing to become even more overvalued.

      Your idea is sensible; the difficulty is that nobody knows when the stock market will begin its decline and when it will hit the bottom.

      Lots of people hope they can time things, but really they can’t. At best, they can make a reasonable guess and get lucky.

      • VintageVNvet says:

        Exactly S:
        IIRC, JP Morgan has been quoted supporting the idea, ”Buy on the way down, but only if you are sure you can hold through the bottom,,, Sell on the way up, because no one can know the top in advance.”
        Seems he did OK with that simple and clear concept, eh?
        Of course, these days are different,,, or are we just in a scenario of massive propaganda driven ignorance?
        Time will tell us, and IMHO, sooner rather than later.

    • The Falcon says:

      Phil the answer to your 2nd question is “no”.

  4. BuySome says:

    I don’t see what one would traditionally refer to as inflation or pay raises. The old economy cannot collapse because it done died and was buried while everyone was tricked into staring at light emitting screens. To keep up this new economy, we now have forced cross-subsidy carried out by destruction of all the “earned savings”. The method of conducting the transfers will be all the little subscriptions and fees that are progressively being jammed down your throat whether you like it or not. And the major culprit being the entire b.s. tech industry which has brought this on with their hand in every corner…oh, don’t worry about the cost of all this crap ’cause it’s all gonna pay for itself with your new ability to buy tiny pieces of scams and place bets on which fools get taken. And we’ll build all the warehousing needed for it by digging a deeper black hole entirely financed with low cost loans since we don’t need to pay you to borrow against your savings. Our bankers are under no obligation to pay depositors in the new system. With the last two presidential elections largely decided by how angry people on the edges have been, it should serve as a real warning of what may come when the defrauded decide they’ve seen enough.

  5. Brent says:

    Dedicated to Michael Engel:

    I.
    Jerome Powell had often attested
    That Inflation at last had been bested.
    But his Loose Money Vices
    Inflated Home Prices,
    Which a Few enjoyed more than the Rest did.

    II.
    Said Fed Chairman: “It’s not of my station,
    To answer for Asset Inflation.
    Though I may let Rates double,
    To burst the next Bubble,
    The True Cause was Lax Regulation.”

    III.
    The Smith’s of 212 Willow Lane
    Thought their Mortgage a terrible Strain.
    They defaulted and then
    Moved next door to 210
    Where they rent, and are solvent again.

    • BuySome says:

      Entertaining, but truthfully:
      They jingled and bolted,
      It was declared “they’ve revolted,
      So they must live under tarps in the rain!”

      • Red says:

        Sounds like Portland

      • DawnsEarlyLight says:

        Nice!

      • Brent says:

        Rich man’s war and poor man’s fight …

        Therefore “Ode to the Soaring Stock Market” along the lines of John Keats:

        When Old Age shall this Generation waste,
        Market shalt soar, in midst of other Woe
        Than ours,
        A Friend to Man, to whom thou say’st,
        “Stock Market is Truth, Truth is Stock Market,—
        That is all Ye know on Earth, and all Ye need to know.”

    • VintageVNvet says:

      Gotta say, ”Great one” Brent!
      Right up there with the various and sundry such wonders dad and his first cousins spent hours trying,,, mostly just trying to come up with such…
      Thank you for the vast amusement,,,
      best laugh of the day, so far,,, and truly,
      WE need every good laugh we can get in the face of the amazing changes due to tech!!!
      That some are good for WE the Peons and some are equally bad should come as no surprise to anyone who has studied her or history,,,

  6. makruger says:

    How to respond to a crisis (loosely quoted from 80’s British comedy):

    Stage # 1 – Say nothing bad is going to happen.

    Stage # 2 – Say maybe something will happen, but we should do nothing about it.

    Stage # 3 – Say maybe we should do something about it, but there is nothing we can do.

    Stage # 4 – Say maybe there was something that we could have done, but it’s too late now.

    • Magnus87 says:

      Thank you, Sir Humphrey.

    • Thomas Roberts says:

      At several points, you are forgetting to blame those responsible for their overwhelming fault in the matter.

      It’s important to remember that although something bad is happening, because of that other person. When you are in charge, it’s under control, until that other person messes up again; resulting in action at some point, which hopefully, will be not be impeded by those causing the problems, despite your great efforts as long as you stay in power and can suppress those causing the problems, you can prevent all the problems; until, problems happen, which are reduced thanks to you, but would not have happened, if you had been in power the whole time and nobody interfered with what you were doing.

      • LP5 says:

        Don’t forget that time-honored approach: punish the non-participants.

        • sam says:

          Re Project mgmt template:

          “Enthusiasm,
          Disillusionment,
          Panic, hysteria and overtime,
          Hunt for the guilty,
          Punishment of the innocent, and
          Reward for the uninvolved.” – Barry Popik

        • Thomas Roberts says:

          LP5,

          They were some of the ones causing the problems.

          ;)

      • COWG says:

        I actually understood that…

        I either need serious help or Thomas needs to share some of that weed…

    • Twinkytwonk says:

      You are Matt Hancock and i claim my £5.

  7. MyLadyHumps says:

    “Ronald Reagan proved that deficits don’t matter”
    (President Cheney/Bush)

    Deficits = inflation
    Deficits don’t matter
    Inflation does not matter
    QED

    Pay more for your car (and everything else) and move on.

  8. Colin Williams says:

    Rivian Automotive, an electric vehicle company that has so far delivered only about 150 electric pickup trucks mostly to its own employees, surpassed General Motors Thursday to become the second most valuable U.S. car company behind Tesla.

  9. Depth Charge says:

    I am on record on this site as saying the money printing was a huge mistake and was going to lead to massive inflation, possibly hyperinflation. Yet, some commenters myopically celebrated the free cheese. Inflation is taking back 10x what you were given. The country is well and truly screwed now. It’s too late, no matter what the course. The damage is done.

    • BuySome says:

      The “money printing” was never a mistake…it was purposefully designed to get what “they” want and have been working for over many decades. And here it comes, so it goes.

      • Jake W says:

        do they think they’re going to come out all smelling nice after all is said and done?

        • DawnsEarlyLight says:

          Based on the overwhelming acceptance of information from the mass media and the short memory cycle of the vast population, it has been smelling pretty good so far!

    • Swamp Creature says:

      DC

      It was over after the year 2000. There is no way out of this now. Some people know this and are batting down the hatches.

    • NBay says:

      DC
      Not just on record…..your song went platinum long ago.

  10. phleep says:

    We saw a huge unprecedented dip in the first big wave of COVID (bottomed March 2020), surge of money in a depressed economy, and a corresponding spike now. My biggest concern NOW and going forward is public panic followed by an overlay of some idiotic government response that will prevent these waves subsiding, and “normalizing,” such as they might. The actors here are what scares me. Wolf refers to knock-on effects of people who can’t hang on. People will not go quietly, and the feedback between them and government can become very messy.

    My own portfolio is heaviest in real estate (direct ownership, not some paper claim that may fall apart in a crash), second in cash (for a crash, and just to pay bills, I have lived through multiple recessions), and third in stocks (mostly other inflation hedges and for a scenario of corporate success). If you model your view of the future and then weight investments for what you see as likely to stay valuable.

    I am a person as Wolf describes in the webcast, fairly immunized to this inflation surge, but I am looking beyond this for further scenarios too. I have lost income to inflation for quite awhile, but my lifestyle has been meticulously built around what I really value, not signalling consumer decadence. This requires a certain mindset. People are anchored to a growth level that was the anomaly — postwar growth. Being creative in one’s life is the greatest source of meaning and value.

  11. Micheal Engel says:

    1) Option #2 : SPX. On the 4h chart we got a setup and a trigger. On the daily, we might get a trigger on Mon/ Tues, but we don’t need one.
    2) On the weekly chart May 10 is a backbone. First stop May 10 fractal zone.
    3) After a reaction, between 0.38 – 0.62 of the drop from Nov to May
    a plunge to Aug 31 fractal zone.

    • Petunia says:

      ME,

      None of this numeric mumbo jumbo matters anymore. The connection to history and valuation is totally broken. The only thing that matters now is politics. Watch the debt ceiling. Watch Evergrande.

      • BuySome says:

        Analysis it all that matters for dealers and players who are deep in playing the ugly game. It has come down to selling fractions of hooves and placing bets on who will get the stale cuts. Meanwhile, the lame horse is lying on its’ side, coughing up the last breaths of blood and no longer pulling the cart. Over on the roadway, a former peasant is now riding a rickshaw powered by electric traction motors controlled by technology that was handed to them on a platter by their western servants. This is horse-trading at its’ most inept level, and we allowed it by not demanding the financial instruments be real and whole. But that would require accountability for what you’re gambling with…other people’s money or debts incurred in their names, including those who have not been born yet.

        • Petunia says:

          The game is all politics now, take from the taxpayers and give to the donors. I’m watching the social security turns into medicare fiasco. Take from the old and sick to feed the predators.

          It wasn’t lost on me that days after passing the $1.9T giveaway, with enough pork to give foreign criminals $450K, they follow it with the biggest increase in medicare premiums ever. The backlash is so close, I can smell it.

  12. Micheal Engel says:

    Or, Mar 2 2020 fractal zone.

    • Bet says:

      SMH is the highest risk reward. Chips up hard and come down hard. Waiting on the NVDA report on Thursday. Straight up like a rocket, gravity is a tough mistress. The markets now remind me much of late 1999 and early 2000

  13. Anthony says:

    The joke is that inflation has never gone away. If it’s 2% then it’s 2% inflation and if you don’t match that in your wages, then you are getting poorer each year. Inflation is here to stay because it never went away…..

  14. Crush the Peasants! says:

    Beware the nominal versus real shell game.

    A $10,000 house in 1890 would be worth almost the same in real dollars in 2010 but more than $350,000 in nominal dollars in 2010. Which matters to the home seller, real or nominal prices? If a seller is holding a mortgage then the question is: Can I sell for more or less than I owe? Since that loan amount is not adjusted for inflation then the nominal value is more important to both the seller and the mortgage holder. It is when nominal prices fall that banks have trouble with high rates of mortgage defaults. But if you are looking at the long-term value of real estate as an investment (compared to stocks or bonds) then you need to take into account the real growth.
    (Data Source for Housing Price Index from Robert Shiller’s Irrational Exuberance)

    • Paulo says:

      But if you are looking at RE as a home and/or a modest revenue generator, it is awesome. Inflation matters a lot less if you have no mortgage payment, especially in a low tax environment.

      In the 80s I moved to a new town for work. I looked around and saw the wealthiest and most influential residents were those who got there first and owned the most land. Lately, there are newer arrivals who sold out wherever and brought their wealth with them, but the issue is still the same. A friend of mine who I once worked for carried on the tradition of his family, and last I looked he owns a city block. All stores rented out. Sometimes such wealth is low key, but it’s there.

    • BuySome says:

      Whoah! 1890…in what world? A 10k home in 1950-1960 might be $350k in 2010. 10k in 1890 could have built something on a parcel adding up to millions in 2010. Unless, of course, you built it out in Swamp Gulch.

  15. Micheal Engel says:

    Argentin Malvinas under economic blockade by the west, like Germany after WWI, exploited by China.

  16. Old School says:

    In some ways government ylis prostituting its balance sheet by current policies. My friend is visiting her some near St. Pete Florida. Bought home for just over $500K less than two years ago. Similar house across the Street just sold for $1.3 mil.

    Somebody pocketed a lot of money. Government will pick up the losses if market tanks in next year or two. How many liabilities can be put on the government’s balance sheet.

  17. Michael Scott Gorback says:

    Used tractors are booming. I bought a 2009 Kubota L4400 for $13,800. 45 horse, 4 wheel drive, hydrostatic trans.  205 hours with front end loader and bush hog. Find one now
    for under $20,000.

    Anyone who pays ridiculous prices for a pickup truck doesn’t need a pickup truck. It’s a tool. You can buy a $5,000 rolex for the glitz but it does not have any more practical use than a $50 rubber watch. You might as well show off your $500 gold-plated hammer.

    This is why although my friends consider me wealthy I avoid wealthy people. They totally suck. It’s a life of “show”.

    “Now, mama said there’s only so much fortune a man really needs… and the rest is just for showing off.” – Forrest Gump

  18. Micheal Engel says:

    Option #3 : Xmas rally, SPX to :
    1) 4763.38.
    2) 4812.76.
    3) 5030.29.

    • MyLadyHumps says:

      $6000

      At that level, Tom Lee will still be on CNBC telling us the market has room to run because… the Fed continues to create vast sums of money and you have no alternative.

      The average worker makes a pittance compared the vast sums the Fed recklessly creates, for wealthy investors, without giving it a second thought.

      The Fed has devalued labor and made working people wage slaves. The best way to spend your time on earth is to just relax and let the government take care of your needs. Don’t be one of the suckers.

  19. Spencer Bradley Hall says:

    Volcker didn’t tame inflation. Volcker created two back-to-back recessions. After the “time bomb”, the widespread introduction of NOW accounts, he imposed reserve requirements on those accounts in April.

    The FED doesn’t need to tighten monetary policy in order to quell inflation. The FED just needs to stand pat.

    • Wolf Richter says:

      Spencer Bradley Hall,

      Sheesh. Recessions always result after periods of excesses. Volcker, with the support of Reagan, tamed the inflation-monster for 40 years, and those efforts to tame inflation (higher interest rates) are designed to result in a reduction of demand, which is how you tame inflation, which can trigger a recession and wrings out the excesses. Recessions are a normal part of the business cycle. Those efforts to tame inflation eventually led to the longest bond bull market, huge stock market gains, and sharply falling interest rates.

      If you don’t tame inflation, you get what they have in Argentina.

      • Michael Gorback says:

        Rampant sex?

      • MyLadyHumps says:

        Reagan fired Volcker, at the end of his first term, and put Greenspan in charge.

        Carter put Volcker in charge of the Fed and told him to do whatever was necessary to tame inflation.

        Carter inherited inflation from bad policies begun during, Johnson, Nixon and Ford.

        History revisionists will forever dump on Carter, he did what he had to and he had integrity. You can spot a person with integrity because they will be universally despised for giving the children their medicine while someone else is trying to hand out candy.

        • Wolf Richter says:

          MyLadyHumps,

          “Reagan fired Volcker, at the end of his first term,”

          That is INCORRECT. This is floating around, and you’re not the first one who said that. So please look it up.

          To look it up, you can go to the Fed’s website, which list the Chairs in reverse chrono order.

          Reagan reappointed Volcker in 1983 for a SECOND term. Volcker served his second term just fine, but wasn’t reappointed for a third term, and his tenure ended after 8 years in August 1987.

        • NBay says:

          To me, the best proof that Carter was a GREAT Prez (other than the plea for less consumption speech, that he knew would doom him) was from my rich lobbyist uncle.
          “What’s a damn scientist doing in the Whitehouse?”

    • historicus says:

      Spencer…
      Volcker tamed inflation
      Powell promotes inflation…

      See the difference?

      Rates must increase…. the problem, too much debt subsidized by rates too low CAN NOT ALSO BE THE SOLUTION!
      The Fed tacked on plenty of wealth….and now are faced with
      *raising rates which will not be enough to quell inflation
      *but the rate increases will be enough to roll over the markets.
      everyone loses…the magic money disappears….
      reality was put on hold by central bankers….for a while.

      • BuySome says:

        Reality has been on hold far longer than most of us have been here. It was always about dealing with a surplus of working population in the face of technological changes that rendered them as excesses. Automobiles, radio, diesel-electric locomotives, airplanes, and loads of other things began an upheaval that continues. The answer has always been some method of removing this population long enough for the (re-inflating) economy to keep going back to upcycle tendencies, switching from curve to curve while avoiding the bottom-line shakeout…all accomplished by ever growing bad debts, both private and public. G.I. Bill, student loan program, on and on. Same-old same-old dressed up in new clothes. We got so good at sidetracking the population, that we had to actively “bring in” outlanders to pick up the newly created slack. And no longer just the farm/factory/road jobs, but every level in the economy. And who got rich on all this debt? Those who keep their mouths shut about asking if we have been on the wrong and over-valued road since 1916.

    • Petunia says:

      Volker did tame inflation by raising interest rates to 21%. This injected fear into the markets because 21% was extreme, and they feared interest rates could go up to any number after that. Volker made it cheaper to play nice than to manipulate markets. That’s how I remember it.

  20. COWG says:

    A man after my own heart…

    My rule number one…

    Live as well as possible as inexpensively as possible…

    That doesn’t necessarily mean cheap, either…

    I will pay more for quality, durable items from companies that value their customers and stand behind their products because in the long run it’s cheaper and provides more value…

    I will buy used or even new, but I never pay retail…

  21. Franz Beckenbauer says:

    Do price controls work ?

    You’ll soon find out in the U.S.

    After all, Biden said he would stop prices going up by decree. So he will. Try, i mean.

    In all of history (including ancient Rome), price controls always were the last step before the collapse of a society.

    But this time it’s different.

    Pardon the Pun.

    • Wolf Richter says:

      Franz Beckenbauer,

      “Biden said he would stop prices going up by decree.”

      He said no such thing. Totally fabricated.

      • Franz Beckenbauer says:

        “Inflation hurts Americans pocketbooks, and reversing this trend is a top priority for me.

        I have directed my National Economic Council to pursue means to try to further reduce these costs, and have asked the Federal Trade Commission to strike back at any market manipulation or price gouging in this sector”.

        Straight from the horse’s mouth.

        You’ll be getting there.

    • Realist says:

      Hmm, Caracalla introduced a new coin, the antoninianus that was denominated at 2 denarii, but did contain the silver equal to one and a half denarius …

      During the chaotic times of the mid third century, Traianus Decius struck antoninianii using old denarii as blanks …

      Aurelian did stabilize the coinage using harsh methods, among other things he had the imperial mint of Rome stormed by the army, thus ending the shenanigans of the main imperial mint …

      Diocletan’s price edict was harsh, but didn’t survive for long. Neither did those people who broke this edict (while it was enforced) because they were destined for a short but exiting career at the circus …

      What will be the US’ solution to things falling apart ?

      • BuySome says:

        You may have been looking for “exciting career”, but “exiting career” was definetly appropriate.

      • cas127 says:

        Realist,

        Nice…people fail to understand just how long and how repeatedly “governments” have used the inflation/systemic fraud tool to bail themselves out of jams created by their own failures.

        Right up to the point where faith in their debauched currency collapses and those governments’ final dissolution occurs.

        God bless wikipedia for bringing these detailed histories to the masses.

      • Franz Beckenbauer says:

        “The Edict on Maximum Prices is still the longest surviving piece of legislation from the period of the Tetrarchy. The Edict was criticized by Lactantius, a rhetorician from Nicomedia, who blamed the emperors for the inflation and told of fighting and bloodshed that erupted from price tampering. ”

        Isn’t it fascinating how in three thousand years nothing has really changed ?

        Except now there’s bitcoin. But i place my bets on that other thing that has always worked for thousands of years.

        But that’s just me.

  22. Michael Scott Gorback says:

    Been there, done that, got the shirt.

  23. Beardawg says:

    I guess it is time to ride it out. Other than food and maybe utilities, what do you really need? US consumers have gotten hooked on “buy now, receive immediately.” If you don’t buy at all, inflation will pass you by.

  24. Persistent wage inflation with low fixed yield mortgages is how the post W2 generation built wealth. There is still a lot of plentiful low priced desirable real estate, if you factor out the limits of jobs tied to the old economic urban center. The temporary blip in preference for goods over services is counter trend. Lower income people tend to spend their wealth on goods, the same people the stimmies have helped. When lower income are no longer low, (wage inflation, fixed low interest payment home mortgages) then spending patterns change.

  25. RockHard says:

    Wolf, you had a comment about 58:00 in the video – “rents are surging in the United States”. I have a friend who’s searching for an apartment and has a hard time finding anything to even look at. Apparently anything decent gets listed about 6AM and they’re rented by noon, and there aren’t many incentives out there. That feels like the stories from earlier in the year where home buyers were bidding up prices – my hot take is that people have been priced out of buying and now the price wars are coming into the rental market. What have you heard about residential rental markets?

Comments are closed.