It’s Fed Day (again) and Jerome Powell and his colleagues at the FOMC are trying to manage monetary policy in such a way that they hit their dual mandate of low inflation and full employment.
Perhaps it's also a matter of a new generation of people being asked who never really experienced inflation before recently?
An average German in the 1950s might have said: it's societal breakdown, and extremely high government debt due to reparations payments that cause inflation.
Me being a child of the sixties and seventies, I am on the lookout for a middle-east fueled oil crisis, and the resurgence of labor unions. Which is why lots of fellow boomers worry about Israel./.Hamas.
If folks focussed on the Pandemic, then there's little to worry about.
On the other hand, labor shortages caused by demographics are here to stay... (That said, Japan has had a tight labor for decades, in combination with deflation -- what gives?)
American children who were old enough to 'experience' the effect of the gfc on their families - some ended up in tent-camps - are said to be rather conservative when it comes to taking on debt / not having savings.
Though currently Americans seem to be spending top dollar through their credit cards who are 'top rated'...
Correct. Any kind of significant hardship experienced during your formative years (age 16-24) but sometimes even younger will have a lasting impact on your political and financial attitudes. That was first proven with the famous 'Recession Babies' paper by Malmendier and Nagel, but can also be shown for the 1970s inflation, the recessions of the 1980s and of course the GFC. Explains also why Gen Z is more activist with regards to climate change and their politics is more left-wing than Gen X, for example.
I work in tax consulting for small and medium-sized enterprises. This year, the margins of many pizzerias compared to variable costs have increased significantly. This means that they have increased prices without a proportional increase in raw materials. Also, the energy prices have been capped thanks to contracts at fixed prices from before 2021 and the government's interventions with large tax credits for energy expenses. I would like to do an experiment. In a time of low inflation, start a journalistic campaign in which a fake uncontrolled increase in prices is loudly denounced with fake statistical projections. It would be the spark that would create a cartel among retailers without any agreements but only on the basis of a collective consciousness that would feel authorized to increase prices without real reasons. This is what happened in Italy with the transition to the euro. 1 euro = 1936.27 lire. But retailers and restaurant etc, decided to simplify it to 1 euro = 1000 lire, in the name of simplicity everyone felt authorized. So what was priced 1000 lire became 1 euro instead of 50 cents, while wages suddenly saw their purchasing power halved. It was a great opportunity for the Italian government to reduce public debt, but it was instead used to increase it.
Perhaps it's also a matter of a new generation of people being asked who never really experienced inflation before recently?
An average German in the 1950s might have said: it's societal breakdown, and extremely high government debt due to reparations payments that cause inflation.
Me being a child of the sixties and seventies, I am on the lookout for a middle-east fueled oil crisis, and the resurgence of labor unions. Which is why lots of fellow boomers worry about Israel./.Hamas.
If folks focussed on the Pandemic, then there's little to worry about.
On the other hand, labor shortages caused by demographics are here to stay... (That said, Japan has had a tight labor for decades, in combination with deflation -- what gives?)
Yes, there is plenty of evidence that your lifetime experience in inflation and interest rates shapes your attitude towards saving, inflation, etc.
American children who were old enough to 'experience' the effect of the gfc on their families - some ended up in tent-camps - are said to be rather conservative when it comes to taking on debt / not having savings.
Though currently Americans seem to be spending top dollar through their credit cards who are 'top rated'...
Correct. Any kind of significant hardship experienced during your formative years (age 16-24) but sometimes even younger will have a lasting impact on your political and financial attitudes. That was first proven with the famous 'Recession Babies' paper by Malmendier and Nagel, but can also be shown for the 1970s inflation, the recessions of the 1980s and of course the GFC. Explains also why Gen Z is more activist with regards to climate change and their politics is more left-wing than Gen X, for example.
'as long as economists try to explain inflation through abstract actions taken in Washington'
Those poor Anglos: having to spend 100k on an education and then having to contemplate the psychological impact of toiletpaper shortages...
And publish on that?
That won't happen anytime soon.
It's amazing - and risible - how the 'experts' discount 'government mismanagement' and 'price gouging'
I work in tax consulting for small and medium-sized enterprises. This year, the margins of many pizzerias compared to variable costs have increased significantly. This means that they have increased prices without a proportional increase in raw materials. Also, the energy prices have been capped thanks to contracts at fixed prices from before 2021 and the government's interventions with large tax credits for energy expenses. I would like to do an experiment. In a time of low inflation, start a journalistic campaign in which a fake uncontrolled increase in prices is loudly denounced with fake statistical projections. It would be the spark that would create a cartel among retailers without any agreements but only on the basis of a collective consciousness that would feel authorized to increase prices without real reasons. This is what happened in Italy with the transition to the euro. 1 euro = 1936.27 lire. But retailers and restaurant etc, decided to simplify it to 1 euro = 1000 lire, in the name of simplicity everyone felt authorized. So what was priced 1000 lire became 1 euro instead of 50 cents, while wages suddenly saw their purchasing power halved. It was a great opportunity for the Italian government to reduce public debt, but it was instead used to increase it.