Cents and Sensibility: the Inflation Guy Podcast

Ep. 70: ’Greedflation’ - I See the ’Flation But is There Greed?

In this episode, the Inflation Guy confronts the question of "Greedflation." What is it, and is it real? Is inflation all the fault of smelly capitalists? And what is the difference between the consumer's greed, wanting to pay less, and the company's greed, wanting you to pay more?

Corporate margins are expanding, along with higher inflation. Does that constitute prima facie evidence of greedflation? The Inflation Guy tackles this too, despite completely butchering the pronunciation of "prima facie." He also mentions the Illuminati. Really, you can't miss this episode.

 

NOTES

Good article: Are greedy corporations causing inflation? The Economist https://www.economist.com/finance-and-economics/2023/04/30/are-greedy-corporations-causing-inflation?giftId=21b1b229-c3bf-4371-bf72-4fd9291cac04

Good book: The Bigness Complex: Industry, Labor, & Government in the American Economy, Walter Adams and James W Brock. https://amzn.to/3NGnmtw

Good Movie: “Everything Everywhere All At Once” https://amzn.to/3NjNOrD

Good blog post: “Enough with Interest Rats Already” https://inflationguy.blog/2023/06/21/enough-with-interest-rates-already/

Ep. 69: This Month’s CPI Report - Rents and Wages Aren’t Falling!

In this, the monthly analysis of the CPI report, the Inflation Guy homes in on a couple of reasons that core inflation is staying high, despite widespread forecasts that it should be decelerating more quickly:

• Rents are still rising at about 6% per year, even though many economists have convinced themselves that rents should decline (despite higher costs for landlords, higher incomes for customers, and higher prices of a substitute), and
• Wages are still rising at about 6% per year, which tends to lend persistence to core services ex-rents (so-called "Supercore").

There are some positive signs in the data, but even as inflation declines slowly on base effects there are few signs that core inflation is dropping below the 5% or so level it has been around for the last few years. A Fed on hold seems appropriate.

Reference: "How Much Do Labor Costs Drive Inflation", Economic Letter, San Francisco Federal Reserve

Ep.68: Great Traders, and How the Inflation Guy Could Be Wrong

In this episode, the Inflation Guy answers a question he is often asked: what makes a good trader? In listing what he thinks the four main attributes of a good trader are, he demonstrates one of them here by asking the question, "How could I be wrong?" and discusses how he would structure a position based on that assumption.

So, if you tuned in this week as one of the people thinking 'this guy is sooo wrong,' then this is the episode for you!

References in this episode:

"What if We’re Thinking About Inflation All Wrong?", The New Yorker, June 6, 2023

"Bad Idea of the Year - Wage and Price Controls", Inflation Guy Podcast Ep. 37, August 22, 2022

"CPI Swaps Improving? Not as Significant as You Think", Inflation Guy Blog, June 7, 2023

 

 

 

Ep. 67: Three-point Goal? Or go for Two? (Percent)

The Fed, along with most global central banks, considers 2% (or in that neighborhood) to be the definition of "price stability" that it aims for. Except that in the Fed's case, that 2% is on PCE (not CPI), and they only aim to hit that as an average over some (unstated) period of time.

However, even that is proving to be...somewhat difficult, leading to "murmurs" in some quarters that the Fed should change its target to 3% rather than 2%. For example, see this article in Reuters from May 24th: https://www.reuters.com/markets/us/murmurs-grow-within-fed-about-tweaking-2-target-once-inflation-recedes-2023-05-24/ 

In this episode, the Inflation Guy reviews the history of the 2% target, including how it's sort of a squishy target...which the Fed doesn't really have the power to hit anyway. The Inflation Guy goes a little nuts with the analogies but you will get the point.

Tune in for the trivia question; stay for the history lesson!

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Ep. 66: De-dollarization - Should We Worry? with Andy Fately

This week, the Inflation Guy brings another special guest on the set.

Andy Fately is a veteran of more than 40 years in the foreign exchange markets, trading spot, forwards and options as well as running businesses for major US and international commercial and investment banks.  He is known as the FX Poet (https://fxpoetry.com/about-2/), but really focused on creating solutions for risk managers for problems as they arise.

Andy and the Inflation Guy tackle the question that naturally follows from headlines like these from earlier this year (links take you to the story):

• Russia embracing the Chinese yuan for much of its global trade
• Saudi Arabia considering invoicing oil exports to China in yuan
• France buying gas from China in yuan
• Brazil and China agreeing to ditch the dollar for bilateral trade
• BRICS countries planning to develop a new reserve currency
• Kenya promising to ditch the dollar for oil purchases
• ASEAN members discussing dropping the dollar for cross-border payments
• India settling some trade in rupees

Should US citizens, or dollar-users in general, be concerned that the sun may be setting on the US Dollar? How would this happen, and is it likely to happen? Andy Fately and the Inflation Guy combine their knowledge (which, to be fair, mostly belongs to Andy) and push back a bit on the 'bear porn' disaster cases by walking through the actual mechanics that would be involved in a de-dollarization.

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Ep. 65: This Month’s CPI Report - Sing a New Song Unto the ’Board

The Inflation Guy addresses this month's CPI report, which showed an above-expectations Core CPI number (by a little). However, the internals of the report were not too bad, and according to the Inflation Guy today's data turns out to be a really good one supporting the timing of the Federal Reserve Board's pivot from active-tightening to steady-policy. The months ahead, though, still are unlikely to deliver what the market is pricing in, setting up a denouement for later in the year. For today, however, sing a new song unto the 'Board!

Ep. 64: Will the Money Supply Decline Save Our Inflationary Bacon?

The M2 measure of the money supply has declined 4% from its peak 8 months ago - the largest decline since M2 has been measured starting in 1959. On the other hand, the Velocity of M2 has risen 8%, tying the largest increase in history. Which of these two titanic monetary tides will prevail? Does the decline in money presage the beginning of a deflationary debacle (at least for the stock market)?

The Inflation Guy takes on this question and untangles the truth for you.

Plus, he added a trivia question. So, there's that.

Ep. 63: A Bitter Pill

In this episode, the Inflation Guy again tilts at windmills by ranting about recent comments by Bank of England Chief Economist Huw Pill to the effect that the reason inflation is remaining high is because normal people are not accepting that they are worse off, and therefore insist on arguing for higher wages rather than "taking their share" of the pain. Wow, he gets animated in this one. It's only Episode 63. What is the Inflation Guy going to be like when we get to Episode 100?

Ep. 62: There’s Nothing Wrong With the Phillips Curve!

It has become de rigeur in economics circles (word to the wise - always avoid such circles if you wish to retain your ability to think independently) to bemoan the death of the “Phillips Curve.” The Phillips Curve supposedly describes an inverse relationship between inflation and unemployment. "Supposedly”? In this succinct episode, the Inflation Guy explains why poor William Phillips' good name has been dragged through the mud unnecessarily. There is nothing wrong with his curve!

In this podcast, the Inflation Guy refers to a chart. It's hard to see charts on audio, so here is a link to the chart in case you want to follow along:

The Real Phillips Curve

Ep. 61: This Month’s CPI Report - Good, Not Great

When is a perfect forecast not a perfect forecast? When you got the reasons wrong. This ain't hurling hand grenades, where only the result matters - if you made a bunch of positive mistakes and a bunch of negative mistakes and they happen to offset, you're not a genius; you just got lucky. So today, Wall Street economists forecast 0.39% on Core CPI. That was exactly what they got. But for all the wrong reasons, and the reasons are important.

In this episode, the Inflation Guy (whose forecast wasn't even right, so who is he to judge?!) highlights the two things which dragged down Core inflation...neither of which was expected by almost anyone. So the news overall is good, not great, and the Inflation Guy will tell you why.

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