Quote:
Originally Posted by opendoor
I don't know, none of the other similarly low points in unemployment had particularly high inflation. In fact, the highest prolonged inflation period ('70s to early '80s) coincided with high unemployment. And over the last 50 years or so, Real GDP growth has been inversely correlated with inflation (i.e. when growth drops, inflation rises, and vice versa). So I don't think there's a lot of evidence that a hot economy is going to drive inflation (unless productivity randomly plummets or wage growth is way out of whack, neither of which is happening).
Money supply growth correlates far more heavily with ongoing inflation, and the US has actually contracted its money supply over the last year or so, which is virtually unprecedented. If that continues, I don't really see where these inflationary pressures are going to come from.
All that said, a hot economy does mean that higher rates are sustainable, so the end result is more or less the same. They only need to lower rates to spur economic growth. So if growth is happening anyway, rates will stay higher for longer.
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There are lots of non money supply related inflation pressures. Oil prices. War in Ukraine. Housing shortage. Supply chain issues. A lot of industries are still suffering from material shortages.
The labor shortage in China is going to change the way the world gets materials. With China's population shrinking and the cost of labor going up there, that will mean less goods coming out of China and prices going up across the board.
https://www.businessinsider.com/chin...economy-2023-2
The "end of globalization" is going to drive up costs. We're all going to have to get used to having less stuff for a while.