HitRed wrote:Inflation
“All hell will break loose” - Professor
https://www.kitco.com/news/2021-05-13/- ... Hanke.html
5% inflation is high, but it's not exactly an extinction level event.
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HitRed wrote:Inflation
“All hell will break loose” - Professor
https://www.kitco.com/news/2021-05-13/- ... Hanke.html
What Causes Inflation and Who Profits From It?
By INVESTOPEDIA Reviewed by MICHAEL J BOYLE Updated Apr 26, 2021
Inflation is a measure of the rate of rising prices of goods and services in an economy. If inflation is occurring, leading to higher prices for basic necessities such as food, it can have a negative impact on society.
KEY TAKEAWAYS
Inflation is a measure of the rate of rising prices of goods and services in an economy.
Inflation can occur when prices rise due to increases in production costs, such as raw materials and wages.
A surge in demand for products and services can cause inflation as consumers are willing to pay more for the product.
Causes of Inflation
4 November 2019 by Tejvan Pettinger
Inflation means there is a sustained increase in the price level. The main causes of inflation are either excess aggregate demand (AD) (economic growth too fast) or cost push factors (supply-side factors).
Summary of Main causes of inflation
Demand-pull inflation – aggregate demand growing faster than aggregate supply (growth too rapid)
Cost-push inflation – For example, higher oil prices feeding through into higher costs.
Devaluation – increasing cost of imported goods, and also the boost to domestic demand.
Rising wages – higher wages increase firms costs and increase consumers’ disposable income to spend more.
Expectations of inflation – causes workers to demand wage increases and firms to push up prices.
1. Demand-pull inflation
If the economy is at or close to full employment, then an increase in aggregate demand (AD) leads to an increase in the price level (PL). As firms reach full capacity, they respond by putting up prices leading to inflation. Also, near full employment with labour shortages, workers can get higher wages which increase their spending power.
, as per Milton Friedman.There is no such thing as a free lunch
NEWS RELEASES
CPI for all items rises 0.8% in April; used cars and trucks among many indexes rising
05/12/2021
In April, the Consumer Price Index for All Urban Consumers rose 0.8 percent on a seasonally adjusted basis; rising 4.2 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy increased 0.9 percent in April (SA); up 3.0 percent over the year (NSA).
Expect much higher inflation this year, with overall prices rising 4.4%, as a reopening economy, government stimulus, and shortages combine to push prices up in many areas. Prices rose 0.8% in April from March, the largest one-month jump in 12 years. Shortages of new cars and trucks due to a lack of computer chips, plus government stimulus checks, created a run on used vehicles, whose prices jumped 10%, accounting for more than a third of the total monthly price increase.
This surge in inflation is going to create a quandary for the Federal Reserve, since one of the Fed’s goals is to fight inflation. But Chair Jerome Powell has indicated a commitment to keeping short-term interest rates near zero in order to push down the unemployment rate, and his analysts tell him that the inflation surge is temporary. So, it is likely that the Fed will stand pat, but if consumer demand means that businesses now have pricing power, then this could create a self-fulfilling prophecy and leave the Fed playing catchup.
HitRed wrote:I watch markets, companies and silver. Things are absolutely changing. Inflation and scarcity of goods is taking off.
https://www.kitco.com/news/2021-05-13/U ... emand.html
CBO Projects Individual Income Tax Liability Will Rise 66% By 2031
taxes will most likely rise in the not-too-distant future. As we emerge from the grasp of Covid-19, once the economy stabilizes, Congress and President Biden are poised to raise rates. Even without the president’s proposed tax hikes, individual income tax liability is expected to rise 66% by 2031 according to a recent Congressional Budget Office report. The CBO projection is based on current tax law, which is subject to change when President Biden’s tax increases are implemented. Why are taxes projected to rise? Look no further than the federal budget.
CBO Study: Benefits of Biden’s $2 Trillion Infrastructure Plan Won’t Outweigh $2 Trillion Tax Hike
March 31, 2021
Scott A. Hodge
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This has been updated based on new information.
President Joe Biden is preparing to roll out an eight-year, $2 trillion infrastructure plan paid for by $2 trillion in tax increases on U.S. corporations spread out over 15 years. Setting aside the questionable mix of math and years, the premise is that the economic benefits of government infrastructure spending outweigh the economic harm from an increase in corporate taxes. The Biden administration has yet to make that case, and economic studies—including those by the Congressional Budget Office (CBO)—indicate that the benefits of the Biden infrastructure plan won’t outweigh the cost to the economy of the tax increases.
As I wrote about last year when presidential candidates were discussing infrastructure spending, CBO determined in a June 2016 report, The Macroeconomic and Budgetary Effects of Federal Investment, that:
Federal investments deliver only half the economic returns as private sector investments, 5 percent versus 10 percent.
A dollar of federal spending results in only $0.67 worth of actual investment because state, local, and private sector entities reduce their spending in response to the federal dollars.
Federal investment financed by debt or taxes could do more economic harm than good because federal borrowing and taxes crowd out private investment. To avoid harming the economy, federal investments should be financed by cuts in other discretionary programs.
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