Posted on 06/23/2025 11:29:48 AM PDT by Angelino97
Bidenflation is over.
But if you feel like prices still aren't falling, you're not alone.
Since Donald Trump took office, inflation has plunged from a Biden-era 5 percent to just 1.4%.
This is actually below the Fed's target of 2%. Normally, at this point, the Fed would be trying to pump inflation since it's "too low."
Of course, for the American people, 1.4% is not "too low." What they want is falling prices, as in take it back to pre-Biden prices.
Will that happen?
In short, no. Prices will never durably fall until we get rid of the Federal Reserve.
Because deflation -- falling prices -- is the #1 thing the Fed fears. Not unemployment. Not recession. Not nuclear war.
This comes from that core propaganda that created central banks: The false claim that deflation itself is bad.
Good Deflation
There are two very different kinds of deflation.
There's the healthy -- in fact, normal -- deflation you automatically get from a growing economy. And the unhealthy deflation when a central-bank financial bubble collapses.
So, walking through, inflation is about how much money is chasing how much goods.
More money gives you inflation -- too much money chasing goods.
More goods gives you deflation -- more goods for money to chase.
So if your economy is growing, it means you're producing more goods. So it takes fewer dollars to buy an apple — a dollar an apple when it used to be 2.
That deflation is good -- it means you're growing.
Central Bank Deflation
But there's a second bad deflation called "debt deflation."
This is where the amount of goods doesn't change, the amount of money collapses. Specifically, mass defaults that collapse the money substitutes called debt.
That means the surviving dollars also buy more — a dollar buys an apple. Not because there's more apples, but because there's effectively less money.
This normally doesn't happen -- outside catastrophic war, you don't get massive economy-wide defaults.
Unless there's a financial crisis.
And what causes financial crises? Ironically enough, central banks. Who does it like clockwork?
They do this by making money artificially cheap with low interest rates and Quantitative Easing. And then slamming the brakes when the cheap money causes inflation.
The central bank boom-bust cycle.
Slamming the brakes causes widespread bankruptcies and defaults -- less money. And it causes recession -- less goods.
But in practice, the defaults far outrun the production. So less stuff, but a lot less money.
Sometimes this can be very big: in the 1919 and 1930's depressions peak deflation was 30 to 40 percent -- a dollar bought almost twice what it used to.
Which was catastrophic for borrowers: A farmer or small business suddenly had to pay effectively twice as much on their loans. All thanks to the Fed's boom-bust.
Nowadays, debt deflation is much smaller -- it peaked at 2% in the 2008 crisis.
Because nowadays, central banks immediately jump in to dump freshly printed money into markets.
So, setting aside the hilarious irony that the Fed fights good deflation specifically because it creates bad deflation, this means even after a catastrophic inflation like Biden or the 1970's the Fed will never let prices come back down.
It’s the price diode.
It’s how the dollar stays king! You are always paying debt with dollars that don’t have the value of the dollars you borrowed.
Prices of commodities go UP and DOWN all the time based on supply and demand.
The price of lumber, Plywood and OSB are back down to the price they were prior to Covid(2021).
The difference is that the LABOR cost to build anything has gone up. The labor cost to have ANYTHING done around your home has gone up significantly. IF you can even find someone to show up.
In inflation adjusted terms prices go down ALL THE TIME.
does anyone remember the most famous wager in economic history?
I know of a contractor whose material costs have dropped but he keeps his rates the same as at peak inflation - gets more profit.
“the LABOR cost to build anything has gone up”
Well my Friend, if you throw out 2 Millions Illegal Alien Invaders (just getting started), that would tend to happen.
Your fellow Americans getting a fair day’s pay for a fair day’s work is a very good thing.
Won’t show up for your work?
Gee. I wonder why?
There are several theories of inflation, the one most quoted talking about money supply vs productivity.
But there are many examples in history that counter more or less all the theories.
The period immediately around 2009 is sort of classic, with a spike in M2 money supply and pretty much no inflation.
The article decided the current rate is sub 2%, but Y/Y core measures are 2.8% which is really the definitive number. If anyone really cares about this stuff, first step is to go learn how the CPI gets computed. Here is a one para synopsis:
Households are surveyed as to what % of spending they allocate to various categories, like shelter and transportation and food, etc. Then separate price measures are done of these categories. The weighted avg of these prices is CPI. Then the change of each category is computed and put together for a % quote of CPI change. (And there are several different kinds of CPI).
Look at your own budget. If your mortgage is not paid off, shelter is likely your biggest expense. This gets the heaviest weight. You will conclude your mortgage payment is constant and therefore inflation should be zero, but that’s not the measure. It is owner equivalent rent. What would you pay to rent your current house with its constant mortgage. If you were landlording out your house you would not hold rent constant because the mortgage is constant. Other things are going on.
Babbling. Bottom line. No one really knows where inflation comes from other than “buyers are more urgent than sellers.” When Chiang Kai Shek was booted out of China to Taiwan, his most carefully guarded shipping to get there contained the entire country’s gold. He took it with him. Personally.
Personal gold doesn’t affect money supply.
Prices go down when sales do greed makes them go bust if they don’t.
The list is long
Frankly, I very rarely hire people to work around my house.
That is because I do almost everything myself.
Trying to hire anyone since Covid has been almost impossible. I attempted to hire a guy with an excavator to put in another driveway. Told him I would pay him cash. He wanted $5000 just to show up at my house for a job that would have maybe taken 2 days at the most.
I just had my roof replaced. About 30 square. I had prices from $13K up to $22K from four different roofing companies.
They were all quoting the exact same roof with the exact same shingles/ice & water shield, synthetic underlayment.
Hyper inflation as we saw in the last four years requires the help of politicians.
I’ve had a helluva time finding good reliable people to do work too.
inflation keeps everyone working, because the second you stop earning you start falling behind because everything DOUBLES in price every 20 years even if inflation only goes up the minimum the fed wants
Good reliable people seem to be constantly ignored by HR and their AI accomplices when they apply for a job.
Nope, they never do come down and the reason is simple: GREED. The only thing that makes them come down is a drop in consumption. PVC pipe is higher than ever and we keep buying it. It will not go down. It is high even though the cost of raw material has gone down. The only real reason petroleum goes down from time to time is the perception of supply and demand.
PVC pipe and fittings were once so cheap before covid that people burned left overs and the cost of laying a water line was incidental, not now.
Good one.
The central bank cult is in over their heads. They created a system which has negative feedback loops that can drive the system to instability. Irving Fisher first noted this back in the early ‘30s, and he’s the guy who came up with the term debt-deflation.
Later on Minsky and others - Bernanke for instance - at least tried to model it all correctly, but they didn’t say it was a good thing. Just “how do you correct it when it goes non-linear”...which printing wheelbarrows of $$ and throwing it out of helicopters...ergo Bennie’s cute nom de guerre.
The price diode is created by this little activity: prop up the prices with More Moolah! and it all works out...so that someday soon a sandwich will be $100 and nobody will wince.
“Good reliable people seem to be constantly ignored by HR and their AI accomplices when they apply for a job.”
I was always interviewed and hired by the manager of the department I was to work in.
HR was never in involved in selecting the people I hired or recommended to be hired.
Interesting. So if inflation goes to zero, nobody will have to work?
Prices go down all the time. Have you checked the price of TV’s these days?! And Gas is a full dollar less in my area than it was when I moved here in 2011.
Hummm. But if it costs the apple producer $1.50 to get the apple to market, there won't be any apples to buy.
I don't want to say deflation is always bad… we have seen plenty of it over the years on select products. A 24 inch color television in the 1960s cost $500 or $600 in 1960s dollars. Now a top of the line 64 inch flat screen is about the same $500-600 dollar price in 2025 dollars. That is spectacular deflation. That $500 dollars in 1960 dollars is worth over $5000 today.
But across the board deflation caused by too many goods chasing too few dollars is typically bad news. It is what kicked off the Great Depression. Business could not make money, they had to close factories and lay off workers. In other words, there were no apples to buy.
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