Where will inflation stop?

red_stapler said:

Boost_Crazy said:
our system redistributes wealth from the rich to the poor.

So at what point will the poor and rich swap places as a result of this system?

Never, because poor and rich are who a person is rather than what they have. 

You could strip the wealth from all the rich people and give it to the poor people. In 10 years 90% of the people that were rich will be rich again and 90% of the poor will be poor again. Rich and poor is a state of mind. 

Edit to remove the condescending tone. I will never be rich. I don't want to be because I don't want to work that hard or have that hassle. I've done poor. It's a little stressful but also fairly easy to do. I decided I was tired of being poor and did something about it. I'm happy with where I am now. Call it solidly middle class. 

frenchyd said:

I'm in no illusion the pie gets bigger if we just tax the rich. 
     But they love the current deal. They control 90% of the nations wealth and only have to pay  25% of the taxes!!!! What a deal.  
   

So they like paying 25% of the taxes even though they're only 1% of the population? Nice job trying to twist the stats, how much "wealth they control" is irrelevant.

Boost_Crazy said:
our system redistributes wealth from the rich to the poor.

So at what point will the poor and rich swap places as a result of this system?

They won't, but I'm pretty sure you know that. My statement wasn't commentary, it was simple fact. Our current system takes more, both in dollars and as a percentage, from high earners vs. low earners, to the point of giving money to the lowest earners. A flat tax would remove much of that, resulting in the low end paying more taxes. it's simple math, no opinions needed. We could exempt a lot of goods and services from the flat tax in an effort to continue or expand the redistribution, but we would just end up with 77,000 pages of sales tax code instead of income tax code. A true flat tax is equal by definition, and comparing our current system to a flat tax illustrates how unequal our current system is. Despite all of the inaccurate assertions that the wealthy don't pay their share of taxes, have loop holes, etc., the data and math do not bear that out. If you want to move to a more unequal system, just simply say it. You are entitled to your opinion. But don't call it equal, because it's not. The only way to make everyone equal is to make everyone equally poor- that is as close as we can get to the rich and poor swapping places, as a whole society. At the individual level, it happens all of the time. A somewhat rarity in the history of civilization is common under our system due to the opportunity. 

Steve_Jones said:

frenchyd said:

I'm in no illusion the pie gets bigger if we just tax the rich. 
     But they love the current deal. They control 90% of the nations wealth and only have to pay  25% of the taxes!!!! What a deal.  
   

So they like paying 25% of the taxes even though they're only 1% of the population? Nice job trying to twist the stats, how much "wealth they control" is irrelevant.

Like isn't part of the discussion.   And with a 2% VAT there is no us/them.  It's like you're buying 1000 gallons of gas you expect to pay 1000 times more then the guy buying only 1 gallon.  

  I think you're a bit confused here.  Paying 25% of the cost of defending the country when you own 90%  seems like you're getting too good a deal. 
  But it won't take a dime away from the wealthy more than they would be obligated to pay.  
  In other words. If they don't buy anything once it's tax law.  They don't have to pay 2% of anything.   They only pay the 2% on anything they buy and any income they earn is tax free.  
       Your kid buys a $1 comic book and he pays $1.02  your wife buys a $10,000 dress she pays $10,200. 
   You buy a $3.00 beer it's $3.06. 
    I'm guessing here but if you total all those Penny's & dollar's etc your taxes should be about what you are paying now.  Just won't have to fill out any forms or hire tax guys.  
   Here's the secret tax break  anything you already own is tax free.  
   The double secret good deal is this will reward Investment in America. 
 How?   Look at sir bags. They are made in Finland or Japan.   Then they are shipped to America and in addition to the shipping there is import duty.  Now an additional 2% will be added on top.  
     Both Japan and Finland pay their workers about what America does.  The shipping, import duty and 2%  could be saved if it was built in America.   
     

In reply to frenchyd :

Except you're talking about a 2% tax on every sale, which means the automotive manufacturer is paying 2% to the airbag manufacturer, no matter where it's made.  So all you're saving is shipping and duty.... and not even that.  How many transactions are in a car before it even leaves the factory? 

1. A refiner buys crude oil: +2%
2. A chemical company buys esters from the refiner:  +2%
3. A plastics company buys resins from the chemical company:  +2%
4. The airbag company buys molded parts from the plastics company: +2%
5. The subassembler buys the airbag from the manufacturer: +2%
6. The vehicle manufacturer buys the dashboard from the subassembler: +2%
7. The dealer buys the vehicle from the manufacturer:  +2%
8. You buy the vehicle from the dealer:+2%

So now we're 8 transactions in, and the "only 2%" has actually become 17.2% on just that one component.

That's starting from crude oil in the tanker.  How many more steps were there to getting to that point?

Transaction     Total % (2% compounded)

0                      1.000
1                      1.02
2                      1.0404
3                      1.061208
4                      1.082432
5                      1.104081
6                      1.126162
7                      1.148686
8                      1.171659
9                      1.195093
10                    1.218994
11                    1.243374
12                    1.268242

It only gets worse from there.

In reply to frenchyd :

Like isn't part of the discussion? I was replying to you saying they "love the current deal"...

You have a lot of answers for someone that can't retire.

In reply to Steve_Jones :

Let's be clear. If I were the 1%  and I had to pay 1 trillion dollars for something worth 16 trillion dollars. I'd be happy, wouldn't you?  
 With regard to the word can't.  Doesn't apply.  
  2 reasons; I want to keep racing. And doing other things that the added income allows. 
Second ; The people I know who live long and healthy lives all seem to work  long past retirement age.  
    

frenchyd said:

In reply to Steve_Jones :
 With regard to the word can't.  Doesn't apply.  
  2 reasons; I want to keep racing. And doing other things that the added income allows. 
Second ; The people I know who live long and healthy lives all seem to work  long past retirement age.  

Well, THAT is certainly revisionist.

In reply to frenchyd :

Like isn't part of the discussion.   And with a 2% VAT there is no us/them.  It's like you're buying 1000 gallons of gas you expect to pay 1000 times more then the guy buying only 1 gallon.  

  I think you're a bit confused here.  Paying 25% of the cost of defending the country when you own 90%  seems like you're getting too good a deal. 
  But it won't take a dime away from the wealthy more than they would be obligated to pay.  
  In other words. If they don't buy anything once it's tax law.  They don't have to pay 2% of anything.   They only pay the 2% on anything they buy and any income they earn is tax free.  
       Your kid buys a $1 comic book and he pays $1.02  your wife buys a $10,000 dress she pays $10,200. 
   You buy a $3.00 beer it's $3.06. 
    I'm guessing here but if you total all those Penny's & dollar's etc your taxes should be about what you are paying now.  Just won't have to fill out any forms or hire tax guys.  
   Here's the secret tax break  anything you already own is tax free.  
   The double secret good deal is this will reward Investment in America. 
 How?   Look at sir bags. They are made in Finland or Japan.   Then they are shipped to America and in addition to the shipping there is import duty.  Now an additional 2% will be added on top.  
     Both Japan and Finland pay their workers about what America does.  The shipping, import duty and 2%  could be saved if it was built in America.   
 

My goodness Frenchyd. Duke did a great job explaing where the math goes wrong, so I'll just stick to the core concept. If you want everyone to pay equal percentages of taxes, this is a great idea. But I don't think you want that, because it would mean that the lower income will pay more- a lot more- relative to the higher income Vs. what they are paying now. Yes, the wealthy do spend more than the poor, so they will be paying more taxes than the poor. BUT THEY ALREADY DO THAT. You aren't changing anything but the ratio- in the wrong direction from your intention. You said it yourself, the rich don't/don't have to spend all of their money. The poor spend all of their money- they often spend money they don't even have. So the poor will be taxed on everything they have while the rich won't. Let's put some numbers to it.Forget your supply chain tax examples- businesses don't pay taxes, they get passed on to consumers. So we'll just try to make the VAT tax equal to current income tax. 
 

The high income earner is taxed on $1,000,000. Let's call it 20%. So they paid $200k. 
 

The low income earner made $25k. With no kids, they would pay $563 in tax. (With kids, they would get $3000 for each and would go negative.) Just over 2%. 
 

If you changed to a flat tax, for the government to receive the same revenue- assuming both tax payers spent all of their money- the flat tax rate would need to be 19.6%. 
 

So the high wage earner now pays $196,000 in taxes while the low wage earner pays $4900. 
 

Now, this is simplistic because in reality there are more low wage earners than high wager earners, so the increases would be spread over more people and not be as dramatic. But the math is sound and demonstrates the shift from high to low. 

In reply to Duke :according to your calculations we don't need 2%. Is 1% still too much ?  

In reply to frenchyd :

You're the one pulling these claims out of your a... thin air.  You tell me.

So getting back to the topic, we've had a number of interest rate increases, and it sure looks like it's slowing the economy.

The real estate market has cooled significantly. Locally, homes that were selling in a day, are now on the market for weeks, months, or not selling at all. I'm seeing a lot of price improvements, as they now call them, and the sold over asking signs have disappeared. The market in some of the cities around Toronto are down over 40% and prices 30%.

I don't know about car prices, I'm not really watching anything, but the off road/dirt bike market has fallen off a cliff.  Prices are down, and even the good deals, which were selling in a matter of hours, or less, are either taking weeks, or not selling at all, and the turnout at our club events is currently about 50% of what it should be. So it seems like the rate increases might be working to slow the economy, and slow inflation, which was supposedly 8.1% last month.

To answer the thread title question: " Where will inflation stop? "

According the Federal Reserve, when we're in a recession, That's when inflation will stop.  According to this Axios article, "The Fed says this is going to hurt" as they increase interest rates.

I think we can reasonably say they are really starting to push down the brakes in this corner.... as the car passes through the tire wall....

I have heard, one economists recommends that interest rates need to match the inflation rate to really control it (!)  Which is essentially what they did in the 80's.

I do wonder how the increase in unemployment will be tampered by the current under staffing that seems to be present in a lot of businesses.

In reply to Indy - Guy :

Yeah, they are going with the Volcker method of trying to reign in inflation, that tends to result in recessions.  Depending on what method you count by, we are already in a recession, but if so, it's a weird one, with unemployment as low as it currently is. 

Wealth distribution has changed since the 80s, so the bottom 50% are going to continue to feel inflation even worse than they did in the past, so if a we don't get a handle on it, it's really bad.  Problem is, a recession involving job losses will also likely affect the bottom 50% worse, too, so finding a balance that doesn't completely screw them is going to be difficult, if not impossible.

I gave up on posting the monthly numbers because, although I was trying to add some light to the conversation, it ended up mostly generating heat. 

I was just in the grocery store today and I can't believe what they're asking for a pound of bacon.

September's numbers are out: Up 8.2% from this time last year.  Associate Press article.

Month to month increase was 0.4%  Is that growth slow enough to signal some relief in sight?

I expect it's going to jump again when the high gas prices from the recent OPEC cuts hit - high gas prices due to the invasion of Ukraine were a major factor in kicking off the first round of inflation that started this thread.

Inflation.  A feature of the Federal Reserve creation in 1913 - Small hockey stick from there.

Another cause was Nixon taking us off the Gold Standard  in 1973 which also had the added feature of kicking off big time inflation.   The hockey stick headed up even more..

eastsideTim said:

In reply to Indy - Guy :

Wealth distribution has changed since the 80s, so the bottom 50% are going to continue to feel inflation even worse than they did in the past, so if a we don't get a handle on it, it's really bad.  Problem is, a recession involving job losses will also likely affect the bottom 50% worse, too, so finding a balance that doesn't completely screw them is going to be difficult, if not impossible.

I wonder how could we make it so that inflation doesn't hurt the bottom 50% as much as it does. Unfortunately, recovery from inflations is harder for the bottom 50% too, if they recover.

This problem is easy to solve too, but first you have to define inflation.....  can't solve if you don't know what causes it.  It has zip to do with interest rates too, but raising those causes more economic pain!

And gas prices were high before Ukraine / Russia was a thing.  Check graphs if you doubt it.  That's another lie being told to keep you from reality. 
 

They will kill as many Ukrainians, Russians and as many Americans as it takes to keep this shell game going unnoticed.  Enjoy the ride, it's going to be scary.  
 

And as some of you allude the poorest people will be hurt the most, they always are.  

AnthonyGS (Forum Supporter) said:

 

And gas prices were high before Ukraine / Russia was a thing.  Check graphs if you doubt it.  That's another lie being told to keep you from reality. 
 

The gas prices were driven up before the war...in anticipation of the war. It wasn't a coincidence, it's just that you can't prevent the market from acting on speculation.

In reply to yupididit :

A progressive tax system helps to some extent.  There are other ways to help, but it'd get too far into the ditch politically, so I don't want to go there.

In some ways, income disparity kept some inflation under control far longer than it would otherwise, given the amount of money that has been dumped into the system.  Can't charge people more than they can afford for the necessities of life unless you want a revolution.  Real estate was an exception, because it was an easy place for people with money to invest, so it went up.  Supply shocks of the past few years due to the pandemic and the current war kicked inflation into high gear.  I'd blame government spending, too, but the government is almost always overspending, it's just a matter of who is in charge as to what they are overspending on.

Indy - Guy said:

September's numbers are out: Up 8.2% from this time last year.  Associate Press article.

 

Month to month increase was 0.4%  Is that growth slow enough to signal some relief in sight?

It's such a weird investing world now. People are seeking bad news from the economy because it means better good news from the fed... or something. I can't really fault Powell, but he's got the rudder and it's proven to be really big for adjusting the stock market and not so big for adjusting inflation. I don't have to retire for 25 more years, so I guess it's fine for me. It doesn't feel good though.