Capitalism as we have it here demands infinite growth, just like cancer.

Private pricing power i mean the owners of the goods. Maybe they don't care how much they sell so they could put high prices and just wait for suckers to buy. But usually there is demand. So they can raise prices until they don't sell. With food, it sells because people must eat.

Yes, cost-push inflation and demand-pull inflation.

What's the exit of this? Collapse?

if you're asking why the long-term pattern includes periods of very low inflation and moderate or high inflation but rarely and deflation, well, that's basically because deflation is worse than inflation for the economy and for most people, so policy makers try to avoid it like the plague.

inflation is obviously not ideal, but low inflation isn't horrible, and it has some positive effects -- it encourages people to spend money before it becomes less valuable, which helps keep the economy moving. this is basically why the fed targets 2% inflation, rather than 0%. plus, we basically know how to tame inflation. jacking up interest rates isn't pretty and can lead to a recession, but once inflation expectations are under control, the economy can resume normal growth with price stability.

deflation is more problematic. once people get the idea that prices are generally going down, they have an incentive to save and save and defer spending. this reduces demand, causing prices to continue to fall, creating a vicious cycle. And unlike inflation, it's harder for policy makers to solve. one might think lowering interest rates and increasing the money supply (the opposite of the inflation-fighting strategy) might work, but unfortunately, this doesn't usually have the desired effect. people just take the easier money and just continue to save rather than spend, which is what is needed to get prices back up.

*short*-term inflation is often followed by prices mostly coming back down, albeit slowly and rarely fully. but inflation that lasts more than a few months is usually followed simply by a return to price stability. policy-makers don't want prices to come back down.

japan got themselves into a deflation trap around 1998, it took about 15 years to get out of it.


as to why we currently have inflation, there are a few lingering effects from the covid shocks, but a lot of it at this point has to do with things like continued consolidation in various industries, allowing trust/monopolistic effects due to decreased competition and a lack of real choices for consumers. that said, biden/powell had nearly ended inflation, but then donnie came along with his tariff nonsense, directly making prices go up, and screwed it back up again.

In December 2024, I've read an article about New Zealand having problems with inflation. Why is that an interest?

New Zealand invented ( link 1, link 2 ) the whole 2%-3% annual inflation target mechanism, which was copied by everyone. All things went well, until the economic crisis of '08-'09. From then on, we know.
The same country that invented the 2%-3% annual inflation target, was back at square one for before it invented that mechanism in the late 1988 or 1989, early 1990s.

That mechanism is "inflation on [very] low heat" – which has proven by now that compounding inflation (inertial inflation?) doesn't erode. It's permanent. We're being told that we're stuck with it ("here to stay&quot , and I'm searching hopelessly why is that considered optimal.

Now they're touting the "Great Currency Reset" talks but that's just another groundhog day that, as we know, has an expiration date of 20 years (minimum), before we'll start again.

So what's left? Imminent collapse? Inflation on low heat since the 1989-1990 eventually transformed today in the "prices now are here to stay, and they'll only grow from now on..."–
Hello, what!?! We're just waiting until mass evictions, bankruptcies, and police to crack skulls?!

Last edited Thu Mar 20, 2025, 11:50 AM - Edit history (1)

Just for some context, it doesn't answer your question, but I see some excellent answers up-thread. Election day was Nov 5 and inauguration day was January 20. And rolling 3 month averages, and month-by-month increases to show trends better in recent inflation. They show prices rising since July.

Latest LBN CPI thread (March 12) https://www.democraticunderground.com/10143416133

News report from the source: https://www.bls.gov/news.release/cpi.nr0.htm
CPI data series: https://data.bls.gov/timeseries/CUSR0000SA0
CORE CPI data series: http://data.bls.gov/timeseries/CUSR0000SA0L1E

I annualize everything to be comparable to each other and to compare to the Fed's 2% target

They are calculated using the actual index values, not from the rounded off monthly change numbers.

The CPI rise averaged 4.3% over the past 3 months on an annualized basis (core CPI: 3.6%)
The February one month increase annualized is: CPI: 2.6%, CORE CPI: 2.8%

REGULAR CPI


CORE CPI = CPI less food and energy


12 month rolling averages (YOY)

One reason for the decline in the 12 month average aka year-over-year is that the big February 2024 increases dropped out of the 12 month window.

CPI increase in February 2024: 0.40% (4.86% annualized)

Core CPI increase in February 2024: 0.37% (4.54% annualized)

The number dropping out of the 12 month window is just as important as the one entering the 12 month window.

If the incoming number is lower than the outgoing number, then the 12 month average drops, plain and simple. (Similarly with any n-month rolling average).

Right... compared to 2010s?
Pre-economic crisis?
'90s?

The purchasing power isn't there anymore and I can't find any economist (unless it's under lock n' key) to erode that inert inflation that we're stuck with.

Last edited Fri Mar 21, 2025, 11:36 AM - Edit history (1)