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In reply to tuna55 :
I'm sure there are some smart guys out there that understand the system.
I'm also pretty sure they don't work for the FED or the government.
My hindbrain wants to batten down the hatches and prepare for a rough ride. I sure hope I'm wrong.
One big thing to remember is the stock market is not the economy, and they can move independently of each other.
GameboyRMH said:....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.
Sort of, but not super obvious. As you can see in the chart below, there is the obvious COVID crash, the first red bar is around late Oct 2021 (a bit flat before that), the second bar is the time when Russia started building up forces. Which wasn't super obvious at that point what they were doing, that wasn't really a serious concern until later in the year, so probably more the second spike after that. The third bar is that start of the invasion. The dump before the invasion is an increase in Saudi production I believe(?) As you can see, the rate of increase from the first bar to the third is pretty constant. (green is a sort of average price from before COVID)
What is more interesting is the second chart which is a wider historical chart. As you can see, even the current price is not out of line of prices from pre 2014. And yes, gas prices are clearly higher, which points to other issues. In the case of the US, a lot of that appears to be refining issues (as in, not enough) and of course... futures... lack of confidence.
eastsideTim said:One big thing to remember is the stock market is not the economy, and they can move independently of each other.
True, but the folks with a lot of exposure to the markets also tend to be the folks who run companies. All too often if they think a recession is coming they will make it a self-fulfilling prophecy.
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.
Your concept isn't valid. In fact it proves my point. If I can have most of the wealth of America I'd gladly pay 25% of the taxes because I know I should pay 99.99% of the taxes.
In reply to frenchyd :
Nevermind that you are commenting on something from pages/months back, but I think you are completely misunderstanding how taxes work and the difference between wealth and income. Let's pretend that your numbers above are accurate, and the richest 1% control 90% of the wealth and pay 25% of the taxes. You are combining two separate things- wealth and income. We are generally not taxed on wealth, with some exceptions- mostly property. We are taxed on income. Wealth is what we accumulate when we have more income than we spend. The wealthy are most certainly taxed on income- they pay a much higher portion of their income in tax. Once it has already been taxed, it becomes their wealth. What you are proposing is to continuously tax their wealth, after they paid their share of tax during the process of accumulating it.
I think if we want this topic to progress then we should probably stop reiterating the same points to the same person who is posting the same incorrect information. Especially when they're replying to post that are from almost 4 months ago. Getting no where. I hate to ignore people but I think it's the best option at this point.
In reply to Ian F (Forum Supporter) :
eastsideTim said:One big thing to remember is the stock market is not the economy, and they can move independently of each other.
True, but the folks with a lot of exposure to the markets also tend to be the folks who run companies. All too often if they think a recession is coming they will make it a self-fulfilling prophecy.
Back to the current discussion, I think you hit the nail on the head. Not only do those who run companies tend to create self fulfilling prophecies, the media and politicians (whichever side is not in power at the time) tend to support that outcome. Businesses become nervous and pull back, reducing inventory and staffing- which lowers sales. We are in a real odd situation now, in which businesses will likely face shortages AND too much inventory at the same time. The supply chain disruptions created a rubber band effect. They put in big orders due to the shortages, but by the time they have filled, demand may have dropped, leaving them sitting on excess inventory. But if they overreact and don't order enough or cancel orders, we are back to shortages and higher prices.
It seems like food prices are a prime driver. It seems like many of the food increases are well beyond the stated inflation. It's also something that is unlikely to be affected by the interest rate hikes (unlikely most will cut down on food purchases!)
https://www.forbes.com/advisor/personal-finance/why-are-food-prices-still-rising/
Eggs up 40%! (having chickens is certainly helpful here)
General reasons stated in the article are:
- Disruption due to COVID (you would think this would be clearing up by now)
- Ukraine, both as a source of fertilizer, and the destruction of crops which will drive up world food demand / prices.
Of course, if the Ukraine war ended tomorrow, it could still take quite a while to return to normal. So... don't expect anything to change a lot anytime soon.
In reply to aircooled :
Food inflation is horrible right now. Case in point. Breakfast sandwiches: I occasionally buy a box of prepackaged frozen sausage and egg biscuits from Aldis. Two months ago the box was $3.99. I bought the exact same product on the way home from work tonight and it now cost $5.19.
That's 30% inflation. In two months !!! Ouch.
They're not just passing along inflated costs from their suppliers, they're also keeping more of that money for themselves.
By their own account, grocery store profit margins in 2020/2021 were also higher than they've been in 35 years.
Meanwhile, companies like Pepsico are seeing revenue and profits increase thanks to raising prices:
When the company that makes/supplies the food as well as the store that sells it are both making more profit, you get tons of inflation.
If anybody is interested in The Fed's outlook on the situation and their plan moving forward, this speech from last week (before the latest bad PPI and CPI reports) puts their plan in pretty clear language.*
*This is just one member of the Fed, rather than an official stance but it's a pretty aggressive stance for them to share on their website.
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Boost_Crazy said: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.
You don't seem understand. No income tax. Period. So how much you earn doesn't matter in how much taxes you pay.
No tax, no forms. Nothing.
Let me give you an example.
Assume you are comparing your tax bill against Warren Musk. ( made up person).
You and your wife make $100,000 a year ( simple numbers ). First your income is going to go up ( no more withholding.).
You have car payments of $10,000 a year, house payment of $30,000 a year Those won't have any additional taxes since you already own them. In fact the only taxes you will owe is anything you buy. Let's say $1000 a month for groceries. That's $20 times 12=$240. Another $1000 a month for utilities another $240.
Let's say you spent another $5000 on stuff so another $100 the rest you save. So your taxes for last year is $580
Now let's look at Warren Musk. Since he gets so many free lunches etc his annual tax bill there is $100
but he did buy that one company for 100 billion so he owes 2 billion on just that one deal.
One last point. 2% of the GDP of America is almost exactly what America raised in income taxes last year.
In reply to STM317 :
I wonder if grocery stores made more because of volume? Less waste, etc. Way more people ate at home vs out in 20-21. That could explain a lot of it.
In reply to Steve_Jones :
That is worth considering. But they also paid their employees more, and around me spent money on infrastructure changes to support pickup and delivery services.
Indy - Guy said:In reply to aircooled :
Food inflation is horrible right now. Case in point. Breakfast sandwiches: I occasionally buy a box of prepackaged frozen sausage and egg biscuits from Aldis. Two months ago the box was $3.99. I bought the exact same product on the way home from work tonight and it now cost $5.19.
That's 30% inflation. In two months !!! Ouch.
That may be due to a sort of "compounded inflation" - a combination of both higher material costs + higher labor costs = one very pricey pre-made sandwich.
In reply to Ian F (Forum Supporter) :
It's a box of four sandwiches (not just one). A very concrete example that stuck in my mind, because it use to be ~$1 per sandwich. It's now $1.2975 / sandwich.
Egg and chicken prices are being driven by the supply. Avian flu went through the chicken and egg farms and somewhere around 30 million birds had to be destroyed. It put a serious dent in the chicken and egg supply and drove prices through the roof. That's also probably driving the breakfast sandwich prices as well.
https://www.cnet.com/science/bird-flu-epidemic-egg-chicken-prices-soaring/
One nice thing about the rate hikes - during the next significant recession, the Fed will have some room to use the traditional method of rate cuts to fight it, instead of using the moral hazard-ridden method of buying securities to prop markets up that has been used more recently.
Forgive me for weighing in without reading all 30 pages, but I feel the need to shard my logic on this.
The supply demand curve is close to newton's laws regarding accuracy over time. When you have less widgets everyone wants one and the price goes up. When there is inventory that no one wants the price goes down in an effort to sell it. I have witnessed exceptions but the laws are true more than not.
So lets look at available workforce. My generation, which is a pretty big part of the workforce, is moving to retirement. So less people to work means labor costs go up.
Now lets go back a few years to the COVID times. People stuck at home didn't spend as much money as they had coming in. Then things got better but there was a lag between when people wanted to spend and new stuff was being made to sell. Hence the boom in used stuff prices. Sold our extra 200 dollar kayak for 300 in a few hours, by the end of the day it was relisted at 350! We all saw what havok it reigned on used car prices, RV prices, etc.
Then the new stuff pipelines finally got filled, but the effect of less people and demand made a situation for prices to go up.
Sounds a lot like inflation has happened.
What am I doing? Reducing spending and waiting for the shift the other way. We buy chicken thighs and drumsticks instead of boneless breasts. Only buy meat on sale and then buy a lot and freeze it. And eat a lot less. Parked the truck and bought a used prius.
Already seeing the shift in inventory. Bought new jeans last night, my size of short and fat rarely is in stock. The volume of 36x29 jeans was easily 10X normal. Cost a fortune but I buy new jeans every 5 years. RV prices are coming down and my other extra kayak went from 350 to 300 and still no bites in a month.
My logic works for me, feel free to comment. In the mean time my CDs at 4% are a great place to park money.
porschenut said:My logic works for me, feel free to comment. In the mean time my CDs at 4% are a great place to park money.
Where are you getting 4% and what length term? I dove in about a week after the last rate hike for some one year CDs at 3.25%. Still have some more in savings I could move to CDs, though, just leery of having a window of more than a year, based on the odds of rates continuing to climb.
In reply to porschenut :
I agree completely with your assessment. The only thing I'll add is that not only were folks staying home during Covid, the government (in a completely bipartisan effort) was dumping massive amounts of money into the economy. When you create a bunch of new dollars but the amount of stuff they can buy is the same (or even less because of supply chain issues), that's a perfect recipe for inflation.
eastsideTim said:porschenut said:My logic works for me, feel free to comment. In the mean time my CDs at 4% are a great place to park money.
Where are you getting 4% and what length term? I dove in about a week after the last rate hike for some one year CDs at 3.25%. Still have some more in savings I could move to CDs, though, just leery of having a window of more than a year, based on the odds of rates continuing to climb.
4% when inflation is almost 9%........I'm not seeing the benefit? The market will come back, it always does, so I'm matching my 401k and putting extra in my Roth.
We rarely keep cash on hand because of inflation under normal times. If we need something big, credit, swap to another for 0% pay it off in a couple months, then go back to throwing money at retirement.
Tom_Spangler (Forum Supporter) said:In reply to porschenut :
I agree completely with your assessment. The only thing I'll add is that not only were folks staying home during Covid, the government (in a completely bipartisan effort) was dumping massive amounts of money into the economy. When you create a bunch of new dollars but the amount of stuff they can buy is the same (or even less because of supply chain issues), that's a perfect recipe for inflation.
Right? Who would have thought throwing $5 Trillion into the economy in less than two years would cause inflation? Especially since a lot of it went to people who didn't need it. I didn't get any stimulus checks, but my fiance did. So she started collecting old 60s Corningware and stuff like that.
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