How the price of a Toyota truck helps explain surging inflation(npr.org)
npr.org
How the price of a Toyota truck helps explain surging inflation
https://www.npr.org/2021/06/10/1004806688/inflation-is-surging-the-price-of-a-toyota-pickup-truck-helps-explain-why
69 comments
My takeaway from the current car situation is the people running legacy automakers aren't very good at their jobs. To mispredict demand this badly and not know that you can't JIT semiconductor production shows a profound incompetence. And on top of that, instead of raising MSRP they're letting their dealers capture all of the surplus. All the more reason to be bullish on Tesla.
Is it inflation only or a catch-up adjustment phenomenon combined with a lag in production resumption?
Lots of purchases and procurement were basically delayed and postponed, thus buffered.
Inflation could explain why prices didn’t drop with the demand in the meanwhile.
Lots of purchases and procurement were basically delayed and postponed, thus buffered.
Inflation could explain why prices didn’t drop with the demand in the meanwhile.
I think it’s temporary inflation. If you take into account the extraordinary circumstances we went through, the numbers make more sense. At this time last year we had massive deflation(e.g. airfare, hotels, house prices and oil went down in price). Now that demand is coming back, all these things are much higher price from this time last year. That’s why I think you see massive year over year inflation numbers. Over the next couple years, I am expecting inflation to average higher 2-3 %, but skeptical we’ll have runaway inflation(I.e. 5+% YoY for the next couple years).
> At this time last year we had massive deflation
No, we didn't.
> (e.g. airfare, hotels, house prices and oil went down in price).
Yes, some of those sectors experienced deflation; overall, price levels were flat, not in “massive deflation”.
No, we didn't.
> (e.g. airfare, hotels, house prices and oil went down in price).
Yes, some of those sectors experienced deflation; overall, price levels were flat, not in “massive deflation”.
Nevertheless, people are exposed to those sectors, oil being a prominent one. I won’t quibble over what is big or massive. I still standby the idea that the virus is causing all these price swings and that it’s temporary. I think we’ll still have inflation, just not hyperinflation.
Prices flat with decreased supply and increased demand isn't really flat, especially with the additional trillions of dollars added to circulation.
> Prices flat with decreased supply and increased demand isn't really flat, especially with the additional trillions of dollars added to circulation.
Yes, it is; supply and demand (and money supply is part of that) are price determinants. A flat output is a flat output regardless of the inputs that produced it. And, anyhow, most of the additional dollars were added after the brief period of flat overall price levels, and explain the return to inflation.
Yes, it is; supply and demand (and money supply is part of that) are price determinants. A flat output is a flat output regardless of the inputs that produced it. And, anyhow, most of the additional dollars were added after the brief period of flat overall price levels, and explain the return to inflation.
Car makers underestimated the demand thus bringing up the increase of car prices amidst chipageddon is not a good reasoning imho.
Yes, if you are "betting" on persistent inflation because of used car prices you are also betting on the bankruptcy of a lot of car manufacturers.
An entire article about inflation in the US, and not a single word mentioning that 35% of all USD in existence have been printed in the last 10 months [1]
Is there any world where you can print that much money and not devalue a currency?
[1] https://www.reddit.com/r/CryptoCurrency/comments/kdpc24/35_o...
Is there any world where you can print that much money and not devalue a currency?
[1] https://www.reddit.com/r/CryptoCurrency/comments/kdpc24/35_o...
> 35% of all USD in existence have been printed in the last 10 months
Yes, currency in circulation increased, which is exactly what you expect when deposit rates are basically zero.
Now please explain why withdrawing some money from your bank account, which converts a deposit account into currency and causes "printing" of money (this is the only thing that can cause printing of money) is going to cause inflation? Seriously, I'd like to know. By this argument, if the US imposed a national teller fee that discouraged cash withdrawals, inflation should plummet, no? Why do central banks bother with interest rates when they have such a powerful inflation fighting mechanism at their disposal?
At some point people need to understand that different assets are fungible. There is no difference between cash in your pocket, a money market mutual fund, a deposit account, or a sweeps account. Shifts in these from one to another may cause swings in M1, and they are the only possible cause of "printing" USD, but they don't cause any inflation.
Yes, currency in circulation increased, which is exactly what you expect when deposit rates are basically zero.
Now please explain why withdrawing some money from your bank account, which converts a deposit account into currency and causes "printing" of money (this is the only thing that can cause printing of money) is going to cause inflation? Seriously, I'd like to know. By this argument, if the US imposed a national teller fee that discouraged cash withdrawals, inflation should plummet, no? Why do central banks bother with interest rates when they have such a powerful inflation fighting mechanism at their disposal?
At some point people need to understand that different assets are fungible. There is no difference between cash in your pocket, a money market mutual fund, a deposit account, or a sweeps account. Shifts in these from one to another may cause swings in M1, and they are the only possible cause of "printing" USD, but they don't cause any inflation.
When people say the Federal Reserve "prints money," they mean it's adding credit to its member banks' deposits.
Federal Open Market Committee (FOMC) is the Fed’s operational arm, guiding monetary policy. It engages in expansive monetary policy when the Fed expands credit. It increases the money supply available to borrow, spend, or invest. Expanding credit helps to end recession
Edit: Sorry please ignore me. I didn't know enough to understand the comment I was replying to.
Federal Open Market Committee (FOMC) is the Fed’s operational arm, guiding monetary policy. It engages in expansive monetary policy when the Fed expands credit. It increases the money supply available to borrow, spend, or invest. Expanding credit helps to end recession
Edit: Sorry please ignore me. I didn't know enough to understand the comment I was replying to.
OP is talking about the printing of M1 money specifically. Which is the creation of physical note, cheques and couple of other things. But basically it’s a measure of cash.
You can look at the M1 supply in isolation because most money doesn’t exist in M1 because it doesn’t earn any interest. If you look at the M2 money supply, which is a superset including M1 cash, then you see there has been very little change.
The reasonable conclusion then is the people have been withdrawing money from banks into cash, and liquidating other assets. So the total amount of money hasn’t increased, it’s just the amount of physical dollar bills that has increased, as digital money becomes physical.
So GP has a good reason to be annoyed. OP has cast as interest, but otherwise inconsequential (from the perspective of inflation) fact as being the sole explanation of changes in inflation.
You can look at the M1 supply in isolation because most money doesn’t exist in M1 because it doesn’t earn any interest. If you look at the M2 money supply, which is a superset including M1 cash, then you see there has been very little change.
The reasonable conclusion then is the people have been withdrawing money from banks into cash, and liquidating other assets. So the total amount of money hasn’t increased, it’s just the amount of physical dollar bills that has increased, as digital money becomes physical.
So GP has a good reason to be annoyed. OP has cast as interest, but otherwise inconsequential (from the perspective of inflation) fact as being the sole explanation of changes in inflation.
Okay, I'm out of my league here.
According to this chart, "only" 22.5% of the M2 circulating USD supply wass created since the start of 2020: https://tradingeconomics.com/united-states/money-supply-m2#:....
> So the total amount of money hasn’t increased, it’s just the amount of physical dollar bills that has increased, as digital money becomes physical.
Isn't this just splitting hairs?
The amount of money actually circulating has increased then. Money that was previously just sitting in the bank, not circulating in the economy now is. Doesn't that have an impact on inflation? It might not be the sole explanation, but given the jump from 6.75 trillion to 18.4 trillion from Jan 2021 to Feb 2021 in the M1 money supply, it would seem odd if there wasn't any.
And the salient point of GP was that this isn't even being discussed.
Isn't this just splitting hairs?
The amount of money actually circulating has increased then. Money that was previously just sitting in the bank, not circulating in the economy now is. Doesn't that have an impact on inflation? It might not be the sole explanation, but given the jump from 6.75 trillion to 18.4 trillion from Jan 2021 to Feb 2021 in the M1 money supply, it would seem odd if there wasn't any.
And the salient point of GP was that this isn't even being discussed.
M2 has grown at an average of 8.365% over the past 10 years, 7.063% over the past 20, 6.436% over the past 40, and 7.145% over the past 60.
M2 is a much better gauge of inflation than the CPI (unless you're poor).
At 7% inflation, holding USD means your value will decrease by nearly half every 10 years.
M2 is a much better gauge of inflation than the CPI (unless you're poor).
At 7% inflation, holding USD means your value will decrease by nearly half every 10 years.
No, 'printing money' does not mean physically printing banknotes.
> adding credit to its member banks' deposits.
The Fed does not just add credits. It buys Treasuries on the open market in exchange for reserves. It is a balance sheet portfolio shift that leaves the assets of the private sector unchanged.
Now the question is, why would this operation "help extend credit". Banks would rather have the treasuries.
Indeed the only thing that affects private credit expansion is interest rates. Lower interest rates is what encourages private credit expansion and higher rates inhibit it. That is all that matters -- not monetary aggregates, but interest rates.
So why does the Fed do open market operations in which reserves are exchanged for treasuries? Three reasons, but they boil down to basic plumbing to keep the financial sector going. It's like adding oil to your car:
1. To satisfy financial sector demand for reserves, as we have an antiquated system in which banks need to lend reserves to each other as opposed to a more modern zero-reserve system (corridor). Many factors determine the financial sector demand for reserves, but whatever that demand happens to be, the Fed must meet it or there will be a liquidity crisis and banks will go bust. Thus there isn't much choice, if banks need a hundred million more of reserves, then that's what the Fed gives them. OTOH, if the Fed gives them too many reserves, then as banks will want to lend excess reserves in the overnight market, the overnight interest rate will fall to zero, as banks in aggregate are as unable to rid themselves of excess reserves. It's like a game of hot potato, if in aggregate the financial system needs 1 billion in reserves, but the Fed adds 1.1 billion, there will always be a bank with an extra hundred million. Wanting to earn interest on that hundred million, it will loan it to another bank, which will loan it to another bank, etc until the overnight rate is 0%. So even a little excess of reserves and the rate falls to zero. Even a little insufficiency of reserves and some bank can't make its payments. Clearly this is a fragile system. This unnecessary complexity is why our system is antiquated and other central banks moved to a corridor system that requires no reserves at all. Reserves are just the oil that greases the engine and prevents it from seizing, they are not the gasoline that causes it to run faster. The gasoline is the interest rate.
2. To satisfy private sector demand for paper money. When individuals withdraw paper money, the banks need to purchase that paper money with reserves, which means that reserves need to be added. When individuals deposit money in a bank, those bills are shredded and converted into reserves. Thus banks swap reserves for currency in response to private sector currency demand. As that process of adding/subtracting reserves requires buying/selling treasures, it is also a swap of treasuries for cash. Once again, we see why the reserves are unnecessary intermediate steps and why other nations moved to corridor systems to get rid of these inter-bank overnight lending markets.
3. In the last round of QE, the Fed purchased a lot of reserves in an attempt to drive down long dated yields as overnight yields were already at zero. Thus banks now find themselves with excess reserves. We have seen in 1 that this means the overnight rate was zero, but now the Fed wants to raise the rate without unwinding all these positions. Thus to support a positive interest rate, we now pay interest on reserves, converting reserves into an effective treasury bill. As the reserves pay a positive interest, banks will not try to get rid of them for zero interest and so the overnight rate will be positive even if there are excess reserves. That truly makes the operation of swapping bills for reserves a NULL OP because now you are swapping two interest bearing assets for each other.
None of this promotes or inhibits bank lending, it is just technical stuff to keep the plumbing working correctly in the inter-bank market. That's all reserves do. They are not a harbinger of hyperinflation. They are motor oil for our antiquated financial system. Economists did think that driving down long term yields via 3 would encourage lending, even though the amount that yields changed was miniscule and subject to a lot of debate, as longer term interest rates are the expected time path of short term rates, which are determined from the overnight rate, so you never know whether a long term rate falling is due to technical factors or to changes in the expected future overnight rates. Thus the ability of QE to drive down long term rates remains subject to interpretive ambiguities.
The Fed does not just add credits. It buys Treasuries on the open market in exchange for reserves. It is a balance sheet portfolio shift that leaves the assets of the private sector unchanged.
Now the question is, why would this operation "help extend credit". Banks would rather have the treasuries.
Indeed the only thing that affects private credit expansion is interest rates. Lower interest rates is what encourages private credit expansion and higher rates inhibit it. That is all that matters -- not monetary aggregates, but interest rates.
So why does the Fed do open market operations in which reserves are exchanged for treasuries? Three reasons, but they boil down to basic plumbing to keep the financial sector going. It's like adding oil to your car:
1. To satisfy financial sector demand for reserves, as we have an antiquated system in which banks need to lend reserves to each other as opposed to a more modern zero-reserve system (corridor). Many factors determine the financial sector demand for reserves, but whatever that demand happens to be, the Fed must meet it or there will be a liquidity crisis and banks will go bust. Thus there isn't much choice, if banks need a hundred million more of reserves, then that's what the Fed gives them. OTOH, if the Fed gives them too many reserves, then as banks will want to lend excess reserves in the overnight market, the overnight interest rate will fall to zero, as banks in aggregate are as unable to rid themselves of excess reserves. It's like a game of hot potato, if in aggregate the financial system needs 1 billion in reserves, but the Fed adds 1.1 billion, there will always be a bank with an extra hundred million. Wanting to earn interest on that hundred million, it will loan it to another bank, which will loan it to another bank, etc until the overnight rate is 0%. So even a little excess of reserves and the rate falls to zero. Even a little insufficiency of reserves and some bank can't make its payments. Clearly this is a fragile system. This unnecessary complexity is why our system is antiquated and other central banks moved to a corridor system that requires no reserves at all. Reserves are just the oil that greases the engine and prevents it from seizing, they are not the gasoline that causes it to run faster. The gasoline is the interest rate.
2. To satisfy private sector demand for paper money. When individuals withdraw paper money, the banks need to purchase that paper money with reserves, which means that reserves need to be added. When individuals deposit money in a bank, those bills are shredded and converted into reserves. Thus banks swap reserves for currency in response to private sector currency demand. As that process of adding/subtracting reserves requires buying/selling treasures, it is also a swap of treasuries for cash. Once again, we see why the reserves are unnecessary intermediate steps and why other nations moved to corridor systems to get rid of these inter-bank overnight lending markets.
3. In the last round of QE, the Fed purchased a lot of reserves in an attempt to drive down long dated yields as overnight yields were already at zero. Thus banks now find themselves with excess reserves. We have seen in 1 that this means the overnight rate was zero, but now the Fed wants to raise the rate without unwinding all these positions. Thus to support a positive interest rate, we now pay interest on reserves, converting reserves into an effective treasury bill. As the reserves pay a positive interest, banks will not try to get rid of them for zero interest and so the overnight rate will be positive even if there are excess reserves. That truly makes the operation of swapping bills for reserves a NULL OP because now you are swapping two interest bearing assets for each other.
None of this promotes or inhibits bank lending, it is just technical stuff to keep the plumbing working correctly in the inter-bank market. That's all reserves do. They are not a harbinger of hyperinflation. They are motor oil for our antiquated financial system. Economists did think that driving down long term yields via 3 would encourage lending, even though the amount that yields changed was miniscule and subject to a lot of debate, as longer term interest rates are the expected time path of short term rates, which are determined from the overnight rate, so you never know whether a long term rate falling is due to technical factors or to changes in the expected future overnight rates. Thus the ability of QE to drive down long term rates remains subject to interpretive ambiguities.
When people say that "35% of all USD in existence have been printed in the last 10 months" and point at M1, they're not just talking about physical currency - that also includes money in people's bank accounts.
Currency in circulation increased by roughly the amount cited over the last 10 months:
https://fred.stlouisfed.org/series/CURRCIR
USD is only printed when banks purchase cash from the Bureau of Engraving in order to meet expected outflows. That cash is purchased with reserves, which are obtained by selling some other asset or going short reserves. The point being, it is demand determined. If people want to hold more cash, they sell one form of cash-equivalent for another which forces the financial sector to adjust the asset side of their balance sheet as well. This cannot affect inflation.
In terms of the growth of M1, there are two sources for this growth:
1. reclassification occuring in May 2020, when some MMF were added to the definition of M1.
2. increase in preference for cash holding.
Neither can be inflationary.
https://fred.stlouisfed.org/series/CURRCIR
USD is only printed when banks purchase cash from the Bureau of Engraving in order to meet expected outflows. That cash is purchased with reserves, which are obtained by selling some other asset or going short reserves. The point being, it is demand determined. If people want to hold more cash, they sell one form of cash-equivalent for another which forces the financial sector to adjust the asset side of their balance sheet as well. This cannot affect inflation.
In terms of the growth of M1, there are two sources for this growth:
1. reclassification occuring in May 2020, when some MMF were added to the definition of M1.
2. increase in preference for cash holding.
Neither can be inflationary.
> This cannot affect inflation.
Increases in money velocity by definition increases inflation risk, this with increased preference to cash and localized liquidity as opposed to financial flows shows a potential increase in consumption and therefore money velocity
This alongside Phillips curve suggests an increase in inflationary forces
Increases in money velocity by definition increases inflation risk, this with increased preference to cash and localized liquidity as opposed to financial flows shows a potential increase in consumption and therefore money velocity
This alongside Phillips curve suggests an increase in inflationary forces
> Increases in money velocity by definition increases inflation risk
OK, but that is just a tautology. What makes you think that caring less about cash versus deposit accounts in a zero rate world is the same thing as, or leads to, increases in money velocity? The last I checked, it is just as easy for me to spend money (and in fact, a bit easier) with one form of cash-equivalent as another, so why would transferring my balance out of a money market fund and into cash affect inflation at all?
> This alongside Phillips curve suggests an increase in inflationary forces
The phillips curve is notoriously unreliable. If you want to argue that deficit spending which pays people to not work will create a supply shortfall and thus increasing prices, I can get that. But that has nothing to do with these types of portfolio shifts.
OK, but that is just a tautology. What makes you think that caring less about cash versus deposit accounts in a zero rate world is the same thing as, or leads to, increases in money velocity? The last I checked, it is just as easy for me to spend money (and in fact, a bit easier) with one form of cash-equivalent as another, so why would transferring my balance out of a money market fund and into cash affect inflation at all?
> This alongside Phillips curve suggests an increase in inflationary forces
The phillips curve is notoriously unreliable. If you want to argue that deficit spending which pays people to not work will create a supply shortfall and thus increasing prices, I can get that. But that has nothing to do with these types of portfolio shifts.
So the simple narrative that the US is printing money to fund all these stimulus packages is false? Just trying to understand why this isn't debunked more if that's the case.
> So the simple narrative that the US is printing money to fund all these stimulus packages is false?
yes, it is false. The funding for these packages are done via lending - the US gov't borrows using treasury bonds, which is sold to whoever that wants to buy it (via banks as intermediaries).
yes, it is false. The funding for these packages are done via lending - the US gov't borrows using treasury bonds, which is sold to whoever that wants to buy it (via banks as intermediaries).
It is exactly what is happening.
Wait, are you taking the word "printing" literally? If not, where did the money for the stimulus packages and bailouts come from?
>Now please explain why withdrawing some money from your bank account, which converts a deposit account into currency and causes "printing" of money (this is the only thing that can cause printing of money) is going to cause inflation?
Why do you go directly from OP's comment to this question?
The market perception of downstream inflation arising from USD 'printing' is arguably the origin of price inflation.
We've seen asset inflation (from real estate to crypto to commodities), now we're seeing price inflation follow.
>Shifts in these from one to another may cause swings in M1, and they are the only possible cause of "printing" USD, but they don't cause any inflation.
The US wasn't pulling from equity to print these funds, it was diluting the existing. This isn't a transfer from one asset to another.
Why do you go directly from OP's comment to this question?
The market perception of downstream inflation arising from USD 'printing' is arguably the origin of price inflation.
We've seen asset inflation (from real estate to crypto to commodities), now we're seeing price inflation follow.
>Shifts in these from one to another may cause swings in M1, and they are the only possible cause of "printing" USD, but they don't cause any inflation.
The US wasn't pulling from equity to print these funds, it was diluting the existing. This isn't a transfer from one asset to another.
I find it baffling how you're managing to conclude it's inflation, and not market demand due to disrupted supply chains due to the pandemic.
The effect of automobile availability due to the chip supply disruption has been well-covered on HN and elsewhere and is a pretty obvious guide post here.
The effect of automobile availability due to the chip supply disruption has been well-covered on HN and elsewhere and is a pretty obvious guide post here.
'Printing money' has nothing to do with printing bank notes.
You mean without a “material” counterpart?
US admins announced massive investment plans. There will be new goods available so you’ll need more monetary symbols in the market to stabilise prices. In theory.
US admins announced massive investment plans. There will be new goods available so you’ll need more monetary symbols in the market to stabilise prices. In theory.
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The technical reason is that devaluing a currency and inflation are defined by economists to be different phenomenon. A currency can devalue without any inflation being measured (eg, currency value drops 2%, productivity increases 2%, roughly 0% inflation and devaluation simultaneously).
But you are right, 35% devaluations are large enough that it would be quite difficult to pull off without causing inflation. Especially when simultaneously the economy partially shuts down.
But you are right, 35% devaluations are large enough that it would be quite difficult to pull off without causing inflation. Especially when simultaneously the economy partially shuts down.
Which currency has the US been devalued by 35% against? Euro? Swiss frank? Japanese Yen? NZD? TWD?
points at the gold price
I mean, if you want to argue that the quantity of money goes up by 35% and the value is down just a little bit then it is unlikely you're going to convince me. It strains credulity. A lot of new dollars are being created.
I mean, if you want to argue that the quantity of money goes up by 35% and the value is down just a little bit then it is unlikely you're going to convince me. It strains credulity. A lot of new dollars are being created.
The price of gold has been been on an upward trend since 2018:
* https://fred.stlouisfed.org/series/GOLDAMGBD228NLBM
It was on a downward trend from 2012-2014, and was mostly flat 2014-2018.
* https://fred.stlouisfed.org/series/GOLDAMGBD228NLBM
It was on a downward trend from 2012-2014, and was mostly flat 2014-2018.
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It hasn’t devalued 35%, more like 10%. You’re pretty close on which currencies though. It has devalued against a basket of the first three currencies in your list, plus Euro, CAD, and Swedish krona: https://en.m.wikipedia.org/wiki/U.S._Dollar_Index
US Dollar Index chart: https://www.cnbc.com/quotes/.DXY
US Dollar Index chart: https://www.cnbc.com/quotes/.DXY
Same level it was 6 months ago
Do you understand what M1, the topic of the article, is? Do you understand what the accounting change regarding M1 was?
* https://fredblog.stlouisfed.org/2021/01/whats-behind-the-rec...
* https://fredblog.stlouisfed.org/2021/01/whats-behind-the-rec...
I have this suspicion that we can’t see the forest through the trees on the US inflation discussion. Does anyone know any good articles which investigate this issue across countries? It seems like a lot of the things that are “blamed” should manifest across the developed world.
The Economist had a pair of articles in December last year about the risks of looming inflation. As usual they state an opinion, but provide plenty of discussion and analysis. I know it's from over 6 months ago, but I think they still provide really useful look at the arguments, and knowing the subsequent history gives useful perspective on the different arguments today.
https://www.economist.com/leaders/2020/12/12/after-the-pande...
https://www.economist.com/briefing/2020/12/12/a-surge-in-inf...
This more recent one on inflation in China, and possible knock on effects is also good for an international perspective.
https://www.economist.com/finance-and-economics/2021/06/10/s...
They have published a few articles looking more specifically at the US, but I think these are good overviews of the global picture and debate.
https://www.economist.com/leaders/2020/12/12/after-the-pande...
https://www.economist.com/briefing/2020/12/12/a-surge-in-inf...
This more recent one on inflation in China, and possible knock on effects is also good for an international perspective.
https://www.economist.com/finance-and-economics/2021/06/10/s...
They have published a few articles looking more specifically at the US, but I think these are good overviews of the global picture and debate.
Kind of an odd example because a) Toyota wasn't hit as hard by the semiconductor shortages because of lessons learned in earlier shortages and b) the Tacoma is a very hot product that was commanding prices above sticker before this all started.
I completely agree. To add to that, the Toyota Tacoma has never been cheap either new or used. Add some pent up demand, and you get a more expensive truck.
Toyota wasn't hit as hard by the semiconductor shortages because of lessons learned in earlier shortages
Car are somewhat fungible so a fall in supply from other manufacturers is enough to push up prices of Toyotas even though their supply might not have been affected.
Car are somewhat fungible so a fall in supply from other manufacturers is enough to push up prices of Toyotas even though their supply might not have been affected.
Toyota dealer in my town has like three cars on the lot
>the Tacoma is a very hot product
As is the old pre-2007 Tundra, which are basically the same sized truck as the "new" Tacoma.
I had an old Tundra, got totaled via minor frame deformity in a rear-end about 4 years ago.
Insurances first offer was almost 25% higher than the highest bluebook, which sounded great, especially since the truck was middle of the road, condition-wise (parked it 20' from salt water for years).
But then I found out real-world price for me to replace it would be closer to 135%.
Had it been the 4-door 4wd, it would have been over 200%, if you could even find one. Closer to 250%, if you needed one sitting on the market "today".
Even paying 35% over bluebook, my 2006 trucks value has gone up everytime I've checked it or had offers on it.
Which is happening now with many vehicles, but like you said, this was happening years before covid with the Toyota trucks.
Tangent: This is also why I'm convinced that the trend toward bigger trucks and SUVs is 95% complying with EPA and safety standards, and maybe 5% market driven. But don't claim that in any of the "you-don't-need-that"/ 'murica-hating threads.
As is the old pre-2007 Tundra, which are basically the same sized truck as the "new" Tacoma.
I had an old Tundra, got totaled via minor frame deformity in a rear-end about 4 years ago.
Insurances first offer was almost 25% higher than the highest bluebook, which sounded great, especially since the truck was middle of the road, condition-wise (parked it 20' from salt water for years).
But then I found out real-world price for me to replace it would be closer to 135%.
Had it been the 4-door 4wd, it would have been over 200%, if you could even find one. Closer to 250%, if you needed one sitting on the market "today".
Even paying 35% over bluebook, my 2006 trucks value has gone up everytime I've checked it or had offers on it.
Which is happening now with many vehicles, but like you said, this was happening years before covid with the Toyota trucks.
Tangent: This is also why I'm convinced that the trend toward bigger trucks and SUVs is 95% complying with EPA and safety standards, and maybe 5% market driven. But don't claim that in any of the "you-don't-need-that"/ 'murica-hating threads.
> This is also why I'm convinced that the trend toward bigger trucks and SUVs is 95% complying with EPA and safety standards, and maybe 5% market driven.
The trend is profit driven which then becomes marketing (not market) driven..
An SUV is basically a gussied-up pickup truck. Take what ye-basic-white-pickup truck would cost a business fleet and the differential cost of an SUV on top of that is pure profit.
So, when the automakers can bank a profit per SUV that exceeds the entire price of a small car, what do you think they're going to do? Naturally, they're going to push the hell out of those SUVs.
The trend is profit driven which then becomes marketing (not market) driven..
An SUV is basically a gussied-up pickup truck. Take what ye-basic-white-pickup truck would cost a business fleet and the differential cost of an SUV on top of that is pure profit.
So, when the automakers can bank a profit per SUV that exceeds the entire price of a small car, what do you think they're going to do? Naturally, they're going to push the hell out of those SUVs.
And you wonder why Ford stopped making cars and switched to only trucks (except for 2 models)
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Ultimately, we basically wallpapered over massive deflation with money printing in 2020.
What is interesting to me given what we have done is how much inflation we still don't have. Right now, the break even inflation rates were still higher in 2008 and 2005.
Of course we were always going to have a surge in the rate of change compared to a year ago when people were are on lockdown.
What is interesting to me given what we have done is how much inflation we still don't have. Right now, the break even inflation rates were still higher in 2008 and 2005.
Of course we were always going to have a surge in the rate of change compared to a year ago when people were are on lockdown.
There has definitely been an increase in the money supply, for example see this chart of the M2:
https://fred.stlouisfed.org/series/M2SL
"Velocity" as it's called dropped in 2020, but once trading picks up again what happens to all those dollars?
Edit: here's the M1, even more striking: https://fred.stlouisfed.org/series/M1SL
https://fred.stlouisfed.org/series/M2SL
"Velocity" as it's called dropped in 2020, but once trading picks up again what happens to all those dollars?
Edit: here's the M1, even more striking: https://fred.stlouisfed.org/series/M1SL
No one is disputing that the money supply has increased dramatically.
The surge in M1 was mostly because of an accounting change:
* https://fredblog.stlouisfed.org/2021/01/whats-behind-the-rec...
(M2 includes M1, IIRC.)
* https://fredblog.stlouisfed.org/2021/01/whats-behind-the-rec...
(M2 includes M1, IIRC.)
This poster is correct, I’m not sure why the post is gray. The way M1 is calculated changed last year, read the linked article for proof.
> "Velocity" as it's called dropped in 2020, but once trading picks up again what happens to all those dollars?
They go back where they came from.
The Fed giveth, the Fed taketh away.
When deflation and unemployment are the concerns, you get the gas pedal pushed and easy money policies. When inflation is a concern instead, they hit the breal and you get tight money policies.
They go back where they came from.
The Fed giveth, the Fed taketh away.
When deflation and unemployment are the concerns, you get the gas pedal pushed and easy money policies. When inflation is a concern instead, they hit the breal and you get tight money policies.
I think the plan has worked out so far: Prevent asset price deflation (to not trigger too many margin calls) by creating artificial asset price inflation. For now CPI seems to be more or less unaffected which can be seen as a success from the "kicking the can down the road" point of view. I think this comment by Christine Lagarde: "We Should Be Happier to Have a Job Than to Have Our Savings Protected" nails it. Its choosing stability over efficiency to prevent the unrest of the masses.
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Deflation? Are we living in the same universe? The prices have been going up and up and up.
You can probably cherry-pick a few items that went down in price, but the overall trend is crystal clear.
You can probably cherry-pick a few items that went down in price, but the overall trend is crystal clear.
There was no massive deflation in 2020. Prices started rising because of 'covid shutdowns', and house prices started upping due to lack of inventory.
It's temporary.
Shift in consumer demand due to work from home, plus temporary logistics inefficiencies and hoarding (similar to toilet paper shortages) can explain higher prices.
Also, consumer has to pay for ppe, cleaning, work restrictions during all steps a product was made, distributed and delivered.
Shift in consumer demand due to work from home, plus temporary logistics inefficiencies and hoarding (similar to toilet paper shortages) can explain higher prices.
Also, consumer has to pay for ppe, cleaning, work restrictions during all steps a product was made, distributed and delivered.
You don't think printing trillions of dollars at never seen before rates is the inflation driver?
No. And neither do people who have to deal with billions of dollars worth of US bonds, given that 10Y Treasury inflation expectations have peaked and are currently going down:
* https://fred.stlouisfed.org/series/T10YIE
The Market™ (currently) thinks this is transitory. See also 5Y:
* https://fred.stlouisfed.org/series/T5YIE
Of course the economy is dynamic, so we'll see what happens when things continue to open up as people get vaccinated. Things may have to be slowed down: but a 'too hot' economy is a nice problem to have, versus the alternative of a too slow one where there's lots of people that are unemployed.
Pre-pandemic the US unemployment rate was at 3.5%; it's currently at 5.8%:
* https://fred.stlouisfed.org/series/UNRATE
I wouldn't be surprised that the desire is to get that lower before considering applying the brakes.
* https://fred.stlouisfed.org/series/T10YIE
The Market™ (currently) thinks this is transitory. See also 5Y:
* https://fred.stlouisfed.org/series/T5YIE
Of course the economy is dynamic, so we'll see what happens when things continue to open up as people get vaccinated. Things may have to be slowed down: but a 'too hot' economy is a nice problem to have, versus the alternative of a too slow one where there's lots of people that are unemployed.
Pre-pandemic the US unemployment rate was at 3.5%; it's currently at 5.8%:
* https://fred.stlouisfed.org/series/UNRATE
I wouldn't be surprised that the desire is to get that lower before considering applying the brakes.
So at what point would printing trillions of dollars have an effect?
If we just gave everyone 10k a month, would inflation occur then?
> So at what point would printing trillions of dollars have an effect?
For a start, when interest rates are not at (effective) zero:
* https://en.wikipedia.org/wiki/Zero_lower_bound
* https://en.wikipedia.org/wiki/Liquidity_trap
In an independent, competently run central bank "money printing" generally only occurs during economic disasters, where the first thing that is generally done is that the central bank reserve rate gets cut.
Further, it should also be recognized that 99% of the "money" that is created in modern financial systems is done by private banks when they issue loans:
* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625
There are a bunch of myths about what "money printing" actually is:
* https://www.pragcap.com/everything-wrong-with-the-money-prin...
For a start, when interest rates are not at (effective) zero:
* https://en.wikipedia.org/wiki/Zero_lower_bound
* https://en.wikipedia.org/wiki/Liquidity_trap
In an independent, competently run central bank "money printing" generally only occurs during economic disasters, where the first thing that is generally done is that the central bank reserve rate gets cut.
Further, it should also be recognized that 99% of the "money" that is created in modern financial systems is done by private banks when they issue loans:
* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625
There are a bunch of myths about what "money printing" actually is:
* https://www.pragcap.com/everything-wrong-with-the-money-prin...
All the 'printed' money is given directly to corporations. This increases their share price. That's where the inflation is. Asset process
What I figure is the printed money is given to people to buy things. It’s given to him who saved/inherited his money and could’ve bought that thing anyways, and to him who didn’t save/inherit his money and couldn’t.
The seller of that thing now has two people competing for it so he can mark up the price further.
He makes profit because he owns the capital, the non-saver or non inheritor, gets a good he couldn’t otherwise afford, and the saver is stuck paying a higher price.
That saver/inheritor who doesn’t own assets but only has his labor to sell, or his inheritance to spend, is effectively having some of his money taken from him and given to the non-saver and the rich man with capital.
The only thing I can say is 'Markets are irrational' (remember 'toilet-paper') and most people overestimate what they really need (example. Newest iPhone vs older fully functional/supported phone). Given the precarious state of the environment, it would pay to be a mindful consumer.