Food Prices Are Soaring Faster Than Inflation and Incomes(bloomberg.com)
bloomberg.com
Food Prices Are Soaring Faster Than Inflation and Incomes
https://www.bloomberg.com/news/articles/2021-03-01/inflation-2021-malnutrition-and-hunger-fears-rise-as-food-prices-soar-globally
598 comments
As someone that is the food mostly spice trade prices have started going up in the last 2-3 weeks though prices have not even reached pre pandemic levels. Black Pepper prices have jumped 20+% in the last 20day that price is still 50% cheaper than what it was 4-5 years ago. The largest problem is not availablity of goods rather shipping. I would advise investing in shipping companies if you are active in the stock market. As now days they are charging 3-4 times the freight and still hard to get space so they probably rare raking it in
Surely you're familiar with the Baltic Dry Index, an index of shipping costs:
https://tradingeconomics.com/commodity/baltic
Also, in case anyone thinks the current environment is crazy then check out the commodities bubble period of 2008 for that index.
https://tradingeconomics.com/commodity/baltic
Also, in case anyone thinks the current environment is crazy then check out the commodities bubble period of 2008 for that index.
Be careful with your reliance on BDI. As the name implies, it does not reflect prices for the entire shipping industry (e.g. container ships). I used to have investments in the area as an institutional investor, and it was common to see people not understand this.
Woah. For anyone interested, go to stats and click 25yrs - it's pretty clear what the above comment is referring to.
Which was all caused by an extremely large drop in the dollar. Anytime there is such a drop, you get global food chaos from a big spike in the price of commodities that destabilizes markets until they're able to adjust. And then you get civil wars out of that inevitably, it helped to cause the Arab Spring as one example.
The US Dollar Index was at 120 in early 2002, and then proceeded to fall persistently until the middle of 2008 when it rested at around 71. An epic collapse by the dollar that triggered all sorts of nasty global effects. Fortunately this time around the dollar drop hasn't been so bad, most major currencies are debasing at the same time. The dollar is merely back to where it was in 2015 and 2018, so far.
The US Dollar Index was at 120 in early 2002, and then proceeded to fall persistently until the middle of 2008 when it rested at around 71. An epic collapse by the dollar that triggered all sorts of nasty global effects. Fortunately this time around the dollar drop hasn't been so bad, most major currencies are debasing at the same time. The dollar is merely back to where it was in 2015 and 2018, so far.
Its amazing that a 50% drop in the dollar was barely detectable in US, due to price stickiness, subsidies, and whatever else.
I'm just beginning to learn about investing...Is there any book and/or website to learn about how the dollar can affect commodities that you would recommend?
I don't think you need a book. When commodities are priced primarily in USD then a decrease in the value of USD leads to an increase in the number of dollars required to make the same purchase.
Increase in any price can be seen as an increase in item value or a decrease in USD value. It takes a more in depth analysis of the market to determine which is the cause of price increase.
Increase in any price can be seen as an increase in item value or a decrease in USD value. It takes a more in depth analysis of the market to determine which is the cause of price increase.
Are there books that would help me get more familiar with these sorts of things?
Most shipping companies in the stock market have rocketed in the past 2-3 months, so that opportunity has passed I think.
Common stock advice: if you hear about an investment opportunity, you've probably already missed out.
Ex: Bitcoin stocks (yes they're stocks / investment products) are only really reported on when they're at an all-time high. They may go up a little more if you're reading something fresh off the press, but it's not going to go up as much as it already has. I mean if you bought a year ago you could have had a 10x return on investment, if you invest now it'll be 10-20% return on investment at best.
Ex: Bitcoin stocks (yes they're stocks / investment products) are only really reported on when they're at an all-time high. They may go up a little more if you're reading something fresh off the press, but it's not going to go up as much as it already has. I mean if you bought a year ago you could have had a 10x return on investment, if you invest now it'll be 10-20% return on investment at best.
Pretty much this. Once the hype has reached the mainstream, the opportunity has peaked or already passed.
Yep, the only reason you should buy into the Bitcoin is when you see the news that it's going the other way (ie: Bitcoin drops $2,000 in 30 minutes)
$2k is only 4%, swings like that happen like every day. Would not recommend trading on that news.
If “hear about” means major media wrote a news story about it because it has gone up then yes. But I’ve learned about profitable investments from places like twitter, reddit etc if you are deeply plugged in to what is happening.
Or deeply plugged into the world of fantasies and pump-and-dump scams. It can be hard to tell.
That's the reasonning that prevented people from buying the ATH when Bitcoin made the news in 2011. And in 2013. And in 2017. And 2020.
Historically when they reach all time high again after a crash they still go up quite a bit (like 400% last upswing). Obviously not a huge sample size there though
Also once Wall Street turns it into a structured product or an ETF, then stay far away.
SPY has gone up 191% in 5 years. I'd say the good ETFs are fine.
Bitcoin has different fundamentals IMO. For buy and hold I still think 10x from here (over the long term) is possible. This year we might see up to 100k. It’s extremely fickle. We could easily see 5k again. No one really knows, though. The best fundamental analysis that gives a bright future is of Bitcoin replacing some significant market cap for gold. Probably not though.
Yup, stock market is all about factored in valuations and others saw the writing on the wall. Since rises and drops are due to surprises, the only way it’ll rocket further is if things will go even EVEN better than already expected. I sometimes have to repeat all this for myself... it helps :p
CPI is a joke, they do something called hedonic adjustments to things like tech products etc. It's completely subjective and BS. Technology is deflationary, things should get cheaper because we go after producing them in creative ways one demand is high.
CPI is absurd, it only perpetuates consumerism and punishes savers. We product 2x the food society consumes - mostly wasted away, just with some supply chain efficiency - there's a lot more room for food not to be expensive though.
CPI is absurd, it only perpetuates consumerism and punishes savers. We product 2x the food society consumes - mostly wasted away, just with some supply chain efficiency - there's a lot more room for food not to be expensive though.
> CPI is absurd, it only perpetuates consumerism and punishes savers.
Okay okay back up.
The consumer price index is a series of numbers designed to help people understand what dollar-denominated figures mean to ordinary people going about their lives, spending those dollars. If that's "consumerism," well yes, it's a portrait of consumerism.
Many economists, mind you, believe CPI doesn't correct quite enough, and suspect that it overstates the inflation it hopes to measure by around 1%. This is because it tracks the actual prices of a certain "market basket" of goods with specific products in it, and that basket gets out of date, as people substitute products.
But if someone's "punishing savers" and "perpetuating consumerism", it's not the index, and it's not the people compiling the index, and it's not the people trying to make the index more accurate by adjusting for quality. Assign the blame where it's due. You have a beef with the Federal Reserve, and possibly with other agencies or laws which refer to the CPI to make policy.
Okay okay back up.
The consumer price index is a series of numbers designed to help people understand what dollar-denominated figures mean to ordinary people going about their lives, spending those dollars. If that's "consumerism," well yes, it's a portrait of consumerism.
Many economists, mind you, believe CPI doesn't correct quite enough, and suspect that it overstates the inflation it hopes to measure by around 1%. This is because it tracks the actual prices of a certain "market basket" of goods with specific products in it, and that basket gets out of date, as people substitute products.
But if someone's "punishing savers" and "perpetuating consumerism", it's not the index, and it's not the people compiling the index, and it's not the people trying to make the index more accurate by adjusting for quality. Assign the blame where it's due. You have a beef with the Federal Reserve, and possibly with other agencies or laws which refer to the CPI to make policy.
There's a ridiculous amount of misconception, FUD, and ignorance around inflation / CPI (it doesn't include housing, it overweights entertainent, it exclude food and energy, hedonic adjustments/basket substitutions make everything look artificially cheap)
To professional economists, it can be infuriating to read (I imagine similar as medical professionals reading antivax blogs/comments, or radio engineers reading about dangers of 5G radiation).
I had a good intention once, to write layman exposition to clear most of the misconceptions. But much like the calculation of the CPI itself, it's a lot of work and ultimately not very rewarding. An unfortunate fact is that a very large part of the CPI comes from household survey responses. These are too expensive for non-professionals to reproduce and verify independently, so probably no amount of writing can really convince CPI-doubters.
To professional economists, it can be infuriating to read (I imagine similar as medical professionals reading antivax blogs/comments, or radio engineers reading about dangers of 5G radiation).
I had a good intention once, to write layman exposition to clear most of the misconceptions. But much like the calculation of the CPI itself, it's a lot of work and ultimately not very rewarding. An unfortunate fact is that a very large part of the CPI comes from household survey responses. These are too expensive for non-professionals to reproduce and verify independently, so probably no amount of writing can really convince CPI-doubters.
Is there an index that isn't a 'consumer price index' but a 'cost of living index' instead then? An index that includes the basics of life like food, energy costs, shelter, transport, education, healthcare and some basic consumer goods? I think the issue most have with CPI is it's often sold as a cost of living index by media, politicians and policy makers and it makes people feel unheard as a result.
"My cost of living has doubled but your saying everything is fine since the CPI has only gone up %3!!!" and general 'let them eat cake' style behaviors saying that iPads are 'so much cheaper'[0] is the general feeling I get.
[0] https://www.reuters.com/article/us-usa-fed-dudley-ipad/ipad-...
"My cost of living has doubled but your saying everything is fine since the CPI has only gone up %3!!!" and general 'let them eat cake' style behaviors saying that iPads are 'so much cheaper'[0] is the general feeling I get.
[0] https://www.reuters.com/article/us-usa-fed-dudley-ipad/ipad-...
I’ve always wanted to see this + I would love to see two Versions of this, one for a 25th percentile earner, and another for 75th percentile. E.g a) what it costs to rent a modest apartment, drive a Honda Civic, shop at Walmart, have 2.5 kids in public school etc. and B) own a home in a metro area, drive an entry level luxury car, shop at Whole Foods, send kids to private college etc.
It’s my perception that there is not much inflation in some areas of the market (chicken thighs at Kroger) and tons for the “keeping up with the Jones’s” set (organic produce, private school education etc)
My point being that inflation can be quite different based on different baskets of goods / consumption patterns
It’s my perception that there is not much inflation in some areas of the market (chicken thighs at Kroger) and tons for the “keeping up with the Jones’s” set (organic produce, private school education etc)
My point being that inflation can be quite different based on different baskets of goods / consumption patterns
The CPI includes shelter, food, energy, transport, education, medical care, clothing, recreation, and others, with weights that by and large make sense to me: https://www.bls.gov/cpi/tables/relative-importance/2020.htm
What do you think is missing, or mis-weighted?
What do you think is missing, or mis-weighted?
People constantly cite that CPI excludes things like housing costs, or if we probably dug into it more excludes stuff in strange ways. It's also probably a global thing, some countries do exclude it completely, others do not so it can confuse things:
Ex:
https://www.macrobusiness.com.au/2017/04/excluding-housing-c...
http://www.chapwoodindex.org/
Ex:
https://www.macrobusiness.com.au/2017/04/excluding-housing-c...
http://www.chapwoodindex.org/
The CPI does include housing. And my citation for that is the Bureau of Labor Statistics, whose job is to put it together. Here is the document with excruciating detail:
https://www.bls.gov/cpi/tables/relative-importance/2020.htm
Housing is 42.385%, of which the shelter itself is 33.316%. The rest includes things like "Clocks, lamps, and decorator items" at 0.313%.
That's American data. Maybe the Australian data (your first link) really does exclude it, but the US most certainly does not.
If people think that the basket of goods is skewed, they need to justify that by comparing it against this list. The BLS makes a ton of data available, and it's unreasonable to claim otherwise.
https://www.bls.gov/cpi/tables/relative-importance/2020.htm
Housing is 42.385%, of which the shelter itself is 33.316%. The rest includes things like "Clocks, lamps, and decorator items" at 0.313%.
That's American data. Maybe the Australian data (your first link) really does exclude it, but the US most certainly does not.
If people think that the basket of goods is skewed, they need to justify that by comparing it against this list. The BLS makes a ton of data available, and it's unreasonable to claim otherwise.
> general 'let them eat cake' style behaviors saying that iPads are 'so much cheaper'
This is a good visualisation of which things got cheaper and others got more expensive, over the last 20 years in the USA. It shows how a "consumer price index" in which, for example, the price of tobacco is weighted at >50% the price of education, can make it seem like it's all okay.
https://cdn.substack.com/image/fetch/f_auto,q_auto:good,fl_p...
This post is also good in that it layers the hike in the price of insulin on the above graph. Be prepared to scroll.
https://insulin.substack.com/p/the-price-of-insulin-vs-the-p...
This is a good visualisation of which things got cheaper and others got more expensive, over the last 20 years in the USA. It shows how a "consumer price index" in which, for example, the price of tobacco is weighted at >50% the price of education, can make it seem like it's all okay.
https://cdn.substack.com/image/fetch/f_auto,q_auto:good,fl_p...
This post is also good in that it layers the hike in the price of insulin on the above graph. Be prepared to scroll.
https://insulin.substack.com/p/the-price-of-insulin-vs-the-p...
1. The current BLS weights for Education is 3.033%, for Tobacco and smoking products 0.608%, that's 20%, not >50% [1].
2. There are around 20mln Americans in college, versus around 34mln adult smokers. Be careful about peer-group bias: how many of your friends smoke, how many went to college?
[1] https://www.bls.gov/cpi/tables/relative-importance/2020.htm
2. There are around 20mln Americans in college, versus around 34mln adult smokers. Be careful about peer-group bias: how many of your friends smoke, how many went to college?
[1] https://www.bls.gov/cpi/tables/relative-importance/2020.htm
It seems like for TVs, it's more that you get a better TV for your money, not that people are spending less on them? A cursory Google search suggests $500-$1,000 was the norm in the 90s, and that seems to be about what people are spending these days too. I can find a nice 24 inch one for $100, but I expect you could find cheaper TVs in the 90s too.
(http://www.tvhistory.tv/tv-prices.htm)
(http://www.tvhistory.tv/tv-prices.htm)
That is a wonderful and very telling graph. Also interesting to note that everything that has becomes cheaper is optional spend (except clothing) that one can do without. Everything above the line which has become more expensive are things which are more necessary.
Maybe the Libertarian in me is coming out when I look at that chart, but it sure seems that the sectors of the economy that increased in price the most are also the most regulated and subsidized.
Without delving into the data, wouldn’t a plausible explanation be that we regulate and/or subsidize those industries _because_ they are the most inflationary? Industries with downward price trends don’t often need consumer protections.
The counter argument is prices come down with increased supply and competition-driven innovation. Regulation inhibits supply. How would regulation make them less inflationary?
Interesting, thanks!
Not an index per se but the Canadian Centre for Policy Alternatives publishes living wage reports, here is how they calculated it in the last one (2019): https://www.policyalternatives.ca/sites/default/files/upload...
Not an index per se but the Canadian Centre for Policy Alternatives publishes living wage reports, here is how they calculated it in the last one (2019): https://www.policyalternatives.ca/sites/default/files/upload...
I'm not an economist.
My layman understanding of inflation is that it is the measure of change of purchasing power a unit of currency has over time. I think most laymen, including myself, questions how this rather theoretical concept is actually measured in real life. Eg. I think it is a sensible expectation that if inflation was said to be 2% for 20 years then I should be able to buy a house that cost $200K 20 years ago for ~$300K now. This expectation is worlds away from reality which then prompts people to question the way inflation is measured.
I know you wrote that you don't really have the inclination anymore to educate on the topic but I for one would be grateful for any pointers how to explain the above discrepancy?
My layman understanding of inflation is that it is the measure of change of purchasing power a unit of currency has over time. I think most laymen, including myself, questions how this rather theoretical concept is actually measured in real life. Eg. I think it is a sensible expectation that if inflation was said to be 2% for 20 years then I should be able to buy a house that cost $200K 20 years ago for ~$300K now. This expectation is worlds away from reality which then prompts people to question the way inflation is measured.
I know you wrote that you don't really have the inclination anymore to educate on the topic but I for one would be grateful for any pointers how to explain the above discrepancy?
Good X and Good Y both increase in price over some period of time, but one does by 2% and the other by 4%. What is the true value of inflation? 2% or 4%? Or is it 3%? Or is it 3.5% because you buy one of the goods twice as often as the other? That's a question of first philosophical origins, and there's no "right" answer.
Particularly if one of those is a house and in the period of time mentioned houses not only got more expensive but they changed in character, being more resistant to earthquakes because of reinforced foundations, and because the fire departments built near them got new hoses for their trucks. So if houses were the one that went up by 4% but they also increased in quality, should we "count" them as having gone up by 4%? After all it's not like your money buys you 4% less house since it actually buys you a slightly different house but for 4% more. Now multiply the number of products and dimensions by a thousand or hundred thousand each and we have the true problem of compiling CPI.
Particularly if one of those is a house and in the period of time mentioned houses not only got more expensive but they changed in character, being more resistant to earthquakes because of reinforced foundations, and because the fire departments built near them got new hoses for their trucks. So if houses were the one that went up by 4% but they also increased in quality, should we "count" them as having gone up by 4%? After all it's not like your money buys you 4% less house since it actually buys you a slightly different house but for 4% more. Now multiply the number of products and dimensions by a thousand or hundred thousand each and we have the true problem of compiling CPI.
> Good X and Good Y both increase in price over some period of time, but one does by 2% and the other by 4%. What is the true value of inflation? 2% or 4%? Or is it 3%? Or is it 3.5% because you buy one of the goods twice as often as the other? That's a question of first philosophical origins, and there's no "right" answer.
Shouldn't the solution basically be how much monthly or yearly does an average consumer spend on x good, and then that is included in the calculation of inflation by that amount.
So if the average consumer spends 30% on housing, then housing should be 30% of the measurement.
Shouldn't the solution basically be how much monthly or yearly does an average consumer spend on x good, and then that is included in the calculation of inflation by that amount.
So if the average consumer spends 30% on housing, then housing should be 30% of the measurement.
Yes. What then should happen when Good Z is invented and grows from 0% to substitute for 25% of Good Y?
How should a measure of inflation track that?
What if Good X becomes half as expensive per unit but people consume twice as much of it as a result? Should that be reflected as a reduction of inflation? If housing per front door goes up by 100% but only up per square foot [or room] by 50%, should the inflation rate of housing be 50%, 75%, or 100%?
How should a measure of inflation track that?
What if Good X becomes half as expensive per unit but people consume twice as much of it as a result? Should that be reflected as a reduction of inflation? If housing per front door goes up by 100% but only up per square foot [or room] by 50%, should the inflation rate of housing be 50%, 75%, or 100%?
TBH looking at my budgets I think this type of argument is missing the point.
Excluding savings, My budget boils down to discretionary and non-discretionary spending. Roughly 1/4th of my budget is fully discretionary and will vary year to year with what I like to do, tracking inflation on the discretionary portion seems like a high difficulty activity which ultimately doesn't matter to my perception of prices.
The remaining 75% of my budget is non-discretionary covering items like
- Housing ~1/4
- Childcare ~1/4
- Food ~1/8
- Non-discretionary expenses (repairs, car, phone, computer, etc. ) ~1/8
I'm fortunate that my healthcare is inexpensive at the moment, but it's pretty straightforward to calculate my future expected health costs and my previous education costs. I'd judge that calculating inflation on the non-discretionary portion of my budget should be trivial, small items like phones/computers simply do not add up to much relative to the big ones like housing, childcare, food, health, and education.
Ironically the CPI seems to focus on the magic basket of goods and not what will actually move the needle for perceived costs by most individuals.
Excluding savings, My budget boils down to discretionary and non-discretionary spending. Roughly 1/4th of my budget is fully discretionary and will vary year to year with what I like to do, tracking inflation on the discretionary portion seems like a high difficulty activity which ultimately doesn't matter to my perception of prices.
The remaining 75% of my budget is non-discretionary covering items like
- Housing ~1/4
- Childcare ~1/4
- Food ~1/8
- Non-discretionary expenses (repairs, car, phone, computer, etc. ) ~1/8
I'm fortunate that my healthcare is inexpensive at the moment, but it's pretty straightforward to calculate my future expected health costs and my previous education costs. I'd judge that calculating inflation on the non-discretionary portion of my budget should be trivial, small items like phones/computers simply do not add up to much relative to the big ones like housing, childcare, food, health, and education.
Ironically the CPI seems to focus on the magic basket of goods and not what will actually move the needle for perceived costs by most individuals.
Even discretionary and non discretionary is a contentious item and in a CPI has to be defined.
For example: is TV service discretionary? Is Internet service discretionary? Is broadband Internet access discretionary?
I just checked. Bell TV + Internet is advertised as $120CAD right now. Cell service combined with that add $70CAD. Per month. With taxes on top that's round about $2,620 per year if we are talking Single person household.
Now it depends on where you are and whether you live alone or not and such. In Toronto as a single person at the median income this alone can be 4.5% of your net income. I'd say that moves the needle. I pay less than half of this with a different ISP and cell provider + Netflix. Of course the precise calculations change as we move between cities and provinces as well as single person vs. families etc. as base costs get shared.
For example: is TV service discretionary? Is Internet service discretionary? Is broadband Internet access discretionary?
I just checked. Bell TV + Internet is advertised as $120CAD right now. Cell service combined with that add $70CAD. Per month. With taxes on top that's round about $2,620 per year if we are talking Single person household.
Now it depends on where you are and whether you live alone or not and such. In Toronto as a single person at the median income this alone can be 4.5% of your net income. I'd say that moves the needle. I pay less than half of this with a different ISP and cell provider + Netflix. Of course the precise calculations change as we move between cities and provinces as well as single person vs. families etc. as base costs get shared.
The hypothetical single income earner that we are debating would pay an average rent of $2250/mo for a 1-bedroom in Toronto. Roughly 10x the cost of TV, internet, and phone. This cost has risen from ~$1750/mo in 2017 at roughly ~10% per year.
For perspective, our hypothetical individual would be experiencing house price inflation equal to a new TV, phone, and internet bill every year.
(1-bedrooms displayed the lowest price increase of any housing category in Toronto according to https://www.zumper.com/rent-research/toronto-on )
For perspective, our hypothetical individual would be experiencing house price inflation equal to a new TV, phone, and internet bill every year.
(1-bedrooms displayed the lowest price increase of any housing category in Toronto according to https://www.zumper.com/rent-research/toronto-on )
Absolutely agreed that there are worse categories than your phone/internet/tv bills. And yet even this relatively small and apparently I Yunsignificant non-discretionary (or was some of it discretionary? Or all of it?) item still makes up 4.5% of your net income. That I still call significant.
Once I have a house the inflation on that also doesn't affect me that much any more (sure, evaluations increase my tax bill - which btw is a NA thing that is irrelevant in Germany for example as long as you have a mortgage) but other items do.
Once I have a house the inflation on that also doesn't affect me that much any more (sure, evaluations increase my tax bill - which btw is a NA thing that is irrelevant in Germany for example as long as you have a mortgage) but other items do.
The underlying problem here is that one of our numbers must be wrong. The options I could see are
1. The marginal cost of housing has little to do with what individuals pay in the short-term.
2. The median income earner requires or will require substantial subsidies or raises to keep pace with the increased costs of their home. Roughly 3-4% per year assuming that housing is the only item inflating.
3. Either the median income, median rental, or tv+internet prices we've quoted are wildly off the mark.
I'd bet that #2 is the correct interpretation of the statistics. While option 1 is possible, it hides low-quality substitutions and assumes that one can always make a substitution such as living with parents for longer.
1. The marginal cost of housing has little to do with what individuals pay in the short-term.
2. The median income earner requires or will require substantial subsidies or raises to keep pace with the increased costs of their home. Roughly 3-4% per year assuming that housing is the only item inflating.
3. Either the median income, median rental, or tv+internet prices we've quoted are wildly off the mark.
I'd bet that #2 is the correct interpretation of the statistics. While option 1 is possible, it hides low-quality substitutions and assumes that one can always make a substitution such as living with parents for longer.
The problem is laymen care about cost of living, not CPI. But news agencies commonly talk about inflation with CPI rather than an actual cost of living. Which is what matters to people living ordinary lives.
Given this, the answers to your questions should be obvious. The answer, as far as laymen are concerned, is 3.5%. Improvements don't matter either. If we eliminated every car other than a Porsche, as far as laymen are concerned then car inflation went up by around 150%.
Given this, the answers to your questions should be obvious. The answer, as far as laymen are concerned, is 3.5%. Improvements don't matter either. If we eliminated every car other than a Porsche, as far as laymen are concerned then car inflation went up by around 150%.
>Given this, the answers to your questions should be obvious.
If the answer seems obvious, then the question isn't fully understood, because there are trade-offs involved in CPI calculations.
There's no such thing as a "layman." Different people in different regions experience different CPI. Inflation for all goods in the Northeast might be 2.1% over the past ten years, but could be 1.6% in the South for the same basket. that might not sound like much, but that means that inflation is rising 25% faster in the Northeast.
No matter what you do, CPI at a national level won't accurately reflect any group. People in the South will claim it's way too high, and people in the NE will complain that it's way too low, etc, etc.
If you want real numbers, relevant to your situation, then the BLS provides the ability to calculate your own person CPI based on what you buy and where you live.
If the answer seems obvious, then the question isn't fully understood, because there are trade-offs involved in CPI calculations.
There's no such thing as a "layman." Different people in different regions experience different CPI. Inflation for all goods in the Northeast might be 2.1% over the past ten years, but could be 1.6% in the South for the same basket. that might not sound like much, but that means that inflation is rising 25% faster in the Northeast.
No matter what you do, CPI at a national level won't accurately reflect any group. People in the South will claim it's way too high, and people in the NE will complain that it's way too low, etc, etc.
If you want real numbers, relevant to your situation, then the BLS provides the ability to calculate your own person CPI based on what you buy and where you live.
[deleted]
I guess that still leaves the question that since it is so difficult, is the CPI actually useful?
Yes, because CPI is a product of both market forces and changes in money supply. The former is not controlled much by anyone, while the latter is controlled by some very rough and not easily predictable knobs held by guys at Fed. Guys at Fed are committed to keep CPI at something like constant 2%, so the must turn these knobs, but for that they need a good feedback as to what their movements are doing.
And sure, they could use something different as a measure of inflation than CPI, but what would that be, and why it would be better than CPI? These questions need to be answered first before we move away from CPI.
And sure, they could use something different as a measure of inflation than CPI, but what would that be, and why it would be better than CPI? These questions need to be answered first before we move away from CPI.
The Fed's dual mandate is very important here. And there's some movement toward "automatic QE in case unemployment starts to rise" - https://www.stitcher.com/show/voxs-the-weeds/episode/fix-rec... (Matt Yglesias wonktalks with Claudia Sahm, very recommended)
CPI is very important, but the labor numbers are much better (since they are easier to measure), so CPI might become a secondary (high level, target) metric over time.
CPI is very important, but the labor numbers are much better (since they are easier to measure), so CPI might become a secondary (high level, target) metric over time.
The problem with applying CPI to an individual's situation is that nobody is average across several dimensions. One person might live in the midwest an have experienced next to no housing inflation, modest food inflation, and be heavily reliant on gasoline (which has gone down in price over 10 years) due to rural living.
The same person living in Seattle might see housing prices double since they rent, food prices explode, since they live in a gentrifying area where low-cost grocers are replaced by high-end organic ones, and gasoline might not be a huge component of their spend because they drive a beater Prius 15 miles a day.
Those are two people, buying pretty similar things who experience inflation very differently than "average." Luckily, the BLS does provide different CPI figures to account for different groups of people -- for example only looking at inflation data for Seattle -- but people generally never discuss those.
The same person living in Seattle might see housing prices double since they rent, food prices explode, since they live in a gentrifying area where low-cost grocers are replaced by high-end organic ones, and gasoline might not be a huge component of their spend because they drive a beater Prius 15 miles a day.
Those are two people, buying pretty similar things who experience inflation very differently than "average." Luckily, the BLS does provide different CPI figures to account for different groups of people -- for example only looking at inflation data for Seattle -- but people generally never discuss those.
> My layman understanding of inflation is that it is the measure of change of purchasing power a unit of currency has over time.
That's loosely correct; but general inflation is the change in purchasing power for currency buying final consumer goods and services, not assets which are intermediary stores of value. Purchased homes are assets (actual or foregone but using a home you own yourself) rents are consumption expenses.
> I think it is a sensible expectation that if inflation was said to be 2% for 20 years then I should be able to buy a house that cost $200K 20 years ago for ~$300K now
It's not. Specifically, that would be the fallacy of division, even if your basic understanding of inflation was correct. The change of an aggregate is not identical to the change in every subset of the aggregate.
That's loosely correct; but general inflation is the change in purchasing power for currency buying final consumer goods and services, not assets which are intermediary stores of value. Purchased homes are assets (actual or foregone but using a home you own yourself) rents are consumption expenses.
> I think it is a sensible expectation that if inflation was said to be 2% for 20 years then I should be able to buy a house that cost $200K 20 years ago for ~$300K now
It's not. Specifically, that would be the fallacy of division, even if your basic understanding of inflation was correct. The change of an aggregate is not identical to the change in every subset of the aggregate.
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Other already gave good answers. The main part is that
a house is not a consumption product - it is not "consumed" (used up) in a limited timespan, but rather, a bundle of a long-durable part (building) and an ultra-durable asset (land). Pretty much all durable assets have increased in price since the 1980s in tandem with falling interest rates[1]. The cause of the long term decline of interest rates is largely unknown.
The BLS largely circumvents this by using rents, actual rents for renters, and owner equivalent rents (OER) for owners. This is done by asking owners what they think their house would rent for, and using those increases for the housing/shelter component of CPI. Rents (which make up 1/3 of CPI) have increased faster than the general CPI, but not as much as house prices[1], likely because of the interest rate decrease.
There are some other complicating aspects around house prices (city prices increased faster than rural, houses sizes grew while household sizes shrank[3], so part of higher prices is just people buying more). But I believe the main aspects is really falling interests rates. A proper decomposition and attribution of most aspects probably takes months of work, enough for a econ Master theses. That's why I mentioned I don't have the energy for that. Nor do most other bloggers/pop-article writers, so they just go for popular appeal and clicks, by telling you why everything is getting worse and more expensive for you.
[1] https://fred.stlouisfed.org/series/MORTGAGE30US [2] https://fred.stlouisfed.org/graph/fredgraph.png?g=BLyd [3] https://azgolfhomes.com/average-home-size-u-s/
The BLS largely circumvents this by using rents, actual rents for renters, and owner equivalent rents (OER) for owners. This is done by asking owners what they think their house would rent for, and using those increases for the housing/shelter component of CPI. Rents (which make up 1/3 of CPI) have increased faster than the general CPI, but not as much as house prices[1], likely because of the interest rate decrease.
There are some other complicating aspects around house prices (city prices increased faster than rural, houses sizes grew while household sizes shrank[3], so part of higher prices is just people buying more). But I believe the main aspects is really falling interests rates. A proper decomposition and attribution of most aspects probably takes months of work, enough for a econ Master theses. That's why I mentioned I don't have the energy for that. Nor do most other bloggers/pop-article writers, so they just go for popular appeal and clicks, by telling you why everything is getting worse and more expensive for you.
[1] https://fred.stlouisfed.org/series/MORTGAGE30US [2] https://fred.stlouisfed.org/graph/fredgraph.png?g=BLyd [3] https://azgolfhomes.com/average-home-size-u-s/
Wouldn't it make sense for the basket of goods used to compute CPI to try to blend the impact of rents (which are included) with "affordability" of buying a house (maybe measured as the carrying costs of an average property per month, which would exclude principal payments)?
Otherwise, because rents and house prices don't always move in lockstep, it's hard to measure the buying power of a dollar over time.
When thinking about purchasing power over time or between different cities, I often think of it as "assume I'm buying 1/180th of an average house in that city each month" as part of a representative basket of goods.
Otherwise, because rents and house prices don't always move in lockstep, it's hard to measure the buying power of a dollar over time.
When thinking about purchasing power over time or between different cities, I often think of it as "assume I'm buying 1/180th of an average house in that city each month" as part of a representative basket of goods.
Not the parent, but the answer here comes down to two simple things:
1. Home prices are not captured in CPI, only rents.
2. The headline CPI is a national number. Home price inflation has actually been somewhat tame overall in recent history (2-3% per year), but it has been very geographically uneven. Some places have experienced basically no inflation, while others have tons of it.
Here is the graph for home price inflation in the San Francisco region: https://fred.stlouisfed.org/graph/?g=BLdf . You can see that it's often double digits, and certainly much higher than any headline inflation rate.
1. Home prices are not captured in CPI, only rents.
2. The headline CPI is a national number. Home price inflation has actually been somewhat tame overall in recent history (2-3% per year), but it has been very geographically uneven. Some places have experienced basically no inflation, while others have tons of it.
Here is the graph for home price inflation in the San Francisco region: https://fred.stlouisfed.org/graph/?g=BLdf . You can see that it's often double digits, and certainly much higher than any headline inflation rate.
> Home prices are not captured in CPI, only rents.
Yes, because CPI measures cost of buying service of housing. Usually, if housing prices rise, so do rents, pretty much in accord, so monitoring rents already gives you a good view on housing affordability. The extent to which cost of renting is decoupled from house prices is largely explained by changes in interest rates: lower interest rates make mortgages more affordable, which allows more bidding for houses and pushes prices up. However, this on net doesn’t do much to actual affordability of said house: at low rates, the sticker price on a house might be high, but the mortgage payments will still be low. Conversely, in the 70s and 80s, boomers saw many cheap houses on the market, but at mortgage rates of 10-12+%, these were even less affordable than houses are today.
That’s why CPI only includes rents, to make an apples-to-apples comparison.
Yes, because CPI measures cost of buying service of housing. Usually, if housing prices rise, so do rents, pretty much in accord, so monitoring rents already gives you a good view on housing affordability. The extent to which cost of renting is decoupled from house prices is largely explained by changes in interest rates: lower interest rates make mortgages more affordable, which allows more bidding for houses and pushes prices up. However, this on net doesn’t do much to actual affordability of said house: at low rates, the sticker price on a house might be high, but the mortgage payments will still be low. Conversely, in the 70s and 80s, boomers saw many cheap houses on the market, but at mortgage rates of 10-12+%, these were even less affordable than houses are today.
That’s why CPI only includes rents, to make an apples-to-apples comparison.
> Usually, if housing prices rise, so do rents, pretty much in accord
While this would theoretically make sense, it's not actually very true in the United States. There's a significant speculative aspect to housing in some markets that results in price increases far higher than rents would sustain (this effect is actually more prominent in other markets, e.g. Canada).
Here: https://smartasset.com/mortgage/price-to-rent-ratio-in-us-ci... you can see that San Francisco prices are 50x rent, while Plano TX, which also has a high per capita income and low eviction rate, sits at 20x rent.
While this would theoretically make sense, it's not actually very true in the United States. There's a significant speculative aspect to housing in some markets that results in price increases far higher than rents would sustain (this effect is actually more prominent in other markets, e.g. Canada).
Here: https://smartasset.com/mortgage/price-to-rent-ratio-in-us-ci... you can see that San Francisco prices are 50x rent, while Plano TX, which also has a high per capita income and low eviction rate, sits at 20x rent.
I think it actually is very true in the United States, outliers like SF notwithstanding. US as a whole is significantly more like Plano than like SF. Sure, that does little to make Bay Area residents feel better about crazy housing prices they deal with, but theirs is by far not a typical American experience.
You're right that we should probably ignore San Francisco and a few others to portray the typical American experience.
But it's still not obvious why for example Atlanta (22.6x) has almost double the price-to-rent ratio of Milwaukee (12.4x) if not due to speculation. Those both seem like fairly "typical America" cities to me. Would you expect Rent in Atlanta to spike heavily in the coming years? Or is the distinction you're making more about urban vs. suburban? (Since my link is just a mediocre blog, it's not clear if those numbers refer to city or metro area.)
But it's still not obvious why for example Atlanta (22.6x) has almost double the price-to-rent ratio of Milwaukee (12.4x) if not due to speculation. Those both seem like fairly "typical America" cities to me. Would you expect Rent in Atlanta to spike heavily in the coming years? Or is the distinction you're making more about urban vs. suburban? (Since my link is just a mediocre blog, it's not clear if those numbers refer to city or metro area.)
> Home prices are not captured in CPI, only rents.
This is literally correct, but misses the essential feature of the housing issue in CPI: A large component of the housing contribution is "owner's equivalent rent" (OER).
Last I checked (now years ago), there is a survey where BLS essentially polls homeowners with the question "How much would your house rent for?" That number is then used for the OER component of CPI.
As the housing bubble was popping, BLS felt it necessary to explain the divergence between rents and OER [1]. The statistic was an absolute mess then, and I haven't seen any reason why it got cleaned up since, although I have not followed it closely in recent years.
[1] https://www.bls.gov/osmr/research-papers/2007/pdf/ec070090.p...
This is literally correct, but misses the essential feature of the housing issue in CPI: A large component of the housing contribution is "owner's equivalent rent" (OER).
Last I checked (now years ago), there is a survey where BLS essentially polls homeowners with the question "How much would your house rent for?" That number is then used for the OER component of CPI.
As the housing bubble was popping, BLS felt it necessary to explain the divergence between rents and OER [1]. The statistic was an absolute mess then, and I haven't seen any reason why it got cleaned up since, although I have not followed it closely in recent years.
[1] https://www.bls.gov/osmr/research-papers/2007/pdf/ec070090.p...
> I think it is a sensible expectation that if inflation was said to be 2% for 20 years then I should be able to buy a house that cost $200K 20 years ago for ~$300K now
Housing is a bit particular because it's a good that's almost always purchased on credit. You'd want to look at the monthly costs of housing (mortgage payment) as opposed to the sticker price, since the total cost that's affordable fluctuates based on the interest rate. Twenty years ago, the interest rate on a 30 year mortgage was about 8%, contrast it with the about 3% rates now.
Housing is a bit particular because it's a good that's almost always purchased on credit. You'd want to look at the monthly costs of housing (mortgage payment) as opposed to the sticker price, since the total cost that's affordable fluctuates based on the interest rate. Twenty years ago, the interest rate on a 30 year mortgage was about 8%, contrast it with the about 3% rates now.
1/3rd of Americans rent their homes. 2/3rd is not "almost always".
>My layman understanding of inflation is that it is the measure of change of purchasing power a unit of currency has over time
>I know you wrote that you don't really have the inclination anymore to educate on the topic but I for one would be grateful for any pointers how to explain the above discrepancy?
obvious answer: it's not "price index", it's "consumer price index". First paragraph from wikipedia:
>A consumer price index measures changes in the price level of a weighted average market basket of consumer goods and services purchased by households.
>I know you wrote that you don't really have the inclination anymore to educate on the topic but I for one would be grateful for any pointers how to explain the above discrepancy?
obvious answer: it's not "price index", it's "consumer price index". First paragraph from wikipedia:
>A consumer price index measures changes in the price level of a weighted average market basket of consumer goods and services purchased by households.
Not an economist either, but I think I can explain that one. CPI is a single rate derived from the change of price in a bunch of goods (houses aren't actually included, as another person noted). A change in CPI tells you nothing about the change in price of a particular good in it; it only tells you how much more expensive those goods are if you bought all of them.
Just as an example, let's say milk and eggs are the only thing on the CPI, and they're both at $2. If milk goes up to $3 and eggs go down to $1, the CPI says there was 0% inflation (assuming they don't adjust for quantity consumed). So rent can go up a lot without affecting the CPI too much, as long as the cost of other goods goes down enough to offset that increase.
Here's a graph showing inflation of different goods between 1998 and 2018: https://realinvestmentadvice.com/wp-content/uploads/2019/04/... As you can see, a lot of "mandatory" things inflated a lot, but the increase in those costs is offset by the decrease in electronics prices.
The CPI is meant, afaik, to gauge the increase in the cost of living for the "average person". It's useful for driving fiscal policy, but it's not terribly useful to laymen, imo (and that includes myself).
Houses are included in asset inflation, I believe. Here's a chart showing asset inflation: https://realinvestmentadvice.com/wp-content/uploads/2019/04/...
Real wages are more interesting to laymen, I think. Those are effectively wages adjusted over time based on inflation from CPI. Using your housing example again, it doesn't really matter if a house cost $200k 20 years ago and costs $400k now, as long as wages doubled over the same period, all things equal. Inflation is fine (for the purposes of buying a house) as long as wages rise to match that increase.
The reason many people can't buy houses anymore is that real wages have fallen. https://en.wikipedia.org/wiki/Real_wages Wikipedia has some interesting info on that. In an ideal world, inflation decreases the purchasing power of a dollar, but your employer gives you more of them to compensate for that. That never happened for many people.
Just as an example, let's say milk and eggs are the only thing on the CPI, and they're both at $2. If milk goes up to $3 and eggs go down to $1, the CPI says there was 0% inflation (assuming they don't adjust for quantity consumed). So rent can go up a lot without affecting the CPI too much, as long as the cost of other goods goes down enough to offset that increase.
Here's a graph showing inflation of different goods between 1998 and 2018: https://realinvestmentadvice.com/wp-content/uploads/2019/04/... As you can see, a lot of "mandatory" things inflated a lot, but the increase in those costs is offset by the decrease in electronics prices.
The CPI is meant, afaik, to gauge the increase in the cost of living for the "average person". It's useful for driving fiscal policy, but it's not terribly useful to laymen, imo (and that includes myself).
Houses are included in asset inflation, I believe. Here's a chart showing asset inflation: https://realinvestmentadvice.com/wp-content/uploads/2019/04/...
Real wages are more interesting to laymen, I think. Those are effectively wages adjusted over time based on inflation from CPI. Using your housing example again, it doesn't really matter if a house cost $200k 20 years ago and costs $400k now, as long as wages doubled over the same period, all things equal. Inflation is fine (for the purposes of buying a house) as long as wages rise to match that increase.
The reason many people can't buy houses anymore is that real wages have fallen. https://en.wikipedia.org/wiki/Real_wages Wikipedia has some interesting info on that. In an ideal world, inflation decreases the purchasing power of a dollar, but your employer gives you more of them to compensate for that. That never happened for many people.
> Using your housing example again, it doesn't really matter if a house cost $200k 20 years ago and costs $400k now, as long as wages doubled over the same period, all things equal. Inflation is fine (for the purposes of buying a house) as long as wages rise to match that increase.
You are missing one crucial aspect: interest rates. 20 years ago, typical interest rate was 8%, so mortgage payments on $200k house were something like $1400/mo. With today’s rate of something like 3.2%, the payments on $400k house are something like $1700/mo, which is 20% higher. To keep the affordability the same between now and then, the nominal wages need only grow 20%, and if they actually doubled, this would hugely increase affordability.
You are missing one crucial aspect: interest rates. 20 years ago, typical interest rate was 8%, so mortgage payments on $200k house were something like $1400/mo. With today’s rate of something like 3.2%, the payments on $400k house are something like $1700/mo, which is 20% higher. To keep the affordability the same between now and then, the nominal wages need only grow 20%, and if they actually doubled, this would hugely increase affordability.
>> CPI (it doesn't include housing..
Uh no, housing is 32% of the CPI.
Source : https://arbor.com/blog/how-does-rent-factor-into-the-consume...
It doesn't track well with the experience of people on this forum because young professionals tend to live in cities with crushing rental markets, especially Silicon Valley. But the whole country, particularly thoseliving in houses not in New York or California, have a different experience.
Uh no, housing is 32% of the CPI.
Source : https://arbor.com/blog/how-does-rent-factor-into-the-consume...
It doesn't track well with the experience of people on this forum because young professionals tend to live in cities with crushing rental markets, especially Silicon Valley. But the whole country, particularly thoseliving in houses not in New York or California, have a different experience.
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it also has real world consequences as CPI is used as a metric for all manners of things, including COLA increases for Social security, as even some private companies.
You forgot the quotes around "economist". Economics is still not science, it's getting closer; but the whole field ignores stuff and deals with spherical cows to simplify complexities.
This, of course, makes it wildly inaccurate.
This, of course, makes it wildly inaccurate.
You know you can be a "professional X" without X being a science, right? It simply means that X is your profession. Some examples of professions that are not sciences: racer, chef, journalist, writer, singer.
Yes, but those professions have agreed upon norms and standards that can be measured.
Did you win, Does it taste good, is it accurate and easy to follow, etc...
Economists are all over the place you an pick and choose different theories to support any Point of view.
I'm sorry, but no, they don't. Out of all of the examples I used, only one has agreed-upon norms and standards that can be measured: racing.
All the other examples I used -- chef, journalist, writer, singer -- can win awards and recognition: Michelin stars, Pulitzer, Hugo, Nebula, Grammy, and such. Those are good indicators of their accomplishments, but that's not the same as having a set of "agreed-upon norms and standards that can be measured".
And if you decide to relax your criteria and say that having those is acceptable, then guess what? There's a Nobel Memorial Prize in Economic Sciences, and a slew of other awards for economists.
Like it or not, studying economics is something that people can and do dedicate their lives to. Would it be better if we had more clarity, transparency, and consensus when it comes to what they do? Absolutely. But dismissing the whole profession out of hand is unhelpful.
All the other examples I used -- chef, journalist, writer, singer -- can win awards and recognition: Michelin stars, Pulitzer, Hugo, Nebula, Grammy, and such. Those are good indicators of their accomplishments, but that's not the same as having a set of "agreed-upon norms and standards that can be measured".
And if you decide to relax your criteria and say that having those is acceptable, then guess what? There's a Nobel Memorial Prize in Economic Sciences, and a slew of other awards for economists.
Like it or not, studying economics is something that people can and do dedicate their lives to. Would it be better if we had more clarity, transparency, and consensus when it comes to what they do? Absolutely. But dismissing the whole profession out of hand is unhelpful.
I don't dismiss the profession. I dismiss the professionals. They need to provide more proof then identifying as a professional exactly because it is not a science. I also need to understand their biases and agenda.
Honestly it's usually easier to just ignore them and give their opinion no weight greater then anyone else.
I agree with everything you wrote except that last sentence, and that is exactly what I refer to as "dismissing the profession". Understanding their biases and agenda is by no means trivial, or even easy, but it's most likely a lot easier than spending all the time they spent on studying the subject matter.
Fair enough, an actual economics professional might have some insight is you can ensure your not talking to a voodoo economics professional.
Economic theory is good for asking questions and maybe creating a standard. It has a dismal record of answering questions.
Economic theory is good for asking questions and maybe creating a standard. It has a dismal record of answering questions.
Scientists in the physical realm would NEVER approximate things as spherical cows! ;)
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>The consumer price index is a series of numbers designed to help people understand what dollar-denominated figures mean to ordinary people going about their lives, spending those dollars.
It's done an absolutely terrible job for the past 15 years, for my lifestyle and where I live. I suspect it hasn't reflect many other people's budgets either, hence the common argument of official CPI figures being nonsense.
I don't even have to look at anything other than the changing health insurance premiums/deductibles/co pays/out of pocket maximums to prove it, not to mention real estate, childcare, taxes, and education. It eviscerates any downward effect tech products and grocery prices might have.
It's done an absolutely terrible job for the past 15 years, for my lifestyle and where I live. I suspect it hasn't reflect many other people's budgets either, hence the common argument of official CPI figures being nonsense.
I don't even have to look at anything other than the changing health insurance premiums/deductibles/co pays/out of pocket maximums to prove it, not to mention real estate, childcare, taxes, and education. It eviscerates any downward effect tech products and grocery prices might have.
My anecdote is as valid as your anecdote. Life got cheaper over the past 15 years, not counting changes in family size.
I used to have insurance co-payment, a deduction from my paycheck, and an unreachable out-of-pocket maximum. All of that has changed.
I used to pay about $1200 rent for a crummy house in a dangerous neighborhood. Now, with a paid-off mortgage, I pay just $266 for property tax on a house that is 3109 square feet on 0.39 acres.
Childcare is my wife, so $0 then and now. Income tax remains $0 due to child deductions. Sales tax is about 7%, relatively unchanged.
Education is a new expense compared to 15 years ago when nobody was in school. If I look back more than 20 years instead, to when I was in college, I can see that college has gotten cheaper. Tuition is a tiny bit lower, but the big change is that tuition and books for the first couple years are now free if you get it done in high school. That cuts the price in half.
This is not to say that I pay less. I now have a huge family. Things are cheaper, but I'm buying much more.
I used to have insurance co-payment, a deduction from my paycheck, and an unreachable out-of-pocket maximum. All of that has changed.
I used to pay about $1200 rent for a crummy house in a dangerous neighborhood. Now, with a paid-off mortgage, I pay just $266 for property tax on a house that is 3109 square feet on 0.39 acres.
Childcare is my wife, so $0 then and now. Income tax remains $0 due to child deductions. Sales tax is about 7%, relatively unchanged.
Education is a new expense compared to 15 years ago when nobody was in school. If I look back more than 20 years instead, to when I was in college, I can see that college has gotten cheaper. Tuition is a tiny bit lower, but the big change is that tuition and books for the first couple years are now free if you get it done in high school. That cuts the price in half.
This is not to say that I pay less. I now have a huge family. Things are cheaper, but I'm buying much more.
> My anecdote is as valid as your anecdote
In this case, technically true is not the best kind of true.
If we generalized both of your anecdata to either
> If I look back more than 20 years instead, to when I was in college, I can see that college has gotten cheaper
Again, that is not generally the case. In fact, the growth in education costs has substantially exceeded the inflation in most other sectors
In this case, technically true is not the best kind of true.
If we generalized both of your anecdata to either
- health insurance and housing got cheaper for everybody, or
- health insurance and housing got more expensive for everybody
> If I look back more than 20 years instead, to when I was in college, I can see that college has gotten cheaper
Again, that is not generally the case. In fact, the growth in education costs has substantially exceeded the inflation in most other sectors
I'm not so sure college has gone up in price, all things considered. The sticker price is much higher, but people aren't usually paying sticker price.
Discounts (scholarships) are much more available.
Stuff like dual-enrollment has spread across the country.
AP is now widely available.
Discounts (scholarships) are much more available.
Stuff like dual-enrollment has spread across the country.
AP is now widely available.
Just so we're clear, here, you've already gone from:
> I can see that college has gotten cheaper
to
> I'm not so sure college has gone up in price
You seem to be good at finding system hacks for your own, and/or proximal cases. But you continue to generalize your own experience(s) in a way that almost certainly doesn't broadly apply.
Here is Google's first link for "student loan total debt history": https://educationdata.org/average-student-loan-debt-by-year
Some stats from that:
> I can see that college has gotten cheaper
to
> I'm not so sure college has gone up in price
You seem to be good at finding system hacks for your own, and/or proximal cases. But you continue to generalize your own experience(s) in a way that almost certainly doesn't broadly apply.
Here is Google's first link for "student loan total debt history": https://educationdata.org/average-student-loan-debt-by-year
Some stats from that:
- Student loan debt at graduation has increased 76% since the Class of 2000, a growth rate that outpaces the rate of inflation by 41%
- After adjusting for inflation, the average student loan debt at graduation has increased 326% since 1970
- Since 2003, the national total student loan debt balance has grown by 602.5%
> Many economists, mind you, believe CPI doesn't correct quite enough, and suspect that it overstates the inflation it hopes to measure by around 1%. This is because it tracks the actual prices of a certain "market basket" of goods with specific products in it, and that basket gets out of date, as people substitute products.
Please provide a source to back up this claim, everything I've seen says inflation is /under/-stated, not over. CPI absolutely takes into account substitute products and CPI is not simply tracking a basket of items over time.
Please provide a source to back up this claim, everything I've seen says inflation is /under/-stated, not over. CPI absolutely takes into account substitute products and CPI is not simply tracking a basket of items over time.
> Many economists, mind you, believe CPI doesn't correct quite enough, and suspect that it overstates the inflation it hopes to measure by around 1%. This is because it tracks the actual prices of a certain "market basket" of goods with specific products in it, and that basket gets out of date, as people substitute products.
These substitutions are tricky, if hypothetically a consumer can move from eating fresh local produce to preserved canned produce then it's likely they will make the switch under price pressure when fresh produce increases in cost by 2x. You could calculate CPI based on the new realized purchasing patterns - or you could calculate it based on the desired purchasing pattern.
Basing CPI on realized purchasing behavior will lead to errors in how inflation is perceived or where consumers are trading quality for cost. From a monetary policy perspective ignoring this consumer tradeoff could lead to sudden shifts in CPI when consumers run out of quality substitutions.
I'd argue we've seen this in housing in the major cities where first home prices were excluded for rental equivalent, then rental quality fell in both the amount of space available in a unit as well as the overall quality of the unit. Eventually you hit the wall where quality can't be traded off any longer and you're left with many people who can't legally house themselves.
These substitutions are tricky, if hypothetically a consumer can move from eating fresh local produce to preserved canned produce then it's likely they will make the switch under price pressure when fresh produce increases in cost by 2x. You could calculate CPI based on the new realized purchasing patterns - or you could calculate it based on the desired purchasing pattern.
Basing CPI on realized purchasing behavior will lead to errors in how inflation is perceived or where consumers are trading quality for cost. From a monetary policy perspective ignoring this consumer tradeoff could lead to sudden shifts in CPI when consumers run out of quality substitutions.
I'd argue we've seen this in housing in the major cities where first home prices were excluded for rental equivalent, then rental quality fell in both the amount of space available in a unit as well as the overall quality of the unit. Eventually you hit the wall where quality can't be traded off any longer and you're left with many people who can't legally house themselves.
The CPI is about as good an index as the DJIA--i.e. it's pretty meaningless but everyone refers to it out of inertia.
There have been several eras in computing where a peripheral had a surplus of capability that applications were not making compelling use of. Most especially video cards.
Then one day cards are 'good enough' that someone builds an application that leverages this power, and all of a sudden that becomes the new baseline. Over night you went from having a video card that is three times what you need to a third of what you need.
We might consider availability of seafood to be a given now, due to improvements in food logistics. But it wasn't always the case. For sure strawberries in winter were just not a thing one would buy until relatively recently.
If I wanted vitamin C in February before it would probably be in the form of jam or tomato sauce.
Then one day cards are 'good enough' that someone builds an application that leverages this power, and all of a sudden that becomes the new baseline. Over night you went from having a video card that is three times what you need to a third of what you need.
We might consider availability of seafood to be a given now, due to improvements in food logistics. But it wasn't always the case. For sure strawberries in winter were just not a thing one would buy until relatively recently.
If I wanted vitamin C in February before it would probably be in the form of jam or tomato sauce.
> But if someone's "punishing savers" and "perpetuating consumerism", it's not the index, and it's not the people compiling the index, and it's not the people trying to make the index more accurate by adjusting for quality.
I’ve seen this a lot around the net and I’m honestly and genuinely curious. What drives you to defend the CPI?
I’ve seen this a lot around the net and I’m honestly and genuinely curious. What drives you to defend the CPI?
>What drives you to defend the CPI?
What drives you to question the motives of the commenter rather than responding to his arguments directly?
What drives you to question the motives of the commenter rather than responding to his arguments directly?
He's right, defending the CPI calculation is almost criminal. Many people on fixed incomes that are adjusted based on the CPI are negatively affected. This bogus formula will be conveniently altered to stay under 2% if inflation creeps into the basket of goods being calculated.
>He's right
Perhaps, but the right way to approach this is to point out the factual errors, rather than making thinly veiled insinuations that his opponent is a shill for the BLS or whatever.
>defending the CPI calculation is almost criminal
Ah yes, because the only possible explanation for why people don't hold the same beliefs as you is because they're acting with malice.
For this and the previous point I refer you to the site guidelines: https://news.ycombinator.com/newsguidelines.html, namely:
Please don't post insinuations about astroturfing, shilling, brigading, foreign agents and the like. It degrades discussion and is usually mistaken.
Assume good faith.
>Many people on fixed incomes that are adjusted based on the CPI are negatively affected. This bogus formula will be conveniently altered to stay under 2% if inflation creeps into the basket of goods being calculated.
All this does is provide a motive for why CPI might be wrong, but stops short of providing evidence or counter-arguments.
Perhaps, but the right way to approach this is to point out the factual errors, rather than making thinly veiled insinuations that his opponent is a shill for the BLS or whatever.
>defending the CPI calculation is almost criminal
Ah yes, because the only possible explanation for why people don't hold the same beliefs as you is because they're acting with malice.
For this and the previous point I refer you to the site guidelines: https://news.ycombinator.com/newsguidelines.html, namely:
Please don't post insinuations about astroturfing, shilling, brigading, foreign agents and the like. It degrades discussion and is usually mistaken.
Assume good faith.
>Many people on fixed incomes that are adjusted based on the CPI are negatively affected. This bogus formula will be conveniently altered to stay under 2% if inflation creeps into the basket of goods being calculated.
All this does is provide a motive for why CPI might be wrong, but stops short of providing evidence or counter-arguments.
> making thinly veiled insinuations that his opponent is a shill for the BLS or whatever.
That was definitely not what I was doing at all. If I am giving off that impression then that’s my mistake but this is purely a curiosity.
> Please don't post insinuations about astroturfing, shilling, brigading, foreign agents and the like. It degrades discussion and is usually mistaken.
> Assume good faith.
Please do me the same courtesy friend. This is out of a genuine curiosity for knowledge.
That was definitely not what I was doing at all. If I am giving off that impression then that’s my mistake but this is purely a curiosity.
> Please don't post insinuations about astroturfing, shilling, brigading, foreign agents and the like. It degrades discussion and is usually mistaken.
> Assume good faith.
Please do me the same courtesy friend. This is out of a genuine curiosity for knowledge.
I have no intention of refuting his arguments. I have no strong position on the value of the CPI. OTOH I’ve noticed repeated vociferous defenses of the CPI across various Internet forums which seems out of the ordinary for me, so I’m naturally curious in what drives it. This is not trying to dismiss his argument, I just want to understand from where it’s coming because I think I’m missing something.
I have occasionally come to the defence of CPI in several threads. What drives is usually that the critic shows little knowledge about that the CPI is and/or how it's actually calculated. There are real technical issues with CPI estimations. But forum and blog posts rarely reach beyond the level of "everything I bought/want to buy is getting more expensive faster than the CPI, so it must be bogus".
It triggers me in a similar way, I think, as comments like "my (sisters'/neighbours') kid got really sick after his vaccination, so vaccines are very dangerous". A small number of people really do get sick after (and sometimes even from) vaccines, and probably no amount of research will override their personal experience. But it's a bit disheartening if the level of discourse never rises much above personal experiences.
It triggers me in a similar way, I think, as comments like "my (sisters'/neighbours') kid got really sick after his vaccination, so vaccines are very dangerous". A small number of people really do get sick after (and sometimes even from) vaccines, and probably no amount of research will override their personal experience. But it's a bit disheartening if the level of discourse never rises much above personal experiences.
This is because media and government (in various computations) use CPI when talking about inflation, so it is natural for them to become used interchangeably.
Since CPI doesn't reflect inflation, it is natural to criticize it for failing at that. Maybe it was never meant to reflect inflation, but that seems about as futile as trying to argue for the proper, original meaning of the term "hacker", not what media made it to be.
Since CPI doesn't reflect inflation, it is natural to criticize it for failing at that. Maybe it was never meant to reflect inflation, but that seems about as futile as trying to argue for the proper, original meaning of the term "hacker", not what media made it to be.
do you realize all the calculations use CPI?
the bond market is highly manipulated because of that, why have a market then?
why are retail accounts in germany, netherland already negative rates? does that make sense to you?
can banks make money that way? danger of nationalization of banking?
personal beef? no. I thought this is a forum for civil discussion and reasoning?
personal beef? no. I thought this is a forum for civil discussion and reasoning?
> do you realize all the calculations use CPI?
Whose calculations? The Federal Reserve's calculations? The Federal Reserve has access to a variety of data sources, and while the CPI is the one that gets the press, they also use series like the chained CPI, the producer price index, bond yield curves, unemployment (and not just U3, but things like U6 and the labor force participation rate).
If all you hear about is vanilla CPI, well, that's because you're looking at a newspaper.
Anyway, as I said. You have a beef with the Federal Reserve.
> why are retail accounts in germany, netherland already negative rates?
Public policy, as effected by the European Central Bank. Perhaps you have a beef with them too.
> does that make sense to you?
I mean, it makes sense as in "I understand why they do it", not as in "I think this is a great thing".
> can banks make money that way?
I've read that low interest rates do, in fact, squeeze their profits, though with regards to Germany the "three-pillar" system is crufty and weird and squeezes profits too. For instance, here is this lovely article I saw a while back, whose subhead notes "Low interest rates and the three-pillar system squish profits": https://www.economist.com/finance-and-economics/2019/03/02/c...
> danger of nationalization of banking?
I'm not sure what you're talking about any more. It seems very detached from the Bureau of Labor Statistics, or European equivalent.
Whose calculations? The Federal Reserve's calculations? The Federal Reserve has access to a variety of data sources, and while the CPI is the one that gets the press, they also use series like the chained CPI, the producer price index, bond yield curves, unemployment (and not just U3, but things like U6 and the labor force participation rate).
If all you hear about is vanilla CPI, well, that's because you're looking at a newspaper.
Anyway, as I said. You have a beef with the Federal Reserve.
> why are retail accounts in germany, netherland already negative rates?
Public policy, as effected by the European Central Bank. Perhaps you have a beef with them too.
> does that make sense to you?
I mean, it makes sense as in "I understand why they do it", not as in "I think this is a great thing".
> can banks make money that way?
I've read that low interest rates do, in fact, squeeze their profits, though with regards to Germany the "three-pillar" system is crufty and weird and squeezes profits too. For instance, here is this lovely article I saw a while back, whose subhead notes "Low interest rates and the three-pillar system squish profits": https://www.economist.com/finance-and-economics/2019/03/02/c...
> danger of nationalization of banking?
I'm not sure what you're talking about any more. It seems very detached from the Bureau of Labor Statistics, or European equivalent.
Does the Fed look at inflation numbers within individual industries and metro regions?
Here's what I'm worried about: if you look at historical examples like say the 1970s inflation, or the post-Cold-War Warsaw Pact hyperinflations, or the post WW-2 hyperinflations in many European countries, prices didn't rise uniformly. Some industry or some region would experience very large inflation, and then eventually it would get transmitted to that industry's customers, or their suppliers. It's basically a network contagion, spread across the links in the economy.
We're seeing the early stages of this happen right now - that's what the article is about.
Powell's public comments are that "inflation doesn't turn on a dime" and "we're likely to see some localized price increases within certain industries, but no generalized inflation." The thing is - I know from history that the former can be false (particularly in wartime, and shifts from a controlled to a market economy, and the recovery from COVID has aspects of both), and the latter tells me that he's looking at the same data that I am but drawing the opposite conclusion. If 5% of firms are experiencing 30% inflation and the rest are experiencing no inflation, the PPI will read 1.5%. If that 30% inflation is in a core industry though (say food, or energy, or labor) and they pass it along to all their customers, then within 1-2 years you could have 30% inflation across the whole economy without passing through the 2% stage.
It's giving me COVID tingles from last year, where in March your overall risk of getting COVID in the U.S. was about 1:100,000, but your risk in NYC was 30%. Then suddenly your risk in Phoenix was 40%, and your risk in South Dakota was 50%, and then your risk in LA was 30%, and suddenly about 20% of the country has had it.
Poke holes in my reasoning, please.
Here's what I'm worried about: if you look at historical examples like say the 1970s inflation, or the post-Cold-War Warsaw Pact hyperinflations, or the post WW-2 hyperinflations in many European countries, prices didn't rise uniformly. Some industry or some region would experience very large inflation, and then eventually it would get transmitted to that industry's customers, or their suppliers. It's basically a network contagion, spread across the links in the economy.
We're seeing the early stages of this happen right now - that's what the article is about.
Powell's public comments are that "inflation doesn't turn on a dime" and "we're likely to see some localized price increases within certain industries, but no generalized inflation." The thing is - I know from history that the former can be false (particularly in wartime, and shifts from a controlled to a market economy, and the recovery from COVID has aspects of both), and the latter tells me that he's looking at the same data that I am but drawing the opposite conclusion. If 5% of firms are experiencing 30% inflation and the rest are experiencing no inflation, the PPI will read 1.5%. If that 30% inflation is in a core industry though (say food, or energy, or labor) and they pass it along to all their customers, then within 1-2 years you could have 30% inflation across the whole economy without passing through the 2% stage.
It's giving me COVID tingles from last year, where in March your overall risk of getting COVID in the U.S. was about 1:100,000, but your risk in NYC was 30%. Then suddenly your risk in Phoenix was 40%, and your risk in South Dakota was 50%, and then your risk in LA was 30%, and suddenly about 20% of the country has had it.
Poke holes in my reasoning, please.
[deleted]
I don't really have a dog in this fight other than to point out your initial post was neither civil nor reasoned - and included not citations or facts.
I'm starting to understand what you're insinuating I think, but you still haven't made your point.
I'm starting to understand what you're insinuating I think, but you still haven't made your point.
[deleted]
The European bond market has little connection to the American CPI. European rates are determined by a complex market of futures and interest rate swaps between various banks and markets. Knowing that, negative interest rates make plenty of sense, because interest rates in Europe are relative to other currencies -- unlike in the US, where interest rates are based in a single currency.
> CPI is a joke, they do something called hedonic adjustments to things like tech products etc.
Hedonic adjustments have very minor effects on tech products (which is one of the few areas I've seen a detailed impact analysis, though not recently enough that I have it at hand.)
> Technology is deflationary, things should get cheaper because we go after producing them in creative ways one demand is high.
And...they do. Hedonic adjustments have an effect on how that is reflected in inflation statistics, but they don't effect the underlying processes.
> CPI is absurd, it only perpetuates consumerism and punishes savers
I think your are (among other errors with that description) confusing measuring inflation with policies targeting a small positive level of inflation. CPI doesn't do either of those things.
Hedonic adjustments have very minor effects on tech products (which is one of the few areas I've seen a detailed impact analysis, though not recently enough that I have it at hand.)
> Technology is deflationary, things should get cheaper because we go after producing them in creative ways one demand is high.
And...they do. Hedonic adjustments have an effect on how that is reflected in inflation statistics, but they don't effect the underlying processes.
> CPI is absurd, it only perpetuates consumerism and punishes savers
I think your are (among other errors with that description) confusing measuring inflation with policies targeting a small positive level of inflation. CPI doesn't do either of those things.
> It's completely subjective and BS
Any measure of inflation is subjective. That doesn't make it B.S.
Inflation is a measure on a basket of goods. There is no single basket because people buy different things. This is why there is no single CPI statistic.
Find a CPI that works for you. The federally-provided ones go as fine-grained as income bracket and metropolitan area. They're extremely precise, but may not be accurate if you have unusual purchasing habits.
Any measure of inflation is subjective. That doesn't make it B.S.
Inflation is a measure on a basket of goods. There is no single basket because people buy different things. This is why there is no single CPI statistic.
Find a CPI that works for you. The federally-provided ones go as fine-grained as income bracket and metropolitan area. They're extremely precise, but may not be accurate if you have unusual purchasing habits.
only if you ignore what kind of impact this stupidity has on financial markets if you care about markets
> what kind of impact this stupidity has on financial markets
Almost financial market professional, including those at the Fed, is tracking multiple measures of inflation.
Almost financial market professional, including those at the Fed, is tracking multiple measures of inflation.
Real question that nobody has yet answered: With what data CPI is even calculated? The data sources are all hidden.
Related: https://news.ycombinator.com/item?id=26259279
Related: https://news.ycombinator.com/item?id=26259279
The data are all over bls.gov, in far more detail than you will find convenient for processing. See my remarks down the page: https://news.ycombinator.com/item?id=26386293
If they're not giving you a one-page report on the methodology for how they arrived at each individual point-in-time price figure that they recorded, well, I'm sorry, it's true, their methods are in that sense "hidden".
If they're not giving you a one-page report on the methodology for how they arrived at each individual point-in-time price figure that they recorded, well, I'm sorry, it's true, their methods are in that sense "hidden".
The input to CPI is secret shoppers visiting a variety of retail outlets, and buying things (or write down the advertised prices for things) without telling the retail outlet what they’re doing.
Publishing the particular products looked at, or even the particular stores visited, would invite market manipulation of the CPI figure by re-pricing the included goods.
Publishing the particular products looked at, or even the particular stores visited, would invite market manipulation of the CPI figure by re-pricing the included goods.
Keynesian economics kool-aid, all the Phd Econ guys worship guy who had done some really shady stuff in his life.
Nobel prize in economics was started by Sveriges riksbank in 1968, just to perpetuate same ideaologies.
Shady af.
The Fed uses PCE instead of CPI in their calculations. It might make your argument more convincing if you included an critique of PCE in addition to CPI.
https://www.clevelandfed.org/newsroom-and-events/publication...
https://www.clevelandfed.org/newsroom-and-events/publication...
depends what you mean by "Fed uses" as blanket term
TIPS use CPI like a lot of other things in bond math: https://www.treasurydirect.gov/indiv/products/prod_tips_glan...
TIPS use CPI like a lot of other things in bond math: https://www.treasurydirect.gov/indiv/products/prod_tips_glan...
> Technology is deflationary, things should get cheaper because we go after producing them in creative ways one demand is high.
And as a consequence the wages you earned by making tech year ago should have less value than the wage you earned today. You should expect small inflation. If you want deflationary money, wages should decline year by year.
If you want to save, don't hold cash.
And as a consequence the wages you earned by making tech year ago should have less value than the wage you earned today. You should expect small inflation. If you want deflationary money, wages should decline year by year.
If you want to save, don't hold cash.
if i want to save, don't hold cash?
hold what then? become investment manager in free time instead of my day job as software developer?
hold what then? become investment manager in free time instead of my day job as software developer?
Low cost index funds for over 7 year investment horizon.
If you are in the US and just want to keep the value, Treasury Inflation-Protected Securities (TIPS) directly from the U.S. Treasury. https://www.treasurydirect.gov/indiv/research/indepth/tips/r...
If you are in the US and just want to keep the value, Treasury Inflation-Protected Securities (TIPS) directly from the U.S. Treasury. https://www.treasurydirect.gov/indiv/research/indepth/tips/r...
You don't need to become an investment manager to invest in stocks and bonds any more than you need to become a bank manager to have a bank account.
Just buy a mutual fund (preferably indexed) from somewhere like Vanguard and let them figure it out.
Just buy a mutual fund (preferably indexed) from somewhere like Vanguard and let them figure it out.
If you want to be prudent, hold land, stocks, or bonds. Buy-and-forget with stocks, on average, outperforms both inflation, and actively managed portfolios.
until you need the money to pay big emergency bills, which at he wrong time can wipe you out no wonder there are half a million bankruptcies per year because of medical bills in the US
and 40% of people have no savin
and another significant portion doesn't have enough saving to spend time to invest in stocks, bonds and land(land also comes with perpetual high property taxes in most places in the US)
In the unlikely event you end up with giant medical bills, despite having health insurance, it doesn't matter whether your money was invested well, or poorly. The hospital will happily take every penny.
For the other overwhelming majority of life events, you should invest your savings prudently, instead of stuffing them into a mattress.
If you have no savings, this is a moot point - but so is inflation. Why do you care that money is losing value if you don't have any?
If anything, if you are in debt, you want inflation - because it lets you inflate your debt away.
For the other overwhelming majority of life events, you should invest your savings prudently, instead of stuffing them into a mattress.
If you have no savings, this is a moot point - but so is inflation. Why do you care that money is losing value if you don't have any?
If anything, if you are in debt, you want inflation - because it lets you inflate your debt away.
[deleted]
You might like "Less Than Zero: The Case for a Falling Price Level in a Growing Economy". Available for free online at http://www.iea.org.uk/sites/default/files/publications/files...
More or less the author argues that stable nominal spending, ie a constant level of nominal GDP, is pretty much ideal. And would lead to falling prices as you suggest.
If you replace constant level with 'target a level of nominal GDP that rises 4% every year' you have pretty mainstream position.
Inflation measures are indeed somewhat subject. Nominal GDP has less suggement calls.
(It's still useful to try and measure inflation. But perhaps it should not be a policy target.)
More or less the author argues that stable nominal spending, ie a constant level of nominal GDP, is pretty much ideal. And would lead to falling prices as you suggest.
If you replace constant level with 'target a level of nominal GDP that rises 4% every year' you have pretty mainstream position.
Inflation measures are indeed somewhat subject. Nominal GDP has less suggement calls.
(It's still useful to try and measure inflation. But perhaps it should not be a policy target.)
of course Mr. Selgin is influenced by Hayek, probably worth a read. thanks for sharing
If you are expecting pure Hayek, you are in for a ride:
George Selgin is a dyed-in-the-wool fan of fractional reserve banking. (And with good reason.)
George Selgin is a dyed-in-the-wool fan of fractional reserve banking. (And with good reason.)
ah, i mean it is still ok to try to read arguments of both sides ... it's not like Hayek or people like us know it all
I wouldn't call it 'both sides'. For one, there are more than two sides. For the other, George Sergin is very much some-kind-of Austrian. Perhaps the most interesting one.
See also eg https://www.alt-m.org/2015/07/29/there-was-no-place-like-can...
See also eg https://www.alt-m.org/2015/07/29/there-was-no-place-like-can...
good point man
Everyone knows CPI is not analogous to reality. Why would it be. Just look at house prices
Because houses are assets, which are closer to stocks than food or cars.
Assets are items that generate cash flow. If you live in it, it's a liability and not an asset. Just because its value increases in relation to funny money doesn't mean it's generating cash flow. How much bitcoin do you need to buy a house?
>Assets are items that generate cash flow. If you live in it, it's a liability and not an asset
imputed rent is the cashflow if you live in it.
https://en.wikipedia.org/wiki/Imputed_rent
imputed rent is the cashflow if you live in it.
https://en.wikipedia.org/wiki/Imputed_rent
Because you have to pay something to live somewhere (that's how gravity + weather works) there's a cost.
If you own vs rent you transfer that payment stream into servicing an asset. Assuming the asset goes up that's generating an implicit cash flow (one you will have access to later when you sell the asset).
If you can buy your house with cash then your "housing" cash stream is suddenly freed to be spent elsewhere, so you "gain" a cash flow you didn't previously have.
You can make a fair argument that this is a semantic quibble or one of the usual human self-deceptions but this is how people implicitly think of it.
If you own vs rent you transfer that payment stream into servicing an asset. Assuming the asset goes up that's generating an implicit cash flow (one you will have access to later when you sell the asset).
If you can buy your house with cash then your "housing" cash stream is suddenly freed to be spent elsewhere, so you "gain" a cash flow you didn't previously have.
You can make a fair argument that this is a semantic quibble or one of the usual human self-deceptions but this is how people implicitly think of it.
> Assets are items that generate cash flow.
I would disagree with that. Stocks that don't pay dividends don't generate cash flow either. Assets are items that are bought with the intention for them to generate value. That value might be cash flow, or it might be an increase in value so that you can sell it later. Not all assets generate cash in real time (most don't).
A house is an asset because a) it allows you to pay your liabilities for housing into an equity generating account, and b) people generally expect them to increase in value.
To put it another way, if they weren't an asset, people wouldn't care if they depreciated. I don't care that my car depreciates because it isn't an asset; I don't expect it to increase its value or hold its value.
I would disagree with that. Stocks that don't pay dividends don't generate cash flow either. Assets are items that are bought with the intention for them to generate value. That value might be cash flow, or it might be an increase in value so that you can sell it later. Not all assets generate cash in real time (most don't).
A house is an asset because a) it allows you to pay your liabilities for housing into an equity generating account, and b) people generally expect them to increase in value.
To put it another way, if they weren't an asset, people wouldn't care if they depreciated. I don't care that my car depreciates because it isn't an asset; I don't expect it to increase its value or hold its value.
> If you live in it, it's a liability and not an asset.
That's not a disqualification of an asset, if devaluation is outstripped by increased valuation over time. eg I live within a parcel, that parcel is not transformed into a liability.
That's not a disqualification of an asset, if devaluation is outstripped by increased valuation over time. eg I live within a parcel, that parcel is not transformed into a liability.
In the United States, maybe, but this is not true everywhere. In Japan, for instance, houses are treated more as depreciating assets like cars.
You can buy a brand new 4 Bedroom house in a nice part of Tokyo for ~$300,000, but don't expect to make money on the deal.
You can buy a brand new 4 Bedroom house in a nice part of Tokyo for ~$300,000, but don't expect to make money on the deal.
Housing prices reflect the cost of shelter for literally everyone who doesn't already own a house.
Shelter is much closer to "food" than to "a piece of paper representing a stake in part of a corporation".
Shelter is much closer to "food" than to "a piece of paper representing a stake in part of a corporation".
>Housing prices reflect the cost of shelter for literally everyone who doesn't already own a house.
Right, but using the raw purchase price of the house isn't a good measure. Mortgage rates dropping would cause housing prices to go up even if monthly payments stay the same. What actually matters is how much you spend per month on rent, or if you owned your house, the imputed rent.
>Shelter is much closer to "food" than to "a piece of paper representing a stake in part of a corporation".
From a finance perspective there's no difference between a house and a share in a corporation. They're both productive assets that provide returns. In the case of a house, it provides shelter as a service, which can either be consumed by the owner (by living it it), or by selling it (renting it out). The only difference is that with a house, the relation to you is more direct, as opposed to a tiny fraction of a multinational entity.
Right, but using the raw purchase price of the house isn't a good measure. Mortgage rates dropping would cause housing prices to go up even if monthly payments stay the same. What actually matters is how much you spend per month on rent, or if you owned your house, the imputed rent.
>Shelter is much closer to "food" than to "a piece of paper representing a stake in part of a corporation".
From a finance perspective there's no difference between a house and a share in a corporation. They're both productive assets that provide returns. In the case of a house, it provides shelter as a service, which can either be consumed by the owner (by living it it), or by selling it (renting it out). The only difference is that with a house, the relation to you is more direct, as opposed to a tiny fraction of a multinational entity.
> From a finance perspective there's no difference between a house and a share in a corporation. They're both productive assets that provide returns. In the case of a house, it provides shelter as a service, which can either be consumed by the owner (by living it it), or by selling it (renting it out). The only difference is that with a house, the relation to you is more direct, as opposed to a tiny fraction of a multinational entity.
From a finance perspective, theres no difference between food and a share in a corporation. They're both productive assets that provide returns. In the case of food, it provides sustenance as a service, which can either be consumed by the owner (by eating it), or by selling it (on the side of the road, or in a restaurant.) The only difference is that with food, the relation to you is more direct, as opposed to a tiny fraction of a multinational entity, and it depreciates much faster.
/s/
when you have a hammer, everything is a nail. When you see the world through finance, everything is a series of cashflows. The ability of a worldview to be applied to many things does not mean it is applied well to those things.
The primary purpose of a house is to, well, house people. Shelter is a necessity. People who are most vulnerable to inflation are the poor, who mostly rent, and thus pay current market prices. They also pay the most for healthcare on a per care instance basis, and often pay for college with expensive debt (5%) if they go to college.
If CPI, etc, are not measuring these price changes, perhaps we should use another measure that does.
From a finance perspective, theres no difference between food and a share in a corporation. They're both productive assets that provide returns. In the case of food, it provides sustenance as a service, which can either be consumed by the owner (by eating it), or by selling it (on the side of the road, or in a restaurant.) The only difference is that with food, the relation to you is more direct, as opposed to a tiny fraction of a multinational entity, and it depreciates much faster.
/s/
when you have a hammer, everything is a nail. When you see the world through finance, everything is a series of cashflows. The ability of a worldview to be applied to many things does not mean it is applied well to those things.
The primary purpose of a house is to, well, house people. Shelter is a necessity. People who are most vulnerable to inflation are the poor, who mostly rent, and thus pay current market prices. They also pay the most for healthcare on a per care instance basis, and often pay for college with expensive debt (5%) if they go to college.
If CPI, etc, are not measuring these price changes, perhaps we should use another measure that does.
>From a finance perspective, theres no difference between food and a share in a corporation
Clearly not. After you eat a bread, it's gone. After you live in a house it's still there. A better analogy would be something like a farm, which continuously provides sustenance as a service.
>The primary purpose of a house is to, well, house people. Shelter is a necessity. People who are most vulnerable to inflation are the poor, who mostly rent, and thus pay current market prices. They also pay the most for healthcare on a per care instance basis, and often pay for college with expensive debt (5%) if they go to college.
Should farm (or food producing corporation shares) prices be factored into the CPI as well? Like housing, food is also a necessity, and buying a farm would ensure you're protected against inflation in food.
Also, your point about buying housing as some sort of protection against inflation doesn't tell the whole story. Yes, it's a hedge against future rent increases, but here's no free lunch because the inflation is already priced into the price of the house. If rents are expected to 10x in the next 10 years, you can be sure that housing prices will grow accordingly. That's why price-to-rent ratios are insane in coastal cities.
Clearly not. After you eat a bread, it's gone. After you live in a house it's still there. A better analogy would be something like a farm, which continuously provides sustenance as a service.
>The primary purpose of a house is to, well, house people. Shelter is a necessity. People who are most vulnerable to inflation are the poor, who mostly rent, and thus pay current market prices. They also pay the most for healthcare on a per care instance basis, and often pay for college with expensive debt (5%) if they go to college.
Should farm (or food producing corporation shares) prices be factored into the CPI as well? Like housing, food is also a necessity, and buying a farm would ensure you're protected against inflation in food.
Also, your point about buying housing as some sort of protection against inflation doesn't tell the whole story. Yes, it's a hedge against future rent increases, but here's no free lunch because the inflation is already priced into the price of the house. If rents are expected to 10x in the next 10 years, you can be sure that housing prices will grow accordingly. That's why price-to-rent ratios are insane in coastal cities.
> Clearly not. After you eat a bread, it's gone. After you live in a house it's still there.
After you live in a house a long time it falls apart. Capital Expenditure restores the asset to its previous value. Bread just depreciates faster. but can still be traded, bought and sold. In Japan houses are often only ever used by one family, and the house is destroyed when the land is sold. I am taking your insistence on a cash flow perspective to its logical extreme to show that it is not always applicable.
Corn is an asset when it is bought and sold. It is food when it is consumed.
> Should farm (or food producing corporation shares) prices be factored into the CPI as well?
I clearly say at the end that if CPI is not measuring these price increases we should use a different measure. I'm not sure you understand what's going on in this conversation, but food is in the CPI.
> Also, your point about buying housing as some sort of protection against inflation doesn't tell the whole story.
Where on earth do I say this? I say that poor people are exposed to inflation the most, especially increases in housing prices. We should have measure for what working Americans are exposed to, and do not.
After you live in a house a long time it falls apart. Capital Expenditure restores the asset to its previous value. Bread just depreciates faster. but can still be traded, bought and sold. In Japan houses are often only ever used by one family, and the house is destroyed when the land is sold. I am taking your insistence on a cash flow perspective to its logical extreme to show that it is not always applicable.
Corn is an asset when it is bought and sold. It is food when it is consumed.
> Should farm (or food producing corporation shares) prices be factored into the CPI as well?
I clearly say at the end that if CPI is not measuring these price increases we should use a different measure. I'm not sure you understand what's going on in this conversation, but food is in the CPI.
> Also, your point about buying housing as some sort of protection against inflation doesn't tell the whole story.
Where on earth do I say this? I say that poor people are exposed to inflation the most, especially increases in housing prices. We should have measure for what working Americans are exposed to, and do not.
>After you live in a house a long time it falls apart. Capital Expenditure restores the asset to its previous value. Bread just depreciates faster. but can still be traded, bought and sold. In Japan houses are often only ever used by one family, and the house is destroyed when the land is sold. I am taking your insistence on a cash flow perspective to its logical extreme to show that it is not always applicable.
1. the part of a house that's getting expensive isn't the house itself, it's the land. the multi-million dollar homes in san francisco would only be worth a few hundred thousand tops if they were moved to rural idaho.
2. corporations fall part too. more specifically, their physical assets (eg. machines in factories) fall apart. In both cases they're kept up by routine maintenance. The only difference is that in a corporation the maintenance is paid from revenue before profits/dividends are paid out, whereas in a house the maintenance is paid out of pocket by the owner.
3. it's not a question of deprecation. after you eat a piece of bread it's gone. that's not due to depreciation, it's due to you consuming it.
>I clearly say at the end that if CPI is not measuring these price increases we should use a different measure. I'm not sure you understand what's going on in this conversation, but food is in the CPI.
That's my original point. Rent (and imputed rent) is directly measured in the CPI, so there's no need to measure home prices.
1. the part of a house that's getting expensive isn't the house itself, it's the land. the multi-million dollar homes in san francisco would only be worth a few hundred thousand tops if they were moved to rural idaho.
2. corporations fall part too. more specifically, their physical assets (eg. machines in factories) fall apart. In both cases they're kept up by routine maintenance. The only difference is that in a corporation the maintenance is paid from revenue before profits/dividends are paid out, whereas in a house the maintenance is paid out of pocket by the owner.
3. it's not a question of deprecation. after you eat a piece of bread it's gone. that's not due to depreciation, it's due to you consuming it.
>I clearly say at the end that if CPI is not measuring these price increases we should use a different measure. I'm not sure you understand what's going on in this conversation, but food is in the CPI.
That's my original point. Rent (and imputed rent) is directly measured in the CPI, so there's no need to measure home prices.
I think the thing you're missing is that affordable starter housing allows people to both meet a basic need and also make an investment.
Consider three people, p1, p2, p3.
P1: works at job making $X and rents home entire life.
P2: works at identical job making identical $X and buys + pays off identical home.
P3: works at identical job making identical $X and buys + misses 10 mortgage payments on identical home.
P1 is WAY better off than P2 or P3. Literally, the difference between retiring and working until you die.
"can afford down-payment and also has enough stability to never miss payments" induces a VERY extreme nonlinearity in outcomes that CPI very much fails to capture.
I don't think anything you've said in this thread even comes remotely close to acknowledging the reality that over half of America lives every day.
Consider three people, p1, p2, p3.
P1: works at job making $X and rents home entire life.
P2: works at identical job making identical $X and buys + pays off identical home.
P3: works at identical job making identical $X and buys + misses 10 mortgage payments on identical home.
P1 is WAY better off than P2 or P3. Literally, the difference between retiring and working until you die.
"can afford down-payment and also has enough stability to never miss payments" induces a VERY extreme nonlinearity in outcomes that CPI very much fails to capture.
I don't think anything you've said in this thread even comes remotely close to acknowledging the reality that over half of America lives every day.
> What actually matters is how much you spend per month on rent, or if you owned your house, the imputed rent.
Right, but in most markets rent prices track property values. The long-term upward trend in housing prices is inflation to approximately everyone who doesn't own a house. Which, significantly, includes approximately everyone under the age of 20 or not yet born.
> From a finance perspective there's no difference between a house and a share in a corporation.
From an investor's perspective, perhaps.
But most people are not buying housing primarily as an investment. Most people are buying housing primarily as a way to shelter themselves from the elements.
Consumer finance is finance.
Right, but in most markets rent prices track property values. The long-term upward trend in housing prices is inflation to approximately everyone who doesn't own a house. Which, significantly, includes approximately everyone under the age of 20 or not yet born.
> From a finance perspective there's no difference between a house and a share in a corporation.
From an investor's perspective, perhaps.
But most people are not buying housing primarily as an investment. Most people are buying housing primarily as a way to shelter themselves from the elements.
Consumer finance is finance.
>Right, but in most markets rent prices track property values. The long-term upward trend in housing prices is inflation to approximately everyone who doesn't own a house. Which, significantly, includes approximately everyone under the age of 20 or not yet born.
and that's fine, because rents are tracked directly in the CPI.
>But most people are not buying housing primarily as an investment. Most people are buying housing primarily as a way to shelter themselves from the elements.
That's what they tell themselves, but from an analytical perspective there's no difference between buying a $1M house that provides you $5000/month return in the form of imputed rent, and buying $1M in stocks/bonds that provides you $5000/month return in cash, which you can use to pay rent.
and that's fine, because rents are tracked directly in the CPI.
>But most people are not buying housing primarily as an investment. Most people are buying housing primarily as a way to shelter themselves from the elements.
That's what they tell themselves, but from an analytical perspective there's no difference between buying a $1M house that provides you $5000/month return in the form of imputed rent, and buying $1M in stocks/bonds that provides you $5000/month return in cash, which you can use to pay rent.
> but from an analytical perspective there's no difference
Only for embarrassingly impoverished analytical frameworks.
Unless you know of a bank that will loan me seven figures at sub-3% interest rates based on 10% down and my income, and then let me spend that money in the stock market :)
Only for embarrassingly impoverished analytical frameworks.
Unless you know of a bank that will loan me seven figures at sub-3% interest rates based on 10% down and my income, and then let me spend that money in the stock market :)
>Unless you know of a bank that will loan me seven figures at sub-3% interest rates based on 10% down and my income, and then let me spend that money in the stock market :)
That does indeed make a x% return in the housing market more attractive than a x% return in the stock market, but has to be considered against all the other factors as well eg. diversification, actual returns (historically stocks have higher returns), risk (10x leverage also means 10x more loss), costs (stocks require no upkeep, houses require yearly maintenance), etc. At the end of the day though, it's still an investment as opposed to something you consume.
That does indeed make a x% return in the housing market more attractive than a x% return in the stock market, but has to be considered against all the other factors as well eg. diversification, actual returns (historically stocks have higher returns), risk (10x leverage also means 10x more loss), costs (stocks require no upkeep, houses require yearly maintenance), etc. At the end of the day though, it's still an investment as opposed to something you consume.
you've implicitly bought into the finance perspective, but it's not the only valid perspective by a long shot. consider at least the humanist perspective that people need to live in housing, and that it's not all about money and wealth. this is a critical weakness of many economics perspectives in relation to how the world really works, and an active area of research in economics.
I'll reuse an argument from another comment I made: sure, let's accept that we need to treat housing differently because people need housing. Should we do the same for food? People need to eat as well. Does that mean we should factor in the cost of arable land into the CPI?
you'd asserted a simple statement that houses are (edit: only) assets, which is trivially rejected by showing just one of many other valid perspectives. that there is a spectrum of goods and diversity of economic intricacy among that range doesn't validate your original statement.
the broader point is that asserting a house is just an asset is more a value statement (and more abstractly, an aggression) than a truism. investment has generally become decoupled from its intended purpose of producing value for the many, not just the few (i.e., the efficient allocation of capital), and this kind of misguidance contributes to that kind of misallocation.
the broader point is that asserting a house is just an asset is more a value statement (and more abstractly, an aggression) than a truism. investment has generally become decoupled from its intended purpose of producing value for the many, not just the few (i.e., the efficient allocation of capital), and this kind of misguidance contributes to that kind of misallocation.
>you'd asserted a simple statement that houses are assets, which is trivially rejected by showing just one of many other valid perspectives. that there is a spectrum of goods and diversity of economic intricacy among that range doesn't validate your original statement.
Not exactly, because there are two definition of "asset". From wikipedia:
https://en.wikipedia.org/wiki/Asset
>In financial accounting, an asset is any resource owned or controlled by a business or an economic entity.
https://en.wikipedia.org/wiki/Asset_(economics)
>An asset in economic theory is a durable good which can only be partially consumed (like a portable music player) or input as a factor of production (like a cement mixer) which can only be partially used up in production.
Not exactly, because there are two definition of "asset". From wikipedia:
https://en.wikipedia.org/wiki/Asset
>In financial accounting, an asset is any resource owned or controlled by a business or an economic entity.
https://en.wikipedia.org/wiki/Asset_(economics)
>An asset in economic theory is a durable good which can only be partially consumed (like a portable music player) or input as a factor of production (like a cement mixer) which can only be partially used up in production.
apologies, you'd asserted a statement that houses are only assets (as amended above). houses can act as assets in an economic sense, but that's not their primary or sole purpose or source of value.
agreed because housing/RE is also used for speculation/investment and not just utility
what portion of valuation is utility in what point in time is hard to tell
Your argument doesn't really "disprove" CPI, as it has many components - https://www.businessinsider.com/consumer-price-inflation-com...
[deleted]
> We product 2x the food society consumes - mostly wasted away, just with some supply chain efficiency
At some point if the prices rise enough it should become profitable to streamline the supply chain?
At some point if the prices rise enough it should become profitable to streamline the supply chain?
good point, i hope so
How do you quantify waste? If I peel a potato, is the skin factored into the waste? I think there are a lot of foods we waste simply because you can't get all the yield out of the given mass, so on paper maybe you do only use half the pumpkin after you peel it, remove the stem, take out the guts, and turn it into a pie.
"thanks to a combination of poor weather, increased demand and virus-mangled global supply chains."
Seems like a lost opportunity to create so much anxiety with a long piece like this, to then only have this single line to hint at a reason for the rise.
Can anybody more economically minded clarify if this is just post-covid rebound supply chain prices or is this food prices adjusting closer to their 'real' cost?
Also what events do they refer to regarding 'poor weather'?
Seems like a lost opportunity to create so much anxiety with a long piece like this, to then only have this single line to hint at a reason for the rise.
Can anybody more economically minded clarify if this is just post-covid rebound supply chain prices or is this food prices adjusting closer to their 'real' cost?
Also what events do they refer to regarding 'poor weather'?
Last year we had:
1. Biblical scale locust infestation in much of Africa, and Asia
2. Floods in East Asia
3. Early winter in Russia, Ukraine, and North China
4. Failed, and missed sowing of grains in much of above regions
5. Shipping disruptions, and resulting food spoilage, and waste
6. Granaries busted, and people burning through many months worth of grain, and flour in much of third world due to initial COVID panic
7. Financial speculators having the best field run on agriculture in decades
8. Anxiety about point 6 repeating runs on food wholesalers again
https://www.aljazeera.com/news/2020/12/10/nobel-winner-wfp-w...
1. Biblical scale locust infestation in much of Africa, and Asia
2. Floods in East Asia
3. Early winter in Russia, Ukraine, and North China
4. Failed, and missed sowing of grains in much of above regions
5. Shipping disruptions, and resulting food spoilage, and waste
6. Granaries busted, and people burning through many months worth of grain, and flour in much of third world due to initial COVID panic
7. Financial speculators having the best field run on agriculture in decades
8. Anxiety about point 6 repeating runs on food wholesalers again
https://www.aljazeera.com/news/2020/12/10/nobel-winner-wfp-w...
imtringued(5)
Sure, almost all central banks over the world have printed an astronomical amount of money. Even though they may state there is no significant inflation, I dont buy it and neither do many other economists. Stock prices, house prices and now, at last, commodity prices have gone through the roof... But you're probably earning about as much as you were a year ago, or less, if your industry was affected...
It's not just food. Lumber, Steel and Oil aswell. https://www.ft.com/content/6a7c232e-9c63-420c-ac05-40aea84a9...
EDIT: noticed link is paywalled (but not when you access via google) alternative article here: https://www.reuters.com/article/us-global-markets-idUSKBN2AM... "World shares slide on inflation fears, commodities surge"
It's not just food. Lumber, Steel and Oil aswell. https://www.ft.com/content/6a7c232e-9c63-420c-ac05-40aea84a9...
EDIT: noticed link is paywalled (but not when you access via google) alternative article here: https://www.reuters.com/article/us-global-markets-idUSKBN2AM... "World shares slide on inflation fears, commodities surge"
Inflation can be created, basically, by two things, an excess of demand respect to what the economy can produce or problems of supply.
Personally, I'm surprise at how robust are the global supply chains that have been able to keep things more or less normal despise what we have been through the last year.
The quantity of reserves created by the Central Banks are irrelevant if they are not spend in the economy. There are two effects to this "printing money": one is that the interest rate goes down facilitating borrowing from the private sector. The second is that governments have the ammunition to spend in stimulus. If the two things happen we could see inflation, but, notice that this the desired effect: compensate for a fall in the normal demand in the economy.
>" [..] central banks over the world have printed an astronomical amount of money. Even though they may state there is no significant inflation, I dont buy it [..]"
It seems to me that, in your model of the world, this should be leading to hyperinflation. If this is the case, my model of the world is wrong and I will make an effort to change it. I wish all the people has been predicting hyperinflation the last 30 years did the same if it doesn't happen. Somehow, I doubt it.
By now, the quantity theory of money based in the fractional reserve banking model should be discredited.
Personally, I'm surprise at how robust are the global supply chains that have been able to keep things more or less normal despise what we have been through the last year.
The quantity of reserves created by the Central Banks are irrelevant if they are not spend in the economy. There are two effects to this "printing money": one is that the interest rate goes down facilitating borrowing from the private sector. The second is that governments have the ammunition to spend in stimulus. If the two things happen we could see inflation, but, notice that this the desired effect: compensate for a fall in the normal demand in the economy.
>" [..] central banks over the world have printed an astronomical amount of money. Even though they may state there is no significant inflation, I dont buy it [..]"
It seems to me that, in your model of the world, this should be leading to hyperinflation. If this is the case, my model of the world is wrong and I will make an effort to change it. I wish all the people has been predicting hyperinflation the last 30 years did the same if it doesn't happen. Somehow, I doubt it.
By now, the quantity theory of money based in the fractional reserve banking model should be discredited.
The examples given above seem like a textbook definition of inflation inside of a closed loop economic system.
That is not what the U.S. has and it’s definitely not the situation if a country has a reserve currency. The Triffin dilemma may hold the answer in that as you supply your currency to the rest of the world, you are creating local deflationary effects while essentially exporting inflation.
When the rest of the world begins using other systems than the reserve currency to conduct trade, the end result is that the inflation returns home as demand for your currency drops.
When the rest of the world begins using other systems than the reserve currency to conduct trade, the end result is that the inflation returns home as demand for your currency drops.
The grandparent says explicitly in the comment "all the central banks". We are not talking specifically about the USA.
Anyway, the "reserve currency" excuse doesn't explain Japan in the last 20 years or the Euro in the last ten. The theory is just wrong. I don't know what more have to happen for people changing their minds.
It's spending what can generate inflation, specifically, spending above what the economy can produce. If Biden tomorrow created a trillion dollar coin and keep it under their bed, there will not be inflation. If the Central Banks create reserves, the interest rate will fall to zero (but not more), and if, despise the low interest rates, nobody is borrowing, there will not be inflation.
Anyway, the "reserve currency" excuse doesn't explain Japan in the last 20 years or the Euro in the last ten. The theory is just wrong. I don't know what more have to happen for people changing their minds.
It's spending what can generate inflation, specifically, spending above what the economy can produce. If Biden tomorrow created a trillion dollar coin and keep it under their bed, there will not be inflation. If the Central Banks create reserves, the interest rate will fall to zero (but not more), and if, despise the low interest rates, nobody is borrowing, there will not be inflation.
I was referring more to your comment that inflation can be caused by only two things. It's much more complicated than that. In fact, if you were able to predict such things with an accuracy matching the confidence of your position, you would be a very wealthy person indeed.
Inflation is caused by somebody asking for more money and somebody else paying it.
That's a failure of competition keeping prices in check, and little else.
The wealthy person you are looking for is Warren Mosler. He retired to the US Virgin Islands many years ago having made a fortune off the back of people who believed in the Quantity Theory of Money
You can read his conclusions in the book "Soft Currency Economics".
That's a failure of competition keeping prices in check, and little else.
The wealthy person you are looking for is Warren Mosler. He retired to the US Virgin Islands many years ago having made a fortune off the back of people who believed in the Quantity Theory of Money
You can read his conclusions in the book "Soft Currency Economics".
Interest rates are at zero. When official inflation starts ticking up they'll raise interest rates which will deflate the stock & house price bubble and cut inflation off at the knees.
We have lots of things to worry about -- inflation isn't one of them.
We have lots of things to worry about -- inflation isn't one of them.
> We have lots of things to worry about -- inflation isn't one of them.
I really hate this comment. I am worried about not being able to ever being afford a house for my family. Avg income in my neighborhood is ~49k but a 2 bed condo here are selling for 450K and getting outbid by 75k over the asking price. Its insane.
Maybe you already own a house and are happy that prices are up. But its really weird to tell other ppl what they should be worried about.
I really hate this comment. I am worried about not being able to ever being afford a house for my family. Avg income in my neighborhood is ~49k but a 2 bed condo here are selling for 450K and getting outbid by 75k over the asking price. Its insane.
Maybe you already own a house and are happy that prices are up. But its really weird to tell other ppl what they should be worried about.
> Avg income in my neighborhood is ~49k but a 2 bed condo here are selling for 450K and getting outbid by 75k over the asking price. Its insane.
Sure, and your point about housing prices mattering is a good one (see my other comment on this story). But, this describes maybe a few dozen housing markets. Probably only a couple dozen if you cut out resort/ski towns. It's a regional problem, not systemic problem with the national economy.
Sure, and your point about housing prices mattering is a good one (see my other comment on this story). But, this describes maybe a few dozen housing markets. Probably only a couple dozen if you cut out resort/ski towns. It's a regional problem, not systemic problem with the national economy.
> But, this describes maybe a few dozen housing markets. Probably only a couple dozen if you cut out resort/ski towns. It's a regional problem
It, uh, describes all of Canada actually.
https://www.reuters.com/article/us-canada-economy-housing-an...
It, uh, describes all of Canada actually.
https://www.reuters.com/article/us-canada-economy-housing-an...
That's totally fair; sorry for assuming the thread was US-centric.
It also describes the most populous US state. The median housing price is now over $700k in California, while the median household income is around $80k.
California is an outlier. Even within California, the $700K number is caused by a few outlier markets.
$700k is the median. The average is even higher, and especially so in “outlier markets” (where outlier here means the cities and surrounding suburbs where most people live).
Also, more Americans live in California than any other state. So if it’s an outlier, it’s an especially impactful one.
Also, more Americans live in California than any other state. So if it’s an outlier, it’s an especially impactful one.
> But, this describes maybe a few dozen housing markets.
Its a national problem
https://www.redfin.com/us-housing-market
'few dozen' is what like 3 dozens? Assuming its a problem only in 36 markets. Wouldn't that be a 'national problem' ? 36 markets should covers a majority of population in the country.
Its a national problem
https://www.redfin.com/us-housing-market
'few dozen' is what like 3 dozens? Assuming its a problem only in 36 markets. Wouldn't that be a 'national problem' ? 36 markets should covers a majority of population in the country.
Because relatively few regional housing markets have non-luxury 2 bed condos going for $525,000 (75K over 450K, per your original post).
E.g., in the Midwest you'd have to be in a nice part of Chicago or choosing the most expensive city neighborhood of a mid-sized city to find a meaningful number of $525K 2 bed condos. And even then, spending that much on a condo is 100% an unnecessary luxury. 10 minutes in any direction prices will crater, and by the time you get to the suburbs starter homes are from the $200s and $525K is a mansion. For the entirety of the midwest and most parts of the south.
Even on the coasts $525K for a 2 bed condo is a Big City thing. E.g., $500-$700K is the going rate for 2 bed condos in most of Boston, but drive an hour away from Boston in any direction? Not so much. Hell, even Wakefield has a 2 bed condo below $300K and that's only a 25 minute drive. And that's one of the more expensive housing markets in the US.
Living 20 minutes from major city centers via public transit has become a luxury, sure. But it's just not accurate to say that $525K for a 2 bed condo is "normal" in the US. It's not. It's quite specific to a very high CoL markets.
E.g., in the Midwest you'd have to be in a nice part of Chicago or choosing the most expensive city neighborhood of a mid-sized city to find a meaningful number of $525K 2 bed condos. And even then, spending that much on a condo is 100% an unnecessary luxury. 10 minutes in any direction prices will crater, and by the time you get to the suburbs starter homes are from the $200s and $525K is a mansion. For the entirety of the midwest and most parts of the south.
Even on the coasts $525K for a 2 bed condo is a Big City thing. E.g., $500-$700K is the going rate for 2 bed condos in most of Boston, but drive an hour away from Boston in any direction? Not so much. Hell, even Wakefield has a 2 bed condo below $300K and that's only a 25 minute drive. And that's one of the more expensive housing markets in the US.
Living 20 minutes from major city centers via public transit has become a luxury, sure. But it's just not accurate to say that $525K for a 2 bed condo is "normal" in the US. It's not. It's quite specific to a very high CoL markets.
Ah yea i see what you mean. that might be an exception to suburbs of altanta. It was just an example of insanity of housing market in USA. I was not implying that the going price of condo.
Our old apartment in Chicago, which was in a nice neighborhood had its rent prices drop by at least $500/month. It might be more now.
When I look at real estate in general in Chicago, it's been dropping a little, not a ton, but it's not like how other are describing the huge increase in housing costs in other parts of the country.
It seems like there are big regional differences going on with housing costs in the US. Supply/demand and policy I'm guessing are making the difference.
When I look at real estate in general in Chicago, it's been dropping a little, not a ton, but it's not like how other are describing the huge increase in housing costs in other parts of the country.
It seems like there are big regional differences going on with housing costs in the US. Supply/demand and policy I'm guessing are making the difference.
Popping the bubble will be worse than the inflation.
How and for whom?
This attitude that the market must always go up has never worked out historically, just makes the eventual reckoning that much worse.
Fortunately that mentality means that renters like my wife and I who want our future kids to grow up in a good house in a quality school district can just keep saving money, waiting to capitalize on the inevitable normalization when all the speculators and eggs-in-one-basket people fail to learn from history... again.
This attitude that the market must always go up has never worked out historically, just makes the eventual reckoning that much worse.
Fortunately that mentality means that renters like my wife and I who want our future kids to grow up in a good house in a quality school district can just keep saving money, waiting to capitalize on the inevitable normalization when all the speculators and eggs-in-one-basket people fail to learn from history... again.
[deleted]
For rich people.
Also for people that put their life savings as downpayment on an overpriced house.
But at least the bubble popping would make it easier for the middle class newcommers enter the market.
Just inflating the bubble further, as every European bank and government is doing, to make existing property owners richer on paper and get their votes, is not a viable long term solution.
IMHO, it can't pop sooner. Houses should be for living, not for speculation and hoarding wealth. The younger generations have been screwed enough by the old established wealth hoarders.
Just inflating the bubble further, as every European bank and government is doing, to make existing property owners richer on paper and get their votes, is not a viable long term solution.
IMHO, it can't pop sooner. Houses should be for living, not for speculation and hoarding wealth. The younger generations have been screwed enough by the old established wealth hoarders.
I was around during 2008, that's exactly the opposite of what will happen. Financing will dry up and the newcomers will find themselves in a highly competitive rental environment with inflated prices, while the banks and wealthy snap up SFH's for pennies on the dollar.
Maybe the government can raise rates and offer some kind of refund to people who bought their first house in the last year?
Otherwise, the number of people in that "put their life savings as a downpayment on an overpriced house" category is only going to grow, making the problem worse when the collapse eventually happens.
Otherwise, the number of people in that "put their life savings as a downpayment on an overpriced house" category is only going to grow, making the problem worse when the collapse eventually happens.
>offer some kind of refund to people who bought their first house in the last year
I think we run into real problems in America trying to protect people from the consequences of their own bad decision making. In addition to being deeply patronising, it eliminates so many of the normal incentives to be responsible and pushes up risk appetite across the board.
If individuals make poor investments (whether on a house or gamestop otm call options) they'll learn their lesson and move on. There's enough of a safety net in America to ensure no one truly goes hungry from bad luck (and before you point to homelessness- that's a complicated issue intertwined with drug addiction, mental illness and in some cases a free lifestyle choice)
I think we run into real problems in America trying to protect people from the consequences of their own bad decision making. In addition to being deeply patronising, it eliminates so many of the normal incentives to be responsible and pushes up risk appetite across the board.
If individuals make poor investments (whether on a house or gamestop otm call options) they'll learn their lesson and move on. There's enough of a safety net in America to ensure no one truly goes hungry from bad luck (and before you point to homelessness- that's a complicated issue intertwined with drug addiction, mental illness and in some cases a free lifestyle choice)
I agree, but at the moment, it seems that same desire to protect them results in preferring a policy that drives prices ever upward. This would be a less destructive compromise.
It will also cut cheap corporate debt off at the knees, and likely begin a domino effect where people are laid off, home prices are depressed, and inflation continues in spite of all that as a result of supply shock.
Inflation due to monetary policy is a hot topic right now, but it’s getting too much blame for current events.
Prices are up for multiple reasons, including more pressure on shipping channels due to increased demand for goods across the board.
Also, this article is largely about inflation in developing nations like Indonesia. The inflation noted in countries like the United States is more pedestrian:
> In the U.S., prices rose close to 3% in the year ending Jan. 2, according to NielsenIQ, roughly double the overall rate of inflation.
Prices are up for multiple reasons, including more pressure on shipping channels due to increased demand for goods across the board.
Also, this article is largely about inflation in developing nations like Indonesia. The inflation noted in countries like the United States is more pedestrian:
> In the U.S., prices rose close to 3% in the year ending Jan. 2, according to NielsenIQ, roughly double the overall rate of inflation.
We were going to build a house about 6 months ago. Plywood sheets that we were looking at were $8. They're now $30.
May I ask what region you're in? Thanks.
Whoops, meant to include: southern United States.
Asking for investment advice in a forum is probably not the best idea, but does anyone have any advice for someone who's been sitting almost entirely in cash for over 2 years (including missing the covid rebound)? I have a fair amount of experience in the market but from an intuition perspective, I feel like I have alzheimer's or something, I haven't a clue what a person should do in this situation.
Don’t try to time the market. Just put the money in a diversified portfolio at a roboadvisor.
The market is up 2% YTD, but down 4% from peak. It’s a reasonable time to buy (better than peak, at least).
If you must try to time the market, use time cost averaging to reduce volatility from getting a peak (or trough) price when you enter the market, but know that doing so reduces expected returns. The basic idea is to put 1/n of your money in over the next n weeks.
The market is up 2% YTD, but down 4% from peak. It’s a reasonable time to buy (better than peak, at least).
If you must try to time the market, use time cost averaging to reduce volatility from getting a peak (or trough) price when you enter the market, but know that doing so reduces expected returns. The basic idea is to put 1/n of your money in over the next n weeks.
Stock market is always the best available long term bet on average, because that's where you can disguise your assets to mix in with wealthy people assets that gets government bailouts.
There are other things like real estate and government contacts, but those are less available to the casual investor, except through stock market funds.
There are other things like real estate and government contacts, but those are less available to the casual investor, except through stock market funds.
Same. I think market bubble is going to keep going atleast in near future because of the new stimulus money that is going to start flowing to the market soon.
https://www.cnbc.com/2021/03/08/how-the-young-plan-to-spend-...
https://www.cnbc.com/2021/03/08/how-the-young-plan-to-spend-...
The market != The Economy. The market trades on multiples that represent asset prices in the future, and the stimulus was priced in months ago. The recent movement in the market was a reaction to the possibility that inflation shows up 6-12 months in the future, and the Fed doesn't raise rates. Subsequently high inflation will erode the value of bonds (Corporate debt). Who is holding them? Banks. If the banks fail lending tightens and the whole thing implodes. People can't get mortgages, corporations can't pay employees, home prices crash, etc.
It's possible something could set off the market today that accelerates the whole process, like the upcoming supplementary leverage ratio change. Or, the bubble could continue inflating until doesn't. But either way the whole thing is incredibly fragile and much more complicated than the "Stimulus is good for the economy" talk politicians are peddling.
It's possible something could set off the market today that accelerates the whole process, like the upcoming supplementary leverage ratio change. Or, the bubble could continue inflating until doesn't. But either way the whole thing is incredibly fragile and much more complicated than the "Stimulus is good for the economy" talk politicians are peddling.
If you don't have a clue, then staying in cash is probably your best option.
John Hussman has a nice article on the option value of cash. https://www.hussmanfunds.com/comment/mc201201/
tldr: Suppose I offer you a security that will pay $100 two days from today. You can buy as much of it as you like today at $50, or you can wait until tomorrow. Tomorrow, I’ll flip a coin. If it’s heads, I’ll sell you the security at $99. If it’s tails, I’ll sell you the security at $25. What should you do?
Clearly, if you buy the security today, you’ll double your money two days from now. That’s a 100% expected return for each dollar you invest, over that 2-day period. If you wait, you’ll earn nothing on the first day, but you’ll then have two possibilities. If heads, you’ll get just 1% on your invested money. If tails, you’ll get a 300% return, quadrupling your money. With a 50/50 chance at each, your expected return for every dollar you invest is 0.51% + 0.5300% = 150.5%. So waiting adds 50.5% to your expected return over that 2-day period.
John Hussman has a nice article on the option value of cash. https://www.hussmanfunds.com/comment/mc201201/
tldr: Suppose I offer you a security that will pay $100 two days from today. You can buy as much of it as you like today at $50, or you can wait until tomorrow. Tomorrow, I’ll flip a coin. If it’s heads, I’ll sell you the security at $99. If it’s tails, I’ll sell you the security at $25. What should you do?
Clearly, if you buy the security today, you’ll double your money two days from now. That’s a 100% expected return for each dollar you invest, over that 2-day period. If you wait, you’ll earn nothing on the first day, but you’ll then have two possibilities. If heads, you’ll get just 1% on your invested money. If tails, you’ll get a 300% return, quadrupling your money. With a 50/50 chance at each, your expected return for every dollar you invest is 0.51% + 0.5300% = 150.5%. So waiting adds 50.5% to your expected return over that 2-day period.
This. Let's take back the power (but don't be like this guy)... https://www.youtube.com/watch?v=yM4gNVme5a0
Here in Australia, some food prizes are up because the farming industry relies on cheap backpacker labor.
Borders are shut so no backpackers come in, so a lot of fruit died on the field.
https://www.nytimes.com/2021/03/02/world/australia/agricultu...
It should be noted that the entire industry is notorious for doing every dodgy thing they can get away with, wage theft, rent theft, extreme conditions, so local workers stay as far away from these jobs as they can.
Other industries have done OK though. Wheat grain, for example, is predicted to be pretty average: https://research.csiro.au/graincast/wheat-yield-forecasts/
Borders are shut so no backpackers come in, so a lot of fruit died on the field.
https://www.nytimes.com/2021/03/02/world/australia/agricultu...
It should be noted that the entire industry is notorious for doing every dodgy thing they can get away with, wage theft, rent theft, extreme conditions, so local workers stay as far away from these jobs as they can.
Other industries have done OK though. Wheat grain, for example, is predicted to be pretty average: https://research.csiro.au/graincast/wheat-yield-forecasts/
Most cereal, corn, and even some fruit harvest is highly mechanized, whereas many other types of produce require manual labor, so it's really not surprising.
In Europe, there are seasonal harvests that require surges of workers, who are sometimes legal and sometimes not. For example loads of foreign workers flock to the vineyards in France, Italy or Spain to collect the grapes for winemaking. It's around 3 weeks of work, obviously not worth a permanent contract.
There were very few restrictions in those countries by the time of harvest (September) so wine prices, to my knowledge, have remained largely unaffected, but if it happened otherwise, winemakers would have been, without doubt, lobbying against the restrictions.
In Europe, there are seasonal harvests that require surges of workers, who are sometimes legal and sometimes not. For example loads of foreign workers flock to the vineyards in France, Italy or Spain to collect the grapes for winemaking. It's around 3 weeks of work, obviously not worth a permanent contract.
There were very few restrictions in those countries by the time of harvest (September) so wine prices, to my knowledge, have remained largely unaffected, but if it happened otherwise, winemakers would have been, without doubt, lobbying against the restrictions.
It’s amazing to me that the EU behaves a lot like the US in this regard. Same with Australia. I had no idea.
Well, it is still somewhat tricky to pick strawberries etc. with robots. There is R&D going on, but humans still win.
You need to take into account that income differences within the EU are enormous. Badly paid job in Germany still translates into very paid job in Bulgaria or Romania. That is why a lot of the seasonal workers come from the Balkans. Within a month they make enough money to live off for several months back home. No qualification needed.
You need to take into account that income differences within the EU are enormous. Badly paid job in Germany still translates into very paid job in Bulgaria or Romania. That is why a lot of the seasonal workers come from the Balkans. Within a month they make enough money to live off for several months back home. No qualification needed.
Modern capitalism usually moves the capital to labor. But you can’t move sunshine or soil, so modern agriculture moves the labor to the capital.
That's amazing. Australia's farm labor is primarily relatively-wealthy vacationers who need a boost while they are far from home?
Working Holiday visa. If you're under 30 it's a rubber stamp thing.
Pay the 400 bucks and you're good for a year.
You can work legally as long as it's no more than 6 months anywhere, and it's pretty easy to get around that.
You can extend your visa for another year if you do 88 days (~3 months) of "farm work" -- doesn't have to be on a farm per se, I know a guy who worked in a hyper-remote rural gas station ("road house").
I worked on a very remote cattle farm digging watering trenches and welding cattle pens. Then hitchhiked across the country.
Pay the 400 bucks and you're good for a year.
You can work legally as long as it's no more than 6 months anywhere, and it's pretty easy to get around that.
You can extend your visa for another year if you do 88 days (~3 months) of "farm work" -- doesn't have to be on a farm per se, I know a guy who worked in a hyper-remote rural gas station ("road house").
I worked on a very remote cattle farm digging watering trenches and welding cattle pens. Then hitchhiked across the country.
I knew backpacking was a thing, but I thought it was quite confidential. I didn't know that the farmers heavily relied on them to harvest
Not sure that we're operating on the same definition of "backpacking" here, it's just low cost travel[1]. On certain visas in Australia you can extend the duration by working in a specified area[2], which is where that form of travel intersects with the food production issues.
[1] https://en.wikipedia.org/wiki/Backpacking_(travel) [2] https://immi.homeaffairs.gov.au/visas/getting-a-visa/visa-li...
[1] https://en.wikipedia.org/wiki/Backpacking_(travel) [2] https://immi.homeaffairs.gov.au/visas/getting-a-visa/visa-li...
I strongly suspect that it might be their flavor of our "traditional" migrant workers that involved some temporary work visa.
There's an additional article that was on here the other day, that says there's a world-wide shipping problem.
Many containers are abandoned in countries that aren't on major routes because they took PPE to those countries, but never bothered to bring the empty containers back.
Also lots of boats moored off the US East and West coasts, plus Europe, waiting of loading/unloading because of delayed supply chains due to COVID.
It's a butterfly or ripple effect of high optimized supply chains being affected by small changes caused by nature/the government throwing a virus shaped spanner in the works.
Many containers are abandoned in countries that aren't on major routes because they took PPE to those countries, but never bothered to bring the empty containers back.
Also lots of boats moored off the US East and West coasts, plus Europe, waiting of loading/unloading because of delayed supply chains due to COVID.
It's a butterfly or ripple effect of high optimized supply chains being affected by small changes caused by nature/the government throwing a virus shaped spanner in the works.
Pure speculation: Texas. (also central US crops? but it's probably too early for that)
I wonder how many warehoused things that require power and integrity got damaged.
I wonder how many warehoused things that require power and integrity got damaged.
They don’t really grow much but cattle in Texas. Doubt there’s a correlation.
Please research Texas agriculture. Cattle does account for half of ag commodities. However it’s such a large state that it is the top US producer of several non-livestock ag commodities.
My 42 years in Texas has taught me that out major export is bullshit; we’ve got a record crop coming in this year.
So housing and food has gone up dramatically, but still "inflation is low" is the story. Doesn't and hasn't passed the smell test in a decade.
Its probably being cancelled out in the basket by healthcare and education prices skyrocketing. Oh wait.
No joke, back in 2011, a Fed executive insisted that iPad deflation was canceling out higher food prices. Not even that iPads were getting cheaper, just, new ones had faster CPUs, so their effective price was lower. (Which somehow frees up more money for food?)
https://www.reuters.com/article/us-usa-fed-dudley-ipad-idUST...
https://www.reuters.com/article/us-usa-fed-dudley-ipad-idUST...
The official was correct, from the perspective of economy-wide price stability. The problem wasn't inflation, the problem was expensive food.
Obviously, this particular exchange was of no comfort to those who suffer from high food prices, but why should monetary policy be the remedy for high food prices (to the exclusion of its current goals) instead of looking for remedies in fiscal policy, trade policy, regulatory policy, or other instruments better suited to a more targeted redress?
Obviously, this particular exchange was of no comfort to those who suffer from high food prices, but why should monetary policy be the remedy for high food prices (to the exclusion of its current goals) instead of looking for remedies in fiscal policy, trade policy, regulatory policy, or other instruments better suited to a more targeted redress?
Well, there's technically correct, and substantively correct. Most people would take away the lesson that "hey, the current definition of inflation doesn't quite capture the reality of normal people's cost of living", not "computer says no suffering, sorry bro".
But I don't think it's even technically correct from the perspective of price stability. The inflation the central bank cares about is the kind that is the result of (to simplify) "too much money chasing too few goods". Technological deflation is totally orthogonal to that, and should be ignored to the extent possible.
Furthermore, even on its on terms, the calculation isn't correct. A fifty percent faster CPU doesn't mean the effective price has fallen fifty percent, because the CPU is only occasionally the bottleneck. (And do they ever adjust inflation upward for quality reductions?)
But I don't think it's even technically correct from the perspective of price stability. The inflation the central bank cares about is the kind that is the result of (to simplify) "too much money chasing too few goods". Technological deflation is totally orthogonal to that, and should be ignored to the extent possible.
Furthermore, even on its on terms, the calculation isn't correct. A fifty percent faster CPU doesn't mean the effective price has fallen fifty percent, because the CPU is only occasionally the bottleneck. (And do they ever adjust inflation upward for quality reductions?)
The BLS does not include a CPU-megahertz (or gigahertz) in its market basket. It uses CPU speed (and other characteristics) to divide the market into "high-end", "mainstream", or "economy" computers, then substitutes new items in the correct slot when as the new items become available, rather than waiting for the price of the older computer to plummet.
That's still equating technological deflation with (absence of) money-induced inflation, and it still assumes that the more powerful computer can displace the effects of food price inflation (or that the out-of-date computer can keep up with the same present needs).
Also, Dudley said:
>>“Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful,”
Also, Dudley said:
>>“Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful,”
> it still assumes that the more powerful computer can displace the effects of food price inflation
Well, yes-kind-also-no?
It's not an index that describes the cost of necessities or human survival. It's an index that describes how consumers spend money on goods and services, such that the value of the money remains more or less constant.
In that sense, yes, people's computer-money spending patterns can affect the price of food. Literally anything else in the index can do so as well. No, the index is not "assuming" anything can "displace" food; it's just never set out to be a thing where food is this sort of baseline.
I can't be 100% sure, but you seem to think that there should be an index which cares more about food. Moreover, you seem to think that more public policy should revolve around this price index rather than the vanilla CPI that is currently used.
However, I would suggest that monetary policy is far blunt an instrument. It is one of the least-targeted tools possible, with the largest set of possible side effects, and food is too small a slice of the economy.
There's a reason we go for economy-level price stability instead of sector-specific. Imagine if the US had a real bumper crop, more corn and soybeans than you could eat: to meet food price stability targets the Fed would be obligated to shrink the money supply until the corn was as expensive as it used to be, and everyone's mortgages, loans, and credit cards would be harder to pay off.
Well, yes-kind-also-no?
It's not an index that describes the cost of necessities or human survival. It's an index that describes how consumers spend money on goods and services, such that the value of the money remains more or less constant.
In that sense, yes, people's computer-money spending patterns can affect the price of food. Literally anything else in the index can do so as well. No, the index is not "assuming" anything can "displace" food; it's just never set out to be a thing where food is this sort of baseline.
I can't be 100% sure, but you seem to think that there should be an index which cares more about food. Moreover, you seem to think that more public policy should revolve around this price index rather than the vanilla CPI that is currently used.
However, I would suggest that monetary policy is far blunt an instrument. It is one of the least-targeted tools possible, with the largest set of possible side effects, and food is too small a slice of the economy.
There's a reason we go for economy-level price stability instead of sector-specific. Imagine if the US had a real bumper crop, more corn and soybeans than you could eat: to meet food price stability targets the Fed would be obligated to shrink the money supply until the corn was as expensive as it used to be, and everyone's mortgages, loans, and credit cards would be harder to pay off.
I think I addressed these points in the other subthread and agreed that, yes, in general, technological gains can indeed alleviate budget problems, including affording food, but it doesn't hold for the example he gave. The comment for a longer reply.
https://news.ycombinator.com/item?id=26390606
>There's a reason we go for economy-level price stability instead of sector-specific. Imagine if the US had a real bumper crop, more corn and soybeans than you could eat: to meet food price stability targets the Fed would be obligated to shrink the money supply until the corn was as expensive as it used to be, and everyone's mortgages, loans, and credit cards would be harder to pay off.
That I don't have a problem with. The concern is with the opposite scenario: say the Fed is pumping enough money to raise food prices 20%, but techno wizards increase production efficiency across the board by 20% and exactly cancels it out. In that scenario the Fed should say, "wow, we're pumping too much money", not "inflation is just right", because they've stolen credit for the gains of technology.
https://news.ycombinator.com/item?id=26390606
>There's a reason we go for economy-level price stability instead of sector-specific. Imagine if the US had a real bumper crop, more corn and soybeans than you could eat: to meet food price stability targets the Fed would be obligated to shrink the money supply until the corn was as expensive as it used to be, and everyone's mortgages, loans, and credit cards would be harder to pay off.
That I don't have a problem with. The concern is with the opposite scenario: say the Fed is pumping enough money to raise food prices 20%, but techno wizards increase production efficiency across the board by 20% and exactly cancels it out. In that scenario the Fed should say, "wow, we're pumping too much money", not "inflation is just right", because they've stolen credit for the gains of technology.
You are playing a word game here by taking a very specific definition of inflation useful to bureaucrats to argue that ipad processor speeds meaningfully counteract food prices in the way an average person perceives the price level. This simply isn't true unless again you redefine all of those words, which, while not hard to do, isn't particularly useful to people who aren't that specific group of bureaucrats.
So pick whatever definition of inflation you want. Just understand that what normal people care about in terms of inflation is how many pieces of paper they need to achieve the basic goals of their life and your definition is totally irrelevant to their set of concerns. Your having a totally separate conversation then they are with nothing but some semantic overlap.
So pick whatever definition of inflation you want. Just understand that what normal people care about in terms of inflation is how many pieces of paper they need to achieve the basic goals of their life and your definition is totally irrelevant to their set of concerns. Your having a totally separate conversation then they are with nothing but some semantic overlap.
Which was horribly tone deaf, but not incorrect: yes, technological improvements do free up money for food. According to the New York Times, in the 70s your average car would survive for 100k miles. Today you can buy a car that not only survives more than twice as long, but it has far fewer costs: engines using a tiny fraction of the oil, coolants that last the car's lifetime, spark plugs that last several times as long, incredible safety features...
The 2021 Chevrolet Spark costs $13,400 (and appears to come with $1000 of "bonus cash" that would bring that down to $12.4k?), gets 38 MPG highway, and has a standard rear camera and touchscreen. You can buy it today - a brand new car, of reasonable quality, from a top name American company, for $160-ish a month for a 7-year note. It is far safer than any car sold in the 70s, it accelerates faster than most cars sold in 1970, it has navigation and a backup camera standard in the base model. Its paint and coatings will last forever, its battery is sealed, and it requires nearly zero service in the beginning of its life.
Look at a budget car in 1970 - Car and Driver's recommended budget pick was the Ford Pinto, $2500 as tested. It was described as "uncomfortable" with four adults - you really should stick to two, they said. The fact that the cars were still running after the first 15,000 miles was, according to Car and Driver, "an indication of the soundness of their basic engineering." It had painful, uncomfortable bucket seats. The Pinto, and I quote, "substantially more powerful than normal store-bought economy cars", had a 0-60 time of eighteen seconds - this is a car described as "nimble and powerful" in its time. _All_ of the budget cars delivered to Car and Driver had "serious defects" straight from the factory - in the Pinto's case, the camshaft had been installed incorrectly. Ford apparently built a whole series of them that way, then lost track of which. For a budget car to not squeak while braking was apparently impossible, so instead of discussing _if_ they squeaked reviews discussed how the squeaks sounded (the Pinto was apparently not bad - the Chevy Vega was described as a "depths of hell" squeak.) According to the manufacturer, in the first 24k miles, you would need a minimum of eleven hours of shop time, best case scenario, to keep the vehicle running. People describing their normal use mentioned they added a quart of oil a week to the Pinto - ludicrous today. And I won't even get into the safety of 1970s cars - a reminder that the Ford Pinto was famous for literally exploding into flames (the controversy came eight years later, 1978 or so), but despite this its safety is considered today "comparable to other 1970s subcompact cars" (aka terrible, but not remarkably so for the time.) Despite all this, it was a popular car for the time and got good reviews in its day.
At the current low minimum wage of $7.25 an hour, you would have had to work about the same amount of hours to buy a budget car today as in 1970 - the budget cars of today being spaceships in comparison. Drive a 70s car and a 2020s car down the road and you'll quickly understand that the modern car is a paradise of comfort in comparison - noise, smoothness, how it drives, handles, vibrations, emissions, etc etc. Many Western states have top speed limits of 80 mph, where the flow of traffic is 85 or higher - your Pinto would feel terrifying and be extremely unsafe at such a speed: if you crash you die.
Of course, the same applies to many things. Improvements in phone cameras mean that for many people, the cost of a phone+camera has gotten far cheaper. Quartz watches can last a lifetime and are far more accurate than mechanical watches. Remote control toys, flashlights, batteries, lightbulbs, washing machines - all cheaper. These things add up!
Reading your other comments in the adjacent thread, I think you're not seeing the forest for the trees. Yes, a CPU that is 10% faster has little marginal utility, and it does not provide you with much (if any) dollar savings in your pocket. But at the same time, the largest single-year increase in the price of bananas in the last few decades was a few cents a pound: those few cents in your pocket don't really do much either. For increases in both the cost of living and food, you're going to have to look at the ten- or twenty-year picture. Look at the total cost of a laptop that meets your average Joe's requirements. Look at the total cost of ownership of a car. Look at the cost of lightbulbs, toothbrushes and bicycles.
So yes, he is correct: technological improvements do cancel out increases in the cost of living elsewhere! The few bucks you save by not topping up your oil can pay for more expensive bananas, the thousands you save by your car lasting longer can pay for higher rent, the hundreds you save by not needing a camera can pay for a fatter bar tab. But, at the same time, tone deaf to say that to a working class audience in Queens NY in the depths of a recession while you're bailing out the big banks.
The 2021 Chevrolet Spark costs $13,400 (and appears to come with $1000 of "bonus cash" that would bring that down to $12.4k?), gets 38 MPG highway, and has a standard rear camera and touchscreen. You can buy it today - a brand new car, of reasonable quality, from a top name American company, for $160-ish a month for a 7-year note. It is far safer than any car sold in the 70s, it accelerates faster than most cars sold in 1970, it has navigation and a backup camera standard in the base model. Its paint and coatings will last forever, its battery is sealed, and it requires nearly zero service in the beginning of its life.
Look at a budget car in 1970 - Car and Driver's recommended budget pick was the Ford Pinto, $2500 as tested. It was described as "uncomfortable" with four adults - you really should stick to two, they said. The fact that the cars were still running after the first 15,000 miles was, according to Car and Driver, "an indication of the soundness of their basic engineering." It had painful, uncomfortable bucket seats. The Pinto, and I quote, "substantially more powerful than normal store-bought economy cars", had a 0-60 time of eighteen seconds - this is a car described as "nimble and powerful" in its time. _All_ of the budget cars delivered to Car and Driver had "serious defects" straight from the factory - in the Pinto's case, the camshaft had been installed incorrectly. Ford apparently built a whole series of them that way, then lost track of which. For a budget car to not squeak while braking was apparently impossible, so instead of discussing _if_ they squeaked reviews discussed how the squeaks sounded (the Pinto was apparently not bad - the Chevy Vega was described as a "depths of hell" squeak.) According to the manufacturer, in the first 24k miles, you would need a minimum of eleven hours of shop time, best case scenario, to keep the vehicle running. People describing their normal use mentioned they added a quart of oil a week to the Pinto - ludicrous today. And I won't even get into the safety of 1970s cars - a reminder that the Ford Pinto was famous for literally exploding into flames (the controversy came eight years later, 1978 or so), but despite this its safety is considered today "comparable to other 1970s subcompact cars" (aka terrible, but not remarkably so for the time.) Despite all this, it was a popular car for the time and got good reviews in its day.
At the current low minimum wage of $7.25 an hour, you would have had to work about the same amount of hours to buy a budget car today as in 1970 - the budget cars of today being spaceships in comparison. Drive a 70s car and a 2020s car down the road and you'll quickly understand that the modern car is a paradise of comfort in comparison - noise, smoothness, how it drives, handles, vibrations, emissions, etc etc. Many Western states have top speed limits of 80 mph, where the flow of traffic is 85 or higher - your Pinto would feel terrifying and be extremely unsafe at such a speed: if you crash you die.
Of course, the same applies to many things. Improvements in phone cameras mean that for many people, the cost of a phone+camera has gotten far cheaper. Quartz watches can last a lifetime and are far more accurate than mechanical watches. Remote control toys, flashlights, batteries, lightbulbs, washing machines - all cheaper. These things add up!
Reading your other comments in the adjacent thread, I think you're not seeing the forest for the trees. Yes, a CPU that is 10% faster has little marginal utility, and it does not provide you with much (if any) dollar savings in your pocket. But at the same time, the largest single-year increase in the price of bananas in the last few decades was a few cents a pound: those few cents in your pocket don't really do much either. For increases in both the cost of living and food, you're going to have to look at the ten- or twenty-year picture. Look at the total cost of a laptop that meets your average Joe's requirements. Look at the total cost of ownership of a car. Look at the cost of lightbulbs, toothbrushes and bicycles.
So yes, he is correct: technological improvements do cancel out increases in the cost of living elsewhere! The few bucks you save by not topping up your oil can pay for more expensive bananas, the thousands you save by your car lasting longer can pay for higher rent, the hundreds you save by not needing a camera can pay for a fatter bar tab. But, at the same time, tone deaf to say that to a working class audience in Queens NY in the depths of a recession while you're bailing out the big banks.
It seems like an implicit premise in that line of reasoning is that consumers have a choice: they can increase their spending if they want a quality upgrade, or they can forgo the upgrade and keep their spending relatively constant.
In some cases, though, there often isn't much of a choice. I can't buy a (new-ish) car without a rear-view camera, now that they're mandated. I can't hire a builder and tell him that I don't need GFCI outlets, or HVAC, or fire sprinklers; it's all required by code. If I wanted a ~1000 square foot house, I could have built one 50 years ago, but today my planning department wouldn't approve.
Similarly, I might have been content with the experience of using my iPhone 4 back in 2010, but I can't recreate that for much cheaper today. Even if I could buy an iPhone 4 for cheap, it no longer receives security updates, and many apps have dropped support, or at least focus their QA on newer devices.
Or I might have been content with the 2mbps connection my ISP offered back in 2000, but now their plans start at 50mbps. Even if I could find a cheap 2mbps plan, it wouldn't be as practical given the bloated state of websites today. (I mean it's doable, buy my quality of experience would be much lower than it was in 2000.)
In some cases, though, there often isn't much of a choice. I can't buy a (new-ish) car without a rear-view camera, now that they're mandated. I can't hire a builder and tell him that I don't need GFCI outlets, or HVAC, or fire sprinklers; it's all required by code. If I wanted a ~1000 square foot house, I could have built one 50 years ago, but today my planning department wouldn't approve.
Similarly, I might have been content with the experience of using my iPhone 4 back in 2010, but I can't recreate that for much cheaper today. Even if I could buy an iPhone 4 for cheap, it no longer receives security updates, and many apps have dropped support, or at least focus their QA on newer devices.
Or I might have been content with the 2mbps connection my ISP offered back in 2000, but now their plans start at 50mbps. Even if I could find a cheap 2mbps plan, it wouldn't be as practical given the bloated state of websites today. (I mean it's doable, buy my quality of experience would be much lower than it was in 2000.)
Well, except that you do have that choice in most things. You can buy a used car without a rear-view camera, or keep your older car - and many people do. If you want a cheap smartphone, you can get one - I recently had a Nokia 1 (cost me 24 euros!) as an experiment, and it worked fine. If you're content with a TV from 2001, you can get one for free off Craigslist.
The reason I like the car as an example is because it is a quality upgrade and also a lower cost. A vehicle with more than twice the lifespan translates directly into cash in your pocket. You save cash on a regular basis by not needing to purchase a quart of oil a week, 11 hours of mechanic time (while the car is still new!), more expensive tires, more spark plugs, more coolant, etc.
I get your point that quality upgrades are _occasionally_ mandatory, but the majority are not. If you want to save money by skipping the improvements (get a TV, flashlight, keyboard etc from 2001, or a more spartan smartphone) - go ahead, plenty of people do, and they save money for it. But if you want the latest tech, and a palace on wheels, and international travel, and organic food, and a fancy university on your resume, well, those things cost money.
Fun fact - community college enrollment has dropped year over year for about a decade now (today it stands at almost half of its peak enrollment.) There are plenty of budget smartphones, but the most popular phone in the world by far is the non-SE current-year iPhone, costing $800 to $1600 depending on configuration and the place you buy it in. A safety razor is cheap and effective (I use one) but Gilette sells millions of copies of expensive razors. The American middle class, in particular, wants to consume at a very high level, increasing every year, and it will not be satisfied with less. Interestingly, this consumption has shaped the political debate on the American left. Student loan forgiveness, which as planned today would be a colossal handout to the upper middle class, is wildly popular. Money for the millions of Americans living in true poverty is discussed nowhere, while left circles are furious that couples making 160k won't get any extra thousands with the latest stimulus bill.
The reason I like the car as an example is because it is a quality upgrade and also a lower cost. A vehicle with more than twice the lifespan translates directly into cash in your pocket. You save cash on a regular basis by not needing to purchase a quart of oil a week, 11 hours of mechanic time (while the car is still new!), more expensive tires, more spark plugs, more coolant, etc.
I get your point that quality upgrades are _occasionally_ mandatory, but the majority are not. If you want to save money by skipping the improvements (get a TV, flashlight, keyboard etc from 2001, or a more spartan smartphone) - go ahead, plenty of people do, and they save money for it. But if you want the latest tech, and a palace on wheels, and international travel, and organic food, and a fancy university on your resume, well, those things cost money.
Fun fact - community college enrollment has dropped year over year for about a decade now (today it stands at almost half of its peak enrollment.) There are plenty of budget smartphones, but the most popular phone in the world by far is the non-SE current-year iPhone, costing $800 to $1600 depending on configuration and the place you buy it in. A safety razor is cheap and effective (I use one) but Gilette sells millions of copies of expensive razors. The American middle class, in particular, wants to consume at a very high level, increasing every year, and it will not be satisfied with less. Interestingly, this consumption has shaped the political debate on the American left. Student loan forgiveness, which as planned today would be a colossal handout to the upper middle class, is wildly popular. Money for the millions of Americans living in true poverty is discussed nowhere, while left circles are furious that couples making 160k won't get any extra thousands with the latest stimulus bill.
True for now, but there's a limited and ever-decreasing supply of older cars without rear-view cameras, small homes without HVAC, etc. Today it's hard to buy a car (in decent shape) without airbags; I expect that in 20 years it will be hard to buy one (in decent shape) without a rear-view camera. Fair point about lower maintenance costs though.
Your problem is ignoring depreciation. Yes, you may pay more if you buy a new car today with X flashy feature, but that will have little bearing on its used price in two decades, because the flashy features depreciate at a rate far faster than the feature of the car, y'know, actually moving. In 20 years from now, if you buy a $1000 cheap beater car it will not be $600 of car and $400 of backup camera, it will be $990 of car and $10 of backup camera. The same for airbags (the US GAO estimated they added $300 to the manufacturers' costs) - a $1000 car is not $700 of car and $300 of airbags.
(Also, the rear view camera is a tiny, tiny fraction of the car's manufacturing cost. Yes, as an option it costs $xxx, but option sticker prices are nowhere the actual cost of the option.)
(Also, the rear view camera is a tiny, tiny fraction of the car's manufacturing cost. Yes, as an option it costs $xxx, but option sticker prices are nowhere the actual cost of the option.)
I don't think we're disagreeing here, at least not about the broad economic and technological dynamics. I agree that, in the large, technological improvements do improve your ability to meet a budget, including to feed yourself, and I think the examples you gave are great. I don't think he's off-base in appealing to that general principle; it's just a matter of failing to realize when specific cases deviate from the heuristic.
That is, it doesn't follow that every technological gain has that effect, and it doesn't mean that that year's technological gain canceled that year's gain in costs of necessities. It doesn't mean that a new iPad's being 50% "more powerful" translates into it providing the utility of 1.5 "iPad 1"s. And it especially doesn't mean that improvements purely for luxury entertainment goods can ever truly act as substitutes for necessities.
Dudley was speaking as if that past year's improvements in the iPad really did cancel, in some substantive way, that past year's gain in necessities. (Remember, the iPad was released in 2010, and the story is from 2011.) It's not relevant to compare to e.g. not having mobile videochat integrated into your phone at all (since we had that in 2010), or the efficiency of cars from the 70s.
>The few bucks you save by not topping up your oil can pay for more expensive bananas,
And as above, those fuel efficiency improvements happened over decades; there wasn't significant gain in the prior year that obviated the extra costs.
Edit: Furthermore, as in the other reply, I think price changes purely attributable to technology aren't relevant to the kind of inflation central banks care about, and shouldn't be regarded as offsetting the "too much money/too few goods" problem.
That is, it doesn't follow that every technological gain has that effect, and it doesn't mean that that year's technological gain canceled that year's gain in costs of necessities. It doesn't mean that a new iPad's being 50% "more powerful" translates into it providing the utility of 1.5 "iPad 1"s. And it especially doesn't mean that improvements purely for luxury entertainment goods can ever truly act as substitutes for necessities.
Dudley was speaking as if that past year's improvements in the iPad really did cancel, in some substantive way, that past year's gain in necessities. (Remember, the iPad was released in 2010, and the story is from 2011.) It's not relevant to compare to e.g. not having mobile videochat integrated into your phone at all (since we had that in 2010), or the efficiency of cars from the 70s.
>The few bucks you save by not topping up your oil can pay for more expensive bananas,
And as above, those fuel efficiency improvements happened over decades; there wasn't significant gain in the prior year that obviated the extra costs.
Edit: Furthermore, as in the other reply, I think price changes purely attributable to technology aren't relevant to the kind of inflation central banks care about, and shouldn't be regarded as offsetting the "too much money/too few goods" problem.
>Its probably being cancelled out in the basket by healthcare and education prices skyrocketing. Oh wait.
If you go to bls's site, you can easily tell what it's being canceled out by. From the looks of it, it's mostly being canceled out by low energy prices.
https://www.bls.gov/cpi/tables/supplemental-files/home.htm
If you go to bls's site, you can easily tell what it's being canceled out by. From the looks of it, it's mostly being canceled out by low energy prices.
https://www.bls.gov/cpi/tables/supplemental-files/home.htm
I live near San Fran and I paid over $4/gallon for regular gas. That’s the same price I paid when gas was at all time highs. I know that a lot of it is taxes but the BLS must be taking that into consideration, no?
Also electricity is at all time highs, depending on the tier and time of day I’m paying 0.50/kWh. During the pandemic this has been killing me. I can’t believe that energy prices are low at least around here.
Also electricity is at all time highs, depending on the tier and time of day I’m paying 0.50/kWh. During the pandemic this has been killing me. I can’t believe that energy prices are low at least around here.
You’re using local price factors when BLS is looking at National ones. Outside California, things are quite different. For example, see [1]. In general, just assume that California doesn’t reflect the broader US on basically any measure.
[1] https://www.eia.gov/dnav/pet/pet_pri_gnd_dcus_nus_a.htm
[1] https://www.eia.gov/dnav/pet/pet_pri_gnd_dcus_nus_a.htm
Here's the data for the san francisco area: https://www.bls.gov/regions/west/news-release/2021/pdf/consu..., dated december 2020.
on page 5 it says gasoline prices are down 9.2% YOY, but electricity is up 5.9% YOY.
on page 5 it says gasoline prices are down 9.2% YOY, but electricity is up 5.9% YOY.
You're in a different world.
https://www.gasbuddy.com/gaspricemap
https://www.gasbuddy.com/gaspricemap
Electricity prices have gone up substantially last 10 years.
Don’t forget utilities (also skyrocketing here).
"But TVs are cheaper!"
I guess my TV is a good emergency snack for when I can't afford food.
I guess my TV is a good emergency snack for when I can't afford food.
> "But TVs are cheaper!" I guess my TV is a good emergency snack for when I can't afford food.
Only if it's an Apple ;).
I'm sorry, I'll show myself out.
Only if it's an Apple ;).
I'm sorry, I'll show myself out.
The article says inflation is up 1.5% overall, and 3% on food in the United States. The food inflation is partially due to increased shipping costs for food, due to increased demand on goods overall. This is demand-pull inflation
> In the U.S., prices rose close to 3% in the year ending Jan. 2, according to NielsenIQ, roughly double the overall rate of inflation.
The soaring food inflation refers to developing countries like Indonesia, which are facing a different set of problems.
> In the U.S., prices rose close to 3% in the year ending Jan. 2, according to NielsenIQ, roughly double the overall rate of inflation.
The soaring food inflation refers to developing countries like Indonesia, which are facing a different set of problems.
> This is demand-pull inflation
This is not demand-pull inflation. People are not eating more than they were a few months ago.
This is supply constraints making their way up the chain, constraints in the supply of shipping and in the supply of produce.
This is not demand-pull inflation. People are not eating more than they were a few months ago.
This is supply constraints making their way up the chain, constraints in the supply of shipping and in the supply of produce.
"Food Prices are soaring faster than inflation"....Food Prices soaring IS inflation.
Exactly. If whatever metric that is being used does not reflect the inflation a real person experiences, then the metric is simply wrong (or more generously, it measures something else, not inflation).
Technically no. Prices rising, or falling are a byproduct of the inflation/deflation caused by the actions of a central bank.
1.8% (housing) and 3% (food) are dramatic increases to you?
You would not have liked the 80s.
You would not have liked the 80s.
Where do you get 1.8%? Do you mean 1.8% over inflation? Because the nominal increase is of 4.3%, and that was during a pandemic year with a rent moratorium, it seems to be increasing even faster.
But 2% per year faster than inflation is already quite bad. Remember, this is exponential.
But 2% per year faster than inflation is already quite bad. Remember, this is exponential.
> the nominal increase is of 4.3%, and that was during a pandemic year
Well, of course. Using office space in many areas is illegal, and even where it's not, it's unwise. People are substituting residential-housing space, instead, so demand is way, way up. Construction is booming, but not so quickly as to take the edge off those prices.
> with a rent moratorium
?!?!? whatchew talkin' 'bout
Well, of course. Using office space in many areas is illegal, and even where it's not, it's unwise. People are substituting residential-housing space, instead, so demand is way, way up. Construction is booming, but not so quickly as to take the edge off those prices.
> with a rent moratorium
?!?!? whatchew talkin' 'bout
I'm not talking about the increase in value, I'm talking about housing expenses.
There is/was a rent moratorium in the US, which would have reduced housing expenses in practice.
There is/was a rent moratorium in the US, which would have reduced housing expenses in practice.
> There is/was a rent moratorium in the US
But that's just not true. There may have been some small local/regional areas that did (not aware of any, but maybe...) and some individual landlords may have, but there was never a federal rent moratorium.
What was done at the federal level was a temporary _eviction_ moratorium... but rents are still incurred and due (plus penalties and interest for late payments.) The restriction is simply that landlords can't evict during the period of the moratorium for late/non-payment anyone who lost jobs/hours during the pandemic and would likely become homeless or be forced to live with additional people.
But that's just not true. There may have been some small local/regional areas that did (not aware of any, but maybe...) and some individual landlords may have, but there was never a federal rent moratorium.
What was done at the federal level was a temporary _eviction_ moratorium... but rents are still incurred and due (plus penalties and interest for late payments.) The restriction is simply that landlords can't evict during the period of the moratorium for late/non-payment anyone who lost jobs/hours during the pandemic and would likely become homeless or be forced to live with additional people.
The federal eviction moratorium has been overturned as unconstitutional, a court concluding "that the federal government's Article I power to regulate interstate commerce and enact laws necessary and proper to that end does not include the power to impose the challenged eviction moratorium." (Notice that Terkel vs CDC was a declaratory judgment on the constitutional question of the Commerce Clause, while earlier cases upholding the moratorium challenged it on the premise the CDC exceeded its authority, or that its use of that authority was an unlawful delegation of legislative power. Litigation will probably continue.)
If the government tried went beyond that to a rent moratorium, they'd definitely lose. It would be a "Law impairing the Obligation of Contracts," explicitly forbidden in the Constitution. Like, the original Constitution, not even an amendment: the Constitutional Convention forbade it even before they guaranteed the freedom of religion and of speech.
If the government tried went beyond that to a rent moratorium, they'd definitely lose. It would be a "Law impairing the Obligation of Contracts," explicitly forbidden in the Constitution. Like, the original Constitution, not even an amendment: the Constitutional Convention forbade it even before they guaranteed the freedom of religion and of speech.
"Something important is more expensive, but 'it's just that something, and not everything ever'. Doesn't pass the smell test."
Also healthcare (insurance) and education. We live during a time of massive inflation yet our media and government work to tell us not to believe our lying eyes (or bank accounts).
Rising food costs. Rising housing costs. Rising unemployment and stagnating wages.
Another crash coming in the next couple of years?
Another crash coming in the next couple of years?
This article is about food prices in developing nations like Indonesia. It’s not about food costs in countries like the United States.
The article mentions that US food prices are inflating at a much more pedestrian 3%:
> In the U.S., prices rose close to 3% in the year ending Jan. 2, according to NielsenIQ, roughly double the overall rate of inflation.
The article mentions that US food prices are inflating at a much more pedestrian 3%:
> In the U.S., prices rose close to 3% in the year ending Jan. 2, according to NielsenIQ, roughly double the overall rate of inflation.
I got massively downvoted in my other comment for pointing out that there are boom and bust cycles and that COVID just brought ours closer to one of the larger bust cycles, but in the interest of informing (I wrote that on a phone) I found a link which explains it much better than I could[0].
I highly recommend taking 30 minutes to watch it, the person speaking is a well regarded economist.
[0]: https://www.youtube.com/watch?v=PHe0bXAIuk0
I highly recommend taking 30 minutes to watch it, the person speaking is a well regarded economist.
[0]: https://www.youtube.com/watch?v=PHe0bXAIuk0
>I highly recommend taking 30 minutes to watch it, the person speaking is a well regarded economist.
You mean Ray Dalio? Wikipedia says he's a hedge fund manager and has a MBA, but no economics degree.
You mean Ray Dalio? Wikipedia says he's a hedge fund manager and has a MBA, but no economics degree.
Don't forget soaring stock prices too.
Sure all feels like inflation to me.
Sure all feels like inflation to me.
Talking about inflation seems to have turned into some sort of political issue. I know I can feel the prices rising everywhere. But ppl counter it immediately by saying 'fed has tools like increasing interest rates if it really becomes a problem, they know better than you'
> Talking about inflation seems to have turned into some sort of political issue.
It is political. The method in which inflation is created benefits bankers via interest. Further, higher inflation widens the divide between the asset class and the rest of us.
However, the mainline (I would say propaganda) is that `...they know better than you` where `they` are unelected technocrats.
It is political. The method in which inflation is created benefits bankers via interest. Further, higher inflation widens the divide between the asset class and the rest of us.
However, the mainline (I would say propaganda) is that `...they know better than you` where `they` are unelected technocrats.
Sure, but inflation is not a feeling. It needs to be estimated using a statistical methodology.
It is a feeling to ppl who want to start a family, buy a house. Official Inflation doesn't count for those. What else is the word that we can use here?
Cost of living.
rents are falling though. so not the same.
Rents are falling slightly in dense urban areas that were already inflated from a decades long surge (65% in LA, 30% nationally [1]), but are actually increasing in suburban areas [2]. In those areas, the increases are affecting all sectors of the market:
"Overall, CoStar data show the largest rent increases have come in higher-end properties, where average rent for a vacant unit in the Inland Empire has grown 9.3% over the last year, compared with the previous four-year average of 3.8%.
In older, more rundown properties where lower-income households are likely to live, rent is up 3.4%, compared with the previous four-year average of 4.9%."
1. https://www.latimes.com/business/real-estate/story/2019-12-2...
2. https://www.latimes.com/business/story/2020-11-23/rent-falli...
"Overall, CoStar data show the largest rent increases have come in higher-end properties, where average rent for a vacant unit in the Inland Empire has grown 9.3% over the last year, compared with the previous four-year average of 3.8%.
In older, more rundown properties where lower-income households are likely to live, rent is up 3.4%, compared with the previous four-year average of 4.9%."
1. https://www.latimes.com/business/real-estate/story/2019-12-2...
2. https://www.latimes.com/business/story/2020-11-23/rent-falli...
In my opinion it's a perceived increase in prices, which may or may not real, and may or may not have to do with inflation.
Not quite sure what you mean by 'may not real'. Its not possible for most ordinary ppl to even think about buying a house right now. Why isn't this a concern for policy makers.
I mean that the prices need to be measured objectively, because people aren't very good a tracking prices. They may think prices have risen when they have not.
Sure, but inflation should be viewed as individual vectors.
Each vector corresponding to a delta of price and time in a generalized location for a specific good.
Something like the CPI cannot be a hard science as it refuses to acknowledge that each and every person will experience inflation based on the inflationary vectors of goods and services multiplied by a persons relative use of said goods and services.
Every person experiences a unique inflation rate, and to try and average that in something as wholly simplistic as a basket of goods is pure chicanery aimed at making this topic intractable.
Each vector corresponding to a delta of price and time in a generalized location for a specific good.
Something like the CPI cannot be a hard science as it refuses to acknowledge that each and every person will experience inflation based on the inflationary vectors of goods and services multiplied by a persons relative use of said goods and services.
Every person experiences a unique inflation rate, and to try and average that in something as wholly simplistic as a basket of goods is pure chicanery aimed at making this topic intractable.
That would be the cost of living for a particular person. Inflation is not that. It's literally a change in the price level of an economy, and what they are trying to measure is exactly that.
Yes, the average of the above for the entire economy. I agree, but the methodology of CPI does not at all match anything grounded in the averaging of the above logic.
A proper measure of inflation should start from the individual level and reason from there.
So if on average 1 loaf of bread is bought by a US consumer and a loaf of bread's rate of inflation is increasing(or even decreasing) by %x, and that's %y of the average consumer's expenditure, then that should contribute %x*%y of the overall inflation rate experienced by the average American consumer.
Clearly this is a complex line of reasoning, but it should be the basis of thought on measuring inflation. Yet, housing and medical expenditure are not even considered in CPI. CPI is a terrible measure that I believe was designed to obfuscate.
A proper measure of inflation should start from the individual level and reason from there.
So if on average 1 loaf of bread is bought by a US consumer and a loaf of bread's rate of inflation is increasing(or even decreasing) by %x, and that's %y of the average consumer's expenditure, then that should contribute %x*%y of the overall inflation rate experienced by the average American consumer.
Clearly this is a complex line of reasoning, but it should be the basis of thought on measuring inflation. Yet, housing and medical expenditure are not even considered in CPI. CPI is a terrible measure that I believe was designed to obfuscate.
Housing and health expenditure are listed as components of the CPI [0], so it's almost certain that they're included in its calculation.
Again, inflation means an increase in the general price level. An increase in the price of bread is not inflation, because the price of bread is not the price level. It can be used as a data point to try to estimate a change in the price level, but by itself it doesn't tell us anything about the inflation rate (unless of course bread is the only good being produced in the economy).
[0] https://www.bls.gov/cpi/tables/relative-importance/2020.htm
Again, inflation means an increase in the general price level. An increase in the price of bread is not inflation, because the price of bread is not the price level. It can be used as a data point to try to estimate a change in the price level, but by itself it doesn't tell us anything about the inflation rate (unless of course bread is the only good being produced in the economy).
[0] https://www.bls.gov/cpi/tables/relative-importance/2020.htm
Housing has been rising for a long time. Wages have been stagnant for a long time as well. I'm fairly certain food prices won't be the cause here.
We printed our way out of a pandemic recession, so who knows what other nuclear options will be used to avoid near-term recessions.
We printed our way out of a pandemic recession, so who knows what other nuclear options will be used to avoid near-term recessions.
Are you kidding. There will be an insane recession, if not a depression.
Capitalist economies have a short boom bust cycle and a long one. Short ones cause recessions every 10-20 years. Long ones cause depressions every 100~ years.
It was clearly stated that Covid (if nothing else) could easily cause a recession, with other factors played in as well then it could easily trigger a depression.
Capitalist economies have a short boom bust cycle and a long one. Short ones cause recessions every 10-20 years. Long ones cause depressions every 100~ years.
It was clearly stated that Covid (if nothing else) could easily cause a recession, with other factors played in as well then it could easily trigger a depression.
Can you explain the difference between those, for those of us who are not well versed in economics terms?
A recession is an actual economic term, a depression is a cultural term with no economic definition that basically means "a massive terrible recession".
They differ in magnitude, and (according to some) duration. Roughly speaking, a depression is a loss of more than 10% of economic output:
https://www.thoughtco.com/difference-between-a-recession-and...
https://www.thoughtco.com/difference-between-a-recession-and...
Not OP, but I recommend watching the "Economic machine" by Dalio.
These boom bust cycles are caused by fiat money, inflationary debt/spending, government stimulus and over regulation that causes false market signals and creates bubbles, it’s not a capitalism problem, capitalism would be the solution.
Weren’t there a number of long painful recessions in the US during the 1800s - when currency was tied to gold?
Yes, and the most accepted theory nowadays is that gold-tied money was a leading cause of the ~10y cycle we saw at the 18th century.
As soon as countries adopted fiat money, that one cycle mostly disappeared and even its timing became much more variable. But there are a lot of confounding factors, so this isn't the smoking gun it appears at first.
As soon as countries adopted fiat money, that one cycle mostly disappeared and even its timing became much more variable. But there are a lot of confounding factors, so this isn't the smoking gun it appears at first.
You have to face reality at some point. Literally every single capitalist economy, any time, anywhere, with or without fiat money, at all practically possible levels of stimulus, and regulation, has gone through a boom/bust cycle.
If anything, they got better since the introduction of Keynesianism, not worse.
It's inherent to capitalism. Don't try to delude yourself.
If anything, they got better since the introduction of Keynesianism, not worse.
It's inherent to capitalism. Don't try to delude yourself.
It isn't just "capitalism", it's inherent to economics, period. One of the valuable lessons of studying differential equations is just how easy it is to have cyclic behavior appear. Anywhere you have a the size of a change in velocity that is the negative of how far the value is away from some baseline... in other words, the second derivative is negative... you almost certainly have a cycle of some sort showing up. (Technically it can be avoided, but a lot of those ways are physically implausible.) Negative second derivatives are going to be pretty common.
(It doesn't have to be "pure". "Simple harmonic motion" is the result of when the negative second derivative fully characterizes a system. There are, of course, plenty of systems that aren't as simple, and things get complicated... but where ever you get a significant negative second derivative you've got a system that is going to exhibit some sort of cyclic behavior, even the the cycles vary wildly in size, duration, how fractal the value behaves on smaller time scales, etc.)
(It doesn't have to be "pure". "Simple harmonic motion" is the result of when the negative second derivative fully characterizes a system. There are, of course, plenty of systems that aren't as simple, and things get complicated... but where ever you get a significant negative second derivative you've got a system that is going to exhibit some sort of cyclic behavior, even the the cycles vary wildly in size, duration, how fractal the value behaves on smaller time scales, etc.)
Economies do not necessarily have to follow differential equations with highly volatile second derivatives.
In fact, historically, they haven't.
This is only possible because of the volatility of capital markets that lead to even higher volatility in production which leads to volatility in general markets which leads to volatility in capital markets again - there is a loop of unstable prices.
And this loop is the unique and defining feature of capitalism. It didn't exist before capitalism, and in experiments like those of the Soviet Union, it didn't exist either, because there were no capital markets at all.
What you're describing is a behaviour of capital markets, but due to a lack of perspective it's described as a behaviour of economies in general - and it isn't.
In fact, historically, they haven't.
This is only possible because of the volatility of capital markets that lead to even higher volatility in production which leads to volatility in general markets which leads to volatility in capital markets again - there is a loop of unstable prices.
And this loop is the unique and defining feature of capitalism. It didn't exist before capitalism, and in experiments like those of the Soviet Union, it didn't exist either, because there were no capital markets at all.
What you're describing is a behaviour of capital markets, but due to a lack of perspective it's described as a behaviour of economies in general - and it isn't.
I think he's making a more general point.
Basically every time varying system, no matter how complex, can be thought of as a system of differential equations. Human systems of production -- any such system -- is a time varying system, and as such, probably has some cyclic behavior, instability, etc. somewhere inside.
Basically every time varying system, no matter how complex, can be thought of as a system of differential equations. Human systems of production -- any such system -- is a time varying system, and as such, probably has some cyclic behavior, instability, etc. somewhere inside.
Of course. But not every system of differential equations leads to chaotic large scale behaviour.
I gave examples of economic systems that do not.
I gave examples of economic systems that do not.
The USSR experienced all sorts of issues like this, where the central management would first over supply something, then react by massively undersupplying it, then overreact in the other direction. It also experienced a total collapse. It makes no sense to point to it as a model of stability.
(Also, as you read my message here, recall my claim isn't that communisms has cycles and capitalism doesn't, but everything does because there is no way to build an economic system that doesn't have -d^2/dt^2 terms showing up somewhere in it.)
(Also, as you read my message here, recall my claim isn't that communisms has cycles and capitalism doesn't, but everything does because there is no way to build an economic system that doesn't have -d^2/dt^2 terms showing up somewhere in it.)
Just because a set of differential equations has -d^2/dt^2 somewhere in it doesn't mean that it will lead to an increasing amount of instabilities that will eventually lead to spontaneous -30% economic activity.
The economy of the USSR, in aggregate, literally only ever suffered two recessions - one in 1963 due to political instability (which was a very minor fall in GDP), and one at the beginning of WW2. The collapse of the USSR itself was a purely political issue - the USSR maintained growth right up until its dissolution.
I understand your point, but it is a case of diagnosing a second-order effect but not taking into account it's actual impact. Outside of capitalism, there were not really any economic systems that had such gigantic vorticity that they would spontaneously enter disastrous depressions.
Those cycles that you diagnosed, for example, eventually ended up by either a worker lying to stop the cascade, or someone at the planning office realizing the issue. They never snowballed into a Great Depression, because that simply could not happen. The reason the behaviour of unrestrained vorticity is possible in capitalism is because of capital markets. Without capital markets, or an equivalent, the behaviour you are diagnosing is inevitably dampened.
Think about it like a PID loop - there is a -d^2/dt^2 term in it, the D-loop term. But because of the I-term and the P-term, if you tune it correctly, general error always goes down over a full wavelength. Capital markets allow the D-term to overpower the loop.
The economy of the USSR, in aggregate, literally only ever suffered two recessions - one in 1963 due to political instability (which was a very minor fall in GDP), and one at the beginning of WW2. The collapse of the USSR itself was a purely political issue - the USSR maintained growth right up until its dissolution.
I understand your point, but it is a case of diagnosing a second-order effect but not taking into account it's actual impact. Outside of capitalism, there were not really any economic systems that had such gigantic vorticity that they would spontaneously enter disastrous depressions.
Those cycles that you diagnosed, for example, eventually ended up by either a worker lying to stop the cascade, or someone at the planning office realizing the issue. They never snowballed into a Great Depression, because that simply could not happen. The reason the behaviour of unrestrained vorticity is possible in capitalism is because of capital markets. Without capital markets, or an equivalent, the behaviour you are diagnosing is inevitably dampened.
Think about it like a PID loop - there is a -d^2/dt^2 term in it, the D-loop term. But because of the I-term and the P-term, if you tune it correctly, general error always goes down over a full wavelength. Capital markets allow the D-term to overpower the loop.
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Fiat money is the outcome of unfettered capitalism. The government needs money to pay its loans that it took with interest, so what does it do? Detach the currency from anything tangible like gold or other precious metals, then print more money as it desires, devaluing the hard work of people who are trying to save money.
There's a reason that interest and usury are prohibited in Islam, Judaism, and Christianity.
Market competition is good. Interest and usury are destructive dangerous practices.
There's a reason that interest and usury are prohibited in Islam, Judaism, and Christianity.
Market competition is good. Interest and usury are destructive dangerous practices.
As population grows and goods get cheaper, it can work the other way too. That can make money more scarce and more valuable.
Economics is complicated. Pointing to one lever and saying "I understand the whole machine" is lazy. I call it 'playing dot to dot'. If you just draw lines between any dots you please, you can make the picture look like anything you want.
But there is a real picture there, it has lots of dots, and its worth understanding. Pontificating on the internet is not showing real understanding.
Economics is complicated. Pointing to one lever and saying "I understand the whole machine" is lazy. I call it 'playing dot to dot'. If you just draw lines between any dots you please, you can make the picture look like anything you want.
But there is a real picture there, it has lots of dots, and its worth understanding. Pontificating on the internet is not showing real understanding.
That's why we also should use a bartering system to keep things in check, just like how societies survived for thousands of years.
I'm not claiming to understand the whole machine, however, we know for certain there are rotten practices that make the machine unstable and also much more difficult to understand. Interest and usury are at the core, along with other things that are prohibited by Islam (e.g. selling things that you don't own and several more).
Once those are removed, the system will become much more stable, fair, and better off for everyone.
I'm not claiming to understand the whole machine, however, we know for certain there are rotten practices that make the machine unstable and also much more difficult to understand. Interest and usury are at the core, along with other things that are prohibited by Islam (e.g. selling things that you don't own and several more).
Once those are removed, the system will become much more stable, fair, and better off for everyone.
People don't save money. They save consumption, and the savings are in the form of money or other assets.
If I have $10 from 10 years ago, they're worth less today. The government's incompetence and engagement in usury has caused my money to lose value.
Why do you feel that a dollar bill needs to buy exactly the same amount of real-world stuff in a decade's time? Cash is not an investment, so why do you expect it to be one?
They are pretty competent at getting inflation to the intended target. Maybe you're missing something?
There shouldn't be a target. I don't want my money to be inflated artificially by the government.
Okay, then say you disagree with the target, but don't say they are incompetent.
Why? The very fact that they are engaging in usurious loans is a sign of incompetence. Who ends up paying for it? The hard working people trying to save money.
Save the money in a way that encourages economic growth (buy stocks, invest in a small business, etc).
So they're forcing me how to spend my money. What if I don't want to engage in interest (practically all companies deal with interest in one form or another), so when I buy their stocks I'm dealing with interest in some form.
> The government needs money to pay its loans that it took with interest, so what does it do? Detach the currency from anything tangible like gold or other precious metals, then print more money as it desires.
That sounds like a government problem--not a capitalism problem. Though I do agree that this is the heart of the fiat issue.
That sounds like a government problem--not a capitalism problem. Though I do agree that this is the heart of the fiat issue.
I'm pretty sure interest isn't prohibited in Christianity (not protestant Christianity anyway.)
It was prohibited in early Christianity before the Church gave in and allowed it.
I'd like to hear your source for this.
There's information on Wikipedia, even though Wikipedia is generally not a good source on nuanced religious topics. I found many incorrect things mentioned about Islam for example (I'm Muslim).
> At times, many nations from ancient Greece to ancient Rome have outlawed loans with any interest. Though the Roman Empire eventually allowed loans with carefully restricted interest rates, the Catholic Church in medieval Europe, as well as the Reformed Churches, regarded the charging of interest at any rate as sinful (as well as charging a fee for the use of money, such as at a bureau de change). [1]
So we see how the Church changed its opinion over time. They weaseled their way out of the prohibition, and today they don't say anything. Separation of Church and State also made it easier to engage in these sorts of practices.
[1] https://en.wikipedia.org/wiki/Usury
> At times, many nations from ancient Greece to ancient Rome have outlawed loans with any interest. Though the Roman Empire eventually allowed loans with carefully restricted interest rates, the Catholic Church in medieval Europe, as well as the Reformed Churches, regarded the charging of interest at any rate as sinful (as well as charging a fee for the use of money, such as at a bureau de change). [1]
So we see how the Church changed its opinion over time. They weaseled their way out of the prohibition, and today they don't say anything. Separation of Church and State also made it easier to engage in these sorts of practices.
[1] https://en.wikipedia.org/wiki/Usury
Currency debasement is a pretty ancient phenomenon. It’s also not usury.
The usury comes from the government taking loans with interest, so it is forced to print more money to cover its deficits which keep growing due to interest.
Printing money is the problem there, not interest. If you banned interest/loaning, you could still end up having inflation because government would print money (or do other things such as https://en.wikipedia.org/wiki/Coin#Debasement_and_clipping ).
It's a combination of interest as well as printing money. Interest keeps the deficit growing, forcing the government to print money. If we switch to a non-inflationary currency not at the control of a single entity, these wouldn't happen.
Funny enough this is exactly what happened my last EU4 game.
So in the same paragraph you blame capitalism for something the government does without our consent? We have to at least assign blame equally, instead of picking and choosing which involved systems and actors to blame. Especially if we can't agree on the actual causes.
On a side note: I have seen some good analysis/speculation/theorizing done about how interest/loaning would work in a world without government-regulation. Have a look, there may be some redemption in those concepts for you if you divorce them from government meddling (which I would posit, causes a huge chunk of all the evils we blame on capitalism).
On a side note: I have seen some good analysis/speculation/theorizing done about how interest/loaning would work in a world without government-regulation. Have a look, there may be some redemption in those concepts for you if you divorce them from government meddling (which I would posit, causes a huge chunk of all the evils we blame on capitalism).
We have to move away from interest as an underlying mechanism, it's one of the root causes of the chaos in today's financial world.
The superior model is investments, similar to how VCs invest in companies in exchange for equity. Loans are to be relegated to charity only. If we apply all this, loans will become close to non-existent. We have seen this successfully work because interest is prohibited in Islam, yet it was able to flourish especially in the Islamic Golden Age to push the boundaries of knowledge and science and exploration, during a time where Europe was in the dark ages.
The superior model is investments, similar to how VCs invest in companies in exchange for equity. Loans are to be relegated to charity only. If we apply all this, loans will become close to non-existent. We have seen this successfully work because interest is prohibited in Islam, yet it was able to flourish especially in the Islamic Golden Age to push the boundaries of knowledge and science and exploration, during a time where Europe was in the dark ages.
How do you reconcile your idea that Islamic banking systems will lead to no inflation with the inflation rates of countries that have large Islamic banks, which are much higher than the US?
Cars are much safer and (for the same given size) go a lot farther for the same amount of fuel. They’re also faster, more reliable, last longer between maintenance (used to be 3000 miles between oil changes, now it’s... 7500 miles or so), more comfortable, and with more useful features (navigation, phone integration, etc).
As far as homes, there HAS been real estate inflation, but homes are now better insulated, have much more efficient heating and cooling (and now have actual cooling whereas in the past were often uncooled), have more bathrooms, and have much more efficient and cheaper lighting (which doesn’t need to be replaced as often and has lower fire risk).
Clothing is so plentiful and cheap it’s a bit silly (and this used to be a major practical purchase and highly labor intensive to mend your clothes, so I’m not talking just fashion).
A lot of things people actually need really are much better than in the past.
I hope we fix the housing price issues, though. This is really bad.
As far as homes, there HAS been real estate inflation, but homes are now better insulated, have much more efficient heating and cooling (and now have actual cooling whereas in the past were often uncooled), have more bathrooms, and have much more efficient and cheaper lighting (which doesn’t need to be replaced as often and has lower fire risk).
Clothing is so plentiful and cheap it’s a bit silly (and this used to be a major practical purchase and highly labor intensive to mend your clothes, so I’m not talking just fashion).
A lot of things people actually need really are much better than in the past.
I hope we fix the housing price issues, though. This is really bad.
Ha! Please look at the average housing stock in a city like LA or SF. Better insulated/efficient/bigger/new/21st century home it is not. The exact same 2 bedroom bungalow they built for returning GIs that probably cost $6000 back then costs north of $1.5m now. New construction only gets a slight bump of maybe another $200-400k or so (the cost of construction). The value isn't in how nice the house is, it's in the dirt below and where it sits on earth. The same $1.6m house in LA might go for $20k if you put it on a trailer and stuck it on some land in Nowhere, Louisiana instead. And don't get me started with the rental stock.
> As far as homes, there HAS been real estate inflation, but homes are now better insulated, have much more efficient heating and cooling (and now have actual cooling whereas in the past were often uncooled), have more bathrooms, and have much more efficient and cheaper lighting (which doesn’t need to be replaced as often and has lower fire risk).
None of that really makes a dent price-wise in the more expensive real estate markets.
None of that really makes a dent price-wise in the more expensive real estate markets.
> As far as homes, there HAS been real estate inflation, but homes are now better insulated, have much more efficient heating and cooling (and now have actual cooling whereas in the past were often uncooled), have more bathrooms, and have much more efficient and cheaper lighting (which doesn’t need to be replaced as often and has lower fire risk).
That all matters less than the location of the house.
That all matters less than the location of the house.
not all homes that were inflated improved as such
"Food Prices Are Soaring Faster Than Inflation and Incomes"
...Food price rises ARE inflation!
...Food price rises ARE inflation!
From the article:
> In the U.S., prices rose close to 3% in the year ending Jan. 2, according to NielsenIQ, roughly double the overall rate of inflation.
The study found that food prices are rising faster than inflation.
3% is high, and 1.5% over inflation is also concerning, but I think a lot of people are jumping to conclusions based on the headline. Those inflation numbers would go unnoticed by most during normal times. We’re only seeing these headlines because inflation is a popular media topic right now.
> In the U.S., prices rose close to 3% in the year ending Jan. 2, according to NielsenIQ, roughly double the overall rate of inflation.
The study found that food prices are rising faster than inflation.
3% is high, and 1.5% over inflation is also concerning, but I think a lot of people are jumping to conclusions based on the headline. Those inflation numbers would go unnoticed by most during normal times. We’re only seeing these headlines because inflation is a popular media topic right now.
Disagree that this is alarmism. The question is whether the way inflation is being measured matches the way we use it to make decisions. Graphs like AEI's Chart of the Century [1] have been highlighting for years that inflation numbers are inappropriately averaging decreasing costs for discretionary purchases, while costs for essentials like healthcare and education grow out of control. When food also starts outpacing the average (historically it has paralleled wages in the USA), you really have to ask what inflation is measuring.
Low inflation is essential to justifying the monetary easing policies that have been sustaining the stock market through the pandemic... so it is important for everyone to keep an eye on how dialog changes around these numbers.
[1] https://www.aei.org/carpe-diem/chart-of-the-day-or-century-3...
Low inflation is essential to justifying the monetary easing policies that have been sustaining the stock market through the pandemic... so it is important for everyone to keep an eye on how dialog changes around these numbers.
[1] https://www.aei.org/carpe-diem/chart-of-the-day-or-century-3...
The food inflation number was isolated in the article to be around 3%.
Much of that increase can be traced back to increased shipping costs during COVID lockdown.
Monetary policy isn’t the only or even the primary driver of inflation. In this case, the inflation comes from increases demand on a portion of the food supply chain (shipping services).
The alarmism in the comment section largely comes from people misreading the headline. The article is about soaring food costs in developing nations, but the comment section is treating the headline as if it’s about US food prices.
Much of that increase can be traced back to increased shipping costs during COVID lockdown.
Monetary policy isn’t the only or even the primary driver of inflation. In this case, the inflation comes from increases demand on a portion of the food supply chain (shipping services).
The alarmism in the comment section largely comes from people misreading the headline. The article is about soaring food costs in developing nations, but the comment section is treating the headline as if it’s about US food prices.
> Monetary policy isn’t the only or even the primary driver of inflation.
After two degrees in economics, my perception is that monetary policy is definitely considered a primary driver of inflation, probably THE primary driver. But this is probably irrelevant - see below.
> In this case, the inflation comes from increases demand on a portion of the food supply chain (shipping services).
Yes, for example: "in North America... a shortage of both shipping containers and truck drivers".
> The alarmism in the comment section largely comes from people misreading the headline.
To me, it feels alarmist for Bloomberg to consistently say "inflation" instead of "price increases" throughout the article. A temporary problem with supply/demand is not the same as inflation. Food prices will almost certainly fall back to their normal trajectory within a year or two, once supply/demand normalizes, whereas if there was truly inflation that would almost certainly NOT occur.
After two degrees in economics, my perception is that monetary policy is definitely considered a primary driver of inflation, probably THE primary driver. But this is probably irrelevant - see below.
> In this case, the inflation comes from increases demand on a portion of the food supply chain (shipping services).
Yes, for example: "in North America... a shortage of both shipping containers and truck drivers".
> The alarmism in the comment section largely comes from people misreading the headline.
To me, it feels alarmist for Bloomberg to consistently say "inflation" instead of "price increases" throughout the article. A temporary problem with supply/demand is not the same as inflation. Food prices will almost certainly fall back to their normal trajectory within a year or two, once supply/demand normalizes, whereas if there was truly inflation that would almost certainly NOT occur.
The article also discussed the fact that US prices are temporarily buffered by the supply chain but that big providers like GM are discussing price increases do to sustained cost increases. This is alongside existing practices like shrinkflation that make it harder for a CPI to accurately benchmark costs. It makes sense that articles and readers are looking for leading indicators.
Education and healthcare have pathological cost growth in large part because they aren’t subject to ordinary market pressures (the consumers are either over a barrel and can’t say no or aren’t paying in the first place). We need to fix them but it would be a mistake to let those pathologies drive monetary policy.
I don't have many proactive opinions about monetary policy, but it's worth noting that health care and education together make up 25% of US dollar-valued GDP and significantly more than that of GDP growth. If their pathologies enable them to successfully suck up spare dollars, that is a meaningful hole in the bucket for efforts meant to impact other behaviors.
> Graphs like AEI's Chart of the Century [1] have been highlighting for years that inflation numbers are inappropriately averaging decreasing costs for discretionary purchases, while costs for essentials like healthcare and education grow out of control.
To be fair, three out of the seven categories that are under inflation can also be considered "essential". Imagine the outrage if cars (or more generally, transport) and clothing increased 2x over inflation, or if cellphone/internet access became less and less affordable (remember all the "internet should be an essential service" headlines at the start of the pandemic?).
To be fair, three out of the seven categories that are under inflation can also be considered "essential". Imagine the outrage if cars (or more generally, transport) and clothing increased 2x over inflation, or if cellphone/internet access became less and less affordable (remember all the "internet should be an essential service" headlines at the start of the pandemic?).
yeah, i don't love my discretionary/essential breakdown there.
it's more about the combo of essential + non-exchangeability -- you need a car but there are a lot of options, but when you need a hospital there's usually one best place. (and education is non-exchangeable due to competitiveness).
the other big correlate is just goods vs services (even textbooks are service-like due to editions). I am not an economist but I'm really curious whether rapid depreciation caused by planned obsolescence of e.g. consumer electronics is causing a poor measurement of price trends in that area. Today's iPhone will cost much less next year, but the cost of maintaining a cutting-edge smart phone keeps going up.
the other big correlate is just goods vs services (even textbooks are service-like due to editions). I am not an economist but I'm really curious whether rapid depreciation caused by planned obsolescence of e.g. consumer electronics is causing a poor measurement of price trends in that area. Today's iPhone will cost much less next year, but the cost of maintaining a cutting-edge smart phone keeps going up.
> When food also starts outpacing the average (historically it has paralleled wages in the USA), you really have to ask what inflation is measuring.
inflation is measuring the value of a currency. CPI is a way to infer inflation from the nominal price of consumer goods; but it is not the definition of inflation. put another way, if an apple costs twice as much as it did last year, that fact is not enough to say whether the currency inflated.
inflation is measuring the value of a currency. CPI is a way to infer inflation from the nominal price of consumer goods; but it is not the definition of inflation. put another way, if an apple costs twice as much as it did last year, that fact is not enough to say whether the currency inflated.
"the value of a currency" isn't a physical reality; it is only observed through price fluctuations. so, defining it this way is just kicking the can. The fact that you can measure very different values by focusing on Forex, labor costs, or various CPI baskets is exactly the concern with gaining too much comfort from any single-number summary in the face of price changes that are impacting daily life for millions.
I would consider the value of currency to be as real as the value of a software license, even though neither is a physical item per se. I guess that's somewhat philosophical.
my real point here is that nominal price increases do not necessarily imply inflation. if the price of one type of good is increasing much faster than the others, a better explanation is that the real value of those specific goods is increasing. does this matter to ordinary people buying food? not really. their main concern here is the nominal price of food compared to their nominal earnings.
my real point here is that nominal price increases do not necessarily imply inflation. if the price of one type of good is increasing much faster than the others, a better explanation is that the real value of those specific goods is increasing. does this matter to ordinary people buying food? not really. their main concern here is the nominal price of food compared to their nominal earnings.
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Do we have a way of seeing periodic media obsessions? Seems like a good AI challenge, although would require a good corpus.
I saw another analysis suggesting a 75% drop in media coverage of Biden vs. Trump, at this same point in each’s presidency. That’s a useful statistic that I have a hard time finding in a comprehensive way.
I saw another analysis suggesting a 75% drop in media coverage of Biden vs. Trump, at this same point in each’s presidency. That’s a useful statistic that I have a hard time finding in a comprehensive way.
>> Do we have a way of seeing periodic media obsessions?
We have dozens. Countless companies have tools to show you how things are happening on social media, and all the big new outlets mirror their content to social media. At the most simple level, basic word counts can track how issues appear and disappear. When you hear about a 75% drop in coverage of "Biden v. Trump" that is almost certainly taken from the number of times those two names are included in news reports. Counting words or highlighting the use of new words does not require AI.
We have dozens. Countless companies have tools to show you how things are happening on social media, and all the big new outlets mirror their content to social media. At the most simple level, basic word counts can track how issues appear and disappear. When you hear about a 75% drop in coverage of "Biden v. Trump" that is almost certainly taken from the number of times those two names are included in news reports. Counting words or highlighting the use of new words does not require AI.
Topic modeling is a better technique than simple word counts. Topic modeling can use ML.
We should say "food prices are soaring faster than the average price of the consumer price index basket."
I agree. I may be being pedantic, but I think food prices are (or should be) the first and most important component of what we measure inflation with.
It's much clearer to say "the rest of the basket hasn't risen above normal yet, but I am concerned the headline I quoted will mislead people who don't understand inflation.
It's much clearer to say "the rest of the basket hasn't risen above normal yet, but I am concerned the headline I quoted will mislead people who don't understand inflation.
Why? Food prices are usually few percent (6-18% in the western countries) of total household expenses. If you want to look at something that impacts people way more, look at rent or house prices.
>> Food prices are usually few percent (6-18% in the western countries) of total household expenses.
Maybe for rich people. If you have an income of 2000/month, with the first 1000 or so going to rent, food is likely your second largest expense.
Maybe for rich people. If you have an income of 2000/month, with the first 1000 or so going to rent, food is likely your second largest expense.
Here are the most recent weights for official US CPI calculations: https://www.bls.gov/cpi/tables/relative-importance/2020.htm
Housing is by far the largest component (42%) (contrary to the common misconception that housing is not in the CPI), followed by Food and Beverages (15%) and Transportation (15%). If you want to up-weight food, you must necessarily down-weight some other component. The prime candidate would be shelter (most other categories are already much smaller than food), but that's of course not the answer that CPI-doubters are looking for.
Housing is by far the largest component (42%) (contrary to the common misconception that housing is not in the CPI), followed by Food and Beverages (15%) and Transportation (15%). If you want to up-weight food, you must necessarily down-weight some other component. The prime candidate would be shelter (most other categories are already much smaller than food), but that's of course not the answer that CPI-doubters are looking for.
But the CPI targets a generic US consumer. I would argue that poor people have a different priority list than the rich. The US economy is increasingly polarized with a widening gap between rich and poor.
I am curious as to whether the CPI targets the average person or the average consumer. Rich people spend more. They consumer more and are therefore overrepresented in most consumer-related measurements. Is the CPI meant as a measure of the cost of living or a tool for the calculation of available spending power?
I am curious as to whether the CPI targets the average person or the average consumer. Rich people spend more. They consumer more and are therefore overrepresented in most consumer-related measurements. Is the CPI meant as a measure of the cost of living or a tool for the calculation of available spending power?
Pretty sure (couldn’t read most of the article, paywall) this is talking about worldwide though. (First word of the article is “Global”)
You are making a lot of assumptions here. Chief among them is that the price of food must always be strongly tied to the prices of other things in the consumer price index. But clearly, that does not need to be the case. Especially after how unsustainably humans use farmland:
https://amp.theguardian.com/environment/2015/dec/02/arable-l...
https://amp.theguardian.com/environment/2015/dec/02/arable-l...
"Food prices are not properly accounted for in inflation measures"
There, fixed the headline.
There, fixed the headline.
No, one component of “inflation” (defined as the rise in the consumer price index) rises much faster than the others.
It's entirely possible that all the things in the consumer price index and other measures of inflation rise overall faster than the headline inflation measures - they do some weird things with weighting and so-called hedonistic adjustments which means that it's probably literally impossible for someone to experience inflation that low. For example, they compensate for the supposed increase in values from, say, flash drives increasing in size, computers in speed, and TVs in size in a way that doesn't make sense if you can't even save money by buying a smaller flash drive or slower computer, or you need a faster PC to do the same things, or if the 32 inch TVs have the same resolution, sound and picture quality as a 24 inch of yesteryear and you have to go up to 40-50 inches to get something actually equivalent in quality to a 32 inch TV from years ago.
For a while, one of the key US inflation measures even assumed that if people's medication went up in price massively they'd substitute it for whatever medicine hadn't exploded in price even if it was for some completely different condition! And I'm not convinced that, even for things which genuinely are substitutable like different kinds of food, it's actually possible over the long term to substitute your spending in a way that matches up with official inflation figures.
For a while, one of the key US inflation measures even assumed that if people's medication went up in price massively they'd substitute it for whatever medicine hadn't exploded in price even if it was for some completely different condition! And I'm not convinced that, even for things which genuinely are substitutable like different kinds of food, it's actually possible over the long term to substitute your spending in a way that matches up with official inflation figures.
Food is just one part of the basket.
Are they saying that food prices are driving the inflation vs the other factors? Housing is going up fast too isn't it?
https://fred.stlouisfed.org/series/CUSR0000SEHC
https://fred.stlouisfed.org/series/CUUR0000SEHA
I believe those are the two housing sub components of the basket, with owners’ equivalent rent weighted more than the rent one. Eyeballing it they both look under 2%.
https://fred.stlouisfed.org/series/CUUR0000SEHA
I believe those are the two housing sub components of the basket, with owners’ equivalent rent weighted more than the rent one. Eyeballing it they both look under 2%.
What do you mean by 'driving'?
Causally, inflation in the US is driven by the Fed's 2% average inflation target.
How those 2% distribute amongst the basket of good is a different question, of course.
Causally, inflation in the US is driven by the Fed's 2% average inflation target.
How those 2% distribute amongst the basket of good is a different question, of course.
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So what gives?
Does anyone have the data sets and the formulas used to calculate the CPI? No, I don't think so, because they are hidden.
Until the data used to calculate the CPI is open, it is all speculation.
Does anyone have the data sets and the formulas used to calculate the CPI? No, I don't think so, because they are hidden.
Until the data used to calculate the CPI is open, it is all speculation.
https://download.bls.gov/pub/time.series/
Be sure to refer to overview.txt and for more high-level details refer to https://www.bls.gov/cpi/data.htm and https://www.bls.gov/cpi/methods-overview.htm — you might also find relevant information on weighting here https://www.bls.gov/cpi/tables/relative-importance/home.htm
Typical entries in the AP (Average Price) series look like: APU0000701322 2015 M05 1.335
where APU0000701322 is a pound of spaghetti or macaroni, and M05 is May.
I thought of telling you off for spreading misinformation to incite, but I figured that saying it this would gets my point across more strongly.
Be sure to refer to overview.txt and for more high-level details refer to https://www.bls.gov/cpi/data.htm and https://www.bls.gov/cpi/methods-overview.htm — you might also find relevant information on weighting here https://www.bls.gov/cpi/tables/relative-importance/home.htm
Typical entries in the AP (Average Price) series look like: APU0000701322 2015 M05 1.335
where APU0000701322 is a pound of spaghetti or macaroni, and M05 is May.
I thought of telling you off for spreading misinformation to incite, but I figured that saying it this would gets my point across more strongly.
An "Average Price" has to be calculated from survey data.
That survey data is what is not open as far as I know: https://www.bls.gov/opub/hom/cpi/data.htm.
That survey data is what is not open as far as I know: https://www.bls.gov/opub/hom/cpi/data.htm.
You made the right choice and those links were helpful.
That’s a good point. The CPI has a huge impact on policy and really just about every financial thing in our lives. It’s kind of insane that we don’t have good visibility and oversight into it!
Thanks for posting, that was my question when I saw the headline.
I have a pretty imperfect understanding of inflation, but wouldn’t increased food and energy prices mean that a consumer will have less money to spend on discretionary purchases? Ie, aren’t food price rises DEflationary?
No, inflation is the increase in the money supply resulting in each unit of currency having less real value.
Food price rises are not inflation. Inflation is an increase in the general price level, and specifically it's not an increase in the prices of a selected set of goods.
There is no significant inflation measure that does not include food.
I agree they're not the entirety of the basket, but they are a core component.
There is no "general price level".
I agree they're not the entirety of the basket, but they are a core component.
There is no "general price level".
Food and Beverages make up 15% of the US CPI basket. Some other major components are Housing (42%) and Transport (15%).
Here's the full list, which make up the "general price level": https://www.bls.gov/cpi/tables/relative-importance/2020.htm If you believe food is underweighted, then what category do you believe is overweighted?
Here's the full list, which make up the "general price level": https://www.bls.gov/cpi/tables/relative-importance/2020.htm If you believe food is underweighted, then what category do you believe is overweighted?
There is a "general price level", it's just the price level of a sufficiently broad basket.
It is the inflation for the poorest population. What does it matter that 4k tv's are cheaper to people who spend all their money on necessities.
Call it a price rise. But it's not inflation. You don't get to re-define what economic concepts mean.
Would it not be fair to say that different subpopulations experience different effective inflation rates because they buy different things?
Seriously, would it? I’m not an economist. I am aware of RPI/CPI, and inflation is measured independently in different countries within the Eurozone, so it’s not like we can’t have multiple measures for different purposes or populations.
Seriously, would it? I’m not an economist. I am aware of RPI/CPI, and inflation is measured independently in different countries within the Eurozone, so it’s not like we can’t have multiple measures for different purposes or populations.
The concept of inflation is an attempt to measure price increases that are due to general monetary factors, as opposed to price increases that are due to market forces in specific industries. It’s fair to try and measure the practical household budget of a typical family, and many governments do, but calling this measurement “inflation” tends to mislead people into thinking that any increase must be because there’s an oversupply of money.
>Would it not be fair to say that different subpopulations experience different effective inflation rates because they buy different things?
Inflation is measured based on the changing the value of a dollar. So no, you can't have different inflation for different people.
You can have a separate idea of a poverty line or cost of living. But that's a different concept and would need different measures.
Inflation is measured based on the changing the value of a dollar. So no, you can't have different inflation for different people.
You can have a separate idea of a poverty line or cost of living. But that's a different concept and would need different measures.
You can definitely say that the cost of living has risen at different rates for different subpopulations, but you can't say they have experienced different rates of inflation. Inflation is change in the general price level of the economy, and an economy is something that we can study at a macroeconomic level. In this sense, unless you regard a social group as being an economy on its own, with its own GDP, balance of payments, and whole set of macroeconomic variables, we can't speak of it as experiencing a particular inflation rate.
I've been saying this about housing for a while.
This is the result of the central banks embracing Modern Monetary Theory https://en.wikipedia.org/wiki/Modern_Monetary_Theory as the policy to leave no hedge fund behind and lay the groundwork for UBI.
In plain English this is the fractional reserve banking system providing a cornucopia for all. It's really using debt to finance not capital creation, but current consumption. This cannot possibly end well.
In plain English this is the fractional reserve banking system providing a cornucopia for all. It's really using debt to finance not capital creation, but current consumption. This cannot possibly end well.
>this is the fractional reserve banking system
Seems like we may need a new technical term to replace "fractional reserve banking", because the Fed reduced reserve requirement ratios to zero percent a year ago.
https://www.federalreserve.gov/monetarypolicy/reservereq.htm
Seems like we may need a new technical term to replace "fractional reserve banking", because the Fed reduced reserve requirement ratios to zero percent a year ago.
https://www.federalreserve.gov/monetarypolicy/reservereq.htm
That's not true at all. Central banks have tried to stoke inflation for close to a decade now without success. The reason behind the current rise is just what the article mentions: "poor weather, increased demand and virus-mangled global supply chains". Or maybe you are confusing the actions by the federal government (stimulus checks) with those of the central banks (QE). The former most likely does have inflationary effects - the latter hasn't had an effect for well over 10 years by now.
IMO it's more likely a result of a global pandemic disrupting labor and supply chains combined with some unlucky weather events hurting crop yields.
Or, as I like to call it, Magic Monetary Theory.
After reading this article, I want to stock up on more food for myself and my five dependents. Double our reserves of biscuits, cereals, frozen meat, frozen bread, canned food, preserves, long-life milk, honey, multivitamins, MREs, etc etc.
Is this panic buying? Is it OK? Does it hurt other people? I’d be interested to hear some different points of view.
Is this panic buying? Is it OK? Does it hurt other people? I’d be interested to hear some different points of view.
It's never bad to have a little extra if you have the storage space and rotate through it. If that unlikely hurricane comes, or whatever your area might suffer, you don't have to be a pepper to be a normal level of prepared.
But don't panic buy. Don't now go to the store and stock up massively. Put in an extra shelf-stable item, and next time you go shopping do it again, but don't panic now. That's how you create a food shortage.
Even if you add "only" 10% extra to your purchase, I think that's what happened with toilet paper. I purposefully didn't buy any, figuring the crazies would get their fill soon enough, but a month later it was still going and we were trying not to be in the store more than once a week to prevent that being a spreading place but could now only buy 2 rolls at a time per family and many stores were completely out. Of course, we didn't even have to ask neighbours yet (some neighbors will have had to spare, not as if the rolls all disappeared into thin air) so it wasn't bad in any way in the end, but this panic behaviour is unnecessary and very quickly detrimental, even when a majority of people understand it's unwarranted.
But don't panic buy. Don't now go to the store and stock up massively. Put in an extra shelf-stable item, and next time you go shopping do it again, but don't panic now. That's how you create a food shortage.
Even if you add "only" 10% extra to your purchase, I think that's what happened with toilet paper. I purposefully didn't buy any, figuring the crazies would get their fill soon enough, but a month later it was still going and we were trying not to be in the store more than once a week to prevent that being a spreading place but could now only buy 2 rolls at a time per family and many stores were completely out. Of course, we didn't even have to ask neighbours yet (some neighbors will have had to spare, not as if the rolls all disappeared into thin air) so it wasn't bad in any way in the end, but this panic behaviour is unnecessary and very quickly detrimental, even when a majority of people understand it's unwarranted.
> not as if the rolls all disappeared into thin air
No, they were going down the drain.
No, they were going down the drain.
Given that you don't know how the future will be, instead of doubling all your reserves right away, which definitely sound like panic buying, you may consider a less aggressive approach. Don't just buy everything right away, instead focus only on the most important type of food you need and slowly increase your reserve by buying a bit more when you do your groceries (you buy rice once every 2 weeks? Consider buying a few more kg each time and add to your reserve). And once you're good with rice/noodles/cereals you can do the same for other stuff.
I call this FCA, aka "Food Cost Averaging".
I call this FCA, aka "Food Cost Averaging".
You have five dependents, stock up.
In a crisis bad enough that your prudence and foresight significantly affects other people by depriving them of food you can give them some of your food.
But in that situation you're probably done for already, and should have gone up in the hills, eh?
John Titor said something that scared the shit out of me. Paraphrasing, it was something like, "If you want to survive, move to a place three days further out than a starving person can walk."
( https://en.wikipedia.org/wiki/John_Titor "John Titor is a name used on several bulletin boards during 2000 and 2001 by a poster claiming to be an American military time traveler from 2036." )
If you're worried about the collapse of civilization then, no, stocking up is not going to help as much as just getting way the hell out there in the woods and being self-sufficient. You'll be rolled by starving people. ("People always raid before they starve." https://spaswell.wordpress.com/2016/11/18/dr-gwynne-dyer-geo... )
For disasters less severe than that, then YES! Stocking up is the responsible thing to do and we should all do it as a matter of course, virus or no virus.
In a crisis bad enough that your prudence and foresight significantly affects other people by depriving them of food you can give them some of your food.
But in that situation you're probably done for already, and should have gone up in the hills, eh?
John Titor said something that scared the shit out of me. Paraphrasing, it was something like, "If you want to survive, move to a place three days further out than a starving person can walk."
( https://en.wikipedia.org/wiki/John_Titor "John Titor is a name used on several bulletin boards during 2000 and 2001 by a poster claiming to be an American military time traveler from 2036." )
If you're worried about the collapse of civilization then, no, stocking up is not going to help as much as just getting way the hell out there in the woods and being self-sufficient. You'll be rolled by starving people. ("People always raid before they starve." https://spaswell.wordpress.com/2016/11/18/dr-gwynne-dyer-geo... )
For disasters less severe than that, then YES! Stocking up is the responsible thing to do and we should all do it as a matter of course, virus or no virus.
"three days further out than a starving person can walk" sounds cool if you're posting fake apocalypse theories on the internet (aka John Titor), but is generally pretty terrible advice. First of all, there are an enormous amount of cars in America and there are roads nearly everywhere. The furthest spot from any road in the lower 48 US states is in Yellowstone, 21.7 miles from the closest road: https://www.bbc.com/news/world-us-canada-42104894
Even assuming that there's some kind of enormous EMP that kills all modern cars, there are plenty of pre-80s cars around and around a third of Americans have bikes. You can cover some serious distance on a bike if you're motivated enough (aka by hunger.) There are millions of horses in the USA, not to mention other animals and tools you can use for transportation (canoes etc.) If your bet is to hope that your fellow members of the most adaptable species on Earth won't get to you, you're generally screwed. If you plan to use force (say firearms) to hold back your place, well, that'll attract attention from anyone else (if you look at failed states, you're likely to see roving bands of criminals with more firepower than you.)
There are fairly few examples of people who made their apocalypse preparations and actually rode out the local serious disaster in their bunkers, so to me, it's obvious what your best bet is - to simply live in a safe, sane and successful society.
Even assuming that there's some kind of enormous EMP that kills all modern cars, there are plenty of pre-80s cars around and around a third of Americans have bikes. You can cover some serious distance on a bike if you're motivated enough (aka by hunger.) There are millions of horses in the USA, not to mention other animals and tools you can use for transportation (canoes etc.) If your bet is to hope that your fellow members of the most adaptable species on Earth won't get to you, you're generally screwed. If you plan to use force (say firearms) to hold back your place, well, that'll attract attention from anyone else (if you look at failed states, you're likely to see roving bands of criminals with more firepower than you.)
There are fairly few examples of people who made their apocalypse preparations and actually rode out the local serious disaster in their bunkers, so to me, it's obvious what your best bet is - to simply live in a safe, sane and successful society.
> "three days further out than a starving person can walk" sounds cool
It doesn't sound cool it sounds terrifying, for exactly the reasons you lay out.
> it's obvious what your best bet is - to simply live in a safe, sane and successful society.
Yeah it's obvious to me too. Do you know where I can find a planet like that? And a flying saucer to reach it?
It doesn't sound cool it sounds terrifying, for exactly the reasons you lay out.
> it's obvious what your best bet is - to simply live in a safe, sane and successful society.
Yeah it's obvious to me too. Do you know where I can find a planet like that? And a flying saucer to reach it?
> After reading this article, I want to stock up on more food for myself and my five dependents.
You should always have some amount of food reserves. Space allowing, at least a few days of food. Canned and dry goods with long shelf lives - eat the oldest of this first during regular usage and refresh the stock so you don't end up with 5 year old canned goods.
> Is this panic buying?
A little, yes. There's not much risk of long-term food insecurity in the first world (at least not in the US). There are occasionally disasters that affect us short term - think hurricanes, floods, electricity outages, earthquakes, winter storms in Texas. I'd advise being able to get through those.
> Is it OK? Does it hurt other people?
It can hurt others. At the beginning of the pandemic there was a lot of panic buying. Part of that was an overreaction, part profiteerism, part of it was the world being unready to pivot to consumer goods (like with toilet paper). Do it gradually. Don't go out and buy out a canned goods section at your local supermarket.
You should always have some amount of food reserves. Space allowing, at least a few days of food. Canned and dry goods with long shelf lives - eat the oldest of this first during regular usage and refresh the stock so you don't end up with 5 year old canned goods.
> Is this panic buying?
A little, yes. There's not much risk of long-term food insecurity in the first world (at least not in the US). There are occasionally disasters that affect us short term - think hurricanes, floods, electricity outages, earthquakes, winter storms in Texas. I'd advise being able to get through those.
> Is it OK? Does it hurt other people?
It can hurt others. At the beginning of the pandemic there was a lot of panic buying. Part of that was an overreaction, part profiteerism, part of it was the world being unready to pivot to consumer goods (like with toilet paper). Do it gradually. Don't go out and buy out a canned goods section at your local supermarket.
"It can hurt others. At the beginning of the pandemic there was a lot of panic buying."
On the other hand, having a stock on hand already can be helpful. It means you won't need to join the panic buying, because you're already stocked, and you stocked at a time when the system could easily handle it.
It is a good thing for everyone to have some supplies on hand. It makes all of society more resilient against all sorts of disasters. It means that if your area finds itself in need of emergency services, those emergency services may not have to go to you, leaving them for someone else who may be in more trouble (e.g., someone who was at the epicenter of whatever and legitimately had their supplies totally destroyed).
It is the socially responsible thing to do to have some vital supplies on hand and be able to survive independently for a few days on as few services as possible in your area.
On the other hand, having a stock on hand already can be helpful. It means you won't need to join the panic buying, because you're already stocked, and you stocked at a time when the system could easily handle it.
It is a good thing for everyone to have some supplies on hand. It makes all of society more resilient against all sorts of disasters. It means that if your area finds itself in need of emergency services, those emergency services may not have to go to you, leaving them for someone else who may be in more trouble (e.g., someone who was at the epicenter of whatever and legitimately had their supplies totally destroyed).
It is the socially responsible thing to do to have some vital supplies on hand and be able to survive independently for a few days on as few services as possible in your area.
Not that I suggest but I heard a nice quote a while back "If you must really panic, panic early"
This article and the associated study are about food costs in developing nations like Indonesia.
The article mentions that inflation in the United States is much more pedestrian:
> In the U.S., prices rose close to 3% in the year ending Jan. 2, according to NielsenIQ, roughly double the overall rate of inflation.
Buying and storing food is an inherently inefficient process relative to buying the same food as needed. You would end up spending more to build and maintain food reserves than you would save against inflation. Far more.
The article doesn’t suggest that we’re at risk of running out of food.
The article mentions that inflation in the United States is much more pedestrian:
> In the U.S., prices rose close to 3% in the year ending Jan. 2, according to NielsenIQ, roughly double the overall rate of inflation.
Buying and storing food is an inherently inefficient process relative to buying the same food as needed. You would end up spending more to build and maintain food reserves than you would save against inflation. Far more.
The article doesn’t suggest that we’re at risk of running out of food.
As long as you eventually eat it, it is fine I guess.
It is like energy and power demand on the electical grid. You lower the peak power demand.
It is like energy and power demand on the electical grid. You lower the peak power demand.
Even in normal times you always need a month supply of everything. During pandemic or any other major crisis event it's probably best to keep 3 months supply of everything. That's not panic buying. That's planning for your and your dependants safety and wellbeing. Don't let anyone tell you otherwise.
It is indeed "panic buying" by the definition, but it need not be panicked. It is prudent to have a few months of supplies on hand if you know you're going to need them.
I don't think many other people are panic buying at the moment, so doing it now won't hurt other people by creating a localised shortage.
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You know it's panic buying and you know it will harm other people. That's why you want to do it yourself. You know that if others do it and you don't that it will harm you. So you take the "can't beat 'em, join 'em" approach and do it yourself. Is it wrong for an individual to "join 'em"? No. Is it wrong that individuals feel the only way to be safe is to "join 'em"? Yes. But that's not a problem you can solve by yourself.
The tragedy is that much of the food being stocked up in people's homes will go to waste as they don't have the facilities or knowledge to store it properly. Food suppliers have way better storage facilities than you do at home. They know how to keep food available all year round. There's also plenty of food to go around as should be blindingly obvious by observing the waistlines of people around you and that's including the fact that the food supply chain already has a ton of waste built in.
Tragedy of the commons.
The tragedy is that much of the food being stocked up in people's homes will go to waste as they don't have the facilities or knowledge to store it properly. Food suppliers have way better storage facilities than you do at home. They know how to keep food available all year round. There's also plenty of food to go around as should be blindingly obvious by observing the waistlines of people around you and that's including the fact that the food supply chain already has a ton of waste built in.
Tragedy of the commons.
Closed borders, no students/backpackers, farmers unprepared to pay minimum wages to Australians is resulting in a lot of produce being plowed back into the ground. I just don't know how this economy keeps rolling.
How can farmers meet the payments on their loans?
Reading 'The great depression: A diary' and looking at the world today just shocks the hell out of me. We are following it step for step and the crash is going to be devastating.
How can farmers meet the payments on their loans?
Reading 'The great depression: A diary' and looking at the world today just shocks the hell out of me. We are following it step for step and the crash is going to be devastating.
"We are following it step for step".
Really? Top voted comment on Hacker News? Yikes. Things have really gone downhill around here. Stick to tech, folks.
"During the early 1920s, for example, prices dropped a total of 20%. And during the worst years of the Great Depression, from 1930 to 1933, prices fell a total of 25%"
I mean, the title of the article was even : "Food Prices Soar Globally"
If you want to be a doomer, than at least compare it to the stagflation of the 70s, but honestly, that's probably not accurate either.
Really? Top voted comment on Hacker News? Yikes. Things have really gone downhill around here. Stick to tech, folks.
"During the early 1920s, for example, prices dropped a total of 20%. And during the worst years of the Great Depression, from 1930 to 1933, prices fell a total of 25%"
I mean, the title of the article was even : "Food Prices Soar Globally"
If you want to be a doomer, than at least compare it to the stagflation of the 70s, but honestly, that's probably not accurate either.
That was in regards to following the diary step for step - Farmers plowing food back into the fields, enactment of minimum wage laws, booming house prices followed by a massive crash with nobody attending auctions, booming stock market with massive unemployment.
The snark in this comment is completely unnecessary. It is better for everyone if you make your point in a more constructive manner.
Rant incoming.
I, for one, appreciate it. This thing on HN where you have to beat around the bush and phrase your sentences objectively and in a general way, when everybody knows that you are just talking about a specific instance, saying things like "if you [x] then someone may respond [y]" when it is clear that someone literally said [x] so you can just say [y] in reply.. All that stuff is incredibly tiring to read IMHO. If you just want to call out someone's bullshit you should be able to do so in a straightforward manner and in a tone that corresponds with "calling out someone's bullshit".
If we could just be a little bit more honest here I think it would be an improvement.
I, for one, appreciate it. This thing on HN where you have to beat around the bush and phrase your sentences objectively and in a general way, when everybody knows that you are just talking about a specific instance, saying things like "if you [x] then someone may respond [y]" when it is clear that someone literally said [x] so you can just say [y] in reply.. All that stuff is incredibly tiring to read IMHO. If you just want to call out someone's bullshit you should be able to do so in a straightforward manner and in a tone that corresponds with "calling out someone's bullshit".
If we could just be a little bit more honest here I think it would be an improvement.
While I somewhat agree with the sentiment of your comment, one of the reasons I believe Hacker News is so civilized is because the arguments are always very rationalized. That is, it is easy to point out faulting logic.
Following up with your example: If someone simply states [y] then the context of where [y] came from is lost and the discussion turns into a person saying [x] and a person saying [y], which is a step too close to becoming Twitter.
While I agree it can sometimes be a bit tiresome to read and write, I say this significantly improves the overall quality of the conversations.
Following up with your example: If someone simply states [y] then the context of where [y] came from is lost and the discussion turns into a person saying [x] and a person saying [y], which is a step too close to becoming Twitter.
While I agree it can sometimes be a bit tiresome to read and write, I say this significantly improves the overall quality of the conversations.
It isn't normally clear that someone just said [x]. HN is united only in interests; the usual crowd has a pretty broad range of cultural backgrounds and there enormous room to misinterpret people without body language. Twitter has sentences, HN has paragraphs. It is an improvement, but it isn't really a suitable format for discussion.
And in that vein, the most reasonable interpretation of the thread ancestor is "look, we've been through this sort of thing a couple of times in the last 7,000 odd years of recorded history - why does this all seem to be surprising to the people in charge and catching them unprepared?".
We know we've been here before, and it isn't that crazy to say the current state of the world looks like the prelude to WWI or WWII. Reading books like "The great depression: A diary" is a pretty decent idea. It would have been much more helpful if old mate had argued why there were similarities. Maybe with coaxing they would have. "Yikes. Things have really gone downhill around here. Stick to tech, folks." does not encourage anything half as productive as looking to the past for answers. There are bigger problems afoot in 2021 than tech.
And in that vein, the most reasonable interpretation of the thread ancestor is "look, we've been through this sort of thing a couple of times in the last 7,000 odd years of recorded history - why does this all seem to be surprising to the people in charge and catching them unprepared?".
We know we've been here before, and it isn't that crazy to say the current state of the world looks like the prelude to WWI or WWII. Reading books like "The great depression: A diary" is a pretty decent idea. It would have been much more helpful if old mate had argued why there were similarities. Maybe with coaxing they would have. "Yikes. Things have really gone downhill around here. Stick to tech, folks." does not encourage anything half as productive as looking to the past for answers. There are bigger problems afoot in 2021 than tech.
I understand your position, it is definitely more natural to answer less analytically and more emotionally.
But this is commonplace elsewhere on the Internet and you can see the results. Too often the argument deteriorates into ad-hominem mud flinging.
HN is pretty rare in its analytic culture. I appreciate it and enjoy the difference from Twitter, Reddit et al. enormously.
It is important to realize that we cannot really read the minds on the other side of the screen and a lot of our assumptions what somebody really wanted to say are just prejudice.
But this is commonplace elsewhere on the Internet and you can see the results. Too often the argument deteriorates into ad-hominem mud flinging.
HN is pretty rare in its analytic culture. I appreciate it and enjoy the difference from Twitter, Reddit et al. enormously.
It is important to realize that we cannot really read the minds on the other side of the screen and a lot of our assumptions what somebody really wanted to say are just prejudice.
I didn’t really read it as snark. It has historically been pretty shocking here to find a top comment so confidently wrong and just seemingly totally made up (farmers going bankrupt just like the Great Depression.. because food prices are going up?), and it’s fair to directly call it out. It wasn’t done in any particularly mean way as best I can tell.
> It has historically been pretty shocking here to find a top comment so confidently wrong
You should not be shocked by that, because every comment starts out as the top comment, votes only affect how quickly it drops. If you come back a few days later and the top comment is still confidently wrong, maybe you can be shocked then.
You should not be shocked by that, because every comment starts out as the top comment, votes only affect how quickly it drops. If you come back a few days later and the top comment is still confidently wrong, maybe you can be shocked then.
I promise to moderate my shock as a function of time spent at the top.
When posters assume competence within a domain that they do not have and make predictions with absolute confidence that they have no evidence for, it damages the greatest quality of this board, which is open intellectual discussion. When bullshit get called out in a snarky tone its in the defence of that quality.
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Okay but this was the start of some pretty dark times, so I think it's necessary to be historically accurate here which is not the case. The great depression followed the first more or less industrialized war, also the geo-political situation was a completely different one.
Am I interpreting this correctly that there’s a minimum wage that applies to Australians but not foreigners, and farmers thus rely on foreign labor?
Edit: In Sweden we have/have had similar situations with temporary immigrants that for example pick berries for exploitative wages, but that’s because there’s no actual minimum wage per se - in the rest of society decent wages are ensured by strong unions (except in areas where demand is high anyway, like say for software developers).
Edit: In Sweden we have/have had similar situations with temporary immigrants that for example pick berries for exploitative wages, but that’s because there’s no actual minimum wage per se - in the rest of society decent wages are ensured by strong unions (except in areas where demand is high anyway, like say for software developers).
More like.
I'll pay you minimum wage, but charge you exorbitant amounts for board and lodging and you have no choice because it's the middle of nowhere.
Or for the extra dodgy types, cash payments below minimum wage because they know international workers are less likely to know their rights and be aware of what the minimum wage is.
I'll pay you minimum wage, but charge you exorbitant amounts for board and lodging and you have no choice because it's the middle of nowhere.
Or for the extra dodgy types, cash payments below minimum wage because they know international workers are less likely to know their rights and be aware of what the minimum wage is.
The first happens in The Netherlands on large scale, since they deregulated job agencies. There are 1,000's of shady ones, where administratively all is fine and dandy, but in practice foreign labour is paid far below minimum wage + they are often threatened to not speak up, passport taken, etc.
This, btw, happens all across the EU is my impression. Modern-day slavery very much alive globally even!
This, btw, happens all across the EU is my impression. Modern-day slavery very much alive globally even!
I've heard first hand about this happening in Denmark on a large scale as well. It's hard not believing the government knows about this but does nothing. I wouldn't call it slavery in this case because people come by buses from Poland and go back home after the work is done. They have their freedom of movement. It's just the origin countries are so much worse than the ones where they go to work
It's usually not even that they are so much worse. It's just that the monetary value differences make up the difference. These people can live a much better life in Poland with a Denmark subsistence wage, then they can in Poland with the minimum wage. So they sacrifice some months of their lives living in worse conditions in order to make some money for back home, where they can use that money to improve the lot of their children.
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The problem here is more of a supply / demand thing which you can't simply ignore that because the issue will never go away so long as the incentives for it exist.
If farmers paid good wages they wouldn't need to rely on foreign labour and food prices would go up. This is a workable solution, but is is what people living in western countries want?
We have the same issue here in the UK with the NHS.. We pay NHS workers terrible wages so we need to import foreign labour because wages aren't high enough to attract domestic workers. In one sense it's great because we get better health care than we would otherwise afford and foreigners have an opportunity to get better pay in the UK (even if it's bad by UK standards).
I've found many people here get angry about what we pay NHS workers while also getting angry about NHS waiting times. If we wanted to we could increase wages which would either require resource cuts and lower output or higher taxes for the same level of care. It would also mean we wouldn't need to depend on foreign labour, but who benefits from this? By paying more foreigners now have less opportunity to move to the UK and British citizens have sub-par / higher cost health care.
Presumably, it's the same with agricultural workers. Sure you can pay more, but who benefits from it? The root "problem" is that labour is extremely cheap outside of developed countries. Developed countries can cut themselves off from that labour supply if they like, but I have no idea what the economic incentive (or benefit) of doing so is for either the workers or the citizens. Call it modern-day slavery if you like but these are consensual working relationships, which presumably wouldn't take place if they didn't benefit both the worker and the employer.
So long as labour remains cheap outside of the developed world a trade off will always exist – paying more will just mean higher prices for citizens and fewer opportunities for those living in the poorest parts of the world, but on the up side you can say you pay a fairer wage by your own national standards.
If farmers paid good wages they wouldn't need to rely on foreign labour and food prices would go up. This is a workable solution, but is is what people living in western countries want?
We have the same issue here in the UK with the NHS.. We pay NHS workers terrible wages so we need to import foreign labour because wages aren't high enough to attract domestic workers. In one sense it's great because we get better health care than we would otherwise afford and foreigners have an opportunity to get better pay in the UK (even if it's bad by UK standards).
I've found many people here get angry about what we pay NHS workers while also getting angry about NHS waiting times. If we wanted to we could increase wages which would either require resource cuts and lower output or higher taxes for the same level of care. It would also mean we wouldn't need to depend on foreign labour, but who benefits from this? By paying more foreigners now have less opportunity to move to the UK and British citizens have sub-par / higher cost health care.
Presumably, it's the same with agricultural workers. Sure you can pay more, but who benefits from it? The root "problem" is that labour is extremely cheap outside of developed countries. Developed countries can cut themselves off from that labour supply if they like, but I have no idea what the economic incentive (or benefit) of doing so is for either the workers or the citizens. Call it modern-day slavery if you like but these are consensual working relationships, which presumably wouldn't take place if they didn't benefit both the worker and the employer.
So long as labour remains cheap outside of the developed world a trade off will always exist – paying more will just mean higher prices for citizens and fewer opportunities for those living in the poorest parts of the world, but on the up side you can say you pay a fairer wage by your own national standards.
> Developed countries can cut themselves off from that labour supply if they like, but I have no idea what the economic incentive (or benefit) of doing so is for either the workers or the citizens.
It would end supply of people who are willing to work for unlivable wages, thus making wages for low-end work to go up. The lowest rungs of society would benefit greatly from it, while everyone pay would pay for it (via increased prices).
It would end supply of people who are willing to work for unlivable wages, thus making wages for low-end work to go up. The lowest rungs of society would benefit greatly from it, while everyone pay would pay for it (via increased prices).
> Developed countries can cut themselves off from that labour supply if they like
The UK has done, it is known as Brexit.
The UK has done, it is known as Brexit.
Sounds just like what happens in Australia, joy...
Jobseeker agencies paid by the Federal government to 'place' workers, this doesn't factor in the jobs actually being suitable or useful mind.
The workers on unemployment are also required to apply for a quota of jobs or risk losing their benefits, even though there may actually be no new jobs to apply for.
Jobseeker agencies paid by the Federal government to 'place' workers, this doesn't factor in the jobs actually being suitable or useful mind.
The workers on unemployment are also required to apply for a quota of jobs or risk losing their benefits, even though there may actually be no new jobs to apply for.
What Americans used to call the "company town".
Some of Australia's visa's require that the applicant spend a few months working on a farm, usually fruit-picking. These workers are still entitled to the same minimum wages (as far as I know) and other protections, in theory.
(Australia's geographical isolation makes it difficult to attract seasonal workers, unlike throughout Europe where traveling for work is comparatively cheaper and easier.)
However, farmers have always benefited from the fact that people wanted the visa more than the didn't want to work — many workers are taken advantage of. Now that there are none of these workers, farmers are having to complete for labor like anyone else and that is costing more than they intended.
(Australia's geographical isolation makes it difficult to attract seasonal workers, unlike throughout Europe where traveling for work is comparatively cheaper and easier.)
However, farmers have always benefited from the fact that people wanted the visa more than the didn't want to work — many workers are taken advantage of. Now that there are none of these workers, farmers are having to complete for labor like anyone else and that is costing more than they intended.
In addition to supposedly paying them minimum wage - the farmers employ a racket where they charge the poor souls exorbitant rates to stay on the farm as it is rural and there is no other accommodation thereby bringing the effective minimum wage down significantly.
I don’t mean to downplay this, but it’s similar to the migrant worker booms across the globe over past decades.
For example, people from Central America trek up at risk of their lives through dangerous drug lord territories to get to US states where they can work illegally for less than minimum wage, then send that money back to their families because they can make much more doing that than they could at home and may have no other choice.
The working and living conditions can be terrible, and answer is not to deport them or make their conditions worse; that hurts the host country as well as the workers and creates more division. Similar workers boosted the US culturally and economically because industry and governments embraced them for labor and taxes.
For example, people from Central America trek up at risk of their lives through dangerous drug lord territories to get to US states where they can work illegally for less than minimum wage, then send that money back to their families because they can make much more doing that than they could at home and may have no other choice.
The working and living conditions can be terrible, and answer is not to deport them or make their conditions worse; that hurts the host country as well as the workers and creates more division. Similar workers boosted the US culturally and economically because industry and governments embraced them for labor and taxes.
We have a similar situation in the UK where minimum wage is payed but work and living conditions are horrendous.
No locals will do the work because... Why would you. Living in a caravan for the whole summer and working 12 hours a day isn't a good deal. Maybe its worth it if you intend to move back to a county where you get much better purchasing power?
No locals will do the work because... Why would you. Living in a caravan for the whole summer and working 12 hours a day isn't a good deal. Maybe its worth it if you intend to move back to a county where you get much better purchasing power?
I really doubt that the backpacker community was the major labor source in Australia.
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Which prices are increasing slower than inflation to counteract this?
EDIT: It's energy. https://www.bls.gov/cpi/
EDIT: It's energy. https://www.bls.gov/cpi/
Also clothing, medical care commodities, and transportation services.
Meanwhile used cars are up more than food in the US. That graph has bizzare rollups you need to click through.
But the article is really about 40% spike in global basic commodities for the global poor, not 3% US bump.
But the article is really about 40% spike in global basic commodities for the global poor, not 3% US bump.
Inflation indexes don't give a lot of weight to short term price changes. So there doesn't necessarily have to be anything offsetting it. If prices stay high it should show up in inflation.
I don't get how food consumption can increase in a pandemic. Should be constant in or outside a pandemic situation. Possibly somewhere crops are getting rotten because of newly imposed export restrictions, or for some other things.
Food consumption changes: Pre-pandemic, a good amount of meals would be eaten out of the house. School lunches, breakfast on the way to work, lunch break at the work cafeteria or a fast food place (sure, some folks bring lunch, but many places don't offer a break room that is adequate).
All of this - and things like toilet paper - shifts to consumer goods instead of bulk goods, which takes different equipment and processing in factories, often at different times. A portion of school lunches in the US are the result of government subsidy foods: Cheeses, potatoes, and so on are very low cost to public schools.
In short: Consumer foodstuff demand has increased.
Additionally, more folks are spending a bit of time with food, changing the demands. Plus, home and slightly depressed/anxious with newly found free time means you have more time to eat - and many have taken up eating more.
And then you do have crops that couldn't be picked, disruption in shipping (food travels far), and disruptions in factories that complicates things.
All of this - and things like toilet paper - shifts to consumer goods instead of bulk goods, which takes different equipment and processing in factories, often at different times. A portion of school lunches in the US are the result of government subsidy foods: Cheeses, potatoes, and so on are very low cost to public schools.
In short: Consumer foodstuff demand has increased.
Additionally, more folks are spending a bit of time with food, changing the demands. Plus, home and slightly depressed/anxious with newly found free time means you have more time to eat - and many have taken up eating more.
And then you do have crops that couldn't be picked, disruption in shipping (food travels far), and disruptions in factories that complicates things.
In the UK, last year we had a terrible shortage of bread flour in the supermarkets.
Actually, what we had was a sudden reduction in the amount of flour being used by bakeries, and an increase in the amount of flour being used at home. There wasn't a shortage of flour - there was a shortage of small bags to put it in for selling at a supermarket. The industry was all set up for selling a decent proportion of flour in really large bags.
Likewise, for simple goods like vegetables, dairy, and beer, some suppliers have suddenly had their customers disappear, because they normally sold to restaurants, pubs, and caterers, where other suppliers have not been able to keep up with demand, because they sold to supermarkets. The obvious solution is for the suppliers who previously sold to caterers to sell to supermarkets instead, but it takes a while for these contracts and logistics to be sorted out.
Actually, what we had was a sudden reduction in the amount of flour being used by bakeries, and an increase in the amount of flour being used at home. There wasn't a shortage of flour - there was a shortage of small bags to put it in for selling at a supermarket. The industry was all set up for selling a decent proportion of flour in really large bags.
Likewise, for simple goods like vegetables, dairy, and beer, some suppliers have suddenly had their customers disappear, because they normally sold to restaurants, pubs, and caterers, where other suppliers have not been able to keep up with demand, because they sold to supermarkets. The obvious solution is for the suppliers who previously sold to caterers to sell to supermarkets instead, but it takes a while for these contracts and logistics to be sorted out.
Yes, similar in the US. First all flour was sold out, then as it became available again it was bulk bins first, and then brands that sold in 1 and 5 pound bags last.
Interestingly (well kinda) the similar yeast shortage is still not back to normal. The shortage was partly related to packaging and the yeast at my grocer is still in the post COVID foil packaging and not in the packages it was before. (Luckily I had yeast in the freezer)
Interestingly (well kinda) the similar yeast shortage is still not back to normal. The shortage was partly related to packaging and the yeast at my grocer is still in the post COVID foil packaging and not in the packages it was before. (Luckily I had yeast in the freezer)
We had a load of news stories on TV about dairies and brewers pouring their milk/beer down the drain, and people spluttering about how they couldn't find any beer or milk on the supermarket shelves. That isn't a supply/demand problem, that's a logistics problem.
(Also - seriously, you have 1 pound bags of flour over there? Most bags here are 1.5kg (3.3 pounds), with some specialist flours in 1kg (2.2 pounds) bags. 1 pound seems a little small.)
(Also - seriously, you have 1 pound bags of flour over there? Most bags here are 1.5kg (3.3 pounds), with some specialist flours in 1kg (2.2 pounds) bags. 1 pound seems a little small.)
The "normal" flour is in 5lb bags. I went and looked, and the specialty stuff I had is indeed in a 1 kg, not 1lb, bag.
We had flour shortages in the US as well. I wonder if that was the case across the Western world.
In the UK at least, it's very much due to new-found export (and import) restrictions. The price of food has slightly increased since brexshit, whereas its availability has plummeted: the number of varieties of vegetables stocked by my local Tesco, for example, has plummeted, and the stock sells out almost immediately after delivery.
> The price of food has slightly increased since brexshit, whereas its availability has plummeted: the number of varieties of vegetables stocked by my local Tesco, for example, has plummeted, and the stock sells out almost immediately after delivery.
Zero problems in any of the major supermarkets in my area in the South East. My food bills haven't increased notably either, if anything, looking at my bank statement right now, they seem lower over the past 4-5 months than the year before.
The only anecdotal thing I have noticed, is that there a few new brands on the shelves that weren't there previously, but that's probably just observational and confirmation bias, because I was looking for something, I saw it.
Zero problems in any of the major supermarkets in my area in the South East. My food bills haven't increased notably either, if anything, looking at my bank statement right now, they seem lower over the past 4-5 months than the year before.
The only anecdotal thing I have noticed, is that there a few new brands on the shelves that weren't there previously, but that's probably just observational and confirmation bias, because I was looking for something, I saw it.
How does Brexit even matter if border checks are suspended for imports?
Just the usual scaremongering.
I also shop at Tesco and the stocks haven't changed at all.
Just the usual scaremongering.
I also shop at Tesco and the stocks haven't changed at all.
Oh I agree, what limitations on stock there are, are probably down to Covid and it being winter.
Still, why even have brexit if we're going to do our level best to pretend we're still in the EU as hard as we can. Is being subject to full export restrictions, hammering British businesses, while allowing many European goods to flow in un-checked really the brexit you signed up for?
Still, why even have brexit if we're going to do our level best to pretend we're still in the EU as hard as we can. Is being subject to full export restrictions, hammering British businesses, while allowing many European goods to flow in un-checked really the brexit you signed up for?
Tesco here in Greater Manchester doesn't seem to have been impacted by availability. Where about in the country have you experienced this? Have you tried a different supermarket?
Aldi, Lidl, M&S, Morrisons and the local greengrocer all seem the same as usual here.
Aldi, Lidl, M&S, Morrisons and the local greengrocer all seem the same as usual here.
> the number of varieties of vegetables stocked by my local Tesco, for example, has plummeted, and the stock sells out almost immediately after delivery.
Are you in a really shitty area or something? I only saw what you described in the first week of lockdown one. Nothing has noticeably changed in my local Morrisons for the last few months.
Are you in a really shitty area or something? I only saw what you described in the first week of lockdown one. Nothing has noticeably changed in my local Morrisons for the last few months.
I'm in an urban area that perhaps is a bit poorer than some others nearby, yes. The bigger out-of-town supermarkets have better stock but my usual urban Tesco (and to a lesser extent the two Sainsbury's Locals nearby) just don't have that much stock. It changed a lot in Lockdown 1 and hasn't really recovered.
I certainly noticed a few months ago that the supermarket in my local small town seemed to be better stocked than the larger supermarket in the nearby medium sized city.
I recall this being broadly the same during the first lockdown as well pre brexit.
>I don't get how food consumption can increase in a pandemic.
depression spurs eating binges.
being inside what to do, oh lets make more advanced food. lets bake cakes with the kids instead of sending them out to play with friends. etc. etc.
so increased consumption in combination with other, probably more important, pandemic problems.
depression spurs eating binges.
being inside what to do, oh lets make more advanced food. lets bake cakes with the kids instead of sending them out to play with friends. etc. etc.
so increased consumption in combination with other, probably more important, pandemic problems.
But with most restaurants closing your will also have to subtract the food that would have been used there. Obviously most of them tried to change to a takeaway service, but I am pretty sure their overall customers went down by alot during all of this.
Restaurant supply chains are a totally separate beast. Bulk foods being supplied were mostly sent to landfills. Tons of potatoes for example that were only ear-marked for restaurants went straight to the dump.
Supplier A only supplies to restaurants it's normally a safe bet, so that's all they do. No restaurants buying - holy shit - my entire crop is excess...
I'm not a farmer but this is what I've read.
There's also the fact a lot of panic buyers might buy too much, then end up throwing a bit away because of fear that when they need it - it won't be there, but then it just spoils at home, etc.
Also food banks are taking a lot of the food. More people actually have money for food (one thing the govt does do is make sure people don't starve (usually) maybe more if you have kids).
TLDR: You can't just move all restaurant food to consumer/grocery like it's a commodity in Factorio... it takes a lot to shift global supply chains and get new contracts on how deliverables are received, etc...
Supplier A only supplies to restaurants it's normally a safe bet, so that's all they do. No restaurants buying - holy shit - my entire crop is excess...
I'm not a farmer but this is what I've read.
There's also the fact a lot of panic buyers might buy too much, then end up throwing a bit away because of fear that when they need it - it won't be there, but then it just spoils at home, etc.
Also food banks are taking a lot of the food. More people actually have money for food (one thing the govt does do is make sure people don't starve (usually) maybe more if you have kids).
TLDR: You can't just move all restaurant food to consumer/grocery like it's a commodity in Factorio... it takes a lot to shift global supply chains and get new contracts on how deliverables are received, etc...
If i cant go to a restaurant i still have to eat. I dont think this would lead to a huge difference. At least not for me.
> I don't get how food consumption can increase in a pandemic
There are a lot of people comfort eating and generally grazing out of boredom. I'm sure I've been eating a little more than I should with the crappy foods. Plus, people are saving so they are probably buying more foods to stock up on and thus throwing it all away.
There are a lot of people comfort eating and generally grazing out of boredom. I'm sure I've been eating a little more than I should with the crappy foods. Plus, people are saving so they are probably buying more foods to stock up on and thus throwing it all away.
Not to forget availability of labour. Which travel restrictions affect. Also processing has challenges. When your line worker might be out of service for week or two it can affect output, same goes for increasing the hygiene standards. And those also involve costs which will be moved to consumers.
It only took a global pandemic for the fake argument “immigration doesn’t suppress wages” to finally be cancelled.
If food prices are soaring, and there's a bubble in all kinds of other assets like stocks and bitcoin, why aren't we calling it inflation - can anyone explain why policymakers aren't really concerned?
There's little choice but to rationalize this state of affairs.
Continuing to inflat the money supply is the politically expedient option. Price inflation is a related phenomenon. The Fed is unable to decrease it's balance sheet in a meaningful way.
Some politicians are critical of central bank monetary policy. They are frequently maligned.
Continuing to inflat the money supply is the politically expedient option. Price inflation is a related phenomenon. The Fed is unable to decrease it's balance sheet in a meaningful way.
Some politicians are critical of central bank monetary policy. They are frequently maligned.
India Is Letting Grain Go To Rot—While Thousands Of Indians Die Of Malnutrition Every Day https://www.businessinsider.com/india-malnutrition-a-story-o...
Nothing to do with COVID though, food production and distribution in India has always been horrendously inefficient. Crops rotting in trucks stuck in multi-day customs queues at interstate borders, etc.
Turns out lockdowns aren’t free, even if you just don’t compensate businesses.
Was "lockdowns are free" a serious position held by a relevant number of people?
No, but no one could truly quantify the cost.
The same was true for Covid at the beginning, no one could quantify how bad it actually would be with wild figures in the 5%+ mortality rate. So we screamed for shutdown.
Problem though is that now it's very much clear that Covid was nowhere near that level of mortality, still bad but not the doomsday scenario. Now we we'll have to see what the cost of maintaining the reaction to the initial Covid doomsday estimation; with lockdowns and short term shoring of the economy through fiat currency production.
The same was true for Covid at the beginning, no one could quantify how bad it actually would be with wild figures in the 5%+ mortality rate. So we screamed for shutdown.
Problem though is that now it's very much clear that Covid was nowhere near that level of mortality, still bad but not the doomsday scenario. Now we we'll have to see what the cost of maintaining the reaction to the initial Covid doomsday estimation; with lockdowns and short term shoring of the economy through fiat currency production.
I've not heard any British politicians say that lockdowns are free but I have heard the Chancellor say that any borrowing at the moment is cheap due to low interest rates.
That is literally true though: https://www.bloomberg.com/markets/rates-bonds/government-bon...
Thirty year rates at 1.28%!
Thirty year rates at 1.28%!
Shame I can't get a 30 year mortgage at 1.28%
Lives over stock market was a big thing on the media.
I’m sure these 13.5 million people in the US, who now can’t afford food anymore, wouldn’t have been such enthusiastic lockdown supporters had they realized they would pay the price themselves.
Lockdowns aren't free, but neither would ignoring the pandemic be. There's no way to avoid the cost
Looking back at the Spanish Flu, https://www.inquirer.com/health/coronavirus/coronavirus-covi... showed that lockdowns ended up being cheaper than no lockdowns
Unfortunately the ruling class will always find a way to trickle down costs, so it's no surprise that the poorer you are the more impacted you are. With or without lockdown
"I am once again asking for your financial support" meme for tax payers bailing out megacorp bonuses yet again
Looking back at the Spanish Flu, https://www.inquirer.com/health/coronavirus/coronavirus-covi... showed that lockdowns ended up being cheaper than no lockdowns
Unfortunately the ruling class will always find a way to trickle down costs, so it's no surprise that the poorer you are the more impacted you are. With or without lockdown
"I am once again asking for your financial support" meme for tax payers bailing out megacorp bonuses yet again
The costs of ignoring the pandemic are very country-dependent. In countries whose economies are based on extraction of natural resources, only a fairly small amount of people are needed to run the extraction and export sector. All the other tens of millions of people living in that country have bluntly been called things like "superfluous population" by thinktanks. That small workforce maintaining the economy is little affected by a disease like COVID with its median death age of ~80.
Also, it was believed that COVID presented a threat to the broader economy because it could overwhelm the healthcare system, preventing the broader workforce from accessing treatment. However, one approach is to triage COVID victims, denying them hospital beds so that those beds remain available for the broader population. Liability or elected officials’ sensitivity to accusations of "letting grandma die" prevented some countries from implementing this triaging, but other countries could.
Also, it was believed that COVID presented a threat to the broader economy because it could overwhelm the healthcare system, preventing the broader workforce from accessing treatment. However, one approach is to triage COVID victims, denying them hospital beds so that those beds remain available for the broader population. Liability or elected officials’ sensitivity to accusations of "letting grandma die" prevented some countries from implementing this triaging, but other countries could.
Great statistics on a disease 5 times as fatal that raged a century ago in a world that no longer exists.
This article is primarily about inflation in developing nations like Indonesia.
The inflation in countries like the United States is much lower (around 3% on food compared to 1.5% overall inflation).
Ironically, some of that inflation is due to increased demand for goods providing more demand for shipping services due to lockdown. People had a lot more money to save or spend during lockdown (personal savings rates spiked upward), so shipping prices are inflating due to demand. Food is often shipped, so these inflation costs are partially from shipping costs.
The inflation in countries like the United States is much lower (around 3% on food compared to 1.5% overall inflation).
Ironically, some of that inflation is due to increased demand for goods providing more demand for shipping services due to lockdown. People had a lot more money to save or spend during lockdown (personal savings rates spiked upward), so shipping prices are inflating due to demand. Food is often shipped, so these inflation costs are partially from shipping costs.
Here it comes. Cost of running money printer too hard.
Having we been giving much printed money to people who need more food?
Most people in the western world aren't likely to buy more food, just because they have more money.
Not saying, we won't see inflation, who knows, but I doubt we'll see it in household items.
Most people in the western world aren't likely to buy more food, just because they have more money.
Not saying, we won't see inflation, who knows, but I doubt we'll see it in household items.
Yeah exactly, cyberpsybin's comment reads as "now that people have enough money to buy food they ate all of it".
No, the problem is that there isn't enough food in the first place. The rising price rewards farmers who produce additional food. You just need to run a stimulus program for farmers so that they can expand and mechanize their farms to increase yields.
I wish people would look at physical reality first and then look where physical reality takes the market rather than looking at the market and ignoring what physical reality looks like.
No, the problem is that there isn't enough food in the first place. The rising price rewards farmers who produce additional food. You just need to run a stimulus program for farmers so that they can expand and mechanize their farms to increase yields.
I wish people would look at physical reality first and then look where physical reality takes the market rather than looking at the market and ignoring what physical reality looks like.
Maybe not buy food directly for personal consumption but buying commodities is a possibility that becomes a self-fulfilling prophecy (like GameStop!). When all financial assets increase to all time highs and commodities don’t then speculators push them up to eliminate cross asset price disparities.
For about a year now i buy food in bulk. Mostly because its really nice to have everything at home. However i likely buy more food now too as i never experience the 'nothing nice to eat better go to sleep' situations any more.
Wouldn't it be great if we did that instead of bailing out American Airlines and propping up overpriced real estate?
That's the issue here: not only is stuff you need getting more expensive because of the expanding money supply but the new money is being used directly to cause it rather than helping the individuals that need help.
That's the issue here: not only is stuff you need getting more expensive because of the expanding money supply but the new money is being used directly to cause it rather than helping the individuals that need help.
> Most people in the western world aren't likely to buy more food, just because they have more money.
If you have more money and you use it to buy more food, that's not inflation.
Inflation is when you have more money and you use it to buy the same amount of food. Give people more money, and you will see the price of everything rise without seeing the amount of stuff they buy go up.
If you have more money and you use it to buy more food, that's not inflation.
Inflation is when you have more money and you use it to buy the same amount of food. Give people more money, and you will see the price of everything rise without seeing the amount of stuff they buy go up.
Give people more money, and you will see the price of everything rise without seeing the amount of stuff they buy go up.
In the specific case of COVID in the UK, people have been given money to replace the money they would have earned. The people don't have extra money. The system hasn't changed except for the fact that the money is coming from the government instead of the their employer.
In the specific case of COVID in the UK, people have been given money to replace the money they would have earned. The people don't have extra money. The system hasn't changed except for the fact that the money is coming from the government instead of the their employer.
People have been given money to replace the amount they would've earned, but the work they would've done hasn't happened. All of the goods and services they would've produced no longer exist. The government tried to make up for the fact that large amounts of the real economy were shuttered by printing money, with predictable results.
> with predictable results
Care to elaborate, because *if* there is going to be a fallout from these massive stimulus packages, it certainly doesn't feel predictable to me.
Indeed, we all like to think doomsday scenario, and covid-19 have trained our brains to think the unlikely is likely.. but it's not even obvious there is going to be a fallout from all this stimulus.
Care to elaborate, because *if* there is going to be a fallout from these massive stimulus packages, it certainly doesn't feel predictable to me.
Indeed, we all like to think doomsday scenario, and covid-19 have trained our brains to think the unlikely is likely.. but it's not even obvious there is going to be a fallout from all this stimulus.
Did you respond in the wrong place? "More money" is a premise of "Most people in the western world aren't likely to buy more food, just because they have more money."
Yes, and my reply was to clarify that in some parts of the world COVID hasn't resulted in people having more money despite the government 'money printing machine' going in to overdrive.
The article is about developing countries like Indonesia.
They mention US inflation down below:
> In the U.S., prices rose close to 3% in the year ending Jan. 2, according to NielsenIQ, roughly double the overall rate of inflation.
Money printing isn’t the only or even the main driver of inflation. Increased demands for goods during lockdown has put upward pressure on shipping costs, which is reflected in food prices.
They mention US inflation down below:
> In the U.S., prices rose close to 3% in the year ending Jan. 2, according to NielsenIQ, roughly double the overall rate of inflation.
Money printing isn’t the only or even the main driver of inflation. Increased demands for goods during lockdown has put upward pressure on shipping costs, which is reflected in food prices.
If only they could print productivity to match.
That's what automation is - it's one of the leading causes of increased productivity in the last half century.
Money printing became decoupled from anything real in 1971.
See here what happened to the correlation between productivity and labour income after this https://wtfhappenedin1971.com/
See here what happened to the correlation between productivity and labour income after this https://wtfhappenedin1971.com/
Purchasing power has been consistent. https://i.redd.it/7qqhlk5i48l61.png
The graph uses average hourly wages which does not include overtime, bonuses, shift premiums, and employer benefits. It also doesn't account for all workers.
https://files.stlouisfed.org/files/htdocs/publications/es/07...
total compensation tracks pretty well.
The graph uses average hourly wages which does not include overtime, bonuses, shift premiums, and employer benefits. It also doesn't account for all workers.
https://files.stlouisfed.org/files/htdocs/publications/es/07...
total compensation tracks pretty well.
Thanks for the interesting data point regarding purchasing power. I think we would agree that you’d expect purchasing power to increase when efficiency increases, rather than staying constant. And as efficiency (as measured by value i.e. usefulness/efficiency of capital) has continued to increase while purchasing power stayed mostly stagnant since 1971, those earning their income from labour are drawing the short stick, while those earning their income from capital gains (ie efficiency of productive stuff) are doing much better.
If I misinterpreted your comment (I think we agree), I welcome your explanation of why purchasing power stays the same when efficiency increases since 1971.
If I misinterpreted your comment (I think we agree), I welcome your explanation of why purchasing power stays the same when efficiency increases since 1971.
> why purchasing power stays the same when efficiency increases since 1971.
i would expect that purchasing power remains consistent for people doing the same work.
It's true that capital gains is captured by those who own the capital - but those who do own such capital had to take capital risk to obtain such gains.
Labour income (aka, wage income) increased if the labour changed to be more efficient without said use of capital - for example, programmers' income is very high. But for someone whose labour output hasn't changed from the 70's, is it expected that their purchasing power somehow increases (compared to someone else's)?
i would expect that purchasing power remains consistent for people doing the same work.
It's true that capital gains is captured by those who own the capital - but those who do own such capital had to take capital risk to obtain such gains.
Labour income (aka, wage income) increased if the labour changed to be more efficient without said use of capital - for example, programmers' income is very high. But for someone whose labour output hasn't changed from the 70's, is it expected that their purchasing power somehow increases (compared to someone else's)?
I appreciate your argument that most labour have not increased in value - I guess this metric would be called “labour productivity”. If you have the graph you linked with a longer timeline - it starts just before 1970s - thatd be interesting.
I still see graphs as these https://wtfhappenedin1971home.files.wordpress.com/2020/06/im... as clearly saying labour compensation correlated with advances in technology until 1971, when there was a dramatic shift, and that this is also the time when supply of $ was put in the hands of central bankers rather than any real and external asset.
I still see graphs as these https://wtfhappenedin1971home.files.wordpress.com/2020/06/im... as clearly saying labour compensation correlated with advances in technology until 1971, when there was a dramatic shift, and that this is also the time when supply of $ was put in the hands of central bankers rather than any real and external asset.
https://www.latimes.com/food/dailydish/la-dd-philippes-45cen...
>Frank Martin, bought the restaurant from Philippe Mathieu in 1927, and then the coffee was priced at a nickel.
>Frank Martin, bought the restaurant from Philippe Mathieu in 1927, and then the coffee was priced at a nickel.
The sooner we move to a non-artificially inflationary currency that can be devalued by the whims of the government, the better.
Haven't read the article, but i'm sure the problem could be greatly alleviated, or even entirely eradicated, by cutting down on food waste. I understand an absurd amount of food goes to waste, something like a third.
All around us, obscene amounts of food is going to the bin.
All around us, obscene amounts of food is going to the bin.
...due to TEMPORARY restrictions, such as border closures, that will be lifted once the pandemic is history.
--
On a related topic, quite a few commenters here have made uninformed or intentionally misleading comments about the relationship between inflation indexes and food/energy prices. Let me quote this explanation posted 10 years ago by a PhD student of economics at MIT:
"Food and energy are not excluded from the Consumer Price Index. The standard CPI, which is used to make cost of living adjustments to Social Security (among other things), reflects a full consumption basket, including food and energy.
The index that excludes food and energy is the core CPI, which is used for a very different purpose -- namely, the U.S. Federal Reserve's decisions about U.S. Monetary Policy.
A few observers seem to believe that excluding food and energy from the core CPI reflects either deep ignorance or conspiratorial neglect on the part of monetary authorities. Nothing could be further from the truth. In fact, core CPI (along with some alternatives like mean-trimmed price indices) is a very sensible reaction to the dilemmas facing monetary policymakers.
Suppose that the Federal Reserve had a mandate to stabilize the full Consumer Price Index, and that food prices suddenly doubled. To keep the CPI at a stable level, other prices would need to decrease. The problem, however, is that many prices are sticky, meaning that they do not instantaneously respond to changes in monetary and macroeconomic conditions. This is especially true in the service industry (which comprises the bulk of both Gross Domestic Product and the CPI).
To create these compensating price changes within a relatively short timespan, the Fed would have to impose extremely tight monetary policy, with sky-high nominal interest rates. And as we saw in the early 1980s, a large increase in nominal interest rates is extremely destructive to the real economy, leading to a massive increase in unemployment. Given our already weak economic conditions, such a policy would be even more damaging today.
Core CPI is a way to prevent this kind of needless suffering and unemployment. By targeting a stabler set of prices, the Fed avoids the wild swings in monetary policy that would inevitably arise from targeting an index that includes commodity prices. In other words, the demagogues who assail core CPI have it all wrong: the average American would be much, much worse off if the Fed targeted a volatile measure like headline CPI."
Source: https://www.quora.com/Why-are-food-and-energy-costs-excluded...
--
On a related topic, quite a few commenters here have made uninformed or intentionally misleading comments about the relationship between inflation indexes and food/energy prices. Let me quote this explanation posted 10 years ago by a PhD student of economics at MIT:
"Food and energy are not excluded from the Consumer Price Index. The standard CPI, which is used to make cost of living adjustments to Social Security (among other things), reflects a full consumption basket, including food and energy.
The index that excludes food and energy is the core CPI, which is used for a very different purpose -- namely, the U.S. Federal Reserve's decisions about U.S. Monetary Policy.
A few observers seem to believe that excluding food and energy from the core CPI reflects either deep ignorance or conspiratorial neglect on the part of monetary authorities. Nothing could be further from the truth. In fact, core CPI (along with some alternatives like mean-trimmed price indices) is a very sensible reaction to the dilemmas facing monetary policymakers.
Suppose that the Federal Reserve had a mandate to stabilize the full Consumer Price Index, and that food prices suddenly doubled. To keep the CPI at a stable level, other prices would need to decrease. The problem, however, is that many prices are sticky, meaning that they do not instantaneously respond to changes in monetary and macroeconomic conditions. This is especially true in the service industry (which comprises the bulk of both Gross Domestic Product and the CPI).
To create these compensating price changes within a relatively short timespan, the Fed would have to impose extremely tight monetary policy, with sky-high nominal interest rates. And as we saw in the early 1980s, a large increase in nominal interest rates is extremely destructive to the real economy, leading to a massive increase in unemployment. Given our already weak economic conditions, such a policy would be even more damaging today.
Core CPI is a way to prevent this kind of needless suffering and unemployment. By targeting a stabler set of prices, the Fed avoids the wild swings in monetary policy that would inevitably arise from targeting an index that includes commodity prices. In other words, the demagogues who assail core CPI have it all wrong: the average American would be much, much worse off if the Fed targeted a volatile measure like headline CPI."
Source: https://www.quora.com/Why-are-food-and-energy-costs-excluded...
I had a dream recently on this topic. Price of food inflating. And clothing too. And inversely housing prices dropping.
And then it made sense to me. When the cost of everyday goods go up, there is more money flowing in meager industries.
That means more money for the average joe. (Or it used to be before robot corporations overtook farming.)
And that means more concentration of resources for the normal guy. Which means smaller housing compared to McMansions. And smaller cost of living all around. The problem is that today’s large rich population become not so well off. And poor people hit a better standard of living.
Higher food prices may be a good thing.
And then it made sense to me. When the cost of everyday goods go up, there is more money flowing in meager industries.
That means more money for the average joe. (Or it used to be before robot corporations overtook farming.)
And that means more concentration of resources for the normal guy. Which means smaller housing compared to McMansions. And smaller cost of living all around. The problem is that today’s large rich population become not so well off. And poor people hit a better standard of living.
Higher food prices may be a good thing.
[deleted](1)
Global food shortages are coming, I'm just worried that not enough people are taking this seriously.
Inflation may come right after. This is not good.
Inflation may come right after. This is not good.
Maybe if we didn't throw up to 50% of our food away in "developed nations" there'd be:
A. More left for the rest
B. No need to produce the amount produced right now
C. Reduced impact on the environment
But yeah, let's think about that ,once we do actually have a crisis, as a last resort. Keep stuffing your bins with food you didn't eat and wondering why prices soar.
A. More left for the rest
B. No need to produce the amount produced right now
C. Reduced impact on the environment
But yeah, let's think about that ,once we do actually have a crisis, as a last resort. Keep stuffing your bins with food you didn't eat and wondering why prices soar.
Grain prices caused the arab spring. Expensive food has been toppling governments since the beginning of civilization
This sort of news makes me want to panic.
It's panicking that caused the issue in the first place.
donut panic
It's Spring, plant a garden. Dig up your lawn and plant some potatoes.
https://en.wikipedia.org/wiki/Victory_garden
https://en.wikipedia.org/wiki/Victory_garden
Everyone expected toilet paper and mask shortages.
Ends up being Food and semi conductors.
Ends up being Food and semi conductors.
[deleted]
Overall production/consumption has probably decreased. This means that food has has higher relative share of consumption.
Therefore food prices shift right?
Therefore food prices shift right?
Production has decreased, or at least ability to ship it has.
Consumption is probably the same for most families, albeit they may buy 10% more to make sure certain staples are good in case of a shortage.. more so during the ebb/flow of covid-19 waves and lockdowns.
So a family might end up wasting more food just to be sure they have enough for planned meals or alternatives.
A lot of people are having mental health issues from lockdown, that can affect eating behaviors as well - depression can cause gain or loss of appetite so that's up in the air - could also make you plan to eat in but then decide to get take out because you're too depressed to cook. (Source: I've done this as my anxiety/depression has been really bad this year and my wife who's never been depressed is barely functional this year).
I think the biggest thing is just everything's shifting. We're not just dealing with covid-19 but also fires and other natural disasters. Unfortunately, I think climate change could keep this the norm even if covid-19 is completely normalized (i.e. we return to some semblance of normal).
Covid-19 variants could also keep things an issue. I'm going to get flagged for fear-mongering but I don't see how the next decade gets any better than it is right now, except for fleeting relief cycles as we come out of the pandemic ... but there's a lot of shifting global strife.
You can almost feel the change from day to day everything's changing faster and faster and it's getting harder to predict the future. Kind of like the singularity when technology speeds up.
Consumption is probably the same for most families, albeit they may buy 10% more to make sure certain staples are good in case of a shortage.. more so during the ebb/flow of covid-19 waves and lockdowns.
So a family might end up wasting more food just to be sure they have enough for planned meals or alternatives.
A lot of people are having mental health issues from lockdown, that can affect eating behaviors as well - depression can cause gain or loss of appetite so that's up in the air - could also make you plan to eat in but then decide to get take out because you're too depressed to cook. (Source: I've done this as my anxiety/depression has been really bad this year and my wife who's never been depressed is barely functional this year).
I think the biggest thing is just everything's shifting. We're not just dealing with covid-19 but also fires and other natural disasters. Unfortunately, I think climate change could keep this the norm even if covid-19 is completely normalized (i.e. we return to some semblance of normal).
Covid-19 variants could also keep things an issue. I'm going to get flagged for fear-mongering but I don't see how the next decade gets any better than it is right now, except for fleeting relief cycles as we come out of the pandemic ... but there's a lot of shifting global strife.
You can almost feel the change from day to day everything's changing faster and faster and it's getting harder to predict the future. Kind of like the singularity when technology speeds up.
I remember seeing an article about how some container ship crews haven't been able to leave their ships and see other people for crazy periods of time because of lockdowns. That can't be good for retention and shipping.
Jeebus folks!
This is not about the USA. This is about the vast majority of the mankind that lives on developing countries, vast armies of people already under the threat of food insecurity in the best of times, now unemployed and facing the threat of food inflation.
This is the stuff that create coup d'etats, dictatorships, rampant crime and wars.
Meanwhile you're working on automating work to make this people even more unemployable, and have the nerve to complain about a small food price increase in the frigging US of A.
This is not about the USA. This is about the vast majority of the mankind that lives on developing countries, vast armies of people already under the threat of food insecurity in the best of times, now unemployed and facing the threat of food inflation.
This is the stuff that create coup d'etats, dictatorships, rampant crime and wars.
Meanwhile you're working on automating work to make this people even more unemployable, and have the nerve to complain about a small food price increase in the frigging US of A.
Who's making it about the USA? The article is clearly about the world. Food scarcity hits people in developed countries too, especially the US where there's no safety net against homelessness if you're unfit to work. That "small price increase in the friggin US of A" is a big deal to people below the poverty line. There's always someone poorer in the world, it's just weird to draw a line in the sand and say "you must be this malnourished to speak up".
As for automating work, how far back should we go? Should people be forced to abandon their cars because having horse-drawn chariots employed more people?
I was talking about the comments.
If domestic production is enough to satisfy domestic demand no worries but that's not always the case.
It makes sense. There's more people than ever and less food produced after 2020 flooding in China.
You can see how it's going when the super rich are buying agricultural land
Isnt food prices soaring the definition of inflation... haha
food prices is a part of cpi, which is what people typically mean by "inflation". the cpi is also composed of other items (eg. rents, transport), which means it's possible for inflation to be down even though food prices are up.
"Soaring" is 3% now?
Hackernews user slams journalists using cliche headline vocabulary. The full-throated criticism was not met with a response, the silence is deafening.
Bloomberg is an expensive paywall. Unhelpful.
[deleted]
netdur(2)
Good. Maybe we’ll waste less now.
The most wasteful are the richest though.
"The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money.
Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.
But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.
This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness.”
< https://www.goodreads.com/quotes/72745-the-reason-that-the-r... >
So in short: no. Everyone is wasting.
Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.
But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.
This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness.”
< https://www.goodreads.com/quotes/72745-the-reason-that-the-r... >
So in short: no. Everyone is wasting.
> "The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money.
> So in short: no. Everyone is wasting.
The wealthiest 20% of the world's population consume 80% of resources, while the poorest 20% lack the basics to survive.
It just takes 40 seconds of research to completely disprove your point.
> So in short: no. Everyone is wasting.
The wealthiest 20% of the world's population consume 80% of resources, while the poorest 20% lack the basics to survive.
It just takes 40 seconds of research to completely disprove your point.
Wasting is wasting; small or big wasn't the question.
So why did't the poorer man buy the more expensive boots using a loan, and then pay it off over the life time of the boots?
That would've prevented him from spending hundred dollars on bad boots over and over again. So i argue that it's poor planning.
That would've prevented him from spending hundred dollars on bad boots over and over again. So i argue that it's poor planning.
To be clear, your question is "why don't poor people just get loans"?
The poor person paid out $100 over 10 years, for the equivalent goods that would've costed $50 in upfront capital (good shoes).
So an enterprising banker would be willing to lend this poor person $50, to be repaid with eight $10 installments yearly, for a total of $80 - a 60% return on investment (7.5% pa returns).
This would've kept the poor person's cashflow the same - $10 per year, and he'd have paid an extra $30 for the priviledge of the upfront capital, but saved $20 vs buying new shoes every year for $10, ten years straight.
If those shoes were so important, this would've been the way to do it, not buy a crappy pair every year that end up costing you more in the long run.
Edit: my main point is that financing is a potential way out for those who lack the capital, but is able to to handle the cashflow.
So an enterprising banker would be willing to lend this poor person $50, to be repaid with eight $10 installments yearly, for a total of $80 - a 60% return on investment (7.5% pa returns).
This would've kept the poor person's cashflow the same - $10 per year, and he'd have paid an extra $30 for the priviledge of the upfront capital, but saved $20 vs buying new shoes every year for $10, ten years straight.
If those shoes were so important, this would've been the way to do it, not buy a crappy pair every year that end up costing you more in the long run.
Edit: my main point is that financing is a potential way out for those who lack the capital, but is able to to handle the cashflow.
Then they get hit with an unexpected $1k medical bill. They now default on your shoe loan, and the coat loan, and the car loan, and the rest of the microloans.
Poor people generally don't have access to capital except at incredibly high APRs that typically make things worse, not better.
Poor people generally don't have access to capital except at incredibly high APRs that typically make things worse, not better.
if they were going to get a medical bill, they would've been in the same, or worse position. They would've been without a shoe, instead of with a shoe and face default on the shoe loan.
I have an even better way to reduce waste: Let's raise food prices so that no one can afford to eat! No consumption, no waste.
After just finishing reading Griftopia; I would not be surprised if Goldman Sachs had something to do with this or at least speculation of perishable commodities.
Speculation in commodities reminded me of the onion futures act [0]
""" The Onion Futures Act is a United States law banning the trading of futures contracts on onions as well as "motion picture box office receipts".[1]
In 1955, two onion traders, Sam Siegel and Vincent Kosuga, cornered the onion futures market on the Chicago Mercantile Exchange. The resulting regulatory actions led to the passing of the act on August 28, 1958. As of January 2021, it remains in effect.[1]
The law was amended in 2010 to add motion picture box office futures to the list of banned futures contracts, in response to lobbying efforts by the Motion Picture Association of America.[2] """
0. https://en.wikipedia.org/wiki/Onion_Futures_Act
""" The Onion Futures Act is a United States law banning the trading of futures contracts on onions as well as "motion picture box office receipts".[1]
In 1955, two onion traders, Sam Siegel and Vincent Kosuga, cornered the onion futures market on the Chicago Mercantile Exchange. The resulting regulatory actions led to the passing of the act on August 28, 1958. As of January 2021, it remains in effect.[1]
The law was amended in 2010 to add motion picture box office futures to the list of banned futures contracts, in response to lobbying efforts by the Motion Picture Association of America.[2] """
0. https://en.wikipedia.org/wiki/Onion_Futures_Act
Я здесь Голая https://vk.cc/bZoVGs
Fiat Money! Quantitative easing! Stimulus Checks! Next it will be UBI. Unrestrained monetary policies were the piper to save us from financial crisis after financial crisis. Now his pal inflation is coming for all of our free lunches.
Prior to the pandemic, I always advocated for a couple weeks worth of non-perishables to be at the ready. Storms can cause issues getting to stores (or shipments arriving), and illness can make it a pain to make a weekly run. Now my significant other is entirely on board.
When normal ingredients we used became unavailable, it caused us to continually try new things. I have to admit I was pretty surprised to see today's customers buy up the basic scratch ingredients like rabid consumers early in the pandemic. Flour, sugar, etc. were all a real pain to get a hold of.
I thought prices were increasing pretty steadily before the pandemic and now it's even worse. I can remember so many items being as cheap as 25 cents each during the 90s and into the 00s... now most of them at $1.50 each. Meanwhile, our state minimum wage has increased not nearly as much (but employers are having to offer closer and closer to double to rope in anyone).
When normal ingredients we used became unavailable, it caused us to continually try new things. I have to admit I was pretty surprised to see today's customers buy up the basic scratch ingredients like rabid consumers early in the pandemic. Flour, sugar, etc. were all a real pain to get a hold of.
I thought prices were increasing pretty steadily before the pandemic and now it's even worse. I can remember so many items being as cheap as 25 cents each during the 90s and into the 00s... now most of them at $1.50 each. Meanwhile, our state minimum wage has increased not nearly as much (but employers are having to offer closer and closer to double to rope in anyone).
> prices were increasing pretty steadily during the pandemic and now it's even worse. I can remember so many items being as cheap as 25 cents each during the 90s and into the 00s...
How long have you been having a pandemic for?
Joking aside (that sentence read a bit weirdly), I don't think you should compare what happened in the 90s with what happened since 2020-02. If inflation surpasses minimum wage in the long term, that's not the same as prices soaring because of supply chain changes. And for what it's worth, I've not noticed any price increases here between 2020-02 and last week. This is way too anecdotal and conflating different situations to be useful.
How long have you been having a pandemic for?
Joking aside (that sentence read a bit weirdly), I don't think you should compare what happened in the 90s with what happened since 2020-02. If inflation surpasses minimum wage in the long term, that's not the same as prices soaring because of supply chain changes. And for what it's worth, I've not noticed any price increases here between 2020-02 and last week. This is way too anecdotal and conflating different situations to be useful.
Simply comparing prices from the 90s onward. They've risen significantly more over time while wages haven't seen a bump here in Ohio since 2008.
that sounds like the general trend of wages in the US to not adjust upwards since Reagan’s presidency
The data does not support this, wages have been in the 2-4% rate for a while now. Seems tied to economic conditions rather than who is president.
Source: https://www.epi.org/nominal-wage-tracker
Source: https://www.epi.org/nominal-wage-tracker
The data does, really - on an off-hand search I found this[1], though I'm sure many more could be found. The US has trailed the rest of the world for decades on wage growth and income equality.
[1]: https://www.epi.org/publication/charting-wage-stagnation/
[1]: https://www.epi.org/publication/charting-wage-stagnation/
>Flour, sugar, etc. were all a real pain to get a hold of
I see that as a win. Neither flour nor sugar is essential or healthy.
I see that as a win. Neither flour nor sugar is essential or healthy.
That's great, they're just two items and a lot of people didn't routinely buy flour (or something like yeast). Meanwhile, everything else has gone up in addition. A number of produce items have increased 25-50% in the last year here.
Gotta love some of the people on HN. Maybe it's just the late night crowd?
Gotta love some of the people on HN. Maybe it's just the late night crowd?
Yeah, let them eat kinoa and avocado
The article blames transportation cost due to Covid, and an increase in raw food prices for the rise in food cost.
In my little bubble, in the Bay Area, it feels like plain old greed, and opportunity, but not price gouging.
When the government tells me where I can shop, along with my fear of how certain stores have dealt with Covid precautions, my buying habits don’t take price into account like before.
The first few months; I bought transportation, and raw costs, but now I’m not so sure.
My local Safeway has raised prices on everything. At first, they looked like they were trying to be fair. Now——it looks like they know people can basically shop fir food, so why not raise prices on everything while they have you there?
Same goes for Homedepot. Yea, raw wood prices, and appliances have gone up, but it looks like everything they sell went up.
I haven’t been into Whole food because my local store has had too many sick employees.
(While we are on prices, Mercury Insurance refunded me $6.46 on a $600 policy, and that was last year. Why hasn’t my insurance gone way down? It just seems like accidents would be down? My policy is minimum I can legally get away with. I was going to switch to an insurance company that bills per mile, but my old car does not have a computer that Tye “honesty” devise can plug into. I would be happy to send the company a picture of my odometer monthly, but that is not an option.)
In my little bubble, in the Bay Area, it feels like plain old greed, and opportunity, but not price gouging.
When the government tells me where I can shop, along with my fear of how certain stores have dealt with Covid precautions, my buying habits don’t take price into account like before.
The first few months; I bought transportation, and raw costs, but now I’m not so sure.
My local Safeway has raised prices on everything. At first, they looked like they were trying to be fair. Now——it looks like they know people can basically shop fir food, so why not raise prices on everything while they have you there?
Same goes for Homedepot. Yea, raw wood prices, and appliances have gone up, but it looks like everything they sell went up.
I haven’t been into Whole food because my local store has had too many sick employees.
(While we are on prices, Mercury Insurance refunded me $6.46 on a $600 policy, and that was last year. Why hasn’t my insurance gone way down? It just seems like accidents would be down? My policy is minimum I can legally get away with. I was going to switch to an insurance company that bills per mile, but my old car does not have a computer that Tye “honesty” devise can plug into. I would be happy to send the company a picture of my odometer monthly, but that is not an option.)
If you're in California and carrying the minimum legal limits for car insurance, you're exposing yourself to a massive liability risk, especially if you're a tech worker (savings/high income), since you're not judgement-proof.
Geico refunded customers on account of all the less driving during lockdowns.
> When the government tells me where I can shop,
Which government is telling you where you can shop? In what way do they do that?
Which government is telling you where you can shop? In what way do they do that?
With regards to satisfying hunger, if the government has closed bars and sit-down restaurants in an area, that shifts food procurement towards grocers.
Pre-pandemic, I suspect I purchased over half of my caloric intake from a food vendor other than a grocer. 15 years ago, that would have been 90+% (as so I expect the younger cohorts today would be similar)
Pre-pandemic, I suspect I purchased over half of my caloric intake from a food vendor other than a grocer. 15 years ago, that would have been 90+% (as so I expect the younger cohorts today would be similar)
Where I am restaurants have been available throughout the pandemic at least for take out, and most have setup ways to have outdoor seating which is still allowed. There are a few which have closed permanently, but not as many as I expected, thankfully.
We did many similar things here, though when the outside temps are 0º to -5º C, it's a lot less appealing to eat and socialize outside, so the government prohibition or limitations on indoor dining have still caused a sharp reduction in percentage of calories purchased this way. (I'm not arguing that they are improper, just that they have caused a sharp change in consumption patterns which have, in turn, benefited grocers.)