All you have to look at is stocks and home real estate to see that assets are ballooning no matter how cheap a dozen of eggs stays.
The only reason food hasn't become too expensive is wealthy people don't have a reason to go out and buy up all the food. They do, on the other hand, have reason to go out and invest.
This is, however, starting to fall apart for goods that don't normally have reason to be bought up. In other words, folks with capital now realize they can hoard those resources as well in order to price gouge. This is most evident in consumer electronics as of late.
Usually, these aren't super wealthy individuals, but instead folks who have been priced out of traditional wealth building like stocks / housing. They may not be able to afford a down payment on a house, but they can sure as heck spend a few thousand buying up consumer goods hoping to gouge others.
However, I can’t imagine the trouble that Nintendo would get into if they sold the same device at different prices based on zip code.
Not to say that doesn’t happen, because that’s half the point behind custom phone contracts, where the price you pay for the device over time varies widely from person to person. Though, because it’s individualized, it’s very hard for consumers to compare one another’s prices and identify minor monopolies or price discrimination when it does occur.
Hoarders/scalpers are not aiding price discovery, they are manipulating the price by artificially changing supply or demand. They don't have to do so sustainably either.
And all of that is leaving aside that the goal of a society is to maintain the society over time and in aggregate, not to maximize value extracted from every individual transaction.
one could reasonably argue otherwise. let's take the example of toilet paper in the early weeks of quarantine. with or without the action of scalpers, such a massive shift in demand was going to cause toilet paper to go out of stock regardless. without scalpers, you are shit out of luck when this happens (perhaps literally). with scalpers, you at least have the ability to buy it at an eye-watering price. even before you run out, knowing that you have to pay $20/roll is a strong signal that you ought to use one or two squares per wipe instead of 3+.
On a hunch I'd say a scalper would purchase more off the shelf than a panic buyer, because with the goal they have in mind they a) want a large quantity to resell to a large number of people and b) want to drain shelf stock to increase their odds of success.
on the other hand, one could argue that this did happen in the aftermath of the crypto craze. in that time, gpus sold for well over MSRP (even second-hand) for a year or two. I don't think it's a coincidence that gpu pricing tiers jumped by a couple hundred dollars in the next generation (and again with the RTX 3090, although you could instead argue that's a price cut to the outgoing titan sku).
sometimes i get the idle premonition that if they started trying to do this tomorrow they could do a shockingly good job, to the point that you could almost claim that the only thing holding together social order at this point is that they are not. not saying i believe this-- i don't even really lean this way ideologically-- but it is kind of a sobering thought because it seems plausible (well, to me at least). maybe this has been true at other points in history as well and things have gone fine...
and i don't mean in the "hire people with guns" sense, but literally just people following the letter of the law
All kinds of chaos manifests when that happens. Look at nations that experienced hyperinflation for examples of how it might go.
What's not so clear is what might prompt it to happen.
I lived through collapse and dissolution of one state, civil war, disintegration, and (belated) birth of a new state, with its own currency. The monetary aspect (hyperinflation in the old, change of currency in the new) is only a small part of that. You are correct - in that scenario, there are other things to tend to, more urgent.
I also witnessed that gold did not replace the collapsing currency. Other, non-collapsing currencies took on that role.
USD is safe and sound for as long US is safe and sound. The fiat currency is creation of the state. In collapse, I'd say causality goes 99% state->fiat. Only a small (2nd or 3rd order) effect in the opposite direction.
For the parent - "Hyperinflation – It’s More Than Just a Monetary Phenomenon" by pragcap.com
https://www.pragcap.com/hyperinflation-its-more-than-just-a-...
reads right for me. Even general inflation (= increase in P/y) does not necessarily follow from the exchange equation (M V = P y) and money growth (M). There are other possibilities too, examples discussed in https://www.forbes.com/sites/johntharvey/2011/05/14/money-gr....
To end on a more upbeat note: I also witnessed the hyperinflation tamed, the economy booming, without seemingly much effort and in short period of time. Looking back, I think the most important part is the right diagnosis: where is it coming from. Otherwise the cures end up worsening the disease.
Other commenters have gone into it, but this is about forced scarcity vs need. Incidentally, it's also similar to why workers have trouble negotiating individually vs as a group.
The gist of it is that those in power / wealth have the ability to outlast any single poor individual. You don't want to buy a house, toilet paper, or a nintendo switch right now? That's fine, I'll keep buying them till you or some other chump gives up. I have so much money that it doesn't really matter how long you decide to be frugal and wait. You want to strike? That's fine, you'll be back soon enough when you need to pay for something or keep your family alive. I have enough to outlast you.
Had we pumped this money into the actual working class economy I wouldn't be worried. But instead we siphoned off more working class dollars under the guise that inflation isn't real. It is, and future generations are going to pay dearly for our naivety.
Imagine you are a billionaire and suddenly the minimum wage shoots up to $100k per year. Suddenly that billionaire's wealth has a lower purchasing power.
Inflation is about the prices people actually pay, on average. Your neighbor's house getting sold for a lot of money isn't a real cost to you like rent. Someone paid that price, but they are not necessarily typical.
Inflation does include rent (or "imputed rent") to the extent that people actually pay those prices on average. Some people really do pay higher rents, but many others have lower housing costs locked in via home ownership or rent control, and they count too, so this is going to drag down the average. That's just the nature of averages.
BTW, stock market indexes are an average too, and it's heavily weighted towards tech firms due to market capitalization. Only about half of the stocks in the S&P 500 are up for the year.
Using products to measure inflation, is a terrible mistake in my estimation, because cost has been falling, so stable prices don't mean no inflation.
It just means the governments got wise to just take what they can get without being noticed.
Suppose the government defined "eastern time zone" to be a geographical area. And you live in western indiana, and commute to work in chicago.
Suppose the government defined "torture" to not include "waterboarding".
My point doesn't depend on this tho, measuring inflation by rising prices isn't ideal, because you will be measuring multiple things at once, and only the people lose in that case.
Prices can rise and fall for multiple reasons, and knowing why helps to fix it.
If the price goes up because of a shortage, the increase in price helps stimulate more production.
Governments get the advantage of being able to inflate the money supply to the point were it prevents prices from falling, ensuring easier reelection at the price of the people paying more for things and effectively taxing savers.
Governments have the fiscal capacity to keep the economy going. Is your theory that, for instance, the USA economy would be better without the government stimulus?
When the economy goes bananas, if it's not sustained by the government, not only will be suffering of a big part of the population but the destruction of physical capacity and knowledge in the economy.
This is not the 19th century, that idea that the economy on its own works perfectly should be debunked by now.
Monetary inflation is one thing denoted by the word "inflation", and perhaps it used to be the more common use in general conversation. Its not anymore, price inflation, particularly consumer price inflation is the most common general use.
> measuring inflation by rising prices isn't ideal
It certainly is if you are doing for a purpose to which price levels are most directly relevant, which is quite commonly the case. There's nothing mystical about the word "inflation" that creates an all-purpose best measure (and, in fact, "inflation" is a name for lots of different things, which have complex interrelationships.)
You can; whether that's useful or not depends on the definition and context of use.
> Inflation is an government official indicator with a very clear meaning.
No, its not. Inflation is a broad concept (well, actually, a set of different and interrelated broad concepts) with a number of different official government measures. The most common US government measure of price inflation, the most common kind people talk about, is the all items CPI-U (Consumer Price Index for All Urban Consumers.) But there are lots of other inflation measures, including official government ones used for important purposes, like the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers) which is used as the basis for Social Security COLAs. And also frequently cited is the CPI-U for all items excluding food and energy. There are also CPIs for other populations, CPIs for other categories of goods and services, PPIs (Producer Price Indexes), ECI (Employment Cost Index), and others. All of these are official government price inflation measures.
There are also official government measures of money supply, which equivalently are measures of monetary inflation. And there are a whole bunch of those, not just one.
In any case, the "money supply" is an abstract macroeconomic variable with multiple possible definitions. Why do we care about it? Because it might have a real-world effect on us via price changes.
Gathering data about prices directly is a better way of understanding price levels (and inflation) than mucking around with less measurable quantities.
To the extent that the money supply matters, it's because it might result in higher prices in the future. But this doesn't seem to happen in any mechanical way. Just because people have money doesn't mean they want to spend it. In the classic equation, V (the velocity of money) can slow down.
This is particularly true when we are talking about institutions and rich people who already have savings. Higher numbers in their bank accounts doesn't automatically result in more spending, either by them, by the banks, or by companies whose stock prices get bid up.
It would matter more if the money went to people who actually need to spend it.
Money supply inflation might not directly influence price inflation, though we see price inflation in asset prices, such as stocks and properties.
My point is more on the government saying it needs inflation, when even without price increases inflation might be happening.
We have increasing productivity, cost has been falling, so if prices stay fixed, therefore no price inflation, the people are still paying more than they should.
The value of things have been falling, but prices haven't.
It’s not that price increases are good in themselves, but that it would be good if people spent more, and if it results in prices being a little higher, this is okay.
1 - What an incredible new definition of monetary inflation we have now, that can be split over real markets without any loss of meaning.
They fail to make a distinction between monetary inflation and price inflation which is the reason for the (intended) confusion around the term 'inflation'.
Hey, this checks out with the very thing that the younger generation complains about, correlates with social injustice in the grandest scale (homelessness), that is one influencing factor in major social unrest in the country (racial disparity in access to real estate). But let's ignore that.
Have you considered that the deflection in the economy caused by the inflation happened to manifest itself unevenly across various market segments, and the primary direction that the deflection moved into is the very one you're ignoring?
There are a couple other indexes out there that track total cost of living that are pushing ~10% per year inflation right now.
This is wrong. Food, shelter, and transportation are all included in the basket used to compute CPI. [0]
> The CPI represents all goods and services purchased for consumption by the reference population (U or W). BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups (food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services).
CPI weights changed in 1980, and seemly when using old weights the CPI is 10% instead.
I've read (I didn't checked with all details, I don't live in US so it is not that relevant to me) that a major change is that the cost of having a shelter had its weights greatly reduced. (I don't mean the "housing" category in general)
> 9. Is the CPI a cost-of-living index? ... > Both the CPI and a cost-of-living index would reflect changes in the prices of goods and services, such as food and clothing that are directly purchased in the marketplace; but a complete cost-of-living index would go beyond this role to also take into account changes in other governmental or environmental factors that affect consumers' well-being. It is very difficult to determine the proper treatment of public goods, such as safety and education, and other broad concerns, such as health, water quality, and crime, that would constitute a complete cost-of-living framework. Since the CPI does not attempt to quantify all the factors that affect the cost-of-living, it is sometimes termed a conditional cost-of-living index.
Public services are being gutted in the US. I think this explains why cost of living indexes can be north of 10% while the CPI is < 2%.
It doesn’t explain how groceries, rent, medical care and education costs have all skyrocketed without raising the CPI. My guess is that people are spending less than they used to on things like recreation and apparel, due to lack of money.
Over time, the index has changed in a manner that grossly underestimates the inflation the average person experiences.
The problem is that you think you need to solve a grand problem instead of inventing something simple like a post-it note or a makeup tutorial. You seem to somehow believe that incumbents ALWAYS win. That is not true. Ingenuity with a superior product is what upends the market, shifts and creates new wealth.
So many babies on these forums whine about their inadequacies instead of bettering themselves. Making my imaginary number go down does change the fact that YOU AND ONLY YOU have the most power to change your life not some "system". If you can't afford to buy a house, get a better job. Sorry that's harsh. Who said life was easy?
I'm coming from the perspective of someone whose extended-extended family ranges from dirt poor laborers to set-for-life landlords.
I'm also drawing on my own experiences. I'm a software engineer, currently on hiatus to work on a YouTube series. I lost a good chunk of change from non-housing assets in 2008 from the meager 401k my internship paid into. I lost the rest when I had to cash in the 401k and sell furniture to have enough cash to wrap up my startup when the market I was in dried up (more like soaked up and polluted by the giant 800lb sponges, plus numerous other factors nobody cares about) and Apple took Primesense out.
So here's what I am saying and relates to what I think everyone else is saying: at every point in my life where I've felt like "now is the time to buy a house," I've just been a few percent short on the down payment. So I keep working and getting promotions and raises and saving, and wouldn't you know, now I'm several more percent short on the down payment despite having more saved, because the treadmill keeps getting longer and spinning faster. And as for other assets, yeah, my stocks are up, but houses are still up more than my risk-tolerable gains.
Meanwhile the people who would have been able to buy reasonable houses in reasonable neighborhoods with reasonable jobs don't have stocks to begin with, and are priced out by migrants with portfolios from even higher cost areas and the massive investors I'm currently having to rent from.
> You seem to somehow believe that incumbents ALWAYS win
Did you mean to respond to someone else? Where did I say that?
The question is, will it correct to levels below its current ones? If you have an answer to that, you can make a lot of money.
If you stayed in through 2008 till now, you'd be doing perfectly fine. If you had to take out money right after the collapse, ouch.
Ultimately your portfolio risk should reflect the cash needs of your age/health/lifestyle in the context of the economics of the time. However, we are in uncharted waters.
I'll take a punt. At some point inflation will take root, and when it does the fed will be in a bind.
Hell, the fed has already been digging away at pensions with their 40 year long put. Pensions funds struggle now to find a positive yield that meets their liabilities.
And homes will at some point come under attack. Perhaps only when everything else is gone, perhaps not. They're a sitting target.
https://www.nasdaq.com/market-activity/stocks/aapl/dividend-...
Regarding dividends, in theory when company spends $1 per share on a dividend, its stock price should go down by $1 to compensate for this. So receiving a dividend is kind of like forced selling a small portion of your stock (except that you don't pay the transaction fee).
That is: I've got some money to invest. As far as rate of return goes, a stock at a P/E of 10 is about the same as a bond paying 10% interest. (Yes, the stock can go up in price. It can also go down. And so can the bond - when interest rates change, bond prices change. But stock prices factor in expectations of future earnings changes, which bond prices usually don't.)
Now bonds are only paying 4%. That stock P/E of 10 looks really good - so good that people keep buying it, and the price keeps going up, until the P/E is more like 25, which puts it back at approximately the same yield as bonds.