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Comment by diob | Hacker News Reader

Right, I've posted this before, but long term wealth building is becoming too expensive for the average person.

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.

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> 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

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

We got very near this with the ethanol fashion at the end of the last decade. People with money got an extra reason to buy food and it did completely disrupt the social order all over the world.

On the one hand, it's a bit of a cyclical argument - The only thing holding together social order is social order. On the other, the same is true of anything which is relied upon on for life and dependent on ongoing financial exchange - Food, water, housing (if you rent). If a lot of excess capital suddenly flooded into those markets and gobbled up stock/pushed up demand, joe average could be priced out.

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.

yeah that's the kind of reasoning that makes me feel better about it-- it's not really clear what kind of shock i would really be expecting to happen in the course of ordinary civilization that would cause this sort of run on life support / life-essential stuff that would also not itself be a bigger cause for concern than the system imploding (e.g. a proletariat uprising or world war would do the trick, but would be a bigger deal than the resultant economic shock alone)

You are very much right in thinking this.

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.

If they can hoard goods and sell them all at higher prices, then does that imply that the goods are priced too low to begin with? What's keeping the sellers from recognizing this and raising the prices themselves?

It happens in minor monopolies, which are exploitable best at small scale, like location or temporality. I can flip the latest Nintendo mini on eBay pretty easily.

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.

It's zero sum. The people who desperately needed hand sanitizer or toilet paper today had less money left to spend elsewhere, but overall averaged demand wasn't all that different. Traditional suppliers probably know that jacking the price of one item can lead to losses elsewhere.

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.

I'm definitely not advocating for hoarding or scalping, I'm just curious about what specifically the systemic inefficiencies are that prevent sellers from undercutting the hoarders and scalpers by raising prices on their own.

rightfully or not, raising prices in these situations is considered distasteful by most people. the long-term damage to the brand is probably not worth the short-term profits. retailers would rather just run out of stuff or limit customers to two boxes of pasta to maintain their image.

> 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.

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+.

Hinges on what you believe would have happened to stock that scalpers bought, had they not done so. It may have left enough on the shelf for the would-be customers of scalpers to meet their needs. On the other hand, that leftover stock may have been obtained by panic buyers.

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.

that's why I used the toilet paper example. I don't think scalpers have enough storage space to clear an entire region's stockpile of tp. I did read a story of a guy who did exactly that with hand sanitizer, literally bought the entire supply from every store within 100 miles. that does change the analysis.

I think GP is describing scalpers in the latter part of their comment. the fact that it can be profitable for some guy to buy up a hundred GPUs and sell them at a 50% markup until the fabs catch up does not necessarily make it a good idea for nvidia to do the same thing. it would likely create a lot of ill will for a comparatively small bump to their bottom line.

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).

If wealthy people suddenly bought up all the food then we would see inflation again. It would be very good because it shifts the balance away from capital to labor.

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.

Can you expand the example with consumer electronics - because it's not clear: who's gouging whom? You mean Big Tech selling expensive smartphones to people who can't buy a house so will buy an iPhone instead?

As someone who tried buying Nintendo Switch, I can confirm that there were scalpers who bought up every Switch stock available during the COVID lock down and resold it for ~1.5x to 2x more than the MSRP price. This seems to have happened with the latest Nvidia graphic cards as well.

Ah I see. Well same stuff with concert/football tickets, Air Jordans etc. If something is valuable but with limited quantity, this is inevitable.

You're close here, but I think you're missing the point. Things that haven't been seen as "scarce" in the past are becoming more and more likely to be forced into scarcity. We're not worried about superfluous goods (concerts), but goods like housing / food are not superfluous (one could even argue the same thing about certain electronics).

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.

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