In a functioning economy the supply of cars, houses, and furniture etc. would rise to meet the demand preventing a price increase. But they can't due to chip shortages, labor issues, and other assorted supply chain issues. It's a different problem than inflation and requires different solutions.
It also contradicts the "If you didn't get a 7.5% raise you got a paycut" narrative because it's very dependent on what you bought. If you're trying to buy a house, put furniture in it, and get a new to you used car then things got way more expensive. If you already had those things then it didn't.
If the supply of cars is down why would that in and of itself drive the price up? Surely there's some flexibility in demand for cars?
It seems like a price increase in any individual item can be explained as a supply problem but every additional item that that gets added to the list is an argument for a money supply problem because on some level every item is substitutable.
1. Global supply chain disruptions are well documented, multiple automakers have had to shutdown factories for lack of parts.
2. Cars prices are increasing much more rapidly than the overall inflation rate. (I believe another comment in this thread said ~40% for used vehicles)
3. Total vehicle sales are still below their pre pandemic levels.
I never said that the money supply isn’t contributing to inflation. But it is quite clear that there is a significant supply problem when it comes to cars.
There will always be items that increase in price more than the average. Are you proposing to eliminate all the outliers in each report? In the end, people still need to buy cars, which are more expensive, so the inflation rate should reflect that.
> Car prices are being driven by supply chain issues more so than a surplus of dollars.
That would be true if we were talking about new cars, but apparently the big rise is in used ones. That is likely due to a combination of factors, with liquidity being only one of them - the others are scarcity from the supply side due to covid, and the sector trying to push a new technology (electric) on masses of conservative consumers.
Only because there are practically no new ones.
We've been trying to buy a new vehicle for over a year, with a family member owning a dealership, and still haven't been able to get one.
Our last one, we ordered just before covid, and the 3 month order turned into 13 months.
EV only comes into play because it made new car prices higher in order for companies to meet quotas dictated by CAFE standards, which also raises prices on the used market.
If you believe they'll be able to get back to normal numbers in the next 12 months, you believe inflation will largely go away, maybe even before the midterms
At least wrt cars, isn’t the knock-on pandemic effect by far driving the shortages? (Chips, disruptions in just-in-time, etc) rather than people have more money to spend on them?
> Person: My friend was shot!
> Expert: No, he had his heart stop beating. Stop being so uneducated™ and get your information from places that dont spread disinformation™.
> Person: But he is dead!
> Expert: Stop being so racist and anti-science. All the experts agree that his heart is just transitionally not beating. People dying would make us look bad and that is not the case here!
That is how I see the current conversation about inflation. You're supposed to ignore reality and parrot some dumb talking points. A lack of supply and increase in money IS THE LITERAL DEFINITION of inflation. I don't care about technicalities about gas prices and supply chain. If my money cant buy as much stuff as last year, that is inflation.
"A lack of supply and increase in money" vs "A lack of supply BECAUSE of an increase in money"
So the situation gets muddied a lot when there is a rather large external factor (or, more generally, when society changes). When a global pandemic hits, mouth mask prices skyrocket. This is not inflation.
Iran, we have been embargoed, "it's not inflation".
Inflation is not about changes in the world itself. The price of horse carriages has skyrocketed, because they're a luxury niche product now. The price of global travel has dropped to the point that people are semi-seriously suggesting that mach 15 travel by rocket might become a thing. Paris-Sydney in 30 minutes. That's not inflation and has nothing to do with the actions of the central bank.
House prices, by contrast, are inflation driven.
Inflation is a measure of the effect of the evolution of the money supply. It's done so the central bank can adjust course to optimize how smoothly the economy runs.
It is not a measure of how expensive it is for you to drive to the next city. When Washington decides to go to war, that doesn't affect inflation directly. When your city council decides to block the shortest route to the next city, that doesn't affect inflation, even if it doubles your cost to go there.