[HN Gopher] Food Prices Are Soaring Faster Than Inflation and In...
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Food Prices Are Soaring Faster Than Inflation and Incomes
Author : prostoalex
Score : 475 points
Date : 2021-03-08 08:31 UTC (14 hours ago)
(HTM) web link (www.bloomberg.com)
(TXT) w3m dump (www.bloomberg.com)
| kristopolous wrote:
| Grain prices caused the arab spring. Expensive food has been
| toppling governments since the beginning of civilization
| elzbardico wrote:
| 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.
| phendrenad2 wrote:
| 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?
| elzbardico wrote:
| I was talking about the comments.
| johbjo wrote:
| Overall production/consumption has probably decreased. This means
| that food has has higher relative share of consumption.
|
| Therefore food prices shift right?
| gremlinsinc wrote:
| 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.
| swiley wrote:
| 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.
| mrkramer wrote:
| If domestic production is enough to satisfy domestic demand no
| worries but that's not always the case.
| adamc wrote:
| Bloomberg is an expensive paywall. Unhelpful.
| netdur wrote:
| fuck you... I came here to escape from disturbing news, focus on
| tech and building things, now you ruined my day... fuck you
| atomashpolskiy wrote:
| Gotta contact the suicide hotline, man
| newsbinator wrote:
| It sounds like you're feeling on edge after a very tough year.
|
| HN isn't only for tech and building things.
|
| > On-Topic: Anything that good hackers would find interesting.
| That includes more than hacking and startups. If you had to
| reduce it to a sentence, the answer might be: anything that
| gratifies one's intellectual curiosity.
|
| I'm guessing under normal circumstances you wouldn't curse at
| somebody who shared a worrisome story you didn't want to see.
|
| This pandemic has us all a little feral, doesn't it?
| xbmcuser wrote:
| 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
| H8crilA wrote:
| 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.
| propertymagnate wrote:
| Woah. For anyone interested, go to stats and click 25yrs -
| it's pretty clear what the above comment is referring to.
| adventured wrote:
| 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.
| ragnot wrote:
| 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?
| tastyfreeze wrote:
| 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.
| lupire wrote:
| Its amazing that a 50% drop in the dollar was barely
| detectable in US, due to price stickiness, subsidies, and
| whatever else.
| pottertheotter wrote:
| 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.
| european321 wrote:
| Most shipping companies in the stock market have rocketed in
| the past 2-3 months, so that opportunity has passed I think.
| Cthulhu_ wrote:
| 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.
| bitexploder wrote:
| 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.
| thebean11 wrote:
| 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
| wtf_is_up wrote:
| Where can I find this Bitcoin corporation that issues
| stock?
| base698 wrote:
| $MSTR is one.
| plank_time wrote:
| Also once Wall Street turns it into a structured product or
| an ETF, then stay far away.
| asdff wrote:
| SPY has gone up 191% in 5 years. I'd say the good ETFs
| are fine.
| ChuckNorris89 wrote:
| Pretty much this. Once the hype has reached the mainstream,
| the opportunity has peaked or already passed.
| WrtCdEvrydy wrote:
| 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)
| thebean11 wrote:
| $2k is only 4%, swings like that happen like every day.
| Would not recommend trading on that news.
| porknubbins wrote:
| 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.
| fennecfoxen wrote:
| Or deeply plugged into the world of fantasies and pump-
| and-dump scams. It can be hard to tell.
| jug wrote:
| 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
| carapace wrote:
| It's Spring, plant a garden. Dig up your lawn and plant some
| potatoes.
|
| https://en.wikipedia.org/wiki/Victory_garden
| mouzogu wrote:
| 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.
| DrBazza wrote:
| 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
| jackfoxy wrote:
| 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.
| loveistheanswer wrote:
| >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
| bpodgursky wrote:
| Or, as I like to call it, Magic Monetary Theory.
| jcfrei wrote:
| 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.
| koboll wrote:
| >to finance not capital creation, but current consumption
|
| I don't understand the distinction here. Capital creation
| results from meeting the needs of current consumption, no?
| large wrote:
| Something has to be produced before it can be consumed.
| certnlyuncertn wrote:
| 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.
| nelsonmandela wrote:
| 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.
| blazespin wrote:
| "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.
| nelsonmandela wrote:
| 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.
| octodog wrote:
| The snark in this comment is completely unnecessary. It is
| better for everyone if you make your point in a more
| constructive manner.
| [deleted]
| bondarchuk wrote:
| 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.
| josalhor wrote:
| 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.
| inglor_cz wrote:
| 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.
| roenxi wrote:
| 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.
| blablabla123 wrote:
| 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.
| j4yav wrote:
| 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.
| yorwba wrote:
| > 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.
| j4yav wrote:
| I promise to moderate my shock as a function of time
| spent at the top.
| Hammershaft wrote:
| 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.
| tryonenow wrote:
| Wouldn't prices go up anyway if farmers were forced to pay
| higher wages for picking? I imagine the margin on vegetables is
| quite tiny...
| Cederfjard wrote:
| 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).
| klingon78 wrote:
| 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.
| dbetteridge wrote:
| 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.
| danjac wrote:
| What Americans used to call the "company town".
| rapnie wrote:
| 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!
| dbetteridge wrote:
| 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.
| kungito wrote:
| 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
| simiones wrote:
| 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.
| [deleted]
| kypro wrote:
| 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.
| rjsw wrote:
| > Developed countries can cut themselves off from that
| labour supply if they like
|
| The UK has done, it is known as Brexit.
| killtimeatwork wrote:
| > 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).
| nness wrote:
| 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.
| nelsonmandela wrote:
| 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.
| swarnie_ wrote:
| 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?
| imutemyteam wrote:
| I really doubt that the backpacker community was the major
| labor source in Australia.
| [deleted]
| Havoc wrote:
| Everyone expected toilet paper and mask shortages.
|
| Ends up being Food and semi conductors.
| tinus_hn wrote:
| Turns out lockdowns aren't free, even if you just don't
| compensate businesses.
| PragmaticPulp wrote:
| 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.
| ketzu wrote:
| Was "lockdowns are free" a serious position held by a relevant
| number of people?
| mrfusion wrote:
| Lives over stock market was a big thing on the media.
| adav wrote:
| 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.
| pjc50 wrote:
| That is literally true though:
| https://www.bloomberg.com/markets/rates-bonds/government-
| bon...
|
| Thirty year rates at 1.28%!
| iso1631 wrote:
| Shame I can't get a 30 year mortgage at 1.28%
| Guthur wrote:
| 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.
| tinus_hn wrote:
| 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.
| __s wrote:
| 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
| tinus_hn wrote:
| Great statistics on a disease 5 times as fatal that raged
| a century ago in a world that no longer exists.
| Mediterraneo10 wrote:
| 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.
| itsumoiru wrote:
| The most enthusiastic lockdown supporters are unlikely to
| be the ones that can't afford food now. Much more likely to
| be people reading HN or writing for the NYT.
| tinus_hn wrote:
| The mainstream masses were supporters, definitely not
| limited to niches like you mention.
| tokenmonster wrote:
| 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?
| aww_dang wrote:
| 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.
| bobitsaboy wrote:
| 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).
| Aachen wrote:
| > 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.
| bobitsaboy wrote:
| 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.
| whelming_wave wrote:
| that sounds like the general trend of wages in the US to
| not adjust upwards since Reagan's presidency
| frockington1 wrote:
| 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
| NullPrefix wrote:
| >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.
| bobitsaboy wrote:
| 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?
| atomashpolskiy wrote:
| Yeah, let them eat kinoa and avocado
| wideareanetwork wrote:
| This sort of news makes me want to panic.
| brink wrote:
| It's panicking that caused the issue in the first place.
| KirillPanov wrote:
| donut panic
| j_m_b wrote:
| 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.
| [deleted]
| [deleted]
| Florence9899 wrote:
| Ia zdes' Golaia https://vk.cc/bZoVGs
| williesleg wrote:
| Of course, we need to eat bugs, that's the only way out. Fresh
| water shortages and the climate crisis will only make it worse.
| hellbannedguy wrote:
| 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.)
| Matheus28 wrote:
| 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.
| luxuryballs wrote:
| Geico refunded customers on account of all the less driving
| during lockdowns.
| jhayward wrote:
| > 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?
| sokoloff wrote:
| 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)
| amanaplanacanal wrote:
| 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.
| sokoloff wrote:
| 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.)
| bigpoppa wrote:
| zerohedge.ycombinator.com
| layoutIfNeeded wrote:
| Good. Maybe we'll waste less now.
| pietrovismara wrote:
| 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.
| rcMgD2BwE72F wrote:
| The most wasteful are the richest though.
| pmlnr wrote:
| "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.
| pietrovismara wrote:
| > "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.
| pmlnr wrote:
| Wasting is wasting; small or big wasn't the question.
| chii wrote:
| 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.
| ceejayoz wrote:
| To be clear, your question is "why don't poor people just
| get loans"?
| chii wrote:
| 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.
| ceejayoz wrote:
| 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.
| foobarbaz33 wrote:
| It makes sense. There's more people than ever and less food
| produced after 2020 flooding in China.
| devilduck wrote:
| it's almost time to eat the rich
| marshmallow_12 wrote:
| 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.
| DoingIsLearning wrote:
| "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'?
| mjevans wrote:
| 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.
| TimSchumann wrote:
| They don't really grow much but cattle in Texas. Doubt
| there's a correlation.
| ryanmarsh wrote:
| 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.
| thechao wrote:
| My 42 years in Texas has taught me that out major export
| is bullshit; we've got a record crop coming in this year.
| a_bonobo wrote:
| 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/
| Uberphallus wrote:
| 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.
| babesh wrote:
| It's amazing to me that the EU behaves a lot like the US in
| this regard. Same with Australia. I had no idea.
| michael1999 wrote:
| 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.
| inglor_cz wrote:
| 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.
| Glawen wrote:
| 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
| elyobo wrote:
| 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...
| bpcpdx wrote:
| I strongly suspect that it might be their flavor of our
| "traditional" migrant workers that involved some temporary
| work visa.
| lupire wrote:
| That's amazing. Australia's farm labor is primarily
| relatively-wealthy vacationers who need a boost while they
| are far from home?
| blaser-waffle wrote:
| 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.
| DrBazza wrote:
| 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.
| adflux wrote:
| 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"
| artificialLimbs wrote:
| We were going to build a house about 6 months ago. Plywood
| sheets that we were looking at were $8. They're now $30.
| Diederich wrote:
| May I ask what region you're in? Thanks.
| artificialLimbs wrote:
| Whoops, meant to include: southern United States.
| PragmaticPulp wrote:
| 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.
| mistermann wrote:
| 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.
| dominotw wrote:
| 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-...
| mellavora wrote:
| 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 0.5 _1% +
| 0.5_ 300% = 150.5%. So waiting adds 50.5% to your expected
| return over that 2-day period.
| lupire wrote:
| 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.
| hedora wrote:
| 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.
| bryanlarsen wrote:
| 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.
| blaser-waffle wrote:
| Popping the bubble will be worse than the inflation.
| scottLobster wrote:
| 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.
| bryanlarsen wrote:
| For rich people.
| AlexandrB wrote:
| Also for people that put their life savings as
| downpayment on an overpriced house.
| ChuckNorris89 wrote:
| 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.
| jbay808 wrote:
| 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.
| dominotw wrote:
| > 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.
| throwawaygh wrote:
| _> 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.
| dominotw wrote:
| > 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.
| throwawaygh wrote:
| 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.
| ok_coo wrote:
| 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.
| dominotw wrote:
| 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.
| jbay808 wrote:
| > 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...
| itsdsmurrell wrote:
| This. Let's take back the power (but don't be like this
| guy)... https://www.youtube.com/watch?v=yM4gNVme5a0
| RobertoG wrote:
| 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.
| Threeve303 wrote:
| 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.
| RobertoG wrote:
| 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.
| Threeve303 wrote:
| 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.
| neilwilson wrote:
| 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".
| baybal2 wrote:
| 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...
| imtringued wrote:
| That aljazeera link doesn't sit right with me.
|
| I mean, just look at that first picture. It's a small child
| sitting in a sandy place with a stainless steel bowl with
| porridge like food inside. There is no civilization in sight.
| Maybe some village houses, which represent the bare minimum
| shelter needed. So now you get to ask yourself, should I feel
| pity or should I recognize that this child is not living in
| an environment that is conductive to escaping poverty? If I
| do take pity, will people pity me if I do a hike without food
| and end up starving on some forest path far away from
| civilization? I somehow doubt they would pity me.
|
| My point is, this problem is fundamentally unsolvable without
| either bringing civilization to these people or bringing the
| people to civilization. Taking pity on them doesn't do
| anything except maybe convince yourself that you did your
| part.
|
| Fighting against world hunger feels like a worthy goal that
| is fulfillable but it isn't. You don't solve world hunger by
| feeding people, you solve it by restructuring society.
| boomboomsubban wrote:
| Have you ever left a city? Even in some suburbs it's
| possible to take a picture of someone with only a few
| houses behind them. In my smallish town, only tens of
| thousands of people, I live next to the busiest road and I
| could find an equally barren background about three blocks
| away.
|
| Not living in an urban environment is not devoid of
| civilization.
| meepmorp wrote:
| No civilization in sight? There are actual houses in the
| background of that photo.
| dagaci wrote:
| For context the photo is actually from May 1, 2012: "two-
| year-old Aliou Seyni Diallo eats dry couscous given to him
| by a neighbor, after he collapsed in tears of hunger in the
| village of Goudoude Diobe, in the Matam region of
| northeastern Senegal"
|
| https://en.wikipedia.org/wiki/2012_Sahel_drought
|
| they are thought to be becoming more frequent
|
| https://en.wikipedia.org/wiki/Sahel_drought
| pjc50 wrote:
| Bizarre line of reasoning. If you want "something to be
| done", pity is one of the first steps to motivating that.
| It's not an either/or.
| kingkawn wrote:
| You gotta feed people to be able to do the restructuring.
| Your logic is hollow to someone starving.
|
| Also impressive you've attempted to resurrect the idea of
| "civilizing" people.
| brongondwana wrote:
| What do you mean by 'resurrect the idea of "civilizing"
| people'?
|
| It smells remarkably like you're trying to manufacture a
| culture war out of whole cloth when the the comment
| you're replying to was talking about "bringing
| civilisation" which is quite clearly being used in the
| with the meaning of "infrastructure", not the meaning of
| "white western culture".
| raul-pilla wrote:
| So you're a proponent of the "give the fish" and not
| "teach to fish"? If the supplies flowing to them stop
| they starve again, so I am not sure you're right.
| dguaraglia wrote:
| Strange thought for someone writing a reply on a message
| board using a device there's no way they could build from
| scratch.
|
| We've structured society in a way that not everyone needs
| to be a farmer (or microchip designer/electronic factory
| line worker) for people to obtain food/devices that
| access the internet. Are you a proponent of 'give the
| fish' because you didn't build the device you are typing
| in?
| quintushoratius wrote:
| You can both give a person a fish, and at the same time
| teach them to fish as well. It is not, and never should
| have been presented as, an either/or argument.
| ceejayoz wrote:
| (and sometimes, you have to fix the injuries preventing
| them from being able to even hold the fishing pole)
| TeMPOraL wrote:
| I think the biggest risk here - and the reason why
| talking about "bringing civilization" anywhere attracts
| strong pushback - is that historically, what happened was
| people ending up held hostage over supply of fishing
| equipment.
|
| Giving hungry people fish obviously isn't a good
| solution, because then the fish giver becomes a SPOF. But
| also because the fish giver now has power over the
| hungry, and some givers will abuse it. Teaching people to
| fish doesn't work if they're still hungry. It also
| doesn't work if you're teaching methods that they can't
| employ. If your solution to the last problem is _giving_
| (especially licensing) them means to do fishing, then we
| 're back to square one, with you being SPOF/risk of
| becoming exploitative.
|
| The solution has to be helping people build self-
| sufficiency. That may involve giving money, or donating
| equipment and know-how - but with no strings attached,
| including non-obvious ones like "you'll have to buy spare
| parts from us, because your industry can't make them".
| The goal here is not absolute self-sufficiency (nobody
| truly has that), but avoiding the situation in which
| given society's affairs are being managed by outsiders,
| under threat of starvation or illness.
| propertymagnate wrote:
| I read SPOF as Single Point Of Fish at first.
| lupire wrote:
| Suspicious Provider of Fish.
| UncleMeat wrote:
| How many farms have you seen in big cities?
| xyst wrote:
| Rising food costs. Rising housing costs. Rising unemployment and
| stagnating wages.
|
| Another crash coming in the next couple of years?
| vsareto wrote:
| 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.
| randerson wrote:
| Don't forget soaring stock prices too.
|
| Sure all feels like inflation to me.
| lottin wrote:
| Sure, but inflation is not a feeling. It needs to be
| estimated using a statistical methodology.
| reedjosh wrote:
| 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.
| lottin wrote:
| 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.
| reedjosh wrote:
| 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.
| lottin wrote:
| 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
| dominotw wrote:
| 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?
| lottin wrote:
| 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.
| dominotw wrote:
| 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.
| lottin wrote:
| 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.
| asdff wrote:
| Cost of living.
| dominotw wrote:
| rents are falling though. so not the same.
| asdff wrote:
| 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...
| dominotw wrote:
| 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'
| reedjosh wrote:
| > 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.
| PragmaticPulp wrote:
| 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.
| dijit wrote:
| 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.
| luxuryballs wrote:
| 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.
| sudosysgen wrote:
| 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.
| jerf wrote:
| 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.)
| sudosysgen wrote:
| 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.
| BostonEnginerd wrote:
| Weren't there a number of long painful recessions in the US
| during the 1800s - when currency was tied to gold?
| marcosdumay wrote:
| 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.
| [deleted]
| gher-shyu3i wrote:
| 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.
| zo1 wrote:
| 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).
| gher-shyu3i wrote:
| 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.
| Miraste wrote:
| 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?
| reedjosh wrote:
| > 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.
| lottin wrote:
| People don't save money. They save consumption, and the
| savings are in the form of money or other assets.
| gher-shyu3i wrote:
| 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.
| lottin wrote:
| They are pretty competent at getting inflation to the
| intended target. Maybe you're missing something?
| gher-shyu3i wrote:
| There shouldn't be a target. I don't want my money to be
| inflated artificially by the government.
| lottin wrote:
| Okay, then say you disagree with the target, but don't
| say they are incompetent.
| gher-shyu3i wrote:
| 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.
| hedora wrote:
| Save the money in a way that encourages economic growth
| (buy stocks, invest in a small business, etc).
| gher-shyu3i wrote:
| 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.
| lottin wrote:
| Do you really expect the entire country to change its
| monetary policy in order to accommodate the peculiar way
| in which you conduct your finances? That doesn't seem
| very reasonable.
| gher-shyu3i wrote:
| Well, then let people keep crying everytime the market
| crashes due to the destructive practice that underly it.
| As I said, Islam, Christianity, and Judaism prohibit
| interest, we don't learn from history.
| thehappypm wrote:
| 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?
| JoeAltmaier wrote:
| 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.
| gher-shyu3i wrote:
| 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.
| pram wrote:
| Currency debasement is a pretty ancient phenomenon. It's
| also not usury.
| gher-shyu3i wrote:
| 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.
| zo1 wrote:
| 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#D
| ebasement_and_clipping ).
| gher-shyu3i wrote:
| 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.
| the_only_law wrote:
| Funny enough this is exactly what happened my last EU4
| game.
| swiley wrote:
| I'm pretty sure interest isn't prohibited in Christianity
| (not protestant Christianity anyway.)
| gher-shyu3i wrote:
| It was prohibited in early Christianity before the Church
| gave in and allowed it.
| swiley wrote:
| I'd like to hear your source for this.
| gher-shyu3i wrote:
| 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
| gambiting wrote:
| Can you explain the difference between those, for those of us
| who are not well versed in economics terms?
| hedora wrote:
| 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...
| Hammershaft wrote:
| A recession is an actual economic term, a depression is a
| cultural term with no economic definition that basically
| means "a massive terrible recession".
| tony0x02 wrote:
| Not OP, but I recommend watching the "Economic machine" by
| Dalio.
| dijit wrote:
| 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
| gruez wrote:
| >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.
| thehappypm wrote:
| "Soaring" is 3% now?
| BitwiseFool wrote:
| Hackernews user slams journalists using cliche headline
| vocabulary. The full-throated criticism was not met with a
| response, the silence is deafening.
| Wolfenstein98k wrote:
| " _Food Prices Are Soaring Faster Than Inflation and Incomes_ "
|
| ...Food price rises ARE inflation!
| PragmaticPulp wrote:
| 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.
| AuthorizedCust wrote:
| 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.
| sandworm101 wrote:
| >> 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.
| AuthorizedCust wrote:
| Topic modeling is a better technique than simple word
| counts. Topic modeling can use ML.
| evrydayhustling wrote:
| 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...
| bradleyjg wrote:
| 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.
| PragmaticPulp wrote:
| 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.
| evrydayhustling wrote:
| 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.
| nonidentified wrote:
| > 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.
| [deleted]
| gruez wrote:
| > 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?).
| leetcrew wrote:
| > 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.
| kjrose wrote:
| "Food prices are not properly accounted for in inflation
| measures"
|
| There, fixed the headline.
| EGreg wrote:
| No, one component of "inflation" (defined as the rise in the
| consumer price index) rises much faster than the others.
| makomk wrote:
| 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.
| swiley wrote:
| I've been saying this about housing for a while.
| [deleted]
| lmohseni wrote:
| 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?
| eru wrote:
| Food is just one part of the basket.
| ErikAugust wrote:
| 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.
| fennecfoxen wrote:
| 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.
| edoceo wrote:
| You made the right choice and those links were helpful.
| ErikAugust wrote:
| 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.
| ed25519FUUU wrote:
| 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!
| danvoell wrote:
| Thanks for posting, that was my question when I saw the
| headline.
| 0x008 wrote:
| We should say "food prices are soaring faster than the average
| price of the consumer price index basket."
| Wolfenstein98k wrote:
| 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.
| EGreg wrote:
| 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...
| KptMarchewa wrote:
| 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.
| dwighttk wrote:
| Pretty sure (couldn't read most of the article, paywall)
| this is talking about worldwide though. (First word of
| the article is "Global")
| sandworm101 wrote:
| >> 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.
| em500 wrote:
| 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.
| sandworm101 wrote:
| 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?
| galangalalgol wrote:
| Are they saying that food prices are driving the inflation vs
| the other factors? Housing is going up fast too isn't it?
| eru wrote:
| 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.
| bradleyjg wrote:
| 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%.
| lottin wrote:
| 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.
| sayakura wrote:
| 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.
| lottin wrote:
| Call it a price rise. But it's not inflation. You don't get
| to re-define what economic concepts mean.
| ben_w wrote:
| 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.
| SpicyLemonZest wrote:
| 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.
| lottin wrote:
| 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.
| treis wrote:
| >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.
| Wolfenstein98k wrote:
| 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".
| eru wrote:
| There is a "general price level", it's just the price level
| of a sufficiently broad basket.
| em500 wrote:
| 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?
| babesh wrote:
| I have been buying GSG for the last few weeks as a hedge. Beyond
| transient effects of COVID-19, more chaotic weather due to
| climate change seems to be wreaking havoc. Beyond that, our
| economy seems to be increasingly reliant of raw materials that
| are increasingly harder to extract or that we demand more and
| more of.
|
| For examples of climate havoc, look at the drought in Taiwan and
| the deep cold in Texas.
|
| For examples of resource contention, look at oil and even at
| nickel. Those batteries meant to replace oil in turn require
| cobalt or nickel (at least for certain applications).
|
| The climate havoc and resource contention have much greater than
| linear effects. I don't think most people realize this. Food
| shortages lead not only to higher prices but to civil unrest.
| vlovich123 wrote:
| What's GSG?
| bifftastic wrote:
| Probably this:
|
| https://www.ishares.com/us/products/239757/ishares-sp-
| gsci-c...
|
| In other words a commodity ETF.
| Robotbeat wrote:
| lithium Iron Phosphate batteries have improved to the point
| they're good enough for entry level long-range electric cars
| (Tesla uses them sometimes), and iron is super duper common.
| Lithium and phosphate nearly so, as well. So I don't really
| agree there.
| Robotbeat wrote:
| 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.
| asdff wrote:
| 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.
| 908B64B197 wrote:
| > 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.
| thebean11 wrote:
| > 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.
| whoomp12342 wrote:
| not all homes that were inflated improved as such
| cyberpsybin wrote:
| Here it comes. Cost of running money printer too hard.
| PragmaticPulp wrote:
| 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.
| aww_dang wrote:
| If only they could print productivity to match.
| chii wrote:
| That's what automation is - it's one of the leading causes of
| increased productivity in the last half century.
| aww_dang wrote:
| 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.
| jeofken wrote:
| 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/
| faet wrote:
| 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.
| jeofken wrote:
| 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.
| gher-shyu3i wrote:
| The sooner we move to a non-artificially inflationary currency
| that can be devalued by the whims of the government, the
| better.
| jopsen wrote:
| 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.
| imtringued wrote:
| 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.
| swiley wrote:
| 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.
| herbst wrote:
| 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.
| voisin wrote:
| 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.
| thaumasiotes wrote:
| > 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.
| onion2k wrote:
| _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.
| makomk wrote:
| 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.
| jopsen wrote:
| > 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.
| thaumasiotes wrote:
| 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."
| onion2k wrote:
| 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.
| fiftyacorn wrote:
| You can see how it's going when the super rich are buying
| agricultural land
| DecoPerson wrote:
| 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.
| globular-toast wrote:
| 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.
| rightbyte wrote:
| 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.
| helij wrote:
| 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.
| grumple wrote:
| > 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.
| jerf wrote:
| "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.
| dmingod666 wrote:
| Not that I suggest but I heard a nice quote a while back "If
| you must really panic, panic early"
| dgellow wrote:
| 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".
| Aachen wrote:
| 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.
| pcl wrote:
| > not as if the rolls all disappeared into thin air
|
| No, they were going down the drain.
| OscarCunningham wrote:
| 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.
| sneak wrote:
| 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.
| [deleted]
| carapace wrote:
| 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.
| PragmaticPulp wrote:
| 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.
| z92 wrote:
| 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.
| bryanrasmussen wrote:
| >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.
| alexf95 wrote:
| 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.
| herbst wrote:
| 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.
| gremlinsinc wrote:
| 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...
| Broken_Hippo wrote:
| 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.
| mnw21cam wrote:
| 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.
| exhilaration wrote:
| We had flour shortages in the US as well. I wonder if that
| was the case across the Western world.
| uxp100 wrote:
| 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)
| mnw21cam wrote:
| 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.)
| uxp100 wrote:
| 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.
| Ekaros wrote:
| 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.
| tomp wrote:
| It only took a global pandemic for the fake argument
| "immigration doesn't suppress wages" to finally be cancelled.
| azalemeth wrote:
| 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.
| aembleton wrote:
| 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.
| dageshi wrote:
| I recall this being broadly the same during the first
| lockdown as well pre brexit.
| DrBazza wrote:
| > 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.
| swarnie_ wrote:
| > 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.
| azalemeth wrote:
| 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.
| mnw21cam wrote:
| 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.
| refraincomment wrote:
| 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.
| simonh wrote:
| 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?
| refraincomment wrote:
| Brexit UK is a startup
|
| EU is Oracle
| melomal wrote:
| > 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.
| cs702 wrote:
| ...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...
| TheButlerian wrote:
| Cuckdowncels, you can eat my dick if you are hungry.
| [deleted]
| [deleted]
| coltons wrote:
| Isnt food prices soaring the definition of inflation... haha
| gruez wrote:
| 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.
| throwawaymanbot wrote:
| Hedge funds ...
| OscarCunningham wrote:
| Which prices are increasing slower than inflation to counteract
| this?
|
| EDIT: It's energy. https://www.bls.gov/cpi/
| lupire wrote:
| 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.
| maxerickson wrote:
| 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.
| fredfoobar wrote:
| 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.
| whoisninja wrote:
| 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.
| ErikAugust wrote:
| 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
| whoisninja wrote:
| 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.
| seibelj wrote:
| Keynes was also a child sex tourist who frequently preyed
| on boys, sometimes with friends
| https://skeptics.stackexchange.com/questions/2802/was-
| john-m...
|
| Edit: not sure why I'm being downvoted. He admitted in his
| diaries as a 30 year old man he would pay for sex from 16
| year olds, and referenced others as "boys" without ages. By
| modern standards he would be a sex offender for life. We
| seem to hold all historical figures by modern standards
| now, not sure why we give this pedophile a pass.
| finolex1 wrote:
| Irrelevant to the topic at hand.
| [deleted]
| konjin wrote:
| > By modern standards he would be a sex offender for
| life.
|
| Age of consent in Britain in 16 and 14 in Central Europe.
| We also don't imprison 15 year olds for life.
|
| Not all the world suffers from Yankee puritanism to the
| benefit of everyone.
| [deleted]
| eru wrote:
| Non-Keynesian economists, like the neo-classicals for
| example or the market monetarists or even the more serious
| of the Austrians, don't disagree here.
| fennecfoxen wrote:
| 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".
| derefr wrote:
| 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.
| whoisninja wrote:
| there's this also: https://wtfhappenedin1971.com/
| 908B64B197 wrote:
| > 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?
| whoisninja wrote:
| good point, i hope so
| fennecfoxen wrote:
| > 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.
| em500 wrote:
| 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.
| pwm wrote:
| 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?
| dragonwriter wrote:
| > 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.
| [deleted]
| [deleted]
| rory wrote:
| 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.
| jpmattia wrote:
| > _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...
| xyzzyz wrote:
| > 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.
| rory wrote:
| > 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.
| xyzzyz wrote:
| 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.
| rory wrote:
| 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.)
| jfim wrote:
| > 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.
| jeffbee wrote:
| 1/3rd of Americans rent their homes. 2/3rd is not "almost
| always".
| jfim wrote:
| Purchased, not rented. GP was also referring to house
| prices, not rentals.
| jeffbee wrote:
| Yes that's what they said but then you modified it to
| "housing". People who rent are also purchasing "housing"
| and not on credit.
| jfim wrote:
| Feel free to substitute "real estate" for "housing" in my
| post.
| em500 wrote:
| 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/
| jpdaigle wrote:
| 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.
| mywittyname wrote:
| 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.
| gruez wrote:
| >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.
| curryst wrote:
| 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.
| xyzzyz wrote:
| > 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.
| savanaly wrote:
| 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.
| Cederfjard wrote:
| I guess that still leaves the question that since it is
| so difficult, is the CPI actually useful?
| xyzzyz wrote:
| 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.
| pas wrote:
| 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.
| [deleted]
| bcrosby95 wrote:
| 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%.
| mywittyname wrote:
| >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.
| reedjosh wrote:
| > 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.
| sokoloff wrote:
| 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%?
| lumost wrote:
| 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.
| syshum wrote:
| 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.
| [deleted]
| novok wrote:
| 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-...
| andrepd wrote:
| _> 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,f
| l_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...
| em500 wrote:
| 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
| kbelder wrote:
| 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.
| ghayes wrote:
| 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.
| handoflixue wrote:
| 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)
| em500 wrote:
| 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?
| whoisninja wrote:
| http://www.chapwoodindex.org/
| chartpath wrote:
| 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.po
| licyalternatives.ca/sites/default/files/upload...
| cascom wrote:
| 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
| pnutjam wrote:
| 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.
| CodeMage wrote:
| 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.
| pnutjam wrote:
| 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.
| CodeMage wrote:
| 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.
| pnutjam wrote:
| 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.
| CodeMage wrote:
| 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.
| pnutjam wrote:
| 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.
| Robotbeat wrote:
| Scientists in the physical realm would NEVER approximate
| things as spherical cows! ;)
| [deleted]
| georgeecollins wrote:
| >> 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.
| joshstrange wrote:
| > 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.
| sooheon wrote:
| 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.
| whoisninja wrote:
| 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?
| fennecfoxen wrote:
| > 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.
| [deleted]
| nostrademons wrote:
| 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.
| smachiz wrote:
| 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.
| [deleted]
| mywittyname wrote:
| 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.
| CyberRabbi wrote:
| > 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?
| gruez wrote:
| >What drives you to defend the CPI?
|
| What drives you to question the motives of the commenter
| rather than responding to his arguments directly?
| CyberRabbi wrote:
| 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.
| em500 wrote:
| 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.
| jjav wrote:
| 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.
| bingbong70 wrote:
| 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.
| gruez wrote:
| >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.
| CyberRabbi wrote:
| > 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.
| lotsofpulp wrote:
| >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.
| souprock wrote:
| 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.
| hinkley wrote:
| 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.
| lumost wrote:
| > 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.
| JumpCrisscross wrote:
| > _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.
| whoisninja wrote:
| only if you ignore what kind of impact this stupidity has on
| financial markets if you care about markets
| JumpCrisscross wrote:
| > _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.
| jerry1979 wrote:
| 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...
| whoisninja wrote:
| 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...
| INGELRII wrote:
| > 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.
| whoisninja wrote:
| 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?
| thekyle wrote:
| 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.
| INGELRII wrote:
| 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/indi
| v/research/indepth/tips/r...
| vkou wrote:
| 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.
| [deleted]
| whoisninja wrote:
| 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)
| vkou wrote:
| 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.
| asdff wrote:
| 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.
| dragonwriter wrote:
| > 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.
| whoisninja wrote:
| https://www.lynalden.com/november-2020-newsletter/
| kache_ wrote:
| Everyone knows CPI is not analogous to reality. Why would it
| be. Just look at house prices
| [deleted]
| pas wrote:
| Your argument doesn't really "disprove" CPI, as it has many
| components - https://www.businessinsider.com/consumer-price-
| inflation-com...
| gruez wrote:
| Because houses are assets, which are closer to stocks than
| food or cars.
| throwawaygh wrote:
| 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".
| gruez wrote:
| >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.
| clairity wrote:
| 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.
| gruez wrote:
| 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?
| clairity wrote:
| 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.
| gruez wrote:
| >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.
| clairity wrote:
| 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.
| throwawaygh wrote:
| _> 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.
| gruez wrote:
| >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.
| throwawaygh wrote:
| _> 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 :)
| gruez wrote:
| >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.
| PEJOE wrote:
| > 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.
| gruez wrote:
| >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.
| PEJOE wrote:
| > 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.
| gruez wrote:
| >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.
| whoisninja wrote:
| 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
| kache_ wrote:
| 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?
| gumby wrote:
| 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.
| Supermancho wrote:
| > 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.
| curryst wrote:
| > 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.
| gruez wrote:
| >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
| samr71 wrote:
| 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.
| eru wrote:
| 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.)
| whoisninja wrote:
| of course Mr. Selgin is influenced by Hayek, probably worth a
| read. thanks for sharing
| eru wrote:
| 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.)
| whoisninja wrote:
| 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
| eru wrote:
| 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...
| whoisninja wrote:
| good point man
| nashashmi wrote:
| 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.
| bfrog wrote:
| 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.
| bradleyjg wrote:
| 1.8% (housing) and 3% (food) are dramatic increases to you?
|
| You would not have liked the 80s.
| sudosysgen wrote:
| 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.
| fennecfoxen wrote:
| > 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
| sudosysgen wrote:
| 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.
| abeyer wrote:
| > 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.
| bradleyjg wrote:
| https://news.ycombinator.com/item?id=26386135
| reedf1 wrote:
| "But TVs are cheaper!"
|
| I guess my TV is a good emergency snack for when I can't afford
| food.
| bigwavedave wrote:
| > "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.
| fennecfoxen wrote:
| "Something important is more expensive, but 'it's just that
| something, and not everything ever'. Doesn't pass the smell
| test."
| QuadmasterXLII wrote:
| Its probably being cancelled out in the basket by healthcare
| and education prices skyrocketing. Oh wait.
| SilasX wrote:
| 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...
| owenversteeg wrote:
| 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.
| dlubarov wrote:
| 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.)
| owenversteeg wrote:
| 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.
| dlubarov wrote:
| 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.
| SilasX wrote:
| 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.
| fennecfoxen wrote:
| 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?
| SilasX wrote:
| 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?)
| fennecfoxen wrote:
| 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.
| SilasX wrote:
| 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,"
| anm89 wrote:
| 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.
| gruez wrote:
| >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
| jjav wrote:
| Electricity prices have gone up substantially last 10
| years.
| plank_time wrote:
| 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.
| souprock wrote:
| You're in a different world.
|
| https://www.gasbuddy.com/gaspricemap
| gruez wrote:
| 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.
| mdorazio wrote:
| 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
| hedora wrote:
| Don't forget utilities (also skyrocketing here).
| solosoyokaze wrote:
| 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).
| hitpointdrew wrote:
| "Food Prices are soaring faster than inflation"....Food Prices
| soaring IS inflation.
| insert_coin wrote:
| Technically no. Prices rising, or falling are a byproduct of
| the inflation/deflation caused by the actions of a central
| bank.
| jjav wrote:
| 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).
| PragmaticPulp wrote:
| 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.
| insert_coin wrote:
| > 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.
| known wrote:
| 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...
| Clewza313 wrote:
| 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.
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