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Ask HN: How much of inflation is caused by supply rather than demand issues?

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Re: Ask HN: How much of inflation is caused by supply rather than demand issues?

#11

Post by jmoak3 »

Internationally aging populations are a systemic source of inflation in the cost of producing goods.

I recommend Manoj Pradhan & Charles Goodhart’s, “The Great Demographic Reversal” (2019) for more on the topic.

Covid occurring since then has exacerbated the international debt issues, as well as plucked more of the valuable remaining years away from our labor force’s working years. See the number of early retirements that occurred during the pandemic.

That we’re also seeing a hot war, a trade war, and the ripples of a goosed economic system during covid at the same time? Can’t make it up.

Edit: I wouldn’t hold my breath waiting for the fed to resolve this, they’d have to crush assets to oblivion to keep pricing of labor the same as it dries up due to retirements.

AI on the other hand has a lot of potential to bail us out here

Re: Ask HN: How much of inflation is caused by supply rather than demand issues?

#12

Post by ellisv »

kneebonian wrote: post #8
ellisv wrote: post #5

Earlier quoted context omitted.

I don’t think the Fed anticipated the war in Ukraine.

This was during the war in the Ukraine, which was one of the excuses people gave for inflation being "tranistory" and that things would be sorted out soon.

Sorry, I thought you made your prediction 18 months ago – the generally accepted start of the invasion is 2022-02-24. If your prediction was after, then yes I agree the Fed should have accounted better for the global landscape.

Re: Ask HN: How much of inflation is caused by supply rather than demand issues?

#13

Post by rybosworld »

kome wrote: post #9

This inflation is not created by a lack of supply (not anymore at least), or by an excess of demand... it's an inflation created by excess of profits. and the fed decided to fight it by fighting workers. it makes no sense, really.

It's because central banks can't do much more than adjust rates.

This problem needs to be addressed by policy makers in the form of tax increases (primarily on corporations).

Tax increases are unpopular and so they only tend to happen when shit really hits the fan. And policy makers always wait for shit to hit the fan before doing what's necessary.

Re: Ask HN: How much of inflation is caused by supply rather than demand issues?

#14

Post by rqtwteye »

ellisv wrote: post #5
kneebonian wrote: post #4

I am just going to take a minute to point out that 18 months ago I said the inflation wasn't transitory, it was long term, and everyone told me I was crazy when I said the government was lying about it being transitory.

I don’t think the Fed anticipated the war in Ukraine.

Blaming the current situation on the Ukraine War reminds me of the crash in 2001. Things were going downhill already long before but when 9/11 happened, suddenly everybody blamed the crash on 9/11. I am pretty sure the current situation would have happened without the Ukraine war. Maybe a little different but the writing was on the wall long before.

Re: Ask HN: How much of inflation is caused by supply rather than demand issues?

#15

Post by rqtwteye »

kome wrote: post #9

This inflation is not created by a lack of supply (not anymore at least), or by an excess of demand... it's an inflation created by excess of profits. and the fed decided to fight it by fighting workers. it makes no sense, really.

It makes a lot of sense depending on what side you are. The Fed never was a friend of the working class and unfortunately politics has been paralyzed to a degree that they defer most of economic policy to the Fed.

Re: Ask HN: How much of inflation is caused by supply rather than demand issues?

#16

Post by rybosworld »

kneebonian wrote: post #4

I am just going to take a minute to point out that 18 months ago I said the inflation wasn't transitory, it was long term, and everyone told me I was crazy when I said the government was lying about it being transitory.

Who called you crazy?

Re: Ask HN: How much of inflation is caused by supply rather than demand issues?

#17

Post by bradDonniger »

uoaei wrote: post #6
david927 wrote: post #3

Supply issues are a bit of red herring. Compare industries with more and fewer supply issues and you'll find that it doesn't play an oversized role. The main catalyst, and by that I mean essentially the only catalyst, is monetary policy.

Well, that and the obvious price-gouging tactics.

[dead]

Re: Ask HN: How much of inflation is caused by supply rather than demand issues?

#18

Post by ellisv »

The Fed has monetary policy powers – they can essentially modify the supply of money. Their primary tools are that they can raise/lower the Federal Funds Rate and can purchase/sell financial assets (quantitative easing/tightening). These tools primarily influence demand (e.g., raising rates makes borrowing money more expensive, quantitative tightening decreases liquidity). Congress controls fiscal policy which can take more targeted action to address supply-side issues.

Re: Ask HN: How much of inflation is caused by supply rather than demand issues?

#19

Post by voldacar »

mariodiana wrote: post #10

Full disclosure: My understanding of economics is heavily influenced from what's called the Austrian School. On that understanding, we have two main factors that are contributing to the rise in prices. Only one of them is, properly speaking, inflation. Putting the subject of inflation aside for the moment, the first cause is the destruction of capital. Capital destruction, which broadly speaking includes our ability…

Can you elaborate on capital destruction? Who is destroying capital and why?

Re: Ask HN: How much of inflation is caused by supply rather than demand issues?

#20

Post by [deleted] »

ellisv wrote: post #5
kneebonian wrote: post #4

I am just going to take a minute to point out that 18 months ago I said the inflation wasn't transitory, it was long term, and everyone told me I was crazy when I said the government was lying about it being transitory.

I don’t think the Fed anticipated the war in Ukraine.

[deleted]
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