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Inflation Truthers

awealthofcommonsense.com

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Re: Inflation Truthers

#41

Post by iguy »

throwaway2245 wrote: post #22
iguy wrote: post #9

It's a bit confusing what he's arguing against. But his 2nd-last graph is the good one, [1]. That's only 20 years but [2] is the same thing since 1950. Some things have become much cheaper, other things have become more expensive. Attempting to summarize that in one number seems like it hides more than it exposes, no matter what number you pick. [1] https://awealthofcommonsense.com/wp-content/uploads/2021/01/... [2]…

I find it interesting to look at this graph against Maslow's hierarchy of needs. First layer, shelter and food, have increased almost perfectly in line with wages. That's reasonable. Second layer, security - including healthcare in the US - "feels like it’s experienced hyperinflation", according to the author. And, as you age, your healthcare needs increase. So if you're low in this hierarchy, being relatively poor,…

You can also make almost the opposite point. We used to spend a lot on basic needs like food and shelter, 3/4 of the average income on food, and more money on bread alone than on housing (IIRC, 19thC rich countries). As growth/technology made these cheaper, or if you prefer, made us so rich that they can be had for a tiny fraction of our income, we spend it on other things.

Many of these are status competitions -- it's the location of your house that's expensive, not the drywall, and that's an auction against others who also want it. Education in these graphs is arguably like that too -- what's expensive is a top name, rare connections; the actual knowledge is very close to free.

Healthcare isn't a status competition. But it does increasingly seem like it's possible to spend an unlimited amount of money on it -- why not try a million-dollar cancer treatment if you can (somehow) afford it? None existed in Maslow's time partly because the science hadn't advanced, but also because there were too few potential customers. As a society, it isn't crazy to think that this should be a growing proportion of what we buy. If you think it should be a decreasing slice of the pie, then what exactly should be increasing, over the next 50 years? (Although obviously I'm aware of the ways in which how we buy it is deeply broken.)

Re: Inflation Truthers

#42

Post by TheTrotters »

throw0101a wrote: post #29
PhaedrusV wrote: post #25

Earlier quoted context omitted.

Yes, the author is debating a straw man. The argument that the government is understating inflation is a pretty simple one. 1) The government is heavily incentivized to understate inflation in order to limit its expenditures for social security and TIPS, both of which are indexed to inflation. Social security in particular would explode in costs if, say, the official rate had been 1% higher on average over the past 3…

> Yes, the author is debating a straw man. No, the author is debating crazy people: > Unfortunately, the pandemic has permanently broken every economic chart in existence. > But if we take away the outlier 2020 data points, the average real annual GDP growth from 2010-2019 was 2.3%. The inflation rate in that time averaged roughly 1.8% per year. > If you’re one of the conspiracy people who believe inflation has actua…

Yeah, and the claim that inflation has been at 10-12% per year for the past 5 years is so ridiculous that it can be discarded without any analysis.

If they claimed that inflation is, say, 3.5% instead of ~2% then we could look at their arguments. But to claim that it's at ~10-12% is a little like claiming that all our thermometers are faulty and it's actually 40 degrees Celsius outside. Complete detachment from reality.

Re: Inflation Truthers

#43

Post by edoceo »

JoeAltmaier wrote: post #32
BlueTie wrote: post #30

Isn't this entire article missing the difference between a luxury item and an essential item? A smartphone 10 years ago was a luxury for just about everyone who owned one (that is, bought with extra money) now it's a requirement. The luxury purchase folks are certainly getting a better deal as apples:apples prices go down; but if you're paycheck to paycheck and used to be able to not buy a smartphone but now have to…

Essential? Really? Many of us leave our phones off, leave them at home or in the car, and are only marginally impacted. The difference between 'any phone' and a smart phone is quite small. Except for folks addicted to them, who can't last a day without constant updates.

Or folks who have only phone as their connection for voice and data. Not everyone has a car or home to leave it in and has to keep the phone on for their next gig.

Re: Inflation Truthers

#44

Post by leoedin »

JoeAltmaier wrote: post #32
BlueTie wrote: post #30

Isn't this entire article missing the difference between a luxury item and an essential item? A smartphone 10 years ago was a luxury for just about everyone who owned one (that is, bought with extra money) now it's a requirement. The luxury purchase folks are certainly getting a better deal as apples:apples prices go down; but if you're paycheck to paycheck and used to be able to not buy a smartphone but now have to…

Essential? Really? Many of us leave our phones off, leave them at home or in the car, and are only marginally impacted. The difference between 'any phone' and a smart phone is quite small. Except for folks addicted to them, who can't last a day without constant updates.

Many people don't have a computer. Their smart phone is also their computer.

There's myriad services in modern western life which require a computer of some sort to access. Increasingly government services, banks, transport, event ticketing etc are operating in an online-first way. How do you access those services without a computer?

Re: Inflation Truthers

#45

Post by rozab »

aetherson wrote: post #11
allendoerfer wrote: post #7

One gotcha about how inflation is calculated (at least in Germany, I assume it to be the same in the US), is that they try to compare identical products. So if this years cars do not have air conditioning, but next years cars do, the prices can increase accordingly without showing up as inflation, because you are getting "more car for more money". The problem appears at the point, when there are no cars without air c…

This is the same in the US, yes. And it's still the correct thing to do. Inflation can't be a measure of every dimension of economic hardship at once. As the article points out, healthcare has risen in cost dramatically more than most other things. Does that mean that somehow the inflation rate must reflect the pains of those households not in the average and aggregate? Less capable goods may no longer be available.…

What about improvements linked to mandatory regulations (safety, emissions, efficiency, etc)?

Re: Inflation Truthers

#46

Post by TeMPOraL »

JoeAltmaier wrote: post #32
BlueTie wrote: post #30

Isn't this entire article missing the difference between a luxury item and an essential item? A smartphone 10 years ago was a luxury for just about everyone who owned one (that is, bought with extra money) now it's a requirement. The luxury purchase folks are certainly getting a better deal as apples:apples prices go down; but if you're paycheck to paycheck and used to be able to not buy a smartphone but now have to…

Essential? Really? Many of us leave our phones off, leave them at home or in the car, and are only marginally impacted. The difference between 'any phone' and a smart phone is quite small. Except for folks addicted to them, who can't last a day without constant updates.

It's more essential the poorer you are. Because what's truly essential is Web access - for communicating with your friends and family, for access to government services and banking, and bunch of other little things you may need to do to secure a job, etc. Most of these things you can do even better on a computer - if you own one. A smartphone is the cheapest personal device with full-featured Web access these days, which is how it becomes essential for people who can't afford a computer (and a place to keep it, i.e. a home).

Re: Inflation Truthers

#48

Post by jchook »

Supposedly the total M2 in the US was around $15T last year.

The Federal Reserve dumped $4T more (or 26%) into the economy, bringing us up to $19T.

How does this not impact inflation? If you have more dollars representing the same real value, doesn’t that make each dollar worth less of it?

Re: Inflation Truthers

#49

Post by jfengel »

iguy wrote: post #9

It's a bit confusing what he's arguing against. But his 2nd-last graph is the good one, [1]. That's only 20 years but [2] is the same thing since 1950. Some things have become much cheaper, other things have become more expensive. Attempting to summarize that in one number seems like it hides more than it exposes, no matter what number you pick. [1] https://awealthofcommonsense.com/wp-content/uploads/2021/01/... [2]…

The thing he's arguing against is the Chicago/Austrian school of economics, whose response to just about every monetary policy measure is "But inflation!" UBI would cause inflation; raising the minimum wage would cause inflation; worker protections would cause inflation; government borrowing causes inflation.

That kind of economics gained popularity in the 1970s, when inflation caused genuine hardship. It left a kind of economic PTSD -- especially among people who have money, because inflation erodes the value of savings. The response is a trickle-down economics, where the best way to help the poor is to ensure that the rich have lots of money so that they can give poor people jobs.

So the Internet is full of "But inflation!" and often "But hyperinflation!", usually based on an argument from the first two weeks of economics class where you're shown supply and demand curves. But economics classes go past two weeks. There's a lot more to it than that, and the data simply don't support that argument. The fact is that consumer inflation is very low, and has been for a long time, despite intensive intervention from the central banks.

It is more complicated, and there has been inflation -- most notably in the stock market, and to a lesser degree in other assets (including real estate and cryptocurrency). The stock market has inflated to ludicrous levels, not just in tech assets but as a whole. But not at the consumer level, for a variety of reasons -- a lot of things have become cheaper to produce, and despite tax cuts for the wealthy wages haven't gone up. The wealthy don't eat more or live in more houses with that money, so they're not competing all that much for regular consumer goods. They take all that extra money and buy stocks -- trading them to each other rather than actually starting new businesses.

Anyway, that's what he's arguing against. It should shortcut a whole line of knee-jerk "but inflation!" arguments. But it's been true for decades, and this isn't a new observation, so it doesn't really change anything.

Re: Inflation Truthers

#50

Post by BlueTie »

JoeAltmaier wrote: post #32
BlueTie wrote: post #30

Isn't this entire article missing the difference between a luxury item and an essential item? A smartphone 10 years ago was a luxury for just about everyone who owned one (that is, bought with extra money) now it's a requirement. The luxury purchase folks are certainly getting a better deal as apples:apples prices go down; but if you're paycheck to paycheck and used to be able to not buy a smartphone but now have to…

Essential? Really? Many of us leave our phones off, leave them at home or in the car, and are only marginally impacted. The difference between 'any phone' and a smart phone is quite small. Except for folks addicted to them, who can't last a day without constant updates.

For many people their smartphone is their only access to internet (and thus bills, emails, and everything else that is more or less essential). The difference between the group of people buying an iphone because they need access to that stuff and the group of people where an iphone is only a distraction machine is a pretty solid proxy for the two groups I'm talking about between those who buy as a luxury vs essential purchase.
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