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Food Prices Are Soaring Faster Than Inflation and Incomes

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Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#401
post #239

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.

Its probably being cancelled out in the basket by healthcare and education prices skyrocketing. Oh wait.

>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

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#402
post #379

Earlier quoted context omitted.

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.

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. (…

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.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#403

Earlier quoted context omitted.

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.

> 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

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.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#404

Earlier quoted context omitted.

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 p…

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.

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".

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#405
post #380

Earlier quoted context omitted.

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 r…

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.

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,”

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#406

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.

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.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#407
post #352

Earlier quoted context omitted.

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".

>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" th…

> 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.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#408
post #352

Earlier quoted context omitted.

>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" th…

> 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 differe…

>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.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#409
post #363

Earlier quoted context omitted.

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…

> 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 e…

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