Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Food Prices Are Soaring Faster Than Inflation and Incomes

bloomberg.com

Post reply on HN
Print view View original

421–430 of 605 posts

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#421

Post by gruez »

PEJOE wrote: post #407
gruez wrote: 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…

> 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 mul…

>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.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#422

Post by clairity »

gruez wrote: post #352
throwawaygh wrote: post #338

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…

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.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#423

Post by INGELRII »

whoisninja wrote: post #237

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 efficie…

> 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.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#424

Post by mywittyname »

pwm wrote: post #363
em500 wrote: post #336

Earlier quoted context omitted.

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 abo…

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…

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.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#425

Post by xyzzyz »

Cederfjard wrote: post #412
savanaly wrote: post #377

Earlier quoted context omitted.

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…

I guess that still leaves the question that since it is so difficult, is the CPI actually useful?

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.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#426

Post by whoisninja »

908B64B197 wrote: post #411
whoisninja wrote: post #237

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 efficie…

> 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?

good point, i hope so

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#427

Post by [deleted] »

smachiz wrote: post #308
whoisninja wrote: post #297

Earlier quoted context omitted.

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?

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]

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#428

Post by uxp100 »

mnw21cam wrote: post #351
uxp100 wrote: post #193

Earlier quoted context omitted.

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 yea…

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…

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.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#429

Post by mywittyname »

bcrosby95 wrote: post #415
savanaly wrote: post #377

Earlier quoted context omitted.

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…

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 layme…

>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.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#430

Post by rory »

xyzzyz wrote: post #420
rory wrote: post #385

Earlier quoted context omitted.

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 i…

> 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 affo…

> 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.

Post reply on HN