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Food Prices Are Soaring Faster Than Inflation and Incomes

bloomberg.com

451–460 of 605 posts

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#451

Earlier quoted context omitted.

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 outpacin…

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 misreadi…

> 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.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#452

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…

> 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 sus…

> 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.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#453

Earlier quoted context omitted.

Most shipping companies in the stock market have rocketed in the past 2-3 months, so that opportunity has passed I think.

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 retu…

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

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#454

Earlier quoted context omitted.

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 retu…

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)

$2k is only 4%, swings like that happen like every day. Would not recommend trading on that news.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#455
post #395

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.

>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?

Something has to be produced before it can be consumed.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#457
post #386

Earlier quoted context omitted.

> 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…

1/3rd of Americans rent their homes. 2/3rd is not "almost always".

Purchased, not rented. GP was also referring to house prices, not rentals.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#458

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…

> 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.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#459
post #457

Earlier quoted context omitted.

1/3rd of Americans rent their homes. 2/3rd is not "almost always".

Purchased, not rented. GP was also referring to house prices, not rentals.

Yes that's what they said but then you modified it to "housing". People who rent are also purchasing "housing" and not on credit.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#460
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…

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…

> 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.

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