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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

#571

Post by tharkun__ »

lumost wrote: post #569
tharkun__ wrote: post #567

Earlier quoted context omitted.

Even discretionary and non discretionary is a contentious item and in a CPI has to be defined. For example: is TV service discretionary? Is Internet service discretionary? Is broadband Internet access discretionary? I just checked. Bell TV + Internet is advertised as $120CAD right now. Cell service combined with that add $70CAD. Per month. With taxes on top that's round about $2,620 per year if we are talking Single…

The hypothetical single income earner that we are debating would pay an average rent of $2250/mo for a 1-bedroom in Toronto. Roughly 10x the cost of TV, internet, and phone. This cost has risen from ~$1750/mo in 2017 at roughly ~10% per year. For perspective, our hypothetical individual would be experiencing house price inflation equal to a new TV, phone, and internet bill every year. (1-bedrooms displayed the lowest…

Absolutely agreed that there are worse categories than your phone/internet/tv bills. And yet even this relatively small and apparently I Yunsignificant non-discretionary (or was some of it discretionary? Or all of it?) item still makes up 4.5% of your net income. That I still call significant.

Once I have a house the inflation on that also doesn't affect me that much any more (sure, evaluations increase my tax bill - which btw is a NA thing that is irrelevant in Germany for example as long as you have a mortgage) but other items do.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#572

Post by lumost »

tharkun__ wrote: post #571
lumost wrote: post #569

Earlier quoted context omitted.

The hypothetical single income earner that we are debating would pay an average rent of $2250/mo for a 1-bedroom in Toronto. Roughly 10x the cost of TV, internet, and phone. This cost has risen from ~$1750/mo in 2017 at roughly ~10% per year. For perspective, our hypothetical individual would be experiencing house price inflation equal to a new TV, phone, and internet bill every year. (1-bedrooms displayed the lowest…

Absolutely agreed that there are worse categories than your phone/internet/tv bills. And yet even this relatively small and apparently I Yunsignificant non-discretionary (or was some of it discretionary? Or all of it?) item still makes up 4.5% of your net income. That I still call significant. Once I have a house the inflation on that also doesn't affect me that much any more (sure, evaluations increase my tax bill -…

The underlying problem here is that one of our numbers must be wrong. The options I could see are

1. The marginal cost of housing has little to do with what individuals pay in the short-term.

2. The median income earner requires or will require substantial subsidies or raises to keep pace with the increased costs of their home. Roughly 3-4% per year assuming that housing is the only item inflating.

3. Either the median income, median rental, or tv+internet prices we've quoted are wildly off the mark.

I'd bet that #2 is the correct interpretation of the statistics. While option 1 is possible, it hides low-quality substitutions and assumes that one can always make a substitution such as living with parents for longer.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#573

Post by therealdrag0 »

ghayes wrote: post #553
kbelder wrote: post #533

Earlier quoted context omitted.

Maybe the Libertarian in me is coming out when I look at that chart, but it sure seems that the sectors of the economy that increased in price the most are also the most regulated and subsidized.

Without delving into the data, wouldn’t a plausible explanation be that we regulate and/or subsidize those industries _because_ they are the most inflationary? Industries with downward price trends don’t often need consumer protections.

The counter argument is prices come down with increased supply and competition-driven innovation. Regulation inhibits supply. How would regulation make them less inflationary?

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#574

Post by throwawaygh »

jbay808 wrote: post #384
throwawaygh wrote: post #346

Earlier quoted context omitted.

> Avg income in my neighborhood is ~49k but a 2 bed condo here are selling for 450K and getting outbid by 75k over the asking price. Its insane. Sure, and your point about housing prices mattering is a good one (see my other comment on this story). But, this describes maybe a few dozen housing markets. Probably only a couple dozen if you cut out resort/ski towns. It's a regional problem, not systemic problem with the…

> But, this describes maybe a few dozen housing markets. Probably only a couple dozen if you cut out resort/ski towns. It's a regional problem It, uh, describes all of Canada actually. https://www.reuters.com/article/us-canada-economy-housing-an...

That's totally fair; sorry for assuming the thread was US-centric.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#575

Post by throwawaygh »

gruez wrote: post #482
PEJOE wrote: post #467

Earlier quoted context omitted.

> Clearly not. After you eat a bread, it's gone. After you live in a house it's still there. After you live in a house a long time it falls apart. Capital Expenditure restores the asset to its previous value. Bread just depreciates faster. but can still be traded, bought and sold. In Japan houses are often only ever used by one family, and the house is destroyed when the land is sold. I am taking your insistence on a…

>After you live in a house a long time it falls apart. Capital Expenditure restores the asset to its previous value. Bread just depreciates faster. but can still be traded, bought and sold. In Japan houses are often only ever used by one family, and the house is destroyed when the land is sold. I am taking your insistence on a cash flow perspective to its logical extreme to show that it is not always applicable. 1. t…

I think the thing you're missing is that affordable starter housing allows people to both meet a basic need and also make an investment.

Consider three people, p1, p2, p3.

P1: works at job making $X and rents home entire life.

P2: works at identical job making identical $X and buys + pays off identical home.

P3: works at identical job making identical $X and buys + misses 10 mortgage payments on identical home.

P1 is WAY better off than P2 or P3. Literally, the difference between retiring and working until you die.

"can afford down-payment and also has enough stability to never miss payments" induces a VERY extreme nonlinearity in outcomes that CPI very much fails to capture.

I don't think anything you've said in this thread even comes remotely close to acknowledging the reality that over half of America lives every day.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#576

Post by owenversteeg »

carapace wrote: post #406
DecoPerson wrote: post #4

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 pl…

"three days further out than a starving person can walk" sounds cool if you're posting fake apocalypse theories on the internet (aka John Titor), but is generally pretty terrible advice. First of all, there are an enormous amount of cars in America and there are roads nearly everywhere. The furthest spot from any road in the lower 48 US states is in Yellowstone, 21.7 miles from the closest road: https://www.bbc.com/news/world-us-canada-42104894

Even assuming that there's some kind of enormous EMP that kills all modern cars, there are plenty of pre-80s cars around and around a third of Americans have bikes. You can cover some serious distance on a bike if you're motivated enough (aka by hunger.) There are millions of horses in the USA, not to mention other animals and tools you can use for transportation (canoes etc.) If your bet is to hope that your fellow members of the most adaptable species on Earth won't get to you, you're generally screwed. If you plan to use force (say firearms) to hold back your place, well, that'll attract attention from anyone else (if you look at failed states, you're likely to see roving bands of criminals with more firepower than you.)

There are fairly few examples of people who made their apocalypse preparations and actually rode out the local serious disaster in their bunkers, so to me, it's obvious what your best bet is - to simply live in a safe, sane and successful society.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#577

Post by owenversteeg »

dlubarov wrote: post #545
owenversteeg wrote: post #527

Earlier quoted context omitted.

Well, except that you do have that choice in most things. You can buy a used car without a rear-view camera, or keep your older car - and many people do. If you want a cheap smartphone, you can get one - I recently had a Nokia 1 (cost me 24 euros!) as an experiment, and it worked fine. If you're content with a TV from 2001, you can get one for free off Craigslist. The reason I like the car as an example is because it…

True for now, but there's a limited and ever-decreasing supply of older cars without rear-view cameras, small homes without HVAC, etc. Today it's hard to buy a car (in decent shape) without airbags; I expect that in 20 years it will be hard to buy one (in decent shape) without a rear-view camera. Fair point about lower maintenance costs though.

Your problem is ignoring depreciation. Yes, you may pay more if you buy a new car today with X flashy feature, but that will have little bearing on its used price in two decades, because the flashy features depreciate at a rate far faster than the feature of the car, y'know, actually moving. In 20 years from now, if you buy a $1000 cheap beater car it will not be $600 of car and $400 of backup camera, it will be $990 of car and $10 of backup camera. The same for airbags (the US GAO estimated they added $300 to the manufacturers' costs) - a $1000 car is not $700 of car and $300 of airbags.

(Also, the rear view camera is a tiny, tiny fraction of the car's manufacturing cost. Yes, as an option it costs $xxx, but option sticker prices are nowhere the actual cost of the option.)

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#578

Post by jeofken »

chii wrote: post #565
jeofken wrote: post #522

Earlier quoted context omitted.

Thanks for the interesting data point regarding purchasing power. I think we would agree that you’d expect purchasing power to increase when efficiency increases, rather than staying constant. And as efficiency (as measured by value i.e. usefulness/efficiency of capital) has continued to increase while purchasing power stayed mostly stagnant since 1971, those earning their income from labour are drawing the short sti…

> why purchasing power stays the same when efficiency increases since 1971. i would expect that purchasing power remains consistent for people doing the same work. It's true that capital gains is captured by those who own the capital - but those who do own such capital had to take capital risk to obtain such gains. Labour income (aka, wage income) increased if the labour changed to be more efficient without said use…

I appreciate your argument that most labour have not increased in value - I guess this metric would be called “labour productivity”. If you have the graph you linked with a longer timeline - it starts just before 1970s - thatd be interesting.

I still see graphs as these https://wtfhappenedin1971home.files.wordpress.com/2020/06/im... as clearly saying labour compensation correlated with advances in technology until 1971, when there was a dramatic shift, and that this is also the time when supply of $ was put in the hands of central bankers rather than any real and external asset.

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#579

Post by dencodev »

adventured wrote: post #142
H8crilA wrote: post #121

Earlier quoted context omitted.

Surely you're familiar with the Baltic Dry Index, an index of shipping costs: https://tradingeconomics.com/commodity/baltic Also, in case anyone thinks the current environment is crazy then check out the commodities bubble period of 2008 for that index.

Which was all caused by an extremely large drop in the dollar. Anytime there is such a drop, you get global food chaos from a big spike in the price of commodities that destabilizes markets until they're able to adjust. And then you get civil wars out of that inevitably, it helped to cause the Arab Spring as one example. The US Dollar Index was at 120 in early 2002, and then proceeded to fall persistently until the m…

Are there books that would help me get more familiar with these sorts of things?

Re: Food Prices Are Soaring Faster Than Inflation and Incomes

#580

Post by rland »

sudosysgen wrote: post #402
jerf wrote: post #379

Earlier quoted context omitted.

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 uni…

I think he's making a more general point.

Basically every time varying system, no matter how complex, can be thought of as a system of differential equations. Human systems of production -- any such system -- is a time varying system, and as such, probably has some cyclic behavior, instability, etc. somewhere inside.

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