What used cars tell us about the risk of too much inflation hitting the economy • Hacker News Board

Re: What used cars tell us about the risk of too much inflation hitting the economy

#31

Post by jfengel » Mon, Mar 15, 2021, 4:05 PM UTC

perl4ever wrote: post #20

another_comment wrote: post #9

Earlier quoted context omitted.

>> I think it might be time to define a new metric that more closely reflects the actual cost of living. We had different inflation stats back in the day. The US government has been slowly changing them. This guy uses the old official methodology to calculate inflation today. He gets way higher inflation using the old methodology and plugging in todays numbers. https://en.wikipedia.org/wiki/Shadowstats.com There is a…

>I think inflation is definitely higher than reported. I don't, and it's pretty straightforward why. You can argue about how high inflation was over the past year and about technical details. But if you think it's significantly and systematically off and has been for a long time, then it would compound and make a big difference. Back when my sense of "normal" prices was established, a pound of spaghetti was a dollar.…

Also durability. I just end-of-life'd my car at over 300,000 miles. It was a 2007 Honda Fit that cost around $15,000. My previous car was a 1992 Honda Civic that cost around $12,000 and got 250,000 miles. Before that was a 1984 Civic that got 150,000 miles. (No idea what the original price was; I got it used.)

I hope my new car will reach 500,000 miles. Maybe not. It's my first non-Honda, who appears to have passed its quality crown to Subuaru. Regardless, anecdotally, price-per-mile seems to be going down.

(I will note, though, that gas mileage doesn't appear to be improving. I should perhaps have gotten a hybrid, but I really want an electric.)

Re: What used cars tell us about the risk of too much inflation hitting the economy

#32

Post by jfengel » Mon, Mar 15, 2021, 4:18 PM UTC

tanseydavid wrote: post #26

imtringued wrote: post #21

Earlier quoted context omitted.

>, yet the reporting from our central banks is saying all is well and inflation is low. Low inflation is a catastrophe. I'm surprised you don't know that much. No, things aren't well.

>> Low inflation is a catastrophe. I'm surprised you don't know that much. I am surprised that you did not bother to explain what you mean by this.

Especially since it's unclear.

Most economists consider negative inflation a catastrophe, because of a "deflation spiral" -- prices go down, vendors and manufactures make less money, lay people off, they have less money to spend, so prices go down, etc.

(All other things being equal, of course, which they never really are.)

Most, but slightly fewer, consider low (0-2%) inflation to be sub-optimal, but not catastrophic. A little inflation nudges people to buy stuff (including investments) rather than stuffing their money in a mattress, which it slows the economy down.

About 2% is considered optimal. There are those who would like it lower.

Above 2% is considered a problem, and getting into catastrophic range somewhere on the order of 4-5%, depending on a whole lotta factors.

That's conventional wisdom among economists, but definitely not "I'm surprised you don't know that much" territory. Especially without that crucial distinction between negative and low inflation. 1% inflation simply is not a catastrophe.

Re: What used cars tell us about the risk of too much inflation hitting the economy

#33

Post by jfengel » Mon, Mar 15, 2021, 4:34 PM UTC

evanlivingston wrote: post #7

seibelj wrote: post #2

My grocery bill is up 40% from pre-pandemic and I shop at the cheap grocery store. I buy basically the same stuff as I have for the past 10 years. Yet the government claims inflation is minimal. Combined with the value of my property rising and my 401k, I refuse to believe inflation is what the government claims. Huge scam going on here. The government has no incentive to say CPI is rising because that would require…

This is the same realization I had recently. The value of my house is likely up 15% from last year. My investments grew 20%, my income went up, getting food from any restaurant seems to cost at least $40 for two people, hard to find a bar of chocolate under $4, cup of coffee likewise. There is very little telling me my dollar today is only 1.5%-2% less valuable than last year.

The twenty dollar bill was called a "yuppie food coupon" back when yuppies were a thing. You went to a restaurant, and regardless of the price of your meal, you expected that a $20 would be food, tax, beverage, and tip, without expecting all that much change back. So if "food from any restaurant seems to cost at least $40 for two people", that would suggest that the cost of the yuppie food coupon hasn't changed since the 80s.

Similarly "Starbucks" has been called "Fourbucks" since at least the 90s. If you don't want to pay that much, it's basically a dollar at any convenience store -- literally for pretty much any volume.

As for your investments... yeah, I do think there's inflation there. We're Quantitatively Easing money directly into the stock market, and it doesn't seem to be making its way out. That's a problem, but not a CPI problem.

Similarly, the housing market is up in some places and way down in others -- most visibly in New York and San Francisco, where a ton of people had been paying a lot of money. The money appears to have moved without changing the total amount being paid all that much.

Re: What used cars tell us about the risk of too much inflation hitting the economy

#34

Post by credit_guy » Tue, Mar 16, 2021, 12:20 AM UTC

perl4ever wrote: post #30

credit_guy wrote: post #16

Earlier quoted context omitted.

> people at or near the top who may have incentives to distort things But who are those people? The Chairman of the Fed? The Secretary of the Treasury? The President? Let's say the US Government ends up paying $10 BN more on the inflation-linked bonds because of the CPI, how exactly will any of the 3 top-level people listed above going to suffer? Maybe the President does not get re-elected if the deficit is too high?…

I wouldn't know. If you asked me years ago why would anyone cook LIBOR, I wouldn't have known why or how. But such things happen. I think there is precedent for government figures on inflation being unreliable, (Argentina maybe?) so if you insist "it can't happen here " (in the USA) then it could be hubris, the assumption the US is just better than other countries. When organizational failures happen, they don't happ…

> if you insist "it can't happen here" (in the USA)

It can certainly happen. But absent some obvious incentives, I prefer to give the benefit of the doubt. (The Libor manipulation was done by people employed by the private sector, who had their career advances and their compensation linked to the way the Libor was marked.) You are right that some non-obvious group dynamics can happen in Government organizations, but based on this generic statement alone, we should refrain to accepting any conspiracy theory without at least a modest amount of intellectual due diligence.