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The Ultimate Guide to Inflation

lynalden.com

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Re: The Ultimate Guide to Inflation

#31

Post by lottin »

sbelskie wrote: post #9
crb002 wrote: post #2

M2/Population https://twitter.com/SMT_Solvers/status/1391506520488153091/p... That is an unprecedented hockey stick.

You’re correct that the recent uptick is unprecedented, but given that the other graph (shared by Nobel prize winning economist) shows no stable relationship between M2 and inflation, why does it matter? He might be wrong and you might be right, but that graph alone doesn’t tell that story.

These morons are trying to pump a certain crypto-token by instilling inflation fears, but since inflation has been a non-issue in the US since the 1970s, they are now trying to shift the focus to the money supply as if it had any relevance at all.

Re: The Ultimate Guide to Inflation

#32

Post by nabla9 »

>My base case going forward continues to be that with the combination of sizable broad money supply growth, along with public opinion pushing the pendulum back away from globalization, consumer price inflation is likely to be higher in the 2020s decade than in the 2010s decade.

The biggest news is that Fed changes its inflation targeting goal. It's now average inflation targeting 2.0%. This means that Fed allows inflation run above 2.0% for some time until average matches the goal.

Re: The Ultimate Guide to Inflation

#33

Post by lottin »

SigmundA wrote: post #28
lottin wrote: post #18

Earlier quoted context omitted.

M2 is a measure of the money supply. There are different measures of the money supply, which roughly speaking are M0 (cash), M1 (M0+current accounts), M2 (M1+savings accounts) and M3 (M2+money market instruments). The fact that they have divided M2 by the population seems a little strange, but basically the graphic shows the amount of "money" (cash+current accounts) per person over a time period in the US.

Per Capita is a pretty common way to normalize a statistic to account for population growth / change right?

Yes, but the money supply is rarely reported in per capita terms. (It's not that it doesn't make sense, it's just unusual.)

Re: The Ultimate Guide to Inflation

#34

Post by cortesoft »

I've wondered what the effect our modern digital economy has had on consumer price inflation.

Normally, an increase in money supply would cause consumer goods to increase in price, since more people are able to buy them and there is a limit on how much of any particular physical good is available.

This isn't the case, however, for digital goods. If there are suddenly 100 million new people who want to buy a Netflix subscription, it isn't like we are going to see the price of a Netflix subscription go up because there isn't enough Netflix to go around. The marginal cost for a new subscriber is practically zero, so there should be no price increase caused by a shortage.

It would be easy to see that inflation would be essentially zero if ALL goods people wanted to buy were digital ones... no amount of demand can eat up the supply, since supply is practically infinite.

Of course, in the real world, some goods are digital and some are physical. If you gave everyone $5000, some of that would go to Netflix subscriptions, which wouldn't effect consumer prices, and some would go to buying TVs to play Netflix on, which WOULD cause inflation.

I am curious how much of our current "low inflation even with an increasing money supply" is caused by our increasing spending on non-exclusionary goods.

Re: The Ultimate Guide to Inflation

#36

Post by vmception »

cortesoft wrote: post #34

I've wondered what the effect our modern digital economy has had on consumer price inflation. Normally, an increase in money supply would cause consumer goods to increase in price, since more people are able to buy them and there is a limit on how much of any particular physical good is available. This isn't the case, however, for digital goods. If there are suddenly 100 million new people who want to buy a Netflix s…

These organizations would be expected to have some marginal cost increases from running data centers and physical hardware cost increases and they would calculate passing these on to consumers. Or as an excuse to. But I guess that is covered by your example and understanding that their physical costs being non-digital goods. So, fun thought exercise.

Re: The Ultimate Guide to Inflation

#37

Post by vmception »

silexia wrote: post #29
anm89 wrote: post #16

So awesome to see Lyn Alden at the top of Hacker News. She is an absolute genius! If you aren't familiar with her work and thinking I think a good introduction interview is: https://www.youtube.com/watch?v=f_JmGLMjIOk&t=35s Fun fact: She is an electrical / industrial engineer by trade, not an economist.

I agree. I made a great bet at the beginning of the pandemic, but then the Fed hurt me with it's quick action. I didn't understand macroeconomics, but Lyn Alden has really helped me understand it better with her long form articles.

I wonder if the Court of Claims would cover trading losses from the Fed’s actions

I should look up the judges to get a feel for their predilections

I wanted to see S&P 12,000 for a moment

Re: The Ultimate Guide to Inflation

#38

Post by jbay808 »

anm89 wrote: post #16

So awesome to see Lyn Alden at the top of Hacker News. She is an absolute genius! If you aren't familiar with her work and thinking I think a good introduction interview is: https://www.youtube.com/watch?v=f_JmGLMjIOk&t=35s Fun fact: She is an electrical / industrial engineer by trade, not an economist.

I really liked her article on understanding Japanification, which I probably found linked from HN too. I'd never heard of her before but I immediately added her to my favourites.

https://www.lynalden.com/economic-japanification/

Re: The Ultimate Guide to Inflation

#39

Post by cortesoft »

vmception wrote: post #36
cortesoft wrote: post #34

I've wondered what the effect our modern digital economy has had on consumer price inflation. Normally, an increase in money supply would cause consumer goods to increase in price, since more people are able to buy them and there is a limit on how much of any particular physical good is available. This isn't the case, however, for digital goods. If there are suddenly 100 million new people who want to buy a Netflix s…

These organizations would be expected to have some marginal cost increases from running data centers and physical hardware cost increases and they would calculate passing these on to consumers. Or as an excuse to. But I guess that is covered by your example and understanding that their physical costs being non-digital goods. So, fun thought exercise.

Yeah, that is why I intentionally said "practically zero" instead of actually zero, because there are some marginal costs. They are just orders of magnitude less than what they are for physical goods.

But yeah, I am just curious how that math all works out on a macro scale.

Re: The Ultimate Guide to Inflation

#40

Post by lupire »

cortesoft wrote: post #34

I've wondered what the effect our modern digital economy has had on consumer price inflation. Normally, an increase in money supply would cause consumer goods to increase in price, since more people are able to buy them and there is a limit on how much of any particular physical good is available. This isn't the case, however, for digital goods. If there are suddenly 100 million new people who want to buy a Netflix s…

Businesses charge what customers are willing to pay. If they have more money, they are willing to pay more. Competitiuis the countervailing force, but Netflix has exclusives and serials and network effects (fandoms and friends)
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