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The Ultimate Guide to Inflation

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Re: The Ultimate Guide to Inflation

#61

Post by pessimizer »

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…

> 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.

No, it would go up because they would make more profits with fewer subscribers and a higher margin.

Re: The Ultimate Guide to Inflation

#62

Post by david_dan »

tomrod wrote: post #53
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…

We still have to pay for food, shelter, transportation, clothing, and other physical things. Our inner world is richer, and we consume non-decreasing goods. But everything is tied to something in the physical world, even if it's the hardware and energy running it.

Nope.

Every Physical atom in the universe is nothing but Energy.

The universe itself has infinite energy.

So, in a Singularity World (where Robots produce everything, including other Robots), the marginal cost for everything (like Netflix videos) will collapse to $0.

Re: The Ultimate Guide to Inflation

#63

Post by gruez »

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…

>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.

Not much? Based on the CPI weights given by the BLS[1] at least 82.238% of the CPI is from non digital goods. This is based on summing up the top level categories which are definitely not digital, ie. Food and beverages, Housing, Apparel, Transportation, Medical care. If you drill down into the remaining categories (Education and communication, Recreation, Other goods and services) and eliminate non-digital goods from there you can probably get that percentage even higher.

[1] https://www.bls.gov/cpi/tables/relative-importance/2020.htm

Re: The Ultimate Guide to Inflation

#64

Post by sbelskie »

vmception wrote: post #55
sbelskie wrote: post #42

Earlier quoted context omitted.

How would the Fed fulfilling its mandate give anyone a case for recovering their trading losses?

A different part of the Federal government has a mandate of paying people harmed by the Federal Governments actions. Just make the argument and see. Google Scholar has all of that court’s cases online in plain text.

But if the government raises taxes you don’t get to sue for lost expected income (absent some specific extenuating circumstances), do you?

Re: The Ultimate Guide to Inflation

#65

Post by Edman274 »

kebman wrote: post #45
R0b0t1 wrote: post #4

Earlier quoted context omitted.

It describes a very sharp increase in created money. The poster of the linked tweet is implying this is unique and we will see negative economic effects (like inflation) because of it. Parent to that tweet is arguing we have not seen those effects despite past federal reserve action and so there is no worry. The wider context to this conversation is that some people [who?] believe federal reserve policy is flawed and…

Yes, don't worry guys. The Federal Reserve has got you covered. And if things get too expensive, you can always just ask for a raise, amirite! :) Anyway, here's a cash crop chart for corn that has more than doubled in price since last year. Once the cost of making finished products with these crops increase, you can be sure that shop prices will also reflect it. Some of these charts are even growing exponentially. ^1…

If you zoom out to 20 years it shows that back in 2011 the same thing happened; did we have hyperinflation in 2011 or huge price increases in food in 2011?

Re: The Ultimate Guide to Inflation

#66

Post by kebman »

nradov wrote: post #60
echelon wrote: post #10

Downsides aside, won't inflation help exports and keep USD-denominated trade attractive? It's not like we're the only economy suffering. We might be doing the best of the whole lot.

Inflation only improves the balance of trade if we inflate faster than our trading partners. Lately many countries have been engaged in a competitive currency devaluation race to the bottom.

Well, since March 2020 the Euro has increased in value to the US Dollar.

Re: The Ultimate Guide to Inflation

#67

Post by klipt »

spaetzleesser wrote: post #50
bob33212 wrote: post #47

Earlier quoted context omitted.

We are entering a Post Scarcity Economy. A lot of fiction books write about how this plays out. Regardless of what happens a lot of economic theory becomes less relevant. https://en.wikipedia.org/wiki/Post-scarcity_economy#:~:text=... .

Post scarcity only for certain things. Things like living space are becoming scarcer and more expensive.

Living space in rural areas is cheap. Living space near good jobs is what's scarce.

Re: The Ultimate Guide to Inflation

#68

Post by david_dan »

spaetzleesser wrote: post #50
bob33212 wrote: post #47

Earlier quoted context omitted.

We are entering a Post Scarcity Economy. A lot of fiction books write about how this plays out. Regardless of what happens a lot of economic theory becomes less relevant. https://en.wikipedia.org/wiki/Post-scarcity_economy#:~:text=... .

Post scarcity only for certain things. Things like living space are becoming scarcer and more expensive.

'Living Space' is also an illusion.

In a near perfect VR world, (which we will achieve during singularity), everyone will have infinite 'living' space

Re: The Ultimate Guide to Inflation

#69

Post by dntrkv »

pessimizer wrote: post #61
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…

> 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. No, it would go up because they would make more profits with fewer subscribers and a higher margin.

Economies of scale dictate the opposite.

Fixed costs stay the same no matter the subscriber count, this would allow Netflix to lower the price, while maintaining the same profits. In reality, they would likely keep the price the same and increase their margins without charging more.

Re: The Ultimate Guide to Inflation

#70

Post by cortesoft »

lupire wrote: post #40
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)

Sure, but that doesn't say anything about inflation.

The standard formula for profit is (units sold * price per unit) - (fixed costs + marginal costs * units sold).... Netflix, like every other company, wants to maximize that profit.

For most non-digital companies, the marginal cost is significant, and follows a u-shaped curve... at first, marginal costs decrease as you sell more units, since you can get intermediate goods for cheaper prices as you buy in bulk. At a certain point, however, the marginal price starts increasing again as you start to hit various bottlenecks and intermediate goods start becoming more expensive as you consume all the easy to produce supply. In other words, you can't scale linearly.

Digital goods have a much flatter uptick on that marginal cost graph, and I am very curious what that means at the macro economic level.

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