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The Ultimate Guide to Inflation

lynalden.com

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Re: The Ultimate Guide to Inflation

#191

Post by pmorici »

nl wrote: post #155
omalleyt wrote: post #99

Earlier quoted context omitted.

Gold went up a lot in 2020. It’s underperformance in the past few months is because Treasury rates ripped higher, which made owning bonds more attractive. However, rates can’t rise much more, or the UD gov’t will be unable to service its debt. Therefore, gold has begun to climb again

> However, rates can’t rise much more, or the UD gov’t will be unable to service its debt. Treasury rates are less than 2%. Prior to 2019 they have never in history been lower[1], except for one month during 2016. I don't think the market is worried in any way about the ability of the US to service a 2% rate. [1] https://www.macrotrends.net/2016/10-year-treasury-bond-rate-...

Large share of federal government debt is short duration meaning it has to be rolled over at current rates on a regular basis. Rising rates would definitely drive up costs dramatically.

Re: The Ultimate Guide to Inflation

#192

Post by throwawayboise »

alex_smart wrote: post #76
cortesoft wrote: post #70

Earlier quoted context omitted.

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…

It means that in your formula, the (units sold * price per unit) term dominates the profit formula. So, the price is mostly determined by the consumer's willing to pay.

And by your competitors willingness to take a lower per-unit profit in exchange for more sales.

Re: The Ultimate Guide to Inflation

#193

Post by mlyle »

panarky wrote: post #187
mlyle wrote: post #169

Earlier quoted context omitted.

If you're going to be "terribly econ 101", note that Netflix is not in a perfectly competitive market and almost certainly encounters a downward sloping demand curve... and that its maximum profit point is not going to be at the point where the most units are supplied and may indeed shift as the demand curve shifts.

Many people speak with great confidence about inflation, the money supply and "econ 101". Most of those with the greatest confidence in their own knowledge are not familiar with the fundamental equation of exchange, MV=PQ. Here, M is the money supply, V is the velocity of money, P is the price level, and Q is the real quantity of goods and services. It's easy to see that if M increases and Q increases the same amount…

Thanks, and I understand that... but I feel like you don't understand the context of my reply.

Mr. Beer above stated that an increase in demand for Netflix would not increase the market price of Netflix. But because Netflix is a quasi-monopoly, they would be likely to increase prices to find the new equilibrium maximum profit point.

That is, he made a microeconomic argument which was invalid-- arguing that because Netflix's marginal cost is low the price elasticity of the product they supply must necessarily be low-- but this is not necessarily true. Netflix has some degree of pricing power.

I made no macroeconomic argument, and.. while I agree with your macroeconomic assertions... increasing the supply of money still increases inflationary pressures. If you're facing massive deflationary headwinds because of slowing velocity of money, sure, it may not be enough to cause inflation or even entirely prevent deflation, but it still is net inflationary.

Re: The Ultimate Guide to Inflation

#194

Post by jonnycoder »

aazaa wrote: post #84
nine_zeros wrote: post #81

Earlier quoted context omitted.

Crypto

Or... crypto and the commodities have it backward. The gold market is right. Prepare for the opposite of what the media are hyperventilating about now - a ridiculously strong dollar and deflation.

I think that is possible. If you have a good income, then a hedge would be gold and silver. If the dollar gets strong then so does your purchasing power. If not, then gold/silver hedge against that. Of course it also helps to have bought a house when prices were low going back to 2012ish. For some of us, who cares if housing drops 50%

Re: The Ultimate Guide to Inflation

#195

Post by cortesoft »

closeparen wrote: post #190
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…

A Netflix subscription buys actors, directors, writers, editors, cameras, microphones, lights, clipboards, trucks, sound stages, hair & makeup, trailers, set decoration, tape, clapper boards, generators, radios, VFX render hours, insurance premiums, producers’ risk, and all the other accoutrements of film and TV production. There’s a lot of accounting and financial engineering and temporal shifting going on under the…

Right, but I was talking about the MARGINAL cost per subscriber... those costs you mentioned are fixed costs, and they are the same whether Netflix has one subscriber or a billion.

The marginal cost per additional subscriber is basically bandwidth, which is pennies.

Re: The Ultimate Guide to Inflation

#196

Post by DistressedDrone »

inter_netuser wrote: post #182
syshum wrote: post #148

Earlier quoted context omitted.

>>yet apparently has poorer outcomes than other G10 nations I assume you have data for this? Something more than the flawed infant mortality rate that is often cited but is a very poor judge of a health system in reality? Something like 5 year cancer survival rates. Time a person waits on Specialist Wait List, the time it takes a person to get a replacement Hip, MIR, or Heart Stent. All of which I believe the US is v…

Canada has socialized healthcare. 200 to 300 thousand travel to the US for healthcare every year. That's with population of ~30 million. Extremely common. Which begs the question, why do they travel to the terrible USA, when wonderful social care in Canada is so amazing on paper, with wait lists measured in years?

Getting an accurate portrait of Canada as a whole is very difficult, as healthcare is a provincial responsibility.

As a Canadian however, it would not surprise me if most of the people traveling were upper class people trying to bypass the waiting lists.

You have to understand that this is inevitable as long as our systems don't have the same level of fairness and people are allowed to "choose" their system. Of course privileged people will choose the system that they can benefit from most, whereas unprivileged people cannot afford to choose.

This is not to say that our Canadian healthcare systems are perfect (far from it), but rather that some of them attempt to promote fairness (in service quality and rapidity), thereby negating the greater privilege of wealth relative to less fair systems such as yours.

This practice of healthcare tourism does of course take some pressure off the system for unprivileged people, so it's hard to say it's all bad on the whole. But don't expect the situation to change regardless, as we are also ruled by the wealthy, and they do so like to have freedom of choice.

By the way, the position on the waiting list is often adjusted according to the urgency of one's situation, so people who travel to reduce waiting time would not have been in critical condition on average, not to mention they may simply be traveling to get services that are legislated differently in Canada (as I believe cosmetic surgery can be, depending on the province).

Re: The Ultimate Guide to Inflation

#197

Post by cortesoft »

atq2119 wrote: post #137
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…

> Normally, an increase in money supply would cause consumer goods to increase in price, since more people are able to buy them This isn't actually true, though it's a widespread belief (quite a number of pundits kept making incorrect predictions after the global financial crisis). Where the logic goes wrong is that an increase in money supply doesn't automatically translate into higher disposable incomes. (And highe…

You are right, not all money supply increases are equal. However, I have thought about this more in the context of proposals around UBI or other wealth redistribution ideas. The common complaint about them is around just what you talk about, that distributing wealth to poor people will increase disposable income and cause inflation from not being able to keep up with increased demand.

I wonder how much of that is true in our modern economy. Between our incredible latent productive capacity and the sizable chunk of our economy that consists of non-rivalrous goods, I wonder how much of the increased demand we could absorb without causing inflation to rise substantially. For example, how much would food prices go up if poor people had more money? We can produce a lot of food, and the demand for additional food is not limitless. Some of that money would go towards digital goods like Netflix and video games and other digital goods, which are non-rivalrous.

Of course it would have an effect on inflation, but I am just wondering how much.

Re: The Ultimate Guide to Inflation

#198

Post by cortesoft »

gruez wrote: post #91
cortesoft wrote: post #73

Earlier quoted context omitted.

Yeah, that doesn't say how much of actual consumer spending goes into the goods that are included in the CPI. Even if the CPI were based 100% on non-digital goods, the percentage of purchases that go towards CPI goods could be falling.

Perhaps, but how much of a difference can that make? It's hard to imagine many people spending $100+ on new SaaS/digital goods because of the pandemic.

That is exactly my question! How much are people spending on digital goods, and what percentage of extra income would go towards digital goods.

Re: The Ultimate Guide to Inflation

#199

Post by InvertedRhodium »

syshum wrote: post #148
neuroma wrote: post #119

Earlier quoted context omitted.

I presume you are in the USA. I watch and marvel at how the USA has such expensive health care and yet apparently has poorer outcomes than other G10 nations, in aggregate. The NHS in my home country is undergoing privatisation of the more lucrative or self-contained components. But it seems important for other countries to watch and learn from this example because free market economics are so often heralded as a solu…

>>yet apparently has poorer outcomes than other G10 nations I assume you have data for this? Something more than the flawed infant mortality rate that is often cited but is a very poor judge of a health system in reality? Something like 5 year cancer survival rates. Time a person waits on Specialist Wait List, the time it takes a person to get a replacement Hip, MIR, or Heart Stent. All of which I believe the US is v…

I note that all your statistics are based on figures that only involve the number of people that successfully obtained healthcare which seems like it's ignoring the possibility that a significant percentage don't have access to those wait lists at all.

If you only let half of your population on the list in the first place, I don't think it's overly shocking that metrics across the board would appear better.

I'd be interested to know the percentage of people in each country that require hip replacements, MIR's or Heart Stents but have no effective chance at even seeking out the preliminary care that would lead to them.

Re: The Ultimate Guide to Inflation

#200

Post by eloff »

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 spend fifty times more on real goods each month than digital goods. So while it's fascinating to think about, and it makes quite a lot of sense, it's a rounding error still.
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