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It’s mostly a demand shock, not a supply shock, and it’s everywhere

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Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#131

Post by asdff »

vkou wrote: post #31
waynecochran wrote: post #16

Earlier quoted context omitted.

Certainly shutting down the economy is a factor too.

From a cursory glance at I-5 traffic outside my window, besides for ~5 weeks in 2020, it does not seem like the economy was shut down.

Yeah not much of a shutdown, in LA seems like retail and restaurant workers were back working pretty fast, only a handful of places by me failed to pivot into takeout orders and shut down, I'd say 9/10 restaurants anecdotally are still open today which is about what I'd see with typical restaurant turnover over these two years anyhow even in the before times. The city only felt empty for like a month, then it was back to business as usual only with masks on. Traffic picked up again pretty quick. It was only bars and large events that suffered and even then, those have been back for a long time now (at least for bars, restaurant bars with outdoor dining even longer).

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#132

Post by skybrian »

hammock wrote: post #56
skybrian wrote: post #51

Earlier quoted context omitted.

Keep in mind that CPI is an average based on what people actually pay, which often lags market rate. For housing, you might not pay market rate due to having bought a house long ago, or rent control, or some other way of getting a sweetheart deal.

Housing is not in CPI. They use "owners' equivalent rent" which is a subjective (cooked) metric.

Well, it’s based on a survey. (And surveys are cursed instruments [1].)

> Generally, owners' equivalent rent is obtained through surveys asking homeowners the following question: "If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished and without utilities?" [2]

I would guess that some owners’ ideas of what their house would rent for might lag the market?

[1] https://carcinisation.com/2020/12/11/survey-chicken/

[2] https://www.investopedia.com/terms/o/owners-equivalent-rent....

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#133

Post by opportune »

RC_ITR wrote: post #85
arthur5005 wrote: post #68

What this doesn’t really address is the why? Yeah there’s more money floating around, so perhaps more people want to spend it, but why? Most people aren’t getting materially more stuff or even need that much more stuff, consumption’s already god damn conspicuous. Maybe everyone can afford a jet ski all of a sudden? No, the stims didn’t really do /that/ kind of wealth expansion. To me, this still looks like the bullwh…

What everyone is going to have a real hard time wrapping their head around for the next few years: We built a highly efficient economy for a set of behaviors. A shock happened that caused a lot people to change their behaviors (probably for a long time, since they've had 2 years of 'practice'). Our economy, which was built for those old behaviors (living in cities, riding public transit, eating at restaurants, travel…

As a company it’s probably better to just deal with 2 years of chaos every few decades than to have tons of unused inventory sitting around all the time.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#134

Post by grayfaced »

Gigachad wrote: post #127
grayfaced wrote: post #101

Earlier quoted context omitted.

Efficiency at a trade-off of resiliency. If you're talking about discretionary purchases, you probably value efficiency over resiliency. If you're talking agriculture, we should value resiliency over efficiency.

So we have benefited from decades of cheap consumer electronics and now people had to wait 10 months to get their playstation at RRP so their proposal is to build double the number of playstations for decades and landfill half of them so in the extremely rare case, they will have just enough.

I would consider consumer electronics to be discretionary purchases. So what I suggested is the opposite of that. If disruptions are an acceptable risk, then you should prioritize efficiency. Consumer complaints are meaningless if they don't have a viable competitor to shift their money to.

But we must prioritize resiliency when an economic shock would result in societal instability. I'm willing to pay more for food to be available 100% of the time versus paying 20% less for food to be available 80% of the time.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#135

Post by asdff »

Jensson wrote: post #25
zz865 wrote: post #9

I can remember when a year ago everyone agreed they were happy with consuming less and spending time with the family. Looks like that didn't last long, everyone is out shopping again.

USA never stopped consuming, they just import more and more. Trade balance is even more negative now than before the great depression, there should be a correction happening real soon: https://tradingeconomics.com/united-states/balance-of-trade

We can't afford not to import goods. The cost of manufacturing in the U.S. are too high relative to other parts of the world. Can't do anything about that on our end of the deal short of tarriffing ourselves into total economic isolation and being forced to produce everything nationally.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#136

Post by pengaru »

Isn't a big part of the current problem that transport/delivery/shipping vessels and/or their portable containers have been forced to become part of the storage capacity?

Does it really require much more than that to break the whole system down? You could have what was once a highly parallel system with tons of transport bandwidth brought to its knees and effectively serialized if not completely deadlocked by just overflowing your storage capacity enough to fill all the transport stuck in queues and other forms of holding patterns.

Thought exercise:

You have two warehouses surrounded with tons of loading/unloading docks, plenty of bandwidth capacity, but they're both full inside. You have 20 trucks available, and they too are all full of goods, 10 parked at the docks of one warehouse, the other 10 parked at the other warehouse. But nothing is happening, because all the trucks are full and waiting to unload, and all the warehouses are full.

So you introduce a 21st truck that's empty, and it shows up at one warehouse, loads up, and moves the stuff to the other where it needs to go. What happens? Did you fix the problem? Barely; you've opened up 1 truck worth of transport capacity. Despite having all this potential parallelism and idling trucks at concurrent docks, you will still be stuck with just a single truck moving around making glacial progress at any given moment. At least until enough goods exit this closed system where only the warehouses are storing and the trucks are all transporting again, which requires preserving sufficient headroom at the warehouses to ensure any docked, fully loaded truck can unload immediately.

It's a vastly simplified example, but I wouldn't be surprised if something along those lines has occurred where the transport has become storage because there's been too much stuff pumped into the system for the available holding capacity.

It's like trying to rearrange your overfull apartment when there's zero floor space available, you can't move the bed because it's wedged between the couch and the table. You need to take stuff out of the space so you can actually move things around.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#137

Post by jolux »

ODILON_SATER wrote: post #123
jolux wrote: post #91

Just a warning that this is an article by a hedge fund expressing a view of our current inflationary period that I would argue is heterodox among the economic mainstream. I suggest reading Paul Krugman and Claudia Sahm for dovish views, or Adam Ozimek for a more critical view. In particular, the idea that “inflation expectations” can perpetuate inflation via a self-fulfilling prophecy effect has been called into ques…

Claudia Sahm? Krugman? I rather listen to the hedge fund guys, at least they have skin in the game, don't they? Claudia Sahm is extremely partisan, and so is Krugman. You know it's going to be bad when we are starting to hear from the media that inflation is actually a good thing --because people have more disposable income to spend on things. First, it was just a blip, then they told us it would go away in half a ye…

Nobody thinks inflation is a good thing ceteris paribus. The main questions are whether it’s better than the alternative, and whether it will be transient or not. “Any inflation at all is bad” is not a view held by any serious economist these days, especially not after the Fed has been below target for so long.

I described Sahm and Krugman as dovish and I think that’s more than fair to people who disagree about what inflation means right now. I don’t like pieces like this one that speak authoritatively on so little evidence.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#138

Post by asdff »

gruez wrote: post #125
asdff wrote: post #112

Earlier quoted context omitted.

All of them? The government has this data already it just needs to be aggregated by someone motivated.

How do you combine them into one number, in a way that isn't "cooked"? Proposing we mash up all data ever into one figure, without detailing how, is useless

Medians aren't crooked.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#139

Post by robocat »

RC_ITR wrote: post #85
arthur5005 wrote: post #68

What this doesn’t really address is the why? Yeah there’s more money floating around, so perhaps more people want to spend it, but why? Most people aren’t getting materially more stuff or even need that much more stuff, consumption’s already god damn conspicuous. Maybe everyone can afford a jet ski all of a sudden? No, the stims didn’t really do /that/ kind of wealth expansion. To me, this still looks like the bullwh…

What everyone is going to have a real hard time wrapping their head around for the next few years: We built a highly efficient economy for a set of behaviors. A shock happened that caused a lot people to change their behaviors (probably for a long time, since they've had 2 years of 'practice'). Our economy, which was built for those old behaviors (living in cities, riding public transit, eating at restaurants, travel…

> Our economy ... is doing a bad job of adapting to new behaviors [because] just-in-time

I have been astonished at how well the world has responded to the shock. Our first world economies seem to be amazingly resilient (although perhaps I am biased by being in New Zealand so I am unaware of what is going on elsewhere).

It seems to me that just-in-time is helping us, and capitalist price signals are working.

So far I personally haven't lacked anything important (albeit, I live in a rich county. I did have to wait a month for an iPad).

Sure there is plenty of fail, but I'm not sure the obvious "better" answers would actually improve anything.

It is easy to criticise given perfect hindsight, and easy to see from my armchair what should have been done.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#140

Post by asdff »

300bps wrote: post #113
asdff wrote: post #97

Earlier quoted context omitted.

The government didn't even grant people a months worth of rent in my city. Not sure how that lead to such a huge infusion of demand that continues to persist, unless there are just that many people with very little rent who are driving this demand. Seems like such a small amount in the grand scheme of things considering most people even working a minimum wage job might see more money back on a tax return than the mea…

It isn’t just direct stimulus to private citizens. It’s the near zero interest rate policy, the literally illegal purchasing of mortgage and corporate bonds by the fed and so much more that is flushing the entire economy with trillions of dollars.

So what exactly happens in between the fed purchasing mortgage bonds and allegedly consumer driven supply runs on everything from toilet paper to golf clubs?
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