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Inflation is differential and restructuring (2021)

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Re: Inflation is differential and restructuring (2021)

#151

Post by merpnderp »

dinom wrote: post #142
simonh wrote: post #115

Earlier quoted context omitted.

Devaluing in-the-mattress savings is a good thing, hence all the many government schemes to incentivise small scale productive investment. Here in the UK that's through tax free consumer savings accounts like ISAs, but also pensions. Savings that are invested do work in the economy fund businesses, promote economic activity and aid job and wealth creation. Stuffed mattresses are a boat anchor on the economy. Having s…

What is "in-the-mattress" savings exactly... besides one person's savings that another wants to spend differently? Who should be the ultimate judge of how capital is saved and invested? You? The government? What about the person who actually did the saving? Taken to it's logical conclusion, saying that "devaluing in-the-mattress savings is a good thing" sounds a lot like "let's soak the rich" to me.... and it's a ver…

The value of a worker 50 years ago is surely far less to me today than it was to his employers back then. Yet if we had deflation his work would be worth more today than back then. Why should I value a road builder’s work today when that road has been tore up 10x over since then?

Re: Inflation is differential and restructuring (2021)

#152

Post by littlestymaar »

tlb wrote: post #11
fallingfrog wrote: post #10

Earlier quoted context omitted.

Wait.. how can that be true? If a dollar last year is worth .5 dollars today, and a Euro last year is worth .8 Euros today, then surely the value of the dollar against the Euro has declined to .5/.8 of what it was last year?

Exchange rates affect inflation for imports, but not for domestic goods. So varying exchange rates by 5% might only change inflation by 1-2% (depending which inflation metric you use). Like many things in macroeconomics, the exchange rate / inflation relationship should be true in equilibrium. But several things are out of equilibrium right now due to supply chain disruptions and a demand surge after the pandemic.

> several things are out of equilibrium right now due to supply chain disruptions and a demand surge after the pandemic.

And some things (most of them actually) are never at their equilibrium price for many reasons (but mostly because the characteristic time to reach equilibrium is higher than the frequency of perturbations). A bit like how it's completely fine to still have snow outside even if the temperature is firmly above zero Celsius.

Re: Inflation is differential and restructuring (2021)

#153

Post by goodpoint »

orwin wrote: post #135
Turing_Machine wrote: post #125

Earlier quoted context omitted.

> All currency is made up. Even gold, or bitcoin, or giant rocks Yes, but gold, bitcoin, and giant rocks can't be inflated at will, which is what the OP was complaining about. Simulated pieces of green paper can. Even with the formerly-used real pieces of green paper, there's a physical limit to how fast printing presses can run. With simulated pieces of green paper, you can just type some numbers into a computer and…

Okay, but creating money at will is not a bug, its a feature. I know there is this myth of the "no crisis ever during the gold standard era", but this is false. We had a crisis every ten years or so, sometime way bigger than the 2008 crisis despite the economies being less interconnected. And those crisis sometimes were entirely disconnected from production issues, unlike 2008 that is clearly linked with the conventi…

> creating money at will is not a bug, its a feature

Despite the stupid downvotes, this is true.

Of course the mechanism can be abused by printing money that are not backed by real growth (like in the US), but most countries don't do that.

Re: Inflation is differential and restructuring (2021)

#154

Post by Grim-444 »

throw0101a wrote: post #139
stevesearer wrote: post #136

Earlier quoted context omitted.

From my limited knowledge, I don’t believe hard money advocates would say there are never any crises, but instead that they are shorter lived and not as large.

> […] but instead that they are shorter lived and not as large. Which of course does not match the historical record: * https://www.theatlantic.com/business/archive/2012/08/why-the... * https://archive.ph/FWKcL

The article presents two graphs of arguably manipulated/unreliable CPI rates, and that's somehow being using as evidence for whether crises are larger or smaller? The article from the beginning uses obviously incredibly biased language throughout, it's a pure opinion hit piece; the author isn't even attempting to present an impartial view on the topic.

It always amuses me how strongly people come out in opposition to the idea of the gold standard, when it demonstrably seemed to work for America, it powered the country from the time it was a collection of colonies to the time it had men driving buggies around on the moon. The country was on the gold standard for hundreds of years. Coming off the gold standard is the experiment, is the outlier. The gold standard obviously worked well enough for that vast majority of the country's history, yet it's somehow regarded by certain people as an obviously horrible idea which is gross, repugnant, "a barbarous relic that belongs in the dustbin of history". It just doesn't add up. If it's such an insanely horrible idea, how did it work so well for so long?

Re: Inflation is differential and restructuring (2021)

#155

Post by actionablefiber »

someguydave wrote: post #110
klipt wrote: post #86

Earlier quoted context omitted.

> the value of each coupon becomes more, not less, over time Deflation has historically been a bad thing every time it's happened.

Yeah that decreasing price for silicon chips over the past decades has been a real disaster.

There's a difference between decreases in the price of specific goods that comes about due to technology, and deflation that comes about due to monetary policy.

That I can think of, the obvious difference is that the second one almost definitionally means a steady decrease in nominal wages. This seems like a perverse incentive - if I sock away my first paycheck flipping burgers under my mattress and do nothing with it for 50 years, a deflationary regime means I can take it back out and buy a lot more with it than someone with their first paycheck flipping burgers today.

Re: Inflation is differential and restructuring (2021)

#156

Post by dinom »

simonh wrote: post #148
dinom wrote: post #142

Earlier quoted context omitted.

What is "in-the-mattress" savings exactly... besides one person's savings that another wants to spend differently? Who should be the ultimate judge of how capital is saved and invested? You? The government? What about the person who actually did the saving? Taken to it's logical conclusion, saying that "devaluing in-the-mattress savings is a good thing" sounds a lot like "let's soak the rich" to me.... and it's a ver…

In-the-matress savings are money that is not invested, such as cash stuffed in a matress. This is the opposite of soaking the rich. The well-off generally have a very large proportion of their wealth invested in productive economic activities, with returns well above inflation.

You haven't convinced me. After all... what about short-term bills? Are they considered savings or investment? What about FX accounts? What about operating capital? In other words... what is "not invested"? An axiomatic definition is imperative... not turtles all the way down.

Savings and investment are largely synonymous so I stand by my initial statement. How can one expect to buy a house if they're precluded from putting savings "in-the-mattress"? I'm not suggesting they'd be better or worse off using leverage... I'm saying it is solely for them to determine since they're the ones who are most familiar with their own circumstances.

If someone enjoys wiping their rear with $100 bills that's up to them.

As I can tell, the best definition for "in-the-mattress savings" is capital that is deemed a bad investment by any/every one except the person who managed to create the savings itself.

Your argument leads to a slippery slope... what would stop me from taking your assets because they don't fit my definition of "investment"?

Re: Inflation is differential and restructuring (2021)

#157

Post by MacsHeadroom »

seoaeu wrote: post #104
bojangleslover wrote: post #13

Why can't it be both monetary and non-monetary? Say it's a vector, one element per CPI category. Throw housing in for good measure. The direction of this vector can change due to non-monetary stuff like Russia and oil. But if all of the categories, especially those without clear non-monetary drivers, rise, then it's also monetary. So maybe X = p_monetary + Q_nonmonetaty where p is a scalar and Q is a vector. I think…

Cost of “shelter” is already 32% of the CPI calculation. I really don’t understand this meme that housing costs aren’t factored in

When housing and rents jump 20-30% consumers see these advertised prices immediately and start factoring them into their future budgets. The average renter will have to pay these prices in 6 months (when their lease is up). But the prices won't be reflected in the CPI for another 16 months.

CPI: Shelter measures rents people are currently paying, not new rental prices. New rental prices aren't fully appreciated for 12 months. So the CPI: Shelter figure lags by a year plus a quarter (for data collection).

The reasons for the lag are solid. But it adds to the reasons CPI is an aweful indicator of consumer inflation expectations and effects on personal budgets.

Re: Inflation is differential and restructuring (2021)

#158

Post by lamontcg »

ryathal wrote: post #146
onlyrealcuzzo wrote: post #61

Earlier quoted context omitted.

The article talked a lot about winners and losers. It's interesting that there's no mention of debtors and creditors. The biggest winners in hyperinflation are people in massive debt. It's inflated away to nothing. The biggest losers are creditors for the opposite reasons. When inflation is just abnormally high (~8%), your debt doesn't get deflated to nothing, but you're getting a ~6% discount.

Debtors only benefit from inflation if their pay actually goes up. If you were making $15/hour 1 year ago and still making $15/hour now, you just get fucked.

This is why the headlines to focus on are the ones not about inflation, but about wage increases and unionization happening right now.

> Consumer spending climbs sharply again — and not just because of inflation > Rising incomes partly cushion Americans against high inflation

https://www.marketwatch.com/story/consumer-spending-climbs-s...

But rising wages and the threat of a wage-price spiral and the effect on debts is precisely why the Fed is indicating they're going to crash the economy.

Re: Inflation is differential and restructuring (2021)

#159

Post by lamontcg »

lordnacho wrote: post #39

Wow, this was the article I was looking for, it summarizes a number of thoughts about economics that I'd been having since the undergraduate days: - There's an authority about the field that really isn't deserved. The models are not made properly, and there's a lot of hand-waiving. I studied economics with a class of engineers and everyone pointed this out. - The pop-sci version of economics is a bunch of easy quips.…

Inflation also ignores asset bubbles entirely by focusing on them as a separate class as not as too few houses or too few financial instruments being chased after by way too much money in the hands of the upper 90%/99%.

And this article barely mentions wages, unionization and wage-price spirals.

Re: Inflation is differential and restructuring (2021)

#160

Post by Terry_Roll »

throw0101a wrote: post #119
Terry_Roll wrote: post #23

Inflation, in all theories, doesnt measure the change in quality of the product either. Planned obsolescence is a stealth and legal form of product destruction that the buyer doesnt know about until after they have purchased something which is why the saying exists "buyer beware".

> Inflation, in all theories, doesnt measure the change in quality of the product either. Actually it does. See The Canadian Consumer Price Index Reference Paper by StatCan, chapter seven, "Quality Change and Adjustment": * https://www150.statcan.gc.ca/n1/pub/62-553-x/2014001/chap/ch...

Oh goodie we have an outlier of a country which we can hold as an example of the majority of the world.

So if Canada is so good at testing and knowing the change in quality they must be able to predict when something is going to fail. Right? So why do things pack up in Canada then?

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