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

bridgewater.com

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

#331

Post by hooande »

zhdc1 wrote: post #276
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 this doesn’t really address is the why? Consumers base purchasing decisions on their monthly outlays. When interest rates go down, they can afford more in payments, so they increase their consumption until their expenses match what they can afford. A good example here is housing. The US and many EU states provided an under-appreciated amount of stimulus during the COVID-19 lockdowns. Even when this wasn't give…

This is excellent analysis, thank you

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

#333

Post by naveen99 »

rsj_hn wrote: post #246
Jensson wrote: post #229

Earlier quoted context omitted.

> If the demand for assets is zero, then the price of dollars is whatever it needs to be so that our deflated dollar makes our goods sufficiently cheap and foreign goods sufficiently expensive so that the stimulus spending does not cause a trade deficit. This ignores the fact that dollar is used as a reserve currency. Since the dollar is a reserve currency people will want to keep it stable, so even though USA abuses…

> This ignores the fact that dollar is used as a reserve currency. No, it's my whole damn point. Please re-read and stop it with the US "abusing" China by forcing them to run huge surpluses against us. These discussions are not helped with such emotional outbursts -- we are talking about currency markets, not your kids' tuba recital. >Well, they stop buying dollars, the dollar crashes, Yes, the whole point is to get…

> The only "hole" the U.S. is digging is allowing China to purchase an unlimited amount of dollars. You think China allows the U.S. to do that? It is capital inflows into the US that need to be reigned in, just as China does not allow unrestricted capital inflows into its capital markets.

What if the us pressured China and India to allow capital to flow to them instead ?

Does this make any sense ?: https://twn.my/title/mai1-cn.htm

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

#334

Post by lvl100 »

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…

I’d say wealth effect from people seeing their retirement account ballooning in such a short period of time. The demand will last for awhile especially in places like EU where the stimulus was substantially higher than in the US for lower middle class.

By the way, if we DON’T see sustained inflation from this level of stimulus, that should raise eyebrows and we should really question the role of CBs and efficacy of monetary policies.

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

#335

Post by defaultprimate »

forgotmyoldname wrote: post #186
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…

I also highly suggest reading Paul Krugman, and turning all his "wills" into "won'ts" and "won'ts" into "wills." His insights are worse than political talk between a couple drunk guys at a bar.

Agreed. Krugman should win an award for most incorrect predictions of any economist.

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

#336

Post by perpetualpatzer »

asdff wrote: post #196
epgui wrote: post #154

Earlier quoted context omitted.

The cost of servicing debt decreases and disposable income increases.

People are borrowing money to buy toilet paper and golf clubs? I think you are missing some details in the path from mortgage bonds -> your average consumer buying average consumer goods. I'm not being cynical or anything, I'd just like to understand this relationship a bit better.

I think it's less taking a loan to buy golf clubs and more "feeling less financially stretched makes people more willing to spend money."

Example: Joe just had a kid and was going to buy a house in a good school district no matter the cost. With a higher mortgage rates, he'd have wound up house poor for a few years. With today's rates, he has a comfortable savings rate. Since he's not scrimping, he decides this month he'll buy that putter he'd been eying.

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

#337

Post by dagw »

throaway46546 wrote: post #311
consp wrote: post #300

Earlier quoted context omitted.

After the panic buy I've never seen a toilet paper shortage anymore. I therefore doubt your theory of correlation. Maybe it was so in the us but it definitely does not correlate for everyone.

It took forever for it to get back to normal here. There was limited TP available after the initial panic, but it took months to get anything decent on the shelves. I was ordering it online for a while.

48-72 hours after the initial panic my local large food store had literally more toilet paper on the shelves than I have ever seen in there before. However it was all super low quality and from brands I've never seen before or since.

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

#338

Post by locallost »

Joeri wrote: post #323
locallost wrote: post #319

I did not read too deeply into the article, but there are some things that don't add up. 1) if it's only a demand shock and production of goods is sky high, why are all the goods missing? Apple missed its projections and blamed it on supply issues. Did e.g. TSMC crank the production up, but failed to deliver for Apple? Hard to imagine. So if there's enough goods it implies that e.g. Apple didn't sell as much as expec…

You can have a record supply and still not have enough supply to meet demand. Apple is selling record numbers of products, they have trouble getting the additional supply to meet the extra demand.

That's fair. Their revenue is up, and the projections might have been just wishful thinking. But I see many examples like these, e.g. BMW ditching touchscreens on their cars because they can't find them etc.

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

#339

Post by Jensson »

locallost wrote: post #319

I did not read too deeply into the article, but there are some things that don't add up. 1) if it's only a demand shock and production of goods is sky high, why are all the goods missing? Apple missed its projections and blamed it on supply issues. Did e.g. TSMC crank the production up, but failed to deliver for Apple? Hard to imagine. So if there's enough goods it implies that e.g. Apple didn't sell as much as expec…

> 2) speaking of stimulus, despite the claim that it's a demand shock, the article makes this claim early on: The MP3 response we saw in response to the pandemic more than made up for the incomes lost to widespread shutdowns without making up for the supply that those incomes had been producing.

Most American workers just produce local services, they aren't a part of the supply chain for consumer goods. When they work the money just goes around in the economy, they neither add nor remove anything. So before another person paid them to do a job, and then they bought some good. Now the another person buys a good, the state prints dollars for the worker so the worker can buy a good without working, meaning the good now got bought twice when before it would only have been bought once.

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

#340

Post by throaway46546 »

dagw wrote: post #337
throaway46546 wrote: post #311

Earlier quoted context omitted.

It took forever for it to get back to normal here. There was limited TP available after the initial panic, but it took months to get anything decent on the shelves. I was ordering it online for a while.

48-72 hours after the initial panic my local large food store had literally more toilet paper on the shelves than I have ever seen in there before. However it was all super low quality and from brands I've never seen before or since.

John Wayne toilet paper... it’s rough, tough and doesn't take shit off anybody.
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