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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

#351

Post by wexler88 »

Spooky23 wrote: post #81
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…

It’s a whiptail effect. Shifts in demand and supply cascade and create unpredictable effects. For example, the rush on toilet paper triggered more production, which reduced pulp supplies, which constrained golf cart supply. Why? Seats are made from particleboard, made from pulp. Plus, golf courses bought more carts than usual due to lockdown restrictions.

Was the particleboard really the operative constraint? Or is the explanation about extra demand the correct one?

It seems plausible that golf cart manufacturers aren't ready to handle extremely spiky demand. Also, that the toilet paper explanation begins as a joke or a guess, and takes hold because everyone likes it as a story.

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

#352

Post by wexler88 »

sleepysysadmin wrote: post #348
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…

>Maybe everyone can afford a jet ski all of a sudden? No, the stims didn’t really do /that/ kind of wealth expansion. US money supply M0 in late 2019 was low around 3.5 trillion. Today it's around 6.4 trillion. This doesn't equate to 100% inflation, but it certainly equates to affording jet skis. M2 money supply is sitting around 21 trillion and ought to be more around 16 trillion. This is the equivalent to 31% locke…

This is not how money works.

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

#353

Post by [deleted] »

throwaway2331 wrote: post #6

For anyone scratching their head on what "MP3" is: monetary policy 3, i.e. "helicopter money," i.e. "the government be handin out them stimmies," i.e. the government injected COVID-19 relief funds into the economy, giving an across-the-board increase in demand for goods & services, but there aren't enough "goods & services" to keep up with this demand.

[deleted]

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

#354

Post by colinmhayes »

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.

Krugman's political takes are scorching, but he's still a respected economist.

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

#355

Post by wexler88 »

bezalmighty wrote: post #48
evergrande wrote: post #29

Earlier quoted context omitted.

Actually, that's a good point. Inflation would be even worse if that cash was going into physical goods and services. The government now has an incentive to leave crypto alone aside from providing clarity.

In the macro economic sense, fiat money isn't 'used up' or 'locked away' when you buy something like crypto, it's transferred from your account to someone else's bank account. Worse, it goes through the process of fractional reserve banking and multiplies about ~10x after changing hands repeatedly.

First sentence absolutely correct, second sentence absolute garbage.

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

#356

Post by slv77 »

paganel wrote: post #242
kovacs wrote: post #142

Earlier quoted context omitted.

Organic demand growth is what we want, not this Frankenstein economy that's been created since at least 2008 if not earlier. Demand doesn't boost GDP, producing real goods and services boosts GDP. You can't spend your way to prosperity despite what any of the insane MMT economists might say. I agree that wage growth is good but not in the manner it's happening right now, through insanely easy money policies creating…

> not this Frankenstein economy that's been created since at least 2008 if not earlier For what it's worth the US has economically out-competed the European Union in that time-frame, with the US basically following Keynes and the UE going the austerity route most of the time (and only at times, begrudgingly, also following Keynes as a result of the Americans doing it first). There's also China that has out-competed t…

Both the US and China have paid the costs as that liquidity has flooded into speculative assets such as land which has increased wealth inequality. In addition it likely has resulted in misallocation of capital and a future tidal wave of bad debt.

While households are typically cash constrained economies operating in a fiat system rarely are because cash is essentially created at will by the banking industry. Economic constraints are largely due to the ability to identify, fund and execute in good investments that will provide a reasonable return on capital given the risk.

Is there any investment area in the economy that is currently constrained by the lack of cash?

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

#357

Post by croutonwagon »

throaway46546 wrote: post #299
ajsnigrutin wrote: post #281

Earlier quoted context omitted.

Covid lockdowns have a a lot to do with that too. People used to spent their money in restaurants, bars, cinemas, theaters, parties, festivals, massages, hairdressers, and a bunch of other services. If you add lockdowns, many things happen: * people have leftover money, that they instead spend on "things"... and since they're used to using less services, this is also true for some time after the lockdowns * If you're…

>Some lockdown policies directly affect your 'need for stuff' I think this was the root cause of the toilet paper shortage. People who normally spend a large portion of the day at the office were now spending that time at home. There was a popular viral video at the time of a man driving around on a forklift in a warehouse full of toilet paper laughing about the shortage, but it was all commercial toilet paper not wh…

That and I believe I read that most people used the stimulus to paid down/off debt [1][2]. I would suspect at least a portion of those used that opportunity to also take on more debt down the line as jobs came back

[1] https://www.census.gov/library/stories/2021/03/many-american...

[2] https://www.businessinsider.com/half-of-americans-used-1400-...

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

#358

Post by throwtheacctawy »

wexler88 wrote: post #345
rsj_hn wrote: post #153

Earlier quoted context omitted.

> Natural gas extremely expensive? Let me introduce you to renewables, which btw are getting better and better every year. Shutting down a natural gas pipeline that people depend upon just before winter, and then lecturing them about solar panels is not a good look. Artificially increasing the price of natural gas causes famines, it causes food and fertilizer to be more expensive, and it makes it hard for people to h…

Solar is an excellent replacement for home heating oil during the Michigan winters. The vast majority of people in Michigan are already connected to an extremely efficient distribution network for electricity. The marginal cost of delivering additional energy through this network does not round to zero, it is zero. Meanwhile heating oil is delivered by trucks with a large cost in depreciation, labor, and fuel (furthe…

I live in Michigan. I have a 5.9kwh solar array. Spring/fall, I can produce over 40kwh/day. Summer heat lowers my production to upper 30-40kwh.

January 2021, I produced 197kwh the entire month.

I know this discussion is focused on heating. But from an electric vehicle perspective; 197kwh is not that much. In the winter, I don't think it would be enough electricity for a homes electric needs + EV or electric heat.

I can make 1MWh over 1 month in the summer. Basically, Michigan has short days in the winter. Snow does sit on top of the solar array until it melts, which robs me of production during sunny winter days.

It wouldn't be impossible to use solar to replace heating oil in Michigan, and the over capacity installed to satisfy winter demand could serve as a "peaker plant" during the warm summer months.

While I know renewables have decreased in costs, I think the costs related to building overcapacity is a hindrance.

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

#359

Post by MeinBlutIstBlau »

fallingknife wrote: post #233
MeinBlutIstBlau wrote: post #219

Earlier quoted context omitted.

until the bubble bursts and bankrupts shittons of people causing bank runoffs and failures...like in 1929 and 2008...

Banks don't have any significant portion of their assets in crypto, so no.

Banks don't need to be. If half their customers declare bankruptcy or default on their mortgages, loans, etc; The bank won't have enough liquid assets to take on the subprime loans.

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

#360

Post by pirate787 »

grayfaced wrote: post #206
KittenInABox wrote: post #147

Earlier quoted context omitted.

Isn't that why the US government has longstanding agricultural subsidies, guarantees on prices, etc.? Do we really have a shortage of food?

That's the stated purpose. But it has no teeth. Last year we saw aisles empty of meat and lots of news about meat shortages. But during that time domestic pork supplies were down 40% in the same period that pork exports to China quadrupled. Those subsidies failed in their stated purpose of resiliency. During the bad times, all that mattered is where more profit could be found.

The US doesn't subsidize meat production, your comment has no basis in fact.
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