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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

#81

Post by Spooky23 »

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.

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

#82

Post by yesbut »

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…

Also, a lot of suppliers and shipping companies are trying to recoup their covid losses from 2020. They have increased their service costs, which causes the next guy in the chain to increase their costs, etc.

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

#83

Post by ClumsyPilot »

paul7986 wrote: post #23

Seems like all that free money and no one working has definitely caused a supply issue ... yet everyone has tons of money furthering pushing up demand yet supply to meet the demand has shrunk. For those who push for a universal basic income where large groups of people do not work ... do not help produce the supply only push up the demand. Why do you think UBI is still a good idea and you are perfectly fine with how…

"do not help produce the supply only push up the demand"

Somewhere between 30% and 50% of jobs do not 'produce' anything, they are Starbucks, Macdonalds, etc. They have no bearing on supply of goods and their shortage.

"yet everyone has tons of money furthering pushing up demand"

This was happening at the top of our wconomy for the past 30 years, thata whu the stock market and house valuations have sky rocketed.

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

#84

Post by noduerme »

So here's a thing. Covid can cause neurological damage to the brain's frontal lobe, beyond that implicated by the loss of taste and smell.

Damage to the frontal lobe causes what Neal Stephenson referred to as "poor impulse control". I think the rise in violent incidents on airplanes is linked to this.

Additionally, poor impulse control leads to impulsive spending and purchasing behavior. Compounded by lockdowns and government checks, the situation is that consumers have upped their consumption way beyond their means; but some of this I suspect is neurological as opposed to psychological.

I think wild consumer demand just happens to be right now the most visible part of an iceberg of long lasting brain damage caused by covid, that our society is about to crash into.

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

#85

Post by RC_ITR »

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, travelling internationally, etc.) is doing a bad job of adapting to new behaviors (Living decentrally, driving more, ordering out more, travelling locally. etc.) because we used to think 'People don't change very fast, we can build a just-in-time economy.'

But here's the thing about cycles, soon things will adapt to those new baselines.

Companies will carry more inventory. (until a new generation of FP&A underlings forgets what a pandemic is)

Not enough steel to make enough cars? Here's my amazing ' Airbnb for cars' startup (Hey Sand Hill, did you know, dollar for dollar, they are the most underutilized asset in the world?).

Natural gas extremely expensive? Let me introduce you to renewables, which btw are getting better and better every year.

It may be a painful few years to navigate that transition, and Bridgewater's (weak) point here is that 'hey, consumers are changing behaviors' and nothing more, which to me is a great reminder why this is happening: https://www.bloomberg.com/news/articles/2021-09-02/dalio-s-h...

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

#86

Post by clavicat »

hogFeast wrote: post #35
mattnewton wrote: post #11

Earlier quoted context omitted.

I’m not an economist, but it’s hard to shake the feeling that the CPI is gamed somehow, or at least the official government numbers do not reflect the bubble of the US I live in. My friends and family are seeing record wages and investment growth, but when my generation cohort looks at housing and all the numbers there are proportionally even higher, and people are selling 3 year old cars for nearly the nominal price…

There was an article the other week from Canada about their CPI (I can't find it right now). Their CPI calculation was using prices that were half those available in stores (butter was one product, there are large variations in prices for some primary products in Canada because of producer's co-operatives particularly in dairy), and used sizes for some products that haven't existed for decades. CPI calculations are v…

Is [this](https://www.thestar.com/business/2021/10/23/experts-say-stat...) the article?

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

#87

Post by hogFeast »

clavicat wrote: post #86
hogFeast wrote: post #35

Earlier quoted context omitted.

There was an article the other week from Canada about their CPI (I can't find it right now). Their CPI calculation was using prices that were half those available in stores (butter was one product, there are large variations in prices for some primary products in Canada because of producer's co-operatives particularly in dairy), and used sizes for some products that haven't existed for decades. CPI calculations are v…

Is [this]( https://www.thestar.com/business/2021/10/23/experts-say-stat... ) the article?

Yes.

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

#88

Post by yokem55 »

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.

So what housing cost metric should be looked at? The cost for a retiree living in their paid off home? The mortgage payment for brand new homeowner with minimal down? The cost to split an apartment for 2 people? What objective measure should be used?

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

#89

Post by markus_zhang »

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.

Not necessarily if the money goes to just a few person though.

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

#90

Post by danhak »

skybrian wrote: post #51
mattnewton wrote: post #11

Earlier quoted context omitted.

I’m not an economist, but it’s hard to shake the feeling that the CPI is gamed somehow, or at least the official government numbers do not reflect the bubble of the US I live in. My friends and family are seeing record wages and investment growth, but when my generation cohort looks at housing and all the numbers there are proportionally even higher, and people are selling 3 year old cars for nearly the nominal price…

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.

That is a really good point.

I also have a pet theory that CPI understates the cost of housing due to people who are pushed out of entering the market altogether (e.g. homelessness rising, people living with parents longer)

Sort of the same way some people say unemployment figures understate the true number by ignoring discouraged workers / people who have stopped looking altogether. I have a hunch there are many discouraged folks who have stopped looking for housing altogether.

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