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> Inflation is already almost zero in much of the West. pet theory: Inflation is way way more than zero almost everywhere (prices of services and rents reflect

> Inflation is already almost zero in much of the West. pet theory: Inflation is way way more than zero almost everywhere (prices of services and rents reflect this), but high inflation is masked by increased supply chain efficiencies, cheapening (in some cases worsening) of products and other factors, which keep prices of physical products relatively stable.

adventured 7y ago
It's asset inflation, which is where most of the Fed's inflation (eg many trillions of dollars of overvaluation into the stock market) via artificially low rates has gone since the Clinton and Bush years when they helped to spark the stock market bubble (#1, #2 and now #3) and then the housing bubble that way. Then they openly admitted to intentionally reinflating the housing market with their various market interventions and low rates. Whenever economists claim inflation is low, they're almost always exclusively talking about traditional consumer goods (in which case it is low for the most part). They comically go out of their way to ignore the inflation in housing, healthcare, education and various asset classes. Warren Buffett likes to regularly point out that the Fed's rates act like gravity on stock valuations. The lower the rates, the less gravity. The same is largely true of how housing is affected by the Fed's rates. If you want to absolutely crush housing prices, push Fed rates back up to where mortgage rates are at 15-20% again. What that all really means is, the lower the rates, the more asset valuation inflation occurs. It's just that for amusingly convenient reasons (ie to pretend inflation is lower than it is), most economists like to pretend that asset inflation doesn't count as real inflation in their models.
- zaroth 7y ago
  > Whenever economists claim inflation is low, they're almost always exclusively talking about traditional consumer goods (in which case it is low for the most part). They comically go out of their way to ignore the inflation in housing, healthcare, education and various asset classes. This is false. The CPI weights the basket of goods that comprise the index based on the types of goods that people actually consume, which includes housing (either in the form of rent or mortgage payments), energy, as well as food and consumer goods. It adjusts for consumption patterns monthly, and re-weights the entire index every 2 years. The BLS surveys rental prices as well as calculating something called “owner equivalent rent” for owner-occupied housing. > The OER and Rent indexes have the largest weights of the 211 item categories (item strata) that comprise the CPI market basket. As of December 2008 their shares of the total weight (their relative importances) in the CPI for All Urban Consumers (CPI-U), were 24.433 percent and 5.957 percent, respectively. [1] - https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...
  - deleted 7y ago
    [deleted]
- mcny 7y ago
  > Warren Buffett likes to regularly point out that the Fed's rates act like gravity on stock valuations. The lower the rates, the less gravity. The same is largely true of how housing is affected by the Fed's rates. If you want to absolutely crush housing prices, push Fed rates back up to where mortgage rates are at 15-20% again. What that all really means is, the lower the rates, the more asset valuation inflation occurs. It's just that for amusingly convenient reasons (ie to pretend inflation is lower than it is), most economists like to pretend that asset inflation doesn't count as real inflation in their models. I know what you're proposing will be very unpopular but I have an idea that will be even more unpopular: a federal property tax on land + buildings at (five percent of property valuation) per year. There will be absolutely no exceptions for anyone. Everyone must pay. This money will mostly go back to local governments, toward infrastructure and utilities (mass transit, water, electricity, fiber Internet, sewage, garbage collection, education, ... ideally automated as much as possible) and a portion will go to supplement VAT to pay for supplemental universal basic income (in addition to the freedom dividend) that more than covers the new property tax on a one bedroom somewhere in the continental United States (so not necessarily midtown Manhattan). The key difference in what I propose is the lack of exceptions. Everyone must pay regardless of whether it is a strip club or a church. You don't pay, you get evicted within fifteen years or however long we decide. I recommend eviction should happen when unpaid taxes reaches 100% of property value. My Hope is that this will absolutely crash the housing market and stop this irrational speculation in the housing market.
  - saurik 7y ago
    Normally we use the term "evicted" to imply someone with a lease no longer gets usage of the property; but in this case, these people own the property, so what are you saying happens then? Does the property get given to the government, who then... sells it? I am not complaining (yet), I just want to understand what happens in your mind after the "eviction" as the term isn't clear for me in this context.
    - mcny 7y ago
      > Normally we use the term "evicted" to imply someone with a lease no longer gets usage of the property; but in this case, these people own the property, so what are you saying happens then? Does the property get given to the government, who then... sells it? I am not complaining (yet), I just want to understand what happens in your mind after the "eviction" as the term isn't clear for me in this context. exactly. the property returns to the market to someone who is willing to pay the property tax.
pjc50 7y ago
There's a real discussion to be had here, but we have to be careful not to move the labels too much. The economics term for differential inflation in various goods is "Baumol cost disease": https://www.vox.com/new-money/2017/5/4/15547364/baumol-cost-disease-explained https://www.vox.com/new-money/2017/5/4/15547364/baumol-cost-... Tremendous graph there. Basically, services that have to be provided by western labour in the west have got much more expensive, while goods that can be imported have got much cheaper.
- barry-cotter 7y ago
  > Basically, services that have to be provided by western labour in the west have got much more expensive, while goods that can be imported have got much cheaper. This is broadly true though the bit about the West and imports is unnecessary. Manufactured goods have gotten cheaper whether imported or not in real terms, and services get more expensive in relative terms as a consequence. Some of this is probably a result of government misregulation but not all. Cosmetic surgery isn’t covered by insurance, nor is LASIK or hair loss treatment and in inflation adjusted terms prices have been basically flat for over a decade, neglecting the huge increases in quality. Education probably has similarly large inefficiencies, even outside institutions that exist only because of easily available student loans and non-existent quality control like the University of Phoenix. But Cost Disease is the inevitable product of economic growth. The more capital you have the more labor will be paid because Money is just less valuable to you when you have lots and labour vice versa. A long report on Baumol’s cost disease in the US context and internationally. https://www.mercatus.org/system/files/helland-tabarrok_why-are-the-prices-so-damn-high_v1.pdf https://www.mercatus.org/system/files/helland-tabarrok_why-a...
  - sokoloff 7y ago
    > This is broadly true though the bit about the West and imports is unnecessary. Manufactured goods have gotten cheaper whether imported or not in real terms This must be interpreted in the context of a large fraction of manufacturing moving off shore in the last 75 years. Manufacturing which remained has become significantly less labor intensive (because that which didn’t has moved to lower labor cost locations).
lotsofpulp 7y ago
Inflation is the opposite of cheapening, so I don’t see how that can be. What you may be feeling though, and what isn’t calculated in any numbers, are the increases in volatility, which is itself a cost. The volatility of not living in the few economically burgeoning regions, the volatility of having to keep moving up the ladder or else falling behind, increased years of education and loans for what may or may not be a lucrative career, etc.
- BoorishBears 7y ago
  Cheapening was just one of the above comments points... strange to try and dismiss it on that part alone. But yeah, if I add filler to my soap so that it costs me 20% less to make, but requires you to use 20% more for efficacy, I've cheapened the good, and inflated it's cost.
- pjc50 7y ago
  Parent is probably referring to "shrinkflation": rather than charge 10% more for a box of cereal, make it 10% smaller for the same price. Or otherwise reduce the cost of inputs. > volatility Definitely worth having a discussion on this, although we need to define the reference period - volatility was high in the 60s, 70s, and 80s. Arguably it was only low in the ""end of history"" period between the fall of the Berlin wall and the 2008 crisis.
- deleted 7y ago
  [deleted]

adventured 7y ago

It's asset inflation, which is where most of the Fed's inflation (eg many trillions of dollars of overvaluation into the stock market) via artificially low rates has gone since the Clinton and Bush years when they helped to spark the stock market bubble (#1, #2 and now #3) and then the housing bubble that way. Then they openly admitted to intentionally reinflating the housing market with their various market interventions and low rates. Whenever economists claim inflation is low, they're almost always exclusively talking about traditional consumer goods (in which case it is low for the most part). They comically go out of their way to ignore the inflation in housing, healthcare, education and various asset classes. Warren Buffett likes to regularly point out that the Fed's rates act like gravity on stock valuations. The lower the rates, the less gravity. The same is largely true of how housing is affected by the Fed's rates. If you want to absolutely crush housing prices, push Fed rates back up to where mortgage rates are at 15-20% again. What that all really means is, the lower the rates, the more asset valuation inflation occurs. It's just that for amusingly convenient reasons (ie to pretend inflation is lower than it is), most economists like to pretend that asset inflation doesn't count as real inflation in their models.

zaroth 7y ago
> Whenever economists claim inflation is low, they're almost always exclusively talking about traditional consumer goods (in which case it is low for the most part). They comically go out of their way to ignore the inflation in housing, healthcare, education and various asset classes. This is false. The CPI weights the basket of goods that comprise the index based on the types of goods that people actually consume, which includes housing (either in the form of rent or mortgage payments), energy, as well as food and consumer goods. It adjusts for consumption patterns monthly, and re-weights the entire index every 2 years. The BLS surveys rental prices as well as calculating something called “owner equivalent rent” for owner-occupied housing. > The OER and Rent indexes have the largest weights of the 211 item categories (item strata) that comprise the CPI market basket. As of December 2008 their shares of the total weight (their relative importances) in the CPI for All Urban Consumers (CPI-U), were 24.433 percent and 5.957 percent, respectively. [1] - https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...
- deleted 7y ago
  [deleted]
mcny 7y ago
> Warren Buffett likes to regularly point out that the Fed's rates act like gravity on stock valuations. The lower the rates, the less gravity. The same is largely true of how housing is affected by the Fed's rates. If you want to absolutely crush housing prices, push Fed rates back up to where mortgage rates are at 15-20% again. What that all really means is, the lower the rates, the more asset valuation inflation occurs. It's just that for amusingly convenient reasons (ie to pretend inflation is lower than it is), most economists like to pretend that asset inflation doesn't count as real inflation in their models. I know what you're proposing will be very unpopular but I have an idea that will be even more unpopular: a federal property tax on land + buildings at (five percent of property valuation) per year. There will be absolutely no exceptions for anyone. Everyone must pay. This money will mostly go back to local governments, toward infrastructure and utilities (mass transit, water, electricity, fiber Internet, sewage, garbage collection, education, ... ideally automated as much as possible) and a portion will go to supplement VAT to pay for supplemental universal basic income (in addition to the freedom dividend) that more than covers the new property tax on a one bedroom somewhere in the continental United States (so not necessarily midtown Manhattan). The key difference in what I propose is the lack of exceptions. Everyone must pay regardless of whether it is a strip club or a church. You don't pay, you get evicted within fifteen years or however long we decide. I recommend eviction should happen when unpaid taxes reaches 100% of property value. My Hope is that this will absolutely crash the housing market and stop this irrational speculation in the housing market.
- saurik 7y ago
  Normally we use the term "evicted" to imply someone with a lease no longer gets usage of the property; but in this case, these people own the property, so what are you saying happens then? Does the property get given to the government, who then... sells it? I am not complaining (yet), I just want to understand what happens in your mind after the "eviction" as the term isn't clear for me in this context.
  - mcny 7y ago
    > Normally we use the term "evicted" to imply someone with a lease no longer gets usage of the property; but in this case, these people own the property, so what are you saying happens then? Does the property get given to the government, who then... sells it? I am not complaining (yet), I just want to understand what happens in your mind after the "eviction" as the term isn't clear for me in this context. exactly. the property returns to the market to someone who is willing to pay the property tax.

pjc50 7y ago

There's a real discussion to be had here, but we have to be careful not to move the labels too much. The economics term for differential inflation in various goods is "Baumol cost disease": https://www.vox.com/new-money/2017/5/4/15547364/baumol-cost-disease-explained https://www.vox.com/new-money/2017/5/4/15547364/baumol-cost-... Tremendous graph there. Basically, services that have to be provided by western labour in the west have got much more expensive, while goods that can be imported have got much cheaper.

barry-cotter 7y ago
> Basically, services that have to be provided by western labour in the west have got much more expensive, while goods that can be imported have got much cheaper. This is broadly true though the bit about the West and imports is unnecessary. Manufactured goods have gotten cheaper whether imported or not in real terms, and services get more expensive in relative terms as a consequence. Some of this is probably a result of government misregulation but not all. Cosmetic surgery isn’t covered by insurance, nor is LASIK or hair loss treatment and in inflation adjusted terms prices have been basically flat for over a decade, neglecting the huge increases in quality. Education probably has similarly large inefficiencies, even outside institutions that exist only because of easily available student loans and non-existent quality control like the University of Phoenix. But Cost Disease is the inevitable product of economic growth. The more capital you have the more labor will be paid because Money is just less valuable to you when you have lots and labour vice versa. A long report on Baumol’s cost disease in the US context and internationally. https://www.mercatus.org/system/files/helland-tabarrok_why-are-the-prices-so-damn-high_v1.pdf https://www.mercatus.org/system/files/helland-tabarrok_why-a...
- sokoloff 7y ago
  > This is broadly true though the bit about the West and imports is unnecessary. Manufactured goods have gotten cheaper whether imported or not in real terms This must be interpreted in the context of a large fraction of manufacturing moving off shore in the last 75 years. Manufacturing which remained has become significantly less labor intensive (because that which didn’t has moved to lower labor cost locations).

lotsofpulp 7y ago

Inflation is the opposite of cheapening, so I don’t see how that can be. What you may be feeling though, and what isn’t calculated in any numbers, are the increases in volatility, which is itself a cost. The volatility of not living in the few economically burgeoning regions, the volatility of having to keep moving up the ladder or else falling behind, increased years of education and loans for what may or may not be a lucrative career, etc.

BoorishBears 7y ago
Cheapening was just one of the above comments points... strange to try and dismiss it on that part alone. But yeah, if I add filler to my soap so that it costs me 20% less to make, but requires you to use 20% more for efficacy, I've cheapened the good, and inflated it's cost.
pjc50 7y ago
Parent is probably referring to "shrinkflation": rather than charge 10% more for a box of cereal, make it 10% smaller for the same price. Or otherwise reduce the cost of inputs. > volatility Definitely worth having a discussion on this, although we need to define the reference period - volatility was high in the 60s, 70s, and 80s. Arguably it was only low in the ""end of history"" period between the fall of the Berlin wall and the 2008 crisis.
deleted 7y ago
[deleted]