5 ms·

Again, don't do magical thinking. Inflation is about things like tomatoes. The only way to make their prices go up is to reduce the amount of tomatoes produced

Again, don't do magical thinking. Inflation is about things like tomatoes. The only way to make their prices go up is to reduce the amount of tomatoes produced per year, or increase people's willingness to eat them.

gjulianm 7y ago
Isn't the price affected also by increasing wages, transportation costs, etc too?
arethuza 7y ago
"The only way to make their prices go up is to reduce the amount of tomatoes produced per year, or increase people's willingness to eat them" Or influence other people into thinking that either of those are going to happen?
crispyporkbites 7y ago
That assumes that everyone who wants to buy tomatoes is able to buy them at current prices, and that everyone who is buying tomatoes now would no longer buy them if the price went up. If there are more dollars floating around in the economy, more people may be able to afford to buy tomatoes and more people become price insenstive (e.g. software engineers in SV do not care if tomaatoes are $2/kilo or $4/kilo, they'll still buy). As a seller you'll raise prices and see no drop in demand, ergo prices go up.
fbonetti 7y ago
You’re only looking at one side of the equation. Assuming demand stays constant, if you reduce the number of tomatoes, their price will go up. Likewise if you increase the number of dollars, the price of tomatoes will also go up, because each individual dollar isn’t worth as much.
- TheSpiceIsLife 7y ago
  That only matters if people are prepared to pay more for tomatoes, which I don’t think they are as evidence by inner-city real estate prices going up way more than the price of tomatoes in inner-city groceries. On the whole people are drastically more interested in paying more for real estate / assets / buying or starting a business than they are in giving dollars to tomatoes producers. Tomato producers will take whatever they can get at market, because the produce is perishable, whereas real estate vendors can (usually) afford wait to for a greater-fool with deeper-pockets.
  - fbonetti 7y ago
    You're missing the point of the example. Substitute tomatoes with something with a long shelf life, like Spam. It doesn't matter. The point is that the people utilize leverage (loans) in order to fund investments that will yield a return greater than the interest rate paid on the loan. People don't use leverage to buy milk, cigarettes, and gasoline, which are the types of goods tracked in the Consumer Price Index (CPI). They use leverage to buy assets. So when people say that inflation has been low despite the unprecedented amount of money printed over the last 10 years, they're only looking consumer goods and not assets.
    - TheSpiceIsLife 7y ago
      Oh, sorry, I think I read for previous comment in the wrong context.

gjulianm 7y ago

Isn't the price affected also by increasing wages, transportation costs, etc too?

arethuza 7y ago

"The only way to make their prices go up is to reduce the amount of tomatoes produced per year, or increase people's willingness to eat them" Or influence other people into thinking that either of those are going to happen?

crispyporkbites 7y ago

That assumes that everyone who wants to buy tomatoes is able to buy them at current prices, and that everyone who is buying tomatoes now would no longer buy them if the price went up. If there are more dollars floating around in the economy, more people may be able to afford to buy tomatoes and more people become price insenstive (e.g. software engineers in SV do not care if tomaatoes are $2/kilo or $4/kilo, they'll still buy). As a seller you'll raise prices and see no drop in demand, ergo prices go up.

fbonetti 7y ago

You’re only looking at one side of the equation. Assuming demand stays constant, if you reduce the number of tomatoes, their price will go up. Likewise if you increase the number of dollars, the price of tomatoes will also go up, because each individual dollar isn’t worth as much.

TheSpiceIsLife 7y ago
That only matters if people are prepared to pay more for tomatoes, which I don’t think they are as evidence by inner-city real estate prices going up way more than the price of tomatoes in inner-city groceries. On the whole people are drastically more interested in paying more for real estate / assets / buying or starting a business than they are in giving dollars to tomatoes producers. Tomato producers will take whatever they can get at market, because the produce is perishable, whereas real estate vendors can (usually) afford wait to for a greater-fool with deeper-pockets.
- fbonetti 7y ago
  You're missing the point of the example. Substitute tomatoes with something with a long shelf life, like Spam. It doesn't matter. The point is that the people utilize leverage (loans) in order to fund investments that will yield a return greater than the interest rate paid on the loan. People don't use leverage to buy milk, cigarettes, and gasoline, which are the types of goods tracked in the Consumer Price Index (CPI). They use leverage to buy assets. So when people say that inflation has been low despite the unprecedented amount of money printed over the last 10 years, they're only looking consumer goods and not assets.
  - TheSpiceIsLife 7y ago
    Oh, sorry, I think I read for previous comment in the wrong context.