6 ms·

This sounds like inflation. Didn't the economics say there wouldn't be any/much as a result of printing so much money?

by robbyt 6y ago

jldugger 6y ago
It's not impossible to disentangle inflation from a general supply shock such as COVID. The price of oil, for example, hints that something besides the money supply is at play.
dragonwriter 6y ago
> This sounds like inflation. General inflation would, by definition, extend beyond food prices. Of course, it is, by definition, inflation in that specific sector. > Didn't the economics say there wouldn't be any/much as a result of printing so much money? And there isn't much sign of general inflation, which is what you'd expect if the key driver were money supply.
- pdonis 6y ago
  > there isn't much sign of general inflation, which is what you'd expect if the key driver were money supply. It's too early for much of the newly printed money to have spread out into the economy. We won't know how much inflation printing the money caused for some years, since it will take a while for the rest of the economy to adjust to the new money supply.
  - dragonwriter 6y ago
    > It's too early for much of the newly printed money to have spread out into the economy No, it's not, though if it was that would be another argument against the claim that food prices were an effect of monetart-policy-driven inflation. > We won't know how much inflation printing the money caused for some years If monetary policy had that much lag there'd be little point to it at all.
    - pdonis 6y ago
      > No, it's not Why not? Money doesn't instantly magically transport itself to all parts of the economy. First the people who get the printed money have to spend it--and many of them haven't even gotten it yet. Then the ripple effects of the spending have to propagate through the rest of the economy. That can take a while. > if it was that would be another argument against the claim that food prices were an effect of monetart-policy-driven inflation At this point in time I would agree; there hasn't been enough time for people to have spent enough of the printed money on food. However, since a fair chunk of the printed money is going to people who need it for basic living expenses, I would expect a fair chunk of it to be spent on food over the next few months, which will probably drive food prices up further--or will offset at least some of the price decreases to be expected as supply chains adjust. > If monetary policy had that much lag there'd be little point to it at all. This would come as a great surprise to the Federal Reserve board members and all of the economists who are always pointing out that the Fed has to base policy on estimates of what things will be like some time in the future, since monetary policy has a time lag. Try Google searching on "federal reserve monetary policy time lag" and see what hits come up.
      - dragonwriter 6y ago
        > Try Google searching on "federal reserve monetary policy time lag" and see what hits come up. Funny that when I did that I found pieces saying exactly what I already knew: that monetary policy changes tend to measurable effects quickly but still take a significant time to reach their peak effect (6-8 quarters), which is what the “policy lag” refers to, and then have reduced effect past that point. Policy lag doesn't mean that it takes a long time for monetary policy to start having noticeable impacts, which is what was suggested.
        pdonis 6y ago
        > monetary policy changes tend to measurable effects quickly Measureable effects on interest rates quickly. The reason for that is simple: the interest rates that are measured are usually tied directly to the Fed's rates (usually with an offset that depends on the particular kind of loan) and thus move with them. But we're not talking about interest rates here. We're talking about prices of commodities like food, which are part of the things that "lag". > it takes a long time for monetary policy to start having noticeable impacts, which is what was suggested. What was suggested is that it takes time for monetary policy to start having noticeable impacts on food prices (and more generally prices of commodities).
- darkerside 6y ago
  Based on historic drops in US consumer spending, down 14% in April, maybe what we're seeing is the absence of what might be an expected deflation
wbl 6y ago
Making food just got a bunch harder due to COVID: prices will rise as a result!
perl4ever 6y ago
People have to do stuff in the short term to adapt to new conditions. There's a lot of disruption right now simply because people and stuff have to be moved around. That's not the same thing as a long term shortage of anything, but it has a real cost in terms of physical goods or labor or money. Why should this be permanent? If more flour needs to be allocated to home use than restaurants, restructuring the supply chain is not something that goes on forever, whether restaurants mostly reopen or not.

This sounds like inflation. Didn't the economics say there wouldn't be any/much as a result of printing so much money?

by robbyt 6y ago

This sounds like inflation. Didn't the economics say there wouldn't be any/much as a result of printing so much money?

It's not impossible to disentangle inflation from a general supply shock such as COVID. The price of oil, for example, hints that something besides the money supply is at play.

dragonwriter 6y ago

> This sounds like inflation. General inflation would, by definition, extend beyond food prices. Of course, it is, by definition, inflation in that specific sector. > Didn't the economics say there wouldn't be any/much as a result of printing so much money? And there isn't much sign of general inflation, which is what you'd expect if the key driver were money supply.

pdonis 6y ago
> there isn't much sign of general inflation, which is what you'd expect if the key driver were money supply. It's too early for much of the newly printed money to have spread out into the economy. We won't know how much inflation printing the money caused for some years, since it will take a while for the rest of the economy to adjust to the new money supply.
- dragonwriter 6y ago
  > It's too early for much of the newly printed money to have spread out into the economy No, it's not, though if it was that would be another argument against the claim that food prices were an effect of monetart-policy-driven inflation. > We won't know how much inflation printing the money caused for some years If monetary policy had that much lag there'd be little point to it at all.
  - pdonis 6y ago
    > No, it's not Why not? Money doesn't instantly magically transport itself to all parts of the economy. First the people who get the printed money have to spend it--and many of them haven't even gotten it yet. Then the ripple effects of the spending have to propagate through the rest of the economy. That can take a while. > if it was that would be another argument against the claim that food prices were an effect of monetart-policy-driven inflation At this point in time I would agree; there hasn't been enough time for people to have spent enough of the printed money on food. However, since a fair chunk of the printed money is going to people who need it for basic living expenses, I would expect a fair chunk of it to be spent on food over the next few months, which will probably drive food prices up further--or will offset at least some of the price decreases to be expected as supply chains adjust. > If monetary policy had that much lag there'd be little point to it at all. This would come as a great surprise to the Federal Reserve board members and all of the economists who are always pointing out that the Fed has to base policy on estimates of what things will be like some time in the future, since monetary policy has a time lag. Try Google searching on "federal reserve monetary policy time lag" and see what hits come up.
    - dragonwriter 6y ago
      > Try Google searching on "federal reserve monetary policy time lag" and see what hits come up. Funny that when I did that I found pieces saying exactly what I already knew: that monetary policy changes tend to measurable effects quickly but still take a significant time to reach their peak effect (6-8 quarters), which is what the “policy lag” refers to, and then have reduced effect past that point. Policy lag doesn't mean that it takes a long time for monetary policy to start having noticeable impacts, which is what was suggested.
      - pdonis 6y ago
        > monetary policy changes tend to measurable effects quickly Measureable effects on interest rates quickly. The reason for that is simple: the interest rates that are measured are usually tied directly to the Fed's rates (usually with an offset that depends on the particular kind of loan) and thus move with them. But we're not talking about interest rates here. We're talking about prices of commodities like food, which are part of the things that "lag". > it takes a long time for monetary policy to start having noticeable impacts, which is what was suggested. What was suggested is that it takes time for monetary policy to start having noticeable impacts on food prices (and more generally prices of commodities).
darkerside 6y ago
Based on historic drops in US consumer spending, down 14% in April, maybe what we're seeing is the absence of what might be an expected deflation

wbl 6y ago

Making food just got a bunch harder due to COVID: prices will rise as a result!

perl4ever 6y ago

People have to do stuff in the short term to adapt to new conditions. There's a lot of disruption right now simply because people and stuff have to be moved around. That's not the same thing as a long term shortage of anything, but it has a real cost in terms of physical goods or labor or money. Why should this be permanent? If more flour needs to be allocated to home use than restaurants, restructuring the supply chain is not something that goes on forever, whether restaurants mostly reopen or not.