7 ms·

Yep. There's a concerted effort to keep bringing up high inflation as a means of forcing more austerity. The mythical "high inflation" hasn't materialized but t

by derg 6y ago

Yep. There's a concerted effort to keep bringing up high inflation as a means of forcing more austerity. The mythical "high inflation" hasn't materialized but the cries continue to happen.

take_a_breath 6y ago
There is a reasonable argument that we do have inflation, it’s just being shown in assets prices, not commodity prices. Things like education, housing, stocks, art, startup valuations, and more have signs of inflation even if oil and food prices don’t.
- derg 6y ago
  I would agree to this but this isn't necessarily a blanket monetary policy of spending too much money across the board and is a result of political capture by the wealthy where it's used to keep fueling the infinite growth machine for the already wealthy. I mean housing policy in itself is entirely political: weaponized zoning laws and the lack of new construction to match the growth of the country are a direct result of this infinite growth machine. Housing being considered "an investment" will further perpetuate this price inflation because there is a vested interest in not allowing property values to decrease which is what happens when you can build to match demand.
  - PoachedSausage 6y ago
    The housing situation is one giant prisoners dilemma loose-loose, nobody wants to loose out. I've long believed that houses/land are overpriced but I've recently (Just prior to Covid) become a home owner because I needed somewhere to live and the mortgage repayments are cheaper than rent here. It could have been a spectacularly bad move.
    - sacred_numbers 6y ago
      Well, it's not a lose lose situation to the people that don't own property yet. They would greatly benefit from housing costs dropping, since they could afford to buy their own house or pay less in rent. The problem is that the people who don't own property tend to have less political power and influence than property owners.
      - PoachedSausage 6y ago
        I agree that the basic human need of shelter should be more affordable. I remember 10 years ago, when prices dropped after the financial crisis, people were saying "this is it" but it is politcally untenable to allow prices to drop. So those that didn't own eventually got tired of waiting and then when they have bought they don't want a drop, because who wants to burn money?
        RestlessMind 6y ago
        > I agree that the basic human need of shelter should be more affordable. Affordable where? In West Texas or in Paris? Today, Paris' population is ~2M and the residential buildings cannot be taller than 50m by law. If 10M people want to live there, is it a "basic human right" to build 10M homes for them by replacing existing Parisian building by skyscrapers? What will that do to the existing fabric/culture of the city, and who gets to decide what is allowed? Existing residents or the would-be residents?
        PoachedSausage 6y ago
        Perhaps the question isn't where but when. 40 years ago my parents were able to buy a large modern home for about 3 times times one of their salaries. For young people today it is more like 6 - 10 times the combined salaries of two people.
        RestlessMind 6y ago
        Where did your parents live? In mid-west or in suburbs or in Manhattan? Where are young people living today and are those similar locations as their parents?
    - secabeen 6y ago
      It could be a bad move overall, but there is a floor to the loss, because you get a secure roof over your head that you can become attached to. That has value, especially with a family and community nearby.
- atomi 6y ago
  All that extra liquidity is going straight to capital assets. People think deflationary assets are a good thing (for themselves), but they tend to promote stagnation.
- natch 6y ago
  Agreeing with what you have said here, but you might have to leave food prices out of the argument soon. I don’t know what numbers economists look at for this, but just as naive consumers we are noticing that food prices are going up.
- somethoughts 6y ago
  This is correct based on data I've looked at. In fact if you are okay choosing non-capacity constrained housing and education, even those are not having much inflation. If you are okay with community college or even better self motivated to learn online it is very much affordable. If you are ok not living where every else is, the cost of a house is inflating by cost of lumber and local labor costs versus infinite inflation for houses which face land/NIMBY/zoning constraints.
- ls612 6y ago
  Housing and education are both represented in the CPI. Housing alone is almost a third of it.
  - adjkant 6y ago
    I haven't dug in recently to the CPI, but I wouldn't be surprised to find underlying flaws in the CPI's representation of different groups of people such as people who live in urban areas, people who are in a specific income bracket, etc. The CPI may reflect those things, but if those proportions are off it can significantly affect the inflation number it spits out. I'm not an economic expert but it baffles me that people pay attention to a single CPI and don't look at many at once when analyzing economic policy. A single CPI optimization is inherently going to cater towards the effects on one group, but without study we don't even know what that group is.
- JamesBarney 6y ago
  Education, housing(rent, not the price of a house), and medical care. Are all included in the CPI. Education and medical care are going up due to reasons unrelated to inflation. Shelter is going up at 3% due to supply constraints. The prices of houses, stocks, art, and startups are not. The reason is that assets prices are very heavily affected by interest rates. Imagine a house that costs $100,000 but rents out for 10,000 a year in profit because interest rate are 10%. Now imagine interest rates drop to 1%. Arbitrage will mean that individuals will borrow money at 1% and buy the house and collect 10%. This drives up the price until the return on the house matches the return of other investments, or basically until the house is worth $1,000,000. Now the cost of rent hasn't changed, but the price of the house has gone up 1,000%. Did the economy experience 1,000% inflation? No because the cost of living hasn't changed.
  - take_a_breath 6y ago
    Assets experienced a 1,000% inflation. People can still scrape by being consumers and renters (cost-of-living), but owning assets moves farther and farther out of reach. Since our economic system is built on assets (they appreciate, you can borrow against them, etc.), the inequality gap keeps growing.
- yomly 6y ago
  Yes there is so much mental gymnastics involved in "basket of goods" My dad bought a house and had a kid in London aged 27. He didn't even have a degree and was an immigrant arriving with all the money he had scrounged in his hand. Compare that with the London of today where £200k buys you a 80sqft squat: https://www.dailymail.co.uk/news/article-8541513/Micro-studio-flat-shower-sink-bed-goes-sale-Notting-Hill-200-000.html https://www.dailymail.co.uk/news/article-8541513/Micro-studi... But you know, house prices and rent aren't a good so there's no inflation so there's no problem right? /s
antisthenes 6y ago
I've come to consider the official inflation figures as absolute nonsense. It's a shame, really, because the BLS does a lot of good work, and outdated metric calculation methods really put a tarnish on an otherwise great agency. I'm not sure how much of that is being held hostage to political goals. Things that are in actual demand [1], like health care, education and housing (in desirable areas) have absolutely been outpacing inflation. Sure, if you measure the absolute basics needed to not die in a society, the figures might make sense (as it would be mostly food and clothing, both of which are dirt cheap. So cheap in fact that most of the time they can be had for free! Thrift stores and food banks are your friend) But if we're talking about a thriving society and population, surely our aims should be set higher than the very first step on Maslow's hierarchy of needs? [1](it's not Smart TVs and Smartphones, although even flagship smartphones have recently ballooned in price far outstripping any sort of inflation figures)
- derg 6y ago
  > But if we're talking about a thriving society and population, surely our aims should be set higher than the very first step on Maslow's hierarchy of needs? Very much agreed. The issues with sectors that have been outpacing inflation aren't due to a blanket "we're pumping too much fiat into the economy" but are absolutely political choices. Healthcare: The US does spend too much here for what we get in return but this is a political choice. We could institute Medicare for All and _save_ money [0] Education: Again political here. How much funding has been stripped at the state/local level for the universities and how much can be attributed to extremely bloated administrations? Other countries can manage education just fine. Housing: this is current housing being weaponized to increase the value of property while artificially limiting what, where, when, who, and how much can be built at any given time. See: all of California. Housing as strictly a monetary investment now dictates that nothing is ever allowed to depreciate, only ever increase. [0]https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(19)33019-3/fulltext https://www.thelancet.com/journals/lancet/article/PIIS0140-6...
  - secabeen 6y ago
    > Healthcare: The US does spend too much here for what we get in return but this is a political choice. We could institute Medicare for All and _save_ money. This is absolutely true, but also exceptionally hard. Extracting the $1 Trillion/yr out of the current healthcare system is going to put a lot of people out of work. We'll need a good system to re-train them for new work too.
staplers 6y ago
I find myself waiting and hoping for a complete and utter financial crash just for the opportunity to be able to afford a home. My income is several times above the poverty line. It makes me feel sad and guilty but that is the reality. Inflation is real when you look for it.
- mrep 6y ago
  Have you considered looking for a job outside of the west coast because inflation adjusted price per square foot hasn't actually changed for a lot of the US [0]. It's mainly just the west coast where home prices have ballooned (in the US at least). [0]: 0]: https://www.supermoney.com/inflation-adjusted-home-prices/ https://www.supermoney.com/inflation-adjusted-home-prices/
  - natch 6y ago
    Looking for just one job is not enough. To feel secure leaving silicon valley, you need a wide choice of jobs and employers in the area where you go to, in case the first job doesn’t last. From here every other place looks to have more limited options.
    - mrep 6y ago
      The bay area might have the most programmers, but there are still tons of programmer jobs outside of it. 80% of programmers don't live in california [0]. Almost every fortune 500 company has some software developers so there are jobs in every decent size metropolitan area. A lot of the big companies also have satellite offices you can work at. I just moved from Seattle to Chicago and it only cost me 4% of my salary and I've already had 5 recruiters ping me on linkedin since I moved here a few weeks ago. [0]: https://dqydj.com/number-of-developers-in-america-and-per-state/ https://dqydj.com/number-of-developers-in-america-and-per-st...
    - LargeWu 6y ago
      Well, it's clearly a tradeoff. By staying in the Valley, you are prioritizing having options at many startups at the expense of home ownership. I live in Minneapolis. Not as wide ranging options here, but many of them are at fortune 500 companies (relatively stable), and homes are affordable. I'm sure you can find examples in many other similar cities. The Valley may have the most opportunities of anywhere, but to say that there's just no work anywhere else is a bit ridiculous.
martin_bech 6y ago
Well it has in Venezuela, with the printing of money. But maybe you need a measure of scarcity to trigger high inflation.
nostrademons 6y ago
There's a tangent on this in Carlota Perez's Technological Revolutions and Financial Capital. Basically you get this phenomena of "two moneys" - rather than the economy acting as a monolithic entity, a new socioeconomic system grows up around the new fundamental technologies, and then goods/services/assets that are connected to the new economy (tech companies, programmer & data scientist salaries, Silicon Valley real estate, SV daycare prices) inflate rapidly while everything connected to the old economy remains stagnant. This sucks if you're trying to manage daily life in the new economy - you may be making $600K/year, but a crappy house is now $3M. It's pretty awesome if you're in the new economy but buying something from the old economy though. A new TV is about an hour of compensation for a mid-level Googler; a cruise to Antarctica is about a month's worth. The usual outcome of this situation is something far worse than high inflation. Instead, you typically get a financial crisis, then war and conquest as the new technologies are applied to weaponry.
- Can_Not 6y ago
  Reminds me of the heightening contradiction, my generation is "criticized" for buying Starbucks instead of saving for a home, so sure I'll not drink a Starbucks daily for 577 years and use that money to buy a home. It's financial advice that ignores the fundamental problem.
taneq 6y ago
Inflation is a consequence of 'the average consumer' having more money to spend and thence becoming less price sensitive. The reason we haven't seen inflation is that the stupendous amounts of money printed recently have all gone to people who already have more than enough cash to spend.

by derg 6y ago

Yep. There's a concerted effort to keep bringing up high inflation as a means of forcing more austerity. The mythical "high inflation" hasn't materialized but the cries continue to happen.

take_a_breath 6y ago

There is a reasonable argument that we do have inflation, it’s just being shown in assets prices, not commodity prices. Things like education, housing, stocks, art, startup valuations, and more have signs of inflation even if oil and food prices don’t.

derg 6y ago
I would agree to this but this isn't necessarily a blanket monetary policy of spending too much money across the board and is a result of political capture by the wealthy where it's used to keep fueling the infinite growth machine for the already wealthy. I mean housing policy in itself is entirely political: weaponized zoning laws and the lack of new construction to match the growth of the country are a direct result of this infinite growth machine. Housing being considered "an investment" will further perpetuate this price inflation because there is a vested interest in not allowing property values to decrease which is what happens when you can build to match demand.
- PoachedSausage 6y ago
  The housing situation is one giant prisoners dilemma loose-loose, nobody wants to loose out. I've long believed that houses/land are overpriced but I've recently (Just prior to Covid) become a home owner because I needed somewhere to live and the mortgage repayments are cheaper than rent here. It could have been a spectacularly bad move.
  - sacred_numbers 6y ago
    Well, it's not a lose lose situation to the people that don't own property yet. They would greatly benefit from housing costs dropping, since they could afford to buy their own house or pay less in rent. The problem is that the people who don't own property tend to have less political power and influence than property owners.
    - PoachedSausage 6y ago
      I agree that the basic human need of shelter should be more affordable. I remember 10 years ago, when prices dropped after the financial crisis, people were saying "this is it" but it is politcally untenable to allow prices to drop. So those that didn't own eventually got tired of waiting and then when they have bought they don't want a drop, because who wants to burn money?
      - RestlessMind 6y ago
        > I agree that the basic human need of shelter should be more affordable. Affordable where? In West Texas or in Paris? Today, Paris' population is ~2M and the residential buildings cannot be taller than 50m by law. If 10M people want to live there, is it a "basic human right" to build 10M homes for them by replacing existing Parisian building by skyscrapers? What will that do to the existing fabric/culture of the city, and who gets to decide what is allowed? Existing residents or the would-be residents?
        PoachedSausage 6y ago
        Perhaps the question isn't where but when. 40 years ago my parents were able to buy a large modern home for about 3 times times one of their salaries. For young people today it is more like 6 - 10 times the combined salaries of two people.
        RestlessMind 6y ago
        Where did your parents live? In mid-west or in suburbs or in Manhattan? Where are young people living today and are those similar locations as their parents?
  - secabeen 6y ago
    It could be a bad move overall, but there is a floor to the loss, because you get a secure roof over your head that you can become attached to. That has value, especially with a family and community nearby.
atomi 6y ago
All that extra liquidity is going straight to capital assets. People think deflationary assets are a good thing (for themselves), but they tend to promote stagnation.
natch 6y ago
Agreeing with what you have said here, but you might have to leave food prices out of the argument soon. I don’t know what numbers economists look at for this, but just as naive consumers we are noticing that food prices are going up.
somethoughts 6y ago
This is correct based on data I've looked at. In fact if you are okay choosing non-capacity constrained housing and education, even those are not having much inflation. If you are okay with community college or even better self motivated to learn online it is very much affordable. If you are ok not living where every else is, the cost of a house is inflating by cost of lumber and local labor costs versus infinite inflation for houses which face land/NIMBY/zoning constraints.
ls612 6y ago
Housing and education are both represented in the CPI. Housing alone is almost a third of it.
- adjkant 6y ago
  I haven't dug in recently to the CPI, but I wouldn't be surprised to find underlying flaws in the CPI's representation of different groups of people such as people who live in urban areas, people who are in a specific income bracket, etc. The CPI may reflect those things, but if those proportions are off it can significantly affect the inflation number it spits out. I'm not an economic expert but it baffles me that people pay attention to a single CPI and don't look at many at once when analyzing economic policy. A single CPI optimization is inherently going to cater towards the effects on one group, but without study we don't even know what that group is.
JamesBarney 6y ago
Education, housing(rent, not the price of a house), and medical care. Are all included in the CPI. Education and medical care are going up due to reasons unrelated to inflation. Shelter is going up at 3% due to supply constraints. The prices of houses, stocks, art, and startups are not. The reason is that assets prices are very heavily affected by interest rates. Imagine a house that costs $100,000 but rents out for 10,000 a year in profit because interest rate are 10%. Now imagine interest rates drop to 1%. Arbitrage will mean that individuals will borrow money at 1% and buy the house and collect 10%. This drives up the price until the return on the house matches the return of other investments, or basically until the house is worth $1,000,000. Now the cost of rent hasn't changed, but the price of the house has gone up 1,000%. Did the economy experience 1,000% inflation? No because the cost of living hasn't changed.
- take_a_breath 6y ago
  Assets experienced a 1,000% inflation. People can still scrape by being consumers and renters (cost-of-living), but owning assets moves farther and farther out of reach. Since our economic system is built on assets (they appreciate, you can borrow against them, etc.), the inequality gap keeps growing.
yomly 6y ago
Yes there is so much mental gymnastics involved in "basket of goods" My dad bought a house and had a kid in London aged 27. He didn't even have a degree and was an immigrant arriving with all the money he had scrounged in his hand. Compare that with the London of today where £200k buys you a 80sqft squat: https://www.dailymail.co.uk/news/article-8541513/Micro-studio-flat-shower-sink-bed-goes-sale-Notting-Hill-200-000.html https://www.dailymail.co.uk/news/article-8541513/Micro-studi... But you know, house prices and rent aren't a good so there's no inflation so there's no problem right? /s

antisthenes 6y ago

I've come to consider the official inflation figures as absolute nonsense. It's a shame, really, because the BLS does a lot of good work, and outdated metric calculation methods really put a tarnish on an otherwise great agency. I'm not sure how much of that is being held hostage to political goals. Things that are in actual demand [1], like health care, education and housing (in desirable areas) have absolutely been outpacing inflation. Sure, if you measure the absolute basics needed to not die in a society, the figures might make sense (as it would be mostly food and clothing, both of which are dirt cheap. So cheap in fact that most of the time they can be had for free! Thrift stores and food banks are your friend) But if we're talking about a thriving society and population, surely our aims should be set higher than the very first step on Maslow's hierarchy of needs? [1](it's not Smart TVs and Smartphones, although even flagship smartphones have recently ballooned in price far outstripping any sort of inflation figures)

derg 6y ago
> But if we're talking about a thriving society and population, surely our aims should be set higher than the very first step on Maslow's hierarchy of needs? Very much agreed. The issues with sectors that have been outpacing inflation aren't due to a blanket "we're pumping too much fiat into the economy" but are absolutely political choices. Healthcare: The US does spend too much here for what we get in return but this is a political choice. We could institute Medicare for All and _save_ money [0] Education: Again political here. How much funding has been stripped at the state/local level for the universities and how much can be attributed to extremely bloated administrations? Other countries can manage education just fine. Housing: this is current housing being weaponized to increase the value of property while artificially limiting what, where, when, who, and how much can be built at any given time. See: all of California. Housing as strictly a monetary investment now dictates that nothing is ever allowed to depreciate, only ever increase. [0]https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(19)33019-3/fulltext https://www.thelancet.com/journals/lancet/article/PIIS0140-6...
- secabeen 6y ago
  > Healthcare: The US does spend too much here for what we get in return but this is a political choice. We could institute Medicare for All and _save_ money. This is absolutely true, but also exceptionally hard. Extracting the $1 Trillion/yr out of the current healthcare system is going to put a lot of people out of work. We'll need a good system to re-train them for new work too.

staplers 6y ago

I find myself waiting and hoping for a complete and utter financial crash just for the opportunity to be able to afford a home. My income is several times above the poverty line. It makes me feel sad and guilty but that is the reality. Inflation is real when you look for it.

mrep 6y ago
Have you considered looking for a job outside of the west coast because inflation adjusted price per square foot hasn't actually changed for a lot of the US [0]. It's mainly just the west coast where home prices have ballooned (in the US at least). [0]: 0]: https://www.supermoney.com/inflation-adjusted-home-prices/ https://www.supermoney.com/inflation-adjusted-home-prices/
- natch 6y ago
  Looking for just one job is not enough. To feel secure leaving silicon valley, you need a wide choice of jobs and employers in the area where you go to, in case the first job doesn’t last. From here every other place looks to have more limited options.
  - mrep 6y ago
    The bay area might have the most programmers, but there are still tons of programmer jobs outside of it. 80% of programmers don't live in california [0]. Almost every fortune 500 company has some software developers so there are jobs in every decent size metropolitan area. A lot of the big companies also have satellite offices you can work at. I just moved from Seattle to Chicago and it only cost me 4% of my salary and I've already had 5 recruiters ping me on linkedin since I moved here a few weeks ago. [0]: https://dqydj.com/number-of-developers-in-america-and-per-state/ https://dqydj.com/number-of-developers-in-america-and-per-st...
  - LargeWu 6y ago
    Well, it's clearly a tradeoff. By staying in the Valley, you are prioritizing having options at many startups at the expense of home ownership. I live in Minneapolis. Not as wide ranging options here, but many of them are at fortune 500 companies (relatively stable), and homes are affordable. I'm sure you can find examples in many other similar cities. The Valley may have the most opportunities of anywhere, but to say that there's just no work anywhere else is a bit ridiculous.

martin_bech 6y ago

Well it has in Venezuela, with the printing of money. But maybe you need a measure of scarcity to trigger high inflation.

nostrademons 6y ago

There's a tangent on this in Carlota Perez's Technological Revolutions and Financial Capital. Basically you get this phenomena of "two moneys" - rather than the economy acting as a monolithic entity, a new socioeconomic system grows up around the new fundamental technologies, and then goods/services/assets that are connected to the new economy (tech companies, programmer & data scientist salaries, Silicon Valley real estate, SV daycare prices) inflate rapidly while everything connected to the old economy remains stagnant. This sucks if you're trying to manage daily life in the new economy - you may be making $600K/year, but a crappy house is now $3M. It's pretty awesome if you're in the new economy but buying something from the old economy though. A new TV is about an hour of compensation for a mid-level Googler; a cruise to Antarctica is about a month's worth. The usual outcome of this situation is something far worse than high inflation. Instead, you typically get a financial crisis, then war and conquest as the new technologies are applied to weaponry.

Can_Not 6y ago
Reminds me of the heightening contradiction, my generation is "criticized" for buying Starbucks instead of saving for a home, so sure I'll not drink a Starbucks daily for 577 years and use that money to buy a home. It's financial advice that ignores the fundamental problem.

taneq 6y ago

Inflation is a consequence of 'the average consumer' having more money to spend and thence becoming less price sensitive. The reason we haven't seen inflation is that the stupendous amounts of money printed recently have all gone to people who already have more than enough cash to spend.