7 ms·

The people who continue to jumble up inflation by its consumer defenition with the huge expanding of the amount of us dollars are only shooting their own wealth

The people who continue to jumble up inflation by its consumer defenition with the huge expanding of the amount of us dollars are only shooting their own wealth and anyone who listens to them's wealth in the foot. All you have to look at is stocks and home real estate to see that assets are ballooning no matter how cheap a dozen of eggs stays.

foota 6y ago
I mean, to some degree I'm not sure how much it matters. If there's some delayed response to the asset inflation then it'll be concerning, but why are inflated asset prices an issues in and of themselves?
- toomuchtodo 6y ago
  Inflated asset prices means most folks are never going to be able to purchase a home, and equities (which generates wealth with no further effort besides the capital invested, for the most part) will continue to be owned by the wealthiest. Inequality worsens when asset prices increase faster than wages.
  - foota 6y ago
    This doesn't check out to me (well, the home part does, but I'm not sure we've seen significantly above normal growth there compared to historical norms, outside of hot coastal markets), but for other assets the price doesn't matter, as you can just get a fraction of them or they're split.
    - deleted 6y ago
      [deleted]
    - grey-area 6y ago
      The wealthy own a lot more assets than the poor, therefore asset inflation increases inequality.
    - dnautics 6y ago
      > well, the home part does, but I'm not sure Hey, this checks out with the very thing that the younger generation complains about, correlates with social injustice in the grandest scale (homelessness), that is one influencing factor in major social unrest in the country (racial disparity in access to real estate). But let's ignore that. Have you considered that the deflection in the economy caused by the inflation happened to manifest itself unevenly across various market segments, and the primary direction that the deflection moved into is the very one you're ignoring?
- chrischattin 6y ago
  Food, shelter and transportation aren't included in the CPI. Yet those things are essential for quality of life. Inflation is the reason you can't own a house and support a family on a single income anymore. There are a couple other indexes out there that track total cost of living that are pushing ~10% per year inflation right now.
  - nickles 6y ago
    > Food, shelter and transportation aren't included in the CPI. This is wrong. Food, shelter, and transportation are all included in the basket used to compute CPI. [0] > The CPI represents all goods and services purchased for consumption by the reference population (U or W). BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups (food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services). [0] https://www.bls.gov/cpi/questions-and-answers.htm https://www.bls.gov/cpi/questions-and-answers.htm
    - speeder 6y ago
      I think he refers to the fact that those categories have their inflation higher than CPI. CPI weights changed in 1980, and seemly when using old weights the CPI is 10% instead. I've read (I didn't checked with all details, I don't live in US so it is not that relevant to me) that a major change is that the cost of having a shelter had its weights greatly reduced. (I don't mean the "housing" category in general)
    - hedora 6y ago
      From your [0]: > 9. Is the CPI a cost-of-living index? ... > Both the CPI and a cost-of-living index would reflect changes in the prices of goods and services, such as food and clothing that are directly purchased in the marketplace; but a complete cost-of-living index would go beyond this role to also take into account changes in other governmental or environmental factors that affect consumers' well-being. It is very difficult to determine the proper treatment of public goods, such as safety and education, and other broad concerns, such as health, water quality, and crime, that would constitute a complete cost-of-living framework. Since the CPI does not attempt to quantify all the factors that affect the cost-of-living, it is sometimes termed a conditional cost-of-living index. Public services are being gutted in the US. I think this explains why cost of living indexes can be north of 10% while the CPI is < 2%. It doesn’t explain how groceries, rent, medical care and education costs have all skyrocketed without raising the CPI. My guess is that people are spending less than they used to on things like recreation and apparel, due to lack of money.
- btilly 6y ago
  It means that if you don't already own those assets, then you have no hope of ever owning said assets.
  - blackflame7000 6y ago
    No you just need to be ingenuitive and solve a problem the world needs solving. Look at Jeff Bezos 30 years ago.
    - triceratops 6y ago
      To buy a house, just start one of the largest companies in history. Easy-peasy.
      - blackflame7000 6y ago
        You can literally buy a house by making a YouTube video now a days. It kinda is easy-peasy. Go look at all those TikTok stars. Your ancestors lived in caves be thankful you can even live in a house. It would be much harder to do that without Banks like the FED. The problem is that you think you need to solve a grand problem instead of inventing something simple like a post-it note or a makeup tutorial. You seem to somehow believe that incumbents ALWAYS win. That is not true. Ingenuity with a superior product is what upends the market, shifts and creates new wealth.
        nitrogen 6y ago
        The people who are working in the post-it note and makeup factories want houses too, you know.
        blackflame7000 6y ago
        The argument wasn't that they had to invent something to buy a house, it was that it's not a hopeless situation where there is no class mobility. Someone substituted ASSETS for HOUSES for some reason but its not the same thing. ASSETS are what allow some people to have an advantage over others in business. So many babies on these forums whine about their inadequacies instead of bettering themselves. Making my imaginary number go down does change the fact that YOU AND ONLY YOU have the most power to change your life not some "system". If you can't afford to buy a house, get a better job. Sorry that's harsh. Who said life was easy?
rthomas6 6y ago
Well, for stocks, the P/E ratio is also extraordinarily high, so it's not inflation there. At least not mostly. The stock market is just overvalued and there will be a correction at some point in the future.
- vkou 6y ago
  For t -> ∞, a prediction that the stock market will correct in the future will always hold true. The question is, will it correct to levels below its current ones? If you have an answer to that, you can make a lot of money.
  - scsilver 6y ago
    I'm not gonna bet against the fed. Im not going to bet against politicians protecting retirement accounts and personal homes. I've got 30 more years until I get out of the market, might as well hedge against the dollar, only take out a bit to get a down payment on a home in a nice area, and try to catch the capitalist wave. If you stayed in through 2008 till now, you'd be doing perfectly fine. If you had to take out money right after the collapse, ouch. Ultimately your portfolio risk should reflect the cash needs of your age/health/lifestyle in the context of the economics of the time. However, we are in uncharted waters.
    - leg100 6y ago
      > I'm not gonna bet against the fed. Im not going to bet against politicians protecting retirement accounts and personal homes. I'll take a punt. At some point inflation will take root, and when it does the fed will be in a bind. Hell, the fed has already been digging away at pensions with their 40 year long put. Pensions funds struggle now to find a positive yield that meets their liabilities. And homes will at some point come under attack. Perhaps only when everything else is gone, perhaps not. They're a sitting target.
      - scsilver 6y ago
        From my viewpoint in history, the homes will be the last thing to get attacked, politicians can't stomach another 08 and we know how to print our way out. If the dollar manages to fend off devaluation due to entended printing(crosses fingers and hopes the world trusts us more than any other currency to pay back our debt) the US may get out of this, ahead of other economies. The people really holding bag havent even entered the workforce, many havent even been born yet.
MichaelApproved 6y ago
Don’t forget ballooning healthcare costs.
diob 6y ago
Right, I've posted this before, but long term wealth building is becoming too expensive for the average person. The only reason food hasn't become too expensive is wealthy people don't have a reason to go out and buy up all the food. They do, on the other hand, have reason to go out and invest. This is, however, starting to fall apart for goods that don't normally have reason to be bought up. In other words, folks with capital now realize they can hoard those resources as well in order to price gouge. This is most evident in consumer electronics as of late. Usually, these aren't super wealthy individuals, but instead folks who have been priced out of traditional wealth building like stocks / housing. They may not be able to afford a down payment on a house, but they can sure as heck spend a few thousand buying up consumer goods hoping to gouge others.
- cle 6y ago
  If they can hoard goods and sell them all at higher prices, then does that imply that the goods are priced too low to begin with? What's keeping the sellers from recognizing this and raising the prices themselves?
  - clankyclanker 6y ago
    It happens in minor monopolies, which are exploitable best at small scale, like location or temporality. I can flip the latest Nintendo mini on eBay pretty easily. However, I can’t imagine the trouble that Nintendo would get into if they sold the same device at different prices based on zip code. Not to say that doesn’t happen, because that’s half the point behind custom phone contracts, where the price you pay for the device over time varies widely from person to person. Though, because it’s individualized, it’s very hard for consumers to compare one another’s prices and identify minor monopolies or price discrimination when it does occur.
  - nitrogen 6y ago
    It's zero sum. The people who desperately needed hand sanitizer or toilet paper today had less money left to spend elsewhere, but overall averaged demand wasn't all that different. Traditional suppliers probably know that jacking the price of one item can lead to losses elsewhere. Hoarders/scalpers are not aiding price discovery, they are manipulating the price by artificially changing supply or demand. They don't have to do so sustainably either. And all of that is leaving aside that the goal of a society is to maintain the society over time and in aggregate, not to maximize value extracted from every individual transaction.
darawk 6y ago
Asset prices are being inflated by the low risk-free rate. That's why you see asset prices rising while CPI remains flat.
- scsilver 6y ago
  Agreed
skybrian 6y ago
Consumer inflation actually is inflation, by definition. This isn't being confused, this is understanding how inflation is defined and using terms correctly. Inflation is about the prices people actually pay, on average. Your neighbor's house getting sold for a lot of money isn't a real cost to you like rent. Someone paid that price, but they are not necessarily typical. Inflation does include rent (or "imputed rent") to the extent that people actually pay those prices on average. Some people really do pay higher rents, but many others have lower housing costs locked in via home ownership or rent control, and they count too, so this is going to drag down the average. That's just the nature of averages. BTW, stock market indexes are an average too, and it's heavily weighted towards tech firms due to market capitalization. Only about half of the stocks in the S&P 500 are up for the year.
- pedro_hab 6y ago
  This is the new definition, in old dictionaries inflation was defined as increase in money supply. Using products to measure inflation, is a terrible mistake in my estimation, because cost has been falling, so stable prices don't mean no inflation. It just means the governments got wise to just take what they can get without being noticed.
  - pjc50 6y ago
    .. how old a dictionary are we talking here? It's not a recent change.
    - pedro_hab 6y ago
      Probably 100 years old, I don't remember exactly, but it is not recent at all.
  - RobertoG 6y ago
    You can't define inflation as you want. Inflation is an government official indicator with a very clear meaning.
    - 6y ago

foota 6y ago

I mean, to some degree I'm not sure how much it matters. If there's some delayed response to the asset inflation then it'll be concerning, but why are inflated asset prices an issues in and of themselves?

toomuchtodo 6y ago
Inflated asset prices means most folks are never going to be able to purchase a home, and equities (which generates wealth with no further effort besides the capital invested, for the most part) will continue to be owned by the wealthiest. Inequality worsens when asset prices increase faster than wages.
- foota 6y ago
  This doesn't check out to me (well, the home part does, but I'm not sure we've seen significantly above normal growth there compared to historical norms, outside of hot coastal markets), but for other assets the price doesn't matter, as you can just get a fraction of them or they're split.
  - deleted 6y ago
    [deleted]
  - grey-area 6y ago
    The wealthy own a lot more assets than the poor, therefore asset inflation increases inequality.
  - dnautics 6y ago
    > well, the home part does, but I'm not sure Hey, this checks out with the very thing that the younger generation complains about, correlates with social injustice in the grandest scale (homelessness), that is one influencing factor in major social unrest in the country (racial disparity in access to real estate). But let's ignore that. Have you considered that the deflection in the economy caused by the inflation happened to manifest itself unevenly across various market segments, and the primary direction that the deflection moved into is the very one you're ignoring?
chrischattin 6y ago
Food, shelter and transportation aren't included in the CPI. Yet those things are essential for quality of life. Inflation is the reason you can't own a house and support a family on a single income anymore. There are a couple other indexes out there that track total cost of living that are pushing ~10% per year inflation right now.
- nickles 6y ago
  > Food, shelter and transportation aren't included in the CPI. This is wrong. Food, shelter, and transportation are all included in the basket used to compute CPI. [0] > The CPI represents all goods and services purchased for consumption by the reference population (U or W). BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups (food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services). [0] https://www.bls.gov/cpi/questions-and-answers.htm https://www.bls.gov/cpi/questions-and-answers.htm
  - speeder 6y ago
    I think he refers to the fact that those categories have their inflation higher than CPI. CPI weights changed in 1980, and seemly when using old weights the CPI is 10% instead. I've read (I didn't checked with all details, I don't live in US so it is not that relevant to me) that a major change is that the cost of having a shelter had its weights greatly reduced. (I don't mean the "housing" category in general)
  - hedora 6y ago
    From your [0]: > 9. Is the CPI a cost-of-living index? ... > Both the CPI and a cost-of-living index would reflect changes in the prices of goods and services, such as food and clothing that are directly purchased in the marketplace; but a complete cost-of-living index would go beyond this role to also take into account changes in other governmental or environmental factors that affect consumers' well-being. It is very difficult to determine the proper treatment of public goods, such as safety and education, and other broad concerns, such as health, water quality, and crime, that would constitute a complete cost-of-living framework. Since the CPI does not attempt to quantify all the factors that affect the cost-of-living, it is sometimes termed a conditional cost-of-living index. Public services are being gutted in the US. I think this explains why cost of living indexes can be north of 10% while the CPI is < 2%. It doesn’t explain how groceries, rent, medical care and education costs have all skyrocketed without raising the CPI. My guess is that people are spending less than they used to on things like recreation and apparel, due to lack of money.
btilly 6y ago
It means that if you don't already own those assets, then you have no hope of ever owning said assets.
- blackflame7000 6y ago
  No you just need to be ingenuitive and solve a problem the world needs solving. Look at Jeff Bezos 30 years ago.
  - triceratops 6y ago
    To buy a house, just start one of the largest companies in history. Easy-peasy.
    - blackflame7000 6y ago
      You can literally buy a house by making a YouTube video now a days. It kinda is easy-peasy. Go look at all those TikTok stars. Your ancestors lived in caves be thankful you can even live in a house. It would be much harder to do that without Banks like the FED. The problem is that you think you need to solve a grand problem instead of inventing something simple like a post-it note or a makeup tutorial. You seem to somehow believe that incumbents ALWAYS win. That is not true. Ingenuity with a superior product is what upends the market, shifts and creates new wealth.
      - nitrogen 6y ago
        The people who are working in the post-it note and makeup factories want houses too, you know.
        blackflame7000 6y ago
        The argument wasn't that they had to invent something to buy a house, it was that it's not a hopeless situation where there is no class mobility. Someone substituted ASSETS for HOUSES for some reason but its not the same thing. ASSETS are what allow some people to have an advantage over others in business. So many babies on these forums whine about their inadequacies instead of bettering themselves. Making my imaginary number go down does change the fact that YOU AND ONLY YOU have the most power to change your life not some "system". If you can't afford to buy a house, get a better job. Sorry that's harsh. Who said life was easy?

rthomas6 6y ago

Well, for stocks, the P/E ratio is also extraordinarily high, so it's not inflation there. At least not mostly. The stock market is just overvalued and there will be a correction at some point in the future.

vkou 6y ago
For t -> ∞, a prediction that the stock market will correct in the future will always hold true. The question is, will it correct to levels below its current ones? If you have an answer to that, you can make a lot of money.
- scsilver 6y ago
  I'm not gonna bet against the fed. Im not going to bet against politicians protecting retirement accounts and personal homes. I've got 30 more years until I get out of the market, might as well hedge against the dollar, only take out a bit to get a down payment on a home in a nice area, and try to catch the capitalist wave. If you stayed in through 2008 till now, you'd be doing perfectly fine. If you had to take out money right after the collapse, ouch. Ultimately your portfolio risk should reflect the cash needs of your age/health/lifestyle in the context of the economics of the time. However, we are in uncharted waters.
  - leg100 6y ago
    > I'm not gonna bet against the fed. Im not going to bet against politicians protecting retirement accounts and personal homes. I'll take a punt. At some point inflation will take root, and when it does the fed will be in a bind. Hell, the fed has already been digging away at pensions with their 40 year long put. Pensions funds struggle now to find a positive yield that meets their liabilities. And homes will at some point come under attack. Perhaps only when everything else is gone, perhaps not. They're a sitting target.
    - scsilver 6y ago
      From my viewpoint in history, the homes will be the last thing to get attacked, politicians can't stomach another 08 and we know how to print our way out. If the dollar manages to fend off devaluation due to entended printing(crosses fingers and hopes the world trusts us more than any other currency to pay back our debt) the US may get out of this, ahead of other economies. The people really holding bag havent even entered the workforce, many havent even been born yet.

MichaelApproved 6y ago

Don’t forget ballooning healthcare costs.

diob 6y ago

Right, I've posted this before, but long term wealth building is becoming too expensive for the average person. The only reason food hasn't become too expensive is wealthy people don't have a reason to go out and buy up all the food. They do, on the other hand, have reason to go out and invest. This is, however, starting to fall apart for goods that don't normally have reason to be bought up. In other words, folks with capital now realize they can hoard those resources as well in order to price gouge. This is most evident in consumer electronics as of late. Usually, these aren't super wealthy individuals, but instead folks who have been priced out of traditional wealth building like stocks / housing. They may not be able to afford a down payment on a house, but they can sure as heck spend a few thousand buying up consumer goods hoping to gouge others.

cle 6y ago
If they can hoard goods and sell them all at higher prices, then does that imply that the goods are priced too low to begin with? What's keeping the sellers from recognizing this and raising the prices themselves?
- clankyclanker 6y ago
  It happens in minor monopolies, which are exploitable best at small scale, like location or temporality. I can flip the latest Nintendo mini on eBay pretty easily. However, I can’t imagine the trouble that Nintendo would get into if they sold the same device at different prices based on zip code. Not to say that doesn’t happen, because that’s half the point behind custom phone contracts, where the price you pay for the device over time varies widely from person to person. Though, because it’s individualized, it’s very hard for consumers to compare one another’s prices and identify minor monopolies or price discrimination when it does occur.
- nitrogen 6y ago
  It's zero sum. The people who desperately needed hand sanitizer or toilet paper today had less money left to spend elsewhere, but overall averaged demand wasn't all that different. Traditional suppliers probably know that jacking the price of one item can lead to losses elsewhere. Hoarders/scalpers are not aiding price discovery, they are manipulating the price by artificially changing supply or demand. They don't have to do so sustainably either. And all of that is leaving aside that the goal of a society is to maintain the society over time and in aggregate, not to maximize value extracted from every individual transaction.

darawk 6y ago

Asset prices are being inflated by the low risk-free rate. That's why you see asset prices rising while CPI remains flat.

scsilver 6y ago
Agreed

skybrian 6y ago

Consumer inflation actually is inflation, by definition. This isn't being confused, this is understanding how inflation is defined and using terms correctly. Inflation is about the prices people actually pay, on average. Your neighbor's house getting sold for a lot of money isn't a real cost to you like rent. Someone paid that price, but they are not necessarily typical. Inflation does include rent (or "imputed rent") to the extent that people actually pay those prices on average. Some people really do pay higher rents, but many others have lower housing costs locked in via home ownership or rent control, and they count too, so this is going to drag down the average. That's just the nature of averages. BTW, stock market indexes are an average too, and it's heavily weighted towards tech firms due to market capitalization. Only about half of the stocks in the S&P 500 are up for the year.

pedro_hab 6y ago
This is the new definition, in old dictionaries inflation was defined as increase in money supply. Using products to measure inflation, is a terrible mistake in my estimation, because cost has been falling, so stable prices don't mean no inflation. It just means the governments got wise to just take what they can get without being noticed.
- pjc50 6y ago
  .. how old a dictionary are we talking here? It's not a recent change.
  - pedro_hab 6y ago
    Probably 100 years old, I don't remember exactly, but it is not recent at all.
- RobertoG 6y ago
  You can't define inflation as you want. Inflation is an government official indicator with a very clear meaning.
  - 6y ago