4 ms·

Note that Warren Buffet recently noted that his companies are seeing consistent increases in prices throughout the supply chain and will in turn need to raise p

Note that Warren Buffet recently noted that his companies are seeing consistent increases in prices throughout the supply chain and will in turn need to raise prices: https://www.cnbc.com/2021/05/03/warren-buffett-says-berkshire-hathaway-is-seeing-very-substantial-inflation-and-raising-prices.html https://www.cnbc.com/2021/05/03/warren-buffett-says-berkshir... Others are taking the risks of inflation much further. Stanley Druckenmiller noted that the current spending policy and fiscal policy of the US is threatening the Dollar's status as the world's reserve currency: https://www.cnbc.com/2021/05/11/stanley-druckenmiller-says-the-fed-is-endangering-the-dollars-global-reserve-status.html https://www.cnbc.com/2021/05/11/stanley-druckenmiller-says-t...

throw0101a 5y ago
> Note that Warren Buffet recently noted that his companies are seeing consistent increases in prices throughout the supply chain and will in turn need to raise prices: This is a known phenomenon: > Imagine an economy in which everyone expects inflation to be high for the foreseeable future (Americans of a certain age don’t have to imagine this; for a while, we lived in that economy). In such an economy, a company setting its prices for the next year will do so taking into account the likelihood that everyone else’s prices — the prices charged by competitors, the costs of raw materials, the wages offered by rival employers — will be going up over time. > Reflecting this expectation, companies will mark prices up relative to what they would have been if they didn’t expect future inflation — and by so doing, will feed the very inflation they fear. In other words, once expectations of sustained inflation are embedded in the economy, inflation becomes self-perpetuating — and bringing it down can be extremely difficult. That’s what makes stagflation — inflation despite high unemployment — possible. > The point, however, is that short-term fluctuations in volatile prices tell us little about whether stagflation is becoming a risk. That’s why Fed policy generally ignores the headline inflation rate and instead focuses on a measure that excludes food and energy prices. > So what’s going to happen in the months ahead? We’ll probably see a number of transitory price increases, not just because the economy is booming, but also because the lingering effects of the pandemic have produced some unusual disruptions — for example, a global shortage of shipping containers. * https://www.nytimes.com/2021/03/22/opinion/us-inflation-stimulus.html https://www.nytimes.com/2021/03/22/opinion/us-inflation-stim... * https://archive.is/Vxj5h https://archive.is/Vxj5h It can become dangerous (see 1970s), but economists have a decent understanding of it nowadays, and so can be factored into decision making.

throw0101a 5y ago

> Note that Warren Buffet recently noted that his companies are seeing consistent increases in prices throughout the supply chain and will in turn need to raise prices: This is a known phenomenon: > Imagine an economy in which everyone expects inflation to be high for the foreseeable future (Americans of a certain age don’t have to imagine this; for a while, we lived in that economy). In such an economy, a company setting its prices for the next year will do so taking into account the likelihood that everyone else’s prices — the prices charged by competitors, the costs of raw materials, the wages offered by rival employers — will be going up over time. > Reflecting this expectation, companies will mark prices up relative to what they would have been if they didn’t expect future inflation — and by so doing, will feed the very inflation they fear. In other words, once expectations of sustained inflation are embedded in the economy, inflation becomes self-perpetuating — and bringing it down can be extremely difficult. That’s what makes stagflation — inflation despite high unemployment — possible. > The point, however, is that short-term fluctuations in volatile prices tell us little about whether stagflation is becoming a risk. That’s why Fed policy generally ignores the headline inflation rate and instead focuses on a measure that excludes food and energy prices. > So what’s going to happen in the months ahead? We’ll probably see a number of transitory price increases, not just because the economy is booming, but also because the lingering effects of the pandemic have produced some unusual disruptions — for example, a global shortage of shipping containers. * https://www.nytimes.com/2021/03/22/opinion/us-inflation-stimulus.html https://www.nytimes.com/2021/03/22/opinion/us-inflation-stim... * https://archive.is/Vxj5h https://archive.is/Vxj5h It can become dangerous (see 1970s), but economists have a decent understanding of it nowadays, and so can be factored into decision making.