6 ms·

Costco is seeing inflation abound, impacting a slew of consumer products

26 points by koolba 5y ago

runawaybottle 5y ago
The fed always hoped there would be some inflation. Japan has been trying to print the hell out of their situation for awhile now and still haven’t seen the levels of inflation they’d like. I wonder how premature the current siren calls are.
- kokanator 5y ago
  The US financial system is based upon inflation targeting 2%. This is true since the US left the gold standard and is one of the reasons the idea was pushed so hard. Controlled inflation creates wealth for those that control the money (banks). They are assured the value of their deposits will always increase. It's like magic ever expanding money. [0] In trade the Federal Reserve is given a control they can place on the growth of the market and manage employment rates [1] [0]https://www.zeitgeistmovie.com/ https://www.zeitgeistmovie.com/ [1]https://www.federalreserve.gov/faqs/economy_14400.htm https://www.federalreserve.gov/faqs/economy_14400.htm
satya71 5y ago
Also Planet Money did an episode[1] about how the 2% target came about. Essentially it was a guess. IMO it’s too conservative. Some economists have argued for a 4% target, and I think it would be better for growth and equality. [1] https://www.npr.org/sections/money/2018/11/30/672366380/episode-879-the-secret-target https://www.npr.org/sections/money/2018/11/30/672366380/epis...
- hcurtiss 5y ago
  I don't know what "equality" means in this circumstance, but for those nearing retirement age, 4% inflation would destroy the value of their savings at a time when they cannot afford to take additional risk in equities with no guarantee they'd perform. Inflation robs the value of a lifetime of prudence and hard work. There's an argument it's truly evil.
  - poopypoopington 5y ago
    Wealthy people hold investments that make let's say 7% a year, while working class people make $x a year that grows probably much less than 7% a year. So if inflation is higher, wealth inequality grows less quickly, or in some cases can shrink, as was the case after the world war, because Europe was destroyed so inflation was rampant which actually created a lot more equality. Same thing happened after the Black Death in Europe. It's painful in the short term but can help reduce wealth inequality. Also I wonder if people on a fixed income like social security might be able to stave off the effects of this if social security grew at inflation. Thomas Piketty's book capital is a great source for this^
    - webinvest 5y ago
      Many of their investments make 3% or less. How many seniors do you know that have more stocks than cash or bonds? Seniors are very risk adverse.
    - briefcomment 5y ago
      > "working class people make $x a year that grows probably much less than 7% a year. So if inflation is higher, wealth inequality grows less quickly" How does wages not keeping up with inflation decrease inequality?
      - satya71 5y ago
        Wages tend to keep up with inflation. Idle assets on the other hand don’t.
        briefcomment 5y ago
        My wages have certainly not kept up with houses, land, crypto, or anything scarce really. Those idle assets seem to be capturing all the gains.
        tolbish 5y ago
        Wage gains have gone to the highest tier workers, not the lower/middle class.
m0llusk 5y ago
It seems like the difference between inflation and short term problems with supply chains could be hard to discern. For example, many commonly used chips are in low supply which has had a broad range of impacts, but the chip shortage is expected to be temporary so none of those cascading impacts should be considered evidence of inflation or contributing to inflationary trends.
- runawaybottle 5y ago
  But if (hyper)inflation is psychological, could this be all we need to get the ball rolling?
- adam_arthur 5y ago
  Price increases happen as a result of supply shortages. E.g. demand exceeds supply, reducing availability of the goods. If the supply chain is not elastic enough to increase production quickly, prices will likely rise. See: any chart of Supply/Demand, that demonstrates the relationship. But saying price increases are due to shortages should not alleviate inflation concerns, unless there are specific supply side reasons for the shortage. Prices will only really tend to increase when producers can't meet demand, and can't ratchet up production quickly. Otherwise they're leaving money on the table by having empty shelves of their below market priced goods. E.g. if the chip shortage is caused by a natural disaster: supply side issue. If the chip shortage is caused by increased demand: demand side issue (which manifests as supply shortage). It's very important to distinguish the reason for the shortage to get a better sense of what's going on. In some cases it's just backlogged things due to covid, in others it's increased personal consumption draining inventory and leading to demand induced shortages. Inflation doesn't manifest uniformly. You'll see prices of some subset of goods increase, now that company has more money and spends that money etc. It's highly related to velocity of money

26 points by koolba 5y ago

The fed always hoped there would be some inflation. Japan has been trying to print the hell out of their situation for awhile now and still haven’t seen the levels of inflation they’d like. I wonder how premature the current siren calls are.

kokanator 5y ago
The US financial system is based upon inflation targeting 2%. This is true since the US left the gold standard and is one of the reasons the idea was pushed so hard. Controlled inflation creates wealth for those that control the money (banks). They are assured the value of their deposits will always increase. It's like magic ever expanding money. [0] In trade the Federal Reserve is given a control they can place on the growth of the market and manage employment rates [1] [0]https://www.zeitgeistmovie.com/ https://www.zeitgeistmovie.com/ [1]https://www.federalreserve.gov/faqs/economy_14400.htm https://www.federalreserve.gov/faqs/economy_14400.htm

satya71 5y ago

Also Planet Money did an episode[1] about how the 2% target came about. Essentially it was a guess. IMO it’s too conservative. Some economists have argued for a 4% target, and I think it would be better for growth and equality. [1] https://www.npr.org/sections/money/2018/11/30/672366380/episode-879-the-secret-target https://www.npr.org/sections/money/2018/11/30/672366380/epis...

hcurtiss 5y ago
I don't know what "equality" means in this circumstance, but for those nearing retirement age, 4% inflation would destroy the value of their savings at a time when they cannot afford to take additional risk in equities with no guarantee they'd perform. Inflation robs the value of a lifetime of prudence and hard work. There's an argument it's truly evil.
- poopypoopington 5y ago
  Wealthy people hold investments that make let's say 7% a year, while working class people make $x a year that grows probably much less than 7% a year. So if inflation is higher, wealth inequality grows less quickly, or in some cases can shrink, as was the case after the world war, because Europe was destroyed so inflation was rampant which actually created a lot more equality. Same thing happened after the Black Death in Europe. It's painful in the short term but can help reduce wealth inequality. Also I wonder if people on a fixed income like social security might be able to stave off the effects of this if social security grew at inflation. Thomas Piketty's book capital is a great source for this^
  - webinvest 5y ago
    Many of their investments make 3% or less. How many seniors do you know that have more stocks than cash or bonds? Seniors are very risk adverse.
  - briefcomment 5y ago
    > "working class people make $x a year that grows probably much less than 7% a year. So if inflation is higher, wealth inequality grows less quickly" How does wages not keeping up with inflation decrease inequality?
    - satya71 5y ago
      Wages tend to keep up with inflation. Idle assets on the other hand don’t.
      - briefcomment 5y ago
        My wages have certainly not kept up with houses, land, crypto, or anything scarce really. Those idle assets seem to be capturing all the gains.
      - tolbish 5y ago
        Wage gains have gone to the highest tier workers, not the lower/middle class.

m0llusk 5y ago

It seems like the difference between inflation and short term problems with supply chains could be hard to discern. For example, many commonly used chips are in low supply which has had a broad range of impacts, but the chip shortage is expected to be temporary so none of those cascading impacts should be considered evidence of inflation or contributing to inflationary trends.

runawaybottle 5y ago
But if (hyper)inflation is psychological, could this be all we need to get the ball rolling?
adam_arthur 5y ago
Price increases happen as a result of supply shortages. E.g. demand exceeds supply, reducing availability of the goods. If the supply chain is not elastic enough to increase production quickly, prices will likely rise. See: any chart of Supply/Demand, that demonstrates the relationship. But saying price increases are due to shortages should not alleviate inflation concerns, unless there are specific supply side reasons for the shortage. Prices will only really tend to increase when producers can't meet demand, and can't ratchet up production quickly. Otherwise they're leaving money on the table by having empty shelves of their below market priced goods. E.g. if the chip shortage is caused by a natural disaster: supply side issue. If the chip shortage is caused by increased demand: demand side issue (which manifests as supply shortage). It's very important to distinguish the reason for the shortage to get a better sense of what's going on. In some cases it's just backlogged things due to covid, in others it's increased personal consumption draining inventory and leading to demand induced shortages. Inflation doesn't manifest uniformly. You'll see prices of some subset of goods increase, now that company has more money and spends that money etc. It's highly related to velocity of money