3 ms·

I’ll bite, effectively you’re correct, there’s a supply side shortage. All the input costs have increased, dramatically. They then have to charge more downstre

I’ll bite, effectively you’re correct, there’s a supply side shortage. All the input costs have increased, dramatically. They then have to charge more downstream. The additional costs are then going to be absorbed the the consumers (other businesses and end customers). The consumer has been given super cheap loans or checks in the mail and can now afford an increased expense. Now everything costs more - inflation. Note: much of the money went into game stop, amc, crypto, etc and didn’t necessarily go towards more production. However, free money won’t be available forever. Will wages rise? Not necessarily as fast, especially with high transportation and raw material costs. So wages likely won’t rise as quickly. Due to the higher input costs, many businesses will have to close, further suppressing wages. At the end of the day, we could have stagnant wages, lower adjusted gdp, with increased inflation. Now, to your point — it’s possible businesses stay open and even expand, increasing wages. You’ll still see inflation, just no depression. However, that doesn’t seem likely given these price increases in raw materials, transportation, etc seem to be increasing and there’s no addition release of capital on the consumer side. Finally, if the FED tries to decrease inflation it’ll reduce economic growth. The treasury also cannot sell more bonds on the open market with these decreased interest rates — no one is willing or can buy enough. At the end of the day, we will have trouble not printing money to cover the debt — increasing inflation. I don’t think there’s a method of not printing our way out of debt. No one knows for sure, so I feel all discussions have their merits

murgindrag 5y ago
My general feeling is that we will see a structural adjustment: - We will see a total of about 50-100% inflation. This is not necessarily a bad thing, given the amount of debt in the system. People's mortgage, educational debts, and credit card debts will be lightened. - The dollar will fall in value relative to world currencies. This makes sense since the US no longer has a monopoly on much of anything. There is no business like the US automotive/manufacturing post-WWII, or tech in the eighties and nineties. The US is a superpower mostly out of velocity. I don't think this necessarily results in a depression, unless we mess up. This could be healthy or unhealthy, depending on the cards we play. I don't see a world in 30 years where a SWE in the US makes $350K and a SWE in China/India makes $10k, or where unskilled labor in the US makes $40k, and unskilled labor in India/Africa makes $1k. The key question is how we get the the new world. This could be through an economic collapse in the US, or through pretty healthy changes. I just don't know. E.g. 50-100% inflation is enough to trigger a spiral to hyperinflation, depending on how we react.
jjk166 5y ago
Inflation is not simply goods costing more, it is money being worth less. If there is a major supply chain disruption and thus a scarcity of some good like say lumber, the price increases because what lumber remains is legitimately more valuable. As soon as the supply chain returns to normal and there is an abundance of lumber, that lumber will lose its value and the price will fall back down again. Anyone continuing to sell overpriced lumber will be outcompeted. The only thing that's weird is that everything has become more valuable because everything has become more scarce because every supply chain got hit at the same time. You don't have people avoiding high lumber prices by switching to steel because the steel prices have likewise increased. If you want to build a house right now, you're going to have to build it out of something rarer than you had to 2 years ago. Normally people would just not buy the house, and then construction companies would have to fire people and sell off assets, which would reduce their capacity to build homes even after lumber prices fell back down. But with the injection of cash the demand is maintained and the builders are able to weather the storm. Now it's possible and indeed likely that the amount of cash injected is not exactly the right amount to maintain business as usual - there likely will be over production of certain high demand goods which will create a glut in the market after supply chains return to normal, and at the same time workers hired to do these superfluous tasks will be laid off when demand falls after the money printers stop. Cheap goods and higher unemployment mean lower pressure on increasing wages. Further, companies who invested too heavily will either be bought or sell off their assets for pennies on the dollar, leading to increased consolidation. To finance this expansion, odds are a lot of financial assets purchased now will be offloaded. When the dust settles people may see a legitimate decrease in purchasing power, but this change is still far off in the future and will be much less acute than the current situation.
skybrian 5y ago
Although some money was spent bidding up meme stocks, the money doesn’t disappear. What did the sellers do with their gains? Inflated asset prices mean that some people think they’re richer than they are and they might soon find out otherwise (consider the drop in cryptocurrency). In the meantime, it’s hard to see how easy money for all sorts of investments discourages spending on things that will actually fix supply bottlenecks, eventually. There is lots of silly stuff going on at the same time, granted, and sometimes it’s a bit harder to tell the difference.

murgindrag 5y ago

My general feeling is that we will see a structural adjustment: - We will see a total of about 50-100% inflation. This is not necessarily a bad thing, given the amount of debt in the system. People's mortgage, educational debts, and credit card debts will be lightened. - The dollar will fall in value relative to world currencies. This makes sense since the US no longer has a monopoly on much of anything. There is no business like the US automotive/manufacturing post-WWII, or tech in the eighties and nineties. The US is a superpower mostly out of velocity. I don't think this necessarily results in a depression, unless we mess up. This could be healthy or unhealthy, depending on the cards we play. I don't see a world in 30 years where a SWE in the US makes $350K and a SWE in China/India makes $10k, or where unskilled labor in the US makes $40k, and unskilled labor in India/Africa makes $1k. The key question is how we get the the new world. This could be through an economic collapse in the US, or through pretty healthy changes. I just don't know. E.g. 50-100% inflation is enough to trigger a spiral to hyperinflation, depending on how we react.

jjk166 5y ago

Inflation is not simply goods costing more, it is money being worth less. If there is a major supply chain disruption and thus a scarcity of some good like say lumber, the price increases because what lumber remains is legitimately more valuable. As soon as the supply chain returns to normal and there is an abundance of lumber, that lumber will lose its value and the price will fall back down again. Anyone continuing to sell overpriced lumber will be outcompeted. The only thing that's weird is that everything has become more valuable because everything has become more scarce because every supply chain got hit at the same time. You don't have people avoiding high lumber prices by switching to steel because the steel prices have likewise increased. If you want to build a house right now, you're going to have to build it out of something rarer than you had to 2 years ago. Normally people would just not buy the house, and then construction companies would have to fire people and sell off assets, which would reduce their capacity to build homes even after lumber prices fell back down. But with the injection of cash the demand is maintained and the builders are able to weather the storm. Now it's possible and indeed likely that the amount of cash injected is not exactly the right amount to maintain business as usual - there likely will be over production of certain high demand goods which will create a glut in the market after supply chains return to normal, and at the same time workers hired to do these superfluous tasks will be laid off when demand falls after the money printers stop. Cheap goods and higher unemployment mean lower pressure on increasing wages. Further, companies who invested too heavily will either be bought or sell off their assets for pennies on the dollar, leading to increased consolidation. To finance this expansion, odds are a lot of financial assets purchased now will be offloaded. When the dust settles people may see a legitimate decrease in purchasing power, but this change is still far off in the future and will be much less acute than the current situation.

skybrian 5y ago

Although some money was spent bidding up meme stocks, the money doesn’t disappear. What did the sellers do with their gains? Inflated asset prices mean that some people think they’re richer than they are and they might soon find out otherwise (consider the drop in cryptocurrency). In the meantime, it’s hard to see how easy money for all sorts of investments discourages spending on things that will actually fix supply bottlenecks, eventually. There is lots of silly stuff going on at the same time, granted, and sometimes it’s a bit harder to tell the difference.