5 ms·

Its inflation. Despite very high levels of production, there is even higher demand and a willingness to pay the higher prices. When you consider the fed print

Its inflation. Despite very high levels of production, there is even higher demand and a willingness to pay the higher prices. When you consider the fed printed trillions of dollars for easing in the last year this should be even more apparent.

rabidonrails 5y ago
Where are you seeing the "high levels of production?" The attached article seems to say just the opposite.
- cptskippy 5y ago
  It just says they ramped down production in anticipation of decline due to the pandemic. The article then discusses the challenge of expanding or opening a saw mill. You don't talk about expansion if you're running below peak capacity.
  - mikhailt 5y ago
    https://www.msn.com/en-us/money/markets/wood-production-hits-13-year-high%E2%80%94but-lumber-prices-are-still-up-171percent-since-covid-started/ar-BB1fagN3 https://www.msn.com/en-us/money/markets/wood-production-hits... They talk about opening new sawmills because a huge number of them went out of business since the last great recession. It's a supply/demand issue and the production relative to COVID or last recession hasn't recovered.
  - abakker 5y ago
    This is a highly complex problem. One reason to run below capacity is that many of the trees that have grown in the souther US were left standing to grow longer during persuades of low demand in the last decade. Now that there is high demand it has become apparent that not many sawmills in the south of the UD have the capacity to saw larger trees, and many of the bigger mills that can are in Canada which is being impacted by tariffs that make shipping them back and forth not so economic.
- adam_arthur 5y ago
  Lumber production at all time high, as easily found in many articles. It's called demand pull inflation. Suddenly populace has many more dollars, and thus can buy out supply of whatever... In this case, new housing stock. Or it could be driven simply by changes in preferences... The exact breakdown can't be known. Whether it persists or not is the important question. https://www.google.com/amp/s/fortune.com/2021/06/10/lumber-prices-2021-chart-price-of-lumber-production-wood-supply-costs-update-june/amp/ https://www.google.com/amp/s/fortune.com/2021/06/10/lumber-p... A lot of people handwave away shortages as a supply side issue, but an increase in demand leading to a shortage is not supply side at all. The distinction is subtle but important.
deleted 5y ago
[deleted]
michaelmrose 5y ago
The price is off the wall high a 377% increase. Inflation isn't 377% its 4.2%. The price of lumber spiked nearly 100x faster than inflation. Actual inflation is such a small component of the spike that it would be hard to see through the noise.
- swader999 5y ago
  Inflation numbers are an average of several prices.
  - imtringued 5y ago
    This implies that lumber is a tiny portion of the basket of goods and is irrelevant for the majority of consumers. Edit: My point is that if it is such a tiny portion, then a nation wide change in demand can have a huge impact on pricing without necessarily requiring monetary policy as cause.
mikhailt 5y ago
What high level of production? Please cite your source for this. The production is still lower than it was prior to the last recession and they're ramping to match pre-COVID levels. It may be high relative to the last decade or pre-COVID but in the long run, it hasn't recovered to the pre-recession levels. (https://www.msn.com/en-us/money/markets/wood-production-hits-13-year-high%E2%80%94but-lumber-prices-are-still-up-171percent-since-covid-started/ar-BB1fagN3 https://www.msn.com/en-us/money/markets/wood-production-hits...) In other words, you have to include past levels when you say it is very high level, it isn't high relative to last year nor last decade either. Inflation on its own doesn't explain ~100-400% price hike in the past year. Inflation hasn't even broken 10% yet. It also doesn't explain that this started long before COVID as well. This is mostly a supply and demand issue; the supply has taken a huge hit since the recession and lot of companies went out of business since then. COVID didn't help the matter.
- adam_arthur 5y ago
  Prices only tend to rise due to supply demand imbalances. That's exactly how inflation manifests... and in the real world it won't happen at a uniform rate across all goods. As a thought experiment, imagine we print 2x the money supply and hand it to all citizens. Suddenly they can buy twice as many goods, so we would expect shortages, and prices to rise to compensate. But likely a surge in discretionary income will hit certain types of goods first. We won't see people start stockpiling toilet paper with their newfound money, will we? Most people have all the toilet paper they need already. Funds will hit discretionary things, before spreading through rest of the economy as it circulates. This thought experiment demonstrates an extreme, but this is the exact policy we enacted, just to a lesser degree.
  - Scoundreller 5y ago
    While everyone probably caches a bit more toilet paper than before, a whole swathe of people took the plunge on a bidet and will buy 90% less toilet paper in perpetuity. At the face of it, a shortage looks great for producers, but can bite them in the long-term.
  - imtringued 5y ago
dragonwriter 5y ago
> Its inflation. Yes, the increase in price of a good is the definition of inflation. That’s a tautology, not an explanation. (It is not general inflation, because the lumber price increases are way out of line with general inflation.) > When you consider the fed printed trillions of dollars for easing in the last year this should be even more apparent. That... doesn't explain the specific increase in lumber not seen across the broader market of goods and services.
- ltbarcly3 5y ago
  No, it's not the definition of inflation. If Monet becomes very fashionable and his paintings double in value, that's not 'inflation' it's just something increasing in value. When the government prints trillions of dollars to bail out corrupt wallstreet firms and hedge funds so that the super rich can avoid the consequences of their high risk investment strategies, and this causes the purchasing power of money to decrease, that is inflation, and that is what is happening. Wood just has a low ability to flex up production quickly compared to many other goods. The price of a Big Mac has gone up 12% in the last year and a half. I encourage you to pick something and price compare it from pre to post covid and see if inflation might not be higher than the official number.

rabidonrails 5y ago

Where are you seeing the "high levels of production?" The attached article seems to say just the opposite.

cptskippy 5y ago
It just says they ramped down production in anticipation of decline due to the pandemic. The article then discusses the challenge of expanding or opening a saw mill. You don't talk about expansion if you're running below peak capacity.
- mikhailt 5y ago
  https://www.msn.com/en-us/money/markets/wood-production-hits-13-year-high%E2%80%94but-lumber-prices-are-still-up-171percent-since-covid-started/ar-BB1fagN3 https://www.msn.com/en-us/money/markets/wood-production-hits... They talk about opening new sawmills because a huge number of them went out of business since the last great recession. It's a supply/demand issue and the production relative to COVID or last recession hasn't recovered.
- abakker 5y ago
  This is a highly complex problem. One reason to run below capacity is that many of the trees that have grown in the souther US were left standing to grow longer during persuades of low demand in the last decade. Now that there is high demand it has become apparent that not many sawmills in the south of the UD have the capacity to saw larger trees, and many of the bigger mills that can are in Canada which is being impacted by tariffs that make shipping them back and forth not so economic.
adam_arthur 5y ago
Lumber production at all time high, as easily found in many articles. It's called demand pull inflation. Suddenly populace has many more dollars, and thus can buy out supply of whatever... In this case, new housing stock. Or it could be driven simply by changes in preferences... The exact breakdown can't be known. Whether it persists or not is the important question. https://www.google.com/amp/s/fortune.com/2021/06/10/lumber-prices-2021-chart-price-of-lumber-production-wood-supply-costs-update-june/amp/ https://www.google.com/amp/s/fortune.com/2021/06/10/lumber-p... A lot of people handwave away shortages as a supply side issue, but an increase in demand leading to a shortage is not supply side at all. The distinction is subtle but important.

deleted 5y ago

[deleted]

michaelmrose 5y ago

The price is off the wall high a 377% increase. Inflation isn't 377% its 4.2%. The price of lumber spiked nearly 100x faster than inflation. Actual inflation is such a small component of the spike that it would be hard to see through the noise.

swader999 5y ago
Inflation numbers are an average of several prices.
- imtringued 5y ago
  This implies that lumber is a tiny portion of the basket of goods and is irrelevant for the majority of consumers. Edit: My point is that if it is such a tiny portion, then a nation wide change in demand can have a huge impact on pricing without necessarily requiring monetary policy as cause.

mikhailt 5y ago

What high level of production? Please cite your source for this. The production is still lower than it was prior to the last recession and they're ramping to match pre-COVID levels. It may be high relative to the last decade or pre-COVID but in the long run, it hasn't recovered to the pre-recession levels. (https://www.msn.com/en-us/money/markets/wood-production-hits-13-year-high%E2%80%94but-lumber-prices-are-still-up-171percent-since-covid-started/ar-BB1fagN3 https://www.msn.com/en-us/money/markets/wood-production-hits...) In other words, you have to include past levels when you say it is very high level, it isn't high relative to last year nor last decade either. Inflation on its own doesn't explain ~100-400% price hike in the past year. Inflation hasn't even broken 10% yet. It also doesn't explain that this started long before COVID as well. This is mostly a supply and demand issue; the supply has taken a huge hit since the recession and lot of companies went out of business since then. COVID didn't help the matter.

adam_arthur 5y ago
Prices only tend to rise due to supply demand imbalances. That's exactly how inflation manifests... and in the real world it won't happen at a uniform rate across all goods. As a thought experiment, imagine we print 2x the money supply and hand it to all citizens. Suddenly they can buy twice as many goods, so we would expect shortages, and prices to rise to compensate. But likely a surge in discretionary income will hit certain types of goods first. We won't see people start stockpiling toilet paper with their newfound money, will we? Most people have all the toilet paper they need already. Funds will hit discretionary things, before spreading through rest of the economy as it circulates. This thought experiment demonstrates an extreme, but this is the exact policy we enacted, just to a lesser degree.
- Scoundreller 5y ago
  While everyone probably caches a bit more toilet paper than before, a whole swathe of people took the plunge on a bidet and will buy 90% less toilet paper in perpetuity. At the face of it, a shortage looks great for producers, but can bite them in the long-term.
- imtringued 5y ago

dragonwriter 5y ago

> Its inflation. Yes, the increase in price of a good is the definition of inflation. That’s a tautology, not an explanation. (It is not general inflation, because the lumber price increases are way out of line with general inflation.) > When you consider the fed printed trillions of dollars for easing in the last year this should be even more apparent. That... doesn't explain the specific increase in lumber not seen across the broader market of goods and services.

ltbarcly3 5y ago
No, it's not the definition of inflation. If Monet becomes very fashionable and his paintings double in value, that's not 'inflation' it's just something increasing in value. When the government prints trillions of dollars to bail out corrupt wallstreet firms and hedge funds so that the super rich can avoid the consequences of their high risk investment strategies, and this causes the purchasing power of money to decrease, that is inflation, and that is what is happening. Wood just has a low ability to flex up production quickly compared to many other goods. The price of a Big Mac has gone up 12% in the last year and a half. I encourage you to pick something and price compare it from pre to post covid and see if inflation might not be higher than the official number.