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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 ma

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
  >As a thought experiment, imagine we print 2x the money supply and hand it to all citizens. I would like to mention that the money supply in this thought experiment is irrelevant. The key reason why the though experiment drives inflation is that "all citizens" includes a large group of people at the bottom of maslow's hierarchy of needs and they all want those needs to be met.. If you were to give all the money to Jeff Bezos he may not even be able to spend the first trillion and we would forever be doomed with extremely negative interest rates.
  - ltbarcly3 5y ago
    This shows you fundamentally don't understand how money works in the economy. Lets say you give that money to Bezos. What does he do with it? Unless he literally builds an Uncle Scrooge money bin and hoards physical $100 bills, having the money allocated to Bezos in no way prevents it from being injected directly into the economy. Lets say we hand Bezos $1B today, what does he do with it? Puts it in a bank: Banks want deposits so they can loan more money out at a higher interest rate than they pay to the depositor. Bezos putting money into a bank will cause interests rates to go down slightly and an extra $1B in loans to be issued, and people borrow money to buy things immediately. Buys stocks: For Bezos to buy a stock, that means someone else sold a stock. Now the cash is in someones hands and they have to do something with it. Buy treasuries: Treasuries are used to finance the federal debt, which is money the government is already spending now. Most of it goes to salaries of government employees or direct payments such as social security, both of which are spent by regular people for necessities. The rest of the budget is used to purchase things or to pay interest on the debt, and interest payments put cash in hands of people who then have to do something with it.
    - ItsMonkk 5y ago
      This matches my take. Note your 4 options is what will happen to prices. If he chooses to buy consumption goods, those things will rise in price by some amount. If he chooses stocks, the person that sold that stock to him will want a higher price than before that $1B was handed to Bezos and he increased the demand for stocks by $1B. Likewise for the other two. These are just supply and demand curves. Basic macroeconomics 101. So we can see that when new money is created in an economy, it must necessarily be split within all the asset classes according to the decisions made by the person given the money. The person given that money proceeds to do the same thing in a chain of purchases. So now when we zoom back and look at the Federal Reserves mandate we can see it much more clearly. "We need to ensure that when we print more money than goods are created, that money is chosen to be put into stocks and not consumption goods.". They do so by directly affecting the prices of stocks by buying company bonds, which then is directly used to buyback stocks. In effect, the Federal Mandate is wealth inequality. The big problem with that is its a house of cards. Once you start supporting inequality, the greater inequality means that you have even less room to mess up and smaller and smaller hedges will have larger and larger impacts. And if the wealthy choose to go against their overall utility and cashout today, the entire system collapses. If the wealthy work out that someone else can cashout and they become the bagholder (like BOA margin-calling Archegos Capital), then that will trigger themselves to do so to save risk. So we can see that the Federal Reserve's plan does not in fact deal with the risk, it pushes it forward as a bigger risk. The Federal Reserve is just a Martingale. It might be possible for this system to last for hundreds of years, it's already worked for 50. I have no idea how close we are to some limit.
ltbarcly3 5y ago
> It also doesn't explain that this started long before COVID as well. False, the price run-up started in April 2020, after staying in a fairly narrow band of prices for 40 years. By August 2020 prices had hit an all time high, and then continued to rise to 2.5x that previous record. Compare these graphs, and explain why we should ignore the obvious possibility that this correlation might be meaningful. The money supply went from 4 trillion to 19 trillion (an increase of 4.75x) and the price of lumber went from $300 per 1000bf to $1500 per 1000bf, an increase of 5x over precisely the same period. Probably just a coincidence... https://tradingeconomics.com/commodity/lumber https://tradingeconomics.com/commodity/lumber https://fred.stlouisfed.org/series/M1SL https://fred.stlouisfed.org/series/M1SL > What high level of production? Wood production is at it's highest level since 2008. There was a slight dip during peak covid lockdown, but there was also an offsetting drop in demand during the same period so this can't be explained by the temporary drop in production.

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
>As a thought experiment, imagine we print 2x the money supply and hand it to all citizens. I would like to mention that the money supply in this thought experiment is irrelevant. The key reason why the though experiment drives inflation is that "all citizens" includes a large group of people at the bottom of maslow's hierarchy of needs and they all want those needs to be met.. If you were to give all the money to Jeff Bezos he may not even be able to spend the first trillion and we would forever be doomed with extremely negative interest rates.
- ltbarcly3 5y ago
  This shows you fundamentally don't understand how money works in the economy. Lets say you give that money to Bezos. What does he do with it? Unless he literally builds an Uncle Scrooge money bin and hoards physical $100 bills, having the money allocated to Bezos in no way prevents it from being injected directly into the economy. Lets say we hand Bezos $1B today, what does he do with it? Puts it in a bank: Banks want deposits so they can loan more money out at a higher interest rate than they pay to the depositor. Bezos putting money into a bank will cause interests rates to go down slightly and an extra $1B in loans to be issued, and people borrow money to buy things immediately. Buys stocks: For Bezos to buy a stock, that means someone else sold a stock. Now the cash is in someones hands and they have to do something with it. Buy treasuries: Treasuries are used to finance the federal debt, which is money the government is already spending now. Most of it goes to salaries of government employees or direct payments such as social security, both of which are spent by regular people for necessities. The rest of the budget is used to purchase things or to pay interest on the debt, and interest payments put cash in hands of people who then have to do something with it.
  - ItsMonkk 5y ago
    This matches my take. Note your 4 options is what will happen to prices. If he chooses to buy consumption goods, those things will rise in price by some amount. If he chooses stocks, the person that sold that stock to him will want a higher price than before that $1B was handed to Bezos and he increased the demand for stocks by $1B. Likewise for the other two. These are just supply and demand curves. Basic macroeconomics 101. So we can see that when new money is created in an economy, it must necessarily be split within all the asset classes according to the decisions made by the person given the money. The person given that money proceeds to do the same thing in a chain of purchases. So now when we zoom back and look at the Federal Reserves mandate we can see it much more clearly. "We need to ensure that when we print more money than goods are created, that money is chosen to be put into stocks and not consumption goods.". They do so by directly affecting the prices of stocks by buying company bonds, which then is directly used to buyback stocks. In effect, the Federal Mandate is wealth inequality. The big problem with that is its a house of cards. Once you start supporting inequality, the greater inequality means that you have even less room to mess up and smaller and smaller hedges will have larger and larger impacts. And if the wealthy choose to go against their overall utility and cashout today, the entire system collapses. If the wealthy work out that someone else can cashout and they become the bagholder (like BOA margin-calling Archegos Capital), then that will trigger themselves to do so to save risk. So we can see that the Federal Reserve's plan does not in fact deal with the risk, it pushes it forward as a bigger risk. The Federal Reserve is just a Martingale. It might be possible for this system to last for hundreds of years, it's already worked for 50. I have no idea how close we are to some limit.

ltbarcly3 5y ago

> It also doesn't explain that this started long before COVID as well. False, the price run-up started in April 2020, after staying in a fairly narrow band of prices for 40 years. By August 2020 prices had hit an all time high, and then continued to rise to 2.5x that previous record. Compare these graphs, and explain why we should ignore the obvious possibility that this correlation might be meaningful. The money supply went from 4 trillion to 19 trillion (an increase of 4.75x) and the price of lumber went from $300 per 1000bf to $1500 per 1000bf, an increase of 5x over precisely the same period. Probably just a coincidence... https://tradingeconomics.com/commodity/lumber https://tradingeconomics.com/commodity/lumber https://fred.stlouisfed.org/series/M1SL https://fred.stlouisfed.org/series/M1SL > What high level of production? Wood production is at it's highest level since 2008. There was a slight dip during peak covid lockdown, but there was also an offsetting drop in demand during the same period so this can't be explained by the temporary drop in production.