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What this doesn’t really address is the why? Yeah there’s more money floating around, so perhaps more people want to spend it, but why? Most people aren’t gett

What this doesn’t really address is the why? Yeah there’s more money floating around, so perhaps more people want to spend it, but why? Most people aren’t getting materially more stuff or even need that much more stuff, consumption’s already god damn conspicuous. Maybe everyone can afford a jet ski all of a sudden? No, the stims didn’t really do /that/ kind of wealth expansion. To me, this still looks like the bullwhip effect, which is expected to have an outsized effect on demand over at least a year or two. Buyers, who got used to “just in time” shipping, got spooked by shipping delays and shortages from their suppliers, because of supply demand imbalances during shutdowns, and as a response they all put in orders for 2 to 3 times the amount they usually buy from their suppliers with the intent of rebuilding domestic stock so they don’t miss out on sales. All of a sudden, aggregate demand explodes. Shocking.

tsywke44 5y ago
Remote work. Hundreds of millions of well-off middle class people gained 2 hours of extra time and energy per day from not having to commute. Thats equivalent to a population boom.
- prawn 5y ago
  And that puts more people at home looking at their surroundings thinking about how it might make sense to upgrade. "Well, I'll be looking at this place another 7+ hours a day." Which then puts demand on various hardware supplies and tradespeople. In our case, with the real estate market so hot, it makes sense to upgrade. Selling and buying a house has a stamp duty here of $50k on a $1m house, meaning it's fairly easy to justify $50k on internal renovations (updating bathrooms, flooring, etc) rather than upping and moving.
Spooky23 5y ago
It’s a whiptail effect. Shifts in demand and supply cascade and create unpredictable effects. For example, the rush on toilet paper triggered more production, which reduced pulp supplies, which constrained golf cart supply. Why? Seats are made from particleboard, made from pulp. Plus, golf courses bought more carts than usual due to lockdown restrictions.
- wexler88 5y ago
  Was the particleboard really the operative constraint? Or is the explanation about extra demand the correct one? It seems plausible that golf cart manufacturers aren't ready to handle extremely spiky demand. Also, that the toilet paper explanation begins as a joke or a guess, and takes hold because everyone likes it as a story.
  - rustyminnow 5y ago
    > Was the particleboard really the operative constraint? Or is the explanation about extra demand the correct one? Probably both were contributing factors, along with a slew of other things. This particular story does seem like it could be a folk-tale explanation, but it's not really about golf-carts - no one cares about golf-cart shortages. It's just a simple example of a broader issue for people to easily grasp. Even if it isn't particularly accurate, the same thing is happening in/across just about every industry
  - Spooky23 5y ago
    Check out: https://charlestonbusiness.com/news/automotive/80346/ https://charlestonbusiness.com/news/automotive/80346/ I don’t have an academic paper, but I got the same story from several pretty big rental providers. (I needed about a dozen golf carts for a project) It was crazy - the rental places had no inventory because gold courses weren’t offloading older gold carts due to the supply chain issues. We ended up buying a smaller number of bigger utility vehicles from Bass Pro Shops, of all places! The techs had fun with that.
yesbut 5y ago
Also, a lot of suppliers and shipping companies are trying to recoup their covid losses from 2020. They have increased their service costs, which causes the next guy in the chain to increase their costs, etc.
RC_ITR 5y ago
What everyone is going to have a real hard time wrapping their head around for the next few years: We built a highly efficient economy for a set of behaviors. A shock happened that caused a lot people to change their behaviors (probably for a long time, since they've had 2 years of 'practice'). Our economy, which was built for those old behaviors (living in cities, riding public transit, eating at restaurants, travelling internationally, etc.) is doing a bad job of adapting to new behaviors (Living decentrally, driving more, ordering out more, travelling locally. etc.) because we used to think 'People don't change very fast, we can build a just-in-time economy.' But here's the thing about cycles, soon things will adapt to those new baselines. Companies will carry more inventory. (until a new generation of FP&A underlings forgets what a pandemic is) Not enough steel to make enough cars? Here's my amazing ' Airbnb for cars' startup (Hey Sand Hill, did you know, dollar for dollar, they are the most underutilized asset in the world?). Natural gas extremely expensive? Let me introduce you to renewables, which btw are getting better and better every year. It may be a painful few years to navigate that transition, and Bridgewater's (weak) point here is that 'hey, consumers are changing behaviors' and nothing more, which to me is a great reminder why this is happening: https://www.bloomberg.com/news/articles/2021-09-02/dalio-s-hedge-fund-risks-being-dumped-by-pension-on-weak-returns https://www.bloomberg.com/news/articles/2021-09-02/dalio-s-h...
- deleted 5y ago
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- Guthur 5y ago
  I just don't get why everyone maintains JIT manufacturing is bad, it's one of the many reasons we can have such reasonably low cost goods, its efficient.
  - grayfaced 5y ago
    Efficiency at a trade-off of resiliency. If you're talking about discretionary purchases, you probably value efficiency over resiliency. If you're talking agriculture, we should value resiliency over efficiency.
okaram 5y ago
I may be wrong, but I don't think we need anything special to explain this, other than COVID. Covid came, the economy died. No travel, restaurants, theaters etc, plus work clothes, beauty products ... Now covid is less of a problem every day, and those things are coming back ... we have a huge demand shock.
- nuerow 5y ago
  > Now covid is less of a problem every day, and those things are coming back ... we have a huge demand shock. I suspect that stimulus checks may have also played a role. Those who fall below the poverty line finally found themselves with a little disposable income to spend on basic everyday things, thus driving up demand. Stimulus check detractors prefer to spin this as inflation but you only get that with a generalized increase in demand for basic consumer goods and services. My personal theory is that this effect is driven mainly by poor people finally getting a break. Those who were already well-off tend to either not change their consumer patterns with small changes in disposable income, or tend to spend it with one-off expenses such as luxury goods and services, or even dump it in risky investments like crypto as we've been seeing in the ongoing bull run.
VirusNewbie 5y ago
>No, the stims didn’t really do /that/ kind of wealth expansion. Of course they did, but indirectly. By propping up the economy by keeping an artificial demand for treasuries, it caused a securities bubble. I bought a bigger house, and so did plenty of my friends, and so did everyone else my real estate agent was working with, which meant I needed a new couch, bed, desk, curtains, speakers, tv, etc. All of the move up buyers who moved some of their money from the stock market into housing likely also spent money buying more 'stuff' for the bigger space.
xadhominemx 5y ago
Overall expenditures are still pretty close to pre-covid trend. Stimulus prevented aggregate expenditures from falling below trend, as they have in previous economic shocks. What’s happened is people have shifted spend from services (particularly healthcare and travel) to goods.
TheBobinator 5y ago
[flagged]
- nicoffeine 5y ago
  > A CDC Whistleblower leaked they had found over 40k vax-induced deaths in medicare data back in July I don't know what FaceBook feed you are mainlining, but you should probably stop.
edmundsauto 5y ago
Looking for “why” is often a path to becoming more fragile and/or frustrated. I do a lot of split tests (a/b testing). People always want to know why a treatment worked. I believe this is human nature. However, the answer to any specific situation is generally unknowable. I may have only changed one color and gotten way different results, but there could be a billion or a trillion situation dependent factors that cause the situation to happen. It is pure chaos. But our brains latch onto our cognitive biases to scaffold a reason, such as “because people find blue more reassuring than red.” This is not generalizable, but more importantly: it probably doesn’t matter in order to resolve the decision that was the reason for the test. Since then, I have accepted that seeking the “why” is generally a fools errand, unless you are doing pure science in a controlled, closed-input system. That’s the beauty of not asking why. It’s a competitive advantage.
- mindslight 5y ago
  What you're finding with A/B testing is local maximums. Which might make sense when your sole goal is squeezing a few more pennies out of a mundane business. But generalizing this to all of existence is sorely mistaken. Asking "why" is the act of cognition. Discerning structure, compression, building a model (science). Then applying that model to new territory (ie engineering), to achieve better gains than undirected walk. Eschewing this is basically nihilism, and it's far too common these days.
  - edmundsauto 5y ago
    Asking why can lead down two paths. In a system where it's possible to understand the "why" (often overlaps with "hard" sciences), it is crucial. In fields where the inputs are unknown, obscured, non-linear, and sometimes non-deterministic: asking "why" is going to create cognitive biases that are very difficult to break. - Why did the Soviet Union fall? - Why did Trump lose in 2020? - Why did I eat a cheeseburger when I'm trying to lose weight? Those all turn into narratives that may or may not be correct, but are usually self-reinforcing. Confirmation bias also means we evaluate the "why" question as follows: "given what I know about this situation, and how I think things generally work, can I see this singular narrative as being true?" That leads to blindness of other possible interpretations, as well as other cognitive dysfunction. To be a little cheeky - that is why commentators on politics, economics, social sciences, psychology... are full of shit. Asking why may be the act of cognition, as you say - but my take is that the act of cognition itself will not lead to understanding the truth, or better decisions. Making up fairy tails is also cognition but does not help us build mental models to better understand the world around us.
vmception 5y ago
Alot of people really didn't pay their rent with their stimmy's and were able to "afford a jet ski" and experiences and have done that. This isn't meant to be a conservative talking piece, a lot of people just reacted to the lack of consequences and futility of their prior aspirations. Also, Congress acted haphazardly and sent some forms of stimulus to anyone with an AGI below like $75k. AGI is influenced by how many deductions you make, not "income", as widely reported. Many people that were not cash poor but had or rolled forward deductions had $0 or negative AGI and automatically received stimulus payments. And we all know how the Paycheck Protection Program went. That was an anything goes lottery. It all are factors. I'm going to go with Ray Dalio on the weighting of the factors. Disruptions, readjusted priorities by individuals, and capital misallocations from what people want to do and how the capital entered the market.
omalleyt 5y ago
If that were true, inventories ("domestic stock") should be very high. Actually, they are at historic lows
fanzhang 5y ago
Your hypothesis of "bullwhip effect" would predict that global inventories are increasing (thus causing a surge in demand). However it doesn't square with all the graphs in the article that show inventories across the world at global lows. Overall, I believe the Bridgewater story to be more correct.
- Scandiravian 5y ago
  I don't think the bullwhip would predict global inventory increases, quiet the opposite from how I read the parent post. The article shows global lows for raw materials, but production for China is up 20% and exports are 40% higher. I can't find any reference to retail inventories in the article, but I think some of the stock could be found there - though I imagine that a lot of it could simply be stuck in transit. I think you and OP agrees - the parent post tries to answer the why of the situation, which the article doesn't spend much/any time on
deleted 5y ago
[deleted]
pfortuny 5y ago
When money has no value (rates=0%) you are better off spending it rather than saving…
credit_guy 5y ago
I think they address the why: “Household balance sheets are now in a materially better state than they were pre-pandemic, as MP3 created a significant amount of wealth, pushing up the value of assets like equities, housing, cryptocurrencies, and so on. These gains have been broad-based across the economy, not just in the top decile or quantile. Ongoing stimulative financial conditions have further lowered debt service costs, and incomes have also benefited as economies have reopened. In short, households are wealthy, flush with cash, and ready to spend—setting the stage for a lasting, self-reinforcing surge in demand.”
- zhdc1 5y ago
  This is one of the factors for current inflation, but it's not sustainable over the long run. Consumers will happily over-leverage themselves to pre-pandemic debt levels, and we'll be left in the same long term situation as before (bad demographics and too much money chasing investment opportunities).
zhdc1 5y ago
> What this doesn’t really address is the why? Consumers base purchasing decisions on their monthly outlays. When interest rates go down, they can afford more in payments, so they increase their consumption until their expenses match what they can afford. A good example here is housing. The US and many EU states provided an under-appreciated amount of stimulus during the COVID-19 lockdowns. Even when this wasn't given directly to citizens, as it was in the US, it still trickled down from businesses to labor through steady wages. It also kept the wheels of the economy greased by keeping businesses out of bankruptcy, so when the lockdowns ended, the unemployed could return to work. The steady wages piece here is key, because the lockdowns led to a significant reduction in daily expenses. So, i.e., if you had 5K in monthly expenses that were matched by 5K in income, for a non-negligible amount of time, you had 5K in income going against 3K in expenses. Even without direct stimulus payments, this led to a significant increase in average savings. Now that the lockdowns are over, consumers - who now have money in the bank - also happen to have access to extraordinarily low interest rates (too much money chasing too few investment opportunities). Because of post-COVID structural issues, there is also an increase in the demand for labor, so wages are also increasing. And there's the much touted structural part of all of this. We've never, ever (at least, from the early 20th century), seen as large of a reduction in global peacetime economic activity as we did in early-mid 2020. The closest example out there is the end of WW2. We've also never seen global economic activity drop, and then rebound, in such a short period of time. > Maybe everyone can afford a jet ski all of a sudden? No, the stims didn’t really do /that/ kind of wealth expansion. Getting back to your post, debt allows leverage. Consumers now have either lower monthly expenses (if they used their savings to pay off debt) or they have more money in the bank to use as a down payment. To use your example of a jet ski, a Yamaha EX at $7,200 USD can be purchased with 1K down and a 60 month repayment plan. The monthly payments will be $118 USD at a 5.2% (high) interest rate. So, the average American consumer, using only government-provided stimulus checks (3.2K per person), can afford the down payment along with almost two years of monthly payments for a jet ski before they have to start paying from their income. Can they afford the jet ski outright? No, but consumer purchases are based on short term impulses, and the US stimulus checks, along with easy access to low interest debt, certainly pushes the equation towards consumption.
- hooande 5y ago
ajsnigrutin 5y ago
Covid lockdowns have a a lot to do with that too. People used to spent their money in restaurants, bars, cinemas, theaters, parties, festivals, massages, hairdressers, and a bunch of other services. If you add lockdowns, many things happen: * people have leftover money, that they instead spend on "things"... and since they're used to using less services, this is also true for some time after the lockdowns * If you're stuck at home, you'll buy stuff that makes that nice... a better tv, a game console,... * Some lockdown policies directly affect your 'need for stuff' - school from home? Kids need their own PCs, you need to buy a scanner and a printer for them,... * People working from home also have more free time, and decide to do the long delayed house work and projects - so people buy more construction materials (also people want houses outside of cities, because it's nicer to be there during lockdowns), so prices of that go up too * and last but not least, manufacturers fuck up their orders, don't have stock buffers, and fail horribly
- watwut 5y ago
  I can confirm that lockdowns made our family save a lot more money then usual - despite us buying quite a lot of new stuff do to lifestyle changes.
  - e-master 5y ago
    My experience supports that - on public transit alone our family saved more than 5k USD last year, it would’ve more than made up for any equipment I would’ve had to buy (turned out though that I already had everything needed to work from home).
    - wiz21c 5y ago
      because of remote work, I have to heat the house 7 days per week, instead of about 0.25*5+2=3.25 => that's about twice as much. Given the rise in energy cost, this will have a huge impact.
      - samarthr1 5y ago
ur-whale 5y ago
> or even need that much more stuff, That's a fairly rich-world centric view of things. I suspect the majority of humanity hasn't reached the point where "they don't need much more stuff".
cslarson 5y ago
Crypto has added a lot to aggregate wealth over the past 12m.
lvl100 5y ago
I’d say wealth effect from people seeing their retirement account ballooning in such a short period of time. The demand will last for awhile especially in places like EU where the stimulus was substantially higher than in the US for lower middle class. By the way, if we DON’T see sustained inflation from this level of stimulus, that should raise eyebrows and we should really question the role of CBs and efficacy of monetary policies.
acje 5y ago
In networking we have TCP global synchronization. This is probably going to be similar for a couple of cycles, but for goods. Also LEAN is the practice of globally optimizing a system, with the less known drawback of making it globally fragile. We have seen this before when supply chains are disrupted, like the flooding in 2011 disrupting HHD's. https://spectrum.ieee.org/the-lessons-of-thailands-flood https://spectrum.ieee.org/the-lessons-of-thailands-flood
sleepysysadmin 5y ago
>Maybe everyone can afford a jet ski all of a sudden? No, the stims didn’t really do /that/ kind of wealth expansion. US money supply M0 in late 2019 was low around 3.5 trillion. Today it's around 6.4 trillion. This doesn't equate to 100% inflation, but it certainly equates to affording jet skis. M2 money supply is sitting around 21 trillion and ought to be more around 16 trillion. This is the equivalent to 31% locked in, happening within a few years inflation. Though looking deeper than this, easily 40% inflation locked in. You are incentivized to buy a jetski even on cheap debt because as this inflation erases the debt. The asset even with depreciation will end up being more expensive than you bought it selling used. In terms of 'wealth expansion' it's sitting around 400% right now.
- wexler88 5y ago
  This is not how money works.
  - sleepysysadmin 5y ago
    >This is not how money works. Ok, could you educate me please?
    - wexler88 5y ago
      Yes, I just did.
  - dang 5y ago
    Please don't post shallow dismissals to HN. We're trying for a different quality of discussion here, to the extent possible. If you wouldn't mind reviewing the rules and sticking to the intended spirit, we'd appreciate it. They're here: https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html. If you know more than someone else, it would be great to share some of what you know so the rest of us can learn. If you don't want to do that, that's fine, but then it's usually best not to post. Putting others down or putting their comments down just makes the thread worse. https://hn.algolia.com/?dateRange=all&page=0&prefix=true&sort=byDate&type=comment&query=share%20know%20learn%20by:dang https://hn.algolia.com/?dateRange=all&page=0&prefix=true&sor... Edit: ditto for https://news.ycombinator.com/item?id=29161503 https://news.ycombinator.com/item?id=29161503.
QuarterReptile 5y ago
I didn't see this yet, so I'll throw in my own experience: with prices inflating in a widespread way, I want to lock in my losses now. Yes, you could point out that investments will probably continue to outpace inflation, but I have never in my life triggered a taxable cap gains event, so for all intents and purposes investment is a one way street to me (money never comes out.) So while my two central air systems continue to work, I'd rather pay 10K to replace them now than 15k in a year when they finally do break. And while I feel it's silly to be driving around a minivan for just the one kid and one dog, it was better to have bought at the end of 2020 and feel silly until kid #2 comes along, rather than be sitting on the wrong end of the enormous swing in car prices.
simonh 5y ago
>Yeah there’s more money floating around, so perhaps more people want to spend it, but why? Even if they don't spend the money, it still drives demand. That's because investment also drives demand. How do you get a return on investment? If you invest in a company, it will expand. Even if you put money into property that will drive renovations and new construction. All profits from investment come from profitable economic activities somewhere down the chain.
snarf21 5y ago
Yeah, this is what happened with toilet paper writ large. Then you add in the supply shocks and it is exacerbated. The other issue is that the ports and trucks staffing was already short handed and then they backed off hard during covid. Either prices will rise enough to attract the workers back or we'll just be in this new world for a long time. I definitely can see some business like fast food switching to a drive-thru only model. You need less staff and don't have the interior maintenance costs. Previously that would have hurt their business but people are now used to the wait. I see lines of 20 cars at all fast food drive-thrus most of the time now.

tsywke44 5y ago

Remote work. Hundreds of millions of well-off middle class people gained 2 hours of extra time and energy per day from not having to commute. Thats equivalent to a population boom.

prawn 5y ago
And that puts more people at home looking at their surroundings thinking about how it might make sense to upgrade. "Well, I'll be looking at this place another 7+ hours a day." Which then puts demand on various hardware supplies and tradespeople. In our case, with the real estate market so hot, it makes sense to upgrade. Selling and buying a house has a stamp duty here of $50k on a $1m house, meaning it's fairly easy to justify $50k on internal renovations (updating bathrooms, flooring, etc) rather than upping and moving.

Spooky23 5y ago

It’s a whiptail effect. Shifts in demand and supply cascade and create unpredictable effects. For example, the rush on toilet paper triggered more production, which reduced pulp supplies, which constrained golf cart supply. Why? Seats are made from particleboard, made from pulp. Plus, golf courses bought more carts than usual due to lockdown restrictions.

wexler88 5y ago
Was the particleboard really the operative constraint? Or is the explanation about extra demand the correct one? It seems plausible that golf cart manufacturers aren't ready to handle extremely spiky demand. Also, that the toilet paper explanation begins as a joke or a guess, and takes hold because everyone likes it as a story.
- rustyminnow 5y ago
  > Was the particleboard really the operative constraint? Or is the explanation about extra demand the correct one? Probably both were contributing factors, along with a slew of other things. This particular story does seem like it could be a folk-tale explanation, but it's not really about golf-carts - no one cares about golf-cart shortages. It's just a simple example of a broader issue for people to easily grasp. Even if it isn't particularly accurate, the same thing is happening in/across just about every industry
- Spooky23 5y ago
  Check out: https://charlestonbusiness.com/news/automotive/80346/ https://charlestonbusiness.com/news/automotive/80346/ I don’t have an academic paper, but I got the same story from several pretty big rental providers. (I needed about a dozen golf carts for a project) It was crazy - the rental places had no inventory because gold courses weren’t offloading older gold carts due to the supply chain issues. We ended up buying a smaller number of bigger utility vehicles from Bass Pro Shops, of all places! The techs had fun with that.

yesbut 5y ago

Also, a lot of suppliers and shipping companies are trying to recoup their covid losses from 2020. They have increased their service costs, which causes the next guy in the chain to increase their costs, etc.

RC_ITR 5y ago

What everyone is going to have a real hard time wrapping their head around for the next few years: We built a highly efficient economy for a set of behaviors. A shock happened that caused a lot people to change their behaviors (probably for a long time, since they've had 2 years of 'practice'). Our economy, which was built for those old behaviors (living in cities, riding public transit, eating at restaurants, travelling internationally, etc.) is doing a bad job of adapting to new behaviors (Living decentrally, driving more, ordering out more, travelling locally. etc.) because we used to think 'People don't change very fast, we can build a just-in-time economy.' But here's the thing about cycles, soon things will adapt to those new baselines. Companies will carry more inventory. (until a new generation of FP&A underlings forgets what a pandemic is) Not enough steel to make enough cars? Here's my amazing ' Airbnb for cars' startup (Hey Sand Hill, did you know, dollar for dollar, they are the most underutilized asset in the world?). Natural gas extremely expensive? Let me introduce you to renewables, which btw are getting better and better every year. It may be a painful few years to navigate that transition, and Bridgewater's (weak) point here is that 'hey, consumers are changing behaviors' and nothing more, which to me is a great reminder why this is happening: https://www.bloomberg.com/news/articles/2021-09-02/dalio-s-hedge-fund-risks-being-dumped-by-pension-on-weak-returns https://www.bloomberg.com/news/articles/2021-09-02/dalio-s-h...

deleted 5y ago
[deleted]
Guthur 5y ago
I just don't get why everyone maintains JIT manufacturing is bad, it's one of the many reasons we can have such reasonably low cost goods, its efficient.
- grayfaced 5y ago
  Efficiency at a trade-off of resiliency. If you're talking about discretionary purchases, you probably value efficiency over resiliency. If you're talking agriculture, we should value resiliency over efficiency.

okaram 5y ago

I may be wrong, but I don't think we need anything special to explain this, other than COVID. Covid came, the economy died. No travel, restaurants, theaters etc, plus work clothes, beauty products ... Now covid is less of a problem every day, and those things are coming back ... we have a huge demand shock.

nuerow 5y ago
> Now covid is less of a problem every day, and those things are coming back ... we have a huge demand shock. I suspect that stimulus checks may have also played a role. Those who fall below the poverty line finally found themselves with a little disposable income to spend on basic everyday things, thus driving up demand. Stimulus check detractors prefer to spin this as inflation but you only get that with a generalized increase in demand for basic consumer goods and services. My personal theory is that this effect is driven mainly by poor people finally getting a break. Those who were already well-off tend to either not change their consumer patterns with small changes in disposable income, or tend to spend it with one-off expenses such as luxury goods and services, or even dump it in risky investments like crypto as we've been seeing in the ongoing bull run.

VirusNewbie 5y ago

>No, the stims didn’t really do /that/ kind of wealth expansion. Of course they did, but indirectly. By propping up the economy by keeping an artificial demand for treasuries, it caused a securities bubble. I bought a bigger house, and so did plenty of my friends, and so did everyone else my real estate agent was working with, which meant I needed a new couch, bed, desk, curtains, speakers, tv, etc. All of the move up buyers who moved some of their money from the stock market into housing likely also spent money buying more 'stuff' for the bigger space.

xadhominemx 5y ago

Overall expenditures are still pretty close to pre-covid trend. Stimulus prevented aggregate expenditures from falling below trend, as they have in previous economic shocks. What’s happened is people have shifted spend from services (particularly healthcare and travel) to goods.

TheBobinator 5y ago

[flagged]

nicoffeine 5y ago
> A CDC Whistleblower leaked they had found over 40k vax-induced deaths in medicare data back in July I don't know what FaceBook feed you are mainlining, but you should probably stop.

edmundsauto 5y ago

Looking for “why” is often a path to becoming more fragile and/or frustrated. I do a lot of split tests (a/b testing). People always want to know why a treatment worked. I believe this is human nature. However, the answer to any specific situation is generally unknowable. I may have only changed one color and gotten way different results, but there could be a billion or a trillion situation dependent factors that cause the situation to happen. It is pure chaos. But our brains latch onto our cognitive biases to scaffold a reason, such as “because people find blue more reassuring than red.” This is not generalizable, but more importantly: it probably doesn’t matter in order to resolve the decision that was the reason for the test. Since then, I have accepted that seeking the “why” is generally a fools errand, unless you are doing pure science in a controlled, closed-input system. That’s the beauty of not asking why. It’s a competitive advantage.

mindslight 5y ago
What you're finding with A/B testing is local maximums. Which might make sense when your sole goal is squeezing a few more pennies out of a mundane business. But generalizing this to all of existence is sorely mistaken. Asking "why" is the act of cognition. Discerning structure, compression, building a model (science). Then applying that model to new territory (ie engineering), to achieve better gains than undirected walk. Eschewing this is basically nihilism, and it's far too common these days.
- edmundsauto 5y ago
  Asking why can lead down two paths. In a system where it's possible to understand the "why" (often overlaps with "hard" sciences), it is crucial. In fields where the inputs are unknown, obscured, non-linear, and sometimes non-deterministic: asking "why" is going to create cognitive biases that are very difficult to break. - Why did the Soviet Union fall? - Why did Trump lose in 2020? - Why did I eat a cheeseburger when I'm trying to lose weight? Those all turn into narratives that may or may not be correct, but are usually self-reinforcing. Confirmation bias also means we evaluate the "why" question as follows: "given what I know about this situation, and how I think things generally work, can I see this singular narrative as being true?" That leads to blindness of other possible interpretations, as well as other cognitive dysfunction. To be a little cheeky - that is why commentators on politics, economics, social sciences, psychology... are full of shit. Asking why may be the act of cognition, as you say - but my take is that the act of cognition itself will not lead to understanding the truth, or better decisions. Making up fairy tails is also cognition but does not help us build mental models to better understand the world around us.

vmception 5y ago

Alot of people really didn't pay their rent with their stimmy's and were able to "afford a jet ski" and experiences and have done that. This isn't meant to be a conservative talking piece, a lot of people just reacted to the lack of consequences and futility of their prior aspirations. Also, Congress acted haphazardly and sent some forms of stimulus to anyone with an AGI below like $75k. AGI is influenced by how many deductions you make, not "income", as widely reported. Many people that were not cash poor but had or rolled forward deductions had $0 or negative AGI and automatically received stimulus payments. And we all know how the Paycheck Protection Program went. That was an anything goes lottery. It all are factors. I'm going to go with Ray Dalio on the weighting of the factors. Disruptions, readjusted priorities by individuals, and capital misallocations from what people want to do and how the capital entered the market.

omalleyt 5y ago

If that were true, inventories ("domestic stock") should be very high. Actually, they are at historic lows

fanzhang 5y ago

Your hypothesis of "bullwhip effect" would predict that global inventories are increasing (thus causing a surge in demand). However it doesn't square with all the graphs in the article that show inventories across the world at global lows. Overall, I believe the Bridgewater story to be more correct.

Scandiravian 5y ago
I don't think the bullwhip would predict global inventory increases, quiet the opposite from how I read the parent post. The article shows global lows for raw materials, but production for China is up 20% and exports are 40% higher. I can't find any reference to retail inventories in the article, but I think some of the stock could be found there - though I imagine that a lot of it could simply be stuck in transit. I think you and OP agrees - the parent post tries to answer the why of the situation, which the article doesn't spend much/any time on

deleted 5y ago

[deleted]

pfortuny 5y ago

When money has no value (rates=0%) you are better off spending it rather than saving…

credit_guy 5y ago

I think they address the why: “Household balance sheets are now in a materially better state than they were pre-pandemic, as MP3 created a significant amount of wealth, pushing up the value of assets like equities, housing, cryptocurrencies, and so on. These gains have been broad-based across the economy, not just in the top decile or quantile. Ongoing stimulative financial conditions have further lowered debt service costs, and incomes have also benefited as economies have reopened. In short, households are wealthy, flush with cash, and ready to spend—setting the stage for a lasting, self-reinforcing surge in demand.”

zhdc1 5y ago
This is one of the factors for current inflation, but it's not sustainable over the long run. Consumers will happily over-leverage themselves to pre-pandemic debt levels, and we'll be left in the same long term situation as before (bad demographics and too much money chasing investment opportunities).

zhdc1 5y ago

> What this doesn’t really address is the why? Consumers base purchasing decisions on their monthly outlays. When interest rates go down, they can afford more in payments, so they increase their consumption until their expenses match what they can afford. A good example here is housing. The US and many EU states provided an under-appreciated amount of stimulus during the COVID-19 lockdowns. Even when this wasn't given directly to citizens, as it was in the US, it still trickled down from businesses to labor through steady wages. It also kept the wheels of the economy greased by keeping businesses out of bankruptcy, so when the lockdowns ended, the unemployed could return to work. The steady wages piece here is key, because the lockdowns led to a significant reduction in daily expenses. So, i.e., if you had 5K in monthly expenses that were matched by 5K in income, for a non-negligible amount of time, you had 5K in income going against 3K in expenses. Even without direct stimulus payments, this led to a significant increase in average savings. Now that the lockdowns are over, consumers - who now have money in the bank - also happen to have access to extraordinarily low interest rates (too much money chasing too few investment opportunities). Because of post-COVID structural issues, there is also an increase in the demand for labor, so wages are also increasing. And there's the much touted structural part of all of this. We've never, ever (at least, from the early 20th century), seen as large of a reduction in global peacetime economic activity as we did in early-mid 2020. The closest example out there is the end of WW2. We've also never seen global economic activity drop, and then rebound, in such a short period of time. > Maybe everyone can afford a jet ski all of a sudden? No, the stims didn’t really do /that/ kind of wealth expansion. Getting back to your post, debt allows leverage. Consumers now have either lower monthly expenses (if they used their savings to pay off debt) or they have more money in the bank to use as a down payment. To use your example of a jet ski, a Yamaha EX at $7,200 USD can be purchased with 1K down and a 60 month repayment plan. The monthly payments will be $118 USD at a 5.2% (high) interest rate. So, the average American consumer, using only government-provided stimulus checks (3.2K per person), can afford the down payment along with almost two years of monthly payments for a jet ski before they have to start paying from their income. Can they afford the jet ski outright? No, but consumer purchases are based on short term impulses, and the US stimulus checks, along with easy access to low interest debt, certainly pushes the equation towards consumption.

hooande 5y ago

ajsnigrutin 5y ago

Covid lockdowns have a a lot to do with that too. People used to spent their money in restaurants, bars, cinemas, theaters, parties, festivals, massages, hairdressers, and a bunch of other services. If you add lockdowns, many things happen: * people have leftover money, that they instead spend on "things"... and since they're used to using less services, this is also true for some time after the lockdowns * If you're stuck at home, you'll buy stuff that makes that nice... a better tv, a game console,... * Some lockdown policies directly affect your 'need for stuff' - school from home? Kids need their own PCs, you need to buy a scanner and a printer for them,... * People working from home also have more free time, and decide to do the long delayed house work and projects - so people buy more construction materials (also people want houses outside of cities, because it's nicer to be there during lockdowns), so prices of that go up too * and last but not least, manufacturers fuck up their orders, don't have stock buffers, and fail horribly

watwut 5y ago
I can confirm that lockdowns made our family save a lot more money then usual - despite us buying quite a lot of new stuff do to lifestyle changes.
- e-master 5y ago
  My experience supports that - on public transit alone our family saved more than 5k USD last year, it would’ve more than made up for any equipment I would’ve had to buy (turned out though that I already had everything needed to work from home).
  - wiz21c 5y ago
    because of remote work, I have to heat the house 7 days per week, instead of about 0.25*5+2=3.25 => that's about twice as much. Given the rise in energy cost, this will have a huge impact.
    - samarthr1 5y ago

ur-whale 5y ago

> or even need that much more stuff, That's a fairly rich-world centric view of things. I suspect the majority of humanity hasn't reached the point where "they don't need much more stuff".

cslarson 5y ago

Crypto has added a lot to aggregate wealth over the past 12m.

lvl100 5y ago

I’d say wealth effect from people seeing their retirement account ballooning in such a short period of time. The demand will last for awhile especially in places like EU where the stimulus was substantially higher than in the US for lower middle class. By the way, if we DON’T see sustained inflation from this level of stimulus, that should raise eyebrows and we should really question the role of CBs and efficacy of monetary policies.

acje 5y ago

In networking we have TCP global synchronization. This is probably going to be similar for a couple of cycles, but for goods. Also LEAN is the practice of globally optimizing a system, with the less known drawback of making it globally fragile. We have seen this before when supply chains are disrupted, like the flooding in 2011 disrupting HHD's. https://spectrum.ieee.org/the-lessons-of-thailands-flood https://spectrum.ieee.org/the-lessons-of-thailands-flood

sleepysysadmin 5y ago

>Maybe everyone can afford a jet ski all of a sudden? No, the stims didn’t really do /that/ kind of wealth expansion. US money supply M0 in late 2019 was low around 3.5 trillion. Today it's around 6.4 trillion. This doesn't equate to 100% inflation, but it certainly equates to affording jet skis. M2 money supply is sitting around 21 trillion and ought to be more around 16 trillion. This is the equivalent to 31% locked in, happening within a few years inflation. Though looking deeper than this, easily 40% inflation locked in. You are incentivized to buy a jetski even on cheap debt because as this inflation erases the debt. The asset even with depreciation will end up being more expensive than you bought it selling used. In terms of 'wealth expansion' it's sitting around 400% right now.

wexler88 5y ago
This is not how money works.
- sleepysysadmin 5y ago
  >This is not how money works. Ok, could you educate me please?
  - wexler88 5y ago
    Yes, I just did.
- dang 5y ago
  Please don't post shallow dismissals to HN. We're trying for a different quality of discussion here, to the extent possible. If you wouldn't mind reviewing the rules and sticking to the intended spirit, we'd appreciate it. They're here: https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html. If you know more than someone else, it would be great to share some of what you know so the rest of us can learn. If you don't want to do that, that's fine, but then it's usually best not to post. Putting others down or putting their comments down just makes the thread worse. https://hn.algolia.com/?dateRange=all&page=0&prefix=true&sort=byDate&type=comment&query=share%20know%20learn%20by:dang https://hn.algolia.com/?dateRange=all&page=0&prefix=true&sor... Edit: ditto for https://news.ycombinator.com/item?id=29161503 https://news.ycombinator.com/item?id=29161503.

QuarterReptile 5y ago

I didn't see this yet, so I'll throw in my own experience: with prices inflating in a widespread way, I want to lock in my losses now. Yes, you could point out that investments will probably continue to outpace inflation, but I have never in my life triggered a taxable cap gains event, so for all intents and purposes investment is a one way street to me (money never comes out.) So while my two central air systems continue to work, I'd rather pay 10K to replace them now than 15k in a year when they finally do break. And while I feel it's silly to be driving around a minivan for just the one kid and one dog, it was better to have bought at the end of 2020 and feel silly until kid #2 comes along, rather than be sitting on the wrong end of the enormous swing in car prices.

simonh 5y ago

>Yeah there’s more money floating around, so perhaps more people want to spend it, but why? Even if they don't spend the money, it still drives demand. That's because investment also drives demand. How do you get a return on investment? If you invest in a company, it will expand. Even if you put money into property that will drive renovations and new construction. All profits from investment come from profitable economic activities somewhere down the chain.

snarf21 5y ago

Yeah, this is what happened with toilet paper writ large. Then you add in the supply shocks and it is exacerbated. The other issue is that the ports and trucks staffing was already short handed and then they backed off hard during covid. Either prices will rise enough to attract the workers back or we'll just be in this new world for a long time. I definitely can see some business like fast food switching to a drive-thru only model. You need less staff and don't have the interior maintenance costs. Previously that would have hurt their business but people are now used to the wait. I see lines of 20 cars at all fast food drive-thrus most of the time now.