19 ms·

US inflation jumps to 31-year high amid global supply chain crisis

197 points by cs702 5y ago

deleted 5y ago
[deleted]
xyzzy21 5y ago
Well in many ways the supply chain crisis are economically equivalent to the Arab Oil Embargo. Add bad monetary policy akin to going off the Gold Standard and I can see how Stagflation is a real probability.
RickJWagner 5y ago
Who would have guessed that months of government cash handouts, restricted energy providers, and massive spending programs would lead to this? Pretty much everyone, of course. Sorry for poor people and those on fixed incomes. If you can't afford a tank of gas for $30 you surely can't afford one for $60.
newaccount2021 5y ago
"transitory" was last year's inflation lie "supply chain" is this year's inflation lie just how long will it take for people to accept that The Fed has debased the currency for the benefit of a select few, to the detriment of many? Jerome Powell has the perfect solution to this conundrum - he has announced his retirement and will let someone else clean up the mess
JackPoach 5y ago
And it's probably going to only get worse looking at Fed
AnthonyMouse 5y ago
People need to decide whether they think this is because of supply chain issues and the demand spike following COVID or if it's because of the Fed.
- JackPoach 5y ago
  Clearly the Fed mostly. We'll see it once the supply chain issues go away, but high prices stay high.
  - MeinBlutIstBlau 5y ago
    I remember thinking $50k was an awesome salary when I first started working. Now I think "damn how do families survive off that kind of household income" after seeing essential goods and services cost roughly 1.5x what they were pre stimulus.
    - dlp211 5y ago
      Median household income has gone up. It's currently the highest it's ever been in real terms. Households are better off today then they have ever been in their day-to-day affordability of goods. You also can't cherry-pick a handful of things that have gone up a lot and then assume that it applies to everything. Some things have gone up in price, others haven't. Inflation is sitting at about 6%, which after a decade+ of sub-2% might seem like such a shock, but it isn't really a big deal.
      - MeinBlutIstBlau 5y ago
        Average hourly wage near me is like $12/hr. That's basically 50k in a 2 adult household. If anyone is projecting it's you thinking everyone has a middle class job...
      - JackPoach 5y ago
        Real wages have been stagnant since 1970s in the US. Median household incomes have only gone up because some people work in highly paid industries, like IT, plus household incomes include income from stocks and real estate AND most households now are two working adults.
        MeinBlutIstBlau 5y ago
cs702 5y ago
The ongoing supply-demand imbalance that is contributing to rising inflation worldwide is in my view the most pressing short-term problem that needs to be solved by hackers, engineers, and entrepreneurs today.[a] We need more people doing what Flexport's Ryan Petersen did with LA ports[a]: Figure out quick, cost-efficient ways to get our current system out of its currently degraded state and back to operating smoothly and normally so we we can go back to growing its global throughput as in the pre-pandemic past. Large, complex, distributed, networked systems, like interconnected cloud datacenters, electric power grids, and global logistics networks, can get "stuck" in a degraded state due to a confluence of highly local bugs that are difficult to diagnose -- especially when no single entity controls the entire network end-to-end. Hoping and waiting for things to get better on their own might not be enough. -- [a] Note: I'm not saying it's the most important problem. I'm saying it's the most pressing, in the near term, because a well-functioning global economy is a prerequisite -- a necessary condition -- for solving all important problems. Please don't attack a straw-man. [b] https://www.inc.com/kevin-j-ryan/flexport-founder-twitter-shipping-logistics-supply-chain.html https://www.inc.com/kevin-j-ryan/flexport-founder-twitter-sh...
- dustingetz 5y ago
  How does degraded supply chain throughput connect to inflation?
  - cs702 5y ago
    When there are supply-demand imbalances, e.g., people in France having to wait three months to get a new boiler versus 24-48 hours before the pandemic[a], the price of newly installed boilers in France tends to increase sharply. For a more general answer, see: https://en.wikipedia.org/wiki/Demand-pull_inflation https://en.wikipedia.org/wiki/Demand-pull_inflation https://en.wikipedia.org/wiki/Cost-push_inflation https://en.wikipedia.org/wiki/Cost-push_inflation -- [a] https://www.connexionfrance.com/French-news/Which-products-are-or-could-be-hit-by-stock-shortages-in-France https://www.connexionfrance.com/French-news/Which-products-a...
  - dghlsakjg 5y ago
    Your question using synonyms: How does reduced supply lead to higher prices?
argentinian 5y ago
Some journalists must be happy with this news. https://mises.org/power-market/inflation-celebration https://mises.org/power-market/inflation-celebration
- ChrisLomont 5y ago
  There's a reason exactly zero of top econ journals or economists[2] are Mises.org Austrian economists - they don't have a track record of anything resembling accuracy, predictions, or theory that works. In fact, it's hard to find much even on Google Scholar.... [1] https://ideas.repec.org/top/top.journals.all.html https://ideas.repec.org/top/top.journals.all.html [2] https://ideas.repec.org/top/top.person.all.html https://ideas.repec.org/top/top.person.all.html
  - logicchains 5y ago
    >they don't have a track record of anything resembling accuracy, predictions, or theory that works Neither does academic economics; there's absolutely zero consequence for an economist who repeatedly makes incorrect predictions. The ones who actually can make predictions with statistically significant accuracy work as quants or traders, not economists, as anyone who can make accurate predictions of the future can easily make six to seven figures doing so. That aside, the fundamental predictions in microeconomics between Austrian and neoclassical economics are pretty similar, so you can't say Austrian theory doesn't work without also saying foundational neoclassical microeconomics doesn't work.
  - rsj_hn 5y ago
    Meh, Hayek was awarded the Nobel. The Austrian school does have a lot of useful insights. Perhaps those insights are not so amenable to the kind of economics that is a fruitful research field and can get grants, but that doesn't mean it's not fruitful for understanding the economy. The main reason why the Austrians tend to be snubbed is that their insights are primarily qualitative rather than quantitative, and thus are not the kinds of things that followers can build on to get published. That does not mean that people who do get published aren't taking inspiration from Austrian economics or learning important lessons from this field. This is the problem with a lot of heterodox econ, btw.
deleted 5y ago
[deleted]
simonsarris 5y ago
I've mentioned before [1] but these prices still don't seem that serious. Most prices have still not beat their highs made in 2008-2014 (crude oil, global energy price, eggs, milk, sugar, rice, chicken, pork chops). Ground beef is an outlier, however. And US price per kwh is back at its peak, though it declined in these October numbers to be below... 2014 numbers again. [2] So while the climb up is bad, the prices themselves aren't even unprecedented. In lieu of an extraordinary global supply chain crisis, these numbers actually seem impressively low. We cocked up everything for a year and prices finally shot back to... prices from 7 years ago? If fed policy has any effect at all, I think we owe them one for being so cool-headed and non-drastic these past two years. They're doing much better than politicians or the media, at least. [1] I have some commentary here, and more in a reply to user `anm89` https://news.ycombinator.com/item?id=29114086 https://news.ycombinator.com/item?id=29114086 [2] https://fred.stlouisfed.org/series/APU000072610 https://fred.stlouisfed.org/series/APU000072610
- ashtonkem 5y ago
  There have been some supply shocks in the past year, but I'm increasingly convinced that the disaster rhetoric around inflation is more of a political argument more than an economic one. Personally I suspect it has more to do with justifying austerity in order to curb labor's demand for more money than anything else.
  - rsj_hn 5y ago
    > I suspect it has more to do with justifying austerity in order to curb labor's demand for more money The problem with blowing off inflation because you think it empowers workers is that the latest round of inflation more than erased all the wage increases that were provided. In real terms, workers have been falling behind. So perhaps to make those labor demands more real, it might be a good idea if the government wasn't competing with the private sector for goods and services.
    - ashtonkem 5y ago
      To be clear, I think that all of the price movement we're seeing today is a result of supply chain shock and pent up demand. Arguing about inflation while the ports are still clogged seems extremely short sighted to me; of course prices rise when supply is stuck in a container in LA! Once the supply chains clear up, then we can decide what, if any level of inflation we're seeing. Until that point in time, I will view any doomer narrative about inflation and the proposed solutions for it with extreme skepticism, especially when the proposed solution is convenient for capital and hard on labor.
croutonwagon 5y ago
Relevant thread: https://news.ycombinator.com/item?id=29174804 https://news.ycombinator.com/item?id=29174804
seanmcdirmid 5y ago
Interest rates really should have went up a couple of years ago. Not just for the sake of stemming inflation, but what good is the tool of lower rates in bad times when they are already at bottom in good times? If something goes wrong (or more wrong) we will have no effective economic tools available because they are constantly running as if we are in crisis already.
- wayoutthere 5y ago
  Nobody wants to be the next Jimmy Carter who lets the fed raise interest rates to stem inflation because it invariably triggers a recession that gets said president and his party voted out of office. So rates will stay perpetually low.
  - ALittleLight 5y ago
    It's very sad to consider young men dying for their country while old men are too afraid to risk four years off their political career for it.
    - politician 5y ago
      A significant number of our elected representatives are women.
      - ameetgaitonde 5y ago
        The Federal Reserve Board Chairman is appointed by the President of the United States, not Congress. https://www.federalreserve.gov/aboutthefed/bios/board/default.htm https://www.federalreserve.gov/aboutthefed/bios/board/defaul...
        deleted 5y ago
        [deleted]
      - shepherdjerred 5y ago
nimbius 5y ago
You need to take this seriously. the reason you should be concerned about these prices in relation to their 2008 crisis prices is because the countermeasure that resulted in 2008 relief --Quantitative Easing-- cannot be used again because we effectively never quit using it to prop up the last decade of commercial market performance. https://en.wikipedia.org/wiki/Quantitative_easing#US_QE4 https://en.wikipedia.org/wiki/Quantitative_easing#US_QE4 the Federal reserve also has no leverage to modify the prime interest rate to combat this inflation, as it already sits near-zero and the fed funds rate has been agreed to stay at under a quarter of a percent. modifying any interest rates in 2021 would blow up the corporate credit bubble, so the fed is mostly just bloviating about "transient inflation" to no ones real entertainment. https://en.wikipedia.org/wiki/Corporate_debt_bubble https://en.wikipedia.org/wiki/Corporate_debt_bubble finally, the bond buyback taper the Federal reserve has been touting since July 2021 but too terrified to implement is effectively meaningless as its not set to end until next July at the earliest, effectively allowing uncorrected inflation to continue another eight months. the fed hasnt announced any further countermeasures after this...they just assume a bond taper will coincide with the purported end of covid and surge of consumer confidence which never manifested in 2021. Instead the supply chain continued to fail and vaccine targets were never met. Id conject the level of wishful thinking driving fed policy at this point should be enough to tenure Powells resignation sometime in March. the only thing combatting stagflation at this point is corporations like Amazon who know if they dont do something about real wages in the absence of effective federal policy it will start to reflect on their earnings reports, and even they seem recalcitrant to take any real steps unless the union comes a knockin.'
- throwawaygh 5y ago
  > the Federal reserve also has no leverage to modify the prime interest rate to combat this inflation, as it already sits near-zero ...huh? If you want to lower inflation you'd typically raise interest rates... (These sorts of stupid-simple mistakes are pretty typical from inflation fearmongers in threads like this one... a lot of words that make it sounds like they know what they're talking about but sprinkled with incredible tells like this one.)
  - 5y ago
boringg 5y ago
Hey everyone - we need to chill out for a second. Stop buying the knee jerk reaction of the media trying to freak everyone out and get some good advertising dollars. This is going to take until after the new year maybe Q1-Q3 timeframe to see if it is transitory. Reminder: we had an unprecedented global supply collapse followed by shutdowns and border closures for more than a year combined with historic levels of fast moving monetary growth during that time. We now have a situation of incredible levels of built up demand, a labor shortage and supply chain issues. Not to mention significant amount of illness and deaths as a result of a pandemic. There were bound to be second and third order effects. The system needs some time to adjust.
- kerng 5y ago
  You miss the key point on why this is happening and will continue to get significantly worse. What happens when the number of dollars approximately doubles in 2 years as it happened? Do you think prices stay the same and everything is just 50% off? Reality is that the current number is off by reality quite a bit, real number has to be much higher. It's just math and the worst part... it can't be just reversed.
  - dubcanada 5y ago
    I have no idea what you are saying. Also what is "just math" and why can't it be reversed? Inflation can go down, it's not a purely up percentage, you can have negative inflation. What do you mean by "number of dollars approximately doubles in 2"?
    - hartator 5y ago
      > What do you mean by "number of dollars approximately doubles in 2"? I think OP was talking about monetary inflation. We nearly double the money supply so it should translate to a nearly double price inflation.
      - dlp211 5y ago
        That is not how inflation works.
standardUser 5y ago
Inflation reduces the value of debt and an era of increased inflation stands to benefit a lot of households. Of course, it helps if wages go up alongside prices, and they have. But even without wage increases, the value of debt lost to inflation is likely worth more than the value of salary lost to inflation for many households.
- throwawaygh 5y ago
  > Inflation reduces the value of debt and an era of increased inflation stands to benefit a lot of households. Maybe. The policy responses to inflation are to increase supply and/or raise interest rates. Both of those put downward pressure on housing prices. So, inflation devalues the debt you owe (good for household) but also devalues the underlying asset (bad for household).
  - fleventynine 5y ago
    In order for young people to have any chance at the same quality of life of their parents, the "real" value of housing needs to come down to at least 50% of the current value. The only way to accomplish this without wiping out those with mortgages is to have a large spike of inflation. It's painful, but likely necessary.
    - throwawaygh 5y ago
      > The only way to accomplish this without wiping out those with mortgages is to have a large spike of inflation. This doesn't make much sense when rent/imputed rent are primary drivers of inflation.
      - fleventynine 5y ago
        We've had significant house price inflation for years due to insufficient supply. I want CPI to increase similarly, along with wages. If housing prices stay the same as today (in dollars) the house buying power of a young person will be much higher after the wage inflation. And because the dollar price of the house doesn't drop, today's mortgage holders won't find themselves underwater. Seems to me like the best we can do for both groups given the circumstances. To make this happen we'd have to build new homes like crazy while keeping the interest rates low.
mattmoose21 5y ago
Reading this article and going through these comments make me realize that while I know what these words are I have a real lack of understanding how this stuff works. This may not be the best place to ask but do any of you guys have any recommendations on where to learn more about economics? Preferably something with good historical context.
- jihadjihad 5y ago
  One to look into is Backhouse's The Ordinary Business of Life (2002). A good overview of the subject that incorporates ancient and modern perspectives.
- jriot 5y ago
  Basic Economics - Thomas Sowell Economics In One Lesson - Henry Hazlitt The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War - Robert Gordon
  - weberer 5y ago
    >Basic Economics - Thomas Sowell I can't recommend this book highly enough. And for those with a short attention span, 30 Second Economics gives a nice overview of many economic concepts (a few paragraphs per concept).
- thoughtstheseus 5y ago
  Bridgewater has helpful YouTube videos and Ray, the founder has a book on applied economic history. Bridgewater is a macroeconomic hedge fund.
- savanaly 5y ago
  Greg Mankiw's introductory economics textbooks (one for micro and one for macro, if you care about the sort of stuff in this thread you care about macro) are well respected and neutral. You don't have to read the latest edition, an edition from just a few years ago would be fine and should be quite cheap used on Amazon.
- spiralx 5y ago
techsin101 5y ago
It's not transitory. Prices have increased, unless there is extreme deflation, they aren't going down. Prices will continue to increase. At this rate, feds will have no control.
- boc 5y ago
  You can put your money where your mouth is by setting up a divergent-pairs position for T-bills and TIPS. The markets still believe the FED knows better than you. But hey, the great thing about our system is that you're always allowed to bet against it.
  - techsin101 5y ago
    history would beg to defer.. esp when fed said themselves: https://www.nytimes.com/2021/10/01/upshot/inflation-economy-analysis.html https://www.nytimes.com/2021/10/01/upshot/inflation-economy-...
mint2 5y ago
A main cause of inflation sticking around is public perception of inflation existing. I feel like there is solid perception that inflation exists. I would not bet on it being transitory. Even if the underlying cause goes away, it will take longer for the perception to go away because is a self reinforcing phenomenon.
- programmertote 5y ago
  I'm afraid that after the supply chain issues are resolved (in next year or a bit later), I suspect that the prices will come down. I'd wager that there is always psychological aspect to inflation. This is not to mention that if we don't see prices increased noticeably because inflation gets cool in the next year or so, we'd still be stuck with shrinkflation (the amount of goods you receive per $1 spent would be lesser). I work with a Fortune 200 CPG company and they are already planning to keep prices stable in various ways (including shrinkflation).
- Dumblydorr 5y ago
  Why is it self reinforcing? Is it inherent to economics or is it psychological? If bacon goes back down 25%, will the local breakfast shop see those savings? Will they pass them on to their customers? Or will their supply chain or the restaurants themselves absorb the profit and keep the prices high for consumers? Even if they keep the prices heightened, if they don't raise them further, then that'd be a leveling off of inflation, right?
6gvONxR4sf7o 5y ago
Does anyone know if there are more local numbers published? I’d imagine that urban vs suburban vs rural inflations are different, that there are regional differences too. It’s tough to interpret this with the US being so huge and heterogeneous.
metamonster 5y ago
IMO this was already evident in some goods like vehicles. We are already living in the era of the 100k pickup truck. You can hardly buy anything new that is decent under 40k nowadays. Unless we see commensurate rises in wages we are in for some real difficulty if this continues.
WarOnPrivacy 5y ago
2021: The world stress tests it's Just-In-Time supply chain and learns it is far too fragile to survive non-ideal conditions. Recommendation: Ban non-ideal conditions.
misiti3780 5y ago
Open question: Besides buying gold (and maybe crypto), what are the best ways to hedge
- jayknight 5y ago
  Series-I Treasury Bonds: https://www.forbes.com/advisor/investing/what-are-i-bonds/ https://www.forbes.com/advisor/investing/what-are-i-bonds/
  - misiti3780 5y ago
    thanks
ASinclair 5y ago
There's one thing I've never quite understood. There seems to be some sort of obsession with inflation and Fed policy among the HN/Reddit demographic. Could it be the crossover with interest in Cryptocurrencies? I could be wrong but it's just something I've noticed over the years.
- ultra_nick 5y ago
  Inflation hedging is to inflation as vaccines are to pandemics.
- symlinkk 5y ago
  HN and Reddit has a younger crowd that doesn’t have a lot of major assets (like a house, big stock portfolio) so they’re getting the worst of all worlds - the price increases from inflation without the corresponding rise of asset value.
  - missedthecue 5y ago
    Stocks and assets don't necessarily increase in value as inflation occurs. During the decade of the 1970s, there was some phenomenal levels of inflation, and the S&P500 inflation adjusted returns for the decade were about -20%
T3RMINATED 5y ago
Joe Biden
999900000999 5y ago
Would buying property be a good inflation hedge. I'd love to lock in a cheap mortgage,even if money is worth 10% less next year, my mortgage remains the same.
- trimbo 5y ago
  If you're going to live in or use the property for a long time, possibly. I've also been looking at buying property with these mortgage rates, but it's not intended as a short term investment. In terms of investment property or flipping, there are many factors and you might want to look at what happened historically. For example, raising interest rates significantly like Volcker did in the 80s stopped new home building cold because new buyers could not afford mortgages. They stopped building the subdivision my family lived in for 3-4 years when this happened. In general, people who bought just before that period did not see a return on their home for a decade-plus, but the economy rebounded quickly after that period https://www.cnbc.com/2019/12/09/when-volcker-ruled-fed-people-thought-theyd-never-buy-a-home-again.html https://www.cnbc.com/2019/12/09/when-volcker-ruled-fed-peopl...
  - 999900000999 5y ago
    I'm thinking of buying a condo in Chicago even if I don't want to live there forever. If you check my post history I'm very fond of the Second City. This condo would be next to public transportation and allow me to live car free. I'd rather invest my money in property vs giving it to Ford Motor Credit. My current 401k contributions alone would cover the mortgage. Ideally when I don't live their I'd rent it out.
IAmWorried 5y ago
In reality it's a lot higher than 6%. You have to understand that the CPI is utter crap. They have continually adjusted the definition of it over time to make inflation seem not as bad as it actually is. It doesn't include house prices, equity prices, college tuition, etc. And the number generated from the remaining categories is dragged down by cheap software and electronics. In reality I'd say inflation is closer to 60% than 6%. The gaslighting is unbelievable. Now they are saying that spending trillions in ridiculous handouts will LOWER inflation!? Are you freaking kidding me?
- unethical_ban 5y ago
  Notwithstanding the concerns about inflation, I challenge the notion that helping people feed their families when they're poor, redistributing wealth from the tippity-top to the middle and down, providing more education, and providing more healthcare to the elderly are "ridiculous". "Handout" is a dogwhistle.
  - IAmWorried 5y ago
    My personal opinion is that the US government is mostly incompetent, and its employment structure incentivizes laziness and waste. Any expansion of government into the lives of the people is bound to backfire. The rich would just find a new way to hide their money, the food programs would be taken advantage of, etc. I think we already spend more per student than any other country, and our public education is mostly a joke. But to each their own, I get the sentiment behind these programs.
    - AlexandrB 5y ago
      > My personal opinion is that the US government is mostly incompetent This is not some natural state of a affairs and more a matter of intentional policy[1] by one (and sometimes both) major parties. Consider the recent attempts to fuck up the USPS. If you rewind ~60 years you find the US government sending people to the moon on extremely short timelines and building the foundations of the internet. [1] https://en.wikipedia.org/wiki/Starve_the_beast https://en.wikipedia.org/wiki/Starve_the_beast
trenning 5y ago
I'm about to go full vegetarian with these food prices. Beef has been too expensive for years, the only beef I've bought for years from grocery stores is bulk pack ground on sale but now on sale is $7/lb. Chicken breast has been my main staple, on sale usually for $2-3/lb, now it's on sale at $5/lb for the cheap bulk packs. Around me it's a wash to cook at home or eat out (at small restaurants/food trucks). I expect restaurants to jack up the prices more soon because they've been fairly sticky.
- marak830 5y ago
  That's quite cheap to say, here in Japan. Pork and chicken here are quite cheap at 70c/100g for pork and 50c/100g of chicken. Then again we don't use as much meat per serving here(approx 80-120g per person, on an average dinner).

197 points by cs702 5y ago

deleted 5y ago

[deleted]

Well in many ways the supply chain crisis are economically equivalent to the Arab Oil Embargo. Add bad monetary policy akin to going off the Gold Standard and I can see how Stagflation is a real probability.

RickJWagner 5y ago

Who would have guessed that months of government cash handouts, restricted energy providers, and massive spending programs would lead to this? Pretty much everyone, of course. Sorry for poor people and those on fixed incomes. If you can't afford a tank of gas for $30 you surely can't afford one for $60.

newaccount2021 5y ago

"transitory" was last year's inflation lie "supply chain" is this year's inflation lie just how long will it take for people to accept that The Fed has debased the currency for the benefit of a select few, to the detriment of many? Jerome Powell has the perfect solution to this conundrum - he has announced his retirement and will let someone else clean up the mess

JackPoach 5y ago

And it's probably going to only get worse looking at Fed

AnthonyMouse 5y ago

People need to decide whether they think this is because of supply chain issues and the demand spike following COVID or if it's because of the Fed.

JackPoach 5y ago
Clearly the Fed mostly. We'll see it once the supply chain issues go away, but high prices stay high.
- MeinBlutIstBlau 5y ago
  I remember thinking $50k was an awesome salary when I first started working. Now I think "damn how do families survive off that kind of household income" after seeing essential goods and services cost roughly 1.5x what they were pre stimulus.
  - dlp211 5y ago
    Median household income has gone up. It's currently the highest it's ever been in real terms. Households are better off today then they have ever been in their day-to-day affordability of goods. You also can't cherry-pick a handful of things that have gone up a lot and then assume that it applies to everything. Some things have gone up in price, others haven't. Inflation is sitting at about 6%, which after a decade+ of sub-2% might seem like such a shock, but it isn't really a big deal.
    - MeinBlutIstBlau 5y ago
      Average hourly wage near me is like $12/hr. That's basically 50k in a 2 adult household. If anyone is projecting it's you thinking everyone has a middle class job...
    - JackPoach 5y ago
      Real wages have been stagnant since 1970s in the US. Median household incomes have only gone up because some people work in highly paid industries, like IT, plus household incomes include income from stocks and real estate AND most households now are two working adults.
      - MeinBlutIstBlau 5y ago

cs702 5y ago

The ongoing supply-demand imbalance that is contributing to rising inflation worldwide is in my view the most pressing short-term problem that needs to be solved by hackers, engineers, and entrepreneurs today.[a] We need more people doing what Flexport's Ryan Petersen did with LA ports[a]: Figure out quick, cost-efficient ways to get our current system out of its currently degraded state and back to operating smoothly and normally so we we can go back to growing its global throughput as in the pre-pandemic past. Large, complex, distributed, networked systems, like interconnected cloud datacenters, electric power grids, and global logistics networks, can get "stuck" in a degraded state due to a confluence of highly local bugs that are difficult to diagnose -- especially when no single entity controls the entire network end-to-end. Hoping and waiting for things to get better on their own might not be enough. -- [a] Note: I'm not saying it's the most important problem. I'm saying it's the most pressing, in the near term, because a well-functioning global economy is a prerequisite -- a necessary condition -- for solving all important problems. Please don't attack a straw-man. [b] https://www.inc.com/kevin-j-ryan/flexport-founder-twitter-shipping-logistics-supply-chain.html https://www.inc.com/kevin-j-ryan/flexport-founder-twitter-sh...

dustingetz 5y ago
How does degraded supply chain throughput connect to inflation?
- cs702 5y ago
  When there are supply-demand imbalances, e.g., people in France having to wait three months to get a new boiler versus 24-48 hours before the pandemic[a], the price of newly installed boilers in France tends to increase sharply. For a more general answer, see: https://en.wikipedia.org/wiki/Demand-pull_inflation https://en.wikipedia.org/wiki/Demand-pull_inflation https://en.wikipedia.org/wiki/Cost-push_inflation https://en.wikipedia.org/wiki/Cost-push_inflation -- [a] https://www.connexionfrance.com/French-news/Which-products-are-or-could-be-hit-by-stock-shortages-in-France https://www.connexionfrance.com/French-news/Which-products-a...
- dghlsakjg 5y ago
  Your question using synonyms: How does reduced supply lead to higher prices?

argentinian 5y ago

Some journalists must be happy with this news. https://mises.org/power-market/inflation-celebration https://mises.org/power-market/inflation-celebration

ChrisLomont 5y ago
There's a reason exactly zero of top econ journals or economists[2] are Mises.org Austrian economists - they don't have a track record of anything resembling accuracy, predictions, or theory that works. In fact, it's hard to find much even on Google Scholar.... [1] https://ideas.repec.org/top/top.journals.all.html https://ideas.repec.org/top/top.journals.all.html [2] https://ideas.repec.org/top/top.person.all.html https://ideas.repec.org/top/top.person.all.html
- logicchains 5y ago
  >they don't have a track record of anything resembling accuracy, predictions, or theory that works Neither does academic economics; there's absolutely zero consequence for an economist who repeatedly makes incorrect predictions. The ones who actually can make predictions with statistically significant accuracy work as quants or traders, not economists, as anyone who can make accurate predictions of the future can easily make six to seven figures doing so. That aside, the fundamental predictions in microeconomics between Austrian and neoclassical economics are pretty similar, so you can't say Austrian theory doesn't work without also saying foundational neoclassical microeconomics doesn't work.
- rsj_hn 5y ago
  Meh, Hayek was awarded the Nobel. The Austrian school does have a lot of useful insights. Perhaps those insights are not so amenable to the kind of economics that is a fruitful research field and can get grants, but that doesn't mean it's not fruitful for understanding the economy. The main reason why the Austrians tend to be snubbed is that their insights are primarily qualitative rather than quantitative, and thus are not the kinds of things that followers can build on to get published. That does not mean that people who do get published aren't taking inspiration from Austrian economics or learning important lessons from this field. This is the problem with a lot of heterodox econ, btw.

deleted 5y ago

[deleted]

simonsarris 5y ago

I've mentioned before [1] but these prices still don't seem that serious. Most prices have still not beat their highs made in 2008-2014 (crude oil, global energy price, eggs, milk, sugar, rice, chicken, pork chops). Ground beef is an outlier, however. And US price per kwh is back at its peak, though it declined in these October numbers to be below... 2014 numbers again. [2] So while the climb up is bad, the prices themselves aren't even unprecedented. In lieu of an extraordinary global supply chain crisis, these numbers actually seem impressively low. We cocked up everything for a year and prices finally shot back to... prices from 7 years ago? If fed policy has any effect at all, I think we owe them one for being so cool-headed and non-drastic these past two years. They're doing much better than politicians or the media, at least. [1] I have some commentary here, and more in a reply to user `anm89` https://news.ycombinator.com/item?id=29114086 https://news.ycombinator.com/item?id=29114086 [2] https://fred.stlouisfed.org/series/APU000072610 https://fred.stlouisfed.org/series/APU000072610

ashtonkem 5y ago
There have been some supply shocks in the past year, but I'm increasingly convinced that the disaster rhetoric around inflation is more of a political argument more than an economic one. Personally I suspect it has more to do with justifying austerity in order to curb labor's demand for more money than anything else.
- rsj_hn 5y ago
  > I suspect it has more to do with justifying austerity in order to curb labor's demand for more money The problem with blowing off inflation because you think it empowers workers is that the latest round of inflation more than erased all the wage increases that were provided. In real terms, workers have been falling behind. So perhaps to make those labor demands more real, it might be a good idea if the government wasn't competing with the private sector for goods and services.
  - ashtonkem 5y ago
    To be clear, I think that all of the price movement we're seeing today is a result of supply chain shock and pent up demand. Arguing about inflation while the ports are still clogged seems extremely short sighted to me; of course prices rise when supply is stuck in a container in LA! Once the supply chains clear up, then we can decide what, if any level of inflation we're seeing. Until that point in time, I will view any doomer narrative about inflation and the proposed solutions for it with extreme skepticism, especially when the proposed solution is convenient for capital and hard on labor.

croutonwagon 5y ago

Relevant thread: https://news.ycombinator.com/item?id=29174804 https://news.ycombinator.com/item?id=29174804

seanmcdirmid 5y ago

Interest rates really should have went up a couple of years ago. Not just for the sake of stemming inflation, but what good is the tool of lower rates in bad times when they are already at bottom in good times? If something goes wrong (or more wrong) we will have no effective economic tools available because they are constantly running as if we are in crisis already.

wayoutthere 5y ago
Nobody wants to be the next Jimmy Carter who lets the fed raise interest rates to stem inflation because it invariably triggers a recession that gets said president and his party voted out of office. So rates will stay perpetually low.
- ALittleLight 5y ago
  It's very sad to consider young men dying for their country while old men are too afraid to risk four years off their political career for it.
  - politician 5y ago
    A significant number of our elected representatives are women.
    - ameetgaitonde 5y ago
      The Federal Reserve Board Chairman is appointed by the President of the United States, not Congress. https://www.federalreserve.gov/aboutthefed/bios/board/default.htm https://www.federalreserve.gov/aboutthefed/bios/board/defaul...
      - deleted 5y ago
        [deleted]
    - shepherdjerred 5y ago

nimbius 5y ago

You need to take this seriously. the reason you should be concerned about these prices in relation to their 2008 crisis prices is because the countermeasure that resulted in 2008 relief --Quantitative Easing-- cannot be used again because we effectively never quit using it to prop up the last decade of commercial market performance. https://en.wikipedia.org/wiki/Quantitative_easing#US_QE4 https://en.wikipedia.org/wiki/Quantitative_easing#US_QE4 the Federal reserve also has no leverage to modify the prime interest rate to combat this inflation, as it already sits near-zero and the fed funds rate has been agreed to stay at under a quarter of a percent. modifying any interest rates in 2021 would blow up the corporate credit bubble, so the fed is mostly just bloviating about "transient inflation" to no ones real entertainment. https://en.wikipedia.org/wiki/Corporate_debt_bubble https://en.wikipedia.org/wiki/Corporate_debt_bubble finally, the bond buyback taper the Federal reserve has been touting since July 2021 but too terrified to implement is effectively meaningless as its not set to end until next July at the earliest, effectively allowing uncorrected inflation to continue another eight months. the fed hasnt announced any further countermeasures after this...they just assume a bond taper will coincide with the purported end of covid and surge of consumer confidence which never manifested in 2021. Instead the supply chain continued to fail and vaccine targets were never met. Id conject the level of wishful thinking driving fed policy at this point should be enough to tenure Powells resignation sometime in March. the only thing combatting stagflation at this point is corporations like Amazon who know if they dont do something about real wages in the absence of effective federal policy it will start to reflect on their earnings reports, and even they seem recalcitrant to take any real steps unless the union comes a knockin.'

throwawaygh 5y ago
> the Federal reserve also has no leverage to modify the prime interest rate to combat this inflation, as it already sits near-zero ...huh? If you want to lower inflation you'd typically raise interest rates... (These sorts of stupid-simple mistakes are pretty typical from inflation fearmongers in threads like this one... a lot of words that make it sounds like they know what they're talking about but sprinkled with incredible tells like this one.)
- 5y ago

boringg 5y ago

Hey everyone - we need to chill out for a second. Stop buying the knee jerk reaction of the media trying to freak everyone out and get some good advertising dollars. This is going to take until after the new year maybe Q1-Q3 timeframe to see if it is transitory. Reminder: we had an unprecedented global supply collapse followed by shutdowns and border closures for more than a year combined with historic levels of fast moving monetary growth during that time. We now have a situation of incredible levels of built up demand, a labor shortage and supply chain issues. Not to mention significant amount of illness and deaths as a result of a pandemic. There were bound to be second and third order effects. The system needs some time to adjust.

kerng 5y ago
You miss the key point on why this is happening and will continue to get significantly worse. What happens when the number of dollars approximately doubles in 2 years as it happened? Do you think prices stay the same and everything is just 50% off? Reality is that the current number is off by reality quite a bit, real number has to be much higher. It's just math and the worst part... it can't be just reversed.
- dubcanada 5y ago
  I have no idea what you are saying. Also what is "just math" and why can't it be reversed? Inflation can go down, it's not a purely up percentage, you can have negative inflation. What do you mean by "number of dollars approximately doubles in 2"?
  - hartator 5y ago
    > What do you mean by "number of dollars approximately doubles in 2"? I think OP was talking about monetary inflation. We nearly double the money supply so it should translate to a nearly double price inflation.
    - dlp211 5y ago
      That is not how inflation works.

standardUser 5y ago

Inflation reduces the value of debt and an era of increased inflation stands to benefit a lot of households. Of course, it helps if wages go up alongside prices, and they have. But even without wage increases, the value of debt lost to inflation is likely worth more than the value of salary lost to inflation for many households.

throwawaygh 5y ago
> Inflation reduces the value of debt and an era of increased inflation stands to benefit a lot of households. Maybe. The policy responses to inflation are to increase supply and/or raise interest rates. Both of those put downward pressure on housing prices. So, inflation devalues the debt you owe (good for household) but also devalues the underlying asset (bad for household).
- fleventynine 5y ago
  In order for young people to have any chance at the same quality of life of their parents, the "real" value of housing needs to come down to at least 50% of the current value. The only way to accomplish this without wiping out those with mortgages is to have a large spike of inflation. It's painful, but likely necessary.
  - throwawaygh 5y ago
    > The only way to accomplish this without wiping out those with mortgages is to have a large spike of inflation. This doesn't make much sense when rent/imputed rent are primary drivers of inflation.
    - fleventynine 5y ago
      We've had significant house price inflation for years due to insufficient supply. I want CPI to increase similarly, along with wages. If housing prices stay the same as today (in dollars) the house buying power of a young person will be much higher after the wage inflation. And because the dollar price of the house doesn't drop, today's mortgage holders won't find themselves underwater. Seems to me like the best we can do for both groups given the circumstances. To make this happen we'd have to build new homes like crazy while keeping the interest rates low.

mattmoose21 5y ago

Reading this article and going through these comments make me realize that while I know what these words are I have a real lack of understanding how this stuff works. This may not be the best place to ask but do any of you guys have any recommendations on where to learn more about economics? Preferably something with good historical context.

jihadjihad 5y ago
One to look into is Backhouse's The Ordinary Business of Life (2002). A good overview of the subject that incorporates ancient and modern perspectives.
jriot 5y ago
Basic Economics - Thomas Sowell Economics In One Lesson - Henry Hazlitt The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War - Robert Gordon
- weberer 5y ago
  >Basic Economics - Thomas Sowell I can't recommend this book highly enough. And for those with a short attention span, 30 Second Economics gives a nice overview of many economic concepts (a few paragraphs per concept).
thoughtstheseus 5y ago
Bridgewater has helpful YouTube videos and Ray, the founder has a book on applied economic history. Bridgewater is a macroeconomic hedge fund.
savanaly 5y ago
Greg Mankiw's introductory economics textbooks (one for micro and one for macro, if you care about the sort of stuff in this thread you care about macro) are well respected and neutral. You don't have to read the latest edition, an edition from just a few years ago would be fine and should be quite cheap used on Amazon.
spiralx 5y ago

techsin101 5y ago

It's not transitory. Prices have increased, unless there is extreme deflation, they aren't going down. Prices will continue to increase. At this rate, feds will have no control.

boc 5y ago
You can put your money where your mouth is by setting up a divergent-pairs position for T-bills and TIPS. The markets still believe the FED knows better than you. But hey, the great thing about our system is that you're always allowed to bet against it.
- techsin101 5y ago
  history would beg to defer.. esp when fed said themselves: https://www.nytimes.com/2021/10/01/upshot/inflation-economy-analysis.html https://www.nytimes.com/2021/10/01/upshot/inflation-economy-...

mint2 5y ago

A main cause of inflation sticking around is public perception of inflation existing. I feel like there is solid perception that inflation exists. I would not bet on it being transitory. Even if the underlying cause goes away, it will take longer for the perception to go away because is a self reinforcing phenomenon.

programmertote 5y ago
I'm afraid that after the supply chain issues are resolved (in next year or a bit later), I suspect that the prices will come down. I'd wager that there is always psychological aspect to inflation. This is not to mention that if we don't see prices increased noticeably because inflation gets cool in the next year or so, we'd still be stuck with shrinkflation (the amount of goods you receive per $1 spent would be lesser). I work with a Fortune 200 CPG company and they are already planning to keep prices stable in various ways (including shrinkflation).
Dumblydorr 5y ago
Why is it self reinforcing? Is it inherent to economics or is it psychological? If bacon goes back down 25%, will the local breakfast shop see those savings? Will they pass them on to their customers? Or will their supply chain or the restaurants themselves absorb the profit and keep the prices high for consumers? Even if they keep the prices heightened, if they don't raise them further, then that'd be a leveling off of inflation, right?

6gvONxR4sf7o 5y ago

Does anyone know if there are more local numbers published? I’d imagine that urban vs suburban vs rural inflations are different, that there are regional differences too. It’s tough to interpret this with the US being so huge and heterogeneous.

metamonster 5y ago

IMO this was already evident in some goods like vehicles. We are already living in the era of the 100k pickup truck. You can hardly buy anything new that is decent under 40k nowadays. Unless we see commensurate rises in wages we are in for some real difficulty if this continues.

WarOnPrivacy 5y ago

2021: The world stress tests it's Just-In-Time supply chain and learns it is far too fragile to survive non-ideal conditions. Recommendation: Ban non-ideal conditions.

misiti3780 5y ago

Open question: Besides buying gold (and maybe crypto), what are the best ways to hedge

jayknight 5y ago
Series-I Treasury Bonds: https://www.forbes.com/advisor/investing/what-are-i-bonds/ https://www.forbes.com/advisor/investing/what-are-i-bonds/
- misiti3780 5y ago
  thanks

ASinclair 5y ago

There's one thing I've never quite understood. There seems to be some sort of obsession with inflation and Fed policy among the HN/Reddit demographic. Could it be the crossover with interest in Cryptocurrencies? I could be wrong but it's just something I've noticed over the years.

ultra_nick 5y ago
Inflation hedging is to inflation as vaccines are to pandemics.
symlinkk 5y ago
HN and Reddit has a younger crowd that doesn’t have a lot of major assets (like a house, big stock portfolio) so they’re getting the worst of all worlds - the price increases from inflation without the corresponding rise of asset value.
- missedthecue 5y ago
  Stocks and assets don't necessarily increase in value as inflation occurs. During the decade of the 1970s, there was some phenomenal levels of inflation, and the S&P500 inflation adjusted returns for the decade were about -20%

T3RMINATED 5y ago

Joe Biden

999900000999 5y ago

Would buying property be a good inflation hedge. I'd love to lock in a cheap mortgage,even if money is worth 10% less next year, my mortgage remains the same.

trimbo 5y ago
If you're going to live in or use the property for a long time, possibly. I've also been looking at buying property with these mortgage rates, but it's not intended as a short term investment. In terms of investment property or flipping, there are many factors and you might want to look at what happened historically. For example, raising interest rates significantly like Volcker did in the 80s stopped new home building cold because new buyers could not afford mortgages. They stopped building the subdivision my family lived in for 3-4 years when this happened. In general, people who bought just before that period did not see a return on their home for a decade-plus, but the economy rebounded quickly after that period https://www.cnbc.com/2019/12/09/when-volcker-ruled-fed-people-thought-theyd-never-buy-a-home-again.html https://www.cnbc.com/2019/12/09/when-volcker-ruled-fed-peopl...
- 999900000999 5y ago
  I'm thinking of buying a condo in Chicago even if I don't want to live there forever. If you check my post history I'm very fond of the Second City. This condo would be next to public transportation and allow me to live car free. I'd rather invest my money in property vs giving it to Ford Motor Credit. My current 401k contributions alone would cover the mortgage. Ideally when I don't live their I'd rent it out.

IAmWorried 5y ago

In reality it's a lot higher than 6%. You have to understand that the CPI is utter crap. They have continually adjusted the definition of it over time to make inflation seem not as bad as it actually is. It doesn't include house prices, equity prices, college tuition, etc. And the number generated from the remaining categories is dragged down by cheap software and electronics. In reality I'd say inflation is closer to 60% than 6%. The gaslighting is unbelievable. Now they are saying that spending trillions in ridiculous handouts will LOWER inflation!? Are you freaking kidding me?

unethical_ban 5y ago
Notwithstanding the concerns about inflation, I challenge the notion that helping people feed their families when they're poor, redistributing wealth from the tippity-top to the middle and down, providing more education, and providing more healthcare to the elderly are "ridiculous". "Handout" is a dogwhistle.
- IAmWorried 5y ago
  My personal opinion is that the US government is mostly incompetent, and its employment structure incentivizes laziness and waste. Any expansion of government into the lives of the people is bound to backfire. The rich would just find a new way to hide their money, the food programs would be taken advantage of, etc. I think we already spend more per student than any other country, and our public education is mostly a joke. But to each their own, I get the sentiment behind these programs.
  - AlexandrB 5y ago
    > My personal opinion is that the US government is mostly incompetent This is not some natural state of a affairs and more a matter of intentional policy[1] by one (and sometimes both) major parties. Consider the recent attempts to fuck up the USPS. If you rewind ~60 years you find the US government sending people to the moon on extremely short timelines and building the foundations of the internet. [1] https://en.wikipedia.org/wiki/Starve_the_beast https://en.wikipedia.org/wiki/Starve_the_beast

trenning 5y ago

I'm about to go full vegetarian with these food prices. Beef has been too expensive for years, the only beef I've bought for years from grocery stores is bulk pack ground on sale but now on sale is $7/lb. Chicken breast has been my main staple, on sale usually for $2-3/lb, now it's on sale at $5/lb for the cheap bulk packs. Around me it's a wash to cook at home or eat out (at small restaurants/food trucks). I expect restaurants to jack up the prices more soon because they've been fairly sticky.

marak830 5y ago
That's quite cheap to say, here in Japan. Pork and chicken here are quite cheap at 70c/100g for pork and 50c/100g of chicken. Then again we don't use as much meat per serving here(approx 80-120g per person, on an average dinner).