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> populist dumb inflation from printing too much money Inflation doesn't work that way. Nor does "printing money" This inflation is caused by actual short sup

> populist dumb inflation from printing too much money Inflation doesn't work that way. Nor does "printing money" This inflation is caused by actual short supply of goods seemingly from putting multiple chips on everything.

eruleman 5y ago
"Inflation is always and everywhere a monetary phenomenon." - Milton Friedman
- mohanmcgeek 5y ago
  Appeal to authority isn't going to change the fact that this isn't a "money supply" problem. The inflation fear is what is driving up the bitcoin prices which in turn is driving up the chip demand. This inflation is partly a supply chain latency issue and partly hysteria driven
- hogFeast 5y ago
  It is amazing to me that people don't get this. Government spending of something like 40-50% of GDP over the past few years. That spending has been leaking into the money supply because the market can't absorb the debt (this is amazing given that all the big exporters own massive amounts of dollars). Handing large stacks of cash to business and consumers. What could possibly go wrong? The last time there was something like this was in the late 60s: the US was consuming heavily, was a huge importer, exporters collecting dollar balances, fiscal expansion into infinity...it is very exceptional (and to be clear, the level of expansion today is something like 4x what happened then). The supply of goods hasn't really changed much. Labour supply is lower by a couple of percent. Raw materials prices up a bit. Demand is up by something like 20-30%. Also, it is worth noting that what you are seeing in the US is worse because there has been the highest level of growth in govt spending (over the past few years, to be clear), and the most amount of fiscal leakage. Even Canada, which really went balls to the wall, isn't seeing the same level of inflation. A good explainer is - https://www.bridgewater.com/its-mostly-a-demand-shock-not-a-supply-shock-and-its-everywhere https://www.bridgewater.com/its-mostly-a-demand-shock-not-a-...
  - md_ 5y ago
    “It is amazing to me that people don't get this. Government spending of something like 40-50% of GDP over the past few years” No, it wasn’t: https://tradingeconomics.com/united-states/government-spending-to-gdp https://tradingeconomics.com/united-states/government-spendi...
    - hogFeast 5y ago
      It was. You don't understand what you have linked me. Trump's tax cut - 12% of GDP CARES - 12% of GDP Further stimmy (iirc, this was a bill passed in December after the election) - 5% of GDP Biden Stimmy - 10% of GDP Infrastructure Bill - 15% of GDP This is why the CBO's projections have suddenly become very controversial. As I made clear, this is not all current spending. It is difficult to talk concisely about all the packages above because the cadence is totally different but the quantum of the effect in the medium-term is 40-50% of GDP (it is probably a bit higher tbh). This only becomes apparent over the medium-term and future % of GDP, obviously, depends quite heavily on GDP growth elsewhere in the economy. The size of the fiscal stimulus being applied however is massive (the chart you linked me shows 10ppts of growth...you realise this supports my argument? 25% growth is a lot in one year...it hasn't happened outside of wartime afaik).
      - md_ 5y ago
        One of us definitely doesn’t understand something here.
- xondono 5y ago
  We’re more likely to find a talking unicorn with a phd than a politician in office who wants to lower spending,
- epistasis 5y ago
  Having been reading about money for the past few years, I have no reason to believe Friedman here. The neoclassical economists have been very very very wrong about inflation. For basics, not distinguishing between cost-push and demand-pull is a pretty basic error.
vladimirralev 5y ago
I really want an opportunity to unpack this with a real economist, because it doesn't make any sense. How do you define a short supply of goods? We are far above the 2019 supply of goods in nominal terms, in real terms, in terms of shipping containers and actual ships and trucks moving. At what point it stops being a supply issue and becomes an issue of excess demand? And wouldn't this demand be fuelled further by the fear of goods costing more tomorrow than they cost today, again due to the accelerating inflation.
- mohanmcgeek 5y ago
  > We are far above the 2019 supply of goods in nominal terms You're looking at aggregate. There are specific types of goods, the lack thereof, that's driving up the CPI. Right now I hear the car prices in US are pretty high and the production is lower because of the chip shortage. The supply for a lot of other things is pretty elastic.
  - vladimirralev 5y ago
    Again, how do you define a shortage? Chip production is way above the 2019 levels. Moreover the utilisation of the fabs, new and old processes combined is much higher[1]. Semiconductor fab worker count is at all time high, 10% above 2019. Why isn't this excess demand (caused by too much free money) as opposed to a "shortage"? [1] https://www.semiconductors.org/chipmakers-are-ramping-up-production-to-address-semiconductor-shortage-heres-why-that-takes-time/ https://www.semiconductors.org/chipmakers-are-ramping-up-pro...
    - mohanmcgeek 5y ago
      Car sales are down double digit percentage across the world and used call prices are up 30% > Why isn't this excess demand (caused by too much free money) as opposed to a "shortage"? It might very well be excess demand. The idea is that supply should always be elastic and grow to meet the demand. In this case it didn't. But this "excess demand" can't be attributable to lower interest rates because people, I imagine, aren't borrowing to buy these goods.
hattar 5y ago
> seemingly from putting multiple chips on everything. This irritates me so much. I don’t need or want computer chips in most of my appliances. Outside of what is needed for the efficient operating of an engine, I don’t want a bunch of electronics in a vehicle. If the shortage is just chips, could we go back to manufacturing goods without them? It’s what I wanted anyway.
- dragontamer 5y ago
  Your steering wheel is fly-by-wire these days. So is the pedals. Antilock brakes, sensor network (NOx sensors and the like), and more are all computer chips. Purely mechanical designs are more expensive and harder to make.

eruleman 5y ago

"Inflation is always and everywhere a monetary phenomenon." - Milton Friedman

mohanmcgeek 5y ago
Appeal to authority isn't going to change the fact that this isn't a "money supply" problem. The inflation fear is what is driving up the bitcoin prices which in turn is driving up the chip demand. This inflation is partly a supply chain latency issue and partly hysteria driven
hogFeast 5y ago
It is amazing to me that people don't get this. Government spending of something like 40-50% of GDP over the past few years. That spending has been leaking into the money supply because the market can't absorb the debt (this is amazing given that all the big exporters own massive amounts of dollars). Handing large stacks of cash to business and consumers. What could possibly go wrong? The last time there was something like this was in the late 60s: the US was consuming heavily, was a huge importer, exporters collecting dollar balances, fiscal expansion into infinity...it is very exceptional (and to be clear, the level of expansion today is something like 4x what happened then). The supply of goods hasn't really changed much. Labour supply is lower by a couple of percent. Raw materials prices up a bit. Demand is up by something like 20-30%. Also, it is worth noting that what you are seeing in the US is worse because there has been the highest level of growth in govt spending (over the past few years, to be clear), and the most amount of fiscal leakage. Even Canada, which really went balls to the wall, isn't seeing the same level of inflation. A good explainer is - https://www.bridgewater.com/its-mostly-a-demand-shock-not-a-supply-shock-and-its-everywhere https://www.bridgewater.com/its-mostly-a-demand-shock-not-a-...
- md_ 5y ago
  “It is amazing to me that people don't get this. Government spending of something like 40-50% of GDP over the past few years” No, it wasn’t: https://tradingeconomics.com/united-states/government-spending-to-gdp https://tradingeconomics.com/united-states/government-spendi...
  - hogFeast 5y ago
    It was. You don't understand what you have linked me. Trump's tax cut - 12% of GDP CARES - 12% of GDP Further stimmy (iirc, this was a bill passed in December after the election) - 5% of GDP Biden Stimmy - 10% of GDP Infrastructure Bill - 15% of GDP This is why the CBO's projections have suddenly become very controversial. As I made clear, this is not all current spending. It is difficult to talk concisely about all the packages above because the cadence is totally different but the quantum of the effect in the medium-term is 40-50% of GDP (it is probably a bit higher tbh). This only becomes apparent over the medium-term and future % of GDP, obviously, depends quite heavily on GDP growth elsewhere in the economy. The size of the fiscal stimulus being applied however is massive (the chart you linked me shows 10ppts of growth...you realise this supports my argument? 25% growth is a lot in one year...it hasn't happened outside of wartime afaik).
    - md_ 5y ago
      One of us definitely doesn’t understand something here.
xondono 5y ago
We’re more likely to find a talking unicorn with a phd than a politician in office who wants to lower spending,
epistasis 5y ago
Having been reading about money for the past few years, I have no reason to believe Friedman here. The neoclassical economists have been very very very wrong about inflation. For basics, not distinguishing between cost-push and demand-pull is a pretty basic error.

vladimirralev 5y ago

I really want an opportunity to unpack this with a real economist, because it doesn't make any sense. How do you define a short supply of goods? We are far above the 2019 supply of goods in nominal terms, in real terms, in terms of shipping containers and actual ships and trucks moving. At what point it stops being a supply issue and becomes an issue of excess demand? And wouldn't this demand be fuelled further by the fear of goods costing more tomorrow than they cost today, again due to the accelerating inflation.

mohanmcgeek 5y ago
> We are far above the 2019 supply of goods in nominal terms You're looking at aggregate. There are specific types of goods, the lack thereof, that's driving up the CPI. Right now I hear the car prices in US are pretty high and the production is lower because of the chip shortage. The supply for a lot of other things is pretty elastic.
- vladimirralev 5y ago
  Again, how do you define a shortage? Chip production is way above the 2019 levels. Moreover the utilisation of the fabs, new and old processes combined is much higher[1]. Semiconductor fab worker count is at all time high, 10% above 2019. Why isn't this excess demand (caused by too much free money) as opposed to a "shortage"? [1] https://www.semiconductors.org/chipmakers-are-ramping-up-production-to-address-semiconductor-shortage-heres-why-that-takes-time/ https://www.semiconductors.org/chipmakers-are-ramping-up-pro...
  - mohanmcgeek 5y ago
    Car sales are down double digit percentage across the world and used call prices are up 30% > Why isn't this excess demand (caused by too much free money) as opposed to a "shortage"? It might very well be excess demand. The idea is that supply should always be elastic and grow to meet the demand. In this case it didn't. But this "excess demand" can't be attributable to lower interest rates because people, I imagine, aren't borrowing to buy these goods.

hattar 5y ago

> seemingly from putting multiple chips on everything. This irritates me so much. I don’t need or want computer chips in most of my appliances. Outside of what is needed for the efficient operating of an engine, I don’t want a bunch of electronics in a vehicle. If the shortage is just chips, could we go back to manufacturing goods without them? It’s what I wanted anyway.

dragontamer 5y ago
Your steering wheel is fly-by-wire these days. So is the pedals. Antilock brakes, sensor network (NOx sensors and the like), and more are all computer chips. Purely mechanical designs are more expensive and harder to make.