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Not sure what the reasoning is here: of course it's a demand/supply issue. There are too many dollars in the economy. Because people have money, they want to bu

Not sure what the reasoning is here: of course it's a demand/supply issue. There are too many dollars in the economy. Because people have money, they want to buy cars, and houses and furniture etc. Why do you want to ignore car prices? Haven't they always been a part of inflation? Some people say housing and cars should have a bigger weight in the CPI, because that's where a lot of the money goes for a huge number of American families (that and education+healthcare)

wbsss4412 5y ago
Car prices are being driven by supply chain issues more so than a surplus of dollars.
- hackeraccount 5y ago
  How would you know that? If say the number of cars went down by 50% and the amount of money in everyone's pocket went up by 100% which would driving the upward price more? If the supply of cars is down why would that in and of itself drive the price up? Surely there's some flexibility in demand for cars? It seems like a price increase in any individual item can be explained as a supply problem but every additional item that that gets added to the list is an argument for a money supply problem because on some level every item is substitutable.
  - wbsss4412 5y ago
    I don’t know in the sense that I have exhaustively researched the topic in exacting detail, but I believe it is mostly supply related because of a combination of factors: 1. Global supply chain disruptions are well documented, multiple automakers have had to shutdown factories for lack of parts. 2. Cars prices are increasing much more rapidly than the overall inflation rate. (I believe another comment in this thread said ~40% for used vehicles) 3. Total vehicle sales are still below their pre pandemic levels. I never said that the money supply isn’t contributing to inflation. But it is quite clear that there is a significant supply problem when it comes to cars.
    - flavius29663 5y ago
      > Cars prices are increasing much more rapidly than the overall inflation rate There will always be items that increase in price more than the average. Are you proposing to eliminate all the outliers in each report? In the end, people still need to buy cars, which are more expensive, so the inflation rate should reflect that.
      - wbsss4412 5y ago
        The argument wasn’t that it should be eliminated from the inflation rate, the discussion was about what was causing car prices to be inflated. > Car prices are being driven by supply chain issues more so than a surplus of dollars.
mdorazio 5y ago
The question wasn't "is this supply/demand driven?", it was "is this transitory or not?". Items like car prices are likely transitory and will return to pre-covid levels once supply chain issues get worked out later this year and production returns to normal.
- helen___keller 5y ago
  Just a nitpick but a return to the mean does not imply a return to pre-Covid levels, although I think we can all agree that sooner or later cars will actually start depreciating in value again.
- almost_usual 5y ago
  No one really knows when supply chain issues will be worked out.
  - giantg2 5y ago
    And if the cost of fixing those issues (like building new chip facilities) will continue to affect price.
    - deleted 5y ago
      [deleted]
shmatt 5y ago
That's exactly OP's point. It's only worrying IF you believe car factories are stuck making less than 2019 numbers for years and years to come If you believe they'll be able to get back to normal numbers in the next 12 months, you believe inflation will largely go away, maybe even before the midterms
toyg 5y ago
> Because people have money, they want to buy cars That would be true if we were talking about new cars, but apparently the big rise is in used ones. That is likely due to a combination of factors, with liquidity being only one of them - the others are scarcity from the supply side due to covid, and the sector trying to push a new technology (electric) on masses of conservative consumers.
- mym1990 5y ago
  Electric cars are hardly a 'new' technology. The rise in prices is predominantly because of a shortage of new cars which drives consumers to the used market.
- beerandt 5y ago
  >apparently the big rise is in used ones Only because there are practically no new ones. We've been trying to buy a new vehicle for over a year, with a family member owning a dealership, and still haven't been able to get one. Our last one, we ordered just before covid, and the 3 month order turned into 13 months. EV only comes into play because it made new car prices higher in order for companies to meet quotas dictated by CAFE standards, which also raises prices on the used market.
  - jhickok 5y ago
    Yep, our local Honda lot has functionally been sold out for 2 years. I've resigned myself to driving my current vehicles into dust.
- barake 5y ago
  Check out sub-prime car loans. Carvana and the like will finance anything with a pulse, so people with poor credit buy used instead of new.
cr1895 5y ago
> There are too many dollars in the economy. Because people have money, they want to buy cars At least wrt cars, isn’t the knock-on pandemic effect by far driving the shortages? (Chips, disruptions in just-in-time, etc) rather than people have more money to spend on them?
treis 5y ago
> Because people have money, they want to buy cars, and houses and furniture etc. Why do you want to ignore car prices? In a functioning economy the supply of cars, houses, and furniture etc. would rise to meet the demand preventing a price increase. But they can't due to chip shortages, labor issues, and other assorted supply chain issues. It's a different problem than inflation and requires different solutions. It also contradicts the "If you didn't get a 7.5% raise you got a paycut" narrative because it's very dependent on what you bought. If you're trying to buy a house, put furniture in it, and get a new to you used car then things got way more expensive. If you already had those things then it didn't.
- pxeboot 5y ago
  Unless you grow your own food, there are very few workers who haven't been impacted by price increases in the past year.
tryptophan 5y ago
Yeah this discussion around inflation feels a lot like gas-lighting. > Person: My friend was shot! > Expert: No, he had his heart stop beating. Stop being so uneducated™ and get your information from places that dont spread disinformation™. > Person: But he is dead! > Expert: Stop being so racist and anti-science. All the experts agree that his heart is just transitionally not beating. People dying would make us look bad and that is not the case here! That is how I see the current conversation about inflation. You're supposed to ignore reality and parrot some dumb talking points. A lack of supply and increase in money IS THE LITERAL DEFINITION of inflation. I don't care about technicalities about gas prices and supply chain. If my money cant buy as much stuff as last year, that is inflation.
- candiodari 5y ago
  Close but, no, not really. There's a subtle difference: "A lack of supply and increase in money" vs "A lack of supply BECAUSE of an increase in money" So the situation gets muddied a lot when there is a rather large external factor (or, more generally, when society changes). When a global pandemic hits, mouth mask prices skyrocket. This is not inflation.
  - mc32 5y ago
    That makes no sense. With your augmentation, we could say the 1970s oil shock price increases "were not inflation!" because, you know, external factors. Iran, we have been embargoed, "it's not inflation".
    - candiodari 5y ago
      That would be accurate. They were price increases because of war. Same for Iran. Inflation is not about changes in the world itself. The price of horse carriages has skyrocketed, because they're a luxury niche product now. The price of global travel has dropped to the point that people are semi-seriously suggesting that mach 15 travel by rocket might become a thing. Paris-Sydney in 30 minutes. That's not inflation and has nothing to do with the actions of the central bank. House prices, by contrast, are inflation driven. Inflation is a measure of the effect of the evolution of the money supply. It's done so the central bank can adjust course to optimize how smoothly the economy runs. It is not a measure of how expensive it is for you to drive to the next city. When Washington decides to go to war, that doesn't affect inflation directly. When your city council decides to block the shortest route to the next city, that doesn't affect inflation, even if it doubles your cost to go there.
stjohnswarts 5y ago
It's not a normal market. Unusual chip and supply shortages have made several markets like the one for cars inelastic for traditionally elastic purchases. On such a wide scale you can just say "simple supply and demand" as you're basically just stating "water is wet". It's much more complicated than traditional versions of inflation.

wbsss4412 5y ago

Car prices are being driven by supply chain issues more so than a surplus of dollars.

hackeraccount 5y ago
How would you know that? If say the number of cars went down by 50% and the amount of money in everyone's pocket went up by 100% which would driving the upward price more? If the supply of cars is down why would that in and of itself drive the price up? Surely there's some flexibility in demand for cars? It seems like a price increase in any individual item can be explained as a supply problem but every additional item that that gets added to the list is an argument for a money supply problem because on some level every item is substitutable.
- wbsss4412 5y ago
  I don’t know in the sense that I have exhaustively researched the topic in exacting detail, but I believe it is mostly supply related because of a combination of factors: 1. Global supply chain disruptions are well documented, multiple automakers have had to shutdown factories for lack of parts. 2. Cars prices are increasing much more rapidly than the overall inflation rate. (I believe another comment in this thread said ~40% for used vehicles) 3. Total vehicle sales are still below their pre pandemic levels. I never said that the money supply isn’t contributing to inflation. But it is quite clear that there is a significant supply problem when it comes to cars.
  - flavius29663 5y ago
    > Cars prices are increasing much more rapidly than the overall inflation rate There will always be items that increase in price more than the average. Are you proposing to eliminate all the outliers in each report? In the end, people still need to buy cars, which are more expensive, so the inflation rate should reflect that.
    - wbsss4412 5y ago
      The argument wasn’t that it should be eliminated from the inflation rate, the discussion was about what was causing car prices to be inflated. > Car prices are being driven by supply chain issues more so than a surplus of dollars.

mdorazio 5y ago

The question wasn't "is this supply/demand driven?", it was "is this transitory or not?". Items like car prices are likely transitory and will return to pre-covid levels once supply chain issues get worked out later this year and production returns to normal.

helen___keller 5y ago
Just a nitpick but a return to the mean does not imply a return to pre-Covid levels, although I think we can all agree that sooner or later cars will actually start depreciating in value again.
almost_usual 5y ago
No one really knows when supply chain issues will be worked out.
- giantg2 5y ago
  And if the cost of fixing those issues (like building new chip facilities) will continue to affect price.
  - deleted 5y ago
    [deleted]

shmatt 5y ago

That's exactly OP's point. It's only worrying IF you believe car factories are stuck making less than 2019 numbers for years and years to come If you believe they'll be able to get back to normal numbers in the next 12 months, you believe inflation will largely go away, maybe even before the midterms

toyg 5y ago

> Because people have money, they want to buy cars That would be true if we were talking about new cars, but apparently the big rise is in used ones. That is likely due to a combination of factors, with liquidity being only one of them - the others are scarcity from the supply side due to covid, and the sector trying to push a new technology (electric) on masses of conservative consumers.

mym1990 5y ago
Electric cars are hardly a 'new' technology. The rise in prices is predominantly because of a shortage of new cars which drives consumers to the used market.
beerandt 5y ago
>apparently the big rise is in used ones Only because there are practically no new ones. We've been trying to buy a new vehicle for over a year, with a family member owning a dealership, and still haven't been able to get one. Our last one, we ordered just before covid, and the 3 month order turned into 13 months. EV only comes into play because it made new car prices higher in order for companies to meet quotas dictated by CAFE standards, which also raises prices on the used market.
- jhickok 5y ago
  Yep, our local Honda lot has functionally been sold out for 2 years. I've resigned myself to driving my current vehicles into dust.
barake 5y ago
Check out sub-prime car loans. Carvana and the like will finance anything with a pulse, so people with poor credit buy used instead of new.

cr1895 5y ago

> There are too many dollars in the economy. Because people have money, they want to buy cars At least wrt cars, isn’t the knock-on pandemic effect by far driving the shortages? (Chips, disruptions in just-in-time, etc) rather than people have more money to spend on them?

treis 5y ago

> Because people have money, they want to buy cars, and houses and furniture etc. Why do you want to ignore car prices? In a functioning economy the supply of cars, houses, and furniture etc. would rise to meet the demand preventing a price increase. But they can't due to chip shortages, labor issues, and other assorted supply chain issues. It's a different problem than inflation and requires different solutions. It also contradicts the "If you didn't get a 7.5% raise you got a paycut" narrative because it's very dependent on what you bought. If you're trying to buy a house, put furniture in it, and get a new to you used car then things got way more expensive. If you already had those things then it didn't.

pxeboot 5y ago
Unless you grow your own food, there are very few workers who haven't been impacted by price increases in the past year.

tryptophan 5y ago

Yeah this discussion around inflation feels a lot like gas-lighting. > Person: My friend was shot! > Expert: No, he had his heart stop beating. Stop being so uneducated™ and get your information from places that dont spread disinformation™. > Person: But he is dead! > Expert: Stop being so racist and anti-science. All the experts agree that his heart is just transitionally not beating. People dying would make us look bad and that is not the case here! That is how I see the current conversation about inflation. You're supposed to ignore reality and parrot some dumb talking points. A lack of supply and increase in money IS THE LITERAL DEFINITION of inflation. I don't care about technicalities about gas prices and supply chain. If my money cant buy as much stuff as last year, that is inflation.

candiodari 5y ago
Close but, no, not really. There's a subtle difference: "A lack of supply and increase in money" vs "A lack of supply BECAUSE of an increase in money" So the situation gets muddied a lot when there is a rather large external factor (or, more generally, when society changes). When a global pandemic hits, mouth mask prices skyrocket. This is not inflation.
- mc32 5y ago
  That makes no sense. With your augmentation, we could say the 1970s oil shock price increases "were not inflation!" because, you know, external factors. Iran, we have been embargoed, "it's not inflation".
  - candiodari 5y ago
    That would be accurate. They were price increases because of war. Same for Iran. Inflation is not about changes in the world itself. The price of horse carriages has skyrocketed, because they're a luxury niche product now. The price of global travel has dropped to the point that people are semi-seriously suggesting that mach 15 travel by rocket might become a thing. Paris-Sydney in 30 minutes. That's not inflation and has nothing to do with the actions of the central bank. House prices, by contrast, are inflation driven. Inflation is a measure of the effect of the evolution of the money supply. It's done so the central bank can adjust course to optimize how smoothly the economy runs. It is not a measure of how expensive it is for you to drive to the next city. When Washington decides to go to war, that doesn't affect inflation directly. When your city council decides to block the shortest route to the next city, that doesn't affect inflation, even if it doubles your cost to go there.

stjohnswarts 5y ago

It's not a normal market. Unusual chip and supply shortages have made several markets like the one for cars inelastic for traditionally elastic purchases. On such a wide scale you can just say "simple supply and demand" as you're basically just stating "water is wet". It's much more complicated than traditional versions of inflation.