24 ms·

Inflation propagates unevenly

245 points by luu 5y ago

fleddr 5y ago
It becomes even more complex when you include shrinkflation and quality reduction of products.
- sbelskie 5y ago
  For what it’s worth, the BLS does have methods to account for both of these. How well they work I don’t know, but the numbers you see reported contain adjustments for these.
warpspin 5y ago
Clicked on it, wholeheartedly expecting something about cosmic inflation. Ah those were the times.
- zalebz 5y ago
  I had the same expectation, maybe adding "Economic" to the start of the title would help.
- layer8 5y ago
  Right, today’s inflation is really nothing compared to cosmic inflation. And people didn’t complain in the primordial universe!
  - marcosdumay 5y ago
    To be fair, any complaint was guaranteed not to reach anybody else.
- plainnoodles 5y ago
  Within the past few weeks, what with the JWST coming online and more radioastronomy happening than ever, and also economic inflation coming into the news for the first time in a while, this is unfortunately not the first time I've had to play "spacetime or finance?" with an inflation headline recently.
willcipriano 5y ago
You have dollars and you have cheeseburgers. People exchange dollars for cheeseburgers. If you suddenly increase the number of available cheeseburgers, eventually the market will correct and you'll get more cheeseburger per dollar. Most people accept this, but tell them if you increase the number of dollars but leave cheeseburger production the same, you'll need more dollars to get the same amount of cheeseburgers as you did previously, and they insist this isn't true. As a bonus you can replace cheeseburgers with labor and they will say "lump of labor fallacy". Inflation would probably happen more evenly if we got over these economic myths we have invented for ourselves.
- imtringued 5y ago
  I have played a game called prosperous universe. The fact that there are money printers that encourage you to engage in economic activity, i.e. the additional money encourages you to invest is something that I tried to question. Why does an increase in the money supply encourage people to produce more? From the perspective of the community, producing more is certainly a good thing as the economy is not very well developed and there are some progression cliffs as getting engineers and technicians are basically a form of luxury as only ship building is really dependent on their products. So, more money is somehow good, but why? One idea I had is that creating new money rewards people for doing something they would have otherwise not done. In other words, people receive a share of the economy in return for their economic activity even if half the economic activity is simply being throwing into an NPC dumpster. If you were to represent that share as a percentage of the economy, then your percentage grows as you obtain more created money. It also means that the share of the economy of others shrinks. One could say that this is a way of decentralizing power. When you think about the opposite idea. A fixed money supply. The economic share of all players may effectively be frozen. Since your power may never shrink, unless you want it to shrink, it becomes very easy for the system to be dominated by a few players. So ultimately, the problem is the fact that those who need money cannot get it and those who have too much want to keep it. Redistribution among players somehow ends up benefiting both yet this is not the natural order of things. If one person had too much wheat and another too little and the first one has too few tomatoes and the second one has too many, one would obviously see the opportunity for a trade, the market apparently solves the exchange of goods but why does it fail to solve the exchange of money properly? New players are obviously dependent on older players to give them money, but the older players have no incentive to buy from new players, they can just buy from other old players. Lots of people give up at the start, precisely because they don't feel they are being needed. In fact, I think I would describe the biggest fear that I have experienced in life that I am not needed by anyone. Yes my boss pay me a salary. My parents like me. I have some nice friends. I have had plenty of experiences that make me glad I was born. If reality was a game I probably would have quit, not because of some angry capitalists exploiting me or because of violence against me. I would have thought, this is a nice game but I feel out of place, enjoy your time here, I unfortunately won't be participating. In fact, a lot of males are sent to fight wars to keep them busy and feel needed. A lot of child soldiers start that way. What's the solution? Well, the solution doesn't sound that bad or even impossible, it may even sound obvious. Essentially, there must be a purpose for every life. The supply of labor must drive the demand for labor. Interestingly, there is even a law that postulates such a thing to occur. It is known as says' law and yet full employment has remained elusive. If economics predicts that supply and demand will balance themselves automatically, then the only reason for that to not happen is that we have built a machine that prevents this from happening. Money, when used as a store of value, is essentially the ability to decouple supply and demand and we have decided that one should be allowed to do so eternally. Imagine if everyone saves half their salary and nobody borrows that money and money is saved until that person dies. Half the supply would fail to generate demand! Half the people in the economy would be redundant! This is the ugly truth, we are trying to make each other redundant for fear of becoming redundant ourselves as someone must be redundant at the end of the day the moment the economy is saturated. It's not really a lump of labor fallacy. Those who save, will at some point spend their money even if they do so in a single second at the end of their life. The problem is the mismatch between when the money must be spent and when it is actually spent. A negative interest rate effectively indicates the point at which spending can no longer be delayed and savings must be reduced.
spupe 5y ago
If we are about to enter a period of sustained inflation, contracts may start including automatic monthly/quarterly raises to offset it.
- mym1990 5y ago
  I think this is where inflation really hurts in the long run: the ability to somewhat accurately forecast based on the current state of the world. Ultimately a lot of companies will get it wrong, have too much/too little inventory, and some companies will struggle or go bankrupt due to this.
hammock 5y ago
Further reading Cantillon effect https://mattstoller.substack.com/p/the-cantillon-effect-why-wall-street https://mattstoller.substack.com/p/the-cantillon-effect-why-... Biflation https://www.investopedia.com/terms/b/biflation.asp#:~:text=Biflation%20is%20the%20simultaneous%20occurrence,economic%20goods%20or%20asset%20classes https://www.investopedia.com/terms/b/biflation.asp#:~:text=B....
danuker 5y ago
> It can take years for an inflation shock to propagate through the economy and reach a stable equilibrium Markets are never in equilibrium, but always changing. So the author's point is even stronger.
danuker 5y ago
> As a result, the inflation rate each person experiences is very personalized. It's hard to agree on what "the inflation rate" is, because it depends on what you need to buy. If you drive a lot, fuel inflation will impact you more. If you're vegetarian, meat inflation isn't going to hit your pocket book. Investopedia defines inflation as "the decline of purchasing power of a given currency over time". [0] Prices diverging is not inflation. It's reallocation of value in response to a changing world and changing perspectives. [0] - https://www.investopedia.com/terms/i/inflation.asp https://www.investopedia.com/terms/i/inflation.asp
- layer8 5y ago
  The question is, how do you quantitatively define "purchasing power" when prices are diverging? Is it the number of cheeseburgers you can buy? The number of TVs? The number of houses? If you take some average, the average of which set, and why?
  - danuker 5y ago
    One idea is weigh by reported actual expenses in each category you're measuring. But that way, you're just measuring the trend in expenses, which should be proportional to GDP per capita. Edit: no, not all GDP is consumer spending (there is also investment, government expenses, and net exports). Here is what I think is a better CPI: Personal consumption divided by population, scaled to compare with the official CPI. https://fred.stlouisfed.org/graph/?g=MMdx https://fred.stlouisfed.org/graph/?g=MMdx Growth rates compared: https://fred.stlouisfed.org/graph/?g=MMeV https://fred.stlouisfed.org/graph/?g=MMeV
- anotherman554 5y ago
  I don't understand your objection or what quoting Investopedia is supposed to show? Here's a paper from the New York Fed that contains the sentence "Because the basket actually purchased by each household potentially differs from the CPIís basket, the inflation rate faced by any given household might be very different from the CPI-inflation rate." https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr173.pdf https://www.newyorkfed.org/medialibrary/media/research/staff...
djrobstep 5y ago
> I've heard multiple Americans say that "inflation is good for workers because it erodes debts", but they forget that wages are generally the last thing to adjust. This seems to completely ignore bargaining power and what the corresponding state of the labour market is when inflation is about: Typically it's a tight labour market that's really good for wages, particularly low-end wages! I really like Devon's writing usually but I think this one isn't telling the whole story.
- bluGill 5y ago
  Even though wages are last to adjust, over the long term inflation is good for those with a lot of debt at fixed interest rates. Those large debts get smaller over time and eventually wages catch up. Note the qualifacations on that though. Change any and things change. In the US real estate often does fit the specifics.
  - jbay808 5y ago
    Also, any new debts being created will tend to price in the inflation with a higher interest rate.
    - bluGill 5y ago
      Those are a minority of all debts by total value. People won't refinacne to a higher rate, and those who get high rates plan to refinancing in a few years when rates improve (might not happen but that is the plan) For a bit over half of Americans inflation is good for their situation over 10 years.
jonathan-adly 5y ago
One thing that inflation does that is rarely talked about is how it affects time preference (long-term orientation) of the population as a whole. As inflation rises, low time-preference folks are punished, and high time-preference are rewarded. high-debt w/ little savings is smart, YOLOs are natural. A 22 years old now that saved 10% of his salary toward an index fund with 4-5% expected returns over a decade is disadvantaged versus someone who just spending his money for material rewards now (in 7%+ inflation long-term environment.) It infects everything in society and absolutely not some benign monetary problem that the markets will adjust too. "Low time preference generations produce prosperity, which produces high time preference generations, who bring ruin, which produces low time preference generations."
- imtringued 5y ago
  This is an absurd conclusion. Time preference is a function of wealth, not the other way around. If you are a billionaire and can't even spend all your money without being completely reckless then your wealth will grow by the sheer nature of the exponential function, i.e. you spend 3% of your wealth but it grows by 6% so your wealth will grow by 3% forever until the economic system collapses since you have completely absorbed it. Your time preference is basically 0% as you are unable to spend the vast majority of your wealth. The time preference of poor people is very high, because their fixed costs like shelter and food massively outweigh the capital gains they earn. Yet every single cent they spend is partially paying the capital gains of the rich. This has nothing to do with not doing YOLO or being smart or being rewarded, the system is simply rigged. If this was a free market the interest rate would fall below time preference. In fact, the interest rate would actually have to go negative, not because time preference can be negative, but instead because time preference is actually unable to capture the nature of interest to begin with. It's a complete myth that time preference and the interest rate are the same thing. It's fundamentally impossible as time preference can only exist relative to the highest risk free interest rate minus time preference. What is the highest risk free interest rate? Fucking 0%. Why is a 0% interest floor terrible? Because the real world undergoes a permanent increase in entropy and requires a perpetual energy input to stand still. So, getting 0% interest actually requires someone, anyone, to pay a non zero interest rate which represents the amount of energy that was added to the system to keep it standing still. In other words, the interest floor is below 0% and we simply forced it to be 0% by decree, against the will of the vast majority of humans on the planet. This is not a free market, it's an oppressive and coercive market. Obviously, it is impossible for us to simply declare entropy increase nonexistent. The dust we have swept under the rug is still there. It's accumulating. You can see a little mountain forming under the rug. Yes, I'm talking about inflation. Because we refuse to face reality, we either have to perpetually grow the economy to make the mountain of money seem appropriate or we implement negative interest rates through the backdoor, with inflation where people start noticing the dust mountain getting in their way. No, a gold standard does not solve the fact that we are mortal. It's just another way of ignoring entropy by decree.
4lb0 5y ago
Argentinian here. I agree with almost everything in this article. Except for > high-inflation Argentina has almost no mortgage industry. Real state is 100% dollarized since the late 70s [1]. It is not just about inflation because you can have adjusted interest rates [2]. We don't have mortgages because of the government currency exchange restrictions, and also our salaries didn't adjust as much as the inflation rates. [1] https://www.lanacion.com.ar/propiedades/propiedades-cuando-se-dolarizaron-porque-se-mantiene-nid2466773/ https://www.lanacion.com.ar/propiedades/propiedades-cuando-s... [2] https://www.argentina.gob.ar/como-acceder-un-credito-hipotecario-uva https://www.argentina.gob.ar/como-acceder-un-credito-hipotec...
MontyCarloHall 5y ago
Here is a good chart illustrating the heterogeneity of goods/services inflation[0] over the last 20 years. I would love to see it extended into 2022. Technological progress is often deflationary in ways we can’t easily quantify, even after hedonic adjustments[1]. A $500 smartphone today would have cost tens of thousands of dollars only a few years ago, if it were even possible to manufacture then. Some people estimate that a smartphone’s total computing power would have been worth several million dollars in the 1990s[2]. Yet someone with a $500 smartphone today doesn’t consider themselves a millionaire relative to someone from the 90s; we simply cannot quantify the monetary effect of having millions of dollars of 1990s computing power in our pockets[*]. Similarly, a new $40,000 Honda Accord is superior in every way (power, amenities, ride quality, etc.) to a $200,000 Rolls Royce from the 90s. Conversely, if a car identical to a 90s Rolls were manufactured in modern factories, it would probably cost far less to manufacture than the Accord, owing to its relative technological simplicity. Yet we don’t typically consider middle class Accord owners in 2022 as driving around in cars only attainable to millionaires 30 years ago, even though this is objectively the case. [0] https://www.aei.org/wp-content/uploads/2021/07/cpi2021.png https://www.aei.org/wp-content/uploads/2021/07/cpi2021.png [1] https://www.bls.gov/cpi/quality-adjustment/questions-and-answers.htm https://www.bls.gov/cpi/quality-adjustment/questions-and-ans... [2] https://www.aei.org/technology-and-innovation/innovation/the-12-million-iphone/ https://www.aei.org/technology-and-innovation/innovation/the... [*] I guess the “realistic” 1990s equivalent to a smartphone would be a team of personal assistants who could immediately look up any fact from reference materials, simultaneously call multiple businesses for information about their stock or hours, give real-time driving directions via carphone while reading a map, etc. Definitely more realistic than magically stuffing mainframes worth of compute in your pocket, but still only something that the extremely wealthy could afford.
- imtringued 5y ago
  The problem is that you cannot "deflate" land. You need to talk with the existing land owners and they don't want to share. It's like a completely different economic problem. Like, economists have spent centuries figuring out how to solve the "scarcity problem of reproducible goods" but they haven't spent a second figuring out how to solve the "scarcity problem of non reproducible goods". The suburban sprawl nonsense only exists because we can't figure out how to redevelop existing plots within the city in an equitable way. Yes we have to kick the old residents out, there is no other way but we also build more housing than the numbers of people that were kicked out so if this were done at scale you wouldn't have to worry about leaving the city, just the block you are living in.
barrenko 5y ago
Rounadbout way to say the same is - Money is cheaper the closer you are to the source (whoever is printing it).
whiddershins 5y ago
One thing I’ve noticed is the things that have increased way above inflation for the past few decades are: Medical care, Urban Housing, Education These are things that disproportionately affect middle class families and below, as they are so important and a much bigger proportion of their budget. These are also things that are sometimes referred to as a ‘right’ and are massively regulated by the government. Whatever all that adds up to.
- ahelwer 5y ago
  Countries with socialized housing, healthcare, and education do not experience the cost increases of those things seen in the US. So you have it backward. The US runs these things like a half-assed free market so public wealth is efficiently siphoned to the owning class.
  - whiddershins 5y ago
    What is an example of a country with socialized housing?
    - ahelwer 5y ago
      Denmark has partially socialized housing.
      - whiddershins 5y ago
        The United States has public housing projects, and Medicare/Medicaid coverage of nursing homes. We also have government provided halfway houses. We also have government provided housing for orphans. We also have welfare, which people can use to pay for housing. We also have section 8, which allows low income people to live in normal apartments but the government pays part of their rent. Would that be partially socialized housing?
        standardUser 5y ago
        In total, about 5 million US household receive some kind of housing assistance. So yes, very, extremely partial.
naveen99 5y ago
Half glass full / empty : so many things deflating all the time: moore’s law, internet information, open source software, incompetent people getting fired, cheaters getting caught, brain drain from poorly managed states.
bannedbybros 5y ago
sdoering 5y ago
What I also find with a bit more years of experience is that different groups are impacted quite differently by inflation and price shifts like currently happening. Take my 15 year younger self. I was driving to university 35km (around 22 miles) and back every weekday. Additionally 4 - 5 times per week I drove this for my job as well (I was working as a bartender while in university). I paid for gasoline from my tip. The rest money was for costs of living. I was happy when I was able to buy a book for leisure reading. The price for gasoline in Germany skyrocketed in the last few weeks. I would have been hit so hard by these prices. Nowadays, with a stable job, working from home and earning quite well I don't drive that much by a long shot. This gasoline price surge doesn't hit me so hard nowadays. Because I am in a privileged position to be able to WFH and earning more than enough, that it would not impact me so hard if I would need to drive to the office every day. In my opinion people with less available/spendable income are hit harder. Rural people are hit harder (at least in Germany gasoline is more expensive in my experience in rural areas). People who absolutely need to commute to work are hit harder. So the distribution of impact isn't even as well.
- wonderwonder 5y ago
  The old saying that "its expensive to be poor" holds true in almost every scenario.
MrPatan 5y ago
I had the realization that economists only look at identities that hold in the "steady state" after a shock to a system, like the printer going brrr for a while, and don't consider transitory states because they are difficult to model and calculate. That's why you have smart people going around saying inflation doesn't matter and other dumb stuff like that. There's no steady state, people! The system takes longer to reach steady state than the time between shocks! Am I wrong?
- mrtranscendence 5y ago
  You're only wrong in one respect: economists don't only look at steady states. Keynesian macro looks at frictions, for example. Economists are quite aware that inflation propagates through the economy unevenly; they are not that naive as a rule. I did learn general equilibrium in grad school, but we were not told that it was a precise description of reality.
nemo44x 5y ago
> "Boys’ apparel is up 8.4%, while girls’ apparel is down 0.4%." Rise up, Men! It is time we take to the streets wearing hats adorned with cocks-and-balls to demand equity in clothing prices!
- uoaei 5y ago
  Off-topic, flippant, rude trivialization of the fight for equity. Shame.
  - throwawayninja 5y ago
    Off-topic, flippant, rude trivialization of the fight for equity. Hilarious.
  - nemo44x 5y ago
    Authoritarians hate jokes at their expense too and demand to be taken seriously. If you can't stand being laughed about then you can't expect to be taken seriously either.
    - uoaei 5y ago
      Show me where the joke is and I would agree.
      - nemo44x 5y ago
        Sure! > It is time we take to the streets wearing hats adorned with cocks-and-balls to demand equity in clothing prices!
        uoaei 5y ago
        If it is intended as a joke, it's not one. If it is intended as satire, it's trite and contrived.
commandlinefan 5y ago
> the contractor has always denominated his prices in USD. Might want to reconsider that...
- xunn0026 5y ago
  Suggestions welcome.
nemo44x 5y ago
I spat out my coffee this morning when a CNN news reader commented that because of the 5 trillion that was handed out to people last year, people will be able to fight through this inflationary period. I think we aren't too far away from "thank goodness that the regime printed trillions of dollars for everyone so we can fight through the Putin price hike!"
- ajsnigrutin 5y ago
  Yep... putins relatively fresh war is guilty for a year of price increases due to massive printings of money... CNN! Otherwise, what i find most sad is, that people are cheering the printing of money (because they get handouts), but "in the end" (which is very soon after the handouts), they lose the same amount of money in price hikes everywhere due to inflation, and large corporations (so the ones that get the "free money" from the people to sell them stuff) profit in the end. Also the propaganda machine is helping the pumping-up the prices... first they talk about the higher prices of everything because of this and that (covid, putin, war,...), people then expect higher prices, and even if the current wholesale prices are still low, the sellers will raise them, because the media told the people that the prices will go up, people blame putin (and not the stores), and why not take advantage of the situation?
  - nemo44x 5y ago
    You might get some gauging and people taking advantage of things, but I do believe that it will correct in relatively short order. The entire beauty of the free market system is that anyone making "too much" will have that margin taken away by someone willing to do it for less profit. I just wish economists like Krugmen would revisit some of their previous articles about how printing trillions of dollars and passing it out won't cause inflation. Those articles were parroted by so many people and for the party that demands "accountability" they certainly know how to bury things and move on to another problem they have the best solution to.
  - uoaei 5y ago
    > they lose the same amount of money in price hikes everywhere due to inflation This point only makes sense if you assume that the price hikes wouldn't happen without the handouts, and that those people would have been able to stay in a dignified life (food, housing) without that buffer. Big assumption! Your point about the rhetoric around prices is exactly right. Pretty obvious, only looking at corporate profits vs price increases.
deleted 5y ago
[deleted]
cryptica 5y ago
Financial assets which are close to the money printers are the most affected by inflation. In the case of financial assets such as stocks, the effects appear to be positive initially, but the increase in stock price adds fragility which means that when people start selling their stocks (e.g. employees start retiring and selling their shares), it will crash very quickly if reserve banks don't step in to bail out the markets.
neilwilson 5y ago
"Little or no consideration has been given to the possibility that higher prices may simply be the market allocating resources and not inflation. Prices reflect the indifference levels where buyers and sellers meet. If, for example, there is a freeze in Brazil, the price of coffee may go up. The higher price accommodates the transfer of the remaining supply of coffee from the sellers to the remaining buyers" Soft Currency Economics II, Warren Mosler, pp70
- mym1990 5y ago
  Higher prices across the board is the market trying to allocate resources, but not being able to do so efficiently. Higher prices, by definition, IS inflation...it doesn't matter what the cause is, whether it is a freeze in Brazil or a ship getting stuck in the Suez or a war. If prices go up, your purchasing power goes down, and it is inflation.
WalterBright 5y ago
Living through 1970s inflation permanently deterred me from investing in anything dollar-denominated.
frereubu 5y ago
> inflation disproportionately harms people who can't easily adjust their income upwards This was demonstrated quite well in a Twitter thread by Jack Monroe about food poverty in the UK - https://twitter.com/BootstrapCook/status/1483778776697909252 https://twitter.com/BootstrapCook/status/1483778776697909252 - and led to the Office For National Statistics looking into calculating the impact of inflation on different income groups - https://www.theguardian.com/business/2022/jan/26/cost-of-living-crisis-ons-inflation-jack-monroe https://www.theguardian.com/business/2022/jan/26/cost-of-liv... She had initially named the idea the "Vimes Boot index" after the Terry Pratchett character: "The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money. Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of okay for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles. But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that’d still be keeping his feet dry in ten years’ time, while a poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet." https://www.theguardian.com/books/2022/jan/26/terry-pratchett-jack-monroe-vimes-boots-poverty-index https://www.theguardian.com/books/2022/jan/26/terry-pratchet...
- imtringued 5y ago
  The problem with the story is that it is vaguely correct but it makes subtle mistakes. The problem isn't the fact that the boots are longer lasting. It's the fact that buying new boots is an emergency so you cannot just delay it. It's a fixed cost that everyone has to pay. The rich person can afford to buy both the crappy boots and the good boots and still have enough left over for everything else.
- chii 5y ago
  a tailored narrative at best. Vimes could have borrowed money to buy the good boots - as long as he could earn more than the interest when using those boots.
mirntyfirty 5y ago
Only thought about this today but if a person relies on credit, inflation is going to end up being much higher.
- cced 5y ago
  Would you mind expanding on this? If a person relies on credit and borrows to purchase a home, wouldn't inflation eating away at the value of that debt (assuming wages increase) be less of an impact on the borrower?
  - mirntyfirty 5y ago
    I was thinking more about consumables like gas, groceries, and rent. A lot of American consumers rely on credit to pay monthly bills and inflated goods would likely prevent people from paying bills in full. The inflated prices would be hit with interest rates on revolving credit lines.
erichocean 5y ago
Can we at least all agree that the 4.7% inflation for shelter in the CPI is utter bullshit? It's almost as if they wanted < 8% inflation, and just kept adjusting that number down in the spreadsheet until we hit 7.9%. Here on Earth, actual rent is up 19% and housing is up 18% YoY. It's also 1/3rd of the CPI basket. If shelter was set to 18.5% YoY instead of 4.7%, CPI would be well into double digits. ----- In reply: CPI isn't about things you're not buying. It's about new purchases. By definition. That said, 40% of homes in the US have no mortgage. ~6 million homes are sold every year. The CPI should be about the cost of those purchases changing YoY, not about "well, if we include all of the things people bought in previous years, as you can see, prices didn't go up."
- mdorazio 5y ago
  Rent is not the entire housing bucket (only 35% of Americans don’t own a home) and it’s also not uniform. If you have a house with a fixed mortgage, your housing cost has increased by probably about the increase in property tax due to assessed value rise. What you’re probably looking for is a local cost of living index rather than nationwide CPI.
Gollapalli 5y ago
Yup. Mentioned at length in Economics in One Lesson.
valenterry 5y ago
> As a general rule, inflation disproportionately harms people who can't easily adjust their income upwards. That's actually interesting. Especially in countries with job safety, where you can't fire one easily, nor reduce their salary without consent (such as France, Germany, ...) this seems to be an easy way for employers to "adjust" salary and essentially get people fired who earn "too much" from the perspective of the employer. On the other hand, this is good for people who _can_ negotiate their salary upwards. Would be interesting to have this part covered in more detail.

245 points by luu 5y ago

fleddr 5y ago

It becomes even more complex when you include shrinkflation and quality reduction of products.

sbelskie 5y ago
For what it’s worth, the BLS does have methods to account for both of these. How well they work I don’t know, but the numbers you see reported contain adjustments for these.

warpspin 5y ago

Clicked on it, wholeheartedly expecting something about cosmic inflation. Ah those were the times.

zalebz 5y ago
I had the same expectation, maybe adding "Economic" to the start of the title would help.
layer8 5y ago
Right, today’s inflation is really nothing compared to cosmic inflation. And people didn’t complain in the primordial universe!
- marcosdumay 5y ago
  To be fair, any complaint was guaranteed not to reach anybody else.
plainnoodles 5y ago
Within the past few weeks, what with the JWST coming online and more radioastronomy happening than ever, and also economic inflation coming into the news for the first time in a while, this is unfortunately not the first time I've had to play "spacetime or finance?" with an inflation headline recently.

willcipriano 5y ago

You have dollars and you have cheeseburgers. People exchange dollars for cheeseburgers. If you suddenly increase the number of available cheeseburgers, eventually the market will correct and you'll get more cheeseburger per dollar. Most people accept this, but tell them if you increase the number of dollars but leave cheeseburger production the same, you'll need more dollars to get the same amount of cheeseburgers as you did previously, and they insist this isn't true. As a bonus you can replace cheeseburgers with labor and they will say "lump of labor fallacy". Inflation would probably happen more evenly if we got over these economic myths we have invented for ourselves.

imtringued 5y ago
I have played a game called prosperous universe. The fact that there are money printers that encourage you to engage in economic activity, i.e. the additional money encourages you to invest is something that I tried to question. Why does an increase in the money supply encourage people to produce more? From the perspective of the community, producing more is certainly a good thing as the economy is not very well developed and there are some progression cliffs as getting engineers and technicians are basically a form of luxury as only ship building is really dependent on their products. So, more money is somehow good, but why? One idea I had is that creating new money rewards people for doing something they would have otherwise not done. In other words, people receive a share of the economy in return for their economic activity even if half the economic activity is simply being throwing into an NPC dumpster. If you were to represent that share as a percentage of the economy, then your percentage grows as you obtain more created money. It also means that the share of the economy of others shrinks. One could say that this is a way of decentralizing power. When you think about the opposite idea. A fixed money supply. The economic share of all players may effectively be frozen. Since your power may never shrink, unless you want it to shrink, it becomes very easy for the system to be dominated by a few players. So ultimately, the problem is the fact that those who need money cannot get it and those who have too much want to keep it. Redistribution among players somehow ends up benefiting both yet this is not the natural order of things. If one person had too much wheat and another too little and the first one has too few tomatoes and the second one has too many, one would obviously see the opportunity for a trade, the market apparently solves the exchange of goods but why does it fail to solve the exchange of money properly? New players are obviously dependent on older players to give them money, but the older players have no incentive to buy from new players, they can just buy from other old players. Lots of people give up at the start, precisely because they don't feel they are being needed. In fact, I think I would describe the biggest fear that I have experienced in life that I am not needed by anyone. Yes my boss pay me a salary. My parents like me. I have some nice friends. I have had plenty of experiences that make me glad I was born. If reality was a game I probably would have quit, not because of some angry capitalists exploiting me or because of violence against me. I would have thought, this is a nice game but I feel out of place, enjoy your time here, I unfortunately won't be participating. In fact, a lot of males are sent to fight wars to keep them busy and feel needed. A lot of child soldiers start that way. What's the solution? Well, the solution doesn't sound that bad or even impossible, it may even sound obvious. Essentially, there must be a purpose for every life. The supply of labor must drive the demand for labor. Interestingly, there is even a law that postulates such a thing to occur. It is known as says' law and yet full employment has remained elusive. If economics predicts that supply and demand will balance themselves automatically, then the only reason for that to not happen is that we have built a machine that prevents this from happening. Money, when used as a store of value, is essentially the ability to decouple supply and demand and we have decided that one should be allowed to do so eternally. Imagine if everyone saves half their salary and nobody borrows that money and money is saved until that person dies. Half the supply would fail to generate demand! Half the people in the economy would be redundant! This is the ugly truth, we are trying to make each other redundant for fear of becoming redundant ourselves as someone must be redundant at the end of the day the moment the economy is saturated. It's not really a lump of labor fallacy. Those who save, will at some point spend their money even if they do so in a single second at the end of their life. The problem is the mismatch between when the money must be spent and when it is actually spent. A negative interest rate effectively indicates the point at which spending can no longer be delayed and savings must be reduced.

spupe 5y ago

If we are about to enter a period of sustained inflation, contracts may start including automatic monthly/quarterly raises to offset it.

mym1990 5y ago
I think this is where inflation really hurts in the long run: the ability to somewhat accurately forecast based on the current state of the world. Ultimately a lot of companies will get it wrong, have too much/too little inventory, and some companies will struggle or go bankrupt due to this.

hammock 5y ago

Further reading Cantillon effect https://mattstoller.substack.com/p/the-cantillon-effect-why-wall-street https://mattstoller.substack.com/p/the-cantillon-effect-why-... Biflation https://www.investopedia.com/terms/b/biflation.asp#:~:text=Biflation%20is%20the%20simultaneous%20occurrence,economic%20goods%20or%20asset%20classes https://www.investopedia.com/terms/b/biflation.asp#:~:text=B....

danuker 5y ago

> It can take years for an inflation shock to propagate through the economy and reach a stable equilibrium Markets are never in equilibrium, but always changing. So the author's point is even stronger.

danuker 5y ago

> As a result, the inflation rate each person experiences is very personalized. It's hard to agree on what "the inflation rate" is, because it depends on what you need to buy. If you drive a lot, fuel inflation will impact you more. If you're vegetarian, meat inflation isn't going to hit your pocket book. Investopedia defines inflation as "the decline of purchasing power of a given currency over time". [0] Prices diverging is not inflation. It's reallocation of value in response to a changing world and changing perspectives. [0] - https://www.investopedia.com/terms/i/inflation.asp https://www.investopedia.com/terms/i/inflation.asp

layer8 5y ago
The question is, how do you quantitatively define "purchasing power" when prices are diverging? Is it the number of cheeseburgers you can buy? The number of TVs? The number of houses? If you take some average, the average of which set, and why?
- danuker 5y ago
  One idea is weigh by reported actual expenses in each category you're measuring. But that way, you're just measuring the trend in expenses, which should be proportional to GDP per capita. Edit: no, not all GDP is consumer spending (there is also investment, government expenses, and net exports). Here is what I think is a better CPI: Personal consumption divided by population, scaled to compare with the official CPI. https://fred.stlouisfed.org/graph/?g=MMdx https://fred.stlouisfed.org/graph/?g=MMdx Growth rates compared: https://fred.stlouisfed.org/graph/?g=MMeV https://fred.stlouisfed.org/graph/?g=MMeV
anotherman554 5y ago
I don't understand your objection or what quoting Investopedia is supposed to show? Here's a paper from the New York Fed that contains the sentence "Because the basket actually purchased by each household potentially differs from the CPIís basket, the inflation rate faced by any given household might be very different from the CPI-inflation rate." https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr173.pdf https://www.newyorkfed.org/medialibrary/media/research/staff...

djrobstep 5y ago

> I've heard multiple Americans say that "inflation is good for workers because it erodes debts", but they forget that wages are generally the last thing to adjust. This seems to completely ignore bargaining power and what the corresponding state of the labour market is when inflation is about: Typically it's a tight labour market that's really good for wages, particularly low-end wages! I really like Devon's writing usually but I think this one isn't telling the whole story.

bluGill 5y ago
Even though wages are last to adjust, over the long term inflation is good for those with a lot of debt at fixed interest rates. Those large debts get smaller over time and eventually wages catch up. Note the qualifacations on that though. Change any and things change. In the US real estate often does fit the specifics.
- jbay808 5y ago
  Also, any new debts being created will tend to price in the inflation with a higher interest rate.
  - bluGill 5y ago
    Those are a minority of all debts by total value. People won't refinacne to a higher rate, and those who get high rates plan to refinancing in a few years when rates improve (might not happen but that is the plan) For a bit over half of Americans inflation is good for their situation over 10 years.

jonathan-adly 5y ago

One thing that inflation does that is rarely talked about is how it affects time preference (long-term orientation) of the population as a whole. As inflation rises, low time-preference folks are punished, and high time-preference are rewarded. high-debt w/ little savings is smart, YOLOs are natural. A 22 years old now that saved 10% of his salary toward an index fund with 4-5% expected returns over a decade is disadvantaged versus someone who just spending his money for material rewards now (in 7%+ inflation long-term environment.) It infects everything in society and absolutely not some benign monetary problem that the markets will adjust too. "Low time preference generations produce prosperity, which produces high time preference generations, who bring ruin, which produces low time preference generations."

imtringued 5y ago
This is an absurd conclusion. Time preference is a function of wealth, not the other way around. If you are a billionaire and can't even spend all your money without being completely reckless then your wealth will grow by the sheer nature of the exponential function, i.e. you spend 3% of your wealth but it grows by 6% so your wealth will grow by 3% forever until the economic system collapses since you have completely absorbed it. Your time preference is basically 0% as you are unable to spend the vast majority of your wealth. The time preference of poor people is very high, because their fixed costs like shelter and food massively outweigh the capital gains they earn. Yet every single cent they spend is partially paying the capital gains of the rich. This has nothing to do with not doing YOLO or being smart or being rewarded, the system is simply rigged. If this was a free market the interest rate would fall below time preference. In fact, the interest rate would actually have to go negative, not because time preference can be negative, but instead because time preference is actually unable to capture the nature of interest to begin with. It's a complete myth that time preference and the interest rate are the same thing. It's fundamentally impossible as time preference can only exist relative to the highest risk free interest rate minus time preference. What is the highest risk free interest rate? Fucking 0%. Why is a 0% interest floor terrible? Because the real world undergoes a permanent increase in entropy and requires a perpetual energy input to stand still. So, getting 0% interest actually requires someone, anyone, to pay a non zero interest rate which represents the amount of energy that was added to the system to keep it standing still. In other words, the interest floor is below 0% and we simply forced it to be 0% by decree, against the will of the vast majority of humans on the planet. This is not a free market, it's an oppressive and coercive market. Obviously, it is impossible for us to simply declare entropy increase nonexistent. The dust we have swept under the rug is still there. It's accumulating. You can see a little mountain forming under the rug. Yes, I'm talking about inflation. Because we refuse to face reality, we either have to perpetually grow the economy to make the mountain of money seem appropriate or we implement negative interest rates through the backdoor, with inflation where people start noticing the dust mountain getting in their way. No, a gold standard does not solve the fact that we are mortal. It's just another way of ignoring entropy by decree.

4lb0 5y ago

Argentinian here. I agree with almost everything in this article. Except for > high-inflation Argentina has almost no mortgage industry. Real state is 100% dollarized since the late 70s [1]. It is not just about inflation because you can have adjusted interest rates [2]. We don't have mortgages because of the government currency exchange restrictions, and also our salaries didn't adjust as much as the inflation rates. [1] https://www.lanacion.com.ar/propiedades/propiedades-cuando-se-dolarizaron-porque-se-mantiene-nid2466773/ https://www.lanacion.com.ar/propiedades/propiedades-cuando-s... [2] https://www.argentina.gob.ar/como-acceder-un-credito-hipotecario-uva https://www.argentina.gob.ar/como-acceder-un-credito-hipotec...

MontyCarloHall 5y ago

Here is a good chart illustrating the heterogeneity of goods/services inflation[0] over the last 20 years. I would love to see it extended into 2022. Technological progress is often deflationary in ways we can’t easily quantify, even after hedonic adjustments[1]. A $500 smartphone today would have cost tens of thousands of dollars only a few years ago, if it were even possible to manufacture then. Some people estimate that a smartphone’s total computing power would have been worth several million dollars in the 1990s[2]. Yet someone with a $500 smartphone today doesn’t consider themselves a millionaire relative to someone from the 90s; we simply cannot quantify the monetary effect of having millions of dollars of 1990s computing power in our pockets[*]. Similarly, a new $40,000 Honda Accord is superior in every way (power, amenities, ride quality, etc.) to a $200,000 Rolls Royce from the 90s. Conversely, if a car identical to a 90s Rolls were manufactured in modern factories, it would probably cost far less to manufacture than the Accord, owing to its relative technological simplicity. Yet we don’t typically consider middle class Accord owners in 2022 as driving around in cars only attainable to millionaires 30 years ago, even though this is objectively the case. [0] https://www.aei.org/wp-content/uploads/2021/07/cpi2021.png https://www.aei.org/wp-content/uploads/2021/07/cpi2021.png [1] https://www.bls.gov/cpi/quality-adjustment/questions-and-answers.htm https://www.bls.gov/cpi/quality-adjustment/questions-and-ans... [2] https://www.aei.org/technology-and-innovation/innovation/the-12-million-iphone/ https://www.aei.org/technology-and-innovation/innovation/the... [*] I guess the “realistic” 1990s equivalent to a smartphone would be a team of personal assistants who could immediately look up any fact from reference materials, simultaneously call multiple businesses for information about their stock or hours, give real-time driving directions via carphone while reading a map, etc. Definitely more realistic than magically stuffing mainframes worth of compute in your pocket, but still only something that the extremely wealthy could afford.

imtringued 5y ago
The problem is that you cannot "deflate" land. You need to talk with the existing land owners and they don't want to share. It's like a completely different economic problem. Like, economists have spent centuries figuring out how to solve the "scarcity problem of reproducible goods" but they haven't spent a second figuring out how to solve the "scarcity problem of non reproducible goods". The suburban sprawl nonsense only exists because we can't figure out how to redevelop existing plots within the city in an equitable way. Yes we have to kick the old residents out, there is no other way but we also build more housing than the numbers of people that were kicked out so if this were done at scale you wouldn't have to worry about leaving the city, just the block you are living in.

barrenko 5y ago

Rounadbout way to say the same is - Money is cheaper the closer you are to the source (whoever is printing it).

whiddershins 5y ago

One thing I’ve noticed is the things that have increased way above inflation for the past few decades are: Medical care, Urban Housing, Education These are things that disproportionately affect middle class families and below, as they are so important and a much bigger proportion of their budget. These are also things that are sometimes referred to as a ‘right’ and are massively regulated by the government. Whatever all that adds up to.

ahelwer 5y ago
Countries with socialized housing, healthcare, and education do not experience the cost increases of those things seen in the US. So you have it backward. The US runs these things like a half-assed free market so public wealth is efficiently siphoned to the owning class.
- whiddershins 5y ago
  What is an example of a country with socialized housing?
  - ahelwer 5y ago
    Denmark has partially socialized housing.
    - whiddershins 5y ago
      The United States has public housing projects, and Medicare/Medicaid coverage of nursing homes. We also have government provided halfway houses. We also have government provided housing for orphans. We also have welfare, which people can use to pay for housing. We also have section 8, which allows low income people to live in normal apartments but the government pays part of their rent. Would that be partially socialized housing?
      - standardUser 5y ago
        In total, about 5 million US household receive some kind of housing assistance. So yes, very, extremely partial.

naveen99 5y ago

Half glass full / empty : so many things deflating all the time: moore’s law, internet information, open source software, incompetent people getting fired, cheaters getting caught, brain drain from poorly managed states.

bannedbybros 5y ago

sdoering 5y ago

What I also find with a bit more years of experience is that different groups are impacted quite differently by inflation and price shifts like currently happening. Take my 15 year younger self. I was driving to university 35km (around 22 miles) and back every weekday. Additionally 4 - 5 times per week I drove this for my job as well (I was working as a bartender while in university). I paid for gasoline from my tip. The rest money was for costs of living. I was happy when I was able to buy a book for leisure reading. The price for gasoline in Germany skyrocketed in the last few weeks. I would have been hit so hard by these prices. Nowadays, with a stable job, working from home and earning quite well I don't drive that much by a long shot. This gasoline price surge doesn't hit me so hard nowadays. Because I am in a privileged position to be able to WFH and earning more than enough, that it would not impact me so hard if I would need to drive to the office every day. In my opinion people with less available/spendable income are hit harder. Rural people are hit harder (at least in Germany gasoline is more expensive in my experience in rural areas). People who absolutely need to commute to work are hit harder. So the distribution of impact isn't even as well.

wonderwonder 5y ago
The old saying that "its expensive to be poor" holds true in almost every scenario.

MrPatan 5y ago

I had the realization that economists only look at identities that hold in the "steady state" after a shock to a system, like the printer going brrr for a while, and don't consider transitory states because they are difficult to model and calculate. That's why you have smart people going around saying inflation doesn't matter and other dumb stuff like that. There's no steady state, people! The system takes longer to reach steady state than the time between shocks! Am I wrong?

mrtranscendence 5y ago
You're only wrong in one respect: economists don't only look at steady states. Keynesian macro looks at frictions, for example. Economists are quite aware that inflation propagates through the economy unevenly; they are not that naive as a rule. I did learn general equilibrium in grad school, but we were not told that it was a precise description of reality.

nemo44x 5y ago

> "Boys’ apparel is up 8.4%, while girls’ apparel is down 0.4%." Rise up, Men! It is time we take to the streets wearing hats adorned with cocks-and-balls to demand equity in clothing prices!

uoaei 5y ago
Off-topic, flippant, rude trivialization of the fight for equity. Shame.
- throwawayninja 5y ago
  Off-topic, flippant, rude trivialization of the fight for equity. Hilarious.
- nemo44x 5y ago
  Authoritarians hate jokes at their expense too and demand to be taken seriously. If you can't stand being laughed about then you can't expect to be taken seriously either.
  - uoaei 5y ago
    Show me where the joke is and I would agree.
    - nemo44x 5y ago
      Sure! > It is time we take to the streets wearing hats adorned with cocks-and-balls to demand equity in clothing prices!
      - uoaei 5y ago
        If it is intended as a joke, it's not one. If it is intended as satire, it's trite and contrived.

commandlinefan 5y ago

> the contractor has always denominated his prices in USD. Might want to reconsider that...

xunn0026 5y ago
Suggestions welcome.

nemo44x 5y ago

I spat out my coffee this morning when a CNN news reader commented that because of the 5 trillion that was handed out to people last year, people will be able to fight through this inflationary period. I think we aren't too far away from "thank goodness that the regime printed trillions of dollars for everyone so we can fight through the Putin price hike!"

ajsnigrutin 5y ago
Yep... putins relatively fresh war is guilty for a year of price increases due to massive printings of money... CNN! Otherwise, what i find most sad is, that people are cheering the printing of money (because they get handouts), but "in the end" (which is very soon after the handouts), they lose the same amount of money in price hikes everywhere due to inflation, and large corporations (so the ones that get the "free money" from the people to sell them stuff) profit in the end. Also the propaganda machine is helping the pumping-up the prices... first they talk about the higher prices of everything because of this and that (covid, putin, war,...), people then expect higher prices, and even if the current wholesale prices are still low, the sellers will raise them, because the media told the people that the prices will go up, people blame putin (and not the stores), and why not take advantage of the situation?
- nemo44x 5y ago
  You might get some gauging and people taking advantage of things, but I do believe that it will correct in relatively short order. The entire beauty of the free market system is that anyone making "too much" will have that margin taken away by someone willing to do it for less profit. I just wish economists like Krugmen would revisit some of their previous articles about how printing trillions of dollars and passing it out won't cause inflation. Those articles were parroted by so many people and for the party that demands "accountability" they certainly know how to bury things and move on to another problem they have the best solution to.
- uoaei 5y ago
  > they lose the same amount of money in price hikes everywhere due to inflation This point only makes sense if you assume that the price hikes wouldn't happen without the handouts, and that those people would have been able to stay in a dignified life (food, housing) without that buffer. Big assumption! Your point about the rhetoric around prices is exactly right. Pretty obvious, only looking at corporate profits vs price increases.

deleted 5y ago

[deleted]

cryptica 5y ago

Financial assets which are close to the money printers are the most affected by inflation. In the case of financial assets such as stocks, the effects appear to be positive initially, but the increase in stock price adds fragility which means that when people start selling their stocks (e.g. employees start retiring and selling their shares), it will crash very quickly if reserve banks don't step in to bail out the markets.

neilwilson 5y ago

"Little or no consideration has been given to the possibility that higher prices may simply be the market allocating resources and not inflation. Prices reflect the indifference levels where buyers and sellers meet. If, for example, there is a freeze in Brazil, the price of coffee may go up. The higher price accommodates the transfer of the remaining supply of coffee from the sellers to the remaining buyers" Soft Currency Economics II, Warren Mosler, pp70

mym1990 5y ago
Higher prices across the board is the market trying to allocate resources, but not being able to do so efficiently. Higher prices, by definition, IS inflation...it doesn't matter what the cause is, whether it is a freeze in Brazil or a ship getting stuck in the Suez or a war. If prices go up, your purchasing power goes down, and it is inflation.

WalterBright 5y ago

Living through 1970s inflation permanently deterred me from investing in anything dollar-denominated.

frereubu 5y ago

> inflation disproportionately harms people who can't easily adjust their income upwards This was demonstrated quite well in a Twitter thread by Jack Monroe about food poverty in the UK - https://twitter.com/BootstrapCook/status/1483778776697909252 https://twitter.com/BootstrapCook/status/1483778776697909252 - and led to the Office For National Statistics looking into calculating the impact of inflation on different income groups - https://www.theguardian.com/business/2022/jan/26/cost-of-living-crisis-ons-inflation-jack-monroe https://www.theguardian.com/business/2022/jan/26/cost-of-liv... She had initially named the idea the "Vimes Boot index" after the Terry Pratchett character: "The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money. Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of okay for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles. But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that’d still be keeping his feet dry in ten years’ time, while a poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet." https://www.theguardian.com/books/2022/jan/26/terry-pratchett-jack-monroe-vimes-boots-poverty-index https://www.theguardian.com/books/2022/jan/26/terry-pratchet...

imtringued 5y ago
The problem with the story is that it is vaguely correct but it makes subtle mistakes. The problem isn't the fact that the boots are longer lasting. It's the fact that buying new boots is an emergency so you cannot just delay it. It's a fixed cost that everyone has to pay. The rich person can afford to buy both the crappy boots and the good boots and still have enough left over for everything else.
chii 5y ago
a tailored narrative at best. Vimes could have borrowed money to buy the good boots - as long as he could earn more than the interest when using those boots.

mirntyfirty 5y ago

Only thought about this today but if a person relies on credit, inflation is going to end up being much higher.

cced 5y ago
Would you mind expanding on this? If a person relies on credit and borrows to purchase a home, wouldn't inflation eating away at the value of that debt (assuming wages increase) be less of an impact on the borrower?
- mirntyfirty 5y ago
  I was thinking more about consumables like gas, groceries, and rent. A lot of American consumers rely on credit to pay monthly bills and inflated goods would likely prevent people from paying bills in full. The inflated prices would be hit with interest rates on revolving credit lines.

erichocean 5y ago

Can we at least all agree that the 4.7% inflation for shelter in the CPI is utter bullshit? It's almost as if they wanted < 8% inflation, and just kept adjusting that number down in the spreadsheet until we hit 7.9%. Here on Earth, actual rent is up 19% and housing is up 18% YoY. It's also 1/3rd of the CPI basket. If shelter was set to 18.5% YoY instead of 4.7%, CPI would be well into double digits. ----- In reply: CPI isn't about things you're not buying. It's about new purchases. By definition. That said, 40% of homes in the US have no mortgage. ~6 million homes are sold every year. The CPI should be about the cost of those purchases changing YoY, not about "well, if we include all of the things people bought in previous years, as you can see, prices didn't go up."

mdorazio 5y ago
Rent is not the entire housing bucket (only 35% of Americans don’t own a home) and it’s also not uniform. If you have a house with a fixed mortgage, your housing cost has increased by probably about the increase in property tax due to assessed value rise. What you’re probably looking for is a local cost of living index rather than nationwide CPI.

Gollapalli 5y ago

Yup. Mentioned at length in Economics in One Lesson.

valenterry 5y ago

> As a general rule, inflation disproportionately harms people who can't easily adjust their income upwards. That's actually interesting. Especially in countries with job safety, where you can't fire one easily, nor reduce their salary without consent (such as France, Germany, ...) this seems to be an easy way for employers to "adjust" salary and essentially get people fired who earn "too much" from the perspective of the employer. On the other hand, this is good for people who _can_ negotiate their salary upwards. Would be interesting to have this part covered in more detail.