8 ms·

The point is the economy is currently based on something hits the news, hoard hoard hoard, price explodes, empty shelves and high profits. Happened to TP a cou

by VLM 5y ago

The point is the economy is currently based on something hits the news, hoard hoard hoard, price explodes, empty shelves and high profits. Happened to TP a couple years ago and is in process with microcontroller chips and will be happening soon with food. People hear story on news, think there will be empty shelves, buy a multi-year supply of boxed Mac n Cheese, the shelves are indeed empty, more people think there will be more empty shelves, repeat. I know a small time ham radio kit mfgr whom bragged about blowing the cost of a new house on a shipping pallet of '328 chips because he has to secure his supply chain if he wants to eat and everyone knows the shelves will soon be empty. Of course that has three effects: He has to store and finance a four year supply of chips, he total wiped the supply in his home country so nobody in that country can buy a '328, and he's stuck using a 2009-era chip until at minimum 2024, when his competitors will be shipping products based on early 2020's chips. On the positive side he gets to eat while competitors whom didn't hoard can't ship product. Of course the only reason there is a shortage is because he cornered the market before someone else did it. I absolutely guarantee we have more than enough wheat to continue to set new record levels of obesity; while I also guarantee there will be empty food store shelves in the near future.

groby_b 5y ago
> The point is the economy is currently based on something hits the news, hoard hoard hoard, price explodes, empty shelves and high profits. Given that that extends well beyond individual behaviour (Wheat futures[1] are currently bonkers), this raises the question if the claim that "capitalism is the optimal way to allocate resources" is really true at least for the current version of capitalism. This extends well beyond wheat. Market behavior is often completely irrational, for extended periods of time. The idea that "all information is priced in" extends to entirely made up information of any kind, which, given technology's ability to proliferate information, now means it often outnumbers actual information significantly. This means that the markets often don't reflect a fair price for the product any more. They instead show a price that is an excellent representation for human emotions around the product. That does not seem a sustainable principle, in the long run. I wish I could close with a lovely "and here's how we fix that" paragraph, but it's a problem that leaves me stumped. [1] https://www.cnbc.com/quotes/@W.1 https://www.cnbc.com/quotes/@W.1
- s1artibartfast 5y ago
  >this raises the question if the claim that "capitalism is the optimal way to allocate resources" is really true at least for the current version of capitalism. It is important to remember that economic supporters of markets don't claim that the markets are always rational in the short term. Corrections and irrational behavior expected.
  - groby_b 5y ago
    Yes - but we're currently in a situation where irrationality absolutely dominates. (And it's not exactly short term)
    - s1artibartfast 5y ago
      Yeah, I agree that irrational behavior sucks. But this brings us full circle to your OP, and the lack of a better alternative.
    - brian_cloutier 5y ago
      You seem to be claiming that the prices of many different assets are largely divorced from fundamentals. I'm willing to believe you, what you're saying is plausible, but I apparently haven't been looking at the same data you've been looking at. Do you have examples of some prices you think are bonkers, and reasons why they're bonkers?
      - a1369209993 5y ago
        > that the prices of many different assets are []largely divorced from[] fundamentals. Actually, I think the claim is that prices are driving fundamentals rather than vice versa - ie rather than "$STUFF shortage causes rising price", you instead get "rising $STUFF price causes shortage".
- kqr 5y ago
  Note that derivatives like futures add additional layers of emotion over the cash market. In the cash market, prices are generally set to match supply and demand of the actual physical thing. Supply is what it is, and demand can go crazy in mysterious ways. In a derivatives market, prices reflect the supply and demand of promises and expectations of the physical thing. You're buying and selling a completely abstract entity only loosely coupled to the physical thing. Here both supply and demand are driven by all sorts of mysterious whims. Not to mention that derivatives markets tend to be designed for speculation.
nradov 5y ago
The difference is that unlike microchips, wheat can't be stored indefinitely. Eventually it rots. And reserve storage capacity is very limited; they have to make room for the next crop. The worldwide wheat market is huge and fragmented so no one can really corner the market through hoarding. An electronics manufacturer might not be able to easily substitute a '328 for another microcontroller, but an Egyptian baker can easily substitute French or Indian wheat for Ukrainian wheat as long as the transport can be worked out at a reasonable cost.
- JasonFruit 5y ago
  Wheat properly stored keeps for at least thirty years without noticeable degradation[0]. I'm not sure how easy that is at scale, but on first glance it seems not impractical. [0] https://extension.usu.edu/preserve-the-harvest/research/storing-wheat https://extension.usu.edu/preserve-the-harvest/research/stor...
  - nradov 5y ago
    It's easy to store small quantities of wheat for years at home, but that's irrelevant to this situation. We're talking about grain elevators and warehouses.
    - JasonFruit 5y ago
      I'm not convinced that an airtight grain storage facility filled with carbon dioxide is impractical. A quick search turns up several manufacturers of airtight grain silos.
      - littlestymaar 5y ago
        In fact, you don't even need the silo to be air-tight: moisture is the enemy. If you can keep you silo dry (including when air temperature change, which is really the only challenge you would face, for example in the ancient world), you're good[1], it won't rot. Humans have known how to keep wheat for several millennia ! [1]: at least if the goal is to eat the wheat. Replanting the seeds will become much harder after time passes.
Stevvo 5y ago
Absolutely, and it's not just limited to wheat; prices are up across the board even in industries with very little presence in Ukraine or Russia.

by VLM 5y ago

groby_b 5y ago

> The point is the economy is currently based on something hits the news, hoard hoard hoard, price explodes, empty shelves and high profits. Given that that extends well beyond individual behaviour (Wheat futures[1] are currently bonkers), this raises the question if the claim that "capitalism is the optimal way to allocate resources" is really true at least for the current version of capitalism. This extends well beyond wheat. Market behavior is often completely irrational, for extended periods of time. The idea that "all information is priced in" extends to entirely made up information of any kind, which, given technology's ability to proliferate information, now means it often outnumbers actual information significantly. This means that the markets often don't reflect a fair price for the product any more. They instead show a price that is an excellent representation for human emotions around the product. That does not seem a sustainable principle, in the long run. I wish I could close with a lovely "and here's how we fix that" paragraph, but it's a problem that leaves me stumped. [1] https://www.cnbc.com/quotes/@W.1 https://www.cnbc.com/quotes/@W.1

s1artibartfast 5y ago
>this raises the question if the claim that "capitalism is the optimal way to allocate resources" is really true at least for the current version of capitalism. It is important to remember that economic supporters of markets don't claim that the markets are always rational in the short term. Corrections and irrational behavior expected.
- groby_b 5y ago
  Yes - but we're currently in a situation where irrationality absolutely dominates. (And it's not exactly short term)
  - s1artibartfast 5y ago
    Yeah, I agree that irrational behavior sucks. But this brings us full circle to your OP, and the lack of a better alternative.
  - brian_cloutier 5y ago
    You seem to be claiming that the prices of many different assets are largely divorced from fundamentals. I'm willing to believe you, what you're saying is plausible, but I apparently haven't been looking at the same data you've been looking at. Do you have examples of some prices you think are bonkers, and reasons why they're bonkers?
    - a1369209993 5y ago
      > that the prices of many different assets are []largely divorced from[] fundamentals. Actually, I think the claim is that prices are driving fundamentals rather than vice versa - ie rather than "$STUFF shortage causes rising price", you instead get "rising $STUFF price causes shortage".
kqr 5y ago
Note that derivatives like futures add additional layers of emotion over the cash market. In the cash market, prices are generally set to match supply and demand of the actual physical thing. Supply is what it is, and demand can go crazy in mysterious ways. In a derivatives market, prices reflect the supply and demand of promises and expectations of the physical thing. You're buying and selling a completely abstract entity only loosely coupled to the physical thing. Here both supply and demand are driven by all sorts of mysterious whims. Not to mention that derivatives markets tend to be designed for speculation.

nradov 5y ago

The difference is that unlike microchips, wheat can't be stored indefinitely. Eventually it rots. And reserve storage capacity is very limited; they have to make room for the next crop. The worldwide wheat market is huge and fragmented so no one can really corner the market through hoarding. An electronics manufacturer might not be able to easily substitute a '328 for another microcontroller, but an Egyptian baker can easily substitute French or Indian wheat for Ukrainian wheat as long as the transport can be worked out at a reasonable cost.

JasonFruit 5y ago
Wheat properly stored keeps for at least thirty years without noticeable degradation[0]. I'm not sure how easy that is at scale, but on first glance it seems not impractical. [0] https://extension.usu.edu/preserve-the-harvest/research/storing-wheat https://extension.usu.edu/preserve-the-harvest/research/stor...
- nradov 5y ago
  It's easy to store small quantities of wheat for years at home, but that's irrelevant to this situation. We're talking about grain elevators and warehouses.
  - JasonFruit 5y ago
    I'm not convinced that an airtight grain storage facility filled with carbon dioxide is impractical. A quick search turns up several manufacturers of airtight grain silos.
    - littlestymaar 5y ago
      In fact, you don't even need the silo to be air-tight: moisture is the enemy. If you can keep you silo dry (including when air temperature change, which is really the only challenge you would face, for example in the ancient world), you're good[1], it won't rot. Humans have known how to keep wheat for several millennia ! [1]: at least if the goal is to eat the wheat. Replanting the seeds will become much harder after time passes.

Stevvo 5y ago

Absolutely, and it's not just limited to wheat; prices are up across the board even in industries with very little presence in Ukraine or Russia.