4 ms·

Inflation is happening now because oil demand is higher than supply, food demand is higher than supply, electronic chip demand is higher than supply. The causes

Inflation is happening now because oil demand is higher than supply, food demand is higher than supply, electronic chip demand is higher than supply. The causes of the supply drought is due to covid reducing supply and it not recovering fast enough, and of course the whole Russia invasion of Ukraine.

kzrdude 4y ago
To what extent do we have saturation of some parts of the system? We expect growth in all areas including how much stuff the can be delivered from manufacturing, but investments in capacity might be missing
thaumasiotes 4y ago
> Inflation is happening now because oil demand is higher than supply, food demand is higher than supply, electronic chip demand is higher than supply. But none of that is sufficient for inflation to occur. Inflation is a fall in the value of a unit of currency. In your terms, it can only occur when currency supply is higher than currency demand.[1] But in other terms, while it is true that shortfalls in the supply of food, oil, and circuitry lower the value of a dollar, it is not true that they are able to cause inflation; if the number of dollars is lowered commensurately with the loss in value, that will offset the effect.
- mjburgess 4y ago
  Inflation is a general rise in prices. A fall in currency value is one reason that would occur.
  - thaumasiotes 4y ago
    No, a general rise in prices and a fall in currency value are one and the same thing. The meaning of "a fall in currency value" is nothing other than "a general rise in prices".
    - mjburgess 4y ago
      A currency can maintain its value against others, and against certain commodities whilst a general price rise occurs. Talking in terms of the currency often puts the issue backwards.
      - thaumasiotes 4y ago
        > A currency can maintain its value against others, and against certain commodities whilst a general price rise occurs. So? It's not maintaining its value. Who cares whether it's maintaining its value measured in baht? That would just mean the baht is also losing value.
        mjburgess 4y ago
        No, it wouldnt. Because the UK can experience (temporary) inflation whilst Thailand not. These are the kinds of confusion which arises when you offer a theory of why inflation occurs (currency changes), rather than a definition.
        thaumasiotes 4y ago
        The pound sterling can experience inflation while the Thai baht doesn't, that's true. And it's also true that the pound sterling can experience inflation while maintaining its exchange rate against the Thai baht. But those two things cannot happen simultaneously; if the pound is experiencing inflation and maintaining its exchange rate with the baht, then the baht is also experiencing inflation.
        mjburgess 4y ago
        currencies dont experience inflation... it's prices which inflate a currency is "devalued" by, eg., money printing, only in the sense that eventually the new cash drives prices up when speaking about "inflation" we're always talking about some sets of prices... even in the case of "general inflation", this does not mean global prices for all products -- it means a certain subset, eg., CPI so the GBP can maintain its value in many senses whilst the person-on-the-street experiences CPI.. the value of GBP isnt only in "general purchasing power relative to market relative to baskets" trivially, arbitrage opportunities do exist, markets aren't perfectly efficient.. so there can be cases where UK CPI inflation is "ahead of the global curve"
wronglyprepaid 4y ago
> Inflation is happening now because oil demand is higher than supply, food demand is higher than supply, electronic chip demand is higher than supply. I'm not sure this statement makes that much sense, won't demand always go up when prices drop, and drop off when it goes up? Demand does not exist in abstract, if I could get an iPhone 13 pro for $10 I would take 5, if it costs $2,000 I will take 0. If oil cost $1 a gallon instead of $4, won't the demand increase? And if it is $10 a gallon won't the demand decrease? Maybe to simplify, cite something that backs your claim that demand is higher than supply. And then maybe further, can you clarify: will demand not increase when people are given more money? Won't for example trillions of direct and indirect stimulus drive up demand? And if price stays constant won't the increase in demand not have to result in prices going up in order to avoid supply shortages?
- adrianN 4y ago
  How sensitive demand is to changes in price depends on a lot of factors. When heating your home suddenly costs four times as much you can't just use a quarter of the gas, or you'll freeze. Given enough time of course, demand will go down as people improve insulation and switch to heat pumps, but on the scale of a year or two or three demand can't be reduced very much.
  - wronglyprepaid 4y ago
    > When heating your home suddenly costs four times as much you can't just use a quarter of the gas, or you'll freeze. Maybe this is an aside to you, but would you expect heating cost to increase or decrease if you are using fossil fuels for heating, and the government has promised to end fossil fuels? I guess we can point all fingers to Putin, but decreasing the supply of fossil fuels seems to be an implicit campaign promise of the Biden administration, and he has the most popular administration in history, so I'm not sure why people are upset with paying more for heating and gas.
    - sokoloff 4y ago
      > [Biden] has the most popular administration in history. I see the data quite differently. No President since World War II ended has a lower approval rating on day 523 of their administration. https://projects.fivethirtyeight.com/biden-approval-rating/ https://projects.fivethirtyeight.com/biden-approval-rating/
chasd00 4y ago
Remember the early days of the “bend the curve” part of the pandemic? The US economy was switched off with nothing but crossed fingers ensuring it would turn back on when the switch was flipped back. Production was quite literally brought to near zero. Anyone who dared to hesitate was labeled an anti-science caveman. I hope someone somewhere wrote down how bad an idea that was.
- midasuni 4y ago
  Much of the problem comes from the supply shock in China. Inflation is a global problem which is applying regardless how much “money was printed” My reading of the figures is US supply has either recovered or is limited because of restricted imports (chips etc)
Kinrany 4y ago
What does this mean? Not always, but most of the time neither supply nor demand is being fully used up, and both unmet supply and unmet demand are irrelevant.

kzrdude 4y ago

To what extent do we have saturation of some parts of the system? We expect growth in all areas including how much stuff the can be delivered from manufacturing, but investments in capacity might be missing

thaumasiotes 4y ago

> Inflation is happening now because oil demand is higher than supply, food demand is higher than supply, electronic chip demand is higher than supply. But none of that is sufficient for inflation to occur. Inflation is a fall in the value of a unit of currency. In your terms, it can only occur when currency supply is higher than currency demand.[1] But in other terms, while it is true that shortfalls in the supply of food, oil, and circuitry lower the value of a dollar, it is not true that they are able to cause inflation; if the number of dollars is lowered commensurately with the loss in value, that will offset the effect.

mjburgess 4y ago
Inflation is a general rise in prices. A fall in currency value is one reason that would occur.
- thaumasiotes 4y ago
  No, a general rise in prices and a fall in currency value are one and the same thing. The meaning of "a fall in currency value" is nothing other than "a general rise in prices".
  - mjburgess 4y ago
    A currency can maintain its value against others, and against certain commodities whilst a general price rise occurs. Talking in terms of the currency often puts the issue backwards.
    - thaumasiotes 4y ago
      > A currency can maintain its value against others, and against certain commodities whilst a general price rise occurs. So? It's not maintaining its value. Who cares whether it's maintaining its value measured in baht? That would just mean the baht is also losing value.
      - mjburgess 4y ago
        No, it wouldnt. Because the UK can experience (temporary) inflation whilst Thailand not. These are the kinds of confusion which arises when you offer a theory of why inflation occurs (currency changes), rather than a definition.
        thaumasiotes 4y ago
        The pound sterling can experience inflation while the Thai baht doesn't, that's true. And it's also true that the pound sterling can experience inflation while maintaining its exchange rate against the Thai baht. But those two things cannot happen simultaneously; if the pound is experiencing inflation and maintaining its exchange rate with the baht, then the baht is also experiencing inflation.
        mjburgess 4y ago
        currencies dont experience inflation... it's prices which inflate a currency is "devalued" by, eg., money printing, only in the sense that eventually the new cash drives prices up when speaking about "inflation" we're always talking about some sets of prices... even in the case of "general inflation", this does not mean global prices for all products -- it means a certain subset, eg., CPI so the GBP can maintain its value in many senses whilst the person-on-the-street experiences CPI.. the value of GBP isnt only in "general purchasing power relative to market relative to baskets" trivially, arbitrage opportunities do exist, markets aren't perfectly efficient.. so there can be cases where UK CPI inflation is "ahead of the global curve"

wronglyprepaid 4y ago

> Inflation is happening now because oil demand is higher than supply, food demand is higher than supply, electronic chip demand is higher than supply. I'm not sure this statement makes that much sense, won't demand always go up when prices drop, and drop off when it goes up? Demand does not exist in abstract, if I could get an iPhone 13 pro for $10 I would take 5, if it costs $2,000 I will take 0. If oil cost $1 a gallon instead of $4, won't the demand increase? And if it is $10 a gallon won't the demand decrease? Maybe to simplify, cite something that backs your claim that demand is higher than supply. And then maybe further, can you clarify: will demand not increase when people are given more money? Won't for example trillions of direct and indirect stimulus drive up demand? And if price stays constant won't the increase in demand not have to result in prices going up in order to avoid supply shortages?

adrianN 4y ago
How sensitive demand is to changes in price depends on a lot of factors. When heating your home suddenly costs four times as much you can't just use a quarter of the gas, or you'll freeze. Given enough time of course, demand will go down as people improve insulation and switch to heat pumps, but on the scale of a year or two or three demand can't be reduced very much.
- wronglyprepaid 4y ago
  > When heating your home suddenly costs four times as much you can't just use a quarter of the gas, or you'll freeze. Maybe this is an aside to you, but would you expect heating cost to increase or decrease if you are using fossil fuels for heating, and the government has promised to end fossil fuels? I guess we can point all fingers to Putin, but decreasing the supply of fossil fuels seems to be an implicit campaign promise of the Biden administration, and he has the most popular administration in history, so I'm not sure why people are upset with paying more for heating and gas.
  - sokoloff 4y ago
    > [Biden] has the most popular administration in history. I see the data quite differently. No President since World War II ended has a lower approval rating on day 523 of their administration. https://projects.fivethirtyeight.com/biden-approval-rating/ https://projects.fivethirtyeight.com/biden-approval-rating/

chasd00 4y ago

Remember the early days of the “bend the curve” part of the pandemic? The US economy was switched off with nothing but crossed fingers ensuring it would turn back on when the switch was flipped back. Production was quite literally brought to near zero. Anyone who dared to hesitate was labeled an anti-science caveman. I hope someone somewhere wrote down how bad an idea that was.

midasuni 4y ago
Much of the problem comes from the supply shock in China. Inflation is a global problem which is applying regardless how much “money was printed” My reading of the figures is US supply has either recovered or is limited because of restricted imports (chips etc)

Kinrany 4y ago

What does this mean? Not always, but most of the time neither supply nor demand is being fully used up, and both unmet supply and unmet demand are irrelevant.