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It must! For obvious, numerous reasons we are producing less stuff now than before, so we have less available to consume. Prices must outpace wages, or we get

• civilized 4y ago
  Given the combined supply shocks associated with the pandemic and Ukraine, I'm a bit curious why things haven't been much worse. For better or for worse, human labor and fossil fuels are the two most indefensible ingredients of our current global economic system, and the supply of both has been badly disrupted. Obviously a lot has changed since the 70s, but why exactly aren't we having 70s stagflation or worse in the US? Do domestic oil and gas play a role?
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  • nine_zeros 4y ago
    We aren't having massive inflation yet because we have labor from China and other countries producing goods for us. When one producer goes down, another ramps up. If America were producing its own things alone, the supply shock would have pushed inflation much much higher.
    • josephcsible 4y ago
      > We aren't having massive inflation yet because [...] 9.1% isn't massive?
    • civilized 4y ago
      I thought China's production has suffered even more than ours due to the COVID restrictions.
      • nine_zeros 4y ago
        And when China went down, Vietnam, Indonesia and India ramped up. We are extremely privileged to be able to acquire resources even if one producer goes down.
  • lettergram 4y ago
    • josephcsible 4y ago
      > You mean lockdowns, not the pandemic. I agree with this part of your post. > And you mean western sanctions, not Ukraine. But not this part. Ukraine used to export a bunch of stuff that Russia has now destroyed.
      • lettergram 4y ago
        Energy is the most valuable resource in the world. Russia produces a large-ish percentage of the worlds oil and gas: https://en.m.wikipedia.org/wiki/List_of_countries_by_oil_exports https://en.m.wikipedia.org/wiki/List_of_countries_by_oil_exp... Ukraine doesn’t even list on it. They produce grain the news says… about 1/3 as much wheat as Russia. https://www.worldatlas.com/articles/top-wheat-producing-countries.html https://www.worldatlas.com/articles/top-wheat-producing-coun... I can go on, but to put it simply Russian (and Belarus) GDP is much higher than Ukraine GDP. It’s safe to assume they produce more and strict sanctions on them will have a greater impact. Ukraine is still producing, so some of their goods are still able to come to market. That said, yes some was destroyed / impacted I’m sure — but again, far less than sanctions or the lockdowns.
        • klipt 4y ago
          What would be the long term cost of letting Russia invade neighboring countries without sanctions? How do we know they'd stop at Ukraine?
          • civilized 4y ago
            The last time the world let a revanchist dictator take whatever European territory he wanted, things got much, much, much worse.
          • thatguy0900 4y ago
            Anyone who wants to can join nato? What is the long term cost of Russia owning Ukraine? Is there any? Russia interferes with our politics but whether they invade other countries most Americans couldn't place on a map doesn't have much to do with that.
  • refurb 4y ago
    What makes you think things won’t get worse? We’re barely a year into high inflation. Optimistically I’d guess we’re looking at 3-5 years to get inflation under control and that might include a recession (thats already started).
    • civilized 4y ago
      I have no idea how much worse it will get. Your guess seems as good as any.
      • refurb 4y ago
        Of course. But the easiest way to guess at the future is to look at similar problems of the past. Bank of Canada already said inflation won’t be under control for 2 more years.
    • parkingrift 4y ago
      A recession has already started? Someone should tell the labor market. There is still substantial monthly job growth. 250,000 in June. Doesn’t sound like a recession to me. What it does sound like is younger people hoping for a recession because they think it will collapse housing prices. They’re wrong, but what’s new.
      • refurb 4y ago
        https://www.bea.gov/data/gdp/gross-domestic-product https://www.bea.gov/data/gdp/gross-domestic-product 2 quarters of negative GDP growth is a recession. We’ve had 1 quarter so far and lay offs are increasing. I hope not, but with increasing rates we stand a good chance.
        • parkingrift 4y ago
          That’s your definition, not “the definition.” The highest authority on this matter is the NBER. Their definition is pasted, below. I don’t see a significant decline and so far it has not impacted employment. We’re still adding a quarter million net jobs each month. “A significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”
  • lamontcg 4y ago
    > but why exactly aren't we having 70s stagflation or worse in the US? we had strong unions back then which would demand double-digit COLA raises in salary producing a wage-price spiral. given how people could actually afford homes back then, though, i don't think this was a particularly bad thing. what we have now contains all the inflation in the system to the upper class and asset bubbles. we need either to have the cost of housing deflate or the wages paid to inflate. it will be less painful to inflate wages. this isn't what we're going to do though.
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• Retric 4y ago
  > are producing less stuff Are you sure? Numbers I looked at suggested both global and US manufacturing output is up both in terms of output and percent of GDP. So consumption could rise. https://www.macrotrends.net/countries/WLD/world/manufacturing-output https://www.macrotrends.net/countries/WLD/world/manufacturin...
  • maccard 4y ago
    Up over 2020 which saw a global pandemic and a shutdown of most of the developed world.
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    • Retric 4y ago
      Did you look at the graph? 2021 is higher than 2020 and 2019. Presumably because manufacturing was trying to catch up with a backlog.
  • tmn 4y ago
    GDP is measures dollars in the numerator. This is the same concept of retail sails increasing in terms of dollars sold, but decreasing in terms of actual things sold.
  • ska 4y ago
    Does a dollar denominated analysis like that inherently bake in inflation (real, not nominal)?
  • textbookrental 4y ago
    I don't think this correct. Many industries in north America are still not producing at precovid levels. For example: https://fred.stlouisfed.org/series/DAUPSA https://fred.stlouisfed.org/series/DAUPSA
    • nly 4y ago
      That graph shoes a long-term decline. The pandemic has just accelerated things toward their natural conclusion.
• hanniabu 4y ago
  It blows my mind to see people saying that people starving and barely getting by is great for the economy. But I guess it is because it creates a system where people are desperate for income and that leaves them vulnerable for abuse. Hence norm of today's wage slave culture.
  • imtringued 4y ago
    It's not great for the economy, it is great for the rich and that includes the American middle class.
  • karamanolev 4y ago
    Who is saying that and in what way? That comment is simply saying that if things aren't being produced, they cannot, by definition, be consumed. So also by definition, with the same (or larger, due to QE) amount of money, less things need to be consumed, hence higher prices / inflation.
  • parkingrift 4y ago
    Price of goods is set by what the market will bear. If demand is higher than supply, prices will rise. This is the situation we have today. Inflation caused by supply chain disruptions and increased demand. The only way that prices will fall is if demand wanes, or supply increases. No one said people starving is great for the economy. It’s a statement of fact that inflation will not abate unless demand falls or supply increases. It’s pretty hard to increase supply right now.
• gsatic 4y ago
  Let's start with mobile phones. Do we need new models every 2 weeks..I can't even understand who is buying so many when I look at the number being reported.
  • jjoonathan 4y ago
    Golly gee gosh, I'll just buy four fewer iPhones every month and use the savings to pay my rent! I'll just buy 200 fewer iPhones and put my kid through college! Why didn't I think of that sooner?
• psi75 4y ago
  > We could talk about taking from the rich, but actually the rich don’t consume all that much in aggregate, so that doesn’t help much (wealth and income don’t matter for this purpose, only consumption). This is certainly what traditional economics says (they consume, rather than invest) because it's what rich people want us to think, but it doesn't hold out. For one thing, their private jets and charter flights eat up a lot of fuel. Their lifestyles aren't free. Second, attribution is a hard problem. When all the poor people drive to work in offices in places chosen by rich people, to create surplus value for the rich, who is consuming all that gasoline? Is it the rich, who benefit from this economic system and the poor being forced to participate? Or is the poor, who are the ones directly buying and using the fuel? Hard to say; at the individual level, attribution is probably impossible. Third, the whole notion of "poors consume; the rich invest" is only true in proportionate terms. Sure, the billionaires don't directly consume 100,000 times as much as average people--simply because that would be ridiculous. No one can eat 100,000 hamburgers for lunch. But they do consume 100-1000 times more than average people--fuel is a big one, and those 20,000-SF houses aren't cheap to maintain--and this adds up. Their footprint on resources is bad enough; their overuse of land is destructive--this kind of private wealth is a catastrophic misallocation of resources. Finally, what tends to happen with the rich is that they don't put their money into direct consumption (because, again, there's no hedonic payoff to having 100,000 hamburgers for lunch; 99,995+ will go to waste) so much as they use what they have to further secure personal and familial advantages, both economic and political. That's what this investment is: the configuration of society by the last round's winners to ensure they'll win the next round. This has resulted in an economic system that benefits them and keeps the middle classes comfortable enough to survive but--you're right on this--is unsustainable. You're absolutely correct to say that "hit the rich" is far from sufficient here. We in the middle class are going to need to sacrifice. Thing is, no one's going to sacrifice anything with the current upper class in charge. Would you give up anything for these people and the society they've built? I sure wouldn't. You can't ask people in the middle classes to eat less meat and fly less often if you're taking a private jet to Davos. Neoliberalism has a lot of problems, but a big one is that these WEF people have literally none of the moral authority on which they seem to believe they operate.
  • mym1990 4y ago
• arturkane7 4y ago
  Not being snarky but if a rich person owns multiple flats that she is renting out, and you force her (say by jacking up wealth tax or banning buy-to-let) to sell the majority of them, how is that not helping with house price and rent inflation? My point is that you are right the rich don’t consume that much in terms of buying eggs, but they buy a hell of a lot of assets that eventually drive inflation (the more real estate they buy, the higher house prices go, the higher lumber and copper prices go,…) Am not an economist just trying to reason using common sense so might have missed something…
  • dragontamer 4y ago
    Increase interest rates. A property that makes 5% of its value a year, when interest rates are paying 6%, is a bad investment. Instead of 3-properties at $1 million (total) returning 0.05 million / year, you should sell those three properties and put $1 million into the bank and get 0.06 million/year.
    • klipt 4y ago
      That only works if the interest rates are higher than inflation. Real estate is an excellent inflation hedge since as inflation goes up, the value of the real estate and the rent you can get for it both go up in tandem. Another way to discourage rent seeking is to tax ownership of land more.
      • dragontamer 4y ago
        > That only works if the interest rates are higher than inflation. Not necessarily. Raising interest rates lowers inflation. So increasing interest rates is a double-whammy on housing. The increased mortgage prices lowers home values, fighting inflation _AND_ causes future profits to be discounted (relative to the risk-free bond rate). The housing market was overheating earlier this year because low 2.5% interest rates meant that people's monthly payments were much lower than people expected. But now that we have 6% mortgage prices, the monthly mortgage price is increasing (which will eventually force housing prices down). -------- This is why rising interest rates is the main tool of the Fed right now. Its not the perfect solution, but its sufficient until Congress enacts lasting change (ie: policy changes that lead to an increased supply of our luxury goods). The bank can only change interest rates so much before it becomes unreasonable.
• lta 4y ago
  The rich do consume that much in aggregate. See the study linked in that article: https://www.theguardian.com/environment/2021/nov/05/carbon-top-1-percent-could-jeopardise-1point5c-global-heating-limit https://www.theguardian.com/environment/2021/nov/05/carbon-t...
• cyanydeez 4y ago
  Taxing excess profits is what manages inflation. That's not taking money from the rich, it's funding the basis for society and can pay into debt releasing obligations. What's fundamentally flawed at the central bank is it's one way street. Congress needs to act.
• Krisjohn 4y ago
  I have a problem with the assumption that everyone can reduce their consumption. I'm confident a growing number of people are giving up on all "wants" and now not fully meeting their "needs". What are they supposed to do, die?