4 ms·

> But if you printed money endlessly and gave it all to Jeff Bezos, there would be no competitive pressure to see prices rise in the general economy. He might t

by ephbit 4y ago

> But if you printed money endlessly and gave it all to Jeff Bezos, there would be no competitive pressure to see prices rise in the general economy. He might try to buy up all the real estate or stocks, driving asset inflation, but there is little reason for him to buy up all the bread to see it appear in CPI where we measure general inflation. The connection isn't all that obvious, but there is indeed a connection between fresh money being invested in financial asset XY and price for bread rising. Even though the investor did not buy up piles of bread, they created pressure on some scarce resources in the value chain on the way to bread. Those are energy, base materials, labour force, ... Whenever an institution (central bank, commercial bank, ..) creates fresh money and this money gets invested in something, a portion of total global resource allocation (towards different end products) gets shifted. Shifted means that some end products see an increase of costs in their value chain, which leads to higher prices. Example: commercial banks in some country xy are allowed to lend more due to some changes in the rules for fractional reserve banking. The banks currently have some kind of skew in their allocation of lending, meaning they don't just lend exactly proportional to current total allocation of credit. Let's say they lend more (in respect to current allocation) to real estate development businesses than to bakeries. This means that the real estate sector now has more bidding power for all the scarce resources (energy, raw materials, ...) than the bread sector. So there's new demand for energy from the real estate sector which makes energy prices rise. Voilà, bakeries spend more on energy, bread prices rise as well. And all that without "someone buying up all the bread". Injecting fresh money in the financial sector will lead to real world resource reallocation, which will put pressure on sectors that don't even seem to be involved.

randomdata 4y ago
> Shifted means that some end products see an increase of costs in their value chain, which leads to higher prices. In the long run, but it is not uncommon to see production lose money when their input costs are higher than the consumer price. A vendor is still beholden to what someone will pay and when you have to pay for your inputs before proving what the end consumer will pay, you can quickly be left holding the bag. This corrects eventually, but not usually within the span of days or even months. It can often take years to see things correct. You still can't have inflation if the people don't have money. A business can't magically charge more than someone is willing and able to pay. And they say the people don't have more money to pay with, currently subsisting on draining their savings, so inflation will be short lived – unless incomes start to rise. The FED is working tirelessly to try and prevent that from happening, but we'll see.
- ephbit 4y ago
  > ... you can quickly be left holding the bag. This corrects eventually, but not usually within the span of days or even months. It can often take years to see things correct. You're aware that especially bakeries have been raising prices very promptly all over the world. True, price raises do have delays in some cases (rents) but generally for most common services and products that people buy in everyday life, if there's no cartel messing with prices, they will very consistently and without years of delays increase when inputs become more expensive. > You still can't have inflation if the people don't have money. This might be true for the more dispensible items in the basket but I'd say for real necessities it's mostly wrong. People who have little money will first shift their expenses from less necessary things to essentials. Even if people don't have more money, they will have to spend more on the things they continue buying. This is exactly what's happening right now, almost everywhere. > A business can't magically charge more than someone is willing and able to pay. Unless there are subsidies by the state that try to keep the businesses afloat. These are very pervasive.

by ephbit 4y ago

randomdata 4y ago

> Shifted means that some end products see an increase of costs in their value chain, which leads to higher prices. In the long run, but it is not uncommon to see production lose money when their input costs are higher than the consumer price. A vendor is still beholden to what someone will pay and when you have to pay for your inputs before proving what the end consumer will pay, you can quickly be left holding the bag. This corrects eventually, but not usually within the span of days or even months. It can often take years to see things correct. You still can't have inflation if the people don't have money. A business can't magically charge more than someone is willing and able to pay. And they say the people don't have more money to pay with, currently subsisting on draining their savings, so inflation will be short lived – unless incomes start to rise. The FED is working tirelessly to try and prevent that from happening, but we'll see.

ephbit 4y ago
> ... you can quickly be left holding the bag. This corrects eventually, but not usually within the span of days or even months. It can often take years to see things correct. You're aware that especially bakeries have been raising prices very promptly all over the world. True, price raises do have delays in some cases (rents) but generally for most common services and products that people buy in everyday life, if there's no cartel messing with prices, they will very consistently and without years of delays increase when inputs become more expensive. > You still can't have inflation if the people don't have money. This might be true for the more dispensible items in the basket but I'd say for real necessities it's mostly wrong. People who have little money will first shift their expenses from less necessary things to essentials. Even if people don't have more money, they will have to spend more on the things they continue buying. This is exactly what's happening right now, almost everywhere. > A business can't magically charge more than someone is willing and able to pay. Unless there are subsidies by the state that try to keep the businesses afloat. These are very pervasive.