8 ms·

Tech execs: The government is the only source of inflation! Also Tech Execs: Raise prices!

by passwordoops 2y ago

andyferris 2y ago
I haven't noticed tech execs say that (the first bit). Is that an Elon Musk thing? (Genuine question)
- padjo 2y ago
  Complaining that loose monetary policy is responsible for inflation is a pretty common theme from Musk/Trump fanboy type CEOs. They’re also starting to question universal suffrage in public now. Good times.
  - x-complexity 2y ago
    A loose monetary policy does contribute to inflation. It's not the sole contributor, but when a lot of money is injected into the system, and the # of goods & services stay the same, inflation occurs. Increasing production takes time. There's not a magical machine that can double it's production overnight: New machines & factories & supply chains need to be built out, and those can take months at best.
    - Retric 2y ago
      Terms like loose are relative so it’s often associated with unhealthy extremes. But in a growing economy you need to increase the money supply to avoid long term deflation. Further, the economy naturally expands and contracts over time so timing things correctly and a loose money supply doesn’t necessarily mean short or long term inflation. Of course everyone is operating with in perfect information so it’s impossible to achieve a completely stable currency.
      - lowkey 2y ago
        Per my sister comment, the Fed printed 80% of all the dollars that ever existed in 2021 and 2022. Did the economy expand 4x?
        Retric 2y ago
        Think through your argument. We didn’t get 300% inflation. So clearly the value of all dollars isn’t simply a direct percentage of the size of the US economy or all wealth in the US etc.
        lowkey 2y ago
        The relationship between money printing and inflation is neither linear nor instantaneous, but the connection is very real. Are you arguing that printing 80% of all the dollars ever created in a short two-year time span had no effect on inflation?
        Retric 2y ago
        I’m saying not printing money would have been disastrous, and much money to print wasn’t obvious. A few years of moderate inflation was an almost perfect outcome compared to the other possibilities.
        lowkey 2y ago
        I think we have very different definitions of moderate inflation. Note: I don't consider CPI a good measure of inflation experienced by the average consumer. Unfortunately the measure is heavily politicized and thus highly distorted from real-world experience. Nonetheless, using CPI as a benchmark: - Average CPI exploded 382% between 2020 and 2021 (from 1.23% to 4.7%) - Grew another 170% from 2021 to 2022 or 650% increase from 2020 to 2022 (2022 CPI was 8.0%) - It subsided somewhat in 2023 and 2024 (to 4% then 3%) but remains significantly higher than historical norms. Notably, CPI is now expected to remain at or above 3% for the foreseeable future, which is a sustained 50% increase over the previous target of 2% The Fed is now working to normalize this new normal as there is basically no chance of us ever returning to the prior target of 2% CPI anytime soon. Also note that the largest spikes in inflation align closely with the Feds massive money printing in 2021 and 2022. source: https://www.investopedia.com/inflation-rate-by-year-7253832 https://www.investopedia.com/inflation-rate-by-year-7253832
  - reliabilityguy 2y ago
    > Complaining that loose monetary policy is responsible for inflation is a pretty common theme from Musk/Trump fanboy type CEOs. What is the source of inflation then?
    - immibis 2y ago
      Inflation is when prices go up. CEOs (loosely speaking) set prices.
      - chii 2y ago
        So why didnt price go up prior to covid, if the CEO can manage to set prices? Or is it that they have always set their price to the maximum that their customers will bear, and it's just that now, their customers were willing to bear a bit higher (due to some external cause)?
        immibis 2y ago
        CEOs didn't realize they could set prices that high and still keep their customers.
  - lowkey 2y ago
    To quantify “loose monetary policy,” between 2021 and 2022 the US Fed increased the money supply by 4x. Put another way 80% of all US dollars that have ever existed were created between Jan 2021 and November 2022.[1] Prior to this event, inflation was tame. After this event inflation exploded. Coincidence? I think not. Notably, the government then blamed COVID, supply chain issues, and the Ukraine war as the reasons for inflation, but neglected to mention money printing. [1] https://techstartups.com/2021/12/18/80-us-dollars-existence-printed-january-2020-october-2021/ https://techstartups.com/2021/12/18/80-us-dollars-existence-...
Y_Y 2y ago
I'm no tech exec, but this seems fine to me. If your government increases the money supply, ceteris paribus the demand curve (for every product) will shift right. At that point the tech exec can raise their price along with their competitors for an easy win. They're not forced to, but it's monetary policy that made it possible.
- cheschire 2y ago
  Chicken or the egg? You’ve just pointed out a correlation but I’ve yet to see actual causation here.
  - Y_Y 2y ago
    Oh sure, I didn't mean I was giving the full explanation, only that I felt the idea wasn't so ridiculous.
- redserk 2y ago
  No need to jump into this ring of assumptions built onto assumptions (plus, what pre-IPO company is reading an Econ 101 textbook on Macroeconomics…?) As you near an IPO, you’d want to make your business look like it’s quite profitable to prevent the share price from nosediving on Day 1.
  - Y_Y 2y ago
    You're right of course. I guess I was trying to steelman the hypothetical exec's position as not totally unfounded or unreasonable, not give the final verdict.
bko 2y ago
I always find it weird when someone's economic model of the world is basically "I hope corporations aren't greedy and don't raise prices too much" Surely there must be something else going on, no?

Tech execs: The government is the only source of inflation! Also Tech Execs: Raise prices!

andyferris 2y ago

I haven't noticed tech execs say that (the first bit). Is that an Elon Musk thing? (Genuine question)

padjo 2y ago
Complaining that loose monetary policy is responsible for inflation is a pretty common theme from Musk/Trump fanboy type CEOs. They’re also starting to question universal suffrage in public now. Good times.
- x-complexity 2y ago
  A loose monetary policy does contribute to inflation. It's not the sole contributor, but when a lot of money is injected into the system, and the # of goods & services stay the same, inflation occurs. Increasing production takes time. There's not a magical machine that can double it's production overnight: New machines & factories & supply chains need to be built out, and those can take months at best.
  - Retric 2y ago
    Terms like loose are relative so it’s often associated with unhealthy extremes. But in a growing economy you need to increase the money supply to avoid long term deflation. Further, the economy naturally expands and contracts over time so timing things correctly and a loose money supply doesn’t necessarily mean short or long term inflation. Of course everyone is operating with in perfect information so it’s impossible to achieve a completely stable currency.
    - lowkey 2y ago
      Per my sister comment, the Fed printed 80% of all the dollars that ever existed in 2021 and 2022. Did the economy expand 4x?
      - Retric 2y ago
        Think through your argument. We didn’t get 300% inflation. So clearly the value of all dollars isn’t simply a direct percentage of the size of the US economy or all wealth in the US etc.
        lowkey 2y ago
        The relationship between money printing and inflation is neither linear nor instantaneous, but the connection is very real. Are you arguing that printing 80% of all the dollars ever created in a short two-year time span had no effect on inflation?
        Retric 2y ago
        I’m saying not printing money would have been disastrous, and much money to print wasn’t obvious. A few years of moderate inflation was an almost perfect outcome compared to the other possibilities.
        lowkey 2y ago
        I think we have very different definitions of moderate inflation. Note: I don't consider CPI a good measure of inflation experienced by the average consumer. Unfortunately the measure is heavily politicized and thus highly distorted from real-world experience. Nonetheless, using CPI as a benchmark: - Average CPI exploded 382% between 2020 and 2021 (from 1.23% to 4.7%) - Grew another 170% from 2021 to 2022 or 650% increase from 2020 to 2022 (2022 CPI was 8.0%) - It subsided somewhat in 2023 and 2024 (to 4% then 3%) but remains significantly higher than historical norms. Notably, CPI is now expected to remain at or above 3% for the foreseeable future, which is a sustained 50% increase over the previous target of 2% The Fed is now working to normalize this new normal as there is basically no chance of us ever returning to the prior target of 2% CPI anytime soon. Also note that the largest spikes in inflation align closely with the Feds massive money printing in 2021 and 2022. source: https://www.investopedia.com/inflation-rate-by-year-7253832 https://www.investopedia.com/inflation-rate-by-year-7253832
- reliabilityguy 2y ago
  > Complaining that loose monetary policy is responsible for inflation is a pretty common theme from Musk/Trump fanboy type CEOs. What is the source of inflation then?
  - immibis 2y ago
    Inflation is when prices go up. CEOs (loosely speaking) set prices.
    - chii 2y ago
      So why didnt price go up prior to covid, if the CEO can manage to set prices? Or is it that they have always set their price to the maximum that their customers will bear, and it's just that now, their customers were willing to bear a bit higher (due to some external cause)?
      - immibis 2y ago
        CEOs didn't realize they could set prices that high and still keep their customers.
- lowkey 2y ago
  To quantify “loose monetary policy,” between 2021 and 2022 the US Fed increased the money supply by 4x. Put another way 80% of all US dollars that have ever existed were created between Jan 2021 and November 2022.[1] Prior to this event, inflation was tame. After this event inflation exploded. Coincidence? I think not. Notably, the government then blamed COVID, supply chain issues, and the Ukraine war as the reasons for inflation, but neglected to mention money printing. [1] https://techstartups.com/2021/12/18/80-us-dollars-existence-printed-january-2020-october-2021/ https://techstartups.com/2021/12/18/80-us-dollars-existence-...

Y_Y 2y ago

I'm no tech exec, but this seems fine to me. If your government increases the money supply, ceteris paribus the demand curve (for every product) will shift right. At that point the tech exec can raise their price along with their competitors for an easy win. They're not forced to, but it's monetary policy that made it possible.

cheschire 2y ago
Chicken or the egg? You’ve just pointed out a correlation but I’ve yet to see actual causation here.
- Y_Y 2y ago
  Oh sure, I didn't mean I was giving the full explanation, only that I felt the idea wasn't so ridiculous.
redserk 2y ago
No need to jump into this ring of assumptions built onto assumptions (plus, what pre-IPO company is reading an Econ 101 textbook on Macroeconomics…?) As you near an IPO, you’d want to make your business look like it’s quite profitable to prevent the share price from nosediving on Day 1.
- Y_Y 2y ago
  You're right of course. I guess I was trying to steelman the hypothetical exec's position as not totally unfounded or unreasonable, not give the final verdict.

bko 2y ago

I always find it weird when someone's economic model of the world is basically "I hope corporations aren't greedy and don't raise prices too much" Surely there must be something else going on, no?