20 ms·

So am I wrong to deduce from recent news that basically they’re just raising rates until consumers cry uncle and THAT makes prices go down? I dunno, these recen

So am I wrong to deduce from recent news that basically they’re just raising rates until consumers cry uncle and THAT makes prices go down? I dunno, these recent headlines are implying a huge market failure, because like you know… shouldn’t competition do it’s magic? Is there so much oligopoly pricing that this is happening? And if so, shouldn’t that be addressed directly? I’m not at all ashamed to say I do not understand the economy post COVID.

Loquebantur 3y ago
I would guess, it is simply wrong to assume, market actors would engage in first order thinking only. Of course they will frequently see mutual understandings as the best course of action and take obvious psychological dynamics into account? Here, they see "justified by circumstances"-acceptance of price hikes and act accordingly. Holding back on such a price hike would actually hurt your bottom line, as people do not switch brands so easily in real life.
chiefalchemist 3y ago
Don't let the name fool you, inflation is not about prices increasing per se. It's about your dollar having less value. In response to Covid The Fed "goosed" the economy by "printing" a ridiculous amount of new dollars. That obviously devalued what was already in circulation. Devalue === worth less Worth less === buys less Voila...inflation. The reason you / we don't understand is because no one - gov, Fed or media - wants the come clean on the impact of The Fed's Covid related decisions.
- deleted 3y ago
  [deleted]
- nly 3y ago
  The classic Milton Friedman argument is: higher government spending = higher inflation. Friedman made the argument that productivity (GDP growth per capita) has no effect on inflation, and interest rates just move where you choose to measure 0, hence his famous quote that "inflation is always and everywhere a momentary phenomenon" (paraphrased)
  - zeroonetwothree 3y ago
    The quote is “inflation is always and everywhere a _monetary_ phenomenon” which means something quite different than what you said
    - nly 3y ago
      Yes, sorry, typo.
  - nly 3y ago
    Friedman also always said that wage growth doesn't cause inflation, but inflation causes wage growth.
- IndoorPatio 3y ago
  The dollar's value is high. https://www.schwab.com/learn/story/will-us-dollar-be-dethroned https://www.schwab.com/learn/story/will-us-dollar-be-dethron...
  - fuzzfactor 3y ago
    In comparison to what? Other currencies? Certainly not in what it will buy in the USA. Wages definitely are not driving inflation, wages will never keep up very well nor catch up. Prices will never come down, except in unusual circumstances like overblown bubbles in market-based commodities where the market controls the value more so than underlying utility.
  - htss2013 3y ago
    Not domestically. If the dollar had been gaining strength, the price of everything domestically would be getting cheaper.
    - witchesindublin 3y ago
      This is what the FT noted was the paradox of the US dollar's strength. The problem comes with the fact that the US dollar being the global currency of trade, means that everything is originally priced in US dollars, so the strength or weakness of the US dollar does not change the price. Furthermore the US is somewhat self-sufficient in terms of trade in key inflation areas such as food, so the dollar is ending up hurting exporters and reducing corporates profits.
  - deleted 3y ago
    [deleted]
- ffgjgf1 3y ago
  They have been printing money at a significantly elevated (yet far from being as high as in 2020-21) rates for years yet CPI growth remained very low both in US and the EU besides fluctuations in energy prices and housing.
  - chiefalchemist 3y ago
    That might be true on the surface. But there needs to be an explanation why all that printing had no side effects. It doesn't make sense. Something else must be going on.
    - ffgjgf1 3y ago
      There was inflation in asset and some other prices but those are simply not included or have a low weight. Also increasing productivity and technological progress should (and usually does)result in lower prices of goods. Of course for things like cars or phones you end up paying the same or more for a superior product with more features, efficiency etc. instead.
  - s1artibartfast 3y ago
    Money has to go somewhere. When real economic growth is high, that money gets locked up investments or used to purchase more goods. If there are no good investments and the number of goods manufactured isn't increasing, then the price of goods themselves goes up.
- dragonwriter 3y ago
  > Don't let the name fool you, inflation is not about prices increasing per se. It literally exactly is. > It's about your dollar having less value. That’s exactly the same thing. > The reason you / we don't understand is because no one - gov, Fed or media - wants the come clean on the impact of The Fed's Covid related decisions. Almosf everyone (policy makers, media, outside observers) recogbizes and openly acknowledges that the recent inflation is largely a stimulus (mix of fiscal and monetary, though you focus on specifically the monetary part) overshoot from the extremely sharp but also extremely short, and with an extraordinary rapid bounce back, COVID recession. Trying to make this an “everyone is hiding it” conspiracy is... amusing, I guess, but not grounded in reality in any way.
  - chiefalchemist 3y ago
    No. It's not the same thing. At least not in the minds of the masses. The value of your dollar is *deflating*. And that's because where there used to be X there are now more of X. A lot more. It's not a conspiracy theory when 99% of the time the narrative is "...it's the Russians and war..." or whatever BS they push and barely passing references to "oh btw The Fed flooded the money supply...again...and has devalued your dollars...effectively raising your taxes". FFS stop with the hyperbole, stop being so naive, and stick to the facts. Please.
    - dragonwriter 3y ago
      > No. It's not the same thing. Yes, “the number of dollars I must give to get a fixed set of goods is larger” is exactly the same thing as “the number of things I can get for a fixed quantity of dollars is smaller”. General price increases and dollars being less are identical. > It's not a conspiracy theory when 99% of the time the narrative is "...it's the Russians and war... It wouldn’t be if that were true 99% of the time, but its not so, as you say: > FFS stop with the hyperbole, stop being so naive, and stick to the facts. Please.
      - chiefalchemist 3y ago
        It's not the same thing. Because looking at it from the two different perspectives leads to two different conclusions. So it's The Russians? And The Fed's decisions have nothing to do with it? Come on now. Who aside from the masses is buying that? And instead of tossing around cliches (e.g., conspiracy theories) just stick the facts. There's a narrative in the media and it doesn't mention The Fed. Funny enough, you seem to be championing that narrative. I can see w hy you're confused and lazily playing the cliche card. Good luck with that.
vinyl7 3y ago
The SEC has been asleep at the wheel for the past two decades. We've seen a huge amount of consolidation across many industries, so it's not surprising that prices start going up once single actors practically own a whole market.
- JumpCrisscross 3y ago
  FTC?
htss2013 3y ago
No that is the children's version. CPI cannot go down without housing going down. Housing will not go down unless we have a massive rise in foreclosures. It's not about consumers reaching the point where they cannot consume. It's about making them homeless. This sounds cruel but it is the only counterweight to runaway housing costs, if we are going to live in a world where housing is an investment and we restrict new supply severely.
- joe-collins 3y ago
  Which begets the question of why we should allow housing to be an investment.
  - hollerith 3y ago
    Because we want the decisions on where and how much new housing to build to be made efficiently?
  - 88913527 3y ago
    If everyone could accessibly own a home free and clear, there'd be less incentive to work; it's a household's largest expense. That and employed-provided health care coverage.
    - paulryanrogers 3y ago
      What about just affording a mortgage or rent without college education, dual incomes, moving away, having few or no children, plus receiving an inheritance?
    - witchesindublin 3y ago
      Social housing is a thing in much of the world. Housing is cheap in many countries around the world as well. Healthcare is free in most of the world and good standard in majority of the developed world.
      - EdwardDiego 3y ago
neilwilson 3y ago
Raising rates has little down regulation effect on inflation. (At best the effect is uncertain). The purpose of raising rates is to increase the interest share of income and protect that from inflation [0] [0]: https://economicsfromthetopdown.com/2023/04/16/how-interest-rates-redistribute-income/ https://economicsfromthetopdown.com/2023/04/16/how-interest-...

Loquebantur 3y ago

I would guess, it is simply wrong to assume, market actors would engage in first order thinking only. Of course they will frequently see mutual understandings as the best course of action and take obvious psychological dynamics into account? Here, they see "justified by circumstances"-acceptance of price hikes and act accordingly. Holding back on such a price hike would actually hurt your bottom line, as people do not switch brands so easily in real life.

chiefalchemist 3y ago

Don't let the name fool you, inflation is not about prices increasing per se. It's about your dollar having less value. In response to Covid The Fed "goosed" the economy by "printing" a ridiculous amount of new dollars. That obviously devalued what was already in circulation. Devalue === worth less Worth less === buys less Voila...inflation. The reason you / we don't understand is because no one - gov, Fed or media - wants the come clean on the impact of The Fed's Covid related decisions.

deleted 3y ago
[deleted]
nly 3y ago
The classic Milton Friedman argument is: higher government spending = higher inflation. Friedman made the argument that productivity (GDP growth per capita) has no effect on inflation, and interest rates just move where you choose to measure 0, hence his famous quote that "inflation is always and everywhere a momentary phenomenon" (paraphrased)
- zeroonetwothree 3y ago
  The quote is “inflation is always and everywhere a _monetary_ phenomenon” which means something quite different than what you said
  - nly 3y ago
    Yes, sorry, typo.
- nly 3y ago
  Friedman also always said that wage growth doesn't cause inflation, but inflation causes wage growth.
IndoorPatio 3y ago
The dollar's value is high. https://www.schwab.com/learn/story/will-us-dollar-be-dethroned https://www.schwab.com/learn/story/will-us-dollar-be-dethron...
- fuzzfactor 3y ago
  In comparison to what? Other currencies? Certainly not in what it will buy in the USA. Wages definitely are not driving inflation, wages will never keep up very well nor catch up. Prices will never come down, except in unusual circumstances like overblown bubbles in market-based commodities where the market controls the value more so than underlying utility.
- htss2013 3y ago
  Not domestically. If the dollar had been gaining strength, the price of everything domestically would be getting cheaper.
  - witchesindublin 3y ago
    This is what the FT noted was the paradox of the US dollar's strength. The problem comes with the fact that the US dollar being the global currency of trade, means that everything is originally priced in US dollars, so the strength or weakness of the US dollar does not change the price. Furthermore the US is somewhat self-sufficient in terms of trade in key inflation areas such as food, so the dollar is ending up hurting exporters and reducing corporates profits.
- deleted 3y ago
  [deleted]
ffgjgf1 3y ago
They have been printing money at a significantly elevated (yet far from being as high as in 2020-21) rates for years yet CPI growth remained very low both in US and the EU besides fluctuations in energy prices and housing.
- chiefalchemist 3y ago
  That might be true on the surface. But there needs to be an explanation why all that printing had no side effects. It doesn't make sense. Something else must be going on.
  - ffgjgf1 3y ago
    There was inflation in asset and some other prices but those are simply not included or have a low weight. Also increasing productivity and technological progress should (and usually does)result in lower prices of goods. Of course for things like cars or phones you end up paying the same or more for a superior product with more features, efficiency etc. instead.
- s1artibartfast 3y ago
  Money has to go somewhere. When real economic growth is high, that money gets locked up investments or used to purchase more goods. If there are no good investments and the number of goods manufactured isn't increasing, then the price of goods themselves goes up.
dragonwriter 3y ago
> Don't let the name fool you, inflation is not about prices increasing per se. It literally exactly is. > It's about your dollar having less value. That’s exactly the same thing. > The reason you / we don't understand is because no one - gov, Fed or media - wants the come clean on the impact of The Fed's Covid related decisions. Almosf everyone (policy makers, media, outside observers) recogbizes and openly acknowledges that the recent inflation is largely a stimulus (mix of fiscal and monetary, though you focus on specifically the monetary part) overshoot from the extremely sharp but also extremely short, and with an extraordinary rapid bounce back, COVID recession. Trying to make this an “everyone is hiding it” conspiracy is... amusing, I guess, but not grounded in reality in any way.
- chiefalchemist 3y ago
  No. It's not the same thing. At least not in the minds of the masses. The value of your dollar is *deflating*. And that's because where there used to be X there are now more of X. A lot more. It's not a conspiracy theory when 99% of the time the narrative is "...it's the Russians and war..." or whatever BS they push and barely passing references to "oh btw The Fed flooded the money supply...again...and has devalued your dollars...effectively raising your taxes". FFS stop with the hyperbole, stop being so naive, and stick to the facts. Please.
  - dragonwriter 3y ago
    > No. It's not the same thing. Yes, “the number of dollars I must give to get a fixed set of goods is larger” is exactly the same thing as “the number of things I can get for a fixed quantity of dollars is smaller”. General price increases and dollars being less are identical. > It's not a conspiracy theory when 99% of the time the narrative is "...it's the Russians and war... It wouldn’t be if that were true 99% of the time, but its not so, as you say: > FFS stop with the hyperbole, stop being so naive, and stick to the facts. Please.
    - chiefalchemist 3y ago
      It's not the same thing. Because looking at it from the two different perspectives leads to two different conclusions. So it's The Russians? And The Fed's decisions have nothing to do with it? Come on now. Who aside from the masses is buying that? And instead of tossing around cliches (e.g., conspiracy theories) just stick the facts. There's a narrative in the media and it doesn't mention The Fed. Funny enough, you seem to be championing that narrative. I can see w hy you're confused and lazily playing the cliche card. Good luck with that.

vinyl7 3y ago

The SEC has been asleep at the wheel for the past two decades. We've seen a huge amount of consolidation across many industries, so it's not surprising that prices start going up once single actors practically own a whole market.

JumpCrisscross 3y ago
FTC?

htss2013 3y ago

No that is the children's version. CPI cannot go down without housing going down. Housing will not go down unless we have a massive rise in foreclosures. It's not about consumers reaching the point where they cannot consume. It's about making them homeless. This sounds cruel but it is the only counterweight to runaway housing costs, if we are going to live in a world where housing is an investment and we restrict new supply severely.

joe-collins 3y ago
Which begets the question of why we should allow housing to be an investment.
- hollerith 3y ago
  Because we want the decisions on where and how much new housing to build to be made efficiently?
- 88913527 3y ago
  If everyone could accessibly own a home free and clear, there'd be less incentive to work; it's a household's largest expense. That and employed-provided health care coverage.
  - paulryanrogers 3y ago
    What about just affording a mortgage or rent without college education, dual incomes, moving away, having few or no children, plus receiving an inheritance?
  - witchesindublin 3y ago
    Social housing is a thing in much of the world. Housing is cheap in many countries around the world as well. Healthcare is free in most of the world and good standard in majority of the developed world.
    - EdwardDiego 3y ago

neilwilson 3y ago

Raising rates has little down regulation effect on inflation. (At best the effect is uncertain). The purpose of raising rates is to increase the interest share of income and protect that from inflation [0] [0]: https://economicsfromthetopdown.com/2023/04/16/how-interest-rates-redistribute-income/ https://economicsfromthetopdown.com/2023/04/16/how-interest-...