UK: Food inflation rises to 18.2% as it hits highest rate in over 45 years
grocerygazette.co.uk
grocerygazette.co.uk
Quite often I’m starting to notice dark patterns in pricing where things you normally didn’t worry about will have randomly increased by £2-3 and you get the checkout and you’ve spent £25-30 on next to nothing.
I wonder if inequality increases caused by printing trillions of dollars during COVID are anything to do with this inflation? Could it be that making the rich endless more wealthy and increasing asset prices is bad for society?
How do we fix this? Some people think redistribution of the increases the wealthy have had over COVID back to the poor would be a good move, but is this all inequality?
Many of those are the same. Pizza dough : once a month take 30 minutes preparing 10 rolls and in the freezer.
And as a bonus, less chemicals in your system.
Nah, it's just that the comment you're responding to is being insufferably pedantic. Your colloquial use of "chemicals" here is perfectly well understood.
We all understood the first time.
BTW, interestingly in a previous life I studied chemistry... Only always in French
Jeff Bezos was interviewed in Pay Pal days after making many millions, and as they drove across the GGB, was asked why he was still driving his beat up honda - he said "Why, just because I have some money? Its still a good car!"
FF 2020: Jeff Bezos builds worlds most expensive yacht, and is having a municiple bridge dismantled so it can pass through, and local residents want to throw eggs at it as it passes by!
As someone from the country you're referring to: this is an internet meme... The bridge that was dismantled is meant to be dismantled for such a thing.
Jeff Bezos did not and also cannot order bridges to be dismantled.
My family was poor growing up and we shopped by cent per oz, and noticed any significant price changes and went for alternatives.
Planned dinner/produce/meat based off what was on sale, etc.
Many, many people notice when milk goes up 50 cents. I still do.
But I recently stopped buying in corner shops because their prices are usually close to 50% higher than in large supermarkets and with food inflation it makes a difference in my budget.
HOWEVER.
Annecdote:
I was at dinner in SF - and we were at a very nice restaurant, nice wine, food etc. My buddy was kvetching over buying this watch, which was something like $200 and was talking about how he wasnt sure if it was worth it...
I looked at him and said "We are spending over $200 on this bottle of wine tonight without blinking, which will be gone in moments - and youre kvetching over a $200 watch which will be around forever?"
Expense-perspective is something to reflect on.
You have to do this in the cereal aisle! All the different-sized boxes of the same exact cereal have wildly different price-per-weight. And the largest-sized box is rarely the cheapest-per-weight!
what surprised me is how expensive plain Cheerios have become. My wife explained it as if I were stupid - they are mostly whole grains and very little garbage. All the other cereals have so much crap in them that the input price hasn't increased as much.
It has been like this for years. It is not just cheaper by unit, the whole box is just straight cheaper, but I can only assume people do not want to bend down? Even the prices are clearly visible from standing position.
Expenses across the board have skyrocketed in the past year. Try and read some stories about what people living in colder, rural areas in Northern Europe (Scotland, Scandinavia, etc.) have had to deal with and you would start to get an idea.
If your rent suddenly increased by 30%, and winter heating bill tripled since last year and food costs 25% more than a year ago, then a lot of people with normally sufficient income would be having financial issues.
While I wouldn't accuse you of showing "extreme privilege" for not noticing a $3 price increase... good on you for not needing to worry about that... I'm tempted to accuse you of it for thinking it's only the poor that would. That's a pretty glaring disconnect.
Do you not even look at your phone/credit card when you tap? Do you really just randomly pay things?
There were several years early in my childhood where macaroni and cheese was one of the main courses in family meals, because we didn't have much money. This was until my parents worked multiple jobs and promoted their way into respectable wealth - hearing my friend make that comment really stuck with me and I laugh whenever I'm reminded of it, like today.
Anyway, I agree with you totally. The OP comment doesn't seem like a normal thing for people to say and is rather tone deaf IMO. I could make ten times more than what I do now and would still notice yogurt being 80% more in our grocery. Luckily for me I don't have to budget when it comes to groceries, but I'm well aware of how much pain some people/families must be going through.
Link to the scene: https://youtu.be/Nl_Qyk9DSUw
Can't seem to find it - but some time ago there was a short vid on why the price of bananas world wide was a good litmus on the shipping/economic trade - it went into detail on how banana prices could be used to measure certain stress points in global trade... I cant seem to find it though.
However, in looking for it I found this, which is kind of interesting:
>>"Are there more international laws on the trade of bananas than conventional weapons, like AK-47s?"
>>"The short answer is astonishingly, yes. The global trade in bananas or banana plants is governed by at least three binding global agreements and the non-binding, though strictly adhered to, Codex food code. The arms trade is not governed by any binding global agreements."
-
https://politicsofpoverty.oxfamamerica.org/comparing-bananas...
I don't care, really, whether the box of macaroni and cheese I buy is $0.35 or $1.69. But I'll tend to buy the cheaper, just because I don't want to contribute to the success of the higher price point. It's my fight for the common man.
All my efforts are completely negated when my wife goes shopping :(
It seems these days we're ambivalent toward the production of stuff, or even antagonistic to it in many cases. So we have less stuff. Combine this with giving people more money and you get inflation.
I cannot emphasize this enough. Wealthy Western nations have been wealthy for so long that people know how to cut up the pie in different sizes more so than they know how to bake more.
Besides, even if we're generous and say that half of California is too mountainous to live in and another quarter is too desert-y to live in, leaving only a quarter of the state's area suitable for habitation, that leaves roughly 40 million people living in roughly 40,000 square miles, or about a thousand heads per square mile. That's comparable to Israel or Belgium in terms of population density, and certainly not as though people are packing into Kowloon.
A city in Japan would build new dense neighborhoods and a new commuter rail line to serve them. A city in California would refuse to build new homes nearby, so people are forced to live in a far-away suburb and commute 2 hours by car. Then Californians complain about increasing traffic congestion.
https://www.reddit.com/r/ImTheMainCharacter/comments/11aqayg...
Japanese people are NOTHING like Americans. Stop saying CA should build like Japan unless you're willing to kick out the loud assholes.
People seem to think inflation is temporary but it seems much more stubborn and central banks are very scared of it, hence rate rises when the banks might collapse.
You might say there's then an incentive to undercut, sure, but if you undercut too much you'll be left with no inventory as the rest of the manufacturers decide on fixed prices as a cartel (which has now become the norm in most industries). The trust busting has been nowhere to be seen in the last decades and the results are in.
Price gouging usually leads to producing more stuff, if it goes on long enough and you are allowed to produce more.
Healthcare is an example where this doesn't work, because you aren't allowed to produce more stuff. You can gouge all you want, but can't provide any additional quantity of services. (See: Certificate of Need laws in the US)
If the providers of those necessities possess a monopoly, either natural or through regulatory capture, humans will pay whatever they have to get those necessities. It is important for social prosperity to prevent extracting excess profits through monopolisation, either by destroying the monopoly or by taxing it and reducing other taxes on the individuals.
If they doubled the price consistently, they would no longer be a low margin business. The fact that they are low margin is evidence that they are not gouging.
I think there's also a misperception of the public on a lot of items. Many of the dramatic price increases we see are deferred inflation from not raising prices (and subsequently eating the added supplier cost). We generally don't see steady 2-5% price increases every year, but rather large step increases every few years. Many of those step increases are catching up for the previous years where there was no increase.
FWIW, I'm not saying there isn't opportunism going on, but it's much less likely in low-margin commodity businesses.
For example, just enabling additional supply can create second order effects in terms of perverse incentives to overproduce creating all sorts of knock-on effects. We can stimulate the supply of corn and end up with distorted food markets and high-fructose corn syrup as a near-ubiquitous food additive. All I’m saying is we need to be mindful of these systemic effects and creating a false dichotomy tends to turn a blind eye towards them.
Any mechanism with the explicit intent to increase supply is tantamount to a subsidy. Tax breaks are an informal “subsidy” to spur business, with a cost incurred by other societal goals. Decreasing environmental regulations are an informal subsidy to increase energy production with externalities borne by others. Etc etc. The broader point is that defining the utility function that captures these societal costs/benefits is complex and your false dichotomy misses all that nuance.
We should not equate rent seeking and genuine innovation as the same things.
Making billionaires more wealthy doesn't affect inflation much because they are already consuming as much as they want. That money will just increase the price of stocks and bonds - whatever billionaires invest in.
Giving every average Joe a thousand more dollars will increase spending by nearly that amount per person and prices of goods will increase.
Giving money to people who need money is part of the solution, but the biggest part of the solution is making sure human productivity (GDP) is going to make things that make people's lives better.
https://www.reddit.com/r/europe/comments/11zwtif/annual_infl...
Like you pay £1.5 for essential product if you scan a card otherwise it is £3.
These should be made illegal.
People on modest salaries either don't spot the cheaper, just-as-good toothpaste that's not as prominent, they think that it's not as good as the ones with lists of all the great things they're supposed to do, or they aren't feeling the squeeze enough to seek it out.
If you drop into an independent chemist you might notice that sometimes the only toothpaste they stock is the 'basic' one, because their customers are price-sensitive, so that's all they'll buy.
Going rate for pizza is around 60p/100g, with a larger than average Aldi 'Meat Feast' pizza coming in at £2.19, which is 39p/100g.
Again, if you're on a 'modest salary', you pick the cheaper products or pick the supermarkets which only really sell the cheaper products.
I'm not saying that prices aren't going up, just that closer to the 'survival' line, there is much less room to increase prices, because people aren't at the point of choosing based on preference, so you can't rely on them switching to a slightly cheaper option from your artificially differentiated product line (yes, you, Colgate-Palmolive). They'll just be forced to stop buying your products altogether.
Going from 125mL to 100mL for the same price => 20% price inflation.
For what is essentially just a mild abrasive plus fluoride, the baffling array of variations on a theme on display, mostly from the same few fmcg conglomerates anyway, is just ridiculous.
I took up cooking from scratch as a hobby a couple of decades ago. I highly recommend it.
After a bit of a learning curve, it's cheaper, tastier. and better for you than highly processed foodlike substances.
Firstly cooking from scratch is absolutely a life skill and nominally cheaper.
But food is also a class issue. Those with time to spare (ie rich) can indulge in for example "stuffing a mushroom" - Shirley Conran famously recanted twenty years of writing cookery lifestyle books exhorting women to become corden bleu cooks by saying life was to short to stuff a mushroom - and that is kind of my point.
I mean Gordon bloody Ramsey does not prepare food the way he tells you to in his cookbooks - it's too slow and inefficient.
All the recipies I love to cook - getting the temperature of the linguini just right before pouring over eggs and pecorino for carbonara for instance - is frankly, a nightmare nutrition wise (even if it's a hit kid wise) and a plate of chicken breast and five different veg and fruit for after is waaaay better - but how many recipients books will do that, how many blog posts extoll boiled peas.
Maybe we would learn from the staff of life - Bread. In the first weeks of lockdown, flour vanished from shelves - obviously because of a shortage but mostly because flour was diverted from domestic use to go to actual bakers and factories who could efficiently mass produce the staple of life that was then shipped to our supermarket shelves to eat. Yes there were bakers running triple shifts, logistic planners sleeping in the office and HVV drivers going every which way. But in the end feeding millions is like Gorden Ramsey says - if you do it like the instagram post says, you are doing it wrong
I recommend you start with an instant pot. You can go from dried legumes to the table in very little time.
> But food is also a class issue.
If we put these two beliefs together (and I think we're of similar minds), I think we should amend the first to be "meal planning and preparation is a life skill". Unfortunately the cooking craze over the past few decades has done nothing to improve, let alone restore, that life skill.
> I mean Gordon bloody Ramsey does not prepare food the way he tells you to in his cookbooks - it's too slow and inefficient.
Here I disagree. Someone like Gordon Ramsey possesses incredible knife and other preparatory and cooking skills. To use an analogy, he may not run a sub 4 minute mile every time he goes for a run, but even his leisurely runs would exhibit abilities that would seem extraordinary yet appear effortless on his part to most people.
That said, as a successful restaurateur Ramsey likely has meal planning skills at least as impeccable as his culinary skills. And meal planning is the most critical aspect to successful, economical home cooking. People seem to think the reason for failure is difficulty in preparation and cooking, thus the popularity of slow cookers, instant pots, etc. But such gadgets address the wrong set of problems. (The emphasis on recipes is misplaced for similar reasons.)
FWIW, I have horrible meal planning skills. Developing a good sense for how to mix and match ingredients is one important aspect; among other reasons, so you can reuse ingredients across multiple meals in a week. Relatedly, learning specific styles of cuisines and their rules also helps--French, Spanish, and Italian cooking all commonly use what in Spanish-influenced cuisine is called a sofrito. But there are many other dimensions to meal planning.
On that note, anyone know of good meal planning books or resources?
I also recommend starting to put your favourite recipes into a recipe app (I use Paprika, available on most platforms). Even add simple stuff like Yogurt and Fruit Breakfast. Then you can use the app's built-in meal planner and grocery list generator.
oBViOUSLy tHE rUSsIANs dID it ;p
The only reason some companies are able to get away with this is because too many people shop mindlessly without checking prices.
The solution is for everyone to pay attention to prices when we shop: the brands who jump their prices up will have 0 customers.
I'm not saying it's easy, and perhaps grocery store price labelling isn't maximally effective, but when we shop frugally, we actually benefit not only ourselves, but each other.
Perfect storm of the lack of available fertilizer, wheat shortage and poor growing seasons over the past five years is hitting everyone. I don't see it geetting better until the world adjusts; swapping to alternative crops and producing nitrogen fertilizer at country level.
https://tradingeconomics.com/country-list/food-inflation (Click on World Tab, and click on the inflation heading to sort - I needed to tap and slide to get it to sort descending).
I think it depends who is "we" and what's the timeline for shooting ourselves in the foot, short term or long term.
In both cases it sucks. I have a preference for the better long term strategy, at least I don't have the impression or driving into a wall (or I feel like we trying to swerve/break).
Some day it's hard not to feel overwhelmed, looking at the global prospective. Keeping our planet habitable will require us to: * Sacrifice individual benefit for the common good * Trust each other * Think long term (like multiple generations)
All things humanity has a horrible track record at.
That does not put me in an optimistic mood.
On the up side, if we kill everything including ourselves maybe in millions of years the next intelligent race will find remnants of our apocalypse and learn from it? =)
https://en.wikipedia.org/wiki/Agricultural_pollution#Nitroge...
Or are you saying “maybe there will be a cheap technology to clean up the environment in the future”? Which seems to be a very risky bet.
I’m not saying I have a simple solution, we do need crops, lots of them, there’s no question. But nitrogen pollution can’t be simply dismissed, we need to find a solution halfway: reduce nitrogen pollution but keep sufficient crop yields.
Can't be that one has tech or purchasing power that the other doesn't, or that food needs to travel a lot further, and I would also not expect vastly different foreign relations (also because EU, but also because the countries are so similar in beliefs and histories).
And similar for slightly different but still nearby and similar countries like Germany, Luxemburg, and the UK. Anyone know what causes these differences?
Edit: to answer your question, I wouldn't look for meaning behind that but rather assume that a limited scope article is a lot easier to write than a broadly scoped one. In the ~global context of HN, the headline then sounds like they're singled out.
Or, in a word, Brexit.
Everywhere is getting inflation. Supply chain disruption, Ukraine war and a dash of climate change (hasn't really bitten yet compared to the other two). Britain seems to be getting about 5% more than everywhere else.
Not sure why but generally journos seem to write about issues like they are only hitting the UK when a simple google search shows they aren’t.
It does come across like a weird concerted effort to paint the UK as collapsing since leaving the EU. The majority of journos seem to be able to write only negatively about UK current affairs unless you read something like The Express who are delusional in their own right.
Most recent ones I can think of are the failed space launch and British volt going under.
These were both highly ambitious projects that had a high chance of failure, especially the space launch. It’s unlikely you’re going to get your first launch right, famously it takes many attempts.
When both of these happened journalists seemed to revel in the failure. It was very odd to see.
I understand with these two examples a lot of it has to do with government/brexiteer chest thumping which shon a spotlight on them. However it was still odd to see.
I think this then trickles down to places like HN (who’s membership generally has a bias towards remain) who also see an opportunity to revel in it.
This is odd as well because I can see why Britons or Europeans would be passionate about membership in a regional trade bloc, Americans who get really passionate about it confuse me. As a Briton I didn’t really care when America left NAFTA.
This is assuming the majority of people on HN are American but based on time zones and when articles are posted I’m probably wrong.
Edit:
This is a UK based publication writing about Groceries in the UK which is why it’s so specific. Your comment just spurred something I’ve been thinking recently.
Especially on Hacker News. I tend to avoid UK-based posts on here because the content is fairly predictable: the UK is going to shit and Brexit is to blame, repeated ad nauseam in the absence of any evidence that it's true. If I wanted thoughtless UK doom mongering, I'd read the Guardian or the NYT.
UK announcing research into x: comments will probably be negative and about how it’s a boondoggle.
UK company doing exciting stuff like fusion or quantum: comments will probably be negative and about how it’s a boondoggle.
It’s tiring.
Edit:
That being said it does lead to hilarious moments where I’ll read the Guardian and see a headline like “The NHS won’t make it to Christmas (for real this time) but it doesn’t matter because we’ll all be dead by then because of Brexit” and then I’ll see the Express in my corner shop with a headline like “Brexit HERO Boris makes Ursula von der Leyen CRY when he announced new BRITISH MOON BASE”
Actually what I'm describing is casualuk which is even wore for its banality some how.
If i needed a teenager to verbally doom scroll me i'd talk to my extended family.
- Governemtn forecast 4% lower GDP than without Brexit
- UK car industry significant decline in output since 2015 (around 30% IIRC)
- People who immigrated here for work (and have the right to stay) are choosing to leave
- Low investment compared to comparable regions / countries
- Turmoil around NI
- Banking migrating to Europe and New York in particular
- Trade deals not materialising
It’s not what “project fear” warned us of, but it’s certainly not good. Many of these effects are playing out across years so haven’t really hit home for people yet.
Are you being facetious ;)
It's because there are narratives to follow, sides to pick. There's no room for facts by themselves, they have to fit some story your pack has bought into.
Right, left, middle, or anarchy, it's all the same; you're part of a herd.
Obviously we are going through a tough time at the moment. While there are some things unique to the UK (such as the nurses and junior doctors strike), for the most part what we are experiencing is common to most of Europe and often even the USA. I mean look at France - Paris is drowning in rubbish due to bin strikes and protesters are setting things on fire - yet if anything that seems to be being covered as something positive for them. People taking back power and exerting their rights. Last time that happened here, though, it was treated as an almost apocalyptic event and emblemic of Broken Britain. Sure the Paris strikes are ostensibly about pensions, but really they're about more than that.
By default, Brits tend to lean toward the negative side. I think even before Brexit/Tories/etc. most British people would broadly have considered the UK to be a bit shit, and generally complain more than they say anything positive. However, when measured, the UK is in the top 10 countries on a huge number of metrics and isn't particulary awful at anything. I do find the general negativity a bit tiresome, but it's not entirely a bad thing. That negativity is probably partly behind why we have managed to become and remain such a successful and stable country for so long.
Online, though, British people seem to be incredibly negative in a way that I've rarely experienced in person. I figure one reason why people online are so unflinchingly negative about the UK is that online Brits seem to lean very hard left and we're now on our 13th year of Tory leadership. I'm pretty lefty myself, but an awful lot of the chronically online UK types are literally Trots and Tankies (who are, nevertheless, pro-remain #FBPE, despite the contradiction between those views). Look at, e.g. Corbyn's online popularity versus his real (un)popularity with the electoral base. Or how the Tories actually generally get a similar popular vote to Labour, but online it's hard to find a single person who expresses any support for them.
I also think the UK generally gets its news about Europe from US news sources, especially when it comes to economic policy and comparisons. The US news (especially NYT and such) love to paint the US as a capitalist hellscape compared to the utopia of Continental Europe and the Nordics in particular. In reality, of course, the EU and Nordics are a lot more complicated than that, and in socioeconomic terms we're a lot closer to Europe in most ways than we are to the US, but that doesn't seem to feed through so people draw the same comparisons that are popular in US papers. You also get that with the NHS vs USA's system, as though those are the only two options.
Most news sites have become rather terrible since they started optimizing solely for ad revenue.
It's for clicks. It's completely disingenuous and one should be wise to take a mental note of the author and publisher.
To answer your question: "Not sure why the UK is being singled out."
The answer to me is simply that it is a UK website www.grocerygazette.co.uk
There are plenty of similar stories about the same kind of inflation here in [redacted] such as [redacted].
With Hacker News being predominately English speaking I suspect plays into why we see more US and UK (and other English speaking countries) related posts vs non-English speaking.
And of course people do love to point out where the UK is suffering these days to put a Brexit spin on it (whether fair or not) as it gets them clicks. Much like a famous or young person dying is almost always reported as "died suddenly" these days regardless of nature of death as it gets clicks with all the anti-vax crowd.
The UK is being singled out because its not able to import the groceries it used to do before Brexit now - there has been a low yield crop season in most parts of Europe and the domestic demand for groceries has literally exhausted the supply that can be exported. Since the UK is out of the Eu, its not possible to access the Eu domestic supply anymore and it has to wait for what remains for export.
https://www.cnbc.com/2023/02/28/british-supermarkets-are-rat...
There isnt such a situation like rationing vegetables anywhere else in Europe.
All I know is that here in the Netherlands, the prices they're mentioning are normal.
That isn't true at all, the UK is about the same as the Euro area taken as a whole.
> Since the UK is out of the Eu, its not possible to access the Eu domestic supply anymore and it has to wait for what remains for export
The UK is absolutely capable of tapping EU supply, we've got an extensive free trade deal. I'm eating Spanish cherry tomatoes as I type!
Source: https://tradingeconomics.com/country-list/food-inflation?con...
https://ycharts.com/indicators/europe_inflation_rate
> The UK is absolutely capable of tapping EU supply,
I don't understand what are you trying to falsify. CNBC or their news about the UK not being able to import as it used to from the Eu.
"...James Walton, chief economist at the Institute of Grocery Distribution, told CNBC: “The U.K. is highly reliant on imports of fresh produce at all times of year, especially in winter — the EU accounts for much of this import volume. If there are shortfalls in production in the EU, then it would make sense that EU producers would serve their local demand first. This leaves less available for export to the U.K...”"
Having a 'free' trade deal does not mean that you will get priority over the domestic buyer as an outsider.
> I'm eating Spanish cherry tomatoes as I type
Your personal experience does not constitute a statistic.
You said the UK, due to Brexit:
> Since the UK is out of the Eu, its not possible to access the Eu domestic supply anymore
Which is just plain not true. Deprioritised, sure, but not unable. A lot of people take the Daily Mail seriously (including other news outlets too) when they say stuff like we can't get tomatoes. It just meant I went to the other shop across the road instead.
The difference apparently is in how much the inflation affects different basket items. Like food.
> Deprioritised
Yeah, that means 'unable' when there is a shortage like how there is just now.
> A lot of people take the Daily Mail seriously (including other news outlets too) when they say stuff like we can't get tomatoes
CNBC is not daily mail.
General inflation: UK 10.4% vs EU 9.9%
Food inflation: UK 18.2% vs EU 19.5%
Same reason I can't say UK inflation is 10.4% and much lower than the EU's 19.5%. They're measuring different things.
Even we gloss over it and trust the UK's own numbers, the Eu inflation in February would have been driven by mostly Germany with ~24% inflation compared to the ~10% most of the major countries have.
...
However it still does not make any difference since prices are irrelevant if there simply arent groceries and they are being rationed. That was the point.
Either food inflation or general inflation, the UK has similar rates to the rest of Europe.
The Tories are not in charge of deciding the inflation rate in the UK, it's from the Office for National Statistics and all the financial lenders would be very quick to voice their disagreement if they thought otherwise. Suggesting that the values coming from the UK are fake is an extraordinary claim which you have no evidence of.
Germany has a general inflation rate of 8.7%, this is below the EU average. They are not driving it up.
Groceries were rationed because UK supermarkets refused to buy them at spot-prices. The UK had a shortage of peppers while Sweden etc had peppers at 10€/kg.
Yeah, and that's a Japanese institution not British. Its incorrigible like the BBC...
> Suggesting that the values coming from the UK are fake is an extraordinary claim
Its as extraordinary as other claims like Iraqi WMDs or the GDP numbers generated from 'homeowners creating and using rent services'.
The trust of Brits in their institutions is amazing.
> Groceries were rationed because UK supermarkets refused to buy them at spot-prices
Surely not because of Brexit... It has to be something else.
Source: live in UK
I wouldn't be surprised if those countries such as Spain reduced the amount available for export so that they can meet demand for local markets though, but capitalism would dictate that they sell to the highest bidder instead.
The rocket isn't necessarily intrinsically useful for everyone but is important because it is the thing that pulls forward all the demand for the all the commodities and all the intermediate production.
Without the rocket there would be no factories, no jobs, no meaning. The factory MUST run to keep everyone's livelihoods going even though the rocket isn't relevant day to day. It also incentivizes things like innovation, efficiency, etc...
However, building TWO rockets at the same time puts such a resource demand that there start to be shortages and breakdowns. Parts of the factory start shutting down. People are left jobless. One of the most serious is if the factory breakdown cascades to the power system (e.g. money) which causes the entire factory to breakdown.
It's a tough job to figure out how to restart the factory incrementally. Meanwhile everyone is left jobless while this is being debugged.
So there's a balance between how many rockets have to be simultaneously built. If there's too little demand, the factories are idle. Capital rots and there are less jobs. If there's too much demand, then shortages and price spikes will cause an even more serious breakdown.
What gold/bitcoin/austrian philosophers understand is that the price of money HAS to reflect market reality. E.g. in a Factorio game all bottlenecks are important to production but if you mess up the energy bottleneck, then the whole thing breaks down. Having a hack like "manually move a few tons a coal every hour" and forgetting it once is catastrophic. The market conditions have been manipulated with buffer.
The Fed & other central banks are usually concerned primarily with the layers of production that affect the most people. E.g. food and gas are critical. However when the "power supply" is threatened they need to start doing things like bailing out banks even if it seems insane to be focusing on this when people can't afford food.
If I agree, I upvote and move on.
For example, in January, food inflation in France was 14.8% and in the UK it was slightly lower at 13.3% and the OECD rate was 15.2%. It's not a Brexit problem; it's a production problem.
- https://tradingeconomics.com/france/food-inflation
- https://www.theguardian.com/business/2023/jan/04/record-133-...
-https://www.ons.gov.uk/economy/inflationandpriceindices/arti...
The UK is one of the most import-dependent nations in europe, and the world; it's easy to give good reasons to suppose had the UK been in the EU it would have seen below-average inflation.
They can choose between the individual products they buy, so it wouldn't be a problem if just some food items got expensive. But the price of food overall is inflating.
A lot of the basic foodstuffs -- dry beans, grains, milk, eggs, flour -- have all gone up in price significantly. I've seen prices double over the last two years on some of these.
In fact, I believe that the price of hot dogs have gone up more than the price of steak has. Yet people are still buying more hot dogs and less steak.
It will happen.
And the inflation will push some people toward such food choices. Maybe not that extreme, but switching to cheaper food generally means eating less nutritious food (unless you were over-spending), which is awful.
Being pushed into single-digits spending on food daily isn't outside the realm of reality. £10 a day is about £305 a month. This is a lot of money for some vulnerable groups, like large single parent families, retirees, students, some young adults, and similar.
The inflation also harms people's diets in a several ways: you must buy less food or less nutritious food for the same amount of money, and you have less money for food as other expenses have inflated. What is worse, less healthy food demand has long-term consequences to do with its supply going down and prices going up further.
In Germany I'm able to buy 1kg of flour for about 50 euro cents at Edeka. I don't know how much bread that makes, but it is A LOT. I'm certain that it is significantly more than 2880 calories.
Still there are in-between options - pasta for instance is more bang for your buck than peanut butter and is much easier to prep yourself than bread.
Anyways, it was to argue a point. Most calorie-dense foods are unhealthy if eaten alone. Peanut-butter, and flour included.
If everybody starts eating even more trash than usual then that will cost the government more in healthcare costs.
Eating seasonal and preserved foods is how we survived before the age of refrigeration and global logistics chains and maybe we should reconsider what is normal.
That we survived doesn't mean we had a balanced diet.
I'm a senior programmer with outrageous salary, and I still paused yesterday looking at the price of beef. Went for chicken instead.
I wish inflation numbers would also include things like "percentage of income spent on just living: food and shelter"
If that also leads to meat being a side dish instead of the main dish more often that's probably for the better for overall population health too AFAIK.
That is a false binary. You can still buy flour (or naan or pita), cheese and tomato sauce instead of pre-made pizzas, sacrificing your time against rising food costs. You can buy lentils instead of steak, sacrificing your preferences against rising food costs. Or you can travel further to a warehouse store and buy in bulk...
When enough people act empowered in the face of adversity, we don't have to sweat "greedflation". Retailers will learn their lesson.
Yes, I understand rising prices make life worse. But don't let anyone tell you there's nothing you can do about it. Learn to cook, change stores, eat differently, maybe even move.
"My Pizza Pops went up 25%, I am powerless in the face of inflation!" Just no.
The exception is maybe if you've got a good Indian supermarket and can buy at the 10-20kg range, then churn out a lot of chapattis.
"Let them make cake"
Why does higher priced food keep inflating too if consumer has no control.
They could always eat cake.
Not sure how this would be relevant.
a) raw ingredients didn't go up in price either. They did: https://news.ycombinator.com/item?id=35291270
b) making food from raw ingredients is cheaper than buying (at least some of the ingredients) pre-made. Again, it isn't for a surprising number of foods because, you know, economies of scale. Prime example is bread.
Why do you think economies of scale wouldn't happen at the potato-selling business? Are they buying and selling individual potatoes?
It's easy to dismiss your opponent with "but rice and potatoes aren't more expensive". Well, I don't only eat rice and potatoes, and prices for other stuff like meat and milk has gone up.
Elastic demand is the opposite. Some products have elastic demand, like luxuries and durables. An expensive car trim might be very price-sensitive because it is a luxury product. People will buy much fewer of those in austere times. They may buy fewer washing machines, too, because these products are durables. They are often bought "as an upgrade" or when one broke but could be repaired for cheaper.
One could be temporarily elastic, e.g. thaw meats from the freezer, eat shelf-stable food from the pantry. And in a few weeks, prices could be different and they do tend to bounce around week to week.
Here we're discussing food... People have to eat so demand for food, at least staples, does not change much when prices rise as long as people can afford to pay (and by and large currently they can).
It should also be noted that in developed countries the price of food has collapsed as a proportion of people's income over the last 100 years. So the reality is that even if prices double demand will probably not change much apart from some arbitrages (go to cheaper brands/supermarkets, drop in demand of a few luxury items and non food items).
People in west vastly overestimate how much they have to eat.
We wouldn't have health epidemic if people can just stop eating all the time.
Last year that number was 3600 ( fda recommendation is 2000, for reference )
imagine what will happen to food prices if americans cut their consumption by half.
I fully expect one or both of those stores to be absorbed by the Safeway/Albertsons/Kroger monolith in the next few years.
In the UK where big business dominate, the competition is illusory and regulators turn the blind eye.
Unfortunately, the Fed has to raise rates to reduce the money supply (increase the cost of borrowing) which puts downward pressure on productivity. This is not a foregone conclusion but is the likely outcome, hence the need to "do more with less" mantra of tech.
So while the money supply will decrease, the real question is will the money supply decrease relative to productivity. Otherwise, we are basically in for a stagflationary period unless technologies like LLMs produce a step-function increase in productivity and efficiency.
The problem is there is also an inverse relationship between productivity gains due to technology and effort. Meaning technology makes life easier, so people work less, effectively resulting in the same overall output, unless economic conditions dictate otherwise. In which case, inflation may not be a bad thing in the very near short term, provided we can produce our way out of it, which may be possible if LLM technologies result in new industries and job opportunities. (However current thinking indicates the opposite, jobs will likely be eliminated as a result of LLM technologies.
If you're Unilever/P&G/Nestlé, what do you do? You start cutting costs (less/worse materials - that's called skimpflation), total production volumes or less volume per product (shrinkflation). You also are not as inclined as before to give out promotions and benefits. The good old "pay 1 take 2" is now "pay 1 take half". Retailers get squeezed because they can't just pass the whole price raise down to the end customer, so they suck it up a little and get less profits. They also had more operational costs, so they get screwed (mostly the people working there). The smaller ones may shut down or get M&A'd, the big ones survive.
To make matters worse, the world is simply unpredictable right now. Post-covid you would expect some categories would go up (deodorants, for example), but then you have a war in Ukraine and a global rise in interest rates. When managers can't predict they go with the worst-case scenarios in their pricing strategies, reinforcing all that's bad.
Personally, I'm saving what I can, investing in inflation-indexed bonds and the occasional "buy the dip" for some select stocks, freezing cooked foods with a month in advance, and being very cautious with any job movements. I hope I'm wrong but I believe that will be the way to go for at least a year, if not more.
I wish so badly that he was wrong about these things, but every day it looks a little more like he got an absolute home run on this topic.
The only other advice I would give to people is, if there is something you need to buy now and you can - do it! Key word here is 'need'. I have been buying in bulk for years now and switching over to equipment that will last a long time. It doesn't mean you will be 100% fine but you can ride the dips as they come.
Which means that pensioners NEED to own their own homes instead of paying rent because the entire system is still designed around that fact. I'm sure it's possible to be renting as a pensioner but it's not ideal at all.
People should own their own homes. People should be restricted to owning only a single home. Homes should be easily transferrable and prices should be heavily restricted/controlled. But that'll never happen, it's too late for that as a lot of false value has already been extracted from them so people who own homes with overblown prices have paid that amount. It's the ones that paid nothing for their house and now see it worth .5-1mn that need a forced reality check. Otherwise houses are just poker chips for rich people; I live in London and even in the outer areas new apartments are being built with each apartment going for 700k-1mn£...for a fucking apartment.
I mean energy underpins the price of everything else in an economy, especially production and transportation, which in turn affects the price of groceries. I guess as far as groceries go there's also a significant labor component, but still, it must surely be the cost of energy as the principal driver of inflation?
Edit: typos
See: FED keeping rates low for over a decade leading to complacency at banks who assume if things get really bad, FED will pivot rate hikes and they'll get bailed out again.
Political power can address inflation, and it can mitigate the effects of inflation on the less well off. These are, however, often opposed goals.
E.g., massive taxes on the working class with no added spending would kill demand-driven inflation, but also make the non-rich worse off.
OTOH, downward redistribution by spending (possibly coupled with high end taxes) would mitigate the low-end effects of inflation, but increase the magnitude of conaumer price inflation.
> In 1971 Nixon froze prices and wages by executive orde
Price controls create black markets, but usually do not control effective prices.
Here is what current greenhouse tech looks like: a human (called a grower) uses their intuition to adjust hundreds of settings that parameterise what the actuators should do in different circumstances. For example, 20 settings might parameterise a 'ventilation setpoint line', which determines what air temperature the vents should start opening at given a measurement of the solar radiation intensity from a weather station. All the different actuators (heating pipes, vents, screens, misting systems, irrigation systems) have their own set of heuristics that need to be adjusted by hand..then beneath that a low-level control layer (e.g., PI control) manipulating individual motors/valves.
It's crazy but the grower has to manually adjust the settings as the weather, energy prices and crop state changes. With better software/automation we can improve the control of the environment within the greenhouse and thereby increase yields [kg/m^2] and minimise energy costs.
If the farmers are producing more tomatoes per m^2 for the same input costs they can afford to sell them to consumers (via supermarkets) at lower prices and still make money. It won't solve all the problems but would be a step in the right direction.
Pricing fluctuates with the season, variety but from the data I've seen a farmer in the US might sell to the distributor at $2/kg, but after paying all their costs (packaging, labour, energy, supplies, depreciation) the pre-tax profit might be around $0.16/kg - so 8%, and that's probably a pretty good year! It's a low margin, high volume kind of business.
Plants don't really give a shit. Implementing a convoluted tech solution in greenhouses for an additional 5% efficiency will never pay back for itself.
> (My bias: I work for a startup that is working on this and I'm kind of obsessed with the industry.)
I suggest you actually learn more about growing plants than optimizing 20 different atmospheric and HVAC parameters. Many of these recent startups folded because they couldn't figure out that growing lettuce indoors hydroponically doesn't actually make anyone any money.
We have people with decades of experience operating 70+ Ha of greenhouses in the team, so I don't think a lack of knowledge about the industry or plants is an issue. Perhaps my comment gave you the wrong impression about us.
> they couldn't figure out that growing lettuce indoors hydroponically doesn't actually make anyone any money.
It is quite easy to refute that statement that nobody can make money growing lettuce indoors by looking at Gotham Greens, or Revol Greens (https://www.revolgreens.com/). What is true is there are a number of agtech startups who raised a lot of money, did not really know what they were doing and imploded, I can agree with you on that.
I'm not sure exactly what you mean by 'efficiency', so I am assuming you mean yield. Have you ever looked at the income statement for a commercial greenhouse? From the data we've seen from operators inside the industry a 5% increase in yield roughly double your profits (consider that the costs for energy, labour, supplies is fairly fixed, so increases in revenue then flow down to the bottom line).
- Food prices are highly correlated with societal discontent. Need bread, circuses alone insufficient.
- 2024 election cycle is starting to ramp up, society will be thinking more politically.
- We're having a warm spring - could be a hot year. Tempers flare more easily in higher temperatures.
- Looks like we're heading into a recession. As the fed fights inflation, peoples investment savings will drop in value, making the middle class feel less secure.
War has nothing to do with that, at least not war in a classical sense. Economic or total war that some countries are involved in can be considered as a major reason.
Once war started, the sanctions made sure they stayed high.
And Ukraine's hesitance/inability to strike war-relevant civilian targets in Russia (say, bridges and factories) more than very-sporadically makes the term a bit iffy even for them. Hell, even Russia's been more restrained than what the term usually suggests, as far as the brutality of attacks, if only barely.
https://en.wikipedia.org/wiki/Total_war
It basically means "complete mobilization of a state & society toward a war effort, coupled with a willingness to engage any target regarded as having any war relevance whatsoever, no matter where or what the target is". Hallmarks are mass conscription, rationing, large-scale conversion of civilian production capacity to making war materiel, and leveling cities on purpose (not just as a side-effect of fighting over them).
0. https://tradingeconomics.com/germany/food-inflation#:~:text=....
1. https://www.google.com/amp/s/amp.dw.com/en/germany-inflation...
So, German groccery prices did a lot of catching up since at least a hear. Slow enough so that you don't realize unless you are living on tight budget. That being said, since salaries in Germany tend to be higher than in France, the average German consumer is still a bit better off (ignoring housing or rent, and using a broad brush here).
The war im Ukraine did caise all kinds of issues, as did Covid. All ghinhs considered so, the developed world did reasonably well so far so. If food prices increaseore so, governments will have to intervene, as lower income families will have a hard time between increased energy and food prices.
neither Covid19 nor the war caused the effects, it were the measures that the stupid monkey horde took.
Anecdotally, seems there's a lot of British and European expats here in the Valley and they don't seem too keen on returning. We've been getting a lot of international applicants (but work from home was supposed to mean Europeans could avoid moving to the "dangerous" US but work for American companies?).
Maybe best to sum things up as a run of bad luck compounded with gross incompetence?
Energy costs are the primary driving factors for the cost of nearly all aspects of modern life.
Circumstances materially changed over the last few years, and inflation is a great time for profit taking as we're seeing, which reinforces the inflation. In a competitive environment the excess profit-taking should start pulling back eventually, but in the meantime the prices are going to the moon.
> They didn't have the pricing power/their customers didn't have the tolerance for rising prices/
Just for everyone's sanity, it's WAY easier to believe that there are underlying market conditions that should be addressed and not worry too much about retailers. They are just doing marginal pricing. If there is a shortage on eggs, it's better for everyone that they price eggs so they stay on the shelves than to price them as if nothing is happening and then people panic because they can never find them anymore.
The profits may be up, but the revenue is still down overall.
There's some empirical evidence from Australia that this is exactly what they did. Also an island nation that heavily imports food
https://www.theguardian.com/business/2023/feb/24/an-economic...
I don't know why people get so hung up on this though: If you have less stuff to sell, and fewer employees to sell it, your profit margins are going to be higher! That doesn't mean though that you are maximizing your revenue potential. Which is probably why despite all of these reports of "record profits" you are not seeing exploding stock evaluations.
Also, it doesn't hurt that inflation is always going to be favorable to retailers. You buy inventory at the pre-inflation price and sell it at the post-inflation price. Even if you just price to keep up with inflation, you are going to report "record profits" every quarter just by nature of inflation.
I'm not sure this can be approached from a rational examination of economic premises alone. You raise good questions. However political economy also should be considered.
Let us imagine for a moment that this narrative is being advanced to deflect from government largess in the economy. Under this scenario court economists have an interest in protecting the regime, while the regime and academic institutions generally have a symbiotic relationship. If these incentives make sense, the narrative can be better understood in this political context.
Unfortunately this hypothesis suggests that there is very little we can say here without this discussion devolving into the regular flames we see on this topic.
Therefore you can see prices fixed for years, and then suddenly a sudden flurry of lots of manufacturers all raising prices 50%.
There cannot be anyway Arizona Ice Tea is making the same profit today on their .99 cans that they were in 1992.
And at some point that has to break unless they become a charity subsidizing aluminum-clad tea.
When "the break" happens they almost always overshoot; it's easier to offer a 'discount' later if necessary.
https://www.latimes.com/business/story/2022-04-12/az-iced-te...
Long story short: they reduce costs (thinner cans, no need for heavy marketing because fixed price is the marketing) and aren't greedy, playing the long game.
A price were willing occur until surviving companies are making minimal amount of profits.
Related is if someone figures out how to produce the same amount for less effort/cost.
If someone is making absurd profits for long periods, then usually some major factor such as government regulations is preventing new players from entering the market.
Supermarkets are expensive but still not expensive enough for someone to bootstrap an operation to elbow themselves into the market as a new player and expect to still make profit.
> A price were willing occur until surviving companies are making minimal amount of profits.
> Related is if someone figures out how to produce the same amount for less effort/cost.
Existing supermarket chains have massive delivery networks and associated efficiency, already have
- the real estate and - all the internals of a retail store and - the associated warehousing set up, - all the personnel who know their way around the store and where everything goes (which is a huge part of the efficiency of distributing the wares in the store), - "brand" recognition of the store (Aldi, Tesco, Walmart, ...)
which means the new competitors would very likely have to massively loss-lead at a time when the already-established market participants are making more profit than before.
> If someone is making absurd profits for long periods, then usually some major factor such as government regulations is preventing new players from entering the market.
Selling foodstuffs especially is an area of business where a huge chunk of regulations are absolutely justified and it's not like all of the food singled out because of expired shelf life ("MHD"/"Mindesthaltbarkeitsdatum") is getting thrown into the garbage (at least here in Germany). I currently work in a supermarket and have done so in a different chain before this one and from what I know most damaged or "expired" food is getting written off and then either set aside in the appropriate temperature store-room for the "Tafel" (food bank) OR if it's really unfit/unsafe for consumption (moldy, completely interrupted cold chain [1] or obvious signs of spoilage like bloated food packaging) it gets thrown into the garbage.
Raving about "free markets" from ones ivory tower is all well and good but the reality is that because of corporate consolidations and necessity-for-living many economic sectors are effectively locked down by (implicit) cartels, either because it's cost-prohibitive to even enter - let alone succeed in - that market or because the actual necessary infrastructure has been divied up between the current market participants (think USA and their local mono-/duopolies of ISPs).
[1]: For example when we find items which should be kept cool or frozen in other areas of the market having been taken and left there by customers who obviously don't care (like that one time I found fresh fish with its plastic bag bloated to bursting in a warm section of the market during summer time, thankfully the packaging wasn't damaged or it wouldn't have been pretty).
The core problem is that Western countries have collectively decided to dial back anti-trust enforcement that could have stepped in.
Never let a crisis go to waste.
Scroll to page 9 for a good graph on how this works. Unit profits are massively up, unit labour costs stagnant.
I understand it's probably a mix of both, but it's hard to tell the relative proportion as a consumer.
Did UK also do something like that?
We are also still seeing supply chain problems here that started during COVID. Consumption didn't cease during COVID, but production did, so there is a massive backlog. Not speaking retail consumption, but industrial and government orgs also consume resources like equipment, machines, etc. And those assets are seeing persistent backlogs, especially domestic production as US is fully employed and no room to increase production.
The UK made its own relief checks, as did all EU countries afaik, but to a much smaller degree than the US. Some only to students or as free meal/vacation vouchers.
Besides the obvious degradation of the energy and fertilizer markets from the war in Ukraine, the collapsed Pound is probably the biggest factor here.
As someone who occasionally orders stuff from UK businesses, I wish the pound would collapse against the Canadian dollar. Like, 1:1 or 1:1.2
Even for things that can be domestically produced, like greenhouse tomatoes, they will still be more expensive even if they are now competitive with imports. And for items like rice and couscous you're not really going to be able to domestically produce them anyway.
0. https://www.economist.com/britain/2023/03/02/britains-tomato...
because if prices shot up 20% last July, and then stopped going up August and onward, the measure is going to say that inflation this month is still at 20% over last year, but consumers have already got used to the new price level in the shops. At the same time, Joe Average is likely to be ready to grumble about prices all the time, so hearing that inflation is still at 20% will reinforce a sense that isn't really accurate.
I'm not saying economists are not measuring the right things, I'm saying that the way the stories are played in the press requires some digging or interpretation.
[1] https://tradingeconomics.com/euro-area/consumer-price-index-...
Pre-COVID I used to able to run and get lunch for under $5.
Now I'm lucky to spend less than $15.
b) There's no way that inflation is "over 100%" in restaurants in California. For example, a carnitas Chipotle burrito is currently $10. In 2018, five years ago, I ordered the same thing for $8 (I have all the records of my purchases). That is only 4.5% annual inflation over that time period (25% total). I don't feel like checking other restaurants, but I suspect if you actually look at data and not your intuition it will agree with this.
America continues to occupy a privileged position in the world of stability and prosperity despite always feeling on the precipice of civil war, unrest, or crisis--but that never quite gets there. What could have been a major banking crisis 2 weeks ago was averted by more coordination between policy makers, and of course, lot's of liquidity.
How long will it last? I don't know, but I don't want to bet against it either.
In fact, local eggs are now cheaper than factory farm eggs around here, and chicken is getting to be equivalent in price to beef.
People might stop caring quite as much about individual pricing once they have enough money not to have to care.
People who have to worry "can I afford all of this once I get to the till" are very aware of how much everything costs, and they are more common than people who don't have to worry.
"Gallons" are not a universal metric:
For the US, 1 Liter of milk = 0.2641720524 (US) Gallons.
For the UK, 1 Liter of milk = 0.2199692483 (UK) Gallons.
Because this has been and still is confusing, the standard unit of liter was introduced as a universal alternative (no flamebait intended).
If you are poor and/or live paycheck to paycheck (for example due to your monthly home heating bills having gone from 400 euros to 3000 euros year over year), I can guarantee you, you pay very close attention to how much food costs.
I doubt it. I've read that Americans throw away 40% of their food. Obesity rates suggest people eat far more than they need to. And there are major choices in what to eat - cheap vs expensive calories.
Obesity rates are also higher among poorer segments of society than wealthy, so it isn't necessarily a given that obese people will choose to eat less just because doing so will make them poorer due to higher prices.
But that's not popular to talk about; nobody likes hearing about personal responsibility anymore.
Friends in the US drove school buses during the day and worked at Wendy's at night, only to give back a substantial part of what they earned to Wendy's to cover their dinner there. They didn't even realize what slavery they were caught up in.
I hear that a lot, and it simply isn't true. A bag of apples is cheap, so is a bag of beans, a bag of rice, a bag of potatoes, etc.
Some of the cheapest foods in the supermarket are an ordinary can of beans. Milk is cheap, too.
It is possible to lose weight eating only at McDonald's but it takes effort.
The fact that Americans drink about 40 gallons of soda a year on average HAS NOTHING TO DO WITH ANYTHING GO AWAY.
(I'd love to do the math if all caloric sodas in the USA had corn syrup removed and fake sugars added what the result would be)
How much is 40 gallons? 426 12 oz cans of soda, 35.5 dozen cans, or 256 20oz bottles of soda.
I wonder if the bad quality of the majority of tap water has an effect on soda consumption. How much less soda would we drink if every residence had on-site water filtration?
That's a complete lie. It's way cheaper to purchase healthy ingredients and cook than to get fast food. It's completely cultural.
If humans behave rationally and eating healthy is cheaper and healthier why don’t more people do it?
It's a matter of culture.
There are currently competing narratives in the UK about food prices - greedy supermarkets v poor farmers and the same people complaining then say they shop at Aldi because it's cheaper.
Food is still cheap - it represents a small percentage of people's income. However, in the UK, we are beginning to see that food produced without the benefit of slave labour is somewhat less cheaper than it used to be.
If you look at it as an average for the population, sure. But that masks the real issue, which is that it hits poor people the hardest because spending on food doesn't scale proportionally with income.
Sure, the distributors are different, but I'd assume it's all still Monsanto, Unilever, etc., at the end of the day anyway.
130 basepoints if you use GAAP measures so only ~7% higher margin then but clearly unilever doesn't just have higher costs but is also increasing their margin.
Here's wholesale food prices in the US: https://fred.stlouisfed.org/series/WPU578101
In fact you'd expect reduced sales from the higher prices to put pressure on profits. That is what seems to be happening in the UK:
https://www.grocerygazette.co.uk/2023/01/31/food-companies-p...
But not in the US, where it does look like there may be some gouging going on, but we'd need to see their profit reporting to be sure:
https://accountable.us/wp-content/uploads/2023/02/2023-02-10...
Should we be concerned about why there are shifts in demand/supply? Sure.(In the case of food, part of this is driven by the UA war and likely other trends in food productive)?
But it is eminently unhelpful to simply attribute increases to 'gouging' and expect that to be the final say.
and i don’t think you’d expect it to. the increased supply needs to hit the market first. depending on how that money is distributed, that could take a long time. also remember that QE has been central fiscal policy in the UK and US since basically 2007. and it’s safe to say that concentration of this wealth is.. very high.
> has UK M2 declining [..]
it becomes a bit more sobering when you look at the full scale on that graph (when the y-axis starts from 0). it’s a metaphorical deck-chair-thrown-off-of-the-titanic amount of decrease.
Yes we have high inflation now, but that’s just been a plain old cockup. The massive inflation reduction act stimulus for example.
The profits are inarguable. They really have never been higher. https://tradingeconomics.com/united-kingdom/corporate-profit...
(note the table underneath pointing out that industrial production has declined at the same time as record profits)
Energy is a large part of that: https://www.bbc.co.uk/news/uk-64489147
This feels correct, but if that were the case, if companies are generating record profits, why aren't we seeing that reflected in stock prices? At the very least, why isn't price / earning ratios cratering?
What are profits like adjusted for inflation?
they only need to increase prices to deal with the increase in costs, and profits represent an increase above and beyond that necessary amount, which in economic terms is "not cool, dude"
The root cause is economic decoupling between Russia, China, and the U.S.
The main change has been energy prices (it is complex because supermarkets stopped selling some products, so the price recorded is not what consumers experienced because the product largely wasn't available).
Also, just generally, that isn't how demand for food works either. It isn't elastic, there are substitutes for every product. The main factor driving differences between countries is usually the structure of the food supply chain and exposure to trade.
Couscous and margarine and eggs being more expensive across the board at the supplier level. This does not speak to any sort of cartel behavior.
There are quite a few significant supply bottlenecks in the U.K. food supply chain, from supermarkets to wholesalers to importers, and they do allow for price fixing - demonstrably so in the case of supermarkets and domestic produce.
Also with a "big evil" you can tell yourself that removing that evil would solve everything.
I use housing as a good example since it's been a major driver of inflation and most houses are sold peer to peer on the open market. If you're selling your house and you see comparable houses selling for $900K, but you only need $750K to earn enough profit to buy your next house, what are you going to do? Sell for the lowest price you can afford? Or sell for the highest price you can get? You'd sell for the highest price. And that same calculation gets played out at every level of every transaction in every corner of the global marketplace. Yet nobody would think of themselves as being a villain for doing it. Or be accused of gouging.
The house sale is a perfect example, and is something to meditate on. (One solution is 'competition' such as making sure new houses are being built, other companies can produce food, etc.)
When a store runs out of flour, people don't get as mad at the store as if they raised the prices but keeps flour on the shelf. Despite the fact that having an expensive option for flour always leaves you better off than having no option.
After Hurricane Katrina there were some prominent examples of people being arrested under anti-scalping laws for trying to haul in food and generators from other areas to sell.
Companies are smart. When news gets spread far and wide about a shortage of eggs or other products due to disease or wars or "supply chain issues", they leap to take advantage of this consumer consciousness by increasing their prices, knowing the consumer will blame the larger macro factor and not the company. This has been well-documented, even in cases where the supply chain issues didn't actually impact the company that raised prices.
The best way to understand what's happening is via corporate earnings calls. They're upfront with their strategy when talking to investors.
For more info I'd recommend listening to this episode: https://www.bloomberg.com/news/articles/2023-03-09/corporate...
I don't deny that corporations will try to make a buck taking advantage of favorable price-over-volume plays when they can, but I think it's crazy that people think during a global energy and fertilizer shortage Walmart just decided to throw out all of their low-price volume corporate strategy just to screw customers over egg prices.
I'd expect decent firms to not try to gouge customers who are already hurting at the time when they most are, but maybe "normal" means "sociopathic" in the context of amoral unrestricted capitalism
Even drug dealers aren't that greedy
Why did companies wait until this year to do that?
What's the reality? In London and outside?
Sounds just like the roaring twenties.
I suspect the "formal economy" is hurting in a number of places, just not the energy sector.
0: https://www.bigissue.com/news/social-justice/we-asked-expert...
I can't walk down the street any more without saying hi to people, the chippy guy who goes on Sunday runs, the coffee shop owner who lets me know when they're trying a new roaster, the elderly women walking their dogs at lunchtime. It's almost like my old hometown.
Has only gotten worse, it seems.
So things are getting noticeably worse but I wouldn't use words like collapse just yet.
Anecdotally at least:
- Brexit is a pretty notable economic negative, purely in the sense that it's added a lot of drag to EU trade and made it harder for workers to access the UK market. Nobody likes loads of red tape. It's hard to separate this from the many other influences from COVID through to Ukraine.
- There has been a pretty clear spike in the cost of living, which has a direct impact on things like poverty. Notably the housing market was very disrupted by the policies of the previous prime minister; again, it's hard to separate this from anything else but anecdotally a very large number of people noticed that they suddenly had to find hundreds of pounds of extra money every month due to housing end energy costs.
- The NHS is not in a great state, no. Several years of underinvestment and the pandemic came home to roost, and combined with the pandemic and rather a lot burnout it is not sounding great from anyone who works there.
- The economy isn't in "free fall" but does have several things dragging at it – including supply-chain difficulties, inflation, worker shortages, and other challenges. It's hard out there.
- Most noticeable and in-your-face thing for someone like me—in the fortunate position of being on the breadline—is an obvious deterioration in services and availability. Lots of strikes in various industries, quality of everything suffering, difficulties getting basic goods sometimes. It can feel pretty oppressive, though of course nothing compared to how some people must be struggling to get by at all.
* Energy prices are higher, and this has had a knock-on effect, but I see it more on childcare (e.g. nursery) than food.
* There have been shortages of some foods - specifically there were shortages of tomatoes and peppers for a week or two a month or two ago, but not recently... and there are shortages of eggs, which I understand from my cousins, who are egg farmers, is primarily due to bird flu (most eggs in the UK are from British hens).
* Regarding NHS, we've not needed to use hospitals recently, but access to GPs has been same as usual.
* I've not seen an increase in crime.
* I hear that poverty is rising, but don't have direct experience.
* The Royal Mail is almost certainly dying, but I think it's been on its way out for years.
Like I say, this is just personal experience - I appreciate that I'm quite lucky at having an OK-paying job, so could well be insulated from problems that others face.
Food here is, empirically, still unbelievably cheap. I can buy a 500g bag of spaghetti for 28p, lentil and beans are cheap, bread is relatively cheap, chicken is so cheap that you wonder how safe it is...still...but the problem is that in the UK, if anything doesn't benefit you immediately then people will complain.
RM...they had a monopoly, their workers are almost always threatening industrial action, like they aren't "hanging by a thread"...they have a licence to print money, workers just won't turn up to work because they feel aggrieved.
NHS...funding is through the roof, the biggest individual component of the budget with a deficit of 5% and tax % of GDP at all-time highs...workers on strike, "they get paid more in Australia" (true of almost every job in the UK because Australia also has significantly higher CoL).
Crime? Again, we have an underclass of people who commit all the crime, repeat offenders often walk free over and over, shoplifting isn't investigated, robberies aren't investigated...and people wonder why it is attractive to commit crime?
Poverty hasn't increased, unemployment has dropped like a stone over the past ten years, all this time we have people like you: the economy is in FREE FALL, poverty is going to rise soon...it hasn't happened, the issue we have is that people are constantly feeling aggrieved. This seems to be a disease of the West too, you see the same thing in the US where there are real economic issues but there is very little discussion of them...all it is just single-dimensional, "things have never been so bad" grievance-building.
But no, nothing has really changed. Life carries on unsurprisingly. The UK has issues, food prices aren't one (in fact, food prices are far too low still), problems that do exist remain unaddressed, problems that don't exist absorb all of the attention.
If the logistics work, delivering letters only if there's a first class letter to be delivered, if there's a standard letter that's been waiting more than 2-3 days, or if Royal Mail feel like it (e.g. delivering to this road for someone else's first class letter) might save a lot of money.
32, tech worker, just bought a house in a village in the south... Yes my vegetables are a bit more expensive week to week, maybe i need to go to another store to buy one or two specific things but generally life is fine.
Still getting pay rises, still getting bonuses. Generally life is more comfortable for me than its ever been.
Someone set fire to a bin last week, does that count as an increase in crime?
Food bank use is clearly rising.
Royal Mail international shipping was down for at least a week due to ransomware: https://techcrunch.com/2023/02/23/royal-mail-restores-global... ; they are in general badly managed, but few delivery companies are ever loved.
Crime is not necessarily exploding, but confidence in the police is rather low. A Metropolitan police officer was jailed for 71 counts of sexual assault earlier this year, having done quite a lot to raise the crime rate all by himself.
We are not yet back to early 80s tent cities.
Week ending 2023-01-18: 748,000 birds affected in Ontario, 7,051,000 in Canada [1]
Week ending 2023-03-22: 749,000 birds affected in Ontario, 7,173,000 in Canada [2]
[1] https://web.archive.org/web/20230120170319/https://inspectio...
[2] https://inspection.canada.ca/animal-health/terrestrial-anima...
While the exchange rates over the past decade mostly move sideways and the effect yoy should be one-off the current moves in the financial markets have potential for further disruption and the UK being more isolated will see her Pound fluctuating more with more immediate impact on people and business.
It doesn't seem like Labour has a charismatic leader either. I could never even find a concrete stance by Corbyn on what he was running on wrt Brexit.
HNers from UK, what does the outlook look like policy wise for the UK.
I'm hoping for boringly competent management of the economy plus a gradual drift back towards relatively friction free trade (both goods and services) with our largest neighbour.
Wage growth would be good and some action on housing so wage gains don't just turn into house price rises.
Sunak will gracefully lose the next election, by a lot, but a lot less than Truss or BJ would have lost it by, and having helped to slow the freefall in reputation by the Tories and steadied the economy a bit. Keir Starmer will be a decent and competent but dull leader for two terms, and the who the heck knows. But the next ten years or so should be pretty dull, in a good, centrist sort of way, ideally culminating in rejoining the EU.
Not optimistic for the next ten years or so.
Over winter tomatoes were in short supply, not because we couldn't grow them, but because the methods of heating greenhouses were too expensive. CO2 heaters use gas in largely uninsulated greenhouses. A bit of creativity (solar thermal with storage supplying radiators) or just modernity (air source heat pumps) would have solved this problem.
Alas, there is little guidance and support. The economic case for fossil fuels continues to weaken and the government does absolutely nothing to support a transition to cleaner sources of fuel which provide shelter from the volatility of energy markets. So we pay instead.
What absolute rot.
Nobody stops to think how that was possible but that doesn't prevent them moaning when Sainsbury's only have 12 varieties of tomato on the shelves in December.
For starters, a commercial scale composting operation needs inputs from various sources in order to achieve NPK balance - not just food waste. Therefore, the complexity increases by an order of magnitude as we have to orchestrate the logistics of food waste, manure, wood chips, and more.
Second is that compost is not even close to ammonia-based fertilizer in terms of elemental nitrogen, which is critical for our most calorie dense crops. Places like the Rodale Institue are not at all intellectually honest about organic production yields. Their systems fall apart at the global population level.
It is a fact that if we were to shift all-organic farming that we would need MORE land, and MORE people to create the same amount of food. That's the opposite of our current goal which is to create more food with less land and less people.
Third, the application of compost would actually increase soil compaction due to larger, heavier equipment required. It just so happens that these large equipment (tractors included) are not yet able to run on electricity. There are some electric tractors, yes, but nothing with the power equivalent to modern combines.
Fourth, is the bias toward energy density that I hinted at in the third point. But it isn't just tractors. Many farm operations are unable to electrify due to their proximity to the grid and the energy draw. I'm talking about grain storage and refinery, and many others.
These are all problems that could be solved with innovation. But to your point, it is probably HARDER than many people suppose. Definitely harder than you are making it out to be. Food systems are incredibly complicated. It is also incredibly optimized, and advocating for a massive shift comes with the intellectual responsibility of addressing this complexity and coming up with a solution that can compete with the status quo.
To your final point, the government is doing a lot to aid in the transition actually. Not sure where you are from, but the USDA is now offering more grant programs than ever before to address all of the above.
having the skills/knowledge to consume fewer finished products is insurance. and the only real price for that insurance is time.
At the same time, a lot of these basics are getting more difficult in the name of efficiency: think about repairing a linen shirt with a loose weave and no stretch vs repairing a spandex-poly shirt with a very tight weave and a ton of stretch.
1. Products offering far smaller portion sizes than before, likely to an even more ridiculous degree than what was happening with things like crisps and chocolate already.
2. The taste and quality of a lot of food items getting worse (probably because the original ingredients got more expensive/became uneconomical to use).
So even products that stayed the same price seem to have suffered recently.
This certainly seems to be more of a sign of a weakening pound not buying as much in n imports than something about food alone.
Thanks Economists!
I will say that the large population of increasingly Facebook-addled Boomers really don't help. These are people who've paid off their mortgage, can collect rental income, are becoming pensioners, and generally vote against immigration, against public spending, and for lower tax rates. They're also massive consumers of NHS resources. We're going to be supporting these people with our taxes for decades to come. Meanwhile the Government has consistently failed to support productivity growth or infrastructure investment, and our whole economy is oriented around the service sector in London and a handful of other cities.
The only alternative prospectus (Corbyn's "Green New Deal") was trashed by the established media, and his successor is now delivering bromides about national unity and being "tough on crime". He's also put EU integration completely off the menu. Nobody in power seems to grasp the scale of the economic and demographic crisis we're facing. It's not great.
I dont care what they state national inflation is - Its important by food category.
Although day to day items that dominate the spending of a lower income person's paycheck are easily seen affected when inflation hits, for a wealthy person, whatever savings and money is accumulated eventually has to be spent on such things also -- whether directly by the owner, or through goods/services that have to pay such expenses.
So in time, in having to spend their wealth, the rich get affected by shrinking buying power as well. (they just have the luxury to spend on more items that are not daily/monthly subsistence expenses)
Is that reasonable to think?
Why am I getting downvoted for such a legitimate economic question? Is this offensive against lower income people?
Society has really quickly lost touch with one’s food sources in a few generations.
One way to stick it back is to set a slow running cron job.
[0] $4 for a bacon & egg biscuit, $1 more for buy-1-get-1-free, and the McCafe drink of any size comes free for an order of $3+
Cheap food isn’t unhealthy. Rice, vegetables, chicken, it’s all cheap. People just aren’t used to calculating these costs.
It's not hard not being obese, just eat less. Yes, that means having a degree of control over your actions, taking responsibility and not stuffing yourself with dopamine inducing fried food all day
:extreme sarcasm:
Kenyes is though, so...
Companies LOVE an excuse to raise prices to where they "think" they should be, and inflation is a great time to do such.
Hmm...
Yeah, okay, whatever.
A sad thought I have about inflation is the fact that it is, wittingly or not, a weapon wielded by the rich against the middle and lower classes. In an inflationary economy, the winners are rich who have valuable assets whose value skyrocket - think real estate, businesses, etc.
The lower classes rely on A) proportionately much more on fiat, i.e. monthly paycheck going into current and savings account, and B) a blue-collar job, the wage of which always lags further behind inflation than white-collar jobs.
Those two factors combined means that the lower classes get absolutely battered, while the rich just sit gleefully as their asset values balloon and pass down wholesale price increases, etc.
It's the dark, sinister side of inflation, and I think we are all beginning to see the societal tensions that it is breeding, e.g. endless blue-collar UK worker union strikes, riots, protests, etc.
Not saying that it is only one class that is affected, but let's face reality here - the lower class suffers by far the most in this situation.
Well, idk about your area, but property prices in northern Germany are still well above the 2020 mark.
https://www.theguardian.com/commentisfree/2023/mar/05/house-....
"UK house prices defy gloom with an average £3,000 rise"
20/03/2023
https://www.theguardian.com/money/2023/mar/20/uk-house-price...
UPDATE: I can see a comment below says they have gone up in some places. Well, when both rates AND prices have gone up, it is not hard to tell :-)
I also agree that low rates were good as you could invest in property with leverage and in businesses which could borrow and raise money to cheaply to grow.
Nobody is having a good time right now.
Anyone with debt is better off with higher inflation as the amount required to pay back is worth less. Anyone who gave money away for interest takes a haircut. The richer entities usually loan money so this is better for the poor with debt. If wages don't raise than this changes
Loans to the poor will always have an above-inflation rate. And the poorer you get the more extreme the rates.
Interestingly this is somehow not considered inflationary.
The real metric isn't total cash, it's outgoings vs income.
Billionaires do not have significant non-discretionary outgoings. At the billionaire level food, housing, and transport are essentially free, and your time is your own. There may be mild chagrin if you can't afford a bigger yacht or another private jet, but mild chagrin is all.
That's not true for most people. The poorer you get, the more aggressively you have to sell your time, and the more likely it is that your outgoings are going to exceed your income.
Not because you can't organise your finances, but because inflation and wage stagnation have made any other outcome impossible.
I noticed you didn't say "declining" because that wouldn't be true.
1 Feb Guardian - house prices fall for fifth month in a row
1 March Guardian - house prices fall at fastest annual rate since 2012
The price-to-earnings ratio is 9X in London and around 5X in the rest of the UK.
Property speculation is always ten steps forward and one step back. Prices in the UK would have to crash by at least 50% to return to any kind of widespread affordability.
At least 2-3 years, anything less is too small a sample size. You could be highlighting a 10% decline after a 200% increase.
You can't get something from nothing.
This was simply subsidizing business borrowing / capitalists at the expense of the labor's purchasing power.
It shouldn't be a mystery why inequality sky-rocketed to surpass Belle Epoch levels under ZIRP.
it's emergent out of the incentives e.g. the Cantillion effect
it wont be around forever with AGI making this so obvious
I present you the US housing market.
this is true in the short term because a lot of assets are held with borrowed money. when interest rates go up those assets get sold to cancel the debt and bring down the market value.
however, either if inflation is sustained or interest rates go down, asset values will inevitably bounce back, but money will NEVER recover its value.
It's what you're seeing happening in Silicon Valley right now.
Usually a reality check occurs every decade or so, bringing heads back down to Earth, but I think too many felt that the COVID lockdown lows in the markets were that reset. They then went right back to their old habits, after a brief pause.
Just thinking about how long it took to recover from 2000, 2008, etc., it's obvious that we didn't truly have that reset.
The lockdowns fundamentally changed a lot, but few people seem to want to acknowledge it. The effects of the lockdowns will been seen for a long time, I honestly do believe.
Just my take on it all.
On the other hand, rising interest rates causes all assets to decline in value, and the decline is worse depending on how far away the "maturity date" is. It looks like the UK has been raising rates, similar to the US. [1]
[1] https://www.bankofengland.co.uk/boeapps/database/Bank-Rate.a...
Fact is the inflation we are seeing here is caused by the after effects of Covid, the Energy price surges caused by the Ukraine war and in the special case of UK - Brexit, which has lead to huge import shortages due to increased bureaucracy at the border, etc…
So please stop this conspiracy talk about the “rich” creating inflation to disown the “poor”.
You do not get it.
This inflation is due to insiders (central bankers) printing money. Covid & ukraine are convenient excuses. Look up where this money ended up.
Help me understand: is this a stacked chart? Why does a chart that ends in 2021 show inflation in 2022 and 2023?
> This inflation is due to insiders (central bankers) printing money.
If this is about the money supply, why is food more affected than other products? IMO everything is a factor, and there is no one culprit, and therefore no one easy fix.
https://image.cnbcfm.com/api/v1/image/106649548-159664277043...
I look forward to open source ai economic simulation tools - when you change variables like m2, you'll see what happens to inflation - and there'll be no more ambiguity
For now: ask gpt-4 yourself & get a lesson
Imagine being a rational human and deciding that a war involving two of the biggest agricultural exporters in Europe, one of whom is also one of the main exporters of oil and gas, as well as a ton of different important materials (nickel, steel, fertilizers, etc.), after 2 years of pandemic that crippled global supply lines and resulted in explosion of prices in many raw materials, have combined absolutely no impact on prices anywhere.
We know the model pretty well: "money printer goes brrr" leads to higher prices for good and services. But the data lately doesn't make a great supporting case.
> I look forward to open source ai economic simulation tools - when you change variables like m2, you'll see what happens to inflation - and there'll be no more ambiguity
Economists have been leading the way in multifactor causal inference, but GPT in particular is not well suited to it. And macroeconomics in particular is hard to measure via natural experiment, so you're left trying to estimate counterfactuals based on a paucity of data
but look, my day job is people coming to me with timeseries data showing an engineering fuckup and debating about what caused it (usually ops vs prod). if theres a nuanced take, im all ears, but so far your fire has brought more heat than light.
you don't get it
money is worth less when there's more of it. especially 40% more of it.
all the inputs to your groceries (labour, energy, materials, transport etc.) thus nominally cost more
when inputs cost more, your groceries cost more
What do you think putting more money into circulation does to demand & nominal purchasing power?
An excess of money causes increased demand per unit dollar and subsequently, higher prices and inflation, through mechanisms including the Cantillon effect, changes in monetary velocity etc.
If i deposit more $ in your bank account, what happens to your nominal demand?
Ideally people would save for a rainy day. But people don't, and can't, always do this. Because for some this is the rainy day.
Non-ideally I would assume that most demand increases would go for non-groceries, and non-commodities in general, such as housing and travel, though I would expect some increase in durable goods commodity prices as people replace older goods with newer. Yet here we have grocery price increases. Are salaries in the grocery production chain going up 18%? Warehouse costs? I doubt it. The price increases are mainly coming from elsewhere, not from money printing.
They don't all have to actively conspire or even know one another for them to have a shared business interest.
Is this a conspiracy theory or a simple observation of incentives?
The thugs get to keep the loans, but the debt gets transferred to the local community, which cements the "somebody who isn't you gets to create abstractions that you have to treat as money"-part of the deal.
The words that used to go with it are "progressive free-market policies", but I think Kamala Harris recently called it "anti-corruption" or something along those lines.
the rich by this point aren't any group of people, but a section of the system.
the system is structural, not-alive. he is choosing to regard the system like rungs on a ladder. each rung is a social class.
the point I'm making is that he's describing the "ladder", referring to structural/systemic aspects of our civilization, not the "persons" standing on each rung which is the meaning you chose to focus on.
our society really is arranged in tiers or classes regardless of you accept it or not (but again, this is a way to understand it; there may be others)
in the UK the so-called "rich" (to answer your question) would be people with legal noble titles.
in Smerica this class of people is not explicit. I guess the older European system (which inspired American ones) at least is explicit about the fact that the royals and their nobles are "the rich" class. I countries with continuing monarchies, like the UK, they really have a noble title and registration. they're "better than you" by legal definition because of choices their parents and older ancestors made (or were forced to make)
So blaming it on the rich might be appropriate, but not in the way that it's usually meant.
Food inflation in Sweden is 22.1% over 12-month [0]
Food inflation in Norway is 8.8% over 12-months [1]
Obviously someone is making money hand-over-fist from this 12.7% discrepancy.
Comments like the one above are really disruptive to any constructive conversations. It is not a conspiracy.
The comment above is (at best) astonishingly naïve. While it is a emotionally plausible argument, we can see it does not hold up if we compare the rates of inflation over similar countries.
[0]: https://www.scb.se/en/finding-statistics/statistics-by-subje... [1]: https://www.ssb.no/en/priser-og-prisindekser/konsumpriser/st...
https://www.nibio.no/en/news/ten-facts-about-the-norwegian-f...
[0]: https://tradingeconomics.com/switzerland/food-inflation
Maybe we should mention that Norway exports oil and gas, and Sweden does not.
To say it is a conspiracy is true, in that corporations are conspiring against consumers to make more profit.
Some articles:
https://www.theguardian.com/business/2023/mar/24/greedflatio...
https://www.cnbc.com/2023/01/24/greedflation-food-brands-may...
https://www.theguardian.com/business/2023/mar/12/global-gree...
https://www.theguardian.com/business/2023/mar/02/ecb-looking...
Every western society heavily taxes working, where often for me as a freelancer it hardly pays of to work more then 6-8 months per year.
But taxes on wealth are very low. And owning property often has many tax cuts, and tends to benefit from low interest rates.
The effect of it is is that either you play the wealth game through property or investing or you are lost out.
I think it would be fare to protect the assets people accumulate through hard work, but at the same time it should be more balanced then it is now and we shouldnt all have to be financial experts.
On top of this, you've got Brexit which was orchestrated by the right wing conservative aristocracy class for their own benefit. And we've also had a conservative government that has not only not pursued a green agenda over the last 13 years, but bent over backwards to get Russian energy money.
So yes, the factors leading to inflation were outside of control. But that doesn't change the fact that the powers that be in this country have been running the country in their own self interests and have given up on even pretending otherwise and that is why the UK is being hit harder by inflation than any other country in the western world. They were so high on their own supply they even elected Liz Truss to cut taxes in an inflationary environment and only reluctantly accepted that they weren't going to get away with it when the global market responded by saying it would tank the property market (which the whole stack of cards relies on).
> Are they all friends with each other and plan all their schemes together?) against the “others”.
This is the UK with it's notorious and very real class and aristocracy system. They don't call the royal family "the firm" for nothing.
I don't think that's true. Right now, UK inflation is lower than almost any European country east of Germany, including Sweden, and it seems inflation was running lower throughout COVID than even the US.
It was the same in most EU countries, but wouldn't that result in lower inflation? The rich that kept getting richer would invest in stocks, business, real estate, park it offshore, buy another helicopter or yacht, etc. which wouldn't impact demand for most products whose prices are increasing.
How does printing more money to give to everyone lower inflation?
>The pandemic could have been the perfect opportunity for a soft debt jubilee to rebalance the system.
I don’t agree with either stimmy or the lockdown business handouts but I find it ridiculous people are using a world tragedy as some sort of crowbar to bring about their idea of some sort of require rebalancing. Not sure how those people even think how that could possibly play out beyond 3 months.
Starting to suspect some people feel the pandemic was the best thing to ever happen to them and are now upset it didn’t go further.
Amazing. Yes, I am sure the poor will just piss their money away on nothing. Rather than you know, starting businesses or upskilling themselves or paying their houses off or whatever. Because, you know, only the people already at the top of the pyramid know how to be productive and everyone at the bottom are just there because they're lazy and useless.
> I don’t agree with either stimmy or the lockdown business handouts but I find it ridiculous people are using a world tragedy as some sort of crowbar to bring about their idea of some sort of require rebalancing. Not sure how those people even think how that could possibly play out beyond 3 months.
Because historically, debt jubilees have been a common occurrence to maintain social order. The topic comes up semi regularly on hacker news, including yesterday. The fact of the matter is, if you don't agree with business handouts or stimulus, then you either don't agree with lockdowns and think we should have just gone about our business and let nature take it's course (if so I can see where you're coming from), or you want social disorder (I don't see where you're coming from). There's no way in hell you could have maintained a lockdown otherwise. People need money to eat and keep a roof over the heads and the poor do not have the savings to do that for an extended period of time without work. So if we're going to give money away to keep people alive, we might as well give more to the people who are struggling to survive rather than giving thousands and thousands to people who already have substantial amounts of assets. Similarly now with energy payment help, why on earth are we giving energy payments to people with second, third, fourth and however many homes rather than using that money to increase the amount we give to the poorest? That is not a ethical allocation of public money.
> Starting to suspect some people feel the pandemic was the best thing to ever happen to them and are now upset it didn’t go further.
If you're aiming this at me personally I was living at home and working a zero hours contract at a local venue so saw basically hardly any furlough money when the pandemic happened. I got £100 week from the job centre for and a handful of hours wage from the venue for a couple of months before they let us go. Meanwhile a guy I know who had been in his new teaching job barely a few weeks before covid hit was raking in over £3000 a month in furlough and treating himself to all manner of things like fire pits, jacuzzis and game consoles.
I saw the pandemic as an opportunity to escape minimum wage drudgery and worked my arse off improving my coding skills and used that to land a job at a local company as a software developer. Despite the fact half the developers worked remotely abroad, they made us go into the office with hundreds of others throughout the entire pandemic and then, when lockdowns were finally lifted for the last time, handed us all laptops and said we were free to work from home. So yeah, that was my covid experience.
So no, I don't think the pandemic was the best thing since sliced bread and that it should have gone further. What I do believe, is that when you give people at the bottom an opportunity and a bit of breathing space as opposed to pummelling them into the ground with debt and drudgery, is that those people can go on to make something of themselves.
No of course not. That'd be 90s-Mr-Burns territory.
Nowadays you pay a SaaS offering to do it for you if you're a landlord:
https://www.propublica.org/article/yieldstar-rent-increase-r...
So the question is -- is real estate the only market you'd do that in? Seems unlikely.
"If I had to guess, I would bet that the big food conglomerates have all signed up with some common AI-backed pricing software package, and that shares data between them. Or, at the very least, they've all started using AI algorithms to increase or decrease production of any number of goods to maximize their profits based on real-time sales and economic data. And since they're all probably contracting this out to the same or a handful of similar AI firms, the conclusions they reach are similar. If all the production companies are running algorithms that tell them to jack up their prices at the same time, well they all jack up their prices at the same time. They don't actually have to meet in some smoke-filled backroom to plot a price-increase conspiracy. They just all run similar algorithms that respond the same way to market trends. The consumer market is highly consolidated, with most goods having just 1-3 producers. If those few producers all sign up for the same AI price-setting software, there won't be price competition to punish needless price increases."
https://www.reddit.com/r/TrueReddit/comments/11gwm2y/europea...
Uh, you should google what the word "profit" means. You're thinking of "revenue".
But it’s a typical observation I have whenever discussing economics with Europeans — economic illiteracy is rampant, here, unfortunately, because schools do not give much priority to basic economic facts.
The economic illiteracy would be not being aware that all those megacorps are posting record profits and trying to gloss it over with made-up theories of your own and accusing an entire continent of people with economic illiteracy in the process:
https://theconversation.com/food-giants-reap-enormous-profit...
https://www.nytimes.com/2022/11/01/business/food-prices-prof...
If their costs were rising more than their revenue, they wouldnt post record profits. They are posting record profits. You are simply wrong. You just !made up! a theory to avoid the actual reality.
Why have you made such a blunt, exaggerated, false statement like 'European economic illiteracy' without doing so much as a google search. Do you know how that made you look...
That‘s a newspaper article published last year citing an NGO report based on annual reports on the year 2021… that was way before the price surges really began. I would wait for the annual reports on the year 2023.
Nestlé e.g. (to stay in Europe) reported a 45.2% decrease of its net profit for 2022 — but, supposedly, also due to out of the ordinary profit in 2021 after selling L‘Oréal. But they also note: „Organic growth reached 8.3%. Pricing was 8.2%, _reflecting significant cost inflation_. Real internal growth (RIG) was positive at 0.1%.“
But it’s typical for leftists to cherry-pick their data and only read news sources that confirm their bias. I hope you are even more angry with me now. :-p
So, the corporations were bamboozling entire planet and sucking it dry during the pandemic, but they are not doing it now...
> before the price surges really began
What does even 'really' mean. 36% is not 'really', but some other percentage is? Doesnt make sense.
> Nestle
https://www.mashed.com/1117426/popular-food-companies-that-r...
There are heaps of other companies other than Nestle. One company doesnt make an argument.
> But it’s typical for leftists to cherry-pick their data and only read news sources that confirm their bias
Its not 'leftists' cherry-picking data. Its those who use vague words like 'price increases REALLY starting' - whatever that means - even as the very capitalist publications of the most capitalist corporations on the planet say that food corporations profited off of pandemic and the war.
So its basically the words of CNBC, Oxfam etc versus your 'really' theory.
> I hope you are even more angry with me now. :-p
I didnt notice that you were disingenous debater. I do now. It explains your absurd arguments, and the 'really' theory of price increases. I'll act accordingly and avoid losing time discussing with you.
> bamboozling entire planet
> …
> food corporations profited
> off of pandemic and the war
I am sorry but you are mangling together so many different things just to prove your narrative about greedy food corps profiting from food price inflation. It all just doesn’t quite make sense. At least, I am assuming that’s what you like to communicate: Food prices increase because food corps want to make insane profits. Right? You are used to being agreed to, of course, as nobody likes big anonymous corporations making billions in money.
I’ll try to show you now why food corporations might make profits and impressive ones, too, but why they can’t have anything to do with steeply rising prices and why their profits do not hurt the average joe, necessarily.
Let’s reflect a little a bit about what a price is: When food prices rise why do they based on economic theory?
In a first approximation it could just reflect a scarcity. Say apple juice becomes more expensive. That could be because apples had a bad harvest season. Or transportation was hampered so not enough apple arrived in the factory or became spoiled. Or there were not enough people available for the harvest or the transportation. Can apple juice corps. expect fat profits because of an apple scarcity? Well, only if a company was lucky enough and managed to produce and sell the same amount of apple juice for the same cost compared to the last season. But since there is an apple scarcity, most companies would have less apples and, hence, have less juice to sell. Furthermore, people tend to drink less apple juice when it’s expensive. Both effects offset the increased revenue per apple on average for all the apple juice companies and, hence, imply a constant profit.
Another reason for a price surge might be monopolization. Say, Nestlé bought all apple juice corps. and can now command a much higher price. Fat profits? Well, Nestlé would have had to buy all their competitors first and in that process had spent quite a lot of money to be in this position. That would have seriously slashed their profit (even though their apple juice revenue would have sky rocketed). Furthermore, again, people would drink less apple juice under these conditions. Finally, obviously, Nestlé isn’t the sole provider of apple juice and in fact does not happen to be the sole provider of food (as you stated yourself) —- so it can‘t in fact profit from a monopoly under the current situation.
A third reason for a rising apple juice price might be a trend shift: People might find apple juice suddenly more attractive and tend to buy more of it at the expense of orange juice and are willing to pay more for it. Surely, that would increase profits for companies only producing apple juice. Producers of both apple and orange juice (like the typical Food Corp), however, would just measure a net zero revenue shift and a rather similar profit unless apple juice production is much more efficient than that of orange juice. But — whatever, consumers wanted to spent more money on apple juice and are now happy nevertheless.
That leaves inflation for another driver of increasing prices. Inflation means our money is losing value and, hence, can not buy as much apple juice as last year. That affects both consumers and producers, however, meaning consumers can buy less apple juice but at the same time apple juice producers can buy less apples (and less machine parts and transportation services). That brings us back to my original argument: Inflation can not drive real profits as — per definition — inflation affects the economy as a whole and hurts consumers and producers alike. Inflation does not mean a redistribution from consumers to producers as your thesis implies. Well, inflation implies a redistribution from consumers of money to producers of printed money but that’s quite a different story…
So why do apple juice corps. make profits in the first place? Because they spend less money in producing apple juice than they make in selling it. The larger the profit margin, the more efficient the company is and the bigger its profit. In a competitive market economy companies cannot just increase the price of the product they produce to boost profits. It is commanded by the market and is simply given. All they can really do is lower the costs of their production.
So while the food price inflation is bad — no doubt — it is not the fault of the food corporations with their fat profits. Ultimately, you want them to make a profit otherwise they would go bankrupt and couldn’t produce any food any more. And no food production is way worse than expensive food production.
Wouldn’t you agree?
In this case though, we're simply talking about inflation. One cause of inflation that you've neglected to mention is quantitative easing and how it's been used to artificially lower interest rates while allowing for higher deficits. I'd suggest you start there before you strawman people who disagree with you as "conspiracy theorists"...
Except countries in the EU, which has a common market that made such checks unnecessary inside of it. Of course there are still customs on the outside EU border.
So if you leave that, and your borders are now not internal market borders anymore but your and the EU's external borders, you're going to do more customs checks than you used to have. In both directions.
I agree with you that bureaucracy here is the problem, and Brexit was the cause of it.
It breaks democracy benefitting a few in power.
The effects of covid are actually the effects of covid policies which benefited govs and big tech and other corporation's while screwing most people. Yes, it appears that people wanted it but when you consider the censorship, behaviour modification propaganda and unconstitutional state force application to suppress people who wanted to oppose them, it's not that clear of a picture.
Then Ukraine, also something that benefits the gov, the energy/war companies and corporations, and not the people. Also heavily propagandized to push more profiteering through endless war.
No conspiracy. Just the system at work and people like you dismissing the true criticism with the same old labels. You may feel an impulse to call me fascist, racist and other customary labels soon, heh.
Do you mean the sanctions our rulers voluntarily chose to impose on that sector? Or is there something intrinsic to the war that would have that effect?
You don't need a formal conspiracy when interests converge.
- George Carlin
You mean dark, sinister side of capitalism, right?
Obliterating the entire hospitality and entertainment industry without compensation would have been .. unpopular.
I think you have it backward. I think the inflation is the byproduct of their ability to own and hoard assets like land and labor, and reap the most value from those things, while everyone else is unable to get a foothold.
Inflation is happening because everyone is making more money, and everyone got a bunch of during covid, and now a lot of people are having large swaths of debt cut from their lives (college loan forgiveness program), not because rich people own stuff. But poorer people also can’t get ahead because rich people own everything.
This is a capitalism problem more specifically than it is a rich v. poor problem. Make it illegal to own more than one property and you will instantly give the lower and middle classes a chance.
Not in the UK.
Real average weekly and hourly earnings have decreased.
> and everyone got a bunch of during covid
Several thousand dollars is more money? That’s one rent or mortgage payment.
> and now a lot of people are having large swaths of debt cut from their lives
Where?
The alternative where the rich are sitting on piles of money because they can’t profit off loaning would quickly make apparent how they’re leaching off the labor of the people.
Inflating wages makes wages relatively more important than existing assets.
And a large part of today's work force is simply not familiar with fighting for wage increases. They're used to getting meager increases that don't keep up with inflation. Workers have been getting screwed for decades, the slowly boiled frog. It's not worth the fight so they have in effect gotten pay decreases, in aggregate, over 30+ years.
[1] https://www.cnbc.com/2021/02/16/map-shows-typical-payday-loa...
[2] https://www.forbes.com/sites/johnhyatt/2021/11/11/how-americ...
Inflation only negatively affects the poor in that their wages are sticky and do not adjust in time (so in effect, their wages in goods and services terms declines)
The same thing happens to rich people, it’s actually a “capital owner vs salary man” divide. (A small building owner is impacted less than a very wealthy athlete for example, since one can raise rent yearly and the other is in a long term salary contract).
Very similar dynamics probably hold almost by definition for anyone who is wealthy.
Yes, that makes them a capital owner, but it's hard to make a metaphor where people aren't allowed to buy stocks with their excess money.
>They probably also have a steady stream of sponsorship deals that get (re-)negotiated more frequently than salary at McDonald's
Sure, but that still makes them worse off than a capital owner.
>Very similar dynamics probably hold almost by definition for anyone who is wealthy.
Sure, but a relatively low-wealth landlord is hurt less than a wealthy banker who consumes most of their salary. That's the only point- that it's more than rich/poor, even if the true nuance is correlated to rich/poor.
https://www.grocerygazette.co.uk/2023/01/31/food-companies-p...
Honestly you're right that inflation can benefit the well off, but I don't buy the conspiracy theory angle. "The Establishment" has been holding inflation rates at historically unprecedented lows for the last generation. It's been the number 1 priority for central banks since the early 90s. The last time the UK inflation rate was above 4% was over 20 years ago.
https://www.macrotrends.net/countries/GBR/united-kingdom/inf...
Inflation of 4% sure isn't as good as 2%, but generally speaking the inflation rate in the UK appears to hover around 2-3% during "stable" periods. https://www.macrotrends.net/countries/GBR/united-kingdom/inf...
https://asia.nikkei.com/Economy/After-20-years-Japan-still-s...
Compare pre and post 1945. The 1800s had a depression every banking cycle, now we just get recessions. Bank failures no longer take down your life savings. The king of England doesn't sometimes surreptitiously start putting copper in the gold coins to fund wars any more (e.g. inflation). GP's chart is pretty impressive, actually. Aside from the 70s oil shock, inflation is pretty constant, especially in the last couple decades.
I might believe this if M2 hadn't increased 4x since 2000 https://fred.stlouisfed.org/series/M2SL
The post you replied to referenced the St. Louis Fed chart saying 4x M2 growth from 2000 to now. The page I referenced shows the same 4x M2 growth for the UK: from 750k at 2000 to 3000k at 2023 (values in GBP Millions). Virtually identical.
However inflation!= growth in the money supply. A lot of the reasoning behind that growth was because inflation was persistently below the 2% target for the entire period up until 2021. That’s two decades of stubbornly low inflation, despite the feds best efforts in juicing the money supply.
It’s maddening how common it is for this forum to treat the issue as so simplistic and formulaic as though policymakers are somehow dunces compared to software engineers.
One of the reasons why the M2 supply increasing wouldn't directly correlate to inflation has to do with global demand to hold the asset in reserve.
So the argument I don't think is bad, just misguided in the sense that once the global demand for currency reserve is saturated the party is over for increase in supply with out a very direct affect on inflation.
However it usually is a more simplistic conversation that glosses over the challenges of actually making policy at the fed.
This is a tautology. The lower class is defined that way. If they didn't suffer the most, they wouldn't be lower class.
It's possible to imagine circumstances in which the upper classes suffer proportionately more than the lower classes. We have, in fact, had these circumstances. Such as the impact of transition from land wealth to industrial wealth during the first couple of industrial revolutions that saw various nobles having to sell their ancestral estates and belongings. Meanwhile the lower classes gained jobs that allowed them to afford more than they could before.
But the article is saying "d suffer(poor) / d(inflation) > d suffer(rich) / d(inflation)", the truth of which is not immediately obvious.
https://migrationobservatory.ox.ac.uk/resources/briefings/lo...
This is a supply side issue, a labour issue, a border issue, and a stagnant economy issue. Productivity in the U.K. flatlined years ago, with the 2008 recession, and what is being experienced there remains the after effects of the bungled policy decisions at the time.
If the assets are liquid ones not really; that's one of the reasons asset-holders start to clamor for the Fed to do something when inflation is high. I read the introduction of Secrets of the Temple, which is kind of a counter-conventional wisdom explanation of how higher rates of inflation were salutary for regular people at the expense of the ruling class, and it was pretty compelling.
For instance our PM Rishi Sunak has paid 24% tax on his £1.9m income last year, while the tax man takes 39% from my wage.
This should be fixed, but Sunak who was pushing for higher taxes on the workers, would never do that.
This is absolute scandal the rich can avoid paying their fair share this way.
I think it is very important to note that when it comes to grocery price increases, even if suppliers are raising their prices (and this isn't always the case), groceries stores aren't just passing down wholesale price increases, they're raising prices even further.
For grocery stores, this isn't an issue with (unqualified) "inflation", it's an issue of price gouging.
https://www.dailymail.co.uk/news/article-11668863/Supermarke...
The whole point with inflation is that nobody knows what future price-levels are going to be, so there's upward price instability. Everyone is trying to gauge how much to raise things -- and of course, they tend to overshoot, which leads to a higher rate of inflation. That's what makes inflation so pernicious, and hard to eradicate. It's not so much that a constant rate of inflation is damaging, but when increase become noticeable, people begin trying to anticipate it, and that increases the rate of change.
You'll also see this in pay negotiations: you'll see more strikes over pay raises, but it'll be very hard for unions or companies to accurate gauge what the pay rate rise should be. It's not that unions are trying to "gouge" management -- it's that the consequences of demanding too small a pay rise is the same as accepting a pay cut. So labour demands more than inflation, which in turn tends to push up the inflation rate.
Unless that has jumped to 10-15%, or jumped in any meaningful way, you're just seeing inflation, not gouging. Generally, grocers are among those businesses with the least pricing power.
https://www.reuters.com/markets/europe/savings-algorithms-uk...
e.g. the ability to accumulate "Tokens of Power" (vs the equivalent of arcade game tokens for commodities) is what motivates the Steve Jobs and Elon Musks to do their universe denting.
This is quite different than say tribal societies where extra resources do not maintain their value across time. An abundance of meat and other resources can only be transmuted into common cultural power via Feasts and Festivals.
Metaphorically, "gold" creates "dragons" because it allows immortal hoarding. Dragons are the only thing with influenceable agency that can reshape "nature". Controlling dragons allows this dominance (for better or for worse) at the cost of dragon externalities (burned towns, randomly devoured livestock)
Ummm... nothing like the 70s/80s (I'm old).
Seriously I think that the younger people in the UK are showing immense stoicism and forbearance.
Actually, it's the opposite that is happening, because central banks have aggressively raised interest rates to bring inflation under control.
When rates rise, the net present value of every long-term cash-earning asset declines, and those individuals and businesses (including banks) that borrowed too much in relation to the declining value of their assets, can and will suffer large losses.
It's not a coincidence that stock markets are down, businesses are cutting costs, office buildings everywhere are starting to file for bankruptcy protection, mismanaged banks are now in financial distress, venture capital firms and their investors are facing the prospect of large losses, and so on.
The opposite is happening:
Asset values are declining.
Stocks, bonds, property, etc. -- all declining in value.
That's the reality.
Also, who is rich/poor and has assets/debts can be hard to tell from appearances alone. Would you call this guy poor [0]? Seems like he has a good life. Which begs the question... when we talk about taxing the rich, who are we thinking of exactly? Someone living beyond their means, or below their means?
Keeping interest rates low keeps inflation high. Raising interest rates reduces inflation but also hurts asset prices and can potentially bankrupt some heavily indebted businesses. This is the balancing act the central banks have been trying to perform. The reality is that getting it wrong in either direction hurts the lower class: excessively high interest rates lead to high unemployment; excessively low interest rates lead to high inflation.
Neither "the rich" nor the "lower class" is a monolithic entity. The idea that they are monolithic allows for elites to disguise their selfish consolidation of power as evidence of being on the side of the people. For some obvious examples, Hitler successfully blamed the Jews for German hyperinflation, and Stalin successfully purged political enemies he deemed as "capitalist".
Being deluded into thinking ["the rich" nor the "lower class" are monolithic entities] is a recipe for abuse by those in power.
What on earth are you eating? From where? The average 800g loaf costs £1.36.
But to feed into your point about who suffers, if you had to give up your luxury loaf, you could still afford two average loaves in its place. People who could only afford a 80p loaf before are now going without.
The solution to allowing lower classes to have more stuff is to make it easier for everybody to produce more stuff.
Giving money CAN help with distribution of stuff, allowing poor people to purchase a larger share. But it requires lots of money given directly to the people that need it (vs allowing the gov't to spend it themselves). And also requires lots of high inflation. Imagine, for example, just giving everyone £10M to spend on whatever they want. This would not create any more stuff - but it would sure be a big equalizer for people buying that stuff!
But really - if we could all focus a bit more on production - allowing, encouraging, and celebrating it - then we'd all have a lot more stuff.
The fact that real wages haven't kept up with productivity means that we can't afford as much more stuff as is being produced, but we can still afford more stuff.
I'm not making a point about society, I'm making a point about what real wages mean.
Inflation was fixed in the U.S. when Reagan became president: https://www.pacificresearch.org/beating-back-inflation-team-...
Recent studies in fact show that wages and productivity are still linked: https://www.aspeninstitute.org/wp-content/uploads/2019/01/3....
And, finally other analyses show that studies on wage stagnation fail to take into account other factors, like the increase in non-wage benefits since the 70s: https://www.cato.org/projects/humanprogress/cost-of-living
These are the orgs who persistently try to sell trickle-down economics, minimal taxation, low regulation, and other discredited, disastrous, and irrational neoliberal policy arguments.
Many are also enthusiastic climate change denialists.
One man's propaganda is another man's truth, and vice versa. Do you really think the EPI is credible? https://www.influencewatch.org/non-profit/economic-policy-in...
> These are the orgs who persistently try to sell trickle-down economics
That's ironic, given that the phrase "trickle-down" was invented by leftists as a marketing tactic: https://www.aei.org/carpe-diem/thomas-sowell-on-the-trickle-...
> low regulation
Well, we can agree on that one at least.
> and other discredited, disastrous, and irrational neoliberal policy argument
Never mind. I guess we have nothing to agree on.
> Many are also enthusiastic climate change denialists.
You're clearly influenced by the outputs of a propaganda industry, not the outputs of credible independent research. See what I did there? I'll even one-up you with some links:
https://www.amazon.com/Unsettled-Climate-Science-Doesnt-Matt...
https://www.amazon.com/Apocalypse-Never-Environmental-Alarmi...
https://www.amazon.com/Fossil-Future-Flourishing-Requires-Ga...
How about giving some arguments?
Inflation in 1980, when Carter's presidency ended, was at 12% YoY, the highest they'd ever been in his entire presidency. Rising oil prices were not the only, or even primary, cause of inflation.
From the article: "In the early 1960s, a pair of Nobel Prize–winning economists, Paul Samuelson and Robert Solow, argued that in order to keep unemployment around 3 percent, U.S. policy makers should be willing to accept that "the price index might have to rise by as much as 4 to 5 percent a year. That much price rise would seem to be the necessary cost of high employment." Both economists were close to Kennedy, who pushed for low interest rates, hoping to spur rapid economic growth."
This idea turned out to be false.
Also from the article: "In the early 1960s, a pair of Nobel Prize–winning economists, Paul Samuelson and Robert Solow, argued that in order to keep unemployment around 3 percent, U.S. policy makers should be willing to accept that "the price index might have to rise by as much as 4 to 5 percent a year. That much price rise would seem to be the necessary cost of high employment." Both economists were close to Kennedy, who pushed for low interest rates, hoping to spur rapid economic growth."
This turned out to be true. And, lastly:
"In the 1970s, that is exactly what happened in the American economy, often by design. As Frum wrote, "The United States had consciously chosen to inflate its currency. It made that choice because of the political ideology and personal weakness of the men entrusted with the job of managing the American economy: their utopianism, their arrogance, and then finally their cowardice." The inflation that vaulted Reagan into office was not an accident or an incidental effect of policy. It was the result of deliberate policy choices."
He also vastly increased govt spending later in his term, despite the common narrative about being frugal.
"It was only after the election, when Volcker knew Carter had lost, that he really clamped down on the money supply. This illustrates an important point: Presidents get the Fed policy they want, no matter how “independent” the Fed may be. If there had been any doubt about this, it was settled in 1967, when Fed Chairman William McChesney Martin buckled under pressure from Lyndon Johnson and eased monetary policy even though Martin knew he should be tightening. This caused inflation to jump from 3 percent in 1967 to 4.7 percent in 1968 and 6.2 percent in 1969."
And:
"Few people now remember how much pressure there was on Reagan to get rid of Volcker and have the Fed run a more accommodating monetary policy. Yet Reagan not only supported Volcker publicly, he appointed like-minded people to the Fed whenever he had the chance. He reappointed Volcker to the chairmanship in 1983 and appointed Alan Greenspan to replace him in 1987.
The result of the Fed’s tight money policy was a far faster reduction in inflation than most economists thought feasible. From 12.5 percent in 1980, inflation fell to 8.9 percent in 1981 and 3.8 percent in 1982. It is difficult to explain just how remarkable this achievement was. Most economists would have considered it impossible in 1980, especially given the big 1981 tax cut, which economists schooled in Keynesian economics generally viewed as pouring gasoline on the fires of inflation."
There's plenty of other takes that contradict yours as well, like this one: https://www.forbes.com/sites/briandomitrovic/2011/02/07/volc...
The authors claims that the Reagan tax cuts were a key ingredient without which the inflation reduction may not have occurred at all, or it at least would have occurred at a much slower rate.
But, look at me not carrying on a "discussion" because I keep citing other sources. I should just respond with one single sentence stating my belief as fact, right?
Deflation = low employment, high buying power
People can pick between high employment and high buying power but they want both. Having both is impossible.
We're not talking about luxuries, we're talking about essentials. A nice iPhone is useless if you can't afford to feed your family or pay your energy bills - which is quite literally the situation many families in the UK are now finding themselves.
Says who? Why can't the people producing stuff simply take lower profit margins instead?
Companies don't use some formula where they give a percentage of what you create to you in return, they try to squeeze your wages down as low as possible. It doesn't matter if you produce 5000 bucks an hour or 100 bucks an hour in value for your company, they still want to pay you as little as possible.
Stuff like staff loyalty and retention has been to a large part abandoned in favor of simply keeping wages down.
Increasing the cost of potato supply, with - for example - extortionate energy and fuel prices means the potatoes don't get grown in the first place.
This is exactly what's been happening in the UK.
Literally.
Not I-read-this-in-an-econ-textbook hypothetically. But for real in the stores.
This means that the normal way of controlling inflation (e.g. taking money away from people so they can't spend it) is not going to work. And in many ways is probably counter productive as it is making supplying goods more difficult.
Just tax the rich (companies) properly. The resources and money is available. The current government chooses not to allocate it properly.
What is happening in the UK is to me 100% the result of the current Conservative Party and their policies.
The problem wouldn't be that they would leave. The problem would be that they would stay and become violent.
Eyeballing this, only 11 of the top 50 richest people in the UK have property as their source of wealth.
There's quite a number of very rich foreigners who economically have very little effect on the UK apart from monopolizing scarce inner city property.
Not the structure built on it (well ... not much ... and you can often just tax that through the resources it consumes).
Not only are you taxing the asset that can't flee the country, and which the poor typically don't own, you also incentivise efficient land usage (it becomes too expensive to be a NIMBY).
So? Let them be violent. What are they gonna do? They don't have guns like in 'Merica.
They're dangerous not because they'll be violent (they won't be), but because they hold missive political leverage.
Let them go, then, the earlier the better and threat them as pariah. What good do you expect to gain from them at that rate?
I'm not sure how it is in France though.
[1]: https://www.bloomberg.com/news/articles/2022-12-14/new-york-...
If people are reluctant to move to a nearby state to save on taxes theyre gonna be even more reluctant to move to a whole other country.
Why do tax reliefs and strategies always benefit the big companies with lots of lawyers.
Lower the taxes of the common folk. Their interests are not being met, but those of the lobbyists.
The rich have historically funded the arts (e.g. patronage), public buildings, public institutions (e.g. Carnegie's libraries).
Useful businesses that require high capital are difficult to get going if no one has any capital.
There's no reason the government couldn't fully fund those things instead.
In fact, "businesses that require high capital" are almost always funded by the government. It's called infrastructure spending.
And if you're talking about companies leaving France, then that's flimsy too. French citizens are among the richest in the world. International companies will pay higher taxes to access that market, and if they don't that's fine, a domestic company can step in or the government can snap up the productive capacity to invest in infrastructure.
See the Nixon era price controls and how they failed to get inflation under control.
Why can they do this? One reason is monopoly power- monopolies must be broken up.
But what else can be done (besides central bank driven demand destruction)? So instead of price controls, a more palatable solution is collective buying. This gives buyers more clout, allows them to bargain for lower prices.
https://en.wikipedia.org/wiki/Buyers_club
So we need more large non-profit buyers clubs, things like that. In the US, allow medicare to bargain with drug companies- it's insane that they can not.
An example where this works: my parents live in a gated community. They pay very little for the cable + internet + cell phone because the entire community has a deal with the provider.
Large retailers have this exact role: they certainly demand and get lower prices from their suppliers. We need a non-profit version of this, why should Walmart owners only benefit from their buying power?
(Well, the actual question is DO they have a monopoly, to which the answer is mostly no)
This was tried a lot in the 20th century (starting in the 19th century), usually emerging from the labour movement. I think in food retail and energy it has mostly failed or simply stopped making a difference. The profit margins of food retailers are small to begin with and easily lost by being a bit less efficient.
But Europe and the UK in particular has been using a similar model pretty successfully to keep drug prices low. Some argue that costs were merely shifted over to the U.S. I think this is only partially true.
Target has a NET 2.6% profit margin, Walmart has 1.9%, which are on the low side of what you'd expect for a sustainable commodity business. Tesco appears to have a GROSS (not net: this is after cost of goods but before salaries, etc.) margin of 6.5% and Sainsbury's has 7.6%. [1] Obviously their net profit margin is going to be less. This is hardly a company with a huge pricing power dynamic. If you want to see that, look at Apple (24.5% NET margin), Coca-Cola (22.2% NET margin), Visa (50.3% NET margin). (Note however that Coca-Cola's customers are its bottlers and Visa's customers are merchants so their pricing power might be invisible to end consumers)
https://www.theguardian.com/environment/ng-interactive/2021/...
My father once went to buy me diapers and returned with living room furniture set(ugly one also), because this was only one available since month or so, and he had to take it on the spot, because entire shipment will be gone in next few hours.
Then he had to go back to the diaper line and wait a few hours, because I wasn't impressed with the furniture enough to stop eating.
> "It happens when someone decides to raise the prices"
What would drive someone to raise the price of something with the confidence it will still sell at that price?
Rising demand and limited supply. Someone with a monopoly on all the widget production can arbitrarily decide to limit supply (e.g. your "limited edition" MTG card), which is a farce.
More often and importantly, in an environment where there are many producers of a commodity like toilet paper, they suffer input shortages or other increases to the cost of production/delivery. On and on this analysis goes until you get to your question, "why not stop the problem at the source". Where is the source in the price increase in toilet paper? Paper production costs are up? Ink costs are up? Shipping costs are up? Regulatory costs are up? Energy prices are up? Labor costs are up? Freeze all of these by government mandate?
As the guy cutting down trees for toilet paper with a shortage of gas for your chainsaw (meaning it costs more to run), do you want the cost of your product arbitrarily frozen with no regard to your input costs? What if the cost of your logging lease from the government increased? Can you raise the price of the toilet paper logs you're selling? No? How is that fair? What if landslides decreased your tree availability by half, but the number butts that needed wiping hasn't changed, or worse, has increased? Are you to sell your now scarce trees at the same price you always did? Or shall you sell to the highest bidder? What if the government says you can't auction the trees but must sell them for the same price? Maybe you look for off-the-books compensation - free tickets to the game, whatever. Someone still bears that increased cost.
If rising demand relative to limited supply is the actual source of the problem (too many people want toilet paper) why not stop the problem there by simply rationing toilet paper? Turns out this is what happens more frequently - rationing eggs, toilet paper, trying to prevent hoarding, scalping, etc.
Arbitrarily limiting the supply costs of a product or the demand for a product is a temporary solution at best.
> Gives anybody with elementary knowledge of econ a heart attack
Plainly, this isn't true. This opinion is not uncommon amongst so-called "Marxist economists" such as Richard Wolff. You can disagree that price controls and rationing would be the best way to solve the problem, but it is outright ignorant and needlessly insulting to make this claim.
If you fix prices, it just means the product keeps selling out quickly and most people can’t get the product.
This is why prices go up when there is a supply shock (like with eggs and the bird flu). There are fewer eggs available, and raising prices reduces demand until it matches the supply (as people who only kinda like eggs switch to cheaper alternatives). While it sucks that eggs are more expensive, at least you can still buy them if you really like eggs. With price controls, it becomes a crapshoot on whether you can get them or not.
Supermarkets earn a lot on eggs, always have.
Many people don't seem to learn from history. When something appeals to their emotions they follow it blindly.
But focusing on the alleged producers while fleecing the people in the middle (who are not the lower end either) is equally bad.
The people in the middle get high taxes, no real possiblity of ownership, no benefits of the bottom (state help) or of the top (the top just increases their own margins).
The top lobbies government and sets an unfair advantage for themselves, making the whole alleged democratic representation a farce.
The government should be more frugal with their won bureocracy and corruption and lower the taxes for the middle and bottom. The pretende that increasing conditions to the top will drip down is demonstrably false. It's mostly a rigged game, depending on where you started.
In theory, you could do this with toilet paper or loaves of bread too.
In the US, the Fed is not concerned about the bottom. They're solely concerned on the top. Check the numbers, zero interest rates did *not* trickle down. Instead they helped further increase the income inequality gap.
To blame to poor (read: the powerless) in any way, shape or form is, at best, misinformation. Worse it gives those responsible a free pass.
"I sit on a man's back choking him and making him carry me, and yet assure myself and others that I am sorry for him and wish to lighten his load by all means possible… except by getting off his back."
Leo Tolstoy
Those spending never reaches the "lower classes", and seldom even reach places where it would have the potential to increase productivity.
It's a tired, old argument that is done to justify stupid spending and enriching certain pockets while claiming to benefit all with a shoddy reasoning that omit the important details
1. Interest-free money for businesses to launch, grow, and advance. This leads to more goods in the market and thus lower prices
2. Free money straight to the people which means more money in the market and thus, inflation, empty shelves, etc.
His general point is that having interest-free money keeps existing players honest since newcomers can come in and start a competing business. Now that the money is drying up, existing players are increasing their moat.
We tried that. It all went into real estate and stocks and gave birth to a massive scam industry involving crypto and other get rich quick schemes as the world is full of stupid people and opportunists.
The average joe didn't see much trickle down to him unless he was already invested in real estate or stocks.
It was basically a wealth transfer. Housing is now about 30% more expensive than pre pandemic but take home wages are not.
Giving away free money without any strings attached to individuals or corporations is a bad idea.
Here, we're discussing a different paradigm: interest-free money vs free money. The issue is that interest-free money has little to no use for individuals. They can't put that interest-free money into an existing business and reap the returns. That's why most people just use that "interest-free" money for stocks (margin trading) and even then it wasn't fully interest-free.
The fundamental issue is how to give individuals interest-free money and have them see returns. Maybe using that money toward job training, or starting incubators that find small businesses and infuse them with money, mentorship, etc.
Tax-breaks doesn't mean giving money to businesses, they mean taking less money from businesses.
At least giving money directly to poor people is spent on things that can grow local economies. It is not perfect, but a lot more “stimulating” than giving money to institutions, corporations and rich people.
[1]: https://fortune.com/2023/03/20/is-federal-reserve-too-powerf...
What's the mechanism? A big loan is a big risk. With a big risk you can have either a big reward or a big failure. Smaller loans, smaller risks, smaller rewards and smaller failures. It's proportional. Why do you think of wealth redistribution?
Big risk are if you use that big loan to start a new business, but not if you dump it all on stocks and desirable real estate in hot or future hot areas.
Buying real estate seems sound only because real estate has some good returns last years. But real estate can go down real fast like in 2008.
Many people gambled money, be it stock, real estate, crypto. Some got very rich, some didn't, some went bankrupt, some will.
I don't believe in speculation and gambling. The market can always can catch you on the wrong foot.
I believe in hard work, well invested thoughts and patience. The results might not spectacular but I rather construct my future than gamble it.
For every new billionaire who got lucky there are 100 new beggars who had bad luck.
You tried the wrong thing. You shouldn't hand money without conditions. Instead of letting speculative assets grow, you should only let productive bussineses borrow money with low interests. Businesses which produce tangible goods and are creating jobs.
I mean if you blocked companies from acquiring their competitors sure.
Otherwise you just end up with the largest company treating acquisitions as an R&D expense.
The current UK government has not been doing much of this.
We did that in comunism with the known results.
Like they can build housing and windfarms, etc.
(The US actually has more public utilities than the UK.)
To a degree you can do it, have the state own companies. But it will kind of be economically inneficient, high position employees and some politicians will steal money. No one will have the motivation to push farther.
Most US transit systems are bad because the government puts even more effort into stopping them from working (via bad land use, incredibly slow decision making, power-harassing Andy Byford) than it does operating them.
It is only acceptable to give money to corporations.
Seems very convenient and totally unbiased
So I go and register an LTD company now I am eligible for free government money.
By contrast I now live abroad in a developing country and it's quite amazing how ripe small business is. Want to sell bread? Okay, bake it and sell it. You can even get it stocked at "convenience marts" easily enough since a that's often just some guy's lower floor transformed in a shop. Talk to the owner, who's probably the guy at the counter, and make a deal. If people like your bread, you're now officially a baker - congrats.
Make it easier for people to sell stuff, and there will be more stuff. And the prices of stuff will trend downwards. While money is a way around these issues, a regular joe who happens to make a great loaf of bread probably isn't especially keen on taking on 5-6 figures of debt just to see if selling his bread actually works, let alone being something he really wants to dedicate himself to.
Sure, you can raise the standards so much that only multi billion companies will be able to comply. In fact that is what we witness today. How many mom and pop shops still exist compared to the '60s?
Let's just be honest with ourselves that these regulations cause us to have less stuff, and consider when they are worth it, and when they are not.
And 100% - making it easier for individuals/businesses to comply with regulations is winners all around.
I don't believe "safe" and "good quality" are necessarily aligned. I live close to a dairy farm where they sell (their own) unpasturised milk. You bring your own bottle, fill it, and pay in the honesty box. The farmer has a (small) disclaimer suggesting that the milk be boiled prior to consumption, but I don't believe any of the local buyers actually do that.
Q: Should this be forbidden?
UNPROCESSED Raw Milk (animal species)
There should probably be a poster or something created by the FDA that quickly summarizes the risks involved with not performing each of the mandatory safety steps for normal retail 'Milk', and it would be helpful if more detailed information were available on a website and from the local health agencies.
Some states such as California do have special exemptions for "cottage" production of low risk foods such as bread.
https://www.cdph.ca.gov/Programs/CEH/DFDCS/Pages/FDBPrograms...
In other industries it's much easier to legally start selling things. Want to make screwdrivers and sell them to the local hardware store? Go ahead.
Bread was just an example. Just try to open a small corner shop and see how easy it is. Almost any small business has legal obstacles and a barrier as a high to entry as a large corporation. While the corporation can pass that barrier, little guys can't.
> Want to make screwdrivers and sell them to the local hardware store? Go ahead.
I doubt you can do it without having to pay attention to thousand of different regulations.
It's only when you start making all sorts of things for yourself that you really start to see how completely irrational the markup on many things is, which then begs the question - why isn't anybody simply dropping the prices by 50% and making a killing? And the only answer I can really see is because it's become really quite painful to be able to sell things in America, unless you want to go all-in on it.
I'd also add that in terms of food safety, the big concern is not small business, but big business. Buy food from an individual or a family and you're eating what they're also eating for dinner, and probably have been for decades. By contrast at e.g. McDonalds, those executives probably aren't touching their "product" except for photo ops. Their only motivation is to maximize profit, which often comes in the form of sacrifices in quality or even safety of what's sold. [1] And this has always been true. "The Jungle" wasn't about Joe Bob's streetside shop.
[1] - https://www.meatpoultry.com/articles/20650-lftb-to-be-classi...
Sure if you bake a few loaves of bread at home then that probably seems cheap in terms of ingredients. Now add in your labor, allocate costs for utilities and kitchen appliances, and figure out what it would cost to drive around all day delivering that bread to retailers. Suddenly it's not so cheap.
In some cases, business simply ignore regulations that that are obscure or inefficient to comply with; this leads to corruption and/or shadow economies.
In more cases, business is simply discouraged and doesn’t grow, or just doesn’t start at all.
The messy patchwork is city, (sometimes) county and state licensing and taxation framework in the US is a huge drag on small business.
I am not arguing for no regulation, licensing, or taxation, only that these entities recognize that requiring businesses to file paper tax returns every quarter, even if they have done zero business in a given city is a significant hindrance to business activity.
Excessive bureaucracy and excessive legislation have the perverse effect to seemingly protect the consumer while in reality helping the big players. Small players will go out of business while new players can't enter. It wouldn't be much surprise if powerful lobbies ask for such legislation while they pretend they think of the public good.
No one likes competition, even entering the bar as a new lawyer is difficult.
This is an excellent idea. Just lower the barrier whatever that barrier is.
Some people can think that lowering the entry barrier can result in subpar products and services but in fact the higher the competition, the higher the quality will be.
If this were true, then appliance manufacturers who produce higher-quality goods would be rewarded. But instead, we're at a weird state where appliances are still not cheap while also not being built to last.
Competition isn't guaranteed to keep the market honest; I'd argue once a market passes a certain size the number of people who can spot lemons becomes insignificant, and then it's a race to the bottom.
But yeah I think that's weird and destructive. Wouldn't it be better to prominently track and celebrate how much new housing is built?
OTOH, many people have all or most of their net-worth tied up in their home price. So even though NOTHING CHANGES when that price goes up or down, it has a psychological affect on them, who vote a lot.
Small plots of land are dominated by HOAs. Finding small plots of "unregulated" (no HOA) land often requires one to live very far from a city & decent grocery stores.
I'm not a big fan of the red tape of regulation & how regulations can be abused by large capital, but in the case of housing, HOAs are a bigger problem. Of course, there are also municipal regulations which require small plots of land to be more tightly regulated re: housing.
A solution is to improve house design which can be modularly expanded as one gains more wealth. That way, a family can start small & gradually build additions or attach additional modules as time goes on.
Debt is a heat sink, which is why Japan failed to spur inflation for two decades despite pulling every spending lever they could come up with. Debt kills economic dynamism, robbing the economy of the capital it requires to invest, expand.
To get to inflation out of borrowing + consumption, you need supply to not keep up. For most of the prior two decades for the US, supply kept up (courtesy of the China manufacturing juggernaut, which was a deflationary force for US consumers). The China effect has reached its end in terms of peaking, the next two decades will not see that kind of offset benefit (at least for the US).
Over the coming decades, the US will see similar problems that Japan did in terms of being unable to spark expected levels of inflation, despite high spending and debt problems. The cause will be the same, more and more of the economy will be locked up in the freezer as debt (typically yielding ever lower interest, in a downward spiral).
As long as execs and CEOs are free to reap the benefits brought by their staff without paying any of it back this problem will continue to be exasperated.
Another contributing factor in the matter is the fact that politicians seem to be immune from the affects of their policies.
This gives them very little incentive to actually help people at the bottom of the totem pole as their funding is coming from the very same people whom are essentially exploiting a desperate workforce.
Is a shelf stacker in Sainsburys a high skilled job? No. Is it absolutely crucial in order for Sainsburys to have a working business? Yes.
The same is true for the cleaner in a bank. If a bank is covered in dirt and stinks people are not going to bank there. Likewise with cleaners of trains and pretty much any other industry.
When you pair the fact that governments are funded by the same people whom are also funding a divisive narrative throughout all media outlets you end up with a grim and bleak outlook for society.
As someone that has come from below 0 to get a good job and try and get out of the council estate poverty cycle it really strikes a nerve when people act as though we get given handouts for nothing.
My mother worked her damn arse off through my childhood and continues to do so now as a 69 year old woman with chronic health issues. She has been left behind and forgotten by society and ill informed people seem to lack any ability to see beyond the outliers in shows like benefits Britain.
Err, votes are the biggest incentive for politicians.
> Is a shelf stacker in Sainsburys a high skilled job? No. Is it absolutely crucial in order for Sainsburys to have a working business? Yes.
Not really, they will soon use robots.
> The same is true for the cleaner in a bank. If a bank is covered in dirt and stinks people are not going to bank there. Likewise with cleaners of trains and pretty much any other industry.
I think in Japan cleaning is robotized already.
> When you pair the fact that governments are funded by the same people whom are also funding a divisive narrative throughout all media outlets you end up with a grim and bleak outlook for society.
Governments funded from taxpayers money.
Not sure if you are aware of the little old B word which was proven to have been based on a campaign of lies.
As for your remark about robots replacing shelf stackers and cleaners. I’ll leave that as the ill-informed and provocative comment it is.
Regarding government funding, governments spend public tax payer money, yes. Political parties receive their funding from private donors who ultimately end up expecting some kind of payback for their donation/bribe. Which ultimately comes out of the tax payer’s pocket.
This creates a cyclic system which is built to extract wealth from the bottom and middle classes in order to feed it back to the society’s richest people.
It can, and has at times, meant:
- Corporate bailouts and "welfare"
- Tax cuts
- Deregulation
- Lobbying / big money donations
Sometimes it means some of the above, other times it means all of the above. But the point is that no one on the fiscal conservative side of the aisle has ever come out and used the term "trickle down economics." Their opposition uses that word because it is loaded and it speaks to their base.
> Those spending never reaches the "lower classes"
What spending are you talking about? The OP was talking about removing barriers to creating business and attributed these barriers to good intentions. We can probably safely assume that the OP is a fiscal-conservative who favours deregulation and a business-friendly environment. And for what it's worth I am not trying to take one side over the other, you just lost me at "spending." The OP is talking about the exact opposite of spending. They are taking a "private solutions over public solutions" position. One where you spend less by having less overhead and red tape standing in the way of those who want to produce goods & services thus creating abundance of supply which lowers prices in addition to more jobs which puts more money in peoples' pockets.
Global ecosystems are already in a free fall, we don’t need to “encourage production” [by deregulating industries? perhaps getting rid of those pesky environmental and worker protections? (that’ll definitely help out those workers) ] and even more rapid resource consumption.
In the US the rate peaked at 91% on earnings over $400k - which is about $4m adjusted.
This is also why middle class tax rates are so high in Nordic countries, and most affluent nations with good social welfare structures. Taxing the rich isn't nearly enough. The US would have to shift to a much higher tax system for everyone, and the US middle class (which is spoiled by relatively low income tax rates) will not go for it (not yet anyway).
It you take all the cars from the top 1% and give them to the other 99%, how many additional cars do you suppose the average family will get? How about for houses? How about for haircuts?
Completely inaccurate. Giving people money that came from taxes does not increase the money supply.
Giving people money that came from selling bonds does not increase the money supply.
Only printing money increases the money supply.
So while one could nitpick some points about the specifics of government actions in relation to the monetary supply, even if we take all of your points for granted - there would almost certainly be inflation proportional to the amount given. The only way there would be no inflation is if this action didn't increase monetary velocity.
That's why, for instance, the Fed is currently raising interest rates. They want to 'gently' brake the economy (while trying to avoid breaking it) such that people stop spending so much money, and inflation cools down. By contrast countless countries have tried to solve inflation by simply naively tackling the problem.
People don't have enough money to buy chicken? Well obviously we just need to give them more money! And that's how you get Zimbabwe. [1] Alternatively, another direct approach is to say "Okay - companies may no longer charge more than $0.50 for a chicken." That's how you get Venezuela. [2]
[1] - https://www.theguardian.com/money/2016/may/14/zimbabwe-trill...
[2] - https://www.reuters.com/news/picture/venezuelas-empty-shelve...
> So tax $1.10 for every $1 redistributed
I would say this is also mostly innacurate. Velocity is one factor, but may or may not be the driving factor depending on circumstances.
If a global pandemic shuts down most of the manufacturing cities in China, and a war in Ukraine takes Russian energy and Ukrainian grain out of the supply equation, then the velocity of money is irrelevant compared to supply constraints.
Also, it's not just about the money supply. It's about who has the money and what they do with it.
Taking money from a rich person who might have had it tied up in stock, and giving it to a poor person who takes it to the grocery store - will not put anything more on the shelves in that grocery store. In the aggregate, it MUST do one of those three things. It may ALSO decrease the price of stock as it's sold by the rich people.
Clearly the economy is complicated, and it's hard to follow around the money. That's why I like to get back to fundamentals. Not even economics, but basically physics: We can't consume what isn't produced. Money is to some degree beside the point. If we want people (of any class) to have more stuff, then we must allow for that stuff to be produced.
Not exactly. Printing simply introduces new money supply. Borrowing (or selling bonds in our case) comes with a corresponding liability that decreases the supply over time in an aggregate amount greater than the original amount, and results in a corresponding difference in behavior from the borrower.
The government hands out that money, and people use it to buy more bonds, then the government hands out more money, and repeat. There is now more money in the world.
Yes, if you unwind everything it will go back down, but that's never actually done.
With a corresponding liability that will eventually remove more money from the system than was introduced. This is of course a dramatically different equation.
I defy you to find any policies in capitalist countries that are intended mainly to "help the poor." Even the liberals' beloved FDR claimed he was just trying to save capitalism with his social programs.
This is mostly true, but it isn’t always, and it isn’t a perfect formula.
For example, there are some goods that have zero or negligible marginal costs to provide. For example, a streaming service. If people use the extra money they get to buy Netflix subscriptions, it isn’t like there will suddenly be a shortage of Netflix streams. It doesn’t take many resources to add additional subscribers for Netflix… it isn’t exactly zero margin, but it is pretty damn close.
This is even somewhat true for some physical goods. There is a lot of latent productivity in our economy… factories only running at 50% capacity, for example, or mines that aren’t producing all the ore they can because the demand doesn’t exist for what they produce. If demand suddenly increases because there is more money being spent, they can increase productivity without putting strain on the productive capacity of the industry.
Obviously this is not infinite capacity, but it is why it is not as simple as “creating more money == 1 to 1 equivalent inflation”. In other words, you aren’t going to get a 10% inflation if you add 10% to the money supply. It would be some fraction of that 10%.
Which specific policies of this Conservative government amount to a change in the direction of giving more money to more nonproductive people? If anything, exactly the opposite has been happening, and yet inflation has been getting worse.
So tax wealth rather than income?
Uh, that's not true in the slightest?
Are you completely unaware of what's happened in the stock market and real estate market over the past year (these are the examples you provided lol)?
(something similar to that, I'm probably paraphrasing badly)
Cmon..I'm a brit too. I haven't seen riots. It's dangerous comment from you.
For people not in the UK: bread at a supermarket costs a quarter of that.
A 1kg wholewheat sourdough loaf. I'm a bit picky regarding bread and have actually started making my own in the last few months due, in part, to A) rising prices, B) manufacturer corner-cutting, and C) it's fun!
Regarding "A quarter of that", that is, IMHO, very optimistic. 1kg of bread for £1 would be quite the steal.
However I should have been more specific about it being sourdough, which is much more expensive to produce than "regular" bread at UK supermarkets.
The main winners of inflation are:
Adaptive over passive. As you mentioned, the average blue-collar wage growth always lags behind inflation. We aren't really seeing white-collar wage inflation either in the U.S. right now though - fast food workers are making $22/hour and Amazon drivers $18/hour, but FAANG engineers are getting laid off. Who are the winners then? The people who swap jobs or swap industries into ones with pricing power, or who found new businesses enabled by changing price structures. What we're seeeing in the U.S. now (with ~5% wage inflation) is that the 80% of wage earners who stay put at their job are getting ~0% raises, while the people switching are getting ~20% raises.
Debtors over savers. This is well documented in econ textbooks - inflation is a transfer of wealth from savers to debtors, because debtors can pay back their debts with less valuable money.
Governments over citizens. Partially this is because of government usually being a net debtor if it gets into a position where inflation happens, and partially it's because of the government's power to issue new currency. Plus tax revenue is usually a percentage of economic activity, so if all prices & wages increase by a certain percentage, so do tax revenues (and the government can bracket-creep you into higher tax brackets).
Poor people usually fare worse than rich people because of the adaptive vs. passive bulletpoint - they have fewer options and less awareness of options than richer people do. But the debtors-over-savers effect works in their favor: poor people usually have higher debts than rich people, and inflation is a form of debt jubilee. If, for example, they jump into a fast-growing new business started because of inflation (like Microsoft or Apple Computer in the 70s) it could be their ticket out of poverty.
Again, thanks.
Wouldn't this be true when interest rates are fixed only? People with variable rates will suffer as interest rates tend to spike during inflation and drive bankruptcy.
Also given wages lag inflation, the debt cost proceeds the payback.
So it feels a mixed case of, this will make some people loose out significantly, but those that can see the other side do well.
Wages only lag inflation if you stick with one job. If you're forever job-hopping, you get the new wage as soon as you land the new job, which could be within weeks.
Yes, this means that you have an incentive to never do any actual work and instead spend the time immediately looking for a new job. This is one of the positive feedback loops that turns inflation into hyperinflation and state failure. With everyone incentivized to look for new work rather than do the old work they signed up for, no actual work gets done. This exacerbates shortages, which causes further price hikes, which increases inflation, which means people have even more of an incentive to take very short jobs and not do them. It also prevents the formation of capital stock - nobody can get good at a job, or train on some expensive piece of machinery, if they need to take a new job tomorrow. That's why there's this compression of time horizons in countries undergoing inflationary episodes, where everything becomes focused around surviving until tomorrow rather than building for the long-term.
Also regarding job hopping, that may be true but taking a macro view of the world, most people don't or can't job hop that often, so I feel this is more the exception that the rule.
Generally I'm not convinced debt is a good thing during inflation as a broad rule. I feel it's more there are good exceptions if the right conditions align but this is not true to the average.
I believe that Andrew Bailey, the current Governor of the Bank of England, was criticised for exactly that last year.
https://www.theguardian.com/business/2022/feb/04/bank-of-eng...
Other than the sticker shock on the price of everything, it's not too bad for a lot of us.
based on what?
I think fewer folks are willing to talk about what lockdowns did to the supply chain.
What happens with those classes during deflation?
That's because you still have to pay wealth taxes in currency, not just by giving up your "wealth". You can't pay taxes in 1/4 of a house or painting.
Although I'm pretty sure an 80% wealth tax would just collapse the economy because people wouldn't own their homes or businesses anymore. Maybe you could take 80% of their debt too?
Inflation helps them as their assets are inflation-proof and it helps wipe out their debd.
Although, to be precise: Inflation hurts everybody maintaining their savings in some form of cash. Rich people with a large pile of cash also have a lot to lose.
In the medium term current retail prices will be offset by wage increases as long as inflation does not become a galloping inflation.
Individual "wealth" is so boring and flat and uninspired. Just Scrooge McDucks everywhere. Doesn't it feel like an archaic concept at this point? Such a narrow instantiation of humanity, can't die soon enough.
The system benefits those who get choose how it operates.
If by "natural" we mean somehow rooted in or consequent to human nature, then economies are very much natural. Human beings are social animals, and within this social context, we exchange goods and services for mutual benefit and for the sake of the common good. Economies become unnatural to the degree that they are detrimental and depart from human nature, in which case they cease to be economies to the degree that they fail. The details of economic practices are subject to a great deal of prudential judgement, and regulation is but a prudential determination of general principles of human nature to specific circumstances.
Economies don't live in some abstract realm, of course. They are the sum of human exchanges which themselves are a product of individual choices themselves influenced by culture and law. When the law is used by those in power to exploit everyone else for their own (myopically understood) benefit, we call that a tyranny.
But to be able to judge any of this requires a clear grasp of what is just. Recall that justice consists in rendering onto others what is their due.
The elite could simply dictate how societies would operate.
I’m sure the Roman plebeians also thought as much during drought induced famine; “the wealthy caused shortages by their greed”
Seems to be the natural response of the hyper-social-aware-confabulatory-ape-mind we, as humans possess.
But make no mistake, inflation is caused by a mismatch between societies expectation of productive capacity, and its real productive capacity.
Right now, real asset values are going down. Yes, some businesses have maintained nominal increases, but as consumers feel the squeeze so will asset real values. Asset valuation is based on real returns, and consumer behavior drives real returns.
Agree. But, even better in inflationary economy: Debt. You want to own massive assets with loads of debt.
When you point your finger, there's three point back at you
In fact, inflation is, in its current form, a tax levied by the government on all citizens--rich and poor. You are correct that the rich can find ways to hedge some of the effects of inflation, but that's expected as the rich have way more disposable income.
I just want to know for how long people will close their eyes to these policies (green energy stimulus, self-inflicted supply chain bottlenecks, QE and bailouts to ultra rich and party donors via deposit bailout).
Related Google:
https://www.google.com/search?q=did+brexit+impact+uk+food+pr...
Source:
- https://www.cnbc.com/amp/2022/12/01/brexit-has-added-6percen...
(roughly speaking the UK can print as much money as it has productive capacity, ie nurses or house builders, then pay those nurses to do something useful, then when there is too much money in nurses pockets and they go spending 4 pounds on bread, the government can tax the money back out of the economy. Either by taxing nurses, or you know million pound equity portfolios or billion dollar companies. The point is if inflation is too much money chasing too few productive capacity the government has a way to remove that money from the economy. How is the politics, but belief is the overton window)
Anyway, yes inflation bad. Solution is not to spend less but to tax more. Who you tax is a political choice. Personally Machine Gun Kelly is the brains here - rob the banks because that's where the money is. Tax the rich because that's where the money is.
(#) not sure what the right term is here. It seems so simple and obvious. But believer is close.
(might not be machine gun kelly)
When inflation is entrenched, wages and prices rise at a similar rate so that workers aren't too terribly effected but the value of financial assets don't keep up.
Inflation is insidious in that respect in that it compounds like interest, you might think 5% a year is not that much, but over 50 years the value of your assets are less than 10% than what they were.
It is harmful to the financial services industry in that people decide it is not worth investing. In 1979 Merrill Lynch was practically a penny stock because they didn't have any products to sell that people found attractive.
It is a horrendously boring argument which immigrants like me "cannot understand" because somehow or other we don't feel like we belong on either "side".
Sometimes it feels like the site is being astroturfed with progressive / class warfare type messages.
Othertimes I feel it's just the same old "eternal september" problem but with techies, a bunch of young idealistic kids fresh out of college who tend to think in black and white terms of "us" vs "them". I remember being this way as a teenager, not quite sure when I grew out of it.
I remember listening to punk rock and advocating for "anarchy" etc (I'm sure I got the idea listening to too much Sex Pistols)... SMH... We all took ourselves and our political views sooooo seriously at that age.... Thank god no one was listening to me back then. The difference between then and now is that my conversations were in person and shared amongst a few high school kids, now they're broadcast to the world, commented on, and amplified.
The more I think about it, I'm hoping its just kids being kids.
As a society, we pride ourselves on being logical yet we ignore the predictable consequences of injecting trillions into the economy amidst heavily damaged supply chains?
I'm not even referring to the downstream consequences such as the extreme fragility leading to blow ups like SVB. Just consider what might happen when you have trillions in new money competing for fewer goods.
In practice, this theory has been shown to be deeply flawed with grave consequence. Each iteration of this easing/tightening cycle seems to make the entire system more fragile at an exponential rate.
In essence, with each iteration, the extent of easing or intervention needed is increasing exponentially. Simultaneously, the system's capacity to withstand tightening or normalization is decreasing exponentially, requiring further interventions sooner and with greater severity.
I believe this is the basis for prognoses such as Balaji's on the US economic hegemony. When examining the exponential increase of these factors, it becomes evident that there is little space left before hyperinflation sets in. While I do not think the collapse will occur in 90 days, it may transpire in 900 or even 3000 days.
They make 0-1% margin [0] on their groceries - which by the way is very high in quality.
Essentially all their profit is from their annual membership fee.
You have to buy massive quantities of everything though. This works well if you live in a huge North American house and have an SUV to transport your month's (year's?) groceries.
[0] I saw a newsletter from Ryan Reeves and confirmed it by checking their financial statements
(Practically, Aldi/Lidl are where one goes for cheap UK groceries, or Farmfoods if you want frozen/nonperishables)
It wasn’t meant as a snide remark, only an observation about buying cheap food
They are now no longer exporting, and many countries in the world are getting 50% or more of their calories from import. Things will get better before they get worse.
It's not like they wouldn't like to export when they could. But they are not allowed to export due to various sanctions and limitations. It's almost like one side taking half of the world as hostages and letting them hunger, so they could harm and blame the other side.
But yes, "Carthago delenda est" no matter the costs and victims.
> Bread was up 20.8%, with pasta products and couscous up 25.3%
This is unjustified. Under no circumstances could this happen unless a) price gauging, or b) supply chain is drying up.
Edit for the ignorant:
> The UK is largely self-sufficient in production of grains, producing over 100% of domestic consumption of oats and barley and over 90% of wheat. Average yields over recent decades have been broadly stable but fluctuate from year to year as a result of better or worse weather. Increasingly unpredictable and extreme weather as a result of climate change is likely to exacerbate these fluctuations. Wheat yields in 2020 were the lowest since 1981 due to of unusually bad weather. However, preliminary data indicates they have since increased in 2021.
> In meat, milk, and eggs, the UK produces roughly equivalent volume to what it consumes. In 2020 it produced 61kg of meat, 227L of milk and 172 eggs per person per year. By value, the UK is a net importer of dairy and beef. This reflects UK consumer preferences for eating higher value products, while lower value products are exported.
> The UK produces a significant proportion of its other crop needs, including around 60% of sugar beet, 70% of potatoes and 80% of oilseeds. Apart from a recent pest-related reduction in oilseeds, these proportions have remained stable over the last ten years. Climate change represents a risk to production both in terms of making conditions unsuitable for some crops and allowing new pests to proliferate but it may also benefit new types of crops.
> The UK produces over 50% of vegetables consumed domestically, but only 16% of fruit. 93% of domestic consumption of fresh vegetables was fulfilled by domestic and European production, while fruit supply is more widely spread across the EU, Africa, the Americas, and the UK.
https://www.gov.uk/government/statistics/united-kingdom-food...
Electricity prices have sky rocketed in most of Europe.
[1] https://www.gov.uk/government/statistics/united-kingdom-food...
> This is unjustified. Under no circumstances could this happen unless a) price gauging, or b) supply chain is drying up.
Are you aware that both Russia and Ukraine are (normally) major exporters of grain?
> The UK is largely self-sufficient in production of grains, producing over 100% of domestic consumption of oats and barley and over 90% of wheat. Average yields over recent decades have been broadly stable but fluctuate from year to year as a result of better or worse weather. Increasingly unpredictable and extreme weather as a result of climate change is likely to exacerbate these fluctuations. Wheat yields in 2020 were the lowest since 1981 due to of unusually bad weather. However, preliminary data indicates they have since increased in 2021.
> The UK produces a significant proportion of its other crop needs, including around 60% of sugar beet, 70% of potatoes and 80% of oilseeds. Apart from a recent pest-related reduction in oilseeds, these proportions have remained stable over the last ten years. Climate change represents a risk to production both in terms of making conditions unsuitable for some crops and allowing new pests to proliferate but it may also benefit new types of crops.
> The UK produces over 50% of vegetables consumed domestically, but only 16% of fruit. 93% of domestic consumption of fresh vegetables was fulfilled by domestic and European production, while fruit supply is more widely spread across the EU, Africa, the Americas, and the UK.
https://www.gov.uk/government/statistics/united-kingdom-food...
Doesn't anybody read what they write?
What I understand is that inflation in high price goods gets passed on to the essential goods as a lifting tide lifts every boat but these can be decoupled.
No.
> This crypto coin can be distributed to everyone every month/week and with a expiry date.
So, you are reinventing ration cards, but with a lot of extra complication?
It... doesn't solve, or even address, inflation. It does create a black/gray market, though, with the usual attendant crime around such markets.
>The Edict on Maximum Prices is still the longest surviving piece of legislation from the period of the Tetrarchy. The Edict was criticized by Lactantius, a rhetorician from Nicomedia, who blamed the emperors for the inflation and told of fighting and bloodshed that erupted from price tampering.
>During the Crisis of the Third Century, Roman coinage had been greatly debased by the numerous emperors and usurpers who minted their own coins, using base metals to reduce the underlying metallic value of coins used to pay soldiers and public officials.
1. Russia's invasion of Ukraine hit energy prices. Europe-wide Ukraine has been a bit of a scapegoat however as Europe is in an energy crisis in large part due to poor planning. That is, complete dependence on Russian natural gas when for almost 10 years the US saw this coming and begged Europe to build LNG ports;
2. Ukraine produces a significant amount of wheat. The war has disrupted that supply and had a large effect on wheat prices. These are pretty much back down to pre-invasion levels but this brings us to;
3. Corporate profiteering. The solution to this is windfall profits taxation.
Remember when people can't afford to heat their homes and have enough to eat, that's not an inevitability to just throw your hands up at. It's a choice. The government could raises money through taxes and subsidize energy costs as a short-to-medium term measure if they wanted to.
The worst part of this is how many just throw their hands up and say there's nothing we can do other than raise interest rates.