Inflation 101
When someone talks about "schools of economics" they are not referring to a group of buildings that teach students. All my classes in econ mentioned where particular theories resided among the "schools" of thought.
I don’t know which economics classes I took past macro and micro. If I remember correctly everyone was teaching Keynesian economics while Chicago people had a different way of looking at things.
All of this changed however in 2008 when the govt started subsidizing companies and bailing out failures.
I didn’t study any economic policy that said the US is a welfare state beholden to corporate entities and their rich backers.
When I opened this thread and saw that PW was participating in it, I thought to myself "finally, it is PW's time to shine. He has that finance degree which he brags about in every thread." All of that, just for him to say "inflation is when prices go up. The end."
You are a great big disappointment, PW!
To be fair, that's what inflation is, and it does seem like a lot of people here needed it explained.
To be fair, that's what inflation is, and it does seem like a lot of people here needed it explained.
I think most people could have done without this simplistic (and obviously incorrect) explanation of inflation:
Yeah I’m not a college professor. I’m not going to right with 100% accuracy. But my definitions are much better than the uneducated answers posters were giving.
There’s a difference between inflation, and drivers of inflation. But don’t take my word for it, go get a finance or Econ degree yourself
I don’t think that is inflation
Money supply has gone way up. If you we look at certain companies goods like Arizona ice tea, we see that their price didn’t change at all. Other peoples companies productes exhibited inflation if they raised their prices but everything else was more less equal
But AZ ice tea didn’t so their product price stayed the same and didn’t exhibit any inflation
Specifically I have a bachelors in science business management finance. I am happy my degree says BS and finance.
I have a biz bachelor's from a few years ago.
When did the biz department add the word "science" to anything? Water/oil.... or maybe water/snake oil?
Oh wait.... you mean Bach OF science
yea thank you for the correction, it doesnt really matter to me the specifics of the BS/BA
If your price stays the same then your price didn’t go up and your price didn’t experience inflation. Arizona ice tea doesn’t raise their prices when the supply of money changes. It pretty much destroys your guys’ argument. Gas is also similar here but that’s a special product.
Thats your problem ….
If I pay 50 cent more per Ice tea liter but I can buy a house 100k cheaper due to a correction (higher interest rates for example) I would be pretty dumb to say I suffer inflation …..
That is what the CPI basket is for .
Inflation isn’t about 1 or 2 commodities it’s about the cost of living .
https://www.imf.org/en/Publications/fand....
Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country.
try go see your employer and ask him a 10% wages increase saying the rate of inflation is that high because ice tea prices increase that much while house and car prices are tumbling ….
FWIW some commodities having a supply/demands problem creating inflation /deflation always gets resolve quickly .
True inflation created by a debasement of a currency ( lowering purchasing power) by creating (printing ) more currencies is always hard and long to get rid off and it’s felt almost everywhere -> higher cost of living -> inflation .
Higher egg prices , ice tea, etc do not always end up creating higher cost of living if other part of the economy crumble .
Not inflation . It’s just higher prices for w.e temporary reasons (union strike diminishing production for example ?) .
Nothing happens to Arizona ice tea. They make less profit than they would if they raised prices.
Arizona ice tea doesn’t raise their prices when the supply of money changes. It pretty much destroys your guys’ argument. Gas is also similar here but that’s a special product.
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Arizona tea isn't selling their tea at 99c out of the kindness of their hearts or to give back! It's their way of not having to spend money on advertising for a product that has a lot of name recognition. They'd probably take a bigger hit and piss off a lot of long-term customers if they were to change their 99c cans to 1.50 - possibly costing them more money on the rest of their products which would be disastrous to them.
It's the same strategy Costco uses with their 1.50 hotdogs. Costco loses money on their dogs and again it isn't to help their customers pay rent. It's because it attracts new customers, maintains the ones they have and keeps them paying their membership.
When someone talks about "schools of economics" they are not referring to a group of buildings that teach students. All my classes in econ mentioned where particular theories resided among the "schools" of thought.
Don't know how you misunderstood this. I have an econ degree and obviously was not talking about buildings.
Did you get a degree or even take a class in "Keynesian Economics"?
I didn't, and that's what I meant.
D2 seemed to think that PW would have studied only a particular school.
Arizona tea isn't selling their tea at 99c out of the kindness of their hearts or to give back! It's their way of not having to spend money on advertising for a product that has a lot of name recognition. They'd probably take a bigger hit and piss off a lot of long-term customers if they were to change their 99c cans to 1.50 - possibly costing them more money on the rest of t
I agree about Costco, but how is the can of tea a loss leader? Do they sell anything else? If not, their profits will soon drop to nothing if they don't raise prices. Even the Dollar Tree is now really the $1.25 tree.
It's important because a lot of people get this wrong. Somethign being inflationary doesn't mean there will be inflation. It has been common for people to argue the government debt isn't infationary because there was no inflation.
Even people who are clever enough to know far better confuse direction of forces with resultant movement.
I agree about Costco, but how is the can of tea a loss leader? Do they sell anything else? If not, their profits will soon drop to nothing if they don't raise prices. Even the Dollar Tree is now really the $1.25 tree.
They are making money on their 99c tea. They have a lot of other products and a pretty loyal base, apparently. Redesigning their cans from .99 xould potenital cause a lot of damage and negative attention, just like it would be idiotic and probably cost costco more money if they were to raise the price of their iconic hot dog to 1.75.
That would be like him saying my car will slow down when I go down a big hill because going down hill slows down a car and then you saying he was technically right despite my car actually slowing because I hit the breaks - not because I was going downhill.
He was right that the economy slowed back then. He was just wrong on why it slowed.
That would be like him saying my car will slow down when I go down a big hill because going down hill slows down a car and then you saying he was technically right despite my car actually slowing because I hit the breaks - not because I was going downhill.
He was right that the economy slowed back then. He was just wrong on why it slowed.
Seems like he may have been trying to be a bit funny with that particular wording, but I don't think the causal evaluation was that off base. The housing and bank crises of 2008 were definitely related to dishonesty and stupidity.
It's important because a lot of people get this wrong. Somethign being inflationary doesn't mean there will be inflation. It has been common for people to argue the government debt isn't infationary because there was no inflation.
Even people who are clever enough to know far better confuse direction of forces with resultant movement.
Probably because the « true » equation of inflation is money supply AND the velocity of money increasing .
Not just an increase of money supply .
And imho that is the big difference between QE of 2008 and the couple ones afterwards and the Covid QE that created massive inflation .
All the previous QE prior to Covid that increase money supply , end up in the hands of big corporations, banks, etc .
So that money just went in stock , gold or bonds where the velocity of money for the real economy (GDP) is like 0.
But obviously u saw a massive Increase in price for assets prices because the excess of money supply and velocity was restricted there .
Covid QE money supply increase went directly in people hands !
Velocity and that money supply went into the real economy -> inflation went crazy and GDP too .
There is no contradiction at all despite different inflation results .
Increase of money supply creates inflation , it just depends who got that money and where that money got spend …
It’s pretty hard to have inflation (higher cost of living ) when people have less money in their hand (reducing money supply) .
They just can’t freakn spend the money that don’t exist !
Price go down .
Seems like he may have been trying to be a bit funny with that particular wording, but I don't think the causal evaluation was that off base. The housing and bank crises of 2008 were definitely related to dishonesty and stupidity.
Yeah, but the point is that the dishonesty and stupidity lays at the feet of the government - not wall street. It was the govt that twisted the arms of banks to give everyone a mortgage in the name of fairness.
his exact next words were
"they all went to yale and harvard so we know they aren't dumb"
to which I thought to myself, didnt Bush go to Yale? and hes an idiot
Thats your problem ….If I pay 50 cent more per Ice tea liter but I can buy a house 100k cheaper due to a correction (higher interest rates for example) I would be pretty dumb to say I suffer inflation …..That is what the CPI basket is for .Inflation isn’t about 1 or 2 commodities it’s about the cost of living .
I am pretty sure I dont agree with any of this
Probably because the « true » equation of inflation is money supply AND the velocity of money increasing .Not just an increase of money supply .And imho that is the big difference between QE of 2008 and the couple ones afterwards and the Covid QE that created massive inflation .All the previous QE prior to Covid that increase money supply , end up in the hands of big corporati
The dot com bubble bursting +y2k fears ****ed the economy up, oh and 9/11. I rememeber after 9/11 seeing GM ads for trucks with like 0.9% APR for 6 years or something. maybe even 0%
so the govt makes borrowing money cheap and easy, and everyone gets a house and a home equity line and everyone with stocks see their portfolio skyrocket... it was a wild time with lots of money on the poker tables
until 2008 came
