The Campbells soup example shows precisely why inflation can't be based on a single product, and why the Bureau of Labor Statistics employs a bunch of professionals to figure this issue out. If you measured inflation by the cost of a 60" television, you'd see a very different (and equally useless) chart.
The new car price chart says in tiny text "not adjusted for inflation".
At that point, I figured the rest of the article was likely to include similarly glaring methodology problems.
You can't eat a 60" tv or a car though. When it comes to surviving, the price of food (among others obviously) is what matters so I'd say it's fair to focus on that for the purpose of a writeup like this. Not saying this isn't cherry picked though.
That's not the point. (As I said, the 60" TV stat is equally useless for evaluating inflation.) Cherry-picking a single product like "Campbell's tomato soup" is not a valid methodology for measuring inflation. Not because it's edible or inedible, but because it's too small of a sample size. You can tell any story you like about inflation and the economy by carefully hand-picking a single item.
If the price of an egg doubles, but the price of butter halves, what do we conclude about inflation? Nothing; we need more information.
Food spending as a percent of income[1] has trended down drastically since the 1890s, though. It would be reasonable to look at the price of food in general, but cherry-picking one specific brand of one specific food item is absurd. It has as much to do with Campbell's marketing strategy as it does with food prices in general.
The point the article is making about the BLS statistics is they do not represent the ground truth of inflation, and indirectly how it impacts different economic classes, due to both difficulty in capturing real inflation AND there are ways to game it. There are reasons for BLS to come with reduced official inflation, same as other countries. The real inflation rate as experienced by the poor and middle class is normally higher then what BLS claims.
No matter how many, or how qualified the professionals, inflation can't really be measured. The goods change over time, and it's very subjective as to whether those changes justify price increases.
A messy and imperfect measure is the best we can do, which is definitely better than no measure at all. Though it also means we argue about inflation methodology calculations forever.
> A messy and imperfect measure is the best we can do, which is definitely better than no measure at all.
Not sure I agree. I think it leads to fundamentally misunderstanding the economy and an excessive focus on financial measures of the economy where other measures are available.
Largely I see inflation measurements as a model that degrades with time. Inflation of one year vs the last couple of years? Not too bad of a measure, things are similar enough. Inflation of this year's dollars vs dollars 50 years ago, much less useful as the things being purchased are radically different. Inflation comparing today's dollars to dollars 100-200 years ago. Largely worthless too many goods are either completely different or don't exist
This jumps from anecdata to cherry-picked stats to really speculative predictions. Some of them may be right, and there can be a real problem, but this is not well argued or thought through.
One could take several of these wild predictions and flip them the other way. The author says military strength will decay due to poor quality recruits. You could also imagine that a job that comes with housing, food, health care and eventually access to higher education would be more desirable, and the military could have its pick of better recruits. The author says we'll put in place a wealth tax ... but in an era where savings already lose their value from the higher inflation also predicted, one might expect that putting a wealth tax into effect would be politically more difficult than in a lower inflation environment (ie savers are already being taxed). Etc etc.
Article starts off with "printing too much money" and doesn't address the quoted rant about housing prices.
Housing prices are the key to cost of living and have gotten really bad in so many places.
There's nothing that complicated about this: we should build more housing, and especially legalize denser, more environmentally friendly housing where there's a market fort it, rather than just do "cheap via sprawl".
Denser housing is more expensive than less dense housing. I personally believe we should work on making commuting from farther distances more reliably fast. In some cities this would mean building more highways, but that solution has been villified recently. In more densely built out cities perhaps dedicated bus lanes that can help flip the equation from car based travel to bus based travel being the faster option. I'm not opposed to loosening codes to encourage organic growth of denser housing, but in summary I suppose I'm asking that we also take a serious look at extending and densifying the transportation network as well.
> Denser housing is more expensive than less dense housing. I personally believe we should work on making commuting from farther distances more reliably fast.
Is your housing cost comparison factoring that in? The cost of lengthy commutes and the infrastructure to support them?
> In some cities this would mean building more highways, but that solution has been villified recently.
Your first point is a good one, at some point the costs aren't worth it. Perhaps the solution there is toll roads instead of freeways because then a large portion of the costs are imposed on the users.
Your second point relates to your first because induced demand doesn't say that increasing road capacity isn't useful. It tells us that now instead getting coffee one exit away, maybe you go to the better place two exits away. Was that extra capacity worth it? You'd have to tally a lot of intangibles to answer that. My premise is that the more rapidly people can get around the city the better demand can meet supply, reducing costs and improving quality. Maybe one way to answer the question would be to look at comparable cities where one has built their transportation routes out heavily and another where they haven't and compare various costs and quality of life measures.
The cheapest housing in a lot of places is low-rise apartments because they're still cheap to build, and use land very efficiently.
But they're illegal in huge swathes of most cities in the US.
Having better transit systems would help a lot in the US, and frankly is pretty necessary in a lot of places. You just can't squeeze that many cars around. Transit is vastly more efficient in terms of the amount of people it can carry.
One thing I don't understand is why housing prices are not falling. When you are a landlord and the home doesn't rent, my first instinct would be to lower the price until people start showing up, yet this doesn't appear to be happening. Even the opposite, landlords would rather kick someone out that can't afford a hike in rent prices than to keep prices at the same level. To me it seems better to have a lower income occupied property than a high income but non-occupied property (effectively making the income 0, and with upkeep cost making it a net expense). Maybe there's some kind of mechanism I don't see because I'm not a landlord myself. How do landlords get the money to bridge the periods their properties are vacant?
Presumably most landlords do behave exactly as you say. But if property values are increasing quickly then the landlord is getting money there, rather than rent, and the value of rent becomes relatively smaller. Also when a property is vacant the only real upkeep cost is property tax, which is pretty small (just tax land [0]!).
You still have the opportunity cost of not renting, but if rents are also increasing fast then keeping a property empty for longer makes sense so you don't get stuck in a long-term lease at a low rent. Dunno how true this is, but anecdotally I notice commercial properties staying vacant for longer, presumably because they operate on long-term leases.
> On a summer day last year, a group of real estate tech executives gathered at a conference hall in Nashville to boast about one of their company’s signature products: software that uses a mysterious algorithm to help landlords push the highest possible rents on tenants.
> “Never before have we seen these numbers,” said Jay Parsons, a vice president of RealPage, as conventiongoers wandered by. Apartment rents had recently shot up by as much as 14.5%, he said in a video touting the company’s services. Turning to his colleague, Parsons asked: What role had the software played?
> “I think it’s driving it, quite honestly,” answered Andrew Bowen, another RealPage executive. “As a property manager, very few of us would be willing to actually raise rents double digits within a single month by doing it manually.”
> Camden’s turnover rates increased about 15 percentage points in 2006 after it implemented YieldStar, Campo, the company’s CEO, told a trade publication a few years later. But that wasn’t a problem for the firm: Despite having to replace more renters, its revenue grew by 7.4%.
> I think it’s driving it, quite honestly,” answered Andrew Bowen, another RealPage executive
I don't know why one should believe this just because this guy says it. His customers are landlords, of course he's going to say that his product helps them make more money.
> One thing I don't understand is why housing prices are not falling.
1. There is still lots of money out there. Unfortunately for Jerome, getting it out is way harder than pumping it. It might take years.
2. Lots of people are locked in low fixed-rates mortgages that they'd exit if they can refinance at the same rate. This makes the market non-liquid and keeps the prices artificially high even though the volume are down.
> When you are a landlord and the home doesn't rent, my first instinct would be to lower the price until people start showing up, yet this doesn't appear to be happening.
Most people in the US use a rental agency. These are greedy and sneaky people. That being said, rents are down in most of the US. The market is correcting but it came from a very high place.
Vacancy rates are quite low. Don't have national numbers but in nyc they're below 4%. Getting below 3% is pretty much impossible due to repairs and people moving so I would say landlords having vacant units is not a problem right now.
My takeaway from the article is that inflation is the root of all evil in the American economy right now and we're doomed. Which ignores the fact that we've been through bouts of inflation before and so have other countries. It doesn't explain why certain goods and services (housing, education, healthcare) have grown in cost much greater than others. That differentiated price growth is not explained away by inflation.
This article puts blame on government spending, but the problem is with unbalanced accumulation. Money can either flow in accumulative or distributive flows. It can pool or diffuse.
In order for the markets to function people need to be able to participate in them, which means people need an adequate supply of freely spendable money. How can money get to people? People with money need to give money to people without money. Without strings attached. That's the only way for people without money to get money that they're able to spend freely, is by getting it from the people or institutions that have money, no strings attached.
If wealthy people hoard money, for example if they hoard the entire money supply to the extent that everyone else is too sunk to participate in the markets, something's gonna give. There will eventually be a crisis in demand, a point where _people and organizations can no longer afford to participate_. They might not even be able to afford to get their basic needs met, to function or survive.
Without demurrage and/or adequate taxes on people/orgs with the most money, the only choice the government has to distribute money is lower the interest rate and hope that public institutions are finding excuses to give it to people ("jobs"). And then there is no way to deal with the ensuing inflation other than to whipsaw the other direction and constrict the money supply.
From my point of view the forces of accumulation and distribution need to be in balance. Currently they are not. It's not because of "the deficit". It's because we have inadequate tools for dealing with the hyperaccumulation, whether they be cultural practices or government tools.
Currency ought to be a collective good. If it's not serving coordination it's serving coordination failure.
> 6) Morality will degrade. Prostitution, drug use, nihilism, and degeneracy of every sort will explode.
> 7) America’s military will weaken dramatically as the quality of recruits plunges and we no longer have the money to properly maintain and supply our forces.
Tried and true right-wing media strategy: sucker people by talking about economic stress on the middle class (real issue), and gradually transition to moral hand-wringing and pumping the military-industrial complex (fake issues).
> 12) The government will institute a wealth tax. It will be sold as something to target the rich, but in practice, over time, they will be taking large amounts of money from people no one considers rich.
Interesting that they start by talking about how Campbell's soup is expensive and finish by talking about how the real threat is a wealth tax...
The 1970s were not an era of flat prices. They were an era of very high inflation. (14% a year, anyone? I was there. I'm pretty sure that people who are talking like the last year or two are the worst were not there in the 1970s.)
What changed was 1979-1981. The Fed pushed interest rates to the stratosphere. Inflation came down and stayed on a downward path from 1981 to 2020.
> Typically, the antiwork subreddit at Reddit is just what it sounds like. A bunch of lazy people complaining that they have to work instead of being rewarded for existing
Back when I was on there regularly I got more the vibe of low income people being tired of the system not working for them which is something I empathized with.
The new car price chart says in tiny text "not adjusted for inflation".
At that point, I figured the rest of the article was likely to include similarly glaring methodology problems.