rogersnm
Not op, but surgery strikes me as an example where there's effectively 0 pay-off until you finish everything. I personally wouldn't want the surgeon to sack it off without sewing me back up.
> The gas price shock is partly caused by a massive supply shock, but also an unwillingness of the cartel to increase supply, since they are doing just fine with the high prices.
I certainly agree with these points.
> I think we are seeing something similar with (for instance) Amazon. A gross simplification is that Amazon has achieved market dominance in many goods. This has reduced competition from smaller businesses, who can't compete in price. However those local stockholders would have been more resilient in the supply chain crisis than the Amazon ecosystem, because they bulk shipped stock to their warehouse (where they held stock), vs drop shipping it on demand from some distant place. This was costlier at the time, but arguably better for the environment and the resilience of the economy.
Retail shopping remains one of the most competitive sectors in the economy. It is true Amazon has raised the bar for service, choice and price, and benefits from economies of scale, which has made it difficult for other businesses to compete, however we’re very far from Amazon having a monopoly on retail shopping (you can also see this in their very slim margin on their retail business - if they were dominating, they’d have a substantially bigger margin.).
> Right now Amazon is not the cheapest on anything ... It doesn't fulfil its promise of being cheaper or faster.
It is somewhat unfair to say that Amazon is bad because smaller businesses cannot compete on price, and also say that Amazon is expensive and other providers are cheaper - both of these statements cannot be true.
You appear to be arguing that an increase in the money supply for "sweatable assets" comes at the cost of a reduction in the money supply for everything else. If this were true, you'd expect inflation in "sweatable assets", and deflation elsewhere, which is not what's observed (we currently have inflation in consumer goods, and if anything, housing & stocks are deflating).
> Inflation has very little to do with money velocity, interest rates, unemployment, wage rises, or any of that other supply side nonsense.
It seems to be a substantial leap to suggest that inflation has little to do with interest rates, given that Central Banks are tasked with managing inflation, and the main lever that they pull on are interest rates. A more typical view is that, in the long run, inflation depends on the quantity of money, and interest rates affect that quantity.
If I have Pounds (GBP) and I need to buy Oil and settle in Dollars (USD), I exchange my Pounds for Dollars, and then I exchange my Dollars for Oil. The price of the Oil in Dollars doesn't matter to me, only the overall price of the Oil in Pounds. It has no effect on how many Pounds I spend if the GBP:USD is weaker now than it was 1, 2 or 5 years ago, it only matters what the net GBP:Oil exchange rate is.
The only time strengthening/weakening of the Dollar can have an effect is if the price moves between the two exchanges, but given how short settlement windows are, this is somewhat irrelevant.
In a system of free-floating exchange rates and absent of supply side shocks, inflation is entirely a domestic phenomenon. The reason why the entire G7 have the same problem is because they all experienced the same pandemic, and their respective Central Banks all took the same action (to increase the money supply).
Foot notes:
[1] We have since layered a supply-side shock on top of this, which has pushed up energy prices in many currencies, but this is not because of the strengthening of the Dollar, it is because many nations wish to minimise the amount of Oil & Gas they buy from one of the largest exporters of said Oil & Gas, effectively reducing supply.
[2] A strong Dollar can cause problems when foreign nations borrow in Dollars (i.e. they borrow Dollars rather than their domestic currency). As the Dollar strengthens, this means they have to sacrifice much more of their local currency to repay the debt, which can cause significant problems. (Editors note: try not to borrow in someone else's currency if you can avoid it.)
> i take a loan at 2% to save in my bank’s savings offer of 5.25% then flow stays the same (i still spend on the same things each month) but money supply went up
Arguably the quantity of money the bank has created for you depends on the bank's net lending to you, so if you borrow money but hold it at the same institution, you haven't really increased the money supply at all.
It's arguably both a stock problem and a flow problem (MV = PQ). If the stock is constant and the flow increases, you get inflation. If the flow is constant and the stock increases, you get inflation.
> Inflation is always, everywhere, a lack of effective competition. In situations of excess supply you have very little to no inflation.
Excess supply at a given price level almost by definition means prices should trend downwards (it is price that ultimately balances supply and demand, and therefore it is too high a price that causes the relative excess of supply/lack of demand).
The price of commodities around the world is going up, by definition this cannot be due to a lack of competition - there must be something else at play.
Higher prices reflect a new equilibrium between the quantity of money and the quantity of goods and services being produced. Until that revised equilibrium is reached, you generally suffer from shortages of goods and rising prices.
> It's still very much in the system, the money supply hasn't changed at all.
The money supply doesn't need to decrease for inflation to stop, it just needs to stop increasing on an output-adjusted basis (and even then you need to wait for the equilibrium to be roughly reached before price levels stabilise).
It seems highly likely that inflation will remain at its current elevated level for at least another 12 months, beyond that horizon, the trajectory will be determined by what happens between now and then.
The only way to make a price cap work is to set all prices in the economy, which as you observe, is not possible. The much more practical solution to maintaining a stable general price level is to adequately control the quantity of money that exists.
The problem is a situation of run-away inflation can arise. This happens because the vast majority of the money supply is created by commercial banks lending activities (not central bank reserves as many seem to believe) - i.e. whenever any commercial bank lends, it creates new money.
When inflation goes up sharply, real interest rates can become sharply negative (as they are presently), and this provides an incentive to borrow money at negative real rates, where you profit by not having to repay as much in the future as you borrowed in real terms. This borrowing/lending activity itself then serves to further increase the money supply, until such time as interest rates are raised sufficiently so as to bring the (expected) real interest rate back into positive territory, thereby removing the profit incentive that drives marginal money creation.
Money isn't tied up in treasuries, money (loosely bank deposits and cash) and treasuries are two distinct concepts. You can trade money in exchange for treasuries, but then the previous holder of the treasuries has the money, and you have the treasuries, it doesn't tie the money up.
The amount of value captured in treasuries is a function of the total government debt outstanding, and a way to increase that value is to issue more Government debt (in which case, the money goes to the Government to then spend, it still isn't tied up), however the Government is actually disincentivised to do this as their cost of borrowing (interest rates) goes up.
> That’s why the last huge injection of money in 2008 didn’t cause inflation.
The "injection of money in 2008" (the creation of central bank reserves) didn't cause inflation because the overall quantity of broad money still feel over that time period (https://fred.stlouisfed.org/series/DDOI07USA648NWDB). This was because of the "credit crunch" occurring at the time, where commercial banks where massively reducing their lending activities. The same is not true now, the creation of additional central bank reserves in the past 2 years has directly translated into more broad money, and we have inflation as a result.