a thread in which ilx interprets economics and finance, sometimes linen by linen*, and disagrees a lot (probably)

During a deflation money evaporates out of the economy. This is what happened during the financial crisis of 2008-2009. Trillions of dollars went *poof* in a few weeks. Cash flows disappear. Companies go bankrupt. Jobs disappear. Incomes disappear. Tax revenues shrink. Oh, and prices go down.

I remember some exception to supply & demand from school. During rough times, you can kinda price gouge on cheap food like potatoes & bread, but people will still buy them since they're so much cheaper than anything else. I guess ramen would fall into this now, or the fast food 'dollar' menu

Hang on … Lots of products types have come down in price over time, especially mass- manufactured products. Also, travel and holidays.

TVs are a good example. In the 1980s a 19 inch color TV would set you back about $400-500 (not adjusted for inflation) and it was massive and weighed a ton. Today you can get a much higher resolution, flat-screen 24-inch TV for under $100.

re: last few posts, doesnt this depend on the cause of inflation? Or even what inflation is

If the price of one good (or a range of goods reliant on that one good) goes up...is that inflation or relative value? Oil goes up and we call it inflation but oil goes down and we dont call it deflation

here's what i wrote in a post upthread about why deflation is undesirable

one reason why is that deflation is very undesirable as it leads to a "deflationary spiral": if consumers anticipate that prices will be lower tomorrow, they will delay purchasing, this then lowers demand, causing prices today to fall further, with causes firms to layoff workers and incomes to fall, which makes demand falls further, and so on. a positive inflation rate provides a "buffer" against deflation. this is especially important over the business cycle since prices tend to fall at the onset of a recession. during the early period of the great depression prices fell by something like 7% every year. central banks nowadays try really hard to avoid this

I get why deflation is bad and worse than inflation, but isn't there a distinction between prices rises/falls in one product or area and generalized inflation? Price rises/falls aren't necessarily inflation/deflation if its a change in relative value to other products?

yep

Absolutely true that that some things (like electrical goods) do come down in price over time due to technological change etc.

But meanwhile, most foods have gone up in price, quite a lot, in the last year.

Once again, if those prices don't come down (which I don't expect them to), then we will all remain relatively poorer (at least in relation to sustenance), because our money has not increased.

Theories of deflation and inflation don't seem to change that fact.

petrol has come down from its super high prices of a year or two ago.

Well the idea is that we don't want deflation and prices dropping due to deflation is bad. But prices of individual goods like oil or foods coming back down isn't bad - especially if those goods prices increased relative to other things (like incomes), that relationship changed.

A paprika costs x minutes of labour, if that goes up to 2x minutes of labour, its not bad if it then returns to x minutes of labour. Thats a relative change of value. But if the paprika AND the wages go up, then its still x minutes of labour

There’s a lot of variables behind price rises for food in the UK: with supply chains impacted by covid pandemic, Russia invasion of Ukraine, Brexit resulting in increase cost and complexity of trade, and weaker sterling being some of the big factors. And there’s extreme weather/impact of climate change.

It’s difficult to say what will happen in the future and when with much certainty.

My guess is: no, because people who sell it won't want to do that and we can't make it happen.

So we'll be stuck with these high (and higher) prices forever, though the amount of money we get doesn't go up.

― the pinefox, Friday, December 9, 2022 5:53 PM (yesterday)

food seems to me to be a category of goods on which we can rely on that classical economics stalwart to control, competition. what you're suggesting is that everybody will end up colluding to keep prices high, which is a real fear. that's why most countries have antitrust/competition enforcement agencies whose job it is to keep an eye out for anticompetitive behavior. what constitutes anticompetitive behavior is actually a pretty interesting question nowadays given the rise of big tech and has led to the rise of a school of thinking called "hipster antitrust" which is a name i think ilx will appreciate.

in case it gets lost in the big block of text:

https://www.competitionpolicyinternational.com/wp-content/uploads/2019/06/APRIL-2018-1-238x300.jpg

what you're suggesting is that everybody will end up colluding to keep prices high

...including the notorious WH Smith ballpoint pen cartel, outed upthread.

There is ample proof of food megacorps price-gouging, that shouldn’t really be a subject for debate.

Afaic, many consumer goods are not actually necessary, and so their comparative low prices now as opposed to 20, 10, or even 5 years ago doesn’t mean much, and I know I’m not alone in that. Fuel (for both transport and heat, etc) and food are the things that actually matter to consumers.

Like I know I’m in the minority here, but Id certainly rather spend $1200 less at the grocery store every year than have a fucking cheaper teevee.

Maybe not so much of a minority as you might think. whether you're indexing your opinion against ilx, or the USA, or the world there are plenty of people out there living hand to mouth or nearly so.

"hipster antitrust" which is a name i think ilx will appreciate.

haha I did appreciate it! I am about to read the linked article -- and just wanted to mention that the ad atop the page is for outsourcing administration of defined benefit plans ... because pensions are outdated

not to be confused with hipster anti-thrust - soaking isn't just for Mormons

Airline mergers and agricultural monopolies and oligopolies have raised consumer prices above competitive levels but lowered prices that suppliers can charge below market levels, she argues, transferring hundreds of billions of dollars each year to the economic elite.

I probably mentioned the issue re suppliers in one of the numerous threads where I "kinda lol but mostly sad"-ed how people in ag-towns loved to shop at wal-mart even while wal-mart was instrumental in decimating small to mid-size agricultural businesses by paying less for products than it took to produce them, which would often result in either: increased poverty (e.g. walmart's cheap prices are the most we can afford because we can barely survive because walmart pays us too little for our products) or consolidation of agricultural land/businesses to corporate interests outside the region.

What is meant by 'price-gouging'?

It is true that some things, like food to survive, are more important than others. But it would be misleading to say that many other things 'don't matter'. Music, fiction, poetry, are things that matter to many of us. If the prices of those became impossibly expensive, it would be bad. (I'm not saying that has actually happened or will happen.)

And again, as noted, self-checkouts rarely work without human assistants.

(Then I read further and saw that it was discussed, sorry.)

having spent half of last year on the self checkouts at work whilst waiting to move back into non self checkout book shop i work in i can confirm that people p much constantly need help.

meal deal not scanning correctly (ie they've picked a non complying item) , have a voucher/coupon for newspaper and unsure how to use it, not sure whether their multibuy has been processed correctly etc etc also when there is no staffed till available some people just want you to scan the items through for them cos they don't like using them full stop. sometimes shop was single staffed and you were encouraged to do other stuff like replen and just leave the self scan unattended, guaranteed 3 mins wouldnt pass without someone needing assistance.

^^ classic UK market failure and productivity gap problem - needing supply side solutions such as employee and customer training (how to use a self-service till) and infrastructure investment (calling out an engineer or purchasing some machines that actually work)

The classic uk solution - throw cheap labour at any problem if possible: ie put an “out of order” sign on any equipment that is malfunctioning or that requires investment to replace, and employ someone on minimum wage in its place and put up a “queue starts here” sign to manage the growing crowds and delays.

I understand people having trouble with self-checkout, but only because I’ve been a checkout person in a high-volume grocery store and it is actually pretty difficult work that should be better compensated.

That said, I don’t have problems with it, but that’s only because I still remember most PLU codes and scan like the wind.

I wasn't suggesting your experience isn't valid, PF, just noting that mine is very different (and it's been a very long time since I've been in a Waitrose)

And a tweet that I meant to add to the earlier discussion:

Nothing to drive me into a murderous rage than spending 30 minutes in a phone queue to perform a task that cannot be completed on the website while a recorded voice reminds me every 30 seconds that the website is convenient and fun.

— Laurie Voss moved to @se✧✧✧@masto✧✧✧.soc✧✧✧ (@seldo) March 1, 2021

^^ definitely one for the technological backward steps thread ...

Yes, agree with that tweet, essentially, and with Andrew F that the point re checkouts is, different people have had different experiences.

Poster Schlosser is probably correct to say that the problem reflects underinvestment in the machines / repair.

I emphasise FWIW that in this particular instance it is not a matter of customer incompetence but of repeated technical failure.

I realise that this thread is not primarily for discussing checkouts (though they are part of 'the economy').

Today I read this Guardian article on inflation and pay.

https://www.theguardian.com/business/2022/dec/11/it-is-soaring-energy-costs-fuelling-uk-inflation-not-humble-pay-rises

As far as I can see, it states that as pay is lower than the rising cost of items, pay rises would not be a bad thing.

I agree with that, except that I'm not sure where employers would get the money from.

Does it strike anyone that the labor shortage supposedly behind inflation (at least in the US) is artificial? Are immigration laws and policies getting in the way? Is labor not sufficiently empowered? Are price and wage expectations always in sync and a matter of political and economic power?

There is a class that can weather changes in prices.

a lot of jobs are shitty and low-paying, and people would prefer not to work shitty low-paying jobs if they don't have to? ... all i know is that I had a bunch of friends who were making way more on Covid unemployment than they ever had in their lives and it gave them a new perspective ...

https://www.aei.org/wp-content/uploads/2021/01/cpi2020-884x1024.png?x91208

the commodities book i mentioned upthread (the world for sale by javier blas and jack farchy of the FT) is pretty boring tbh

College Textbooks.

Those avaricious academic authors are the true financial winners of the last 20 years.

(Open access publishing for publicly funded research and scholarship is overdue and would help mitigate some of the costs, I think.)

(Price changes seem to have increased more rapidly for emblems of wealth, and the way they are priced seems more capricious (and unpredictable?), but I wonder if wages in those sectors have also increased and if they are as responsive to demand. Some seem opportunistic for rapid sector shifts vis a vis training workload.)

(A horrible example seems to be the restaurant industry where workers in fine dining are treated much worse than in chains but in which the value of the experience seems drastically overpriced or unaffordable.)

This Guardian article states that we could be paid more, and discusses potential effects.

https://www.theguardian.com/commentisfree/2022/dec/16/strikes-are-telling-us-something-low-wages-over

It reminds me to ask here:

Inflation goes up, say to 10% - meaning that my packet of spaghetti or tea is 10% more expensive. (I don't know why.)
Meanwhile pay doesn't - people are expected to accept a 3% pay rise, say. And the demand is: pay rises should match inflation.

That sounds good and I'd like to have the extra 10% pay. Or any pay, the way things are going.

But - how can employers afford it? Have they gained 10% more money through the 10% inflation - which they can then pass on in 10% more wages?

In some sectors (like education), this is not the case. Maybe in others it is?

I'm puzzled re: how employers are supposed to raise pay to match inflation.

Public sector pay rises could be met mostly through increases on big business taxes potentially targeting the sectors in which there's evidently broad enough profiteering alongside inflation (which we have been experiencing for a while). Private sector pay rises (where wages are frequently much higher than a public sector equivalent of that job) depend a lot more on the extent to which tax rises affect those profit margins (or investing sure) plus where the general market action is, but they're not as crucial (yet always more likely in our market-led realm).

Because they raised those prices 10% to take greater profits rather than because their own costs increased.
xp

To be fair that’s not true in all sectors but it is true that this bout of inflation is much more about profit-taking than most people realise. Witness record profits for car makers, oil companies etc

So, employers *are* making more profit due to inflation?

And inflation is due to companies putting up prices to make more profit?

Then, someone else could easily undercut them in price (as the price rise is a choice, not necessary)?

In some cases profits have also soared as a result of the relative return to normality post-pandemic and the supposed balancing act of increasing prices to combat demand exceeding supply in the wake of this (and also war if not also other 'unusual' factors e.g. climate change) producing both desired and undesired effects. Undercutting is not necessarily viable or preferable as competitors tend to be affected in the same ways (by those aforementioned supply/demand issues in some cases but also yes the same greed and cynicism in others).

I don't think I see why a return to normality would make prices higher, rather than lower.