Inflation: explain it to me like I'm 5
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Anonymous
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Yes, it’s because the government gave people too much money. They didn’t need money, they just needed the government to allow businesses to open so that people could work again and earn money.
No, it will never go back to how it was before. That’s why it’s so bad and why so many people were warning about it. |
Anonymous
I'm always curious when people say this - who do you imagine is disincentivized to work? Are you disincentivized? Do high prices really pair up with disincentive to work, in your mind? We had a long run of cheap labor performed by immigrants (immigration dried up during covid) and people who were working multiple low-paying jobs. It did not take a lot of loosening in the job market -- a huge demand for blue collar workers and construction, some people dying of covid, some people getting better jobs once WFH opened them up to a broader group -- for the people working multiple service jobs to find a single job that paid the bills. That's not "nobody wants to work anymore" it's "people can do better than they were." |
Anonymous
Can you explain why our inflation is on par with Japan and SK and lower than almost all of Western Europe and Canada? |
Anonymous
| Basic economics. Money has less value because there is so much of it floating around. I’d say that one dollar has the value of about 25-35 cents at this point. |
Anonymous
| People who confuse monetary policy and fiscal policy are the worst! |
Anonymous
OP here. I meant the government was paying out heightened unemployment benefits during the pandemic, which disincentivized work, or at least that's what I'm thinking. I didn't mean that high prices themselves disincentivize work. I was more thinking that since many lower wage earners decided to stay home and collect benefits, businesses were forced to raise wages in order to lure them back, and then were in turn forced to raise prices to cover the higher wages. Your second paragraph is some good perspective for me for the other question I had which is "Where did all the workers go?" Thanks! |
Anonymous
What are you trying to allege? We had, for a long time, rapid and escalating inflation. This lasted a solid two years. The rate of inflation has slowed but there is still inflation. Prices are much higher now compared to three years ago and salaries have not kept up so the real wages of most people have declined. Or are you of the Paul Krugman school of "transitionary" inflation while ignoring that according to his definition, all inflation is transitionary. Western Europe and Canada also engaged in large scale stimulus spending during the COVID years. |
Anonymous
No, unemployment just doesn't pay that much, and IME people jump on opportunities to work for better wages when they are able to. Especially when cost of things they are buying is going up. More to the point, the labor market is tight across most income levels including those way above service job income let alone unemployment income. So that doesn't gel with the idea that people would rather be on unemployment; instead it suggests that the market works and they filled a higher-paying role. |
Anonymous
Sure. It’s because the US has the world’s reserve currency, so the rest of the world needs dollars to do things like buy oil and so on. Therefore, part of the inflation that would ordinarily result from the US’s money printing is squelched by other countries’ buying dollars. Other countries don’t have that luxury, so they feel the full brunt of their own money printing. In essence, the US has abused its role as the provider of the world’s reserve currency to live beyond its means for decades. Once we lose that status, the US will likely face serious economic collapse. |
Anonymous
| Simple: Ever wonder why it costs $5 for a cup of coffee at Starbucks? |
Anonymous
+1 |
Anonymous
| It’s basically caused when demand outstrips supply. For example, early in the pandemic the demand for goods from China soared for things like furniture, TV’s and almost everything for the home. The cost of shipping a freight container of goods from China to the US increased from about $2000 to almost $20,000 because the demand soared but the supply of ships and containers did not increase. That higher cost got passed along to consumers. That’s just one simple example. |
Anonymous
Seriously. The great COVID money giveaway was what - a grand total of $1200 per household? Two years ago? That doesn't amount to squat at this point. |
Anonymous
| I think an under-analyzed source of inflation is due to the lack of housing supply. That's allowed the prices of existing homes to rise rapidly since 2010. Anyone who owned a home in 2010 and was willing to move could sell, pay off their mortgage, pay cash for a new home, and still have proceeds left over. That meant a lot of money sloshing around the upper middle class, looking for a place to be spent. |
Anonymous
Housing costs are the number one driver of CPI right now, and the lack of supply is very well described. |