Examining Inflation

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Mister Imperceptible
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Re: Examining Inflation

Post by Mister Imperceptible »

shemp wrote:
Tue Apr 27, 2021 12:59 pm
I'm don't include in $22K spending extra sugar baby gifts
hedonic adjustment

7Wannabe5
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Re: Examining Inflation

Post by 7Wannabe5 »

FI individuals have a great deal more optionality, access, flexibility and power to ride wave of inflation compared to individual who is working full-time to produce same spending flow absent large savings. The ability to take advantage of geo-arbitrage is obvious example, but it applies to arbitrage and anti-fragility in general.

OTOH, since there is no such thing as a free lunch, there is likely a security of boundary measure which should be added back into running expenses. I can’t quite puzzle it out but it seems to me that it might be reflected in costs underlying maintenance of contract law and this is also reflected in civil unrest when distribution of assets and incomes become greatly disparate.

It’s hard to find good numbers, but I think financial capital per human on Earth is around $48,000. It’s kind of interesting to consider what each human spread out on 2 acres of arable land (plus 2 acres desert/mountain) with $48,000 of tools and stuff would look like.

Qazwer
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Re: Examining Inflation

Post by Qazwer »

@7w5 - how did you estimate $48k?

7Wannabe5
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Re: Examining Inflation

Post by 7Wannabe5 »

@Qazwer:

Quick dirty internet search. I roughly averaged figures offered by a few different sites. It’s only accurate within order of magnitude due to give or take for land, debt, public holdings etc etc. I should note that I mentioned this model not because I am in favor of massive redistribution of wealth n stuff, but just because I like modeling.

nomadscientist
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Re: Examining Inflation

Post by nomadscientist »

1. Depends on personality type but I enjoy switching things around every now and then. I crave new experiences and am easily saturated/bored. Most people seem to be otherwise. But that doesn't matter to me.

2. While there's a great deal of propaganda from universities owned by states that contract law etc. come from states with entrenched power, universities, etc., the historical record shows otherwise. Contract is how sovereigns deal with one another. States that succeed in eliminating other sovereigns inside their domains decay entropically toward Brezhnevian negative sum bureaucratic looting. The Hanseatic League had contract despite no power, no state, drastic wealth inequality, while the USSR did not have contract, and increasingly the USA does not have contract. Mobile individuals approach sovereignty (by being difficult to harm, not by their ability to inflict harm) and thereby exert a pressure to uphold contract law.

JCD
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Re: Examining Inflation

Post by JCD »

shemp wrote:
Tue Apr 27, 2021 12:59 pm
For example, smart people get their dental work in Mexico, while the stupid complain endlessly about dental costs in the USA  rising faster than CPI inflation.
I don't disagree with your comment on college as many folks who go are supposed to be expanding their horizons, but I'm wondering how valid this is for a non-nomad lifestyle?  For you or I, going where the rich people aren't is a valid, easy to execute goal, but I'm imagining a optimistic scenario of a middle class house wife in New England paying for two tickets to get their kid's braces over a weekend.  Per a quick search it sounds like braces in the US cost $3-7k to $1k in Mexico plus two flights at $.5k-1k.  So far, your prediction holds out.  If you have insurance (most in the middle class do) you just use that and the costs go down to 1.5-3.5k, making it relatively competitive with Mexico without the hassle of flights or difficulties if anything goes wrong, to say nothing of the joys of the TSA.  Insurance costs money, but in my experience an employer doesn't give you more pay for not taking or using less insurance.  Depending on the employer you might have to contribute to the insurance cost, but oftentimes the cost-benefit analysis of insurance is much murkier when an employer is partly footing the bill.  For the poor, ACA is at least partly paid for by the gov't, which will also make this sort of analysis difficult.  Of course if you live on the border of Mexico, don't have kids or simply travel around full time, this all gets easier.

I know this is just an example, but for most people who are pre-FIRE there is a time and effort cost in increasing efficiency in this manner.  Much of Jacob's systems, as I read them, were built around the live in your castle approach to life, with what appeared to me to be a goal of being time neutral or even more efficient than the standard American lifestyle.  A lot of his writing also was Wheaton aware.  This go to Mexico sort of solution seems to require already being well versed in the lone wanderer approach to life which for most folks is not a skill set that is easily obtained while they continue to work.  My guess is that sort of efficiency (and that of your deflating lifestyle) is moving up the Wheaton scale using wandering techniques.  For those of us who are willing to wander and with less tying us down, your point is well heard and I don't doubt increasing skill has an impact on inflation.  However, I'm not sure it directly ties to intelligence as many decisions are tied around broader systems built to protect the so-called average person.  The key appears to me to realize these systems exist, yet can be questioned.  In other words, to understand what the elder fish means when he says "How's the water today?" to the younger fish.  At the very least, this element might just be ignorance rather than smarts.  Once you understand the existing system you do the deeper analysis and make better decisions, including possibly paying for US dental costs or going to Mexico.  The ability to run that analysis is definitely an intelligence question.
shemp wrote:
Tue Apr 27, 2021 12:59 pm
YouTube, music from smartphone, e-books and of course forums like ERE have eliminated my need to buy entertainment, so thats 100% deflation of the entertainment budget. Furthermore, quality of this modern electronic entertainment is higher than in the past (any book ever written, versus just what's in the library, etc) so that I no longer use other spending as pseudo entertainment.
I totally agree, but even if I go assume I spent 20k in 30 years for video games/books/movies/etc. (A not too unreasonable guess) or $650 a year, it really isn't that big an amount for a modern budget or say 68k for the average household.  Granted, inflation is a factor, but even in 1990 wages it is only 1% of median household income.  Perhaps our lifestyle overstates the average person's entertainment costs.   These are averages based upon 2019 BLS data for households which are on average 2.5 people, the entertainment budget on average is ~3k a years or ~1.2k per person.  About 1% of pre tax income for the average household.  

I think the eye popping numbers are the ~$21k that is spent on housing, ~$8k on food and ~$11k in transportation.  Right there the average spend is $40k, which way swamps out the savings of entertainment you or I might experience.  This is where the inflation is claimed to be experienced.  When digging into the data, sometimes the numbers seem reasonable, some a bit high and some insane. ~$120 a month per person in eating out is high, but that shouldn't be a budget ending event for a family making 82k pre tax. Most of the real cost in food seems to be the lack of skill in cooking. Not stupidity as much as ignorance, likely solved by the pandemic incidentally. That might be a deflationary force. Beyond cooking skills is gardening, but again, that depends on lifestyle, interest and time. If food is where inflation is, it is a solvable problem sans bread basket failures.

21k in housing is pretty questionable, particularly when it doesn't even include utilities.  In living in airbnbs in the US I have managed to keep way under 15k a year including utilities, without ever sharing a space--and that includes 15% charge airbnb makes as a market maker.  I'm certain that is partly impacted by California and New York, where costs are insane--I have seen property taxes for 100k homes in NY over 10k a year. I'm equally certain many people have way, way more house than they need. Also, if you have kids, in the US it seems like you need to be in a million dollar home (or at least a home 200k more expensive than average) to get a high scoring school. I don't have insight why it takes that sort of insane tax base and home price to get decent services.

However the BLS stat that really blows my mind is 11k transport.  I have been in Athens and Rome where their subway costs maybe 50 dollars a person per month or 1.5k for 2.5 people a year to get reasonable transport.  Granted that is a city, but even if you needed two cars due to location, it seems solvable at less than that. ~70 dollars a month per person in gas seems pretty reasonable, particularly when often two people work in a family. Still higher than train tickets, but that is only 2k out of 11k. Let's say you want to buy new as you don't trust your skill at picking used cars, at 20k(*) a piece for your two workers, your only talking about $6.5k loan payment + 2k in gas or 8.5k a year. That just leaves insurance at 2k a year or 10.5k.  That assumes a 6 year 0% loan, and maintenance costs roughly equal to the equity value you build up in paying for the car. It also assumes the moment you pay the cars off they magically turn to scrap and you do it all over again. That is the sort of crazy town thinking it takes to hit 11k a year average spend. Given cars on average live 12-13 years, these numbers don't make sense unless you just buy a 12 ton trucks that run on a T-rex equivalent amounts of oil per minute. This is a mix of the fish not knowing it is in water and that there are other ways things could work and social status via monetary games. Are the social games just stupidity? I'm not sure.

(*) There are not many 20k cars anymore, not because we can't make them but demand has dried up for them.

Having lived in a relatively efficient manner, I find these sorts of costs exorbitant at best and insanely wasteful at worst. I spend lots of time studying these numbers to understand what these people, my fellow countrymen, are doing, particularly when I know places like Europe don't look like this.

Inflation might end up created if they decide to double down on debt just after the government did a balance sheet repair for them. It is something akin to a cash out refinance of a home which you half way paid off a home with a 15 year mortgage and converted it to a 30 year mortgage. Your debt payments appear low, the cash returned is all concentrated in one payment while the debt isn't gone, it just has an extended duration. Since this happened for everyone all at once, if they all go to spend their money right now while our system is shaky from loss of businesses and supply chain issues, we might see inflation. What I cannot figure out is where the long term inflation would come from unless the US Gov't does UBI without any tax increases forever. However that is not the sort of inflation folks have been on about for the past decade (ala Chapwood index).

Instead it seems to me "true" inflation is primarily social games being played and the realization that the so called Jones have some fancy new thing you just gotta have to be presentable in society. Secondarily, "inflation" is a perception caused by incomes not going up in many areas that previously were manufacturing hubs. In my recent drive through Indiana I could see how those folks feel left behind and forgotten. Those folks who couldn't adjust to a new world. I don't think going to Mexico for dentistry or eliminating spend on entertainment is enough to really explain the inflation others feel. If you reject social convention, are you smarter or just different? Does the method of rejection have impact (e.g. Castle method vs Wanderer method) on inflation rates and can that be predicted ahead of time? If your world is left behind and your entire social system cannot seem to pivot, are you personally dumber for not finding a personal way to exit that herd? When those worlds are created, it becomes an opportunity for others to exploit due to the price differences. Are geographic arbitrators who go from high cost areas to low cost areas creating a sort of heat death, slowly exporting the wealth out of rich areas and eliminating the cheap areas by spending the wealth there? That is what the efficient markets hypothesis, an admittedly questionable theory to apply here, would suggest about any form of arbitrage discovered. Does that mean the smart-deflation will be arbitraged away in the long run?

7Wannabe5
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Re: Examining Inflation

Post by 7Wannabe5 »

“nomad scientist” wrote: Mobile individuals approach sovereignty (by being difficult to harm, not by their ability to inflict harm) and thereby exert a pressure to uphold contract law.
Gotcha. I wasn’t picturing it right because I was thinking about property law and fences. Modern finance is very dependent upon high technology which also allows for mobile digital sovereignty. Kind of like contracts can be “fenced” within an orbiting satellite. Therefore, problems are limited to what happens to your property in Albania when Albania “goes dark” and/or what happens to your property elsewhere if/when Albania “goes dark” while you are in Albania.

nomadscientist
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Re: Examining Inflation

Post by nomadscientist »

Not sure what you mean by contracts in satellites. There are interesting things happening today in smart contracts and so on, but I'm not talking necessarily talking about the future or about property-owners exclusively. Being mobile has been useful to people for centuries and has been useful to pure wage earners without financial assets too.

At root a contract is just an agreement that both sides intend to keep. It's at least uncomfortable to be in a position to not enforce the deal in any way, still less to perform your side of the bargain first. Many people promised defined benefit pensions were in this position and did not receive their defined benefit pensions. Mobile people often can't participate in these schemes, but can choose to live in one or two different jurisdictions that might not both become unfriendly to pensioners simultaneously. Just one example.

7Wannabe5
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Re: Examining Inflation

Post by 7Wannabe5 »

@nomadscientist:

Gotcha. I’m just stuck on focusing on the downside of the Tim Ferris outsource-everything-so-you-can-be-mobile model. As in, okay you are living large avoiding inflation and hanging on the beach in Albania, but meanwhile what the f is really going on in that fulfillment warehouse in Newark that is supposed to be shipping out your product? I also don’t quit grok how being able to avoid this level of hassle/responsibility is accounted for or “expensed” in much more passive investments.

nomadscientist
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Re: Examining Inflation

Post by nomadscientist »

I'm not a business owner, but I'd guess most business owners do not live near their suppliers. If that's a problem, there are other possibilities, such as WFA jobs and also jobs with local demand in many countries (e.g. English teacher).

I would guess an English teacher is less likely to be obsoleted than some elite technical professional. Pay's lower, but this is ERE.

Before the pandemic hit I was thinking about becoming a USA enrolled agent i.e. tax prepper. That's actually quite high up the value chain without either residency requirement or fixed hours.

It's right that you can't easily build up a stock of capital on hand without formal residency. That's a real disadvantage. If you really want to avoid it, though, there are options for formal residency, especially if you're not going to compete in the local labour market.

Mobile capital pays an uncompensated dividend to immobile capital. FIRE bloggers like to talk about leveraging tax advantaged accounts but there's little to stop the government simply deleting all that money if it gets annoying (e.g. causing inflation). Mobility of a fraction of that capital is one check on it.

7Wannabe5
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Re: Examining Inflation

Post by 7Wannabe5 »

@nomadscientist:

Gotcha. I was just being stupid-head. The difference between an FI lifestyle with annual spending level of $10,000 with $300,000 in passive investments vs. an FI lifestyle with annual spending level of $10,000 with $3,000,000 in passive investments which therefore has greater optionality/access/power to avoid inflation is “expensed” through increased taxation. Still relatively small potatoes though. My friend who had over $100 million in investments was obsessed with taxation. OTOH, I barely have to consider it at my level :lol:

Riggerjack
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Re: Examining Inflation

Post by Riggerjack »

What I cannot figure out is where the long term inflation would come from unless the US Gov't does UBI without any tax increases forever.
And this is different from our current constant deficit spending, how?
Are geographic arbitrators who go from high cost areas to low cost areas creating a sort of heat death, slowly exporting the wealth out of rich areas and eliminating the cheap areas by spending the wealth there?
Yes.

It seems to me as though you are trying to capture all value changes as inflation. It's an interesting perspective, but I am not sure what it is good for.

You came very close to something interesting with:
I don't have insight why it takes that sort of insane tax base and home price to get decent services.
+
When those worlds are created, it becomes an opportunity for others to exploit due to the price differences.
But beware, this path may lead to madness. :twisted:

JCD
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Re: Examining Inflation

Post by JCD »

Riggerjack wrote:
Tue May 04, 2021 7:56 pm
And this is different from our current constant deficit spending, how?
I'd give 4 theoretical answers.  The reality will require us to actually run the experiment.  Like Buffett, I'm excited to see the movie play out, but I can still speculate.

TL/DR:
- Velocity of money goes up
- Gov't spending might increase if UBI is "on top of" all other services
- Gov't spending thus far doesn't impact velocity more than elderly take away from velocity
- UBI fragilizes us just as we are weak and becomes a giant target to attack with no easy way to back it out.

Long form:

The first is that money in the hands of consumers may increase velocity.  In general the poor spend all of their money and do little savings, so more money in their hands == more spending.  Velocity of spending does matter and that will get into my next two points.

My second point is government spending may be stepped up dramatically if UBI were to continue, relative to any tax increases.  That additional spending might simply push us over some theoretical hump.  It would vary in likelihood based upon how much an increase we see.

The third is that the excess gov't spending post 2008 in general is investing that takes years to complete and in general is value add.  Adding more goods should lower the price of goods, so in theory in the long run government projects should be deflationary.  These would be the "shovel ready" projects.  The most obvious deflationary gov't investing in the internet and computer chips, eventually those things will generate value in excess of their cost.  That sort of effort is 10% +/- 10% of the overall budget, depending on the year.  The recent US gov't budget is practically 30% medical, 30% military, 30% Social Security and 10% everything else.  As best I can tell the medical element of the budget has seen the most inflation.  1973-2007 saw nearly 400% increase in Medicare / GDP, 23% increase in SS / GDP and 321% increase in Medicaid / GDP.  The elderly tend to spend less otherwise, thus decreasing demand is deflationary relative to the SS increase in spending.  Seeing our population head towards retirement, our budget will become more and more SS and even with that spending it seems likely to be deflationary, as the elderly must further restrict their spending.  Barring something killing the elderly in mass, it doesn't seem like our current gov't programs can't fight the forces of elderly deflation, at least for 60% of the budget.  So while government spending goes up, the elderly must be miserly with their money, lack of investing and thus velocity is likely to go/remain down.  

That leaves the military spending, which we'll get more into in the forth difference.  Overall, troop deployments are down relative to the 1970s, so is spending relative to GDP, even with the Iraq war.  This leaves crowding out effects as a big question.  Can we crowd out manufacturing that is done in China?  Or of the work done in the US, how many US consumers are competing with the military for resources?  It certainly isn't employment. Outside of medical care and the baby pig in the python, the millennials demand for education and soon housing, where will the general inflation come from?  Well the only answer I can give is the US might start crowding out industry just as China's population gets too old to keep producing our goods for cheap.  Maybe the geese will honk to Africa or elsewhere in Asia, but that is not a given.  Also as a service economy, why serve each other?  It's a game that does not obviously add value, see ERE's ideas around solving your own problems.  If crowding out happens, just pull people out of the service sector.  With UBI you might just crowd out enough people who were in the low wage service sector that, with UBI, choose not to return to work.  Add in the additional skills developed in the pandemic that might enable even more folks to opt out or choose to opt out via UBI.

In one of the most civilized internet communities I have seen, ERE has removed its political board.  Given economics and politics go hand in hand I hesitate to go into this, but I do feel it is important to understand a framework built around probability and risk.  If this goes too far for the mods, just remove this last section.

The forth answer is that the US has been using its hegemony and dollar status to spend more in order to provide dollars to the rest of the world.  That appears to have given rise to high finance and the fall of the US manufacturing sector.  The trade off as Peter Zeihan would say was security for international trade.  That system in Zeihan's view is falling apart due to a lack of an obvious threat, ala Russia.  In an approximate way, based on modern history a world Empire gets about 5-10% of additional money beyond GDP to play with and in return they play a sort of global cop and global financier.  See our budget for one of the few examples of the 5% claim, but in return you have to do the military spending, which as I covered we are not doing nearly as much anymore.  After going past 5% the rest of the world starts to fight those shackles, to say nothing of rising powers wanting a piece of the action.  If we have UBI I don't see how we finance our military to play global cop?  Eventually we will be dethroned by doing that, particularly if UBI becomes a "in addition to" perk the US claims.  Also UBI might further our social atomization.  You don't need money to create a community that works together, but if you use money to have "hands off" impersonal transactions with no need to create community and don't create community via jobs because of UBI, your society has greater risk of not coming together during a dramatic event.  See France's lack of cohesion in the 1930s to its ability to respond to WW2.  Community and political cohesion are clearly related topics and I suspect that UBI will not eliminate tensions, but will leave outside attacks of those tensions worse off.

Obviously this is just one of many factors that contribute to that level of problem, but I do believe it to be more of a risk.  If UBI then becomes a dependency, it will be hard to shut off.  Shovel ready projects on the other hand can be turned off at will if something goes wrong or when the economy recovers or inflation appears.  Shovel ready projects can create a sense of community for the workers and often are solving local concerns.  Not to say WPA style jobs don't also have the same sorts of problems, but at least there is a sense that you can vote the bums out if you don't like the policy.  In a sense I'm saying that UBI fragilizes us in a and that in turn, if it does generate inflation, is likely to be more difficult to later correct.  That at a time when our power is at its weakest makes economic attack on us more likely just to further weaken us.  Eventually if we lose our reserve currency status then all our assumptions about inflation completely change as well as expectations of what we can do.  This at a time when we will be full of elderly, with fewer young workers and a political tendency to blame foreigners (e.g. not getting young people from the outside) seems to make inflation more likely via UBI if we lose any significant economic warfare, to say nothing of a shooting war.
Riggerjack wrote:
Tue May 04, 2021 7:56 pm
It seems to me as though you are trying to capture all value changes as inflation. It's an interesting perspective, but I am not sure what it is good for.
If inflation is the generalized increase in prices, with CPI's little hacks set aside, it should be a relatively good measure.  It might be weak on housing and again the hacks, but that is the right style of idea.  However I have seen folks squawk about inflation for years, despite CPI not going anywhere.  Why?  What is the cause?  So I've been trying to understand their thinking.  The problem an expert has relating to a novice is known as the curse of knowledge.  If one has any skill in ERE you'd likely avoid inflation in a variety of ways.  So that would be the curse of knowledge as it were.  My effort is to genuinely grok what it is people are picking up and model it vs what other models have done.  It seems to me important to understanding a macro backdrop for investing, if nothing else.  One of the problems I find myself facing as an investor in our current environment is the first order thinking, ala peloton.  I have no idea why that would be valuable as a product or an investment.  Peloton seems like lifestyle inflation, not real inflation.  But is there real inflation and I don't just mean the current supply issues.  Have attitudes changed in some long term dramatic way?  Is this an inflection point?  If so what?  In some sense this is my effort to use IQ to overcome EQ limitations as I don't really know what it is like to be in the shoes of the people moaning about inflation.

I'd say there are a whole host of other personal and more generalized reasons like a tendency to OCD on subjects until I grok them, the fun of looking at history through physical purchases, the tendency to look at systems via example, and so on.
Riggerjack wrote:
Tue May 04, 2021 7:56 pm
You came very close to something interesting...
But beware, this path may lead to madness. :twisted:
May I say something interesting one day! It's the most I can hope for. As to your comment, where do I go to subscribe to your newsletter?  As an already mad man, I'd love to hear more on the topic!

Riggerjack
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Re: Examining Inflation

Post by Riggerjack »

Well, I have been looking at the same thing, from an entirely different perspective, for different purposes.

I consider cash to be just another commodity. Sometimes there is more than is needed, sometimes less (from the fed's perspective). So they play with rates. This is reflected in the exchange rate between cash and other commodities.

So from my perspective, QE has made for huge inflation. But that inflation isn't in staples (and thus CPI). It is in passive investments.

This doesn't require a manipulation of CPI. It just means that people are pushing the excess cash into real estate, stocks, bonds, gold, etc. These are changes CPI is specifically designed to not reflect.

And what happens when those markets correct? Very little money needs to change hands for current prices to change a lot.

Additionally, the fed is clearly comfortable with saying one thing, and doing another. Investors are trying to jump the feds' actions, and markets move in anticipation of fed decisions.

I can't find any clear signal in all that noise, so I dismissed it. For my purposes, it's garbage information. Too many layers of obfuscation to work with.

Instead, I map values, and value changes.

For instance, when I was in real estate investing, I mapped sales prices onto actual maps. From this, I get something like a third dimension to the map. Like a topo overlay, but related to price, rather than elevation.

So when sales start to move outside of the expected range, I can check for an anomaly, or if this is part of a trend.

Because I don't care about a general inflation, but specific value changes, I don't need to sweat trying to outguess the many other speculators trying to jump the fed.

But that means I don't play with bonds, bond funds, or dirivitives. It means that I watch actual, active markets, which aren't as efficient.

This probably is not much use to you, as you seem to be trying the opposite. You seem to be trying to tie all values to a value shift in cash. Handy, if one wants to compare passive investments, I guess. But when passive investment markets are this high, I step aside, and work active investment.

It just seems safer. YMMV.

Riggerjack
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Re: Examining Inflation

Post by Riggerjack »

And we seem to agree on the absolute folly of UBI, but again for different reasons.

Redistribution creates income inequality through asset appreciation. So UBI would just pump the balance sheets of asset holders at the cost of the tax base.

So I expect UBI when other market stabilization efforts fail.

Mister Imperceptible
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Re: Examining Inflation

Post by Mister Imperceptible »

We already have UBI.

It depends what assets you hold. House prices will be up 100% YoY and Lacy Hunt will still own bonds if the government publishes 1.5% CPI.

giskard
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Re: Examining Inflation

Post by giskard »

Mister Imperceptible wrote:
Thu May 06, 2021 6:46 pm
We already have UBI.

It depends what assets you hold. House prices will be up 100% YoY and Lacy Hunt will still own bonds if the government publishes 1.5% CPI.
:lol: wow

ducknald_don
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Re: Examining Inflation

Post by ducknald_don »

We do have UBI, for traditional retirees.

I think there is a place for it, the problem I have is every proponent of it sets the amount at an unaffordable level. I'd be for removing the progressive nature of income tax (at the lower levels) and offset that by an equivalent amount of UBI.

In the UK you don't start paying income tax until about £12,500 which saves the average individual £2,500 in tax. This isn't far from what most people get on job seekers allowance. Drop the personal allowance and JSA and replace it with a small UBI for everybody.
Riggerjack wrote:
Thu May 06, 2021 6:04 pm
Redistribution creates income inequality through asset appreciation.
How? Redistribution isn't creating any more money.

Campitor
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Re: Examining Inflation

Post by Campitor »

ducknald_don wrote:
Fri May 07, 2021 1:01 am
We do have UBI, for traditional retirees.
Technically that's not UBI. UBI means every adult gets a check regardless of employment status; there's no mean testing. Social Security is for retirees only.

JCD
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Re: Examining Inflation

Post by JCD »

Riggerjack wrote:
Thu May 06, 2021 6:04 pm
And we seem to agree on the absolute folly of UBI, but again for different reasons.
I don't think UBI is an absolute folly, it just looks like a relative folly given our current circumstances. In some circumstance it would, in my view, be a reasonable policy. When the facts change, I change my mind. I was only looking at UBI from a inflation perspective, not a 'universal' evaluation. I also suspect that nearly all economic actors argue for policies that talk their book. I try fairly hard not to do that, instead looking at what would truly lift all boats.

That being said, I try to play the market not on my own politics but from as neutral a position as possible. I have elsewhere been accused of applying my politics to my evaluation of monetary concerns, yet that isn't my goal. My approval or lack of approval to UBI should not play into my call in what the market will do. It is impossible to be completely neutral, how you think the world works will impact your bet, but you want to limit that as much as possible (e.g. If you think inflation is happening from UBI, it doesn't matter if your pro UBI, you'll want inflation hedges. That still requires you to predict what UBI will do, create inflation.).
Mister Imperceptible wrote:
Thu May 06, 2021 6:46 pm
It depends what assets you hold. House prices will be up 100% YoY and Lacy Hunt will still own bonds if the government publishes 1.5% CPI.
I'm curious if you think that 100% YoY will be the average of the US or the max in some specific US markets (ala Boise, ID region)?
ducknald_don wrote:
Fri May 07, 2021 1:01 am
We do have UBI, for traditional retirees.
...
How? Redistribution isn't creating any more money.
This idea did inform my thinking and evaluation, even if I don't think it is exactly UBI. Look at the "OK Boomer" phenomenon. When wealth is seen as plentiful there tends to be a lot more generosity. When wealth is seen as scarce there tends to be more "othering" and animosity. This is one of the risks I see in UBI vs federal spending. On the other hand, there has also been a lot of "othering" of "experts" due to the fact that the experts seem to have driven us into this ditch. Be it anti-fed sentiment or or * lives matter or defund the police, you see othering and system rejection. One of the greatest forms of this is wealth jealousy. Granted it usually isn't about the absolute level of wealth inequality, GINI isn't actually all that useful for this, it is about a feeling of progression or regression and local comparisons. When you feel like you are getting poorer and others are getting a helping hand 'from my money' you see increased class warfare. My view is much of inflation talk actually falls into this camp. I suspect UBI would intensify these feelings rather than lower the flames, but that is just an educated guess.

I can't speak for @Riggerjack regarding redistribution without creating more money, but if I were Riggerjack I'd say that the problem is that ultimately the money goes into the seller of the assets from those who are poor. Think Russia in the 1990s where it created shares of various industries and those who had no money sold the shares for cash today while the oligarchy bought them up on the cheap. If all the money pools to the top, UBI doesn't work without taxation. I don't know if Riggerjack would say this, but it seems obvious that taxation doesn't currently work, see Microsoft and the work it takes to deal with just one complex case. How many complex cases can you run at once? In effect the system needs to be rewritten and a UBI patch is not enough. Also I don't think Riggerjack specifically said UBI would be done without creating money. He might be assuming even if folks claimed it to be revenue neutral this year, next year they'll vote for 10% more spending because "we have to", like has happened in recent history....

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