Good sentences about inflation

by on March 15, 2013 at 10:22 am in Economics | Permalink

As free goods become increasingly plentiful throughout the economy, and people learn to recycle, swap and exchange goods without monetary transaction, it becomes very difficult to engineer an inflation problem.

That is from Izabella Kaminska.  Most of the post is about the gold market.

Bob Knaus March 15, 2013 at 10:51 am

A good sentence, but I think that “cheap goods” are much more important in this sense than “free goods”. Craigslist, eBay, and e-commerce in general have greatly increased the ease and quantity of recycles, swaps, and exchanges. The monetary transactions involved are considerably less than they would have been two decades ago, thus helping to keep inflation in check.

griggs March 15, 2013 at 11:02 am

| “As free goods become increasingly plentiful throughout the economy, and people learn to recycle, swap and exchange goods without monetary transaction, it becomes very difficult to engineer an inflation problem.” |

-

Nonsense.

‘Scarcity’ is the first law of basic economics — free goods do not & can not plentifully increase throughout an economy.

Barter exchange to avoid monetary transactions & inflation is a small-scale, last-resort economic tool… that can not possibly support a modern large-scale economy.

Engineering inflation is extremely easy if you are Ben Bernake… or run a national central-bank.
{U.S. general inflation now running at 8.4% annualized rate, according to just-released Labor Dept report — Thanks Ben!}

JWatts March 15, 2013 at 12:13 pm

U.S. general inflation now running at 8.4% annualized rate, according to just-released Labor Dept report

Can you reference that please?

dstraws March 15, 2013 at 2:27 pm

Look its a flying pig!!! Nice cherry pick. Calculated Risk has the numbers from the Cleveland Fed. All rates are about 2.5% except for the one including fuel which was the 8.5% due to the 180% uptick in fuel prices.

Dismalist March 15, 2013 at 11:14 am

Echo griggs: Nonsense!

derek March 15, 2013 at 11:41 am

Vibrant markets in used goods is an indication of low income. All we need is some inflation so that everyone would have more money.

Matt Waters March 15, 2013 at 12:08 pm

Or better mechanisms for matching used goods sellers and buyers. I get most books on my Kindle, but a few books which I needed but didn’t have a Kindle edition I got used and in good condition from Amazon. “Good” condition means only light wear and tear, with no markings or rips, which suits my purposes just fine. I also sold a couple of books on Amazon in what was a very efficient process.

In other words, you are assuming an increase in used goods is due to an income effect. However, the increase can also be due to a substitution effect. As it becomes cheaper to buy used goods, we will buy more used goods even if our income is constant.

Urso March 15, 2013 at 12:49 pm

Or higher quality of goods, leading to extended useful lifetimes.

prior_approval March 15, 2013 at 11:45 am

Well, the sentence would be more accurate with a single ‘re-’ added –

‘and people relearn to recycle, swap and exchange goods without monetary transaction’

Since this has been pretty the much the case thoughout history and all societies.

Or why a true Green Party will always exist.

Cliff March 15, 2013 at 12:43 pm

Where?

Ed March 15, 2013 at 11:56 am

My impression is that stuff now is amazingly cheap. What kills you are the rents.

john personna March 15, 2013 at 12:00 pm

That was my thought. People can dodge on a lot of things, but it’s hard to dodge on the rent.

Beans March 15, 2013 at 3:07 pm

Even rents can be mitigated through shared accommodations.

JWatts March 15, 2013 at 12:23 pm

Rents are definitely higher.
Source: http://www.census.gov/hhes/www/housing/census/historic/grossrents.html

Why is that? Is this primarily regulatory? Where we don’t let people live in housing that was as cheap as was built in the 1940′s/50′s? Is it population growth that is faster than new land becomes accessible? Other?

I suspect a large part is regulatory. Building codes are much more intensive and expensive than they were 30 years ago.

celestus March 15, 2013 at 12:36 pm

Supporting housing prices probably doesn’t help.

I’d also guess that rent per person per square foot has increased much less than rent. People are buying more space and not having to live with their parents/grandparents/(now ex-)spouses.

Urso March 15, 2013 at 12:53 pm

Yep. As recently as the early 70s my dad’s family was in a ~1000 sq ft house with a family of six. That would be literally undreamt of today. We are now three in a house of roughly that size and people talk about how small it is.

Dismalist March 15, 2013 at 6:43 pm

All the comments on rents are well taken. I particularly sympathize with Urso. However, when I first read the word “rents”, I thought of political rents!

Ed March 16, 2013 at 3:30 am

Actually I meant real estate, education/ credentials, insurance (particularly medical insurance), and taxes. Real estate is still a big part of it. Anything charge for basically just being around, because the organization is powerful enough to do it.

Brian Donohue March 16, 2013 at 9:39 am

I thought you were saying something along these lines. Great comment.

Matt Waters March 15, 2013 at 12:00 pm

Nah, used goods have supply and demand curves just like new goods, and shifting the demand curve outward increases their price just like new goods.

Steve Sailer is pretty cool March 15, 2013 at 1:57 pm

Gold is not going to be considered a commodity for much longer.

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Ethan A March 20, 2013 at 12:19 am

I think that the Idea of moving from a society and economy that is driven by the “mighty dollar”, to a barter system economy would be fascinating. It would be very interesting to observe how people decided to react in everyday transactions such as buying milk or a tank of gasoline. It could become difficult to operate in our everyday lives because there would be no measurement to determine how much of one item was equal to that of another. I think that people would eventually become adjusted and establish an unwritten understanding of the value of items that would help people decide just how many chickens would equal one cow, or how many cows would be equal to one truck. It would be interesting to see what items would rise to the top of the ladder in this new barter system. I believe that goods that satisfy needs such as food and water would become more valuable in this new economy because they are goods that are necessary for survival, and goods that satisfy wants could possibly loose some of their value due to the fact that they only satisfy wants and not needs. I also agree that in this new economy issues such as inflation would become a problem of the past. It would be difficult for inflation to exist because there would be no monetary transactions. This would allow for the value of goods to remain at a lower rate and could allow people to barter for more goods and services.

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