The Economy

Medical science is a "vibe" too, because there are people who insisted that ivermectin would treat Covid.

The whole thing that piece glosses over over a bit about prices being signals to people, is kind of important beyond his "Well, people with common sense know better" thing. But I won't go back and forth about that.

Regardless, what happens with "gouging" terminology is that like every populist thing a politician can capitalize on to take over more of our lives, it's never a limited thing pulled out once every decade in a time of an extreme emergency.

Kamala Harris signaled food producers, food retailers as the places where she is going to crack down on "gouging." That article isn't talking about that. She's not talking about a temporary severe supply shortage of gasoline after a hurricane. She's talking about the fact that people have been drowning under runaway prices, and her economic "policy" was to cynically hint that she will fix it with price controls. If you are going to throw populist crap at people, sorry, you have to own it fully. Now people want to pretend that isn't precisely what she said or was doing.

In the case of food -- the thing she pointed at specifically -- they are competitive, low margin businesses. Not that it really should matter. VOLUNTARY EXCHANGE should determine prices in a free society. But still.

She may be just throwing out populist red meat, but it's dangerous, and ignorant people eat it up. There is no "vibe" about the bread lines that price controls have led to in places that a government tried to artificially control prices and caused severe shortages, like the Soviet Union. It was pretty tangible.

Prices ran up in the first place because of runaway government spending that has distorted markets, and the disastrous monetization of the debt that fueled that spending. In short, they printed a crazy amount of dollars to enable stupid behavior, making each dollar worth a lot less, and it had an effect on the markets for a lot of goods and services and prices generally are up something like 25 percent over the last 4 years or so. The fact that the politicians who did the destructive things that caused that then turn around and propose price controls as their response, and people eat it up, is so frustrating. We are a nation of idiots.

 

It's not like we live in a small box where there are only two variables at work. "Inflation" doesn't necessarily flow into the price of beef. Inflation is simply expanding the money supply -- the negative effects of which can be seen in any number of places depending on the mechanism by which that money reaches people. But always in a way that creates a distortion that causes pain somewhere down the line. It's not always something that shows up entirely in the CPI.

Prices have run up over time because of the continual debasing of money. Prices have been on a march upward -- the dollar has lost 99 percent of its value under the current central ban. So it's not like it wasn't happening before 2021.

But there are also counteracting factors when they do what they do. With the technological gains of the last several decades, we likely should have been in a glorious period of things getting cheaper (like they did when America was becoming an industrial power), not more expensive, as a lot of new innovations got commoditized and the technology itself led to huge productivity gains that we have seen. That hasn't been the case. Instead, prices have continually risen, on the back of an artificially expanding money supply -- particularly via credict creation (which is a form of money). But if prices should have been coming down, but instead have been marching higher 2 percent a year, they are really robbing you of more than 2 percent -- they are taking away the falling prices people should have been profiting from.

Second, the way that they expand the money supply influences how the liquidity they inject gets absorbed by the "economy." Most of what we have seen since the turn they took after the financial crisis (with outright asset purchases), funneled that money into the banking system in a way that flowed to people who already had money. They didn't use the "free money" that largely benefited them (but not the unwashed masses) to consume -- they didn't need to. They used it to buy assets -- things like technology stocks, rare bottles of wine, artwork. And that is where you saw most of the effects of the "inflation." Companies used it to buy back stock to return money to shareholders. It set us up forasset bubbles that have the potential to cause financial devastation for everyone on the backside.

What happened during Covid was that the amount of debt monetization took off -- like they started doing it on steroids. At the same time, it was accompanied by a huge step up in fiscal "stimulus" -- what the central bank was monetizing. That put the newly created money into a much larger swath of people's pockets. ... and it's why we are seeing the effects more in the CPI and PPI.



Where the line goes vertical in that graph is where the effects on prices of a lot of goods and services became pronounced. It was that dramatic flooding the economy with "new money" and what it was for that created a surge in demand. Fiscally, they were mailing out checks to people every quarter and paying people not to work and coming up with a variety of multibillion dollar spending programs that were the equilavent of helicopter dropping a ton of new dollars in people's pockets. It's the monetary phenomenon -- debasing the money supply -- that is the inflation. The mechanism for doing it is what creates distortions -- whether it is housing bubbles when that is where it gets concentrated or stock market bubbles or consumer price inflation. And none of it works in a vaccuum. There are other things, such as how productive we are becoming on the back of innovation, which can countereffect what they are doing.

 

What if a lot of technologies have become so commoditized that they should have dropped in price way more than they have, except prices are staying higher than they otherwise would because of the extreme amount of monetary inflation we have seen?

Prices in the U.S. dropped significantly between around 1815 and 1860. The reason is that we saw a lot of innovation and industrial mechanization. This is the period that the U.S. became a power.

Right now, we should be in a similar period of our standards of living rising because of technological innovation followed by those innovations creating lower prices -- in the technologies themselves as they become easier to produce, but in a lot of other things that get cheaper to produce because of the productivity gains those technologies themselves spur.

But we have shit all over the dollar while it was happening. That $300 TV likely would have cost significantly less than $300 today as the technology became commoditized, without a central bank monetizing so much debt that it was robbing people via monetary inflation to do it.

It's simplistic (and not going to paint a picture of how "inflation" works) if you keep doing what you are doing. The price of any given thing that you are going to cherry pick doesn't correlate 1 to 1 with M2 money supply growth. The world's a bit more multifactorial than that.

 

Now explain why a company that needs to sell franchises in order to make its owners money would intentionally put in place things that hurt its franchisees for completely illogical reasons?

New franchisees (what McDonald's Corporation is out there selling) don't look at what they are potentially buying and say, "I'm not coming up with the millions of dollars you want me to fork over to you to own a McDonald's, only to have you fuck me in the operations of the franchise"?

Also, the franchise model that earns McDonald's Corp. money nets the company more when the franchise sells more stuff. Franchisees fork over a percentage of their sales. This is how McDonald's Corp. profits. Why exactly are they trying to make their franchises sell less (so they themselves earn less) in that silly connect-the-dots narrative?

 

Maybe it's not being put in place to hurt franchisees is the point.

Of course it is "intentionally" put in place by corporate. That is how the franchise model works. So you as a customer know that the McDonald's you go to 3,000 miles away will be consistent with the one you know somewhere else, they control EVERY aspect of the business. You can't have franchisees making decisions about the brand. If they want that, they wouldn't buy a McDonald's franchise.

That tweet threat pointed to it as something they control (like they don't control every aspect of the business for a reason) in order to fuck their francisees. And that seems highly unlikely (when you aren't trying to create narratives) because McDonald's BENEFITS from it's franchisees selling more. They aren't going to intentionally do things that make them sell less. McDonald's gets a percentage of revenues from its franchisees. It makes no sense that they are intentionally trying to come up with things that create fewer sales.