A posting every day; an interesting idea every three months…
Some photos from a recent trip to Costco where we stocked up for holiday entertaining. A roast feeds a lot of (masked-for-safety) people inexpensively:
Wash it down with some red wine, reduced in price thanks to a glut in Australia:
Costco in Florida offers fun family fireworks for after dinner:
And the local Publix agrees that explosives and incendiaries are safe for the whole family:
Happy New Year to everyone!
Full post, including commentsMindy the Crippler’s primary leash, purchased in March 2021 from chewy.com:
The upper snap, useful for parking a dog outside of a shop, has failed. The same product is still available on chewy.com:
That’s a 33 percent price increase in what the human and AI minds at Chewy.com think that a consumer will be willing to pay. The leash is actually available at $30 from Zappos so maybe this proves our Native American elders correct. Consumers are now so accustomed to Bidenflation that they won’t question dramatically higher prices. This leads to price gouging ($5 worth, in this case) and massive profits.
There’s a sports car dealer next to our favorite taco place here in Jupiter. Their lot was jammed with cars, seemingly twice as full as in the summer. From their perspective, the car market turned about 30 days ago. They’re now paying only MSRP for nearly-new (500-mile) C8 Corvettes. What do they turn around and sell them for? It’s a little unclear because they say “We haven’t had a call for a Corvette in 3-4 weeks. The interest rates have killed demand.” (Note that this is contrary to my theory that we have enough deficit spending and inflation-indexed spending to have inflation even if nobody does any borrowing; see Can our government generate its own inflation spiral? and Economist answers my question about high interest rates and high deficits.)
How about real estate? There’s a house in our neighborhood (built by the MacArthur Foundation for middle-class and upper-middle-class people!) whose $3.35 million asking price in April 2022 seemed aggressive, particularly since there was no pool and the new owner would have to lease it back to the sellers until October when the sellers expected their new-built house to be ready.
Here’s the “value history”:
In June 2022, there actually was a greater fool who agreed to pay $3 million for this albatross. But then it seems that this person disappeared or wised up and the closing price was $2.4 million (last week):
If you’re depressed because you forgot to sell all of your assets in March 2022, this message from the taco place might be useful:
If you’re depressed because you were dumb enough to buy a house early in 2022 at early-2022 prices (looking in the mirror is painful!), you can be comforted that you don’t live in San Francisco, which MSNBC uses as shorthand for a truly crummy and crime-plagued urban environment (the MSNBC interviewer says, regarding a higher-crime Manhattan, “We’re worried this could be San Francisco”):
Readers: What are you seeing? Did we run off the cliff a few months ago and not notice until now?
Late-night political thought… If prices are guaranteed to keep spiraling upward due to everything the government spends being indexed (see Can our government generate its own inflation spiral?), might Republicans be better off losing all of the Senate and House races on Tuesday? Even if the Republicans earned majorities in both sides of Congress, Joe Biden would likely veto any legislation that cut spending or removed inflation indexing from spending. So the Republicans have no realistic chance of reducing inflation, any more than the Inflation Reduction Act. If they’re totally out of government, only the Democrats will be blamed for the next two years of inflation and maybe that would help Republicans win the White House as well as Congress in 2024.
A Nobel laureate who is always right agrees with me: “Republicans Have No Inflation Plan” (Paul Krugman, New York Times, 10/27).
If we ignore the government inflation spiral-from-indexing effect, how much pent-up inflation is there? I remarked on the price increase for frozen peas (Peaflation at Publix). On a more recent trip, the supermarket shelves were entirely bare for all brands of frozen peas. The market-clearing price for peas is obviously higher than even the new high-ish prices. Similarly, canned pumpkin was sold out. Our 42-inch-wide built-in fridge is dying. Is a Sub-Zero a ripoff at $14,000? Actually, it is underpriced and should go up further according to Econ 101 because it will take a year (a year!) for them to build and deliver one. The company is giving away fridges right now for way less than the market-clearing price.
Isn’t there a good chance that Americans will become disenchanted with whoever wins in 2022? And some might remember Republicans’ absurd campaign promises. Here’s a medical doctor promising to “fix” inflation, which is as plausible as a Scientologist being significantly helpful at a car accident scene (Tom Cruise video; go about 1 minute in).
Even if Dr. Oz was in possession of an economic policy that would Whip Inflation Now, Joe Biden would surely veto it. Sprinkling a few Republicans into Congress isn’t going to turn around the policies that got the U.S. into this inflationary mess. Will Republicans truly gain by promising to stop inflation and then not stopping it?
Here are the House Republicans implying that voting for them will somehow stop “the highest inflation in 40 years”:
Here’s a promise from the Republican House leader to “lead the way” on inflation:
On the Senate side, here’s Mitch:
But Congress has never been able to cut spending (which spirals upward with inflation automatically). And the Republicans won’t support tax increases. So the deficit spending will continue even if Mitch McConnell and fellow Republicans can win a majority.
Full post, including commentsHappy Tax Day if you filed for an extension.
What’s different this year? Inflation means that ordinary schlubs can pay tax rates that were sold as applying only to the elite. The Obamacare “Net Investment Income Tax” of 3.8 percent on top of ordinary income and capital gains taxes, for example, wasn’t supposed to hit Joe Average. But what if Joe Average tried to escape the lockdowns and school closures in California by selling a house and moving to Texas? Adjusted for inflation in the real estate market, his house might not have gone up in value at all. In other words, his purchasing power from selling the house to buy a different house wouldn’t have changed (probably reduced, actually, in terms of how big a house in Austin can be purchased with the proceeds from selling a house in California). But almost surely he will have more than $250,000 in nominal gains. This is all an illusory inflation-driven “gain” and the tax code recognizes that to a small extent by excluding the first $250,000 of house price inflation. But on the rest of it, Joe will have to pay California capital gains tax, Federal capital gains tax, and an additional 3.8 percent for Obamacare. From the IRS:
The Net Investment Income Tax does not apply to any amount of gain that is excluded from gross income for regular income tax purposes. The pre-existing statutory exclusion in section 121 exempts the first $250,000 ($500,000 in the case of a married couple) of gain recognized on the sale of a principal residence from gross income for regular income tax purposes and, thus, from the NIIT.
How about a wage slave? If he/she/ze/they was earning $170,000 in 2019 and got bumped to $210,000 in 2021, his/her/zir/their spending power is actually lower due to raging inflation. Yet now he/she/ze/they is subject to the 0.9 percent Obamacare “Additional Medicare Tax” due to having income over a fixed threshold of $200,000 (soon to be the price of a Diet Coke?).
From Delray Beach, Levy and Associates:
What kind of people are paying the bill for all of the great work done by Congress and Joe Biden? From the haters at Heritage Foundation:
In 2018, due to the cruel policies of the dictator Donald Trump, the rich Americans who earned 21 percent of all income paid only 40 percent of income taxes. Separately, keep in mind that the above chart relates to cash income. A person could be in the “Bottom 50%” with $0 in W-2 income and still have a spending power and lifestyle better than someone earning $50,000 per year (in the “25%-50%” column) due to means-tested public housing, health care, SNAP/EBT, smartphone, and broadband. See “The Work versus Welfare Trade‐Off: 2013” (CATO) for the states where being on welfare leads to a larger spending power than working at the median wage. Maskachusetts is #3 in Table 4, with welfare being worth 118% of median salary.
Full post, including commentsIn 2017, I purchased a single-serve coffee maker for $29.88:
This machine has brewed its last cup. How much is the new one?
The $42.39 price is 42 percent inflation relative to the $29.88 price paid in 2017. What does the official government site say? It should cost $35.88 (20 percent inflation).
Separately, if you don’t like the weak Keurig coffee, you might enjoy this one though it is slightly more effort. Keurig is trying to be French press coffee, but with minimal contact time between water and grounds. A standard drip machine like this yields a more intense drink.
Full post, including commentsBack in June, I wondered Could our epic deficits drive inflation no matter how high the Fed raises rates? and this question was followed up Economist answers my question about high interest rates and high deficits. Here’s the NYT front page, September 22:
The government has been shoveling out cash to people who don’t do anything to earn it while at the same time trying to stanch the inflation bleeding with high interest rates charged to those who might have a productive purchase for money. Our best and brightest can’t figure out why inflation persists.
Related:
Until a few months ago, we paid $1.99 for 16 oz. of frozen peas. Now it is $2.29 for 15 oz. That’s 23 percent inflation.
Related:
In the spring of 2020, the typical state governor ordered his/her/zir/their subjects to stay home and watch TV or play Xbox. A lot of us are still following the habits that we developed in 2020. The U.S. labor force participation rate:
A business executive with whom I talked in Oslo said “it takes three months to create a new habit,” which was his explanation for why a fair number of Norwegians haven’t returned to their pre-coronapanic work habits. (World Bank stats show that Norwegians are much more likely to work than Americans, with participation rates of 66 percent versus 61 percent. Part of this may be a difference in family law. It is not straightforward in Norway to live comfortably off a prior sexual relationship, either by alimony or child support. The country offers no-fault (“unilateral”) divorce, but anecdotally, profits are limited to about 10 percent of the defendant’s pre-tax income. Having sex with a high-income defendant and harvesting child support is even less lucrative.)
I’m wondering if there is some pent-up inflation that we’ve built into the U.S. economy by teaching people how great life at home with a plethora of screens can be. Getting Americans back to work at previous levels plainly will require paying them more than what employers are currently paying.
We saw evidence of this in every state that we visited this summer between Florida and Oshkosh, Wisconsin. A coffee shop near Great Smoky Mountain National Park:
Indianapolis:
A hotel manager in Oshkosh explained that he had to fly people in from Florida and Georgia to work during the peak EAA AirVenture week.
An airport manager retired in May 2021 and, as of July 2022, the city of Prairie du Chien had not been able to find a replacement at the wages offered (about $63,000 per year, plus benefits worth another $40,000 per year?):
The saddest photo of all… a homemade donut shop with shortened hours in Chattanooga:
What do we think? Is there a round of inflation built into our society that is yet to hit us? Either employers will have to raise wages to get Americans off our couches or money will need to be borrowed/printed by the government to fund all of the means-tested benefits to which the couch-dwellers are entitled (raising tax rates is not an option, I don’t think, for increasing revenue because rates are already set to the level that maximizes taxes actually collected). Both of these changes would be inflationary.
(Norway, incidentally, has no help-wanted signs nor, as far as I could tell given my illiteracy, any apology signs. The locals say that service businesses are short-staffed and that quality has suffered, but that all recruiting is done online so customers won’t see signs encouraging job applications.)
Related:
From May 9, 2022, S&P 500 down at least 6 percent since Joe Biden took office:
Who wants to get bragging rights by calling the bottom on this market slide? I’m going to say that the correct value is 3,200 (pre-coronapanic value) plus 0 percent growth for 2020 when Americans cowered in place and 8 percent growth for 2021. Then add 20 percent for the inflation rate that is experienced by people with enough money to buy stock. So today’s correct nominal value is 4,096. Markets tend to overshoot, though, so let’s take 5 percent off that for the bottom: 3,891.
Today the S&P 500 closed at 3,932, down 4.3 percent after the government released inflation numbers.
Let’s look at the chart:
Not a huge change compared to May 9, 2022, at least in nominal dollars, but the index is down in real terms given the inflation that continues to eat away at savings.
My prediction that the stock market would bottom out at 3,891 was wrong. 3,667 on June 16 was the local minimum. But some of the folks who commented were off by even more, e.g., with a prediction of 2,700 (but on the third hand, I didn’t specify a time interval so it is possible that we will yet reach 2,700).
Full post, including comments