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Is Amazon Lowering The Global Rate of Inflation? (businessinsider.com)
An anonymous reader quotes Business Insider:
Another investment bank analyst has signed on to the idea that the internet is holding down the rate of inflation. Bilal Hafeez, the global head of G10 FX strategy and head of EMEA research at Nomura, published two notes last month on whether the value of the dollar was being held down by Amazon and its ilk. In one note he called it "the Amazonization of inflation"... [O]nline commerce typified by Amazon is making the supply and distribution of goods so cheap that "Amazonisation" itself is now a deflationary force at a macro level, Hafeez argues. He writes: "While globalisation was the meme of the 2000s, this decade's has to be the 'Amazonisation' of commerce. Given the bulk of the cost of goods is distribution costs, Amazon's unique distribution model and widening range of products could impart a new disinflationary impulse on goods prices."
This idea is becoming more popular among analysts as the months roll by. Back in September 2016, we told you about the "Spotify problem," in an interview with HSBC's James Pomeroy. His theory is that the internet allows consumers to shop around and compare prices incredibly easily. It also substitutes cheap digital goods over more expensive physical ones. For instance, people stop paying £20 every month for a CD when they start paying £10 a month for endless music from Spotify. The result is that businesses are aggressively driving down their own prices because consumers simply won't go to the ones that charge more, and are no longer trapped into shopping in their own neighbourhoods. Sweden is so advanced as a digital economy that it may be importing its own deflation via digital shopping, Pomeroy argued.
This idea is becoming more popular among analysts as the months roll by. Back in September 2016, we told you about the "Spotify problem," in an interview with HSBC's James Pomeroy. His theory is that the internet allows consumers to shop around and compare prices incredibly easily. It also substitutes cheap digital goods over more expensive physical ones. For instance, people stop paying £20 every month for a CD when they start paying £10 a month for endless music from Spotify. The result is that businesses are aggressively driving down their own prices because consumers simply won't go to the ones that charge more, and are no longer trapped into shopping in their own neighbourhoods. Sweden is so advanced as a digital economy that it may be importing its own deflation via digital shopping, Pomeroy argued.
It all depends on what factors you use to calculate inflation.
For merchandise possible to purchase via Amazon, Ebay or other similar large scale web source then it's holding down inflation since prices are severely pushed down. But for other merchandise like food and similar that don't do well on Amazon and Ebay then inflation can be quite different.
If builders built buildings the way programmers wrote programs, then the first woodpecker would destroy civilization.
Economists are nerds too....
Amazon is using the classic monopolist approach: sell at unbeatably low prices until you drive the competition out of business. At that point, with no competition you can raise your prices to whatever you like, and, with no competition, people have to pay.
1 ...
...
2
3. Profit!
The PC put most mainframers out of work. In 1983 a PC cost $9,000 (inflation adjusted). Today an equivalent PC costs less than $5 on ebay. Think of all those computer operators that were put out of work and bring back the mainframe. Think of the jobs that would be saved by reversing the deflation of computing prices.
TFS: the idea that the internet is holding down the rate of inflation. Bilal Hafeez, ... published two notes ... on whether the value of the dollar was being held down.
Confused dog is confused. Holding down the rate of inflation implies keeping the value of the dollar up.
Science and technology are lowering it. We are slowly going to have to face the fact that our economic and social models are obsolete. We will have to accept that not everyone needs to work and we are in an ocean of abundance, but forcing each other to operate as if it's the Bronze Age.
As usual, it's not the countless scientists and engineers that designed and built the machinery that allows this abundance, instead, we focus on one person who had nothing to do with it, and he gets all the credit.
Restaurant food prices are going up, but food price are going down. Restaurants are for special occasions and rich people. Learn to cook, you can easily make restaurant quality food for a fraction of restaurant prices. You can save thousands of dollars per year.
That's for nerds. Go away loser.
... the banks can used borrowed money to help you drive the price out of your reach. All that money saved on amazon is soaked up by interest payments on your house.
Then the market crashes, the banks get the houses, and hold them off the market until the next crop of suckers is ready to pay too much for fear of being left out.
Rinse, repeat.
My $30 smartphone plays back music perfectly fine.
For instance, people stop paying £20 every month for a CD when they start paying £10 a month for endless music from Spotify.
This assumes that people generally buy music monthly, and that the music costs a certain amount. It also assumes that the same selection is available on Spotify as in the record store.
When I buy music on a physical format, almost exclusively CD, it's almost always used. If it's not used it's because it's a new release and is not available used, and if my interests are not top-40 or top-100 then it's probably not available on Spotify either.
I'm going to hazard a guess that Spotify isn't displacing as much physical media or purchased media files as it is listeners of satellite radio and FM radio, where listeners got tired of excessive numbers of ads or of not getting enough of the music that they want, or of paying for stations that they don't listen to.
It's often commented that 80-90% of one's business comes from 10-20% of one's customers, the die-hard, repeat customers. Based on my own observations, with music this seems to hold true. Sales to the very occasional buyer of an album are not insignificant, but they're not as important as sales to those who feel that they are connoisseurs and make regular purchases. Those in the latter group are probably going to still buy, it's the casual buyers that will be lost to services.
Do not look into laser with remaining eye.
It's like those last minute ticket websites. In the past, if you wanted a restaurant or a hotel room for a conference at the last minute, you could only phone round so many hotels. You might have a search strategy based on the distance from the venue or being close to a train line, but you had to take what was available and they would jack up the rates if they knew you were going for the conference rather than a holiday. With the website, you have the whole range of all hotels searched instantly and anonymously. That helped drive down prices since supply exceeded demand.
In the past, I've experienced the price gouging by high street office supply stores. One place tried to charge me £80 for a pack of 10 pre-formatted 3.5" floppy disks. When mail-order office supply shops became popular those stores had to cut their prices to something sensible.
Vintage computer adverts: http://www.vintageadbrowser.com/computers-and-software-ads
Then maybe an article on spread sheet chat bots?
Oh princes, don't get your panties in a twist. I'm certain some intern in Accounts Receivable is cheering just for you.
Walmart has been having the same effect (one of many) since the mid 90s.
Why name this after Amazon?
* Transit fares have gone up continuously; e.g. https://globalnews.ca/news/235... And pennies have been withdrawn from circulation in Canada
*A new 1974 Ford Maverick, V8, automatic transmission cost under $4,000 in Canada, and probably around $3,000 US. Try getting a 2018 Ford Focus for under $20,000 today.
* Food prices have kept rising continuously
* Rents and housing getting unaffordable here in Toronto
* Cable bills keep shooting upwards, which is why "cord-cutting" is now a thing
* A new 50 inch plasma TV was $3,500 in 2007 dollars. Today a 50 inch LED TV can be had for $300
* A basic IBM PC with 640 KILObytes of ram, 10 MEGAbyte disk drive, and 320x200 siaplay CRT came in at around $5,000 in 1983 dollars. Today's $1,000 machines walk all over it.
Problem... you can't live in a PC or TV; you can't eat a PC or TV; you can't ride to work in a PC or TV. The upper or upper-middle class are better off today (what's left of the middle class, but that's another story).
Meanwhile. a lot of ordinary people, especially those in minimum wage jobs, have extreme difficulty paying for basic necessities. Is there an inflation index for necessities, i.e. food/shelter/clothing and transportation? And by transportation, I mean local stuff. A flight to Hawaii might cost less today, but the average person is more worried about commuting to work, and getting around town.
I'm not repeating myself
I'm an X window user; I'm an ex-Windows user
1. Return on savings accounts: Abysmally low.
2. Have you seen a decent raise since the 80's? Not me... Not anyone I know. All decent raises happen at the C-level and above.
3. Have you noticed the price of housing, education and heath care are all skyrocketing? These are the essential things everyone needs. Will food be next?
4. What about that trend towards precarious employment (temps, gig work, etc.) have you been affected? Jobs are essential too.
5. All the stuff not required to live decently has not been inflating... (Well maybe except for cable TV, airline fares, and insurance).
6. Have you noticed the hyperbole in politics? This is a distraction to keep everyone from noticing the detrimental changes to society.
7. Have you noticed the government can't get anything done? Me too.
8. Have you noticed a trend to marginalize the rights of ordinary citizens? (Binding Arbitration, Non-compete agreements, Federal preemption)
9. Have you noticed a rise in hate groups, and religious zealotry, as well as attacks gay and transgender people? Hmmmm, this is like Germany in the 1930's.
Something nasty is bound to happen soon.
at least not in the United States. Here it's our aging population who've had their pensions and retirement funds raided the last 20 years. They've still got their savings though and they're using those to buy houses to flip and/or rent. That's also what caused the 2008 crash and why it was so bad. It wasn't poor people buying houses they couldn't afford. Those folks tried tooth and nail to hang onto their homes. It was upper middle class who'd over extended themselves in the house flipping market. When it became clear they weren't going to make back their investment they just walked away because they had no emotional attachment.
Basically it's baby boomers. We've left them with just enough money to be dangerous but not enough to live out their lives comfortably. They're gonna wreck our shit for the next 20 years until they die off...
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Different people have different priorities and perspectives, of course.
I enjoy cooking. Additionally, it's not like my non-cooking hours are filled to the brim with productive activities - I mean, here I am, posting on Slashdot for goodness sake! So "spending time" to do something like cooking is often a better use of resources than spending money to eat out, from my perspective.
And, when our family goes out to eat, it's considered a treat rather than a time-savings.
#DeleteChrome
While I agree with some of your points, Amazon didn't exist in 1974. If you were to look at their effect, you'd have to limit yourself to the 10-15 years they've been operating as a significant international player. But yes, it makes sense they're only effective in the markets they operate in, ordinary consumer goods, rather than cars, etc.
Cable bills? That's a tough one - you say "They're rising hence cord cutting is a thing", but Amazon is one of the companies that's involved in that cord cutting and making it possible. People are going from spending $50-100 on cable TV to $20-40 on Amazon Prime, Netflix, and Hulu.
And Comcast has actually noticed that. They're now offering their channels as streaming TV instead. So sure, "Cable TV" is more expensive than ever, but "Having stuff I can watch on TV" is going in the reverse direction price wise.
You are not alone. This is not normal. None of this is normal.
The PC put most mainframers out of work.
Not really. Despite the PC, the number of AS/400 and other "mainframes" continued to grow for years, and are still common today, especially at financial institutions.
Go to any job site, and type in "AS400". There are still plenty of opportunities available.
Hello, baby boomer here...
I wish I could criticize your post beyond being a bit exaggerated...
There are huge numbers of boom-generation people hanging on to what remains of their work lives and careers by the last millimeter of their fingernails. Add to that the fact that there's no such thing as a "savings account" any more: The only way to not fall behind inflation (see paragraph below) is to "invest" in equity, bond and/or international markets. Those markets are gyrating madly and some who needed to see a bit of safety for their 10 year money bought into the real estate market. They hope to put their hard-earned savings into a material investment vehicle they could see (and not evaporate suddenly), that should at least keep up with inflation. Some of them bought into the explosive adjustable rate mortgages, having been lied to by the fuckheads selling those (IMHO) fraudulent loans. My wife and I bought a house (using our 30+ years of savings) for that reason, though we would never get sucked into such a sick excuse for a loan.
Now about inflation: I think I agree that easily shippable goods have experienced reduction of inflation due to the Amazons of the world. But let's not be confused about "inflation". My wife and I have experienced increases in the costs of stuff we cannot do without far far in excess of "inflation". These things are things that cannot be shipped from countries engaged in "the race to the bottom": Medical insurance, taxes (property, sales, etc.), communication (I am a developer, my wife is a psychologist. There is no business without it.) We are grateful that another source of monstrous and damaging inflation, education (also local and increasingly profit driven) is not killing us financially as it is so many others.
My observation is that inflation has developed a bimodal distribution: services that can only be acquired locally have a high inflation rate, while goods or services that can be globalized have a low inflation rate.
Bottom line: Some unwise boomers didn't save and may have taken advantage of the bullshit loans, which contributed to the meltdown; I suppose the temptation of a McMansion might be part of it. I pin blame for the meltdown on the lying thieving bankster fuck heads (if I believed in Hell, they belong there, they knew exactly what they were doing to their mark^H^H^H^Hcustomers). There are also "wise" boomers that have savings who are getting fucked over by the lack of any investment vehicles that can be trusted in less than 20 year time horizon.
I save time by cooking at home. If I were to eat out every meal, I'd be wasting a ton of time fighting through traffic and waiting in lines, three times a day. I'd also be getting sick because those restaurants are never perfect at hygiene. I've never had food poisoning from a meal I prepared at home, but when I eat out, it's a bit like rolling dice.
With a garden in my backyard, a lot of my food doesn't even need to be cooked -- cooking is a crutch for people eating tough store bought foods that aren't young, fresh, and tender like what I get out of my garden. Plus, I don't have to wait in any lines to "check out" from my garden "grocery store."
Next, I learned about composting my food wastes, which REALLY improves the cleanup efforts of stuff that used to take forever to cleanup manually. It is SO much easier to take my dirty cutting board outside and hose it off at high pressure over the woodchip compost pile than scrubbing it indoors where anything splashing ends up creating potential cross-contamination and more cleanup work.
Ignore the steadily rising cost of housing
Per square foot, housing is about the same as it was in 1980 in comparison to median wages. The main reason why housing is more expensive is that houses today are bigger.
The reason you hear a lot about high housing prices is that most journalists live in NYC, DC, SF, or LA, and those are all expensive housing markets. But they are outliers, not the norm.
Anytime the scale is increased and there is a competitor (both Walmart and the "competition" of all brick and mortar versus online are Amazon competitors), prices will be under pressure to stay low and can be kept that way in this case both by reduction in costs (no store fronts in prime locations) and by voluntary reduction in profit margins.
This is nothing new. If you look at what we have today versus 50 years ago from an absolute point of view instead of a relative to others of the same day point of view, we've experienced tremendous deflation. This is what tech does. It will inevitably end in either our destruction or everything eventually being free.
Global competition, cheaper prices, customer choice - aren't these the very tenets of Capitalism that has been lauded for so long? So now *too much* Capitalism is a bad thing?
But how much is that mainframe vs vendor lock-in with a solution provider who just happens to sell them? DEC?
This is part of the problem with the way inflation is measured. The fact that housing isn't inflating on a square-foot basis is irrelevant. Consumers are price-takers in the market, and if a bigger more expensive house is all the market supplies, then consumers are effectively faced with inflation. Cost per square foot is irrelevant, because you can't go down to the store and just buy the square footage you need.
Another way inflation is poorly measured is this whole business of throwing out certain goods like food and fuel because "they are volatile"; but this is a topic that's been beaten to death everywhere.
See also, "hedonics" where the Ivory Tower assures us there's no inflation because our 36-inch flat-screen is so much better than our 17-inch tube.
Inflation numbers have been politicized to the point of absurdity, and I can't even really tell how far it's gone so I don't want to say it's all that bad... but word on the street is that it's a lot worse than what they're telling us.
Meanwhile. a lot of ordinary people, especially those in minimum wage jobs, have extreme difficulty paying for basic necessities. Is there an inflation index for necessities, i.e. food/shelter/clothing and transportation?
Sounds like a difficult figure to calculate, but you can look at percentage of spending. The lowest quartile spend ~35% of their income on food and that's relatively stable. In 1992 the AAA's driving cost gave a composite index of 38.8 cents/mile for 15k miles, which put into an inflation calculator is 67.9 cents in 2017 dollars while for 2017 it's 56.6 cents. Basic clothing I didn't really find any great statistics for and is hard to separate from design and fashion clothes but labor costs have been pretty flat from the 80s to 2010 which indicates prices on basic clothing wouldn't really get much better either. Price per square feet for a new home is also pretty flat in real dollars, even though the number of square feet per home and per person is growing.
In summary, living on minimum wage wasn't easy a few decades ago, it's still not easy now. It's hard to find some figure that's significantly worse though, though increasing disparity may in itself be a problem if you feel "everybody else" can afford to drink their coffee at Starbucks except you. That's what drives most people into financial disaster, if you accept the social stigma of being poor and just blatantly say you can't afford it you'll probably do okay. It's those who have to try pretending they have money when they don't who bury themselves in credit card debt and end up in a quagmire they never get out of. I have one buddy that is like that, he's made some life choices which has left him quite far behind us financially. And nobody's pushing him to spend, but he's constantly overextending himself.
Live today, because you never know what tomorrow brings
Very few people bought music on tape and kept it forever. They replaced their tapes with CDs, then their CDs with something else. So theoretically a CD would last a long time, but in actual use it doesn't. Also, very few people buy an iPod Touch (or an iPad?!) to listen to streaming music. They listen on some device they already own or are buying for another purpose, like a smartphone.
The impact on the economy is what the average person does, not what some nerd on Slashdot points out is technically possible.
How about you not posting an easily disproved lie? Some conservative legislators have already said they're open to forbidding hardware that makes semi-auto firearms fire as rapidly as an automatic firearm.
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It seems wrong to call someone in such an unscientific and highly politicized field a nerd.
"When information is power, privacy is freedom" - Jah-Wren Ryel
That's one of the nastiest things I've ever read on slashdot. No, I'm not new here.
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Actually, can go to a store and buy the additional square footage you need, as long as you don't live in it. http://www.homedepot.com/p/Handy-Home-Products-Majestic-8-ft-x-12-ft-Wood-Storage-Shed-18631-8/202205311
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BS. I've done the math more than once. The cost per sq area has increased versus the average wage.
I'll give you an example. My grandfather bought a house with 2.5 years of his income. The same house right now would take me 8 years income to purchase.
The price rise from $4,000 to $20,000 over 43 years is below 4%/year, and you're getting a somewhat better car. The focus is available in a rage of prices, from $13650 to $36995.
4% a year is not outrageously high, although it is excessive: should be zero.
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There was a time 300 years ago when food was over 50% of a median person's spending. For 250 years the price of food dropped but now it only makes up a small portion of the basket because I can only eat so much. Housing on the edge of a city hasn't gone up faster than inflation and if we define the cost of housing in terms of distance to the edge of the urban area it isn't going up that fast. One other point about housing in North America is that the amount of space per person has increased significantly. So outside of urban cores, the cost per square foot may not have kept up with inflation. Cars - The car that is in the basket of goods today is a far better car than the one 30 years ago. It is more reliable, will last longer, pollutes less, has air conditioning, is far safer, gets more gas mileage, etc.,br> There has always be some part of the basket of goods that the consumer uses that drops in price. This won't lead to deflation over all though because I can only have so many TVs, computers and Spotify accounts. Maybe initially the drop in price will cause me to buy more of these goods but in the long run the portion of my spending on them will decrease and I will spend more on something else that has probably gone up in price. On exception to this is anything that rapidly decrease energy or transportation costs. Then we could have deflation - no canals, rail roads and internal combustion engines did not rapidly decrease transportation costs, they took many decades. Nuclear almost gave us cheap power in the late 60s but the environmentalists killed that (and saved the coal industry).
This. On top of that, it is a very pleasant and satisfying feeling to feed people with what you made from scratch.
Depends how healthy you are too. I never did until I started taking a medication that lowers my immune system, now I have 3 times in 5 years.
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amazon is not "significant" outside US...
Right for example
https://www.amazon.co.uk/Jamie...
You can get to and from the restaurant in 15 minutes then? Realistically for the vast majority of people this is not the case.
Are you high pressure hosing meat juice off the board? You could be making aerosols that you could inhale. Better to just wipe it down with some soapy water in the sink. If you use a wood board it helps since bacteria have issues growing much in wood. Apply mineral oil and/or beeswax from time to time when the wood looks dried out. Bamboo cutting boards are inexpensive if you're nervous and want to replace them when they're scarred from use but I don't worry about it much, myself. Otherwise, yes, always fun to incorporate gardening into the kitchen.
What a lot of people aren't seeing is that Amazon is slowly working towards removing all of the overhead involved in distribution of goods. Eventually, Amazon's private air cargo service can pick up a few pallets of Chinese manufactured goods directly from a supplier it practically controls, ship them on their own carrier to their own warehouses, and eventually use their own delivery service to get them to your door. At every step in this process, they've removed overhead and labor form the process. The supplier is under similar terms that Walmart extracted from them years ago, so they're making a tiny profit on their finished goods or selling at a loss to get product placement. If Amazon isn't paying shipping companies to send their goods to the US, then those shipping company employees don't have jobs. Once the goods are in the warehouses, Amazon uses their near monopoly power on low-skilled labor to drive the box-packers as hard as possible. And of course, there aren't any store employees or stores in Amazon's system (yes, they now own a grocery chain, I know...that's going to be a whole new universe of disruption.)
It's just end-stage capitalism. No one will be able to afford any goods once all their jobs are gone. I just don't think we're ready for the level of hardship everyone is going to experience. The vast majority of jobs are middle-man in nature. Some are huge wastes of money- just look at realtors and insurance brokers - but that doesn't mean their industry doesn't support millions of good-paying jobs. It's going to be a big culture shock when these jobs move to minimum wage in a warehouse from a nice office and a decent middle class living.
There are two main reasons why houses are so expensive today: because women don't stay at home anymore, families disposable income nearly doubled, but because you can't easily create more land, house prices nearly doubled from that alone, the rest of the difference in price can be easily be explained by the insanely low interest rates and ease of credit available today. Back when my grandfather bought his house, he couldn't get a bank loan, and had to ask a financier with a lot of cash to give him a loan with a signed and registered contract.
A tech business with enough scale to have a macroeconomic effect? Sure sounds like "news for nerds, stuff that matters" to me.
It wasn't the boomer's McMansions that caused the crash. It was their desperate attempt to secure their finances after their pensions were raided by the Bain Capitals of the world.
I suppose there's a case to be made that the Boomers allowed the deregulation that made that kind of pension raiding possible, but well, there was just a Nobel prize given out for why people make bad decisions. For esoteric financial regulations it can be surprisingly hard to keep them intact, especially when you have multi-millionaires and billionaires attacking them non-stop.
What I'm saying is those boomers weren't necessarily any wiser, they were just lucky. A savings account was never going to see you through retirement. That's why folks came up with pensions in the first place. And that's why an entire industry sprouted up to raid those pensions...
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I am not fully getting the link he is trying to establish. Inflation is a result of increased monetary supply, which has been controlled by the central banks—depending on how you want to see it—the *latest* with the introduction of the floating exchange rates. This article makes it seem like inflation is somehow reduced by increasing productivity, specifically by reducing the costs of basket products as opposed to increasing their quality, i.e. cheaper things of the same quality every year rather than identically priced items of higher quality every year. That is completely besides the point and has nothing to do with the reason we have low inflation rates, being quantitative easing.
BS. I've done the math more than once.
Maybe you need a new calculator.
The cost per sq area has increased versus the average wage.
No it hasn't..
The price rise from $4,000 to $20,000
The Ford Maverick ($4000 in 1974) was not an entry level car. It was a high performance car. The Ford Focus ($20,000 now) is an entry level car
To get a real comparison, you would need to determine what 2017 car is the equivalent to the 1974 Maverick. I don't know.
However, according to http://www.usinflationcalculat... $4000 in 1974 would be almost $20,000 in 2017. I'm sure that whatever the equivalent 1974 car to the 2017 Focus was less than $4000.
Don't try to out wierd me, three-eyes. I get stranger things than you, free with my breakfast cereal. --Zaphod Beeblebr
Inventions happen whether there are wealthy patrons or not. Most inventions are not from "big labs", but rather either serendipity, or some technician trying to solve a specific problem for a specific product. I bet there would be more innovation if we didn't have a patent system. Smaller co's would be able to mix and match existing ideas without paying an arm and leg in royalties to conglomerates.
Table-ized A.I.
Ford Maverick was a piece of junk, maintenance-wise. Most of today's cars are far more reliable than the 1970's, and thus I'm not sure it's an even compare. But I have noticed that minivan prices seem to either be dropping or staying below inflation for the last 20 years.
Another thing is, since cars last longer, most "low end" car shoppers buy used. It's value depreciates quickly the first few years. Today's 5 year old car is probably on par or better than the reliability of new cars of the 70's. Therefore, car manufacturers target more financially established buyers. The new-vs-used curve has shifted.
In fact, a new car is a bad deal relative to say a 4-year-old car in terms of total cost. People buy new for the status, not from sound wallet logic. (If your job requires timeliness, then reliably may trump cost, but that's an exception.)
In short, the example was comparing apples to lemons.
Table-ized A.I.
Correction
Re: "It's value depreciates quickly the first few years" is supposed to go after "a new car is a bad deal..."
Table-ized A.I.
While technically correct, in the shorter term it takes markets a while to adjust. If the costs shrinks faster than the adjustment pace can absorb it, then lower costs can cause deflation or sub-part inflation.
I agree that austerity makes it worse, but we can't do massive government spending because of the debt problem we are in.
There are two other solutions: 1, tax the rich, and 2, print more money (AKA "helicopter theory"). I say let's try both.
Table-ized A.I.