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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.
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.
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.
* 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.
Amazon hasn't been the cheapest for a long time now. What's making people stick with Amazon is that they offer a better service overall. I know that if I start looking there, I can almost certainly find what I want, the price will be reasonable - Walmart and eBay will usually offer slightly better prices for generic goods, but not significantly - and I'll get the product in two days delivered to my door.
They're no longer competing on price, they're competing on the entire experience.
Walmart has the business model you're referring to, but they've had limited success with it, largely because the whole experience involves shoddy goods, frequently abusive customer service, long lines, and dirty stores. You have to do more than compete on price.
You are not alone. This is not normal. None of this is normal.
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.
1. Walmart isn't always the cheapest.
2. There are things that Walmart just plain doesn't sell. At least, not at their retail stores.
If you're buying something like an XBox One bundle, the console you'll get at Walmart is no different from the console you'll get from anyone else, so there's no reason to favor or avoid Walmart if you're buying one.
If you want a Denon or Yamaha home theater amp, you aren't going to be getting it from your local Walmart store AT ANY PRICE, because Walmart doesn't stock expensive niche items in retail stores at all, and is rarely price-competitive with Amazon when they have them online.
Likewise, the products sold at Walmart aren't necessarily identical in quality to seemingly-identical products sold elsewhere. For example, a TV manufacturer might have a model -- let's call it the "QZX65Y" -- that everyone at avsforum.com worships, and has 99% 5-star reviews everywhere from people who think it's the greatest TV, ever. That TV might wholesale for $520, and sell for $599 at stores like Best Buy. Now, let's scrutinize its seemingly-identical cousin, the "QZX65Y3" (sold only by Walmart). See, Walmart balked at the $520 wholesale price, and threatened to walk unless the manufacturer sold it to them for $507. But Walmart doesn't really care if their model is literally 100% identical, as long as it has the same advertised specs. So, the manufacturer grudgingly agrees to Walmart's lower wholesale price, then manufactures Walmart's run of TVs using cheaper, lower-binned backlight LEDs, and gives it a slightly different model number to avoid harming all the 5-star reviews the "real" model has gotten. Then Walmart advertises it for $589. On paper, the two look the same -- especially to a clueless consumer who doesn't even know what to look for. But if you put the two models side by side displaying uniform 50% gray, the "good" model might display a field of relatively consistent gray, while the "Walmart" model might have patches with a blue or yellow twinge, or slightly different brightness (because low-binned LEDs aren't guaranteed to be as consistent as high-binned LEDs).
Sadly, the same kind of "quality fade" can happen if, a year later, you go to some regional electronics chain (like Brandsmart in Florida) who sells mostly "last year's models, at rock-bottom prices". For the last manufacturing run or two of a given model, the manufacturer might just switch to low-binned LEDs so they can reduce the wholesale price and scrape up a few more buyers. The "good" stores won't buy the cost-reduced models anyway (they're waiting for next year's models), and by that point the manufacturer has piled up enough 5-star reviews for ANYONE who bitches about getting a late-version model with inferior low-binned LEDs to look like a wacky outlier. Companies like Linksys and Netgear do this so often, they've practically turned quality-fade into a performance art.
It happens. All the time. Every single manufacturer with models specific to Walmart does this. And it's not just TVs... a Lawn Boy or Toro lawnmower from Walmart might LOOK like the lawnmowers sold by more expensive stores, but if you scrutinize the model numbers, you'll see that they differ slightly. And if you tore down two seemingly-identical models (with slightly different model numbers) side by side, you'll find at least a few insidious differences, GUARANTEED. Maybe it's something as simple as polishing off the injection-molding burrs from the starter handle on the "good" model, while leaving them on the "Walmart" model. Or using stainless-steel screws on the "good" model, and cheaper galvanized screws on the "Walmart" model. Regardless, the differences are real, and they're there if you look hard enough for them.
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.
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.