why is inflation so low?


what are your thoughts?

I blame Amazon

Inflation is low because prices are not gong up. Duh.

Interesting. I think demographics must be a big part of the story, although I’m not sure if I buy the notion of permanently low inflation in the future as the population ages. Japan is a good test case of course and they have had no inflation for over 20 years now with no sign of that changing. But we are still recovering from a severe recession which led to an enormous amount of slack in the economy. We could be close to a tipping point where wages and prices start to grow again.

The UK has managed to give themselves a temporary inflation boost through Brexit. Prices now growing faster than wages there. So there’s always that. Shoot yourself in the foot economically speaking and spark some price growth.

Inflation is at a historic low in China and India too. So not just in the West. I think inflation in India will pick up soon though. Perhaps not in China where the demographic prospects are as bad as Europe.

oil and food majority of inflation changes, which is why they usually track another metric that excludes it.

in any case low inflation is a good thing. for stock and bond prices. this shit spikes. we’re going down down in an earlier round.

apparently everyone is a bargain shopper now. this was mainly brought on by the Great Recession’s effect on Millennials but all social groups are looking to buy cheap. so ghetto people buy at dollar stores, okay people buy at wal-mart or target, middle-upper and upper class buy at costco. there’s not anybody willing to pay full price for a brand name anymore except the super rich but their purchases are not meaningfully more extravagant than in the past.

people spend money on housing, cars, energy, clothes, food and discretionary crap.

housing is up, but barely when low interest rates are incorporated. cars are down significantly over the years. energy prices are down, gasoline at least, especially when you incorporate fuel efficiency gains over the past several years. clothes are dirt cheap. food is cheap because of decent crop yields and the fact that most people switch buying behaviour when something like bacon goes up 300%. discretionary crap is cheaper than ever thanks to dollar stores and costco. amazon will accentuate this price drive lower over time.

this is why house prices in high demand areas will get more and more expensive over the long term. the average long and short term interest rate will decline making housing cheaper to carry and you can’t build much more in high demand areas. everything but housing should theoretically get cheaper and positive inflation will be driven by rising housing costs. housing could end up being disinflationary if current materials are substituted with much cheaper ones or more of the build process is automated. land value will perpetually rise though - in the long-term.

as an example. to all of those who think toronto housing is expensive, it will shock you to know that the carrying cost of an average toronto house is now only at its historical average thanks to low interest rates. toronto prices could probably be sustainably 30% higher than today given the ease of entering the market relative to history. imagine if the market priced-in a long-term interest rate of 3% or lower, which it should, because inflation is non-existant.

only war can screw up this disinflationary world.