06-06-2022, 07:17 PM
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#21
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Franchise Player
Join Date: Aug 2008
Location: California
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Quote:
Originally Posted by Shazam
Deflation never occurs.
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That’s not true. TVs and most technology products are deflationary. Cars have been deflationary as well as outsourcing has occurred.
In real dollars energy prices dropped until very recently. Though that is more increasing at a rate below inflation.
I think my washing machine and fridge were both cheaper than the ones my parents bought in the early 90s
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06-06-2022, 08:59 PM
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#22
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Franchise Player
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Quote:
Originally Posted by GGG
That’s not true. TVs and most technology products are deflationary. Cars have been deflationary as well as outsourcing has occurred.
In real dollars energy prices dropped until very recently. Though that is more increasing at a rate below inflation.
I think my washing machine and fridge were both cheaper than the ones my parents bought in the early 90s
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In aggregate deflation is very rare. The product deflation above had been roughly offset by significant inflation in services (Healthcare spending, restaurant prices, post secondary tuition).
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06-06-2022, 10:43 PM
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#23
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Franchise Player
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Who said deflation would occur? Reduced demand and increased supply can lead to significant price drops in many sectors while there is still (relatively modest) inflation occurring in the aggregate. We see it all the time with commodities, and we've seen it with food, where many staples cost less in the 2015-2020 period than they did in the decade prior. You need some sectors to become cheaper or stay flat over time to account for the things that go up in price more dramatically if you're going to have modest inflation.
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06-06-2022, 10:53 PM
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#24
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Franchise Player
Join Date: Jan 2014
Location: Toronto
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Hoping the return to normal lending rates will curb the tons of people from borrowing to live and living beyond their means simply because everyone else is doing it. If you can't afford a mortgage and everything else in life, you shouldn't be borrowing just because. Same with the nice car and vacations.
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06-06-2022, 10:58 PM
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#25
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Franchise Player
Join Date: Aug 2005
Location: Memento Mori
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Quote:
Originally Posted by opendoor
Who said deflation would occur? Reduced demand and increased supply can lead to significant price drops in many sectors while there is still (relatively modest) inflation occurring in the aggregate. We see it all the time with commodities, and we've seen it with food, where many staples cost less in the 2015-2020 period than they did in the decade prior. You need some sectors to become cheaper or stay flat over time to account for the things that go up in price more dramatically if you're going to have modest inflation.
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Prices are very sticky. Only certain very specific commodities experience price drops.
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If you don't pass this sig to ten of your friends, you will become an Oilers fan.
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06-06-2022, 11:02 PM
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#26
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Franchise Player
Join Date: Aug 2008
Location: California
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Quote:
Originally Posted by activeStick
Hoping the return to normal lending rates will curb the tons of people from borrowing to live and living beyond their means simply because everyone else is doing it. If you can't afford a mortgage and everything else in life, you shouldn't be borrowing just because. Same with the nice car and vacations.
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If someone will give you a mortgage you probably should take one. That’s a completely separate discussion from cars and vacations. The cost of housing is the one thing that you can’t blame individuals for. In general ownership is a better decision for most people most of the time.
Unless we crack down on credit access like limiting car loans to 5 years, banning leases (or at least get rid of the tax advantage) people will continue to borrow. Even things like insurance being a monthly payment instead of annual encourages just in time spending. Rates won’t deter this lenders will just get more creative.
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06-07-2022, 11:03 AM
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#27
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Franchise Player
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Quote:
Originally Posted by Shazam
Prices are very sticky. Only certain very specific commodities experience price drops.
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Housing, food, and energy all experience regular price fluctuations, and that makes up about 50% of peoples' spending. Travel costs can also fluctuate greatly both up and down.
And many consumer goods also experience price drops over time. While prices for specific models might be sticky, companies often release newer versions that are cheaper than prior ones in response to reduced demand. For instance, a base model Macbook Air was $1299 when it was released in 2010; by 2020 is was $999, despite the estimated cost of production being essentially identical between the two.
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06-07-2022, 05:33 PM
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#28
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Franchise Player
Join Date: Aug 2005
Location: Memento Mori
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Housing? Nope. Long term trend is always upward.
Food? Nope. Long term trend is always upward.
Do you understand the ramifications of a deflationary economy?
Macbooks being cheaper does not mean anything.
Deflation is a macroeconomic phenomenon. You can't apply it to something like a specific manufacturer's product.
Hell let's look at video cards. Are those cheaper?
You must be young or rich. I bought my first house in Calgary in 2002 for $191K. Good luck with that now.
My parents bought their first house in Calgary in 1987ish for $90K.
My wife's parents bought their first house in Calgary in 1979ish for $30K.
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If you don't pass this sig to ten of your friends, you will become an Oilers fan.
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06-07-2022, 05:46 PM
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#29
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Ate 100 Treadmills
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Quote:
Originally Posted by activeStick
Hoping the return to normal lending rates will curb the tons of people from borrowing to live and living beyond their means simply because everyone else is doing it. If you can't afford a mortgage and everything else in life, you shouldn't be borrowing just because. Same with the nice car and vacations.
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The housing issue is more complicated. We have a legit housing shortage. Until that's dealt with, people will continue to borrow lots, as people need a place to live. Rent isn't exactly cheap right now either.
You can tell people not to get mortgages now, as mortgage rates will rise in 5 years. But the way things are going, where will rent be in 5 years?
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06-07-2022, 05:57 PM
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#30
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Franchise Player
Join Date: Aug 2008
Location: California
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Quote:
Originally Posted by Shazam
Housing? Nope. Long term trend is always upward.
Food? Nope. Long term trend is always upward.
Do you understand the ramifications of a deflationary economy?
Macbooks being cheaper does not mean anything.
Deflation is a macroeconomic phenomenon. You can't apply it to something like a specific manufacturer's product.
Hell let's look at video cards. Are those cheaper?
You must be young or rich. I bought my first house in Calgary in 2002 for $191K. Good luck with that now.
My parents bought their first house in Calgary in 1987ish for $90K.
My wife's parents bought their first house in Calgary in 1979ish for $30K.
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What is the point your are making with your original point that deflation will never occur.
It appeared to be arguing that waiting for something to be cheaper is not a strategy people would employ. Real purchasing power is what would matter in that scenario.
And in terms of housing you need to look at the cost of monthly payments on mortgages and not absolute value. The lowering of interest rates driving housing higher is just another wealth transfer to the older generations. As interests rates rise housing will stagnate and decrease. This will require 2-3 more years as people locked in during Covid but it will create downward pressure on housing price.
Also in the 30s we had negative inflation.
Last edited by GGG; 06-07-2022 at 06:04 PM.
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06-07-2022, 06:06 PM
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#31
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Franchise Player
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Quote:
Originally Posted by Shazam
Housing? Nope. Long term trend is always upward.
Food? Nope. Long term trend is always upward.
Do you understand the ramifications of a deflationary economy?
Macbooks being cheaper does not mean anything.
Deflation is a macroeconomic phenomenon. You can't apply it to something like a specific manufacturer's product.
Hell let's look at video cards. Are those cheaper?
You must be young or rich. I bought my first house in Calgary in 2002 for $191K. Good luck with that now.
My parents bought their first house in Calgary in 1987ish for $90K.
My wife's parents bought their first house in Calgary in 1979ish for $30K.
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Who's talking long term? You responded to this:
Quote:
Originally Posted by Bill Bumface
In the scenario wages aren't keeping up, doesn't affordability kick in and people just can't buy stuff anymore and you start to get supply increases and price drops?
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by saying "deflation never occurs." No one was talking about economic deflation, just prices of some goods potentially coming down in the short term because of lack of demand during a recession. Which is exactly what happens. Demand is lowered which leads to oversupply and reduced prices, which reduces the inflation rate. That's the whole point of central banks raising interest rates; they want to dampen demand. Just today, Target lowered their forward guidance saying that their inventories were piling up and they'd be forced to lower prices and reduce their margins to clear out the excess of goods they have.
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06-07-2022, 08:37 PM
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#32
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My face is a bum!
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https://www.mlive.com/news/2022/06/t...bits-drop.html
Quote:
Target said yesterday it will reduce prices and cancel orders in order to reduce an excessive amount of inventory.
Retailers are finding that American pandemic-related spending habits are declining much faster than they had anticipated. Last month, Target reported its fiscal first quarter profit fell by 52% as compared to the same period last year.
According to The Associated Press, “Sales of big TVs and small kitchen appliances that Americans loaded up on during the pandemic have faded, leaving Target with a bloated inventory that it said must be marked down to sell.”
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06-07-2022, 11:35 PM
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#33
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Ate 100 Treadmills
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Quote:
Originally Posted by Bill Bumface
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Doesn't surprise me at all. Many people were in debt before covid and prices for many essential goods have already increased dramatically. The idea that people just had huge swaths of cash to spend and they after going to continue spending this cash for any length of time always seemed far fetched to me.
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06-08-2022, 02:52 AM
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#34
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Franchise Player
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Quote:
Originally Posted by GGG
That’s not true. TVs and most technology products are deflationary. Cars have been deflationary as well as outsourcing has occurred.
In real dollars energy prices dropped until very recently. Though that is more increasing at a rate below inflation.
I think my washing machine and fridge were both cheaper than the ones my parents bought in the early 90s
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My dad paid around $1000.00 for this 17 inch color TV in 1970.
That's over 7k in todays money, but it was color and Hitachi
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06-08-2022, 07:38 AM
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#35
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First Line Centre
Join Date: Apr 2006
Location: Calgary
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Quote:
Originally Posted by Shazam
Housing? Nope. Long term trend is always upward.
Food? Nope. Long term trend is always upward.
Do you understand the ramifications of a deflationary economy?
Macbooks being cheaper does not mean anything.
Deflation is a macroeconomic phenomenon. You can't apply it to something like a specific manufacturer's product.
Hell let's look at video cards. Are those cheaper?
You must be young or rich. I bought my first house in Calgary in 2002 for $191K. Good luck with that now.
My parents bought their first house in Calgary in 1987ish for $90K.
My wife's parents bought their first house in Calgary in 1979ish for $30K.
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Bought my first condo in Calgary in 2012 for 330k. I wish that I was guaranteed inflation like you are implying.
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06-10-2022, 11:09 AM
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#36
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Our Jessica Fletcher
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Not BOC, but not unrelated to the thread/trend either.
Inflation rose 8.6% in May, highest since 1981
https://www.cnbc.com/2022/06/10/cons...-may-2022.html
Quote:
The inflation report comes with the Federal Reserve in the early stages of a rate-hiking campaign to slow growth and bring down prices. May's report likely solidifies the likelihood of multiple 50 basis point interest rate increases ahead.
"Obviously, nothing is good in this report," said Julian Brigden, president of MI2 Partners, a global macroeconomic research firm. "There is nothing in there that's going to give the Fed any cheer. ... I struggle to see how the Fed can back off."
With 75 basis points of interest rate rises already under its belt, markets widely expect the Fed to continue tightening policy through the year and possibly into 2023. The central bank's benchmark short-term borrowing rate is currently anchored around 0.75% -1% and is expected to rise to 2.75%-3% by the end of the year, according to CME Group estimates.
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06-10-2022, 06:24 PM
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#37
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First Line Centre
Join Date: Feb 2014
Location: Uzbekistan
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Will be interesting to see if recent buyers gave themselves wiggle room. I think many are going to be in trouble.
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06-10-2022, 08:08 PM
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#38
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Franchise Player
Join Date: Aug 2008
Location: California
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Quote:
Originally Posted by Johnny199r
Will be interesting to see if recent buyers gave themselves wiggle room. I think many are going to be in trouble.
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If proper due diligence was done with the stress tests than people should be okay for a 2-3% increase. They should have been qualified at 5.25% or their mortgage rate plus 2%
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06-10-2022, 08:28 PM
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#39
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Franchise Player
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Quote:
Originally Posted by GGG
If proper due diligence was done with the stress tests than people should be okay for a 2-3% increase. They should have been qualified at 5.25% or their mortgage rate plus 2%
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I don't think rates alone will cause a huge issue, though they could very well have to go well above a 2-3% increase to get inflation under control. It's hard to see how a 3% Fed/BoC rate is going to combat 7-8% inflation if it gets entrenched.
The bigger issues will be job losses during a recession and people potentially being underwater when housing prices likely drop. That could lead to a pretty ugly combination.
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06-11-2022, 02:07 PM
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#40
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Had an idea!
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Quote:
Originally Posted by Bill Bumface
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Saw this coming a mile away.
Gonna be a big shift across the board as everyone has too much inventory on order and shipping is starting to clear up.
Tough go trying to balance supply & demand if logistics are a disaster.
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