A medium-quality dinner for two in an expensive city costs 100$. A beautiful kitchen knife costs about that much, but lasts 20 years.
A Broadway musical for a family of 4 costs about 800$. A good mattress costs about that much, but lasts for 20 years.
The given wisdom seems to be that we should value experiences more than things. Good things also cause small dose of repeated joyful experiences.
I am 50 years old, and live a reasonably opulent, upper-middle class, big city life. I am guessing here - all the items in my apartment put together, is probably worth 6 months of my work. A bargain, compared to the joy they give me.
Taking a couple of tennis balls to the local park and throwing them with your kids costs about $5, depending on how many you lose. Going for a run along the beach costs a bus fare. You can camp on the weekend for an initial outlay of a few hundred dollars of secondhand gear plus perhaps $40 a trip. Having everyone bring a plate for a potluck dinner costs slightly more than you'd normally spend for a meal.
I think experiences can be as cheap or as expensive as you like. Essentials are the crux of the article, and without essentials most experiences are harder.
Respectfully, this doesn't have much relevance to the fact that basic necessities like rent and food are significantly more expensive than they were just two years ago.
Housing, transportation, and food account for over 60% of all spending.
Experienes and goods aren't my problem. My problem is that my dwelling costs $500 a month more than it did in 2021 and I live in the exact same place, and I haven't gotten a raise.
Housing is an auction, and a bet on how well the area is going to do. If you live in a place that has very high demand, prices are going to go up if there's no building being done. But it's not all rising prices: My house's value hasn't outpaced inflation through the last 20 years, because it's in the wrong part of St Louis. People with blue collar occupations have no problem buying around me: You can buy a 4 bedroom house for under 300k, and their salaries have gone up far more than the price of the houses.
So house pricing problems? Just localized regulatory problems. We'd have a much smaller problem if more metro areas were attractive to people, instead of having such a big separation between of winners and losers.
> basic necessities like [...] food are significantly more expensive than they were just two years ago.
Here on the farm, the price I'm getting when selling food is half of it was two years ago. If I, the farmer, am selling the food for less than two years ago, while you are paying more than two years ago, then it seems experiences are you problem – e.g. you are paying more for the experience of shopping in a grocery store.
Not to put any blame on you or anything, because rents are crazy, but median wages have risen pretty significantly over the last few years. You definitely should be looking for a raise, or a new place of work.
On a personal level I feel the same strains, but all sources I’m finding have median wages rising more than median rent since 2020 and certainly since 2021.
However, that would not be true for buying a home especially when factoring in borrowing costs.
Also the industrial revolution happened, which massively drove down the cost of things. Nothing comparable happened for experiences. A restaurant today needs a similar amount of labor to make your meal as a tavern did 400 years ago. Their ingredient costs went down, but waiters and cooks do about the same amount of work, and property values haven't gone down. Meanwhile the amount of work to make a knife has been drastically slashed through technological progress.
What you say is that bigger cities have bigger inflation. If you live in a smaller city, earn half, but everything costs half, then, you don't have any incentive to move to a big city.
> A Broadway musical for a family of 4 costs about 800$. A good mattress costs about that much, but lasts for 20 years.
Am I the only one that read that and thought "Since when does a mattress last 20 years?" That certainly doesn't match my experience, even for mattresses much more expensive than that.
My friends who are 250 lbs linebackers have to regularly replace their sofas and suchlike because they're 'worn out' i.e. the springs and foam aren't springing and foaming back into place like they used to. On the other hand, I come from a family of 140 lbs marathon runners, and for us that simply does not happen.
Not sure about the US but that price and statement might have been true 15-20 years ago in the UK.
These days a high quality handmade king size mattress of natural materials starts closer to £2,500 and might have a guarantee of 10 years.
I’m lying on a small, high quality mattress purchase 6 years ago for £1,100 from a small boutique business and it started to dip in the middle a bit about 2 years ago but I think it’s got a 2 or 3 more years life left in it.
£630 ($800) will get you a very cheap mattress today and if it’s both comfortable and lasts 20 years that’ll be like winning the lottery
Eating at a restaurant, going on a cruise or going to spa are not experiences I care about.
Spending time with your loved ones, spending time with friends, going outside and walking, reading a book are experiences that I care more about, and they don't cost much, if anything.
Some people living in poor countries report that they are happier than people living in rich countries.
Why is that? Because they have better experiences.
Some experiences are expensive, some are free. Things are never free.
Why are things expensive? Because everyone will charge you the most they can get away with. Part because of supply and demand, part because they use your desires against you, part because they have to be profitable.
Things are expensive, as are experiences, because companies and people earn there living creating them. Man, I hate the take of "everyone else is charging too much", because we all do that, don't we? We negotiate higher salaries, switch jobs and move to improve living standards. And each and every dime we make is ultimately paid for by someone else.
Sure, but if prices rise high enough, that high demand induces more suppliers of those services. In cities, where rent is 3-5x that of rural areas, new suppliers cannot enter the market to provide more of that service unless it involves wages high enough to pay for rent. There is a finite amount of space in a city, especially those as extremely zoning-constrained as American cities.
This "everyone will charge you the most they can get away with" doesn't always have to mean prices go parabolic forever; we can enact simple urban land use reforms that allows more housing units and commercial spaces to be built, which can reduce the price of rent for businesses and the rent of housing units that businesses pay indirectly via wages.
The idea with "buy experiences, not things" is that things often come with upkeep costs, even if it is just a spot to store them. A knife needs cleaning and sharpening, a mattress takes a lot of space, needs clean sheets, etc...
And your examples are somewhat biased in that they are things you need anyways. You can't really live without a mattress and some kind of knife. The question is more about what to do with your disposable income. Do you buy a thing you don't really need or an experience you don't really need. The reason to favor experiences it that they don't come with upkeep costs.
> Do you buy a thing you don't really need or an experience you don't really need. The reason to favor experiences it that they don't come with upkeep costs
On the flip side, I regularly sell the things I don't need anymore. I can't sell my experiences, can I?
The other thing you appear to be missing is that there are few experiences you really need, while there are many things you really need, so any comparison of expenses to things is going to be comparing an unnecessary experience to a necessary thing.
>I am 50 years old, and live a reasonably opulent, upper-middle class, big city life.
This indicates to me that you don't actually know the price of anything, particularly post-pandemic. E.g., a middle-of-the-road mattress costs $800. A good one sets you back 2 grand.
On other hand "experience things" are pretty cheap. Specially in second-hand market.
Second-hand books can be very cheap, same goes for music in form of CDs, or movies as DVDs. Or you can rent them pretty cheap. And even new ones are pretty cheap.
So if experience is mass produced as item it can be very cheap too.
In many parts of the World, taxes are very high. That will push prices up.
In Europe, we have to pay for the recklessness we threw money during the pandemic, for the money we borrowed, for the money we printed out of thin air, for the very high energy prices due to failed green policy and for the war in Ukraine.
People in other parts of the world have their share of problems, too.
IMHO there's another structural issue: Expansion of the "landed gentry" class.
That is, people who own a property can live their whole life of it without single contribution to the society. They might own the property due to a sizeable contribution they made early on but lately a lot of people simply got lucky to be at the right place at the right time due to policies that favoured them or events that happen outside of their control or simply inherited the property.
Those people are taking large portion of the output of the productive people and because of the regulations and market dynamics their wealth doesn't come down but even keeps climbing.
Normally this would be reserved for the elites and can be tolerable and maybe even desirable but when you have that elite class large as today, the resources they take out of productive people gets very significant.
For example, if someone who happened to own a shitty house in an area where a lot of people suddenly start come to work, they can extract much of the productive output of the companies and people there simply because its not feasible to build new housing due to regulations.
When a company happens to solve the navigation needs of the world from SV, they happen to pay very significant chuck of their money to landlords in SV. The people who solved the worlds navigation needs might appear to be compensated handsomely actually don't keep the money for long, they transfer significant amount of it to landlords.
Then you end up with something like 2 people who solved the navigation, 5 people who produced and serviced the consumption needs but 10 people compete for the output of these 5 people since 3 people did nothing but just got richer by keeping owning a property.
Actually, these 3 people don't have to be property owners only, it can be anything that brings enough income for life without any further input to the society. Ideally, this wouldn't cause a problem because ideally they should have been living the good life for some huge contribution they made early on but due unfair market situation they ended up like lottery winners.
I disagree with a few things youre saying, though I think your heart is in the right place, allow me a moment. People who own property pay property taxes, the truth is that almost no one owns property in america, even the rich, we only lease it from the government. Further, a rich persons contribution to society is that cellphones are cheap and powerful, that you can have anything from a couch to a christmas dinner delivered to your door, that any of us have free time enough to talk on the internet rather than sustenance farming.
There is a big trick, they are robbing you, but knowing how is half the battle. As you say regulations push out competition, that is one factor; along with government spending which will always flow to connected interests; lastly a monetary system where the money can only exist when its loaned into existence by a private corporation, the Fed.
Each of these have their respective mythos of justification, and an underlying purpose. Regulation is to protect the public despite the fact that the regulations only come after working conditions have already improved, and are passed after the well connected corporate interests have gained some advantage that would be difficult for smaller businesses to replicate. Government spending is sold as defending citizens from ner-do-wells foreign and domestic, or more modernly for providing for the downtrodden, whereas the vast majority of money flows into the military industrial complex, the pharmaceutical industry, the banks and other well connected interests. The existence of a private organization responsible for the creation of our money is sold as a way to keep prices stable, when the reality is it gives them dominion over the wealth of the population, by manipulating interest rates and banking regulations they can chronically steal the wealth out of the paper you work for.
>people who own a property can live their whole life of it without single contribution
is a big part of why economic growth is slow in the UK these days whereas in the 1800s it was the workshop of the world. The economy shifted from making stuff to getting a levy on asset prices, either housing or financial transactions.
You have hit the nail on the head, and many countries have an invisible tax on services due to company owners selling to private equity companies / large majority shareholders that extract profits to other countries. American (and other) multinationals make owners wealthy and as a quick turnaround start extracting profits outside the nation.
In the UK you can buy a £100m apartment and pay virtually zero tax each year on it. That doesn't sound very high to me. Maybe taxes are high on the wrong people?
> failed green policy
What is a failed green policy? Sounds like a soundbite.
Whatever policies we have, haven't really reduced out CO2 emissions nearly as much as they should. The biggest reduction was probably last winter when everybody turned the heat down to save gas because of the war in Ukraine. I think I heard somewhere that that was a 25% reduction in gas use.
That a massive share of Europe is still dependant on natural gas for things like heating and cooking. In the Nordics housing in populated areas are mostly a mix of district heating or electric heating, and the rest either have wood or some oir burner (people far away from the grid).
In mainland Europe they don’t have a lot of wood to burn so gas from the Russian sphere of influence was a cheap solution that became an addiction that blew up in many peoples’ faces – even us in the north, due to the home energy markets being tied to natural gas
You're not explaining why prices are high, you are justifying your existing beliefs about "money printing" and taxation. Costs (including taxes) are only very loosely related to prices. They only serve as a lower bound, and not even always that.
Taxes are not the reason for the massive price increases. Indeed, you point out high energy prices, which were met with suspension of energy taxes in many European countries, with little effect. VAT was slashed for many sectors, still, prices went up.
If anything, taxes are too low. Many tax rates are at a historic low. European billionaires stole a trillion Euros from the population last year alone. Why people are always so enraged about the taxes that pay for every single public utility instead of the unlimited greed of the hyperwealthy who don't even know what to do with their money because the luxury wharfs are completely booked out and they already own two private jets?
> Why people are always so enraged about the taxes that pay for every single public utility instead of the unlimited greed of the hyperwealthy
Smoke and mirrors. They've managed to deflect the blame nicely, and we are dumb enough to believe that it is so. The same effect can be seen in the universal health care reactions in the US. Fascinating.
Taxes are a fixed percentage of whatever is sold, ubless taxes are raised (didn't happen yet) or new taxes are introduced (didn't happen neither), taxes have zero impact on prices.
The money we threw at the pandemic, like everyone else in the developed world, avoided an economic crash worse than 2008. It resulted in inflation so, among other causes. The high energy prices were temporary and caused by the war in Ukraine, green energy policiies had nothing to do with that (if you want to thank someone that would be Putin).
I agree with your point in general, and disagree with the OP's sentiment. However, seigniorage via central bank Interest Rates is considered a tax by most economists (or at least most economists would reasonably accept an argument that it was tax as legitimate), and does materially impact prices.
As a result, it's not entirely correct to say that tax rates haven't increased in Europe over the last 2 years.
Money printing didnt stop all the small businesses from closing down, its very easy to see the upward transfer of wealth that occured during the pandemic, it was the largest in history.
My cheap tablet doesn't want to smoothly render the linked site but going by the comments, it doesn't answer its own question. I was, however, asking myself the complete opposite question the other day, when browsing Aliexpress. Why are things so cheap? I think I know some of the answers (economy of scale, cheap labor) but still. I was looking for ESP32 related things, and I can get a very sophisticated, tiny little computer, delivered all the way from the other side of the world to my house (Canada) for the price of a coffee at Tim Hortons. So yeah, why are things so cheap?
It's due to the Universal Postal Union, which is a UN agreement that governs the costs and subsidies associated with international shipping.
The link below explains it well, but the gist is that China was rated to be a "poor" nation, whereas the USA was rated to be a "rich" nation. This rating essentially means that the USA is subsidizing packages shipped from China to the USA.
Trump (in a rare moment of not being an idiot) threatened to withdraw from the agreement over the subsidies. He didn't, but the agreement did get amended, and packages from China will start becoming less subsidized (more expensive) by 2025.
The amount of products and service we produce probably did not.
Most people think that M0 is only a small factor in price increase and other factors like credit given by banks, the speed at which money moves and spending/saving behavior play a bigger role. But I doubt that. To me, it seems those are all indirect, delayed outcomes of the money supply. So we don't see the prices increase linearly and instantly with the increase of the monetary base. But we see it eventually.
There are lots and lots of factors that can change the rate between government issued money and money available for consumers. Most of them wouldn't make the news even if the news cared about discussing anything in depth.
But the thing is, historically most governments kept those factors well regulated so that the government had a coarse control over that ratio. (A noisy but effective control.) But at the 2000's crisis, the US decided to loose their regulations so that there the ratio is completely defined by the market.
What that means is that no, it's not obvious that the dollar inflation is coming from the inflated money supply. But that's a problem by itself.
Inflation has been very low since the 1990s. The worry after the 2008 bank crisis was deflation. I suspect our recent blip in inflation which has now largely passed is a result of the covid supply shock.
I get the sense that people increase prices just because everyone else is increasing prices. Even if nothing increased for you since "everything" is increasing might as well increase because now is when you can get away with it.
Joseph Stiglitz, Nobel Prize winning economist, has said that most of the inflation we saw was markups - ie firms raising their prices due to inadequate amount of competition.
I have the same sense - but they can only get away with it because a) people have excess savings b) people are willing to spend those excess savings.
When consumers start reducing demand, or substituting other products things will change - I’ve already started changing my behaviour - but it takes a little while, you buy a $7 jar of mustard, $12 bag of granola, or a $30 hotel margarita - and you’re f** that never doing that again, but it feels like it takes a while for that to work its way through the system.
Prices increase when costs go up. If you’re selling widgets and your wholesale price goes up, you have to increase the retail price or your margins drop.
> I know that most people say that M0 is only a small factor in price increase and other factors like credit given by banks, the speed at which money moves and spendin/saving behavior play a bigger role. But I doubt that.
Please don’t take offense, but I doubt that you understand what you’re talking about given the fact that you confused monetary base and money supply.
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Joseph Stiglitz, Nobel Prize winning economist, has said that most of the inflation we saw was markups - ie firms raising their prices due to inadequate amount of competition.
> Most people think that M0 is only a small factor in price increase and other factors like credit given by banks, the speed at which money moves and spending/saving behavior play a bigger role.
Well, what you seem to be describing is M2, aka actual money available for spending. Which is a rather large factor in the general price level.
No. That is exactly my point: That the change in M0 is the source of increased prices, not changes to M2 (apart from the changes that are in M2 because M0 is in M2).
Think about it this way: How can M2 increase without M0 also increasing? Then we can look at those mechanisms and determine if they are to "blame" for the recent price increases. I think they are not.
When you lend money from a bank, you will not spend it on fancy restaurant visits. Because you know you will have to pay it back.
When you own a house and there is a cafe in that house which pays rent even though it is closed, because it gets the money from some governmental covid assistance program, then you do not have to pay the money back and can spend it consumer goods and drive prices up.
Nothing else explains the global rise in luxury spending and the global cost of living crisis. Steve Keen can bring out all his charts and theories but the lived experience of the people tells a different story.
> To me, it seems those are all indirect, delayed outcomes of the money supply.
Why do you think that? Suppose that Treasury minted $100,000,000,000,000,000 in coins and locked them up in Fort Knox and never spent them. By what mechanism would that increase in the money supply drive up prices?
You do realize that commercial banks create most of the money in the economy and QE is merely the central bank flooding the banks with reserves to back the money they already created?
Honestly, how can you be this dense. The difference in the past years wasn't QE or "money printing", it was that the government performed fiscal stimulus, which tends to put money into the hands of people more than letting their bank account be backed by government bonds.
The Economics Explained yotuber made a video about how hyperinflation is already there using a similar graph and where is it exactly?
I find a lot of things are expensive simply because the business owners live in an expensive area, and this unfortunately rarely results in a vastly superior product. Yes, I'm referring to a lot of DTC brands based out of SF. It's very telling judging from the marketing on just how much they spend to convince you their stuff is superior. I've started to negatively correlate ads vs quality and instead seek brands that don't spend much on marketing, but are still known. Those companies offer true value.
The weirdest thing to me is the variation in gas pricing. Within 100 miles I see gas under $4 and up to $6 on the same day. The most striking was two gas stations on a corner where one was $3.85 and the other $5.30. Even weirder (anecdotally), the cheapest gas seemed to come to the wealthier spots first while poor neighborhoods stayed high.
I suspect you would be interested in seeing the time-prices of various goods, things like TVs continue to steadily get cheaper, whereas things like education and housing continue their upward climb.
Well, houses, it's simple: they (politicians) limit the number of new builds, otherwise prices would fall. It's always supply and demand in the end.
Diamond extracting also: they control the amount of diamonds that 'enter' the market each year. Imagine if it was 'flooded': the diamond market would collapse.
Even in areas where building is effectively unlimited, land is effectively free (or less than $5k/acre) a new house is still moderately expensive. There's a minimum price below which you cannot realistically go, because of flat-cost items, and minimum building requirements.
So you end up where a smallish house costs $200k to build/sell at a modest profit, and a nice large house costs not terribly much more but can be sold at a much higher profit margin.
Sure, but those costs (including land costs) are reduced with triplexes/quadplexes/townhomes, which require moving a mountain to get approved in most zoning districts.
Blaming this on politicians takes voters off the hook too much. There are plenty of homeowners, and ironically, pro-rental groups, strongly advocating for policies that limit supply of new housing.
Housing prices increasingly reflect labour costs, as those represent a higher percentage of the BOM year over year. North America has high wages and so the minimum threshold for a new 2000 sq ft hovers around $250K, bulk of it being labour cost, the rest materials.
My Latin American friends working in construction would not believe this, they are paid crap, and is the American construction company owner who pockets most of the money.
There's also growing competition from large companies buying up supply for one reason or another. Housing is being used as an investment option by hedge funds, and now there's whole companies running AirBnB rentals. The latter is being limited in some areas and there's a new bill in the Senate to stop the former, but at the moment it's hard for first-time homebuyers to enter the market when companies just pay 20% over asking price and outbid them.
This gets posted a lot and the reality is that hedge funds own a very small percentage of properties: it's hard to find numbers, but anywhere from <1% ("how many single-family homes do hedge fund owners own" / "how many single-family homes exist") to 3% (how many "institutional investors" own) [1]. They allegedly purchased ~27% of the new homes during the first 3 months of 2023 [1], which is a larger ratio (and not ideal), but still less than the majority. The majority of homes are owned by individuals [2], and the main reason prices are high is supply and demand.
Institutional investors own less than 1% of SFHs. The only reason to invest in them in mass is because you think the area is dominated by NIMBYs who will prevent new supply. Otherwise theyre a bad investment. So funnily enough YIMBY policy fixes this issue too.
For this to be true, you would expect to see rapid population growth. There aren't any Western countries with undue population growth levels - the immigrants are brought in to make up the numbers for the millions of babies that aren't being made.
Here in Norway the primary driver of the housing crisis is that people move from the countryside to larger cities, while hardly anyone does the reverse.
Ironically there's a shortage in the countryside as well, as many of those that move or inherit (ie kids moved) don't sell due to low prices, opting to keep it as a summer home.
And since prices are low it's difficult to get a loan, since sales price is often below the cost of building.
Average wages have never gone down since WW2 (stats are readily available), although immigration may be a factor in dampening the growth rate. For most people on HN, everything before WW2 is before your lifetime.
This is a take that would take serious evidence to convince me of. Population growth rates been declining in every western country to the point where, even with immigration, many are below replacement.
Also, we don't tax the capital gains of sold additional homes enough. We should tax those gains to the extent that it isn't profitable to own and sell additional property.
Renting shelter is an important piece of flexibility for many people. I was in no position to buy an entire shelter nor tie myself down long-term right after college (and in fact, moved 6 times in the first 8 years, all but one of those being based entirely on my evolving preferences [one was my landlord selling and moving away]).
If you agree that renting shelter is important to many people for valid reasons, someone or something has to be able to own that property that you call "additional" and others call "the place I live".
> they (politicians) limit the number of new builds,
This theory doesn't work very well, because there are lots of places where new construction is entirely uncapped (politicians are desperate for the new property tax growth), and prices still don't fall there. Prices are lower there than SF/NYC comparables, sure, but still up 300% over the past decade, and still rising every year.
I know everyone takes Econ 101, and then nothing else, but there's a lot more to pricing than just "supply v demand". We have lots of markets with high prices despite adequate supply, or even despite major oversupplies.
> Imagine if it was 'flooded': the diamond market would collapse.
The diamond market was already flooded decades ago (we can literally manufacture diamonds without mining now) and the market still did not collapse.
And of course, the supply price of diamond stones has almost nothing to do with the cost of a diamond ring, which is why Zales can still charge thousands of dollars for a loose diamond stone, that can be infinitely manufactured in lab for less than 1/4th of that price
Prices are almost never supply vs demand. And in a capitalist economy, prices are almost never competitive.
>This theory doesn't work very well, because there are lots of places where new construction is entirely uncapped (politicians are desperate for the new property tax growth), and prices still don't fall there
> the supply price of diamond stones has almost nothing to do with the cost of a diamond ring
Correct. But it does have something to do with the supply of *diamond rings*. Since there is a de-facto cartel between producers, middlemen and retail, it is not easy for new entrants to sell their rings to consumers. So no, there is not an oversupply of real diamond rings that would depress prices. Also, there is a sizeable % of people that want to spend more on a ring, which is quite rare in markets.
Also, I bet that there is a growing ecosystem of individuals and companies producing fake diamond jewellery and selling it direct to consumer (haven't looked into it).
Having agreed with everything up to this point, that's a rather bold claim. I would understand it as "supply and demand are not the primary factor in determining almost all prices". Is this really your claim? What are the factors then? Is there evidence?
Readit News
A medium-quality dinner for two in an expensive city costs 100$. A beautiful kitchen knife costs about that much, but lasts 20 years.
A Broadway musical for a family of 4 costs about 800$. A good mattress costs about that much, but lasts for 20 years.
The given wisdom seems to be that we should value experiences more than things. Good things also cause small dose of repeated joyful experiences.
I am 50 years old, and live a reasonably opulent, upper-middle class, big city life. I am guessing here - all the items in my apartment put together, is probably worth 6 months of my work. A bargain, compared to the joy they give me.
I think experiences can be as cheap or as expensive as you like. Essentials are the crux of the article, and without essentials most experiences are harder.
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Housing, transportation, and food account for over 60% of all spending.
Experienes and goods aren't my problem. My problem is that my dwelling costs $500 a month more than it did in 2021 and I live in the exact same place, and I haven't gotten a raise.
https://www.bls.gov/news.release/pdf/cesan.pdf
So house pricing problems? Just localized regulatory problems. We'd have a much smaller problem if more metro areas were attractive to people, instead of having such a big separation between of winners and losers.
Here on the farm, the price I'm getting when selling food is half of it was two years ago. If I, the farmer, am selling the food for less than two years ago, while you are paying more than two years ago, then it seems experiences are you problem – e.g. you are paying more for the experience of shopping in a grocery store.
However, that would not be true for buying a home especially when factoring in borrowing costs.
https://ipropertymanagement.com/research/average-rent-by-yea...
Therefore, paying a local to cook for you is expensive. Buying a kitchen knife made by someone in a low cost of living area is cheap.
This also means that buying a custom knife handmade by a local artisan in your city will be expensive.
Am I the only one that read that and thought "Since when does a mattress last 20 years?" That certainly doesn't match my experience, even for mattresses much more expensive than that.
My friends who are 250 lbs linebackers have to regularly replace their sofas and suchlike because they're 'worn out' i.e. the springs and foam aren't springing and foaming back into place like they used to. On the other hand, I come from a family of 140 lbs marathon runners, and for us that simply does not happen.
These days a high quality handmade king size mattress of natural materials starts closer to £2,500 and might have a guarantee of 10 years.
I’m lying on a small, high quality mattress purchase 6 years ago for £1,100 from a small boutique business and it started to dip in the middle a bit about 2 years ago but I think it’s got a 2 or 3 more years life left in it.
£630 ($800) will get you a very cheap mattress today and if it’s both comfortable and lasts 20 years that’ll be like winning the lottery
Here in the US, experiences are very expensive. Going to a spa for a few hours, $300 to $500+. Buying the things they use at the spa, it's like $60.
Spending time with your loved ones, spending time with friends, going outside and walking, reading a book are experiences that I care more about, and they don't cost much, if anything.
Some people living in poor countries report that they are happier than people living in rich countries.
Why is that? Because they have better experiences.
Some experiences are expensive, some are free. Things are never free.
Why are things expensive? Because everyone will charge you the most they can get away with. Part because of supply and demand, part because they use your desires against you, part because they have to be profitable.
https://en.wikipedia.org/wiki/Baumol_effect
This "everyone will charge you the most they can get away with" doesn't always have to mean prices go parabolic forever; we can enact simple urban land use reforms that allows more housing units and commercial spaces to be built, which can reduce the price of rent for businesses and the rent of housing units that businesses pay indirectly via wages.
And your examples are somewhat biased in that they are things you need anyways. You can't really live without a mattress and some kind of knife. The question is more about what to do with your disposable income. Do you buy a thing you don't really need or an experience you don't really need. The reason to favor experiences it that they don't come with upkeep costs.
On the flip side, I regularly sell the things I don't need anymore. I can't sell my experiences, can I?
The other thing you appear to be missing is that there are few experiences you really need, while there are many things you really need, so any comparison of expenses to things is going to be comparing an unnecessary experience to a necessary thing.
This indicates to me that you don't actually know the price of anything, particularly post-pandemic. E.g., a middle-of-the-road mattress costs $800. A good one sets you back 2 grand.
Younger generations are wealthier in terms of almost everything but these three things whose cost growth has greatly exceeded inflation.
I don’t think it’s a coincidence that we simultaneously restrict supply and subsidize demand in those areas.
It's not. It's just it's easier and cheeper to produce things nowadays than experiences, thanks to the industrial revolution.
It hasn't been like this in the past. People valued things much more.
Second-hand books can be very cheap, same goes for music in form of CDs, or movies as DVDs. Or you can rent them pretty cheap. And even new ones are pretty cheap.
So if experience is mass produced as item it can be very cheap too.
Is that after tax? I'm refurbishing and trying to define a budget.
Probably not for the typical HN crowd, but for many people food is a substantial part of the monthly family budget.
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[1] https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headline...
No.
Are things expensive? No
In Europe, we have to pay for the recklessness we threw money during the pandemic, for the money we borrowed, for the money we printed out of thin air, for the very high energy prices due to failed green policy and for the war in Ukraine.
People in other parts of the world have their share of problems, too.
That is, people who own a property can live their whole life of it without single contribution to the society. They might own the property due to a sizeable contribution they made early on but lately a lot of people simply got lucky to be at the right place at the right time due to policies that favoured them or events that happen outside of their control or simply inherited the property.
Those people are taking large portion of the output of the productive people and because of the regulations and market dynamics their wealth doesn't come down but even keeps climbing.
Normally this would be reserved for the elites and can be tolerable and maybe even desirable but when you have that elite class large as today, the resources they take out of productive people gets very significant.
For example, if someone who happened to own a shitty house in an area where a lot of people suddenly start come to work, they can extract much of the productive output of the companies and people there simply because its not feasible to build new housing due to regulations.
When a company happens to solve the navigation needs of the world from SV, they happen to pay very significant chuck of their money to landlords in SV. The people who solved the worlds navigation needs might appear to be compensated handsomely actually don't keep the money for long, they transfer significant amount of it to landlords.
Then you end up with something like 2 people who solved the navigation, 5 people who produced and serviced the consumption needs but 10 people compete for the output of these 5 people since 3 people did nothing but just got richer by keeping owning a property.
Actually, these 3 people don't have to be property owners only, it can be anything that brings enough income for life without any further input to the society. Ideally, this wouldn't cause a problem because ideally they should have been living the good life for some huge contribution they made early on but due unfair market situation they ended up like lottery winners.
There is a big trick, they are robbing you, but knowing how is half the battle. As you say regulations push out competition, that is one factor; along with government spending which will always flow to connected interests; lastly a monetary system where the money can only exist when its loaned into existence by a private corporation, the Fed.
Each of these have their respective mythos of justification, and an underlying purpose. Regulation is to protect the public despite the fact that the regulations only come after working conditions have already improved, and are passed after the well connected corporate interests have gained some advantage that would be difficult for smaller businesses to replicate. Government spending is sold as defending citizens from ner-do-wells foreign and domestic, or more modernly for providing for the downtrodden, whereas the vast majority of money flows into the military industrial complex, the pharmaceutical industry, the banks and other well connected interests. The existence of a private organization responsible for the creation of our money is sold as a way to keep prices stable, when the reality is it gives them dominion over the wealth of the population, by manipulating interest rates and banking regulations they can chronically steal the wealth out of the paper you work for.
>people who own a property can live their whole life of it without single contribution
is a big part of why economic growth is slow in the UK these days whereas in the 1800s it was the workshop of the world. The economy shifted from making stuff to getting a levy on asset prices, either housing or financial transactions.
> failed green policy
What is a failed green policy? Sounds like a soundbite.
In mainland Europe they don’t have a lot of wood to burn so gas from the Russian sphere of influence was a cheap solution that became an addiction that blew up in many peoples’ faces – even us in the north, due to the home energy markets being tied to natural gas
You will pay £11,911,250 in stamp duty though.
Taxes are not the reason for the massive price increases. Indeed, you point out high energy prices, which were met with suspension of energy taxes in many European countries, with little effect. VAT was slashed for many sectors, still, prices went up.
If anything, taxes are too low. Many tax rates are at a historic low. European billionaires stole a trillion Euros from the population last year alone. Why people are always so enraged about the taxes that pay for every single public utility instead of the unlimited greed of the hyperwealthy who don't even know what to do with their money because the luxury wharfs are completely booked out and they already own two private jets?
Smoke and mirrors. They've managed to deflect the blame nicely, and we are dumb enough to believe that it is so. The same effect can be seen in the universal health care reactions in the US. Fascinating.
valuation of stocks growing higher is not stealing. Using hyperbole is not making your argument any more convincing.
Rent, rent, rent, rent…
The money we threw at the pandemic, like everyone else in the developed world, avoided an economic crash worse than 2008. It resulted in inflation so, among other causes. The high energy prices were temporary and caused by the war in Ukraine, green energy policiies had nothing to do with that (if you want to thank someone that would be Putin).
As a result, it's not entirely correct to say that tax rates haven't increased in Europe over the last 2 years.
The link below explains it well, but the gist is that China was rated to be a "poor" nation, whereas the USA was rated to be a "rich" nation. This rating essentially means that the USA is subsidizing packages shipped from China to the USA.
Trump (in a rare moment of not being an idiot) threatened to withdraw from the agreement over the subsidies. He didn't, but the agreement did get amended, and packages from China will start becoming less subsidized (more expensive) by 2025.
https://en.wikipedia.org/wiki/Universal_Postal_Union#2019_Ex...
https://fred.stlouisfed.org/series/BOGMBASE
The amount of products and service we produce probably did not.
Most people think that M0 is only a small factor in price increase and other factors like credit given by banks, the speed at which money moves and spending/saving behavior play a bigger role. But I doubt that. To me, it seems those are all indirect, delayed outcomes of the money supply. So we don't see the prices increase linearly and instantly with the increase of the monetary base. But we see it eventually.
But the thing is, historically most governments kept those factors well regulated so that the government had a coarse control over that ratio. (A noisy but effective control.) But at the 2000's crisis, the US decided to loose their regulations so that there the ratio is completely defined by the market.
What that means is that no, it's not obvious that the dollar inflation is coming from the inflated money supply. But that's a problem by itself.
https://tradingeconomics.com/united-states/inflation-cpi (click max)
Joseph Stiglitz, Nobel Prize winning economist, has said that most of the inflation we saw was markups - ie firms raising their prices due to inadequate amount of competition.
Here is an 50 min long talk on the subject https://www.youtube.com/watch?v=4BAsZIHp9HI&t=1217s
The idea that the expansion of money supply led to the price increases seems to be mostly a media narrative. Many people believe it however.
When consumers start reducing demand, or substituting other products things will change - I’ve already started changing my behaviour - but it takes a little while, you buy a $7 jar of mustard, $12 bag of granola, or a $30 hotel margarita - and you’re f** that never doing that again, but it feels like it takes a while for that to work its way through the system.
M2 money supply, please read the part where the formula changed in 2020: https://fred.stlouisfed.org/series/M2SL
> I know that most people say that M0 is only a small factor in price increase and other factors like credit given by banks, the speed at which money moves and spendin/saving behavior play a bigger role. But I doubt that.
Please don’t take offense, but I doubt that you understand what you’re talking about given the fact that you confused monetary base and money supply.
“I’m not an economist but here is my …”
edit Joseph Stiglitz, Nobel Prize winning economist, has said that most of the inflation we saw was markups - ie firms raising their prices due to inadequate amount of competition.
Here is an 50 min long talk on the subject https://www.youtube.com/watch?v=4BAsZIHp9HI&t=1217s
Well, what you seem to be describing is M2, aka actual money available for spending. Which is a rather large factor in the general price level.
Think about it this way: How can M2 increase without M0 also increasing? Then we can look at those mechanisms and determine if they are to "blame" for the recent price increases. I think they are not.
Banks lending is an increase in the money supply.
When you own a house and there is a cafe in that house which pays rent even though it is closed, because it gets the money from some governmental covid assistance program, then you do not have to pay the money back and can spend it consumer goods and drive prices up.
And when the loan is paid off, it correspondingly decreases.
The house my brother lives in was sold in 2011 for less than what the owners paid for it in 2006.
Now, its up 2.5x from what he paid.
He doesn’t agree with you. He has a great podcast called Debunking Economics.
Why do you think that? Suppose that Treasury minted $100,000,000,000,000,000 in coins and locked them up in Fort Knox and never spent them. By what mechanism would that increase in the money supply drive up prices?
Honestly, how can you be this dense. The difference in the past years wasn't QE or "money printing", it was that the government performed fiscal stimulus, which tends to put money into the hands of people more than letting their bank account be backed by government bonds.
The Economics Explained yotuber made a video about how hyperinflation is already there using a similar graph and where is it exactly?
Probably due to theft.
It's better to judge in time. How many ours do I have to work to buy this? Or even in breads or burgers. Is this worth x burgers?
Thinking like that made me buy much less than I would have.
So you end up where a smallish house costs $200k to build/sell at a modest profit, and a nice large house costs not terribly much more but can be sold at a much higher profit margin.
That's pretty much nowhere in the US. Or at any rate, not where people are.
[1] https://nationalmortgageprofessional.com/news/democratic-leg...
[2] https://sgp.fas.org/crs/misc/R47332.pdf
[2] https://todayshomeowner.com/blog/guides/are-big-companies-bu...
It seems a rather poor investment.
Ironically there's a shortage in the countryside as well, as many of those that move or inherit (ie kids moved) don't sell due to low prices, opting to keep it as a summer home.
And since prices are low it's difficult to get a loan, since sales price is often below the cost of building.
What are the statistics?
If you agree that renting shelter is important to many people for valid reasons, someone or something has to be able to own that property that you call "additional" and others call "the place I live".
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This theory doesn't work very well, because there are lots of places where new construction is entirely uncapped (politicians are desperate for the new property tax growth), and prices still don't fall there. Prices are lower there than SF/NYC comparables, sure, but still up 300% over the past decade, and still rising every year.
I know everyone takes Econ 101, and then nothing else, but there's a lot more to pricing than just "supply v demand". We have lots of markets with high prices despite adequate supply, or even despite major oversupplies.
> Imagine if it was 'flooded': the diamond market would collapse.
The diamond market was already flooded decades ago (we can literally manufacture diamonds without mining now) and the market still did not collapse.
And of course, the supply price of diamond stones has almost nothing to do with the cost of a diamond ring, which is why Zales can still charge thousands of dollars for a loose diamond stone, that can be infinitely manufactured in lab for less than 1/4th of that price
Prices are almost never supply vs demand. And in a capitalist economy, prices are almost never competitive.
Can you give an example of such a place?
Correct. But it does have something to do with the supply of *diamond rings*. Since there is a de-facto cartel between producers, middlemen and retail, it is not easy for new entrants to sell their rings to consumers. So no, there is not an oversupply of real diamond rings that would depress prices. Also, there is a sizeable % of people that want to spend more on a ring, which is quite rare in markets.
Also, I bet that there is a growing ecosystem of individuals and companies producing fake diamond jewellery and selling it direct to consumer (haven't looked into it).
Having agreed with everything up to this point, that's a rather bold claim. I would understand it as "supply and demand are not the primary factor in determining almost all prices". Is this really your claim? What are the factors then? Is there evidence?