Have you had much inflation with your photo staples?

So-called Austrian-school economists argue that "inflation" means a growing money supply and that price inflation is merely the inevitable consequence. But "inflation" meaning price inflation is the historical norm and remains the most popular usage.

 

The problem with the Austrian-school definition is that money supply isn't the sole inflationary factor, as my previous post explained. Indeed, prices (and wages) can deflate even while the money supply increases. For example, after the Crash of 2008, housing prices in most places deflated for years despite a sudden and massive increase in the money supply to avert another Great Depression. And many workers suffered pay cuts during that period. Even when price inflation returned, it ran below the historical average and wasn't proportional to the growth in money supply.

 

The U.S. government's new infrastructure spending will be spread over several future years, not splurged all at once. Also, it's money we should have been spending over the past decade or more. Now we're trying to catch up. The longer we postpone it, the more expensive it gets, because construction costs rise and borrowing costs are already at historic lows.

 

As I noted previously, other factors besides monetary policy affect the prices of cameras, lenses, and consumables (ink and paper). People aren't buying smartphones instead of digicams because of money supply or interest rates. Camera manufacturers are refocusing on enthusiasts like us who are willing to buy more-expensive equipment. Ink and paper have such large profit margins (especially ink) that they are priced at whatever the market will bear.

 

Brand pricing is yet another inflationary factor unrelated to money supply or government spending. Leica sells its M-mount 75mm f/1.25 lens for $14,295 whereas 7Artisans sells its M-mount 75mm f/1.25 lens for $449. China's production costs are lower than Germany's, but not that much lower. (And according to reviews, the quality difference isn't nearly as great as the price difference.) I don't expect those prices to change much, no matter how many potholes the government fills with new money.

 

P.S. Maybe the "fixed-income retirement" cliche itself needs retiring. Nowadays, workers (especially in service jobs) are more likely than retirees to be living on fixed incomes. Federal minimum wage hasn't risen for 13 years. Social Security recipients get automatic cost-of-living adjustments (COLAs); few workers do. If your retirement income is truly fixed, maybe you're not taking advantage of the only inflation everyone seems to like: stock-price inflation. (Dare we say hyperinflation?)

 

Was talking with a retired guy. He said he never appreciated the fixed income aspect until % rates went down and his bond portfolio income stream dropped by a huge amount. Fixed income is much better than declining income.

If the price of fixing the infrastructure is slight increase in the price of potatoes, count me in.

The infrastructure bill is only (only?) $1T. But they want to spend an additional $3.5T on other programs. Not including either of these bills, we're already way over $1T deficit this year just for the regular budget items like SS, education, defense, and other governments programs. So all that printing is going to cause a rise in prices for more things than just potatoes. I guess you didn't live through the 1970's. Boy, are you in for a surprise.

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Was talking with a retired guy. He said he never appreciated the fixed income aspect until % rates went down and his bond portfolio income stream dropped by a huge amount. Fixed income is much better than declining income.

It's actually worse than that. If let's say you get 2% interest but inflation is 5% as it is the last few months, than the real return is -3%. That's why people are buying up stocks and real estate and archival prints. Everyone is running around looking for better returns. But this is causing bubbles in stocks, real estate, and Ansel Adams prints.

The infrastructure bill is only (only?) $1T. But they want to spend an additional $3.5T on other programs. Not including either of these bills, we're already way over $1T deficit this year just for the regular budget items like SS, education, defense, and other governments programs. So all that printing is going to cause a rise in prices for more things than just potatoes. I guess you didn't live through the 1970's. Boy, are you in for a surprise.

 

The gas lines were the worse. But that was from OPEC. I was a kid back then, family took care of food.

As a retired person with fixed income, higher prices are the last things I need.

My house has gone up 45% in value according to Zillow in the last 8 years since we bought it.

I guess the value of your house isn’t quite so fixed.

 

Quit your whining and take a glance in your full financial mirror before so totally mischaracterizing your situation in public.

What galls me is that there’s stuff in the bills passed by this administration that directly benefits folks in dire need right now. And here, we find resistance to that from someone who’s home’s worth increased in value by 45% in less than a decade, speculating about what might be but willing to ignore what is. Folks need this infusion of money into the system right now in order to eat, feed their kids, and supply themselves with heat and medical care and you’d gladly deny them that on the speculation that it may raise your food and gas bill at a rate of about 2% of the rise in value of your house over the last few years. It will take an awful lot of more expensive potatoes to eat up the increased value of your home. I know, I know, your home value’s about to crash as well. Tell it to Chicken Little.

I guess the value of your house isn’t quite so fixed.

 

Quit your whining and take a glance in your full financial mirror before so totally mischaracterizing your situation in public.

What galls me is that there’s stuff in the bills passed by this administration that directly benefits folks in dire need right now. And here, we find resistance to that from someone who’s home’s worth increased in value by 45% in less than a decade, speculating about what might be but willing to ignore what is. Folks need this infusion of money into the system right now in order to eat, feed their kids, and supply themselves with heat and medical care and you’d gladly deny them that on the speculation that it may raise your food and gas bill at a rate of about 2% of the rise in value of your house over the last few years. It will take an awful lot of more expensive potatoes to eat up the increased value of your home. I know, I know, your home value’s about to crash as well. Tell it to Chicken Little.

A house is not a liquid asset. I don't get any income from it to pay for other things. You have to live somewhere. It's changing value over the years doesn't effect day to day income. The fact it's supposed value has temporarily gone up was mentioned to ask how new younger families can afford the price increase for housing? How do they get started today? These increases are mainly from inflation - the government printing too much. Printing more is just going to raise prices of everything. The fact is it's the poorest and middle class that get hurts the most from inflation and price increases. Their dollar devalues and buys less and less. Forget shooting so much film and that new lens you wanted to buy. The cost of potatoes has gone up as has gasoline, rent and most other things.

 

The money in the infrastructure and social program bills cannot be covered with taxes, only additional printing. The prices increase caused by the additional printing to pay for all of this will hurt those the most who are having problems now and will hurt them more in the future. Going further into debt is not the answer personally or for a country. Anyone who has gotten stuck with credit card bills they just can't seem to pay off knows what I;m talking about. You never get out from under. While the cost of everything goes up. your pay increases should you be lucky to get any, never covers the rising costs. That's why so many people are where they are today. This debt and printing has been going on for decades.

Edited August 12, 2021 by AlanKlein

A house is not a liquid asset. I don't get any income from it to pay for other things. You have to live somewhere. It's changing value over the years doesn't effect day to day income.

If you’re so sure such severe inflation is coming and the value of your house is going to crash, sell it now while the market is hot and get into a rental. You’ll have made out quite well and it will give you years of cash to afford rent money and high-priced potatoes. Assuming you’re well into your seventies, you should get enough cash out of it to afford rent for your remaining years. I wouldn’t understand anyone so sure of the coming crash holding onto an asset that’s about to lose so much of its value. Unless, of course, the point is just to complain and fear-monger about political matters you disagree with.

The fact it's supposed value has temporarily gone up was mentioned to ask how new younger families can afford the price increase for housing?

And in so asking, for whatever putative reason, you revealed a lot about your skewed self image, that you’ll be in such financial dire straights, living on a “fixed income” as you supposedly do. Your “fixed income” is supported by quite some real estate wealth which may currently be only on paper but which could be translated into a whole bunch of cash at the moment you want it.

 

I’d rather be in the position of having a regular income + the security of a house that had increased 45% in value in the last few years than renting and working a minimum-wage job and hoping this dysfunctional country can pass an infrastructure bill that a) might create a higher-paying job for me and b) might keep the road my bus goes down on the way to that job from crumbling under that bus’s weight while keeping the pipes which water flows through to that apartment clear of stuff that will sicken my children.

Kodak and Illford films have a steep increase in price every year it seems. I have been cutting costs however over the last 2 years and have dropped 120 film, color film, Kodak and Illford films. I am now just shooting 35mm with Arista 100 which puts me under $5.00 a roll or about $2.50 a roll if bulk loading. I am using Arista RC paper in the darkroom and cannot really reduce the costs in that regard. I work with 8x10 prints only which keeps it simple and helps with the cost. Anyway prices are up every year but my spending is down.

If you’re so sure such severe inflation is coming and the value of your house is going to crash, sell it now while the market is hot and get into a rental. You’ll have made out quite well and it will give you years of cash to afford rent money and high-priced potatoes. Assuming you’re well into your seventies, you should get enough cash out of it to afford rent for your remaining years. I wouldn’t understand anyone so sure of the coming crash holding onto an asset that’s about to lose so much of its value. Unless, of course, the point is just to complain and fear-monger about political matters you disagree with.

 

And in so asking, for whatever putative reason, you revealed a lot about your skewed self image, that you’ll be in such financial dire straights, living on a “fixed income” as you supposedly do. Your “fixed income” is supported by quite some real estate wealth which may currently be only on paper but which could be translated into a whole bunch of cash at the moment you want it.

 

I’d rather be in the position of having a regular income + the security of a house that had increased 45% in value in the last few years than renting and working a minimum-wage job and hoping this dysfunctional country can pass an infrastructure bill that a) might create a higher-paying job for me and b) might keep the road my bus goes down on the way to that job from crumbling under that bus’s weight while keeping the pipes which water flows through to that apartment clear of stuff that will sicken my children.

You'll change your mind about deficit spending and printing if inflation causes prices to increase like they did in the 1970's.

Kodak and Illford films have a steep increase in price every year it seems. I have been cutting costs however over the last 2 years and have dropped 120 film, color film, Kodak and Illford films. I am now just shooting 35mm with Arista 100 which puts me under $5.00 a roll or about $2.50 a roll if bulk loading. I am using Arista RC paper in the darkroom and cannot really reduce the costs in that regard. I work with 8x10 prints only which keeps it simple and helps with the cost. Anyway prices are up every year but my spending is down.

The last couple of years was a warmup. I'm afraid increases for film are just getting started for real.

The last couple of years was a warmup. I'm afraid increases for film are just getting started for real.

 

 

I agree.

You'll change your mind about deficit spending and printing if inflation causes prices to increase like they did in the 1970's.

I prefer to live in the real world, the one that centers around facts and empathy for other human beings, rather than the hypothetical world of economic fantasies and dire forecasts. To each their own.

I prefer to live in the real world, the one that centers around facts and empathy for other human beings, rather than the hypothetical world of economic fantasies and dire forecasts. To each their own.

Didn't learn much from the past now, did you?

Didn't learn much from the past now, did you?

Yes. I don’t trust Fox News disinformation campaigns and projections.

Inflation, always and everywhere, is primarily caused by an increase in the supply of money and credit...The main driver is inflation - additional money added to the money supply.

 

That's a gross oversimplification. If you chart the growth of U.S. money supply in recent decades and compare it with the inflation rates for that period, you won't see the strong correlation that you assert.

 

I already cited a few contrary examples, which you haven't addressed. Here's another: new money doesn't spread evenly throughout the economy. It tends to accumulate among the wealthy, who in aggregate spend less money than lower-income people do. Velocity of spending is a vital factor in the inflation equation. The less velocity, the less inflation.

 

In 2017, U.S. corporations received a huge tax cut funded by higher government borrowing. As many economists predicted, public companies spent much of this windfall on stock buybacks. In fact, they set a new record for that (unfortunately legal) form of stock-market manipulation. The buybacks inflated the company's share prices and executive bonuses without a corresponding increase in the company's productivity. But consumer prices didn't inflate nearly as much as stock prices did. Indeed, the Federal Reserve usually failed to reach its 2% inflation target in subsequent years. The reason is that very little of that corporate tax windfall trickled down to workers as pay raises.

 

If money supply is the primary driver of price inflation, it should be easy to reverse. The Federal Reserve can do it by shrinking the money supply, probably by reducing or ending its monthly purchases of Treasury bonds, mortgage-backed bonds, and corporate bonds. The federal government can do it by raising taxes and burning the revenue. In reality, however, it's not so easy, because many other factors besides money supply contribute to inflation (and deflation). For instance, in our global economy, we can't control what other nations do.

Was talking with a retired guy. He said he never appreciated the fixed income aspect until % rates went down and his bond portfolio income stream dropped by a huge amount. Fixed income is much better than declining income.

 

Yes, that's why the first rule of investing is diversification. If the retired guy invested all his money in bonds tied to interest rates, he's definitely hurting. Had he invested an age-appropriate percentage of his assets in stocks, the market inflation of recent years would have compensated.

 

Even within a bond-heavy portfolio, some diversification is possible. Some U.S. savings bonds purchased years ago are returning upward of 7.5% interest -- and it's exempt from state and local taxes. There are also inflation-adjusted bonds that pay higher interest in step with higher inflation. Those bonds additionally provide some protection against deflation, because their interest rates don't fall below the base rate at the time they were purchased.

 

It's sad how many people who are nearing retirement or who have already retired know so little about investing. Some are poor by circumstance and never had enough spare money to invest. But I have known well-paid middle-class people in their 50s who don't know what a mutual fund is and who have never contributed money to an IRA or 401(k) retirement account, even when their employer offers to match their contributions.

 

Not that I'm perfect. I still kick myself for not investing more heavily in Leica lenses. I have one "King of Bokeh" 35mm f/2 Summicron lens that has appreciated about 600% since I bought it in the 1980s. Dang, I should have bought a boatload of those.

I prefer to live in the real world, the one that centers around facts and empathy for other human beings, rather than the hypothetical world of economic fantasies and dire forecasts. To each their own.

If printing solved the problems of people, why not print $100K for each person? The problem is that printing does not work effectively. All it does is diminish the value of each dollar. So if you're poor, food, housing, all the basics all cost more. So you wind up hurting the very people you think you're helping.

 

What helps the poor and people, in general, the most, is to allow investments by having fewer taxes and less deficit spending so printing isn't required. Investments create new businesses and expand existing businesses. That creates jobs that help everyone. Earnings in your paycheck stay valuable instead of diminishing because of printing. Politicians always advocate spending more so you'll vote for them. Unfortunately, people are fooled by their promises. It sounds good when they declare all those jobs. But that's fleeting as inflation diminishes the value of your paycheck. It sounds good but backfires.

That's a gross oversimplification. If you chart the growth of U.S. money supply in recent decades and compare it with the inflation rates for that period, you won't see the strong correlation that you assert.

 

I already cited a few contrary examples, which you haven't addressed. Here's another: new money doesn't spread evenly throughout the economy. It tends to accumulate among the wealthy, who in aggregate spend less money than lower-income people do. Velocity of spending is a vital factor in the inflation equation. The less velocity, the less inflation.

 

In 2017, U.S. corporations received a huge tax cut funded by higher government borrowing. As many economists predicted, public companies spent much of this windfall on stock buybacks. In fact, they set a new record for that (unfortunately legal) form of stock-market manipulation. The buybacks inflated the company's share prices and executive bonuses without a corresponding increase in the company's productivity. But consumer prices didn't inflate nearly as much as stock prices did. Indeed, the Federal Reserve usually failed to reach its 2% inflation target in subsequent years. The reason is that very little of that corporate tax windfall trickled down to workers as pay raises.

 

If money supply is the primary driver of price inflation, it should be easy to reverse. The Federal Reserve can do it by shrinking the money supply, probably by reducing or ending its monthly purchases of Treasury bonds, mortgage-backed bonds, and corporate bonds. The federal government can do it by raising taxes and burning the revenue. In reality, however, it's not so easy, because many other factors besides money supply contribute to inflation (and deflation). For instance, in our global economy, we can't control what other nations do.

There's nothing wrong with increasing the money supply. However, productivity has to increase as well. There has to be a relationship between the two. Let's say a country doubled its population over three decades. Well, all other things remaining equal, you can double the money supply because productivity has doubled as well because you have twice the number of workers. Product costs would remain the same even though there's twice the amount of dollars in circulation.

 

The problem occurs when they increase the money supply and productivity doesn't increase. Or worse, production due to Covid has decreased. So you have more money chasing fewer goods. That bids up the price of the goods. That's what we're seeing now.

 

As you said, if the money doesn't wind up in circulation, then it may not have much of an effect. But even 2% isn't chump change. Over a ten-year period, that's 20%. So if you had $100,000 in a savings account, it would only have $80,000 in purchasing power at the end of the ten years. That's an additional tax of $20,000 being paid secretly in the middle of the night that you don't see on your tax returns but is paid never-the-less. I don't know about you. But I'd rather have that $20K. 2% adds up fast.

 

Of course, currently, the extra money is winding up in the economy accounting for around 5 or 6% and growing. That's 2-3x the Fed's goal of 2%. It's going to get worse before it gets better.

Yes, that's why the first rule of investing is diversification. If the retired guy invested all his money in bonds tied to interest rates, he's definitely hurting. Had he invested an age-appropriate percentage of his assets in stocks, the market inflation of recent years would have compensated.

 

Even within a bond-heavy portfolio, some diversification is possible. ...

 

Not that I'm perfect. I still kick myself for not investing more heavily in Leica lenses. I have one "King of Bokeh" 35mm f/2 Summicron lens that has appreciated about 600% since I bought it in the 1980s. Dang, I should have bought a boatload of those.

I diversified in Nikon and Mamiya. My Nikon is worth $25 and my Mamiya system is worth maybe 15% of what I paid for it.

What helps the poor and people, in general, the most, is to allow investments by having fewer taxes

That’s what helps the rich and keeps the poor poor and lowers the standard of the middle class, and it’s been proven over and over again.

 

But enough. This goes nowhere and has nothing to do with photography.

Edited August 13, 2021 by samstevens

As for photography and inflation, I’ve always bought what I could afford and didn’t think about what I couldn’t. That goes for cars and many other purchases that, for some, border on hormonal. :)

I do not worry much about stuff I cannot afford and most of the stuff that I can. However my Leica M6 was free and it just works perfectly year after year. Just shot a roll of Arista 100 yesterday. I went over to what used to be Fort Ord and they are tearing down the old wooden Army barracks so I shot a roll of film of the beat up old buildings that are left. Photos look great and I printed out one in my darkroom. I did not stay in those buildings but I was stationed at Ft Benning in the late 60's and lived in barracks of the same design. They had coal fired heaters.

As you said, if the money doesn't wind up in circulation, then it may not have much of an effect. But even 2% isn't chump change. Over a ten-year period, that's 20%. So if you had $100,000 in a savings account, it would only have $80,000 in purchasing power at the end of the ten years.

 

Actually, 2% inflation over 10 years is more than 20%. Inflation is cumulative. If you plug your numbers into a spreadsheet, you'll find that after 10 years of 2% inflation, your $100,000 would be worth only $78,100.56, not $80,000. So, ha! It's even worse than you think!

 

But seriously, I won the inflation argument against the fear-mongers in 2009 and I'll win this one as well. Too many factors weigh against sustained high inflation at this time.

 

If you're really so worried about it, sell some of your assets to buy inflation-adjusted bonds and maybe Leica lenses. Your $100,000 example assumes it isn't invested in anything. Even in 1980-81 when U.S. inflation reached double digits, I was earning upwards of 18% in money-market funds. My wealth didn't shrink; it grew. In fact, that's when I splurged on my first home computer -- an investment that has paid bigger dividends than anything else I've ever done, except for college.