Where Does Deflation Come From?
May. 3rd, 2021 01:39 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
walkitoutFor more or less my entire life, I have been seeing pundits in print complaining about inflation: that it was about to happen (whether or not it ever did), that it was happening (the glory that was the 1970s), that it was so painful ending inflation but It Must Be Done (the horrifying shit show that was the 1980s), that surely it couldn’t go any lower (from 199x on), until now.
Now, we finally have some inflation. In fact, we might actually have some Core Inflation. And, bonus, we have people out there prepared to say in their out loud voice, Glory, Glory Hallelujah!
I’ve been reading a Very Bad Book that I’m trying not to name about current demographic trends. It is looking at inflation and deflation as an artifact of the “demographic sweet spot” : lots of prime age workers, not very many “dependent” consumers. (<— I do not endorse this perspective.) They only really mention technological developments in very limited contexts and them mostly to say that OMG there will be so many butts to wipe and so many Depends to change and Where Will We Get The (Female) Workers (Probably Africa) Because Robots Can’t Do This.
I mean, I can provide quotes to support all of that, including how they don’t think young men should be encouraged to do these jobs because they lack emotional resilience and empathy. It’s super clear these people have never engaged with reproductive activity (except as sperm donors, maybe), because where the hell do they think that empathy and emotional resilience come from? We learn by doing.
I _firmly_ believe that deflation comes from solid-state circuitry becoming ever smaller and more capable. Moving shit breaks down and requires lots of maintenance and has a very short mean time to failure whenever it gets past a certain extremely limited degree of complexity. But solid state stuff, built well, can be nearly immortal and error free forever. It’s awesome. AKA chips. The smaller it gets, the less power it uses (<— yes, please, go lose yourself finding the exceptions and we’ll talk about it later) and the more places you can use it for both reasons. The first stages of this process happened in the United States and, with startling rapidity, resulted in a chunk of former farmland being renamed Silicon Valley, and then abruptly moved overseas where it became increasingly invisible on every level while simultaneously becoming relentlessly ubiquitous. We live in a world where we really don’t have to do anything any more to even maintain shit. We replace stuff because of unrelated problems that are easily reparable, because the new versions have better solid state circuitry that lets it do Even More Awesome Stuff with less power, water and better for the environment (<— often not all true, and sometimes not true at all).
Until _this year_. This year, we finally hit the cliff. The wall. Making it smaller has become immensely expensive and difficult. Also, this year, the Olds finally started selling their houses to the With Young Children, resulting in a ton of new demand for everything. Before this year, the With Young Children were crammed into tiny apartments and could not buy new things because there was no space, and so they kept themselves happy at bars and gyms and with better electronics the better to consume virtual goods. But this year, the With Young Children cannot go to the bars or the gyms and need space to work from home and also the Young Children need full kit because you know, I’ll just stop now.
Also, lots of electronics involved in building out broadband everywhere to support all the With Young Children moving out of the dense urban areas to suburbs and ex-urbs.
So, to recap: lots of things use — or can use — older, bigger, more power hungry chips, but were not because they did not sell in great lots and so the older, bigger, more power hungry chip making operations _shut_ _down_ _permanently_ because it was more cost effective to just run off newer, smaller, power-sipping chips even for applications that did not need them because there was unaccounted for space on the modern line.
I think the thing that makes me _most_ angry about the demography book I am reading is that it advocates for — while realizing that it does not actually happen — deferring consumption to save for retirement over the course of the life arc. It is _precisely_ _that_ _deferment_ _of_ _consumption_, aka, Boomers Refusing to Adopt Tech, which has landed us in this pickle. The modern lines were scaled with the assumption that demand in the next decade would look like demand in the last decade and it is all well and good to say that, oh, gosh, who saw a pandemic and WFH moving up all this demand?
Basically, we designed a world around older _prime working age people_, who _did not consume_, and expected it to continue.
Wow. That was not smart.
Anyway. Deflation happens when it is easier to produce than it is to get people to consume. Inflation happens when you cannot produce what people want to consume. At this point in time, it is _so_ _easy_ to produce the ability to produce more (<— yes, that is a little complicated), that we have held off on it explicitly to contain the damaging effects of deflation. That’s really what the chip shortage is all about. I know I said, it’s going to take years to resolve, but I really meant that: it’ll take 3 years to resolve. This is not going to generate structural inflation, and whatever structural inflation comes from having more Olds is going to be utterly manageable, because that is just not big enough an issue to swamp the reality that we can make all the food and clothes we could ever need using a tiny fraction of one percent of the global population. Structures, transport and communication take a few more percentage points; everything else is basically entertainment and nice to haves. We’ll be fine, and by making everyone of all ages participate in the glorious, human project of living together and supporting each other, we’ll all become better people, too.
OK, Not Everyone.
Also, none of this fixes the climate problem, so we really should get on that.
ETA: Also, if you are going to do what the authors did, and come at me with, BUT DEMENTIA! SO RESOURCE CONSUMING! Here are my responses in order:
(1) We are working on the smoking problem, which will likely bring down the curve on dementia.
(2) The population with dementia has been significantly dented worldwide this last year. I hope you enjoy that, because no one else has been.
(3) You’ve mistaken labor-resource-intensive-memory-units for the only way to manage dementia.
Now, we finally have some inflation. In fact, we might actually have some Core Inflation. And, bonus, we have people out there prepared to say in their out loud voice, Glory, Glory Hallelujah!
I’ve been reading a Very Bad Book that I’m trying not to name about current demographic trends. It is looking at inflation and deflation as an artifact of the “demographic sweet spot” : lots of prime age workers, not very many “dependent” consumers. (<— I do not endorse this perspective.) They only really mention technological developments in very limited contexts and them mostly to say that OMG there will be so many butts to wipe and so many Depends to change and Where Will We Get The (Female) Workers (Probably Africa) Because Robots Can’t Do This.
I mean, I can provide quotes to support all of that, including how they don’t think young men should be encouraged to do these jobs because they lack emotional resilience and empathy. It’s super clear these people have never engaged with reproductive activity (except as sperm donors, maybe), because where the hell do they think that empathy and emotional resilience come from? We learn by doing.
I _firmly_ believe that deflation comes from solid-state circuitry becoming ever smaller and more capable. Moving shit breaks down and requires lots of maintenance and has a very short mean time to failure whenever it gets past a certain extremely limited degree of complexity. But solid state stuff, built well, can be nearly immortal and error free forever. It’s awesome. AKA chips. The smaller it gets, the less power it uses (<— yes, please, go lose yourself finding the exceptions and we’ll talk about it later) and the more places you can use it for both reasons. The first stages of this process happened in the United States and, with startling rapidity, resulted in a chunk of former farmland being renamed Silicon Valley, and then abruptly moved overseas where it became increasingly invisible on every level while simultaneously becoming relentlessly ubiquitous. We live in a world where we really don’t have to do anything any more to even maintain shit. We replace stuff because of unrelated problems that are easily reparable, because the new versions have better solid state circuitry that lets it do Even More Awesome Stuff with less power, water and better for the environment (<— often not all true, and sometimes not true at all).
Until _this year_. This year, we finally hit the cliff. The wall. Making it smaller has become immensely expensive and difficult. Also, this year, the Olds finally started selling their houses to the With Young Children, resulting in a ton of new demand for everything. Before this year, the With Young Children were crammed into tiny apartments and could not buy new things because there was no space, and so they kept themselves happy at bars and gyms and with better electronics the better to consume virtual goods. But this year, the With Young Children cannot go to the bars or the gyms and need space to work from home and also the Young Children need full kit because you know, I’ll just stop now.
Also, lots of electronics involved in building out broadband everywhere to support all the With Young Children moving out of the dense urban areas to suburbs and ex-urbs.
So, to recap: lots of things use — or can use — older, bigger, more power hungry chips, but were not because they did not sell in great lots and so the older, bigger, more power hungry chip making operations _shut_ _down_ _permanently_ because it was more cost effective to just run off newer, smaller, power-sipping chips even for applications that did not need them because there was unaccounted for space on the modern line.
I think the thing that makes me _most_ angry about the demography book I am reading is that it advocates for — while realizing that it does not actually happen — deferring consumption to save for retirement over the course of the life arc. It is _precisely_ _that_ _deferment_ _of_ _consumption_, aka, Boomers Refusing to Adopt Tech, which has landed us in this pickle. The modern lines were scaled with the assumption that demand in the next decade would look like demand in the last decade and it is all well and good to say that, oh, gosh, who saw a pandemic and WFH moving up all this demand?
Basically, we designed a world around older _prime working age people_, who _did not consume_, and expected it to continue.
Wow. That was not smart.
Anyway. Deflation happens when it is easier to produce than it is to get people to consume. Inflation happens when you cannot produce what people want to consume. At this point in time, it is _so_ _easy_ to produce the ability to produce more (<— yes, that is a little complicated), that we have held off on it explicitly to contain the damaging effects of deflation. That’s really what the chip shortage is all about. I know I said, it’s going to take years to resolve, but I really meant that: it’ll take 3 years to resolve. This is not going to generate structural inflation, and whatever structural inflation comes from having more Olds is going to be utterly manageable, because that is just not big enough an issue to swamp the reality that we can make all the food and clothes we could ever need using a tiny fraction of one percent of the global population. Structures, transport and communication take a few more percentage points; everything else is basically entertainment and nice to haves. We’ll be fine, and by making everyone of all ages participate in the glorious, human project of living together and supporting each other, we’ll all become better people, too.
OK, Not Everyone.
Also, none of this fixes the climate problem, so we really should get on that.
ETA: Also, if you are going to do what the authors did, and come at me with, BUT DEMENTIA! SO RESOURCE CONSUMING! Here are my responses in order:
(1) We are working on the smoking problem, which will likely bring down the curve on dementia.
(2) The population with dementia has been significantly dented worldwide this last year. I hope you enjoy that, because no one else has been.
(3) You’ve mistaken labor-resource-intensive-memory-units for the only way to manage dementia.