Economics
Questions.
- If the money supply increases 20%, how much do groceries increase in price?
Governments create bonds, bought by banks who repay interest, private sector invests money to earn return at least of that interest rate, thus they take on risk. Banks lend to businesses, who provide these returns. Cheap credit increases demand which thus increases prices (supply-demand). This increases labour/materials costs.
Grocery costs <- Logistics <- Farmers <- Equipment, Energy providers <- Energy producers <- Miners
The supply chain for groceries is long - each economic player rationally increases their prices according to the path this new money / credit takes, until it ends at the consumer. Modelling it perfectly is impossible, due to proprietary price information. But we can observe prices publicly grow (groceries).
Papers
- The Use of Knowledge in Society
- Risk, uncertainty and profit (1921)
- Path dependence
- Money creation in the modern economy
The Cantillon Effect.
Money takes a path through the economy. For example, when inflation occurs, governments sell government bonds to the central bank. The central bank can then use this influx of capital to increase/lower interest rates on their loans to the private banking sector (like Westpac, ANZ). The increase in money for these commercial banks allows them to purchase equities, increasing their price, before passing on the interest rate to consumers, who later do the same. This entire process is described as the Cantillon Effect. The path that money takes is extremely important.
Economy.
- Productivity = Technology
- How many hours work does it take to get 1hr of light? now vs. 1800.
Macro.
Risk ladders.
- bitcoin
- gold, silver
- reserve asset currency (USD)
- real estate
- S&P 500
- stocks
- crypto
Constant demand.
What will demand remain constant for?
- housing
- groceries
- electricity (light, heating, cooling)
Readings
- You are Not a Lottery Ticket
- The Rise of Worse is Better
- Henry Brighton - Homo heuristicus and the bias/variance dilemma
- The Bitter Lesson
- Bias-Variance Tradeoff in Everything
- Exploitation vs. exploration.