pull down to refresh
1156 sats \ 7 replies \ @elvismercury 25 Oct 2023 \ on: Meta Econ Takeover Day 9 meta
This is a great question. Some thoughts:
-
How long would re-pricing actually take in a situation like this? Given that you know very precisely how much inflation there's going to be, and it's going to happen all at once, the grocery store could immediately re-price all the stock. The prices would be "wrong" but it's not like they would sell out instantly to Cantillon beneficiaries. Everyone would have a plan in place.
-
But there would be dead zones! E.g., if I know that the new price for an apple is going to be $500k on the assigned date, do I sell apples for $1 on the day before that? Seems dumb. So I stop selling anything in advance, unless the thing will go bad. So there's this dead zone...
-
Related: how much can current-billionaires accomplish in the time before the billions arrive? If the airdrop is in three months, how much wheeling and dealing can happen before then?
-
And, given that the whole world knows that this is coming, it's the same issue w/ the 'real' billionaires who are trying to offload dollars for assets? It would set in motion the highest of high time preferences, where billionaires were trying to spend at scale and almost everyone resisting selling to them at scale.
-
Some people would probably gamble on the deal not going through, though.
-
It would be interesting as a kind of reset: all but the richest of the rich basically become equivalent from a purchasing power perspective. It's like money would be starting over, with some caveats. But a lot of the people who had no money before had no money for a reason -- how long before the amount of money people have re-differentiates, and we have stratification again?
-
In some key ways, though, it still wouldn't be a reset. Assuming the government didn't collapse in the chaos, people would still own property that they owned beforehand; and a lot of people who had no property, and who had always wanted to (e.g., people who couldn't afford a house), will suddenly be on an equal footing with everyone else in purchasing it, at least at first. So relative demand goes up? And prices get even more expensive? I'm less sure about this one.
This is really cool. Would love to see this war-gamed in detail by people who really know what they're talking about. Which makes me wonder: would an Austrian economist and a mainstream economist disagree about what would happen in a scenario this extreme?
This is the kind of thought processes I was hoping we would get.
reply
The hypothetical here is that there is a one week lead up, so there's limited time for people to adjust in advance.
However, you're right to point out that there would be price hikes in anticipation. Probably, prices would get so crazy that no normal person would be able to buy anything during that week.
reply
Ah, I missed the one-week.
It's interesting to play it out across multiple timescales. Different effects unfold by twiddling that one parameter.
reply
I missed the one-week too, and it's my post. I thought it was overnight.
reply
I would imagine the government would institute some controls on what people can and can't do in regards to pricing and hoarding with the one week lead time. I think it is better than overnight for the thought experiment. Waking up with a billion dollars and knowing you are getting a billion dollars a week from now are two very different things. What controls would gov need to put in place, what are the geopolitical consequences (other countries own a lot of treasuries and dollars), if controls were in place in US but not other countries would people be flooding out of the US the week before trying to purchase every desirable good and property possible in other nations?
I think it makes it more interesting that people know it's coming.
reply
I think everything grinds to a halt for that week.
Why would you go to work for your normal wage when you're going to get a billion dollars in a few days?
Why you sell anything for a normal price when you could wait a few days and sell it for thousands of times more?
reply
Some people would probably gamble on the deal not going through, though.
Good point. There would be people who expect the courts or congress to shut it down. In this scenario, they get totally wiped out.
That gives us another prediction: there will be an enormous transfer of wealth from people with confidence in "checks and balances" to everyone else.
reply