The many faces of inflation: Pandemic, politics, and some books reconsidered

 Let's do something slightly different this morning.  Inflation is the subject of the day.  Have you done your Thanksgiving shopping yet?  Probably not, but do it soon.  Don't be one of those poor, unfortunate people stuck in the grocery store Wednesday of next week amid the seething crowds scrounging for enough green beans that are still green.  And don't get me started on the fights over fresh rosemary on that Wednesday.  And while I'm on the subject, here's the real reason we need drone delivery of groceries.  You know you're going to forget something.  You'll swear it's in your fridge, and it won't be, or it'll be bad, or something, and you'll discover it on Thursday, and those Thursday emergency trips to the grocery store really suck, and damnit, Bezos, gimme my 30-minute pizza grocery delivery!  We'll call you Uncle Enzo!*  Anyway, the point is, inflation.  Prices are-a-goin' up.  On groceries, and many other goods.  Yee-haw!  Inflation!  In fact, if it were only food, we would sort of discount it, from a data analysis perspective.  Why?  Food prices can be volatile, so when we calculate core inflation, we will sometimes exclude food and gas, being volatile, to focus on prices that are less volatile.  Otherwise, your measure of inflation will swing wildly, and you can be misled by momentary trends.  But, prices are goin' up on lots-o' stuff.  So let's talk inflation, and then sci-fi, 'cuz it's Sunday.

Why are prices going up?  There are two distinct processes that produce inflation.  There can be an increase in the money supply, thereby decreasing the value of money by reducing its scarcity, or there can be a shortage of goods, causing sellers to raise prices.  These are very different, but you will observe the same thing either way if you only look at prices.

"Printing money."  This is one of those annoying phrases.  I am a stickler for terminology, and people misuse this phrase.  Technically, the Mint prints money.  OK, the process can sort of go beyond that.  The Treasury has policies that can increase the money supply, even beyond the number of physical coins and bills "printed."  We recently got an announcement by the Federal Reserve Board that they will begin "tapering."  What does that mean?  They have been buying up bonds.  In so doing, they have been injecting cash into the economy, taking out bonds.  If they stop, that reduces the inflow of cash.  So in a sense, they have been "printing money" by putting money into the economy that wouldn't have been there.  They can raise the prime rate.  That slows the circulation of money.  Since money multiplies as dollars fuck each other in their bunny-holes-- better known as interest-bearing investments-- an increase in the prime rate slows the process of money fucking like rabbits, and you get fewer bunnies hoppin' 'round the forrest, scoopin' up the field mice and boppin' 'em on the head.

I should write an economics textbook.  Just like this.

Moving on.  Congress can engage in deficit spending.  That causes more money to circulate into the economy.  That's not "printing money" in any technical sense, so the phrase bothers me, but it does increase the supply of money circulating.

All of these policies can potentially be inflationary.  Potentially.  Hedge, hedge, hedge.  Increase the supply of money.  If there are more dollars floatin' around, then in principle, dollars are less valuable.  In principle, then, each dollar should buy you less stuff.  In principle.  Inflation-hawks will insist that this is a deterministic, mathematical law.  It ain't.  If it were, we would have seen fuckloads of inflation long ago.  Why?  Were you watching those bunnies?  You were?  You sicko.  Point being, the Fed kept interest rates near zero for a hell of a long time, bought tons 'o bonds, we engaged in massive deficit spending, had a big tax cut... we did everything possible short of actually, literally doing that "printing money" thing to cause inflation.  So the inflation-hawks have been crying "inflation" for more than a decade.

And here's the thing.  As time passes, the probability of any event occurring approaches 1.  All you have to do is make a prediction without a specific date, and then when it happens, you get to say, "I told you so!"  Right?  Well, no.  Not quite, unless you're just an asshole.  Have you met these people?

But now, inflation is here.  Not just volatile prices on food or energy.  We're seeing it across the board.

And that brings us to the other potential source of inflation.  A shortage of goods.  Prices go up, not because the dollar is devalued by its own oversupply, but by the undersupply of what people want to buy.  That's a very different circumstance.  Which doesn't mean we can't observe both at once.

And that brings us to supply chain issues.  Way back when COVID started, I addressed two novels and how they dealt with the topic.  (Actually, one was a trilogy, but whatever.)  John Scalzi's Interdependency trilogy, and Paolo Bacigalupi's The Windup Girl.  (Yes, I wrote about Bacigalupi last week, when I was thinking about The Water Knife.  I dunno.  He's on my mind lately.)

When COVID first hit, and the US entered lockdown in March of 2020, the various nightmare scenarios were pretty bleak.  When I calculated a death toll, I was using the estimate of 2% mortality with 1/3 infection, and I came up with an estimate of around 2 million dead in the US alone.  According to CDC as of this morning, the US death toll is currently around 760,000.  That's well below 2 million, but of course, far higher than it would be if idiots and assholes took their shots and wore their fucking masks, but welcome to the United States of America.  The economic havoc COVID wreaked is mostly resolved, if we're honest.  There are labor shortages in a lot of sectors, employment is way up... we've clawed our way mostly back, economically.  Not to the peaks we had just before COVID hit, but let's be honest about how much progress the country has made economically, despite the challenge posed by idiots and assholes.  Hey, Joe!  Trump was an asshole, but learn to fucking brag when it's earned!  Damn it, you made me split an infinitive.

And yet.

Inflation.

Which raises the question.  Printing money, supply chain, both?

In Scalzi's Interdependency trilogy, the premise was as follows.  You have a multi-system empire called The Interdependency, ruled by the Emperox.  Humanity, within The Interdependency, is scattered across various star systems, living on domed planets, asteroids, and space stations, but there's only one planet with an atmosphere, where people can live without domes.  It's a backwater called, End.  Basically, everyone is in domes and space stations, and you get from one system to another through a hyperspace-interdimensional-river-thing called "The Flow."  That's your FTL system, and it only has very specific pathways.  Now here's the kicker.  The Interdependency is all a fuckin' scam.  A rent-seeking scam.  Rent-seeking has a technical definition in economics.  In a competitive market, firms seek profit through innovation, maintaining competitive pricing, and blah-fucking-blah.  But what if you are lazy and corrupt?  You go to the government, and buy off the government so that the government grants you a protected monopoly in the market.  No other firms are allowed to conduct business within that market.  That way, you can sell shoddy products, jack up the prices, do whatever.  And since nobody else can enter the market to compete with you, it doesn't fucking matter.  You run the game.  The money that you make on top of what you would have earned in a competitive market is called "rent."  Engaging in this behavior is called "rent-seeking."  Rent-seeking is bad.

The Interdependency is all a rent-seeking scam.  The whole thing is set up where I make sprockets on my domed city in one system, and I'm the only one allowed to make sprockets, by official decree of The Interdependency.  Protected monopoly.  You make widgets on your space station in another system, and by official decree of The Interdependency, you are the only one allowed to make widgets.  Protected monopoly.  Anyone who wants sprockets has to buy my Spacely's Space Sprockets, and anyone who wants to buy widgets needs to buy your widgets, and we can both charge whatever the fuck we want because we each have protected monopolies.  This can work, kinda-sorta, as long as The Flow exists, and we can trade.

The plot of the trilogy is that The Flow is breaking down.  Soon, you aren't going to be able to get my sprockets, and I'm not going to be able to get your widgets.  And since we're all on space stations or in domes, that's kind of a problem!

When I originally wrote about Scalzi, it was in the early days of COVID, and a sort of warning about the pandemic, supply chains, and social order.  We had some significant bumps along the way, and we're hitting another now.  The basic point is that we are economically dependent on other countries.  There is a simplistic answer:  "we don't make things!  We need to make things!"  I am sure you have heard this.  It is, in technical terms, "bullshit."  International economics function on the principle of comparative advantages.  That means we all benefit if I make what I make most efficiently, and you make what you make most efficiently.  The problems with The Interdependency were a) it was a rent-seeking scam, which is not an application of the principle of comparative advantages, but rather a subversion of it, and b) there was no concept of addressing transportation.

Comparative advantages are applied when you have no entry barriers.  In order for the principle to work, I need to find what I can make efficiently, and then enter that market.  The whole structure of The Interdependency was to prevent that.  Beyond that, though, there was a basic problem with how The Interdependency worked.  It was all built around The Flow, which could break down, records of that had been buried (actually, it had to do with an old war), and it was illegal for a system without an atmosphere to build the components to sustain itself... no!  That's not applying the principles of comparative advantages, that's just a fucking scam.

No, we don't need to "make things."  Sloganeering is no substitute for math.  What we need is a functioning supply chain.  When I wrote about Scalzi last year, in a somewhat scarier time for COVID, worst case scenarios could threaten social order, but even on a smaller scale, problems with the supply chain are problems.  Inflation still hurts, particularly when it comes from a shortage of goods, since that's harder to solve with a simple increase in interest rates.  What this demonstrates is what happens when the problems of other countries hit us because we are... interdependent.  Not to the same degree as in Scalzi, but no country is an island, and trying to become one is economically stupid.

That's the whole point of comparative advantages.  The "we don't make things" line is an attempt at an end-run around basic economics.  Comparative advantages.  The reason manufacturing moved was that principle.  We are a tech/services economy, and we're fucking rich because of it.  The consequence is that we need to pay attention to the supply chain, not centrally plan an inefficient economy.

Our economy is mostly back.  Lots of other countries?  Not so much, and the bigger their problems, the more it hits us.  We can vaccinate a lot of our country, and get our economy mostly moving again, but if we are dependent on another country that doesn't, that still hits us.  Goods don't make it here, and we've got a supply chain problem.  We don't die off like a space station without that shipment from Cogswell's Cogs, but prices go up, and that'll hurt.

Vaccinate the fucking species.  Just sayin'.

So we turn, then, to The Windup Girl, once again.  I'll reiterate how much I love Bacigalupi's books.  This guy is awesome, and The Windup Girl is his best book.  Basically, climate change and disease run rampant.  Fossil fuels are mostly used up.  Most of the world has gone to shit, but Thailand is doing comparatively OK, because they closed their borders.  Hard borders.  Why?  There are a variety of blights that will wipe out crops and do all sorts of scary things.  Let any of that shit in, and you're fucked.  So Thailand closes itself off, imposes strict import controls, and fights to keep various threatening micro-organisms from wiping out the fragile country within its hard borders.  Corruption, of course, is rampant, and from the outside, you've got business like AgriGen.  AgriGen is basically Monsanto, and they are represented by Anderson Lake.  AgriGen goes around the world looking for seed stock and genetic material to exploit, and what they offer is food.  Calories.  But the thing is, if you do business with them, and buy their shit, you can't grow it.  Once you are dependent on them, you are dependent on them.  It's a trap.  They'll sell you food that's safe to eat, but once you go down that road, they'll get all you're worth, and you're dependent on them until they decide there's nothing more they can get out of you.  That's why the Thai government (or at least its non-corrupt faction) is trying to keep AgriGen out.  So those are Thailand's choices in this post-apocalyptic hellscape of economics and trade policy, created by not just climate change, but disease.

Basically, though, it's about trade and a trade breakdown.  When I wrote about The Windup Girl last year, I was thinking about it primarily from Thailand's perspective, of course, since that's the perspective of the novel, and I was thinking about it from the perspective of trade policy.  Yet today, I'm thinking about what the novel doesn't show.  The US, or whatever is left of it in Bacigalupi's world.  AgriGen sort of exists as a power in itself.  Bacigalupi points to Des Moines as a power center, and OK.  Interesting.  The world we don't see.  I actually kind of love it when authors do things like this.  A book can never tell you everything, but the book needs to give you the sense of a complete world.  A sense that there is more, and that it is real, beyond what you see, and that of course it makes sense, and that you are merely immersed in one part, but that you could just as easily travel elsewhere within the novelist's world if only you followed another character or characters.  I love it when a writer can do that.

Point being, Des Moines.  Not that I particularly care about Des Moines itself.  Flyover country.  I mean, there are actually some good musicians from Iowa, which has a fascinating country music scene.  Bo Ramsey.  Kelly Pardekooper.  There was a scene that developed there, for whatever reason.  Yeah, I know, I'm a political scientist and the first thing I'm supposed to mention about Iowa is... that thing, but their record of picking nominees, empirically?  It kinda sucks.  I'll spare you a rant on it this morning, but the Iowa Caucus is overblown.

Regardless, AgriGen is a power within Bacigalupi's world.  They've got high-tech and money.  They're doing better than Bangkok.  How well is the rest of the US doing?  Not entirely clear.  We don't see it.  Post-apocalyptic, corporate-run hellscapes are kind of a thing in sci-fi, so you can image lots of things.  One could  imagine a more sparsely-populated America doing better than Thailand, yet run by Uncle Enzo's CosaNostra Pizza AgriGen, or AgriGen sitting in a fortress in Des Moines, surrounded by shit no better than Bangkok because the company don't share with nobody.  We don't know precisely, because we don't see it.  From a reader's perspective, there's something nice about that, but from a social scientist's perspective, let's turn this around.

AgriGen can make the crops better.  Stronger.  They have the technology.  Why aren't they?  [Makes the "money" gesture with fingers.]  If you want to see Anderson Lake get his, don't worry.  He does.  But there is this question hanging over everything, from the perspective of the calorie companies.  Thailand has to close its borders to prevent itself from going the way of the rest of Southeast Asia, but if AgriGen weren't run by shitbags, they could make things better.

At what point in the process of the world going to shit did they figure shit out?  And would they actually make more money, in the long run, by getting Thailand's shit in order?

The first question is not clearly answered, because Anderson Lake is not exactly forthcoming with information on the history of AgriGen's research.  He doesn't even like to admit that he works for AgriGen.  That's the kind of thing that'll get you killed in Bangkok.  The second question is harder, but let's put it this way.  There is a long-term horizon on which a more prosperous world is probably better for AgriGen.  Yet nobody is ever paid on those horizons.  That's not how business works.  You can invest that way as an individual, but within a business context, that's not how incentives are structured for employees.

Governments, though, are supposed to think this way.

And as we look, now, around the world, and see countries struggling with a virus impacting their populations and economies, we can ask, do we want to trade with them?  Now?  In the future?  Shuttin' down borders doesn't really work with micro-organisms.  And trying... is itself brutal.  We can look around the world, and we can see the Thailands of the world.  We can see the impacts of COVID, on the populations, on their economies, and yes, to the degree that this is how we measure things, on the supply chain, and what that does to the purchasing power of our dollar.

AgriGen's policy was to squeeze them for all they were worth.

Or, you can take the longer view.

Well, that was a ramble.  How's about some music?  Here's Chris Smither, with a live performance of "Link of Chain."

Get it?  No?  C'mon.  This one isn't that obscure, is it?