A short digression on why costs are so different in different countries. It will circle back to panickology.
20240205
Oksana, the girls and I walked to pick up the car from the nondescript garage with no signage in our neighborhood last night. They did a lube and an oil change, fixed a rattle, fixed the electronic fob for keyless entry (I don't even know what they're called – I never used one), and checked the transmission and steering. Total bill was 1700 hryvnya - about $45. It is worth thinking about why things are so cheap here.
People drive old cars, many of them from Western Europe. When I lived in Germany 50 years ago, they had a very tough technical inspection for getting a car reregistered. The TÜV – Technischer Überwachungsverein – would take a car off the road for minor imperfections. The upshot was that perfectly serviceable used cars could be bought cheaply and taken abroad. It was no doubt the result of a compact between the government and the car manufacturers to sell more cars.
Ukraine experienced an influx of diesel cars after the Volkswagen emissions measurement cheating scandal of a decade ago. American legislators, I suspect in order to depress demand for European cars and raise that of domestic brands, set nitrous oxide emission standards so tight that nobody's diesel engines could meet them. Western Europeans, in the name of public health, followed suit. The German manufacturers somehow managed the trick. By cheating. Building diesel engines that produced very low emissions on the test stand but still worked efficiently on the highway.
After the scandal erupted, quality German cars could be imported very cheaply. Though some friends claim that pollution in Kyiv bothers them, I as a bicyclist never notice it. The air is far cleaner than that of Washington D.C., where I was a bicycle commuter, and vastly better than smog-sotted Los Angeles of the 60s, before lead fuel was outlawed. At any rate, used diesel cars are cheap here. Cheap to buy, cheap to maintain and not expensive to operate. Gas cars too. We filled the gas tank today – 50 liters for 2550 hryvnya. Almost exactly $5.00 per gallon. The costs are very much a function of government policy. Import duties, sales taxes, registration fees, insurance, fuel taxes and the like.
Tax policy results in odd distortions. I was a consultant to Renault Automobiles, Argentina for six months in 1980. They were still manufacturing the Renault 4, a 1961 design. Ford manufactured the Falcon, using sheet metal stamps from 1960. Hopped-up Falcons were quite the fashion item. Montevideo, capital of next-door Uruguay, was an automotive museum. Model A Fords still roamed the streets. When I was last in Argentina, in 2006, I actually got to drive a Citroën 2CV, a 1948 design. It is a function of import taxes and the cost of labor.
The Janney Montgomery Scott employee with whom I have worked for the last 10 years of my 25-year association with the firm told me that the grocery bill for her family of two has risen to $300 a week. Most of you readers are in the United States – you can add your own comments. We feed our family of six for less than that.
In related news, our government is not trying to prevent farm operators from emitting CO2, nitrogen, or any of the gases that have made up the air for 4.5 billion years (!?). It is not trying to make us eat bugs. Pork, a staple of our diet, costs about two dollars a pound. Expensive imported stuff – farm raised salmon for instance – costs six dollars a pound. Top-quality potatoes, beets and onions cost 30¢ per pound – lesser grades about half of that. Why so reasonable? The government stays out of it. The big food processors and supermarkets have not yet been able to harness the farmers and eliminate the on independent middlemen.
The bottom line on all this is that inflation is a symptom that certain sectors of society (viz. those in the Eccles building) have a disproportionate amount of power. In a freer market – we have no illusions that any markets are truly free – Adam Smith's hidden hand of self-interest has freer play to hold prices down through competition.
That's the news from Lake WeBeGone, where the strong man just went to the market. Mustang Sally hadn't bought everything I asked her, and I was eager for an excuse. I had taken the girls to school, paying 17¢ for the bus. As a senior citizen I am entitled to ride for free, but what the heck, I felt generous. Since there was no convenient bus to return home, I took the regional electric train into town to shop. That trip should cost 40¢, except that that the conductors universally conclude upon looking at my face that as a pensioner I ride free . Tomorrow I'll get into how government panics lead to inflation.
In my experience, food prices in the US have sharply increased. I would say without doing any scientific studies that food in the US costs twice as much as food in Germany. When I lived in Strasbourg, a friend and I used to walk to Germany (across the Rhine) to buy food at Aldi once a week, because it was much cheaper than French supermarkets. When I was in the US, the exact same Kerry Gold butter that I buy in Berlin cost $6.00 while in Berlin I can get it for 3 Euros.
Of course, the taxes in Germany make up for everything being cheaper here. It's no wonder the farmers are striking across almost every European country right now. They have blockaded the EU parliament building and now Ursula Von Der Lyon says that they must have dialogue. Right! When was the dialogue with farmers in the past five years? Brussels just simply sits in their cozy offices and tells Dutch farmers that a couple thousand of them will have to go out of business. That's the dialogue that the EU engages in with the peons.
To quote one of the German government leaders, and I am paraphrasing here, since I don't speak German. This is what he said to the German farmers who were blockading Brandenburg Gate. "Shut up, go home, and do as you are told." That's how the Germans negotiate with protesters.
I am now hearing rumbling from Britain. The farmers there are getting ready to protest. And for those who want to know about the cost of food, consider the latest from Ireland. There, they want to cull the herds of cattle by thousands every year, and they are going to apply masks and diapers for the cows to prevent belching and farting. You can't make up the stupidity of our glorious elected officials. You want to know why there is inflation, because morons are running governments. These dolts look down their noses at us and think that they are smarter than the peasants. And this is how they run their country?
The numbers I heard over the weekend say that overall grocery costs are up 25% since "before Wuflu", so call it since 2019? They note that some items have gone up 100%+ and some less than 25%. They've got to be looking at government numbers, which at best are lies. My best slightly educated guess is that the overall cost of groceries has gone up 50%, perhaps more depending on your location. The price of most red meat is close to 100%, milk is 100+%, a box of oats 100+%, and sugar around 100%. Canned vegetables have gone up very little comparatively at around 20%. Ditto frozen ones.
We've gone from saving money regularly to living paycheck to paycheck. Not a good feeling.