Wednesday, January 28, 2009

Tuna Inflation Made In Somalia

Despite the presence of military ships from several countries outside the coats of Somalia, Somalia-based sea piracy remains a problem. The most obvious effect of this is increasing shipping costs as insurance premiums rises and as ships going from Asia to Europe avoid the Gulf of Aden and instead travels the Cape of Good Hope at the southern tip of Africa.

It will now also raise the price of tuna as fishing fleets increasingly stay away from the tuna rich waters outside Somalia, something which has resulted in reduced catches and therefore higher prices.


Blogger Tomas said...

Uhm, but is that really inflation of any kind? Nothing is being inflated, it's just a reduction in supply.

I mean, when the price of beef shot up here in sweden last year (or at least gothenburg, entrecôte went from 149 sek/kg to over 200 sek/kg basically overnight) due to a reduction in imports from South America (self-imposed or by decree from the authorities, I don't know), nobody's going around calling that inflation.

9:04 AM  
Blogger stefankarlsson said...

Tomas, I think you know very well that the price is what is being inflated.

4:15 PM  
Blogger Tomas said...

Yeah well you're right that I know that's what you mean, but I think it's totally confusing to call a rise in prices for no other reason than falling supply for inflation.

Even the misleading meaning of inflation used by most people bears some connection to monetary inflation. This example has none.

Oh well. Never mind.

3:59 PM  
Blogger stefankarlsson said...

Tomas, price inflation is a real phenomenon which you have to have some name for. Saying it can't be called price inflation won't make it go away. You can instead call it "gurka" if you want, but then no one will understand what is meant, so the common term used by almost all people is more appropriate.

And negative supply shocks are one of the possible causes of price increases, along with monetary inflation (higher money supply) and declining money demand.

6:04 PM  
Blogger John said...

You can try to estimate the rate of inflation of the money supply by measuring changes in prices. However, as Tomas importantly points out, reduction in supplies dramatically affects prices, but may have ZERO bearing on the rate of inflation of the money supply.

Seems like some want to stay in the dark about this distinction.

7:08 AM  

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