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Four Basic Truths of Macroeconomics

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Re: Four Basic Truths of Macroeconomics

#31

Post by AngrySkillzz »

chordalkeyboard wrote: post #27
AngrySkillzz wrote: post #23

Earlier quoted context omitted.

ok let me be more polite: source??? If you think your assertions are "actually true" then back them up. edit: and let's be clear about who has poisoned the well here. You poisoned the well. You decided to go on HN and insinuate that governments are purposefully devaluing working class people's salaries to make their lives worse. An assertion that you provided with no evidence. And you expect that you can just post st…

[flagged]

Hi yes I know quite a bit about sticky wages and inflation. What's your point.

Re: Four Basic Truths of Macroeconomics

#32

Post by dragonwriter »

chordalkeyboard wrote: post #14

> Nominal wages are sticky, for a complex mix of sociological reasons, and so employers do not always respond to lower demand with lower wages for workers. Instead they lay some people off, and that can lead to a recession. > The second thing to know is that well-functioning central banks can offset such demand shocks to a considerable degree — or even prevent them from arising in the first place. The bank can engage…

> Is it that hard to say “we think wages among the working class are too high so the central bank depreciates the currency”?

No, that’s easy to say, but that's not what they are saying, which is substantially more nuanced.

What they are saying is more “there are times when demand drops within one or more sectors of the economy, such that production with wages in that sector at their pre-decline levels would not be sustainable. The result is either moderate cuts to real wages or cuts to production that cut jobs with much larger ripple effects throughout the economy.

“Because nominal wages are sticky against downward adjustment, in the absence of inflation, the result tends to be job cuts with the immediate effect of unemployment plus the ripple effects that unemployment and the associated production cut entails. With moderate inflation, real wages in the effected sectors can be cut modestly without cutting nominal wages, avoiding productivity/job cuts and minimizing ripple effects. This has much more modest effects outside of the target sector, and avoids the worst effects (job losses) in the target sector.

“Also, easy money policies can sometimes avoid the demand drops leading to the choice between real wage cuts and productivity cuts in the first place, short-circuiting the problem instead of merely mitigating it's effects.”

Re: Four Basic Truths of Macroeconomics

#33

Post by [deleted] »

chordalkeyboard wrote: post #26
arcticbull wrote: post #20

Earlier quoted context omitted.

Yeah, it doesn't, though. Inflation only matters from the time you receive your paycheck to the time you invest it in productive assets or buy the necessities of life. After that it sets the benchmark rate of return for your investments. If your salary fails to track inflation that's between you and your boss who's giving you a pay cut year over year, or between you and congress if you're under the minimum wage umbre…

> Inflation only matters from the time you receive your paycheck to the time you invest it in productive assets or buy the necessities of life. It means the people who save by depositing cash in the bank lose value over time, causing them to purchase investments out of necessity (rather than purchasing them because they believe its a good investment). This bids up the price of investments relative to their return, wh…

[deleted]

Re: Four Basic Truths of Macroeconomics

#34

Post by chordalkeyboard »

arcticbull wrote: post #28
chordalkeyboard wrote: post #26

Earlier quoted context omitted.

> Inflation only matters from the time you receive your paycheck to the time you invest it in productive assets or buy the necessities of life. It means the people who save by depositing cash in the bank lose value over time, causing them to purchase investments out of necessity (rather than purchasing them because they believe its a good investment). This bids up the price of investments relative to their return, wh…

> It means the people who save by depositing cash in the bank lose value over time, causing them to purchase investments out of necessity. Ah you get it. That's the idea. Buy gold if you want, buy real estate, buy annuities, buy fixed incomes, I don't care, but money is an intermediary - not a long-term store of value. If you treat it as one you'll have a bad time. Just like if you treated your car as a boat. It'll w…

> Ah you get it. That's the idea. Buy gold if you want, I don't care, but money is an intermediary, not a long-term store of value.

Only because the wealthy benefit from depreciating currency. It doesn’t have to be this way, and it is this way because of policy that is designed to benefit the ultra-wealthy.

> They're paying you less value so it's a decrease. You're tripping yourself up focusing on units.

They’re paying the same, but the units depreciated because the oligarchs want workers’ wages to go down.

> If you treat it as one you'll have a bad time. Just like if you treated your horse as a boat.

Or treat a savings account as a savings account.

Re: Four Basic Truths of Macroeconomics

#35

Post by p1necone »

xnx wrote: post #7

"I also think measures of price inflation are almost useless over the long run, because a person today consumes a very different bundle of goods than one in, say, 1950." I agree with this wholeheartedly. How do we put a value on the fact that, for the cost of no more than a day's labor, most in the US can have a handheld device with access to nearly the sum total of the world's knowledge and entertainment? No one, at…

Sure you can have the entire worlds information and entertainment at your fingertips with a $50 smartphone, but if you can't afford to have a roof over your head I'd argue the smartphone is irrelevant.

I don't think we should be including basic necessities alongside improvements in entertainment in the same statistic, because it will just hide problems.

Re: Four Basic Truths of Macroeconomics

#36

Post by AngrySkillzz »

chordalkeyboard wrote: post #34
arcticbull wrote: post #28

Earlier quoted context omitted.

> It means the people who save by depositing cash in the bank lose value over time, causing them to purchase investments out of necessity. Ah you get it. That's the idea. Buy gold if you want, buy real estate, buy annuities, buy fixed incomes, I don't care, but money is an intermediary - not a long-term store of value. If you treat it as one you'll have a bad time. Just like if you treated your car as a boat. It'll w…

> Ah you get it. That's the idea. Buy gold if you want, I don't care, but money is an intermediary, not a long-term store of value. Only because the wealthy benefit from depreciating currency. It doesn’t have to be this way, and it is this way because of policy that is designed to benefit the ultra-wealthy. > They're paying you less value so it's a decrease. You're tripping yourself up focusing on units. They’re payi…

> Only because the wealthy benefit from depreciating currency

Source this claim. Everyone benefits from a depreciating currency because inflation provides a buffer against deflationary spirals that lead to large recessions and job losses for people of all classes. Tell me exactly how inflation benefits only the ultra-wealthy and not anyone else.

> because the oligarchs want workers’ wages to go down.

I would suggest that you clarify this claim so it does not sound so much like a conspiracy theory.

Re: Four Basic Truths of Macroeconomics

#37

Post by chordalkeyboard »

AngrySkillzz wrote: post #31
chordalkeyboard wrote: post #27

Earlier quoted context omitted.

[flagged]

Hi yes I know quite a bit about sticky wages and inflation. What's your point.

> What's your point.

Should be obvious from the discussion, especially for someone who “knows quite a bit” about the subject.

> Hi yes I know quite a bit about sticky wages and inflation.

Then why did you ask me for a source for a statement that is well understood among anyone who has studied the subject? Krugman’s statements to this effect are so well-known as to have been written about in other publications.

Back to the original statement: Is it that hard to say “we think wages among the working class are too high so the central bank depreciates the currency”? well is it?

Re: Four Basic Truths of Macroeconomics

#38

Post by arcticbull »

AngrySkillzz wrote: post #25
arcticbull wrote: post #20

Earlier quoted context omitted.

Yeah, it doesn't, though. Inflation only matters from the time you receive your paycheck to the time you invest it in productive assets or buy the necessities of life. After that it sets the benchmark rate of return for your investments. If your salary fails to track inflation that's between you and your boss who's giving you a pay cut year over year, or between you and congress if you're under the minimum wage umbre…

Sadly it isn't really worth arguing econ on HN. This place is full of cranks when it comes to that, unfortunately. Maybe better if we all just stick to programming.

It's amazing how otherwise brilliant folks get caught up in this anarchocapitalist conspiracy theory mumbo jumbo.

There's a few bits of plumbing in this world you'd do best to familiarize yourself with so you can raise your socioeconomic stature with maximum efficiency, economics is one of them. I only tilt at them because I hope that they'll benefit from an understanding of how these things work in reality.

Re: Four Basic Truths of Macroeconomics

#39

Post by bawolff »

WalterBright wrote: post #13
tabtab wrote: post #2

I get a "please subscribe" pop-up and can't get rid of it without fiddling with the CSS editor. Anyhow... Summary of Truisms: 1) During recessions, employers tend to lay off rather than reduce wages 2) Central bank stimulus helps recessions 3) Too much stimulus causes run-away inflation 4) Non-monetary problems like oil shocks and pandemics can cause recessions 5) Increasing population helps economies. ("Hump to de-s…

> Non-monetary problems like oil shocks and pandemics can cause recessions It wasn't the oil shock of the 70's that caused recession. It was our response to it - Nixon's oil and gas price & allocation controls. We came out of that when Reagan repealed it. Our current recession is not caused by the pandemic, but the lockdown response to it.

That seems like a silly splitting of hairs.

Why stop there? By that logic the recession is not caused by the lockdown but by less businesses being open and reduced consumer spending.

Re: Four Basic Truths of Macroeconomics

#40

Post by arcticbull »

chordalkeyboard wrote: post #34
arcticbull wrote: post #28

Earlier quoted context omitted.

> It means the people who save by depositing cash in the bank lose value over time, causing them to purchase investments out of necessity. Ah you get it. That's the idea. Buy gold if you want, buy real estate, buy annuities, buy fixed incomes, I don't care, but money is an intermediary - not a long-term store of value. If you treat it as one you'll have a bad time. Just like if you treated your car as a boat. It'll w…

> Ah you get it. That's the idea. Buy gold if you want, I don't care, but money is an intermediary, not a long-term store of value. Only because the wealthy benefit from depreciating currency. It doesn’t have to be this way, and it is this way because of policy that is designed to benefit the ultra-wealthy. > They're paying you less value so it's a decrease. You're tripping yourself up focusing on units. They’re payi…

> Only because the wealthy benefit from depreciating currency. It doesn’t have to be this way, and it is this way because of policy that is designed to benefit the ultra-wealthy.

Do they? Generally inflation benefits debtors and not lenders, because debts are denominated in dollars in the year of issue, and repaid in future dollars, which are worth 2% less per year. Overwhelmingly poor and middle class folks are debtors (think mortgages). Mortgages have become more and more affordable each year. This means folks can afford more and more house for the same money, after all the bulk of the payment of a 30 year fixed is interest for the first 10+ years.

And sure enough, new homes are twice as large as they used to be.

> They’re paying the same, but the units depreciated because the oligarchs want workers’ wages to go down.

Yeah but at the end of that day that's irrelevant. The only thing that matters is what those units represent. If I gave you 5 today and 3 tomorrow does that mean anything? Or course not. 5 what and 3 what? That's what we're talking about

> Or treat a savings account as a savings account.

Totally, they offset about half of inflation because they collateralize loans. With interest rates this low, loan collateralization isn't a big value driver, so it doesn't pay much.

It's your responsibility in a capitalist society to allocate capital most productively and so if this particular allocation isn't the most productive, your job is to go find a different allocation, or to pay the inflation premium. Nobody's ever been entitled to a risk-free return in a savings account.

Money isn't a long-term store of value, it never was, and if you insist on jamming it into a round hole, you've failed to understand one of the most basic premises of modern society.

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