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Have we been thinking about inflation all wrong?

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Re: Have we been thinking about inflation all wrong?

#241

Post by BitwiseFool »

flavius29663 wrote: post #207
MSM wrote: post #39

Earlier quoted context omitted.

This administration has created a ton of money, but I also remember a previous administration going out of their way to literally put their name on the stimulus checks that were sent out following their trillions of dollars of stimulus passed...

I don't understand this bickering about Trump signing the checks, I got a check from Biden as well, with his signature.

> "I don't understand this bickering about Trump signing the checks, I got a check from Biden as well, with his signature."

Ah yes, but he only did that because Trump started it. /s

Re: Have we been thinking about inflation all wrong?

#242

Post by giaour »

dnautics wrote: post #225
giaour wrote: post #186

Earlier quoted context omitted.

> inflation screws over anyone who works for a wage It can, but inflation affects current assets and liabilities immediately and only depresses wages over time. If inflation was 7% over the course of the year, you now owe 7% less on your outstanding loans (in real terms), while any real wage decrease would be amortized over the course of the year. Assuming inflation occurred at a fixed rate and that your nominal wage…

> the average person just doesn't sit down and do the math for their own situation > Do the math. Suppose you are poor and are spending 90% of your income on day-to-day expenses. We get 5% inflation and now you are spending 94% of your income on day-to-day expenses. That is a 40% loss of survival margin. Suppose you're really poor, and you are spending 96% of your income on day-to-day expenses. Under 5% inflation, yo…

I guess if you are free of debt and living paycheck to paycheck, inflation is pretty bad. But that's not most people.

> IF their wages catch up. If their wages don't, do the math.

It depends on your situation. If you have $20K in remaining student debt and make $40K a year, then, yes, assuming a fixed wage, any real decrease in the value of your outstanding debt would be wiped out by the decrease in your real wages over that time period. But if you owe $300K on a house and make $60K a year, the math is different.

> Why? Because they will have a wider margin of survival? Do the math.

No, because their debts will become larger in real terms. It sounds like you're fixated on the case of someone with no debt and very low wages. That's an important case, but it's not the only one.

Re: Have we been thinking about inflation all wrong?

#243

Post by imtringued »

friedturkey wrote: post #195
uses wrote: post #173

Earlier quoted context omitted.

Inflation doesn't exist as a policy to stiff wage earners. Inflation exists as a reality of a growing economy (more goods and services needs more money to cover them). The alternative is deflation, which would be extremely bad. So what we aim for, is low inflation. Which we've had for ~40 years. Low, controlled inflation is the vastly preferable alternative to any amount of deflation, so it's the side of the scale we…

Yeah, deflation is awful. Imagine our continuously increased production and efficiency resulting in goods becoming cheaper and the value of the working person’s dollar going farther. Horrifying.

Imagine money capitalists abandoning physical capital and laying off workers because their grocery bill turns the yield on employment negative while the yield on money itself is positive.

You'd be foolish to sell products for lower prices, you don't get a discount on debt for example (negative interest rates).

Re: Have we been thinking about inflation all wrong?

#244

Post by feoren »

Avshalom wrote: post #27
djrogers wrote: post #5

It's telling that the vast majority of the pushback on the 'inflation is bad' viewpoint comes from well-off academics, tech folks, and just generally people who are hurt the least by inflation.

I unload trucks and stock shelves at Target. You think my viewpoint about inflation is gonna get published in a way that anyone sees?

I'll see it, if you type it out right now in this comment. I think shelf-stockers have more power than ever to get their views heard.

Re: Have we been thinking about inflation all wrong?

#245

Post by imtringued »

dnautics wrote: post #217
jokethrowaway wrote: post #199

Earlier quoted context omitted.

With deflation there would be no reason to invest your money, paralysing the economy. Some inflation is needed; what we don't need is https://brrr.money/

"no reason to invest your money" You mean with deflation people will suddenly no longer want for more money? Sign us up!

If there is no reason to invest they will want more money. Once the interest rate drops below liquidity preference the desire to hold money approaches infinity. This is known as the keynesian liquidity trap. The only solution is to implement negative interest rates on cash to neutralize the liquidity preference.

Even if you have negative interest rates on money, people will flock to the next basic human need that has its own liquidity preference. Once the yield on land or property falls below liquidity preference people will hold onto empty property. The solution to the problem is to neutralize ground rent via land value taxation.

Thus you have both a money cycle and a real estate cycle.

Re: Have we been thinking about inflation all wrong?

#246

Post by G3rn0ti »

spaetzleesser wrote: post #160
whakim wrote: post #3

The basic assumption here is that inflation reduces inequality. That's plausible (it certainly was a strong contributing factor to the great reductions in inequality that occurred between 1920 and 1950). But inflation is also an extremely blunt-force instrument: lots of people who aren't very wealthy also get hurt. I'm not sure why we'd want that in a world where fiscal policy (i.e., taxation) exists, unless we've ju…

In the Germany of the 1920s inflation increased inequality enormously. People who had some assets had to start selling them off until they had nothing. Only people with large reserves could survive this and actually prosper because they could buy up more assets. Inflation kills the middle class who was on the way up. Germany still has a trauma from the 1920s. And rightfully so. Also: the wealthy will steer policy tow…

> Inflation kills the middle class who was on the way up.

It can be argued it was the hyperinflation of the early 1920s that radicalized a lot of people in Weimar Germany. It was the driving force helping the National Socialist German Workers‘ Party into power.

Tragically, inflation policy was inflicted onto the Germans by the early Weimar governments supported by moderate political forces — not the communists or Nazis — in an effort to pay war reparations. In the end the very champions of liberty and democracy — due to their economic illiteracy — sabotaged and ultimately destroyed their project transforming Germany into a modern peace-loving society.

Hopefully, this taught a lesson to their intellectual heirs or didn’t it?

Re: Have we been thinking about inflation all wrong?

#247

Post by [deleted] »

imtringued wrote: post #220
clairity wrote: post #162

Earlier quoted context omitted.

an inherently unstable but critical element of an economic system shouldn't be allowed to float on the whims of a few humans, especially with overwhelming corruptive pressure lapping against them incessantly. a central bank should be trying with all its might to precisely match the amount of money in the system exactly with the amount of productivity being generated. it shouldn't be trying to implement 'fiscal policy…

That's impossible without demurrage or negative interest rates.

[deleted]

Re: Have we been thinking about inflation all wrong?

#248

Post by giaour »

dragonwriter wrote: post #231
giaour wrote: post #192

Earlier quoted context omitted.

> anyone who works for a fixed wage This includes anyone who works for minimum wage (assuming it's not indexed to inflation), and they are not likely to be able to handle a cut in real pay as easily as, say, middle class homeowners.

> This includes anyone who works for minimum wage No, it doesn't, unless they have a contract fixing their pay at minimum wage; being currently paid minimum wage doesn't mean you don't get raises.

That's true; "anyone" was a bit too strong of a word. All things being equal, someone making minimum wage is less likely to get a raise than someone making more, since there's a possibility that the wage represented a statutory minimum and not the employee's "true value" to the employer.

Re: Have we been thinking about inflation all wrong?

#249

Post by notahacker »

dnautics wrote: post #217
jokethrowaway wrote: post #199

Earlier quoted context omitted.

With deflation there would be no reason to invest your money, paralysing the economy. Some inflation is needed; what we don't need is https://brrr.money/

"no reason to invest your money" You mean with deflation people will suddenly no longer want for more money? Sign us up!

People who already have lots of money will no longer want for more money.

That's not so great for the people who need to borrow it, or want a job

Re: Have we been thinking about inflation all wrong?

#250

Post by prewett »

prichino wrote: post #211
uses wrote: post #173

Earlier quoted context omitted.

Inflation doesn't exist as a policy to stiff wage earners. Inflation exists as a reality of a growing economy (more goods and services needs more money to cover them). The alternative is deflation, which would be extremely bad. So what we aim for, is low inflation. Which we've had for ~40 years. Low, controlled inflation is the vastly preferable alternative to any amount of deflation, so it's the side of the scale we…

This deflation is bad meme comes straight from the big international bankers of the early 20th century (JPM et al.). They cared mostly about liquidity and stable exchange rates. Unless you are one of them, please stop parroting "would be extremely bad". Would it be different from now? Probably. Extremely bad? For whom?

People who have debt is the canonical set for whom deflation would be bad Including everyone who has a mortgage: your payments stay the same, but you earn less, so they take up a larger portion of your income. Naturally this can lead people who have debts that they could have serviced without deflation now cannot service them, so they go bankrupt. This also happens with any company that has debt (which is pretty much all of them).

The Great Depression is frequently seen as having been an ordinary depression made worse by a deflationary spiral. So for whom would it be bad for? Everyone.

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