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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?

#411

Post by yed »

dnautics wrote: post #401
colinmhayes wrote: post #286

Earlier quoted context omitted.

There will not be many working people if the economy is deflationary. Please read a macro book so you at least understand what you're arguing against before spouting nonsense.

> There will not be many working people if the economy is deflationary. The us had deflation between 1860 and 1910. I guess at the end of fifty years of that we had, like, no laborers, or something. Please read a history book before provably wrong macro dogma rots your brain and all you do is spout nonsense that could actually harm people.

That time period featured the longest depressionary period in US history with large spikes in unemployment [1]

[1] https://en.m.wikipedia.org/wiki/Long_Depression#:~:text=In%2....

Re: Have we been thinking about inflation all wrong?

#412

Post by jhoechtl »

Inflation really is all about transferring money from those who create to those who produce. Those who create are called workers and those who produce entrepreneurs. Once the creators buy something they are consumers. As a side note: Ironically those who consume are the ones who created it before, therefore Marx thought it would be natural that the working class should be in control.

You want to create positive inflation so the creators have a an incentive to consume because prices in next year a higher than today.

You want to create positive inflation which is not to high as otherwise prices for life-essential goods (energy, water, basic food) increase and a higher proportion of the available income has to be spent on this goods instead on consumables.

The right amount of inflation is dependent on many, many, many factors, for one the availability of cheap energy. Many factors in the model to economic growth are feed-back therefore small changes to one factor can create large effects up to point where the system becomes erratic (chaotic)

See the IS-LM model https://en.wikipedia.org/wiki/IS%E2%80%93LM_model , assuming that interest rate and inflation are directly dependent.

Re: Have we been thinking about inflation all wrong?

#413

Post by baryphonic »

wbsss4412 wrote: post #394
baryphonic wrote: post #380

Earlier quoted context omitted.

No, money really is essential. If you destroy your productive capacity but money supply remains the same (which is honestly a bit odd, since real prices are always relative), then you get substitution effects that don't affect the general price level, only the price levels in particular segments of the economy. (I would expect the prices of products, capital goods and human capital to increase, and the price of commo…

> If you destroy your productive capacity but money supply remains the same (which is honestly a bit odd, since real prices are always relative), then you get substitution effects that don't affect the general price level, only the price levels in particular segments of the economy. Because the destruction of capacity somehow didn’t affect the substitutes? That’s magical thinking. There’s a shortage of new cars => us…

> > Inflation is really always and everywhere a monetary phenomenon.

> It can be one, and that is certainly a contributing factor here, but if you can see the obvious supply chain/shift in demand due to covid effects, then you’re just blinded by dogma.

I didn't realize Jerome Powell commented on Hacker News! If you can't see how the change in the money supply over the past two years[0] may be the dominant and, dare I say, only explanation for the inflation we are experiencing, then—well—maybe I'm not the dogmatic one.

[0]https://fred.stlouisfed.org/graph/fredgraph.png?g=LYjq

Re: Have we been thinking about inflation all wrong?

#414

Post by j7ake »

x3sphere wrote: post #341

> If inflation were allowed to run a bit higher, it could deliver a long-overdue win for young people who have had to face a combination of stagnant wages and rising housing costs. “ Yeah this doesn't make any sense. Housing price increases have far outpaced any increase in wages. If inflation continues to run hot, I expect housing will just get even more expensive especially as investors will be frantic to park thei…

This is wrong because inflation will eat into the size of monthly payments you can contribute to your mortgage, and thus lower the total dollars of house you can buy. Imagine if groceries and gas take more and more of your income.

If/when interest rates go up, it will also decrease price of houses because the cost of borrowing will go up, and thus lower the total dollars of house you can buy.

If you’ve already bought your house then great, but expect to sell the home at a huge loss when interest rates hit 20 percent.

Re: Have we been thinking about inflation all wrong?

#415

Post by megablast »

colinmhayes wrote: post #286
friedturkey wrote: post #195

Earlier quoted context omitted.

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.

There will not be many working people if the economy is deflationary. Please read a macro book so you at least understand what you're arguing against before spouting nonsense.

Tell so Some to read a book because you can’t articulate the issue.

Re: Have we been thinking about inflation all wrong?

#416

Post by xapata »

ledauphin wrote: post #370
xapata wrote: post #238

Earlier quoted context omitted.

40 years ago, there were many fewer stock market participants, and many more retirees on fixed income. Now it's relatively rare to retire with a fixed-income pension. More of us are shareholders now, with IRAs and 401ks.

most of _us_, I can easily believe. But most _people_ in the Western world? I'd like to see some references.

I don't know about the "Western world" but in the US stock ownership is dramatically more prevalent. At the same time, pension plans have nearly disappeared in the private sector.

The ownership rates are trivially searchable. The 2nd link I found was a Gallup survey that estimated around 60% of US residents, which is roughly 1.5x the portion that have a college degree.

If you're thinking of the poor, Social Security payments increase with inflation, so they're not quite fixed-income.

Re: Have we been thinking about inflation all wrong?

#417

Post by oonerspism »

TameAntelope wrote: post #148
oonerspism wrote: post #136

Earlier quoted context omitted.

The truly poor do not have jobs, nor much hope of one in future. They are on fixed state incomes at best, which if they are lucky may have a trivial rise some years after the fact. We don't need to get terribly cerebral to note the basic mechanism of proportion, whereby $10 added to the daily food cost of a person who makes $50/day is vastly more impactful than the same $10 added to the daily food cost of a person wh…

The whole point is that $10 added daily food cost results in the food producer being able to hire more employees, which means the person who makes $0/day can make $300/day now. Also these numbers are super weird. It's probably more like $10 total daily food cost going up to like $10.30, and going from making $30/day (part time minimum wage) to $50 (near full-time minimum wage).

The numbers were symbolic to illustrate proportional effect.

I'm not seeing a great deal of causation in your theory. The same amount of food is being produced, thus the same amount of work is done - so extra employees are not required. If anything, in your closed system theory, the food producer is going to laugh and pocket extra profits.

Re: Have we been thinking about inflation all wrong?

#418

Post by jessaustin »

kangaroozach wrote: post #357
quadrangle wrote: post #354

Earlier quoted context omitted.

Austrian economics is all anti-empirical say-so internally-consistent models that aren't tested against reality. Traditional economics is stuff that claims to be more empirical but fails to do so and focuses almost entirely on official stats and on its own versions of models that aren't tested against reality. The whole field of economics is overall messed up. It's insular, arrogant, and extremely resistant to outsid…

More money inflates the supply of money. This is why cryptocurrencies that burn crypto are considered deflationary. These Econ professors are responsible for inflating a giant bubble based on their politically motivated propaganda. Inflation is not about prices, it’s about simple math. Printing dollars out of thin air, makes the ones in your pocket less powerful. But if you are a the direct beneficiary of the newly p…

Printing dollars out of thin air, makes the ones in your pocket less powerful.

We've been doing this "thin air" thing for twenty years. Why has it only caused inflation over the last several months?

Re: Have we been thinking about inflation all wrong?

#419

Post by coryrc »

jessaustin wrote: post #418
kangaroozach wrote: post #357

Earlier quoted context omitted.

More money inflates the supply of money. This is why cryptocurrencies that burn crypto are considered deflationary. These Econ professors are responsible for inflating a giant bubble based on their politically motivated propaganda. Inflation is not about prices, it’s about simple math. Printing dollars out of thin air, makes the ones in your pocket less powerful. But if you are a the direct beneficiary of the newly p…

Printing dollars out of thin air, makes the ones in your pocket less powerful. We've been doing this "thin air" thing for twenty years. Why has it only caused inflation over the last several months?

Graph housing and health care prices.

Maybe low inflation was a lie all along.

Re: Have we been thinking about inflation all wrong?

#420

Post by ravel-bar-foo »

quadrangle wrote: post #371
majormajor wrote: post #366

Earlier quoted context omitted.

> More money inflates the supply of money. This is why cryptocurrencies that burn crypto are considered deflationary. Crypto isn't in a vaccuum. If the only currency in the world was bitcoin, sure, call it deflationary. But compared to a decade ago, there are far more dollars floating around thanks to crypto. Not only are there are the rich people holding dollars and other currency, or gold, etc, but we've invented a…

> there are far more dollars floating around thanks to crypto Uh no, cryptocurrencies can't generate USD. But if you meant "dollars" as a generic term for currency, then sure, kinda yeah, to the degree that cryptocurrencies are actually working as currencies (which they mostly are not). Anyway, the "deflationary" claim is internal to a cryptocurrency. Nobody is asserting that cryptocurrencies cause deflation of USD.

> Uh no, cryptocurrencies can't generate USD.

If I buy crypto from a miner, the dollars don't disappear. The miner uses it to buy energy and semiconductors, which makes its way around the econony until some miniscule fraction of it comes back to me. (The loss of assets in the economy needed to create the transaction does not destroy dollars, but it does destroy finite resources such as fuel or sunlight for energy, the time of the people involved in the supply chain, etc. In that sense, buying crypto generates USD: we end the process having completed the reaction

Dollars + fuel/energy/resources + time -> Dollars + Crypto

So if one values crypto more than fuel/energy/resouces + time (say, because crypto is deflationary and its value will rise faster than that of the natural resources used to create it, then it does look (if you squint at it) like dollars are generated: the crypto can be sold later for more than the dollars.

At the individual level, the transaction might be even more biased: dollars -> crypto now looks a lot like it generates dollars later if dollars are inflationary and crypto is deflationary (with stable demand for crypto).

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