The Fed plans to sharply boost unemployment • Hacker News Board

Re: The Fed plans to sharply boost unemployment

#21

Post by [deleted] » Sun, Sep 25, 2022, 2:52 PM UTC

socialismisok wrote: post #19

econ101time wrote: post #15

Earlier quoted context omitted.

> That seems like a pretty whacky theory to me because it assumes that companies only increase prices when forced to do so, and not just because they can. I see people post things like this, and I'm forced to conclude that you don't understand supply and demand. Edit: Sure, monopoly pricing is real. But blaming monopoly pricing for inflation is dubious. You'd need an account of 1) how the goods in the CPI basket are…

Supply and demand works on a idealized economy, but it's hardly true in the real world where there are cartels, monopolies, and other incentives to keep prices high even if there's supply.

[deleted]

Re: The Fed plans to sharply boost unemployment

#22

Post by Retric » Sun, Sep 25, 2022, 2:54 PM UTC

econ101time wrote: post #15

fxtentacle wrote: post #2

"With an additional million or two people out of work, the newly unemployed and their families would sharply cut back on spending, while for most people who are still working, wage growth would flatline. When companies assume their labor costs are unlikely to rise, the theory goes, they will stop hiking prices. That, in turn, slows the growth in prices." That seems like a pretty whacky theory to me because it assumes…

> That seems like a pretty whacky theory to me because it assumes that companies only increase prices when forced to do so, and not just because they can. I see people post things like this, and I'm forced to conclude that you don't understand supply and demand. Edit: Sure, monopoly pricing is real. But blaming monopoly pricing for inflation is dubious. You'd need an account of 1) how the goods in the CPI basket are…

Supply and demand are why companies can raise their prices. Suggesting companies only raise prices when they must is mistaken.

Further, increasing the number of workers in the economy increases supply and demand for some things, while the supply of other stuff is like video games is unlimited.

Re: The Fed plans to sharply boost unemployment

#23

Post by behaveEc0n00 » Sun, Sep 25, 2022, 2:55 PM UTC

mjhay wrote: post #5

Wage growth has not been keeping up with inflation, and may even be damping it. The steady chorus of claims that wages are too high strikes me as consent-manufacturing by capital. https://www.epi.org/blog/wage-growth-has-been-dampening-infl... https://insurancenewsnet.com/oarticle/inflation-continues-to...

https://www.nytimes.com/1997/02/27/business/job-insecurity-o...

Agreed. They were more frank about it back in the day.

If everyone has enough money the masses can create/buy assets to capitalize on rather than merely be worker bees.

Re: The Fed plans to sharply boost unemployment

#24

Post by econ101time » Sun, Sep 25, 2022, 2:56 PM UTC

Retric wrote: post #22

econ101time wrote: post #15

Earlier quoted context omitted.

> That seems like a pretty whacky theory to me because it assumes that companies only increase prices when forced to do so, and not just because they can. I see people post things like this, and I'm forced to conclude that you don't understand supply and demand. Edit: Sure, monopoly pricing is real. But blaming monopoly pricing for inflation is dubious. You'd need an account of 1) how the goods in the CPI basket are…

Supply and demand are why companies can raise their prices. Suggesting companies only raise prices when they must is mistaken. Further, increasing the number of workers in the economy increases supply and demand for some things, while the supply of other stuff is like video games is unlimited.

You're forgetting that there's a market at the other end too. Every business has a cost of capital, and if its returns are not in line with other similarly placed businesses, they will have to spend a lot more money to acquire capital.

Re: The Fed plans to sharply boost unemployment

#25

Post by mjhay » Sun, Sep 25, 2022, 2:56 PM UTC

socialismisok wrote: post #19

econ101time wrote: post #15

Earlier quoted context omitted.

> That seems like a pretty whacky theory to me because it assumes that companies only increase prices when forced to do so, and not just because they can. I see people post things like this, and I'm forced to conclude that you don't understand supply and demand. Edit: Sure, monopoly pricing is real. But blaming monopoly pricing for inflation is dubious. You'd need an account of 1) how the goods in the CPI basket are…

Supply and demand works on a idealized economy, but it's hardly true in the real world where there are cartels, monopolies, and other incentives to keep prices high even if there's supply.

Supply and demand works great in Econ 101 though.

Re: The Fed plans to sharply boost unemployment

#26

Post by BlargMcLarg » Sun, Sep 25, 2022, 2:56 PM UTC

econ101time wrote: post #15

fxtentacle wrote: post #2

"With an additional million or two people out of work, the newly unemployed and their families would sharply cut back on spending, while for most people who are still working, wage growth would flatline. When companies assume their labor costs are unlikely to rise, the theory goes, they will stop hiking prices. That, in turn, slows the growth in prices." That seems like a pretty whacky theory to me because it assumes…

> That seems like a pretty whacky theory to me because it assumes that companies only increase prices when forced to do so, and not just because they can. I see people post things like this, and I'm forced to conclude that you don't understand supply and demand. Edit: Sure, monopoly pricing is real. But blaming monopoly pricing for inflation is dubious. You'd need an account of 1) how the goods in the CPI basket are…

Economy is still a social science at large. Upping the prices to their theoretical limits might cause immense backlash whereas steady increases, either fixed yearly increases or a big increase due to "extraordinary forces", may have very different social effects.

Blindly mentioning 'supply and demand' is the same as saying 'calories in and out'. It's true, but it misses nuance.

Re: The Fed plans to sharply boost unemployment

#27

Post by californical » Sun, Sep 25, 2022, 2:57 PM UTC

mjhay wrote: post #14

refurb wrote: post #11

Earlier quoted context omitted.

Everybody wants to control inflation until it's time to suppress wage growth. The Bank of Canada even came right and out said that employers should definitely not raise wages quickly. https://www.theglobeandmail.com/business/article-wage-negoti...

Weird how government agencies that fall to regulatory capture all keep advocating for things beneficial to the industries they oversee. Sufficient tax increases for the well-off would have the same effect as punishing the working class, but that's never an option for some reason.

Not exactly — wealthy people don’t spend most of their money on goods & services, they leave it parked in investments. Reducing a wealthy person’s net worth don’t really affect how much they spend on consumer goods.

A poor or working-class person spends (nearly) all of their money on consumer goods. Give them 10% more money and they try to buy 10% more things.

Restricting money on the wealthy doesn’t reduce demand for GPUs for example, but restricting money on low-middle income people does. That lower demand for consumer goods is how you can slow inflation.

Re: The Fed plans to sharply boost unemployment

#28

Post by bjourne » Sun, Sep 25, 2022, 2:57 PM UTC

> In plain English, that means unemployment. The Fed forecasts the unemployment rate to rise to 4.4% next year, from 3.7% today — a number that implies an additional 1.2 million people losing their jobs.

> "I wish there were a painless way to do that," Powell said. "There isn't."

A reminder to us that psychopaths are running the world economy.

Re: The Fed plans to sharply boost unemployment

#29

Post by ethbr0 » Sun, Sep 25, 2022, 2:59 PM UTC

mjhay wrote: post #14

refurb wrote: post #11

Earlier quoted context omitted.

Everybody wants to control inflation until it's time to suppress wage growth. The Bank of Canada even came right and out said that employers should definitely not raise wages quickly. https://www.theglobeandmail.com/business/article-wage-negoti...

Weird how government agencies that fall to regulatory capture all keep advocating for things beneficial to the industries they oversee. Sufficient tax increases for the well-off would have the same effect as punishing the working class, but that's never an option for some reason.

> Sufficient tax increases for the well-off would have the same effect as punishing the working class

Would they?

From an economic perspective (not a social/fairness one), isn't it well studied that consumption (as percentage of income) is inversely proportional to higher/lower total income?

So raising tax on the well-off would be more akin to raising the prime rate (i.e. decreasing the amount of well-off capital that's reinvested elsewhere) with the added effect of increasing consumption by increasing federal government spending.

Note: I'm not opining on the justness of this, simply the mechanism.

Re: The Fed plans to sharply boost unemployment

#30

Post by smnrchrds » Sun, Sep 25, 2022, 3:00 PM UTC

refurb wrote: post #11

mjhay wrote: post #5

Wage growth has not been keeping up with inflation, and may even be damping it. The steady chorus of claims that wages are too high strikes me as consent-manufacturing by capital. https://www.epi.org/blog/wage-growth-has-been-dampening-infl... https://insurancenewsnet.com/oarticle/inflation-continues-to...

Everybody wants to control inflation until it's time to suppress wage growth. The Bank of Canada even came right and out said that employers should definitely not raise wages quickly. https://www.theglobeandmail.com/business/article-wage-negoti...

Bank of Canada's position is very nuanced, but all the nuance is ignored by their critics. They never asked employers not to raise wages this year. They asked them not to bake in e.g. 8% per year wage increase for the next 10 years if they are negotiating a long term contract with a union. The rationale is that while 8% raise this year is reasonable given the inflation rate, the inflation rate will not remain high for the next decade, so it will be too high further in the future. If many bind themselves with high wage increases long term, we will have high inflation for a long time due to the effect of the cost of labour on prices.

> “Don’t build that into longer term contracts. Don’t build that into wage contracts. It is going to take some time, but you can be confident that inflation will come down.”