6 ms·

So crops rot. The price goes up. Now they can make more money selling crops. So they can pay people more. What I am missing here?

cm2187 10y ago
Inflation. More expensive cost of living for your customers. Not a problem when your Apple gadget budget is a multiple of your food budget. But not everyone has this luxury. Protectionism in international trade will have similar impact. Tax chinese imports and suddenly walmart will hike their prices.
- Consultant32452 10y ago
  One thing that's worth noting is that we've had virtually no inflation for a very long time. The wealth class prefers it this way, but the worker struggling to pay off debts wouldn't mind a little inflation every now and then.
  - icebraining 10y ago
    What kinds of debts are you thinking of? I don't know any workers with long-term debts which aren't inflation adjusted (even if indirectly). The whole idea of inflation reducing the value of debts seems silly. "We'll trick those bankers with this well known, mostly predictable, small decrease in the value of money! They'll never see it coming!"
    - AnimalMuppet 10y ago
      Mortgages. Now, you could argue that the expectation of future inflation is built into the mortgage interest rate at the time you obtain the mortgage. And you'd be correct. But once you have the mortgage, then inflation helps you. Or rather, it helps you when your wages rise in response to inflation.
      - DaiPlusPlus 10y ago
        Unless you have a variable-rate mortgage, of course.
        Spellman 10y ago
        Which is why people tout going fixed rate
    - Consultant32452 10y ago
      Ignore Tucker Carlson, economist Mark Blyth got famous recently for being virtually the only economist who predicted Trump's win. https://www.youtube.com/watch?v=h-hV_XS8dH4 https://www.youtube.com/watch?v=h-hV_XS8dH4
      - icebraining 10y ago
        Why point to Mark Blyth and not to Arthur Laffer?
    - Tsagadai 10y ago
      If I have a debt at an interest rate of 4% and inflation is 5% my debt is worth less every year relative to the value of other things. If I have a debt at an interest rate of 5% and inflation is 2.5% the value of the debt is increasing. This effect is increased if only interest is being paid and the asset the debt is for does not increase in value (like a car). Add to this that wages are relatively stagnant for most people outside of tech since the 80s in some countries and you have a problem. It can get even worse where wages are kept stagnant by government intervention and inflation goes up faster than 5%.
    - AnthonyMouse 10y ago
      > What kinds of debts are you thinking of? Mortgage loans, student loans, car loans, credit card debt, taxes paid in service to national debt, ... > I don't know any workers with long-term debts which aren't inflation adjusted (even if indirectly). Interest rates are somewhat inversely correlated with inflation. Typically the only time you see high inflation and high interest rates together is when the economy is booming and people are willing to borrow despite the high interest rates. Then that borrowing, since banks create the money they loan you (they don't actually have all of it they just credit your account), causes inflation. When inflation is caused by the government creating money, it causes interest rates to go down. Because the supply of money goes up so by supply and demand the price of money goes down. The price of money is the interest rate, therefore lower interest rates. You would think banks wouldn't loan money if the interest rate is less than the rate of inflation, but remember again that they don't actually have all the money you borrow, they just credit your account and collect interest. Even if they had the money, it does them no good sitting in a vault depreciating -- 1% interest against 10% inflation is still more than the 0% they get by not loaning it to anyone. The main problem is that the lower interest rates cause people to borrow more money, so the key is to combine the inflation with policies that would otherwise be deflationary. Increase the housing supply, eliminate mortgage and student loan interest subsidies for new debt, etc. Discourage new debt in general -- even tax loan interest on new debts. That allows the market to correct against historical bad policies without causing disastrous deflation.
  - DaiPlusPlus 10y ago
    Not necessarily - there can be inflation without worker's pay increases, and inflation leads to more costly credit - so someone in that situation is twice as worse-off as before.
    - Consultant32452 10y ago
      Try telling that to the working public who basically hasn't gotten a raise in 30 years in spite of sky-rocketing productivity.
ap3 10y ago
Why wouldn't more farmers just let their crops rot to make more money?
- jksmith 10y ago
  Because you have nothing to sell even if demand goes up. Does you no good.
- mcguire 10y ago
  Because unless last year was a good year, making no money this year means you will be out of business next year.
groby_b 10y ago
So many things. In a first approximation: You can't sell crops that did rot. And the next harvest is next year. Then there's of course the fact that almost nobody (with citizenship) actually wants to pick crops, no matter what you pay them, because it's back-breaking labor. Yes, there'd be a price at which they would, but that's not a price the public would pay for your crops. Of course, if you don't give a shit about people and treat the world solely as an economics textbook, sure, this is perfectly normal and the market is working.
- Consultant32452 10y ago
  >but that's not a price the public would pay for your crops. Maybe the public needs to get used to paying premium prices for premium work instead of outsourcing slavery to other countries or importing cheap slave-wage laborers illegally.
  - icebraining 10y ago
    Or some will just automate, while others go out of business, and then you're left with still more expensive crops than before without any workers getting paid to pick them. But I'm sure those "slaves" will thank you.
    - Consultant32452 10y ago
      Wall Street's interests are diametrically opposed to workers. Wall Street wants to turn good jobs into shitty jobs and ship them to more desperate poor people in poorer countries, whereas workers want the exact opposite. We've had 30 years of free trade and basically no border. A nudge in the other direction isn't going to be the end of the world. A blip on the jobs radar which comes along with stronger worker rights is gonna be okay.
- dikdik 10y ago
  >Then there's of course the fact that almost nobody (with citizenship) actually wants to pick crops... This is complete bullshit and needs to quit being touted. Americans are not afraid of hard, back-breaking labor. I grew up in the Midwest surrounded by corn and soy beans (and not too many illegal or legal immigrants). Tons of my white, middle class friends went out into the field to pollinate corn in the summers or went down to strawberry fields to pick when they came in season. What a sheltered life you must lead if you've never met an American that does manual labor or works in a field...

cm2187 10y ago

Inflation. More expensive cost of living for your customers. Not a problem when your Apple gadget budget is a multiple of your food budget. But not everyone has this luxury. Protectionism in international trade will have similar impact. Tax chinese imports and suddenly walmart will hike their prices.

Consultant32452 10y ago
One thing that's worth noting is that we've had virtually no inflation for a very long time. The wealth class prefers it this way, but the worker struggling to pay off debts wouldn't mind a little inflation every now and then.
- icebraining 10y ago
  What kinds of debts are you thinking of? I don't know any workers with long-term debts which aren't inflation adjusted (even if indirectly). The whole idea of inflation reducing the value of debts seems silly. "We'll trick those bankers with this well known, mostly predictable, small decrease in the value of money! They'll never see it coming!"
  - AnimalMuppet 10y ago
    Mortgages. Now, you could argue that the expectation of future inflation is built into the mortgage interest rate at the time you obtain the mortgage. And you'd be correct. But once you have the mortgage, then inflation helps you. Or rather, it helps you when your wages rise in response to inflation.
    - DaiPlusPlus 10y ago
      Unless you have a variable-rate mortgage, of course.
      - Spellman 10y ago
        Which is why people tout going fixed rate
  - Consultant32452 10y ago
    Ignore Tucker Carlson, economist Mark Blyth got famous recently for being virtually the only economist who predicted Trump's win. https://www.youtube.com/watch?v=h-hV_XS8dH4 https://www.youtube.com/watch?v=h-hV_XS8dH4
    - icebraining 10y ago
      Why point to Mark Blyth and not to Arthur Laffer?
  - Tsagadai 10y ago
    If I have a debt at an interest rate of 4% and inflation is 5% my debt is worth less every year relative to the value of other things. If I have a debt at an interest rate of 5% and inflation is 2.5% the value of the debt is increasing. This effect is increased if only interest is being paid and the asset the debt is for does not increase in value (like a car). Add to this that wages are relatively stagnant for most people outside of tech since the 80s in some countries and you have a problem. It can get even worse where wages are kept stagnant by government intervention and inflation goes up faster than 5%.
  - AnthonyMouse 10y ago
    > What kinds of debts are you thinking of? Mortgage loans, student loans, car loans, credit card debt, taxes paid in service to national debt, ... > I don't know any workers with long-term debts which aren't inflation adjusted (even if indirectly). Interest rates are somewhat inversely correlated with inflation. Typically the only time you see high inflation and high interest rates together is when the economy is booming and people are willing to borrow despite the high interest rates. Then that borrowing, since banks create the money they loan you (they don't actually have all of it they just credit your account), causes inflation. When inflation is caused by the government creating money, it causes interest rates to go down. Because the supply of money goes up so by supply and demand the price of money goes down. The price of money is the interest rate, therefore lower interest rates. You would think banks wouldn't loan money if the interest rate is less than the rate of inflation, but remember again that they don't actually have all the money you borrow, they just credit your account and collect interest. Even if they had the money, it does them no good sitting in a vault depreciating -- 1% interest against 10% inflation is still more than the 0% they get by not loaning it to anyone. The main problem is that the lower interest rates cause people to borrow more money, so the key is to combine the inflation with policies that would otherwise be deflationary. Increase the housing supply, eliminate mortgage and student loan interest subsidies for new debt, etc. Discourage new debt in general -- even tax loan interest on new debts. That allows the market to correct against historical bad policies without causing disastrous deflation.
- DaiPlusPlus 10y ago
  Not necessarily - there can be inflation without worker's pay increases, and inflation leads to more costly credit - so someone in that situation is twice as worse-off as before.
  - Consultant32452 10y ago
    Try telling that to the working public who basically hasn't gotten a raise in 30 years in spite of sky-rocketing productivity.

ap3 10y ago

Why wouldn't more farmers just let their crops rot to make more money?

jksmith 10y ago
Because you have nothing to sell even if demand goes up. Does you no good.
mcguire 10y ago
Because unless last year was a good year, making no money this year means you will be out of business next year.

groby_b 10y ago

So many things. In a first approximation: You can't sell crops that did rot. And the next harvest is next year. Then there's of course the fact that almost nobody (with citizenship) actually wants to pick crops, no matter what you pay them, because it's back-breaking labor. Yes, there'd be a price at which they would, but that's not a price the public would pay for your crops. Of course, if you don't give a shit about people and treat the world solely as an economics textbook, sure, this is perfectly normal and the market is working.

Consultant32452 10y ago
>but that's not a price the public would pay for your crops. Maybe the public needs to get used to paying premium prices for premium work instead of outsourcing slavery to other countries or importing cheap slave-wage laborers illegally.
- icebraining 10y ago
  Or some will just automate, while others go out of business, and then you're left with still more expensive crops than before without any workers getting paid to pick them. But I'm sure those "slaves" will thank you.
  - Consultant32452 10y ago
    Wall Street's interests are diametrically opposed to workers. Wall Street wants to turn good jobs into shitty jobs and ship them to more desperate poor people in poorer countries, whereas workers want the exact opposite. We've had 30 years of free trade and basically no border. A nudge in the other direction isn't going to be the end of the world. A blip on the jobs radar which comes along with stronger worker rights is gonna be okay.
dikdik 10y ago
>Then there's of course the fact that almost nobody (with citizenship) actually wants to pick crops... This is complete bullshit and needs to quit being touted. Americans are not afraid of hard, back-breaking labor. I grew up in the Midwest surrounded by corn and soy beans (and not too many illegal or legal immigrants). Tons of my white, middle class friends went out into the field to pollinate corn in the summers or went down to strawberry fields to pick when they came in season. What a sheltered life you must lead if you've never met an American that does manual labor or works in a field...