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If we have deflation with rising incomes, there would be no issue. If there is deflation with declining incomes, it would create a downward spiral, potentially.
by ryacko 8y ago
If we have deflation with rising incomes, there would be no issue. If there is deflation with declining incomes, it would create a downward spiral, potentially.
- partiallypro 8y agoReal incomes have fallen during/after virtually every US recession; at least in -real- terms. Nominal incomes almost never fall and just remain flat. Monetary theory is complex, but what the flow of credit remains in tact. https://fred.stlouisfed.org/series/MEHOINUSA672N https://fred.stlouisfed.org/series/MEHOINUSA672N https://fred.stlouisfed.org/series/MEHOINUSA646N https://fred.stlouisfed.org/series/MEHOINUSA646N The only way I can see hyperinflation in the US is some cataclysm or inability to service debt through normal means. Most countries that have hyperinflation generally have massive debt loads they are printing out of with no economic output to back it up. They also are usually very centrally planned economies or war torn.
- ryacko 8y agoNot necessarily, the whole reason we invaded Iraq was to maintain the petrodollar. The Saudis would be richer if they unpegged the Riyal and exclusively sold their oil in their currency. The world is essentially the US economy.
- ThrustVectoring 8y agoWhen employers contract their payroll, they do so with layoffs rather than pay cuts. The reasons for this are fairly complex, but if we take this as a given it implies a lot about our monetary policy. Specifically, it argues for something like NGDP targeting, so that employers as a whole continue to have enough money to avoid layoffs even as total real wages decline.