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a. isn't krugman arguing FOR inflation? b. why is low unemployment bad? let's say we have a deflationary economy, doesn't that lead to high unemployment which

a. isn't krugman arguing FOR inflation? b. why is low unemployment bad? let's say we have a deflationary economy, doesn't that lead to high unemployment which is a feedback to more deflation? how is that not a bad thing? excuse my naivete

dnautics 8y ago
His arguing for inflation, exactly. And read the quote. The way it works is by stealing from workers. > "let's say we have a deflationary economy, doesn't that lead to high unemployment which is a feedback to more deflation" I suppose in a deflationary economy the equilibrium state is no one will have a job?
mindslight 8y ago
> why is low unemployment bad? Low unemployment isn't inherently bad as an indicator, but attempting to force low unemployment with monetary policy is. In this context, lowering unemployment means increasing the financial pressure on workers so they accept lower wages. Meanwhile technological progress is eliminating many traditional positions, so workers end up stuck between a rock and a hard place - the screws are being turned on them so they go out and look for a job harder, yet there's nothing to be found!
- logfromblammo 8y ago
  Inflation is the Keynesian economist's tool for cutting wages without letting the wage-employees know that their wages are being cut. Monetary inflation (and monetary deflation) benefit those closest to the monetary authority, those with information advantage, and those with pricing power at the expense of everyone else. If you know what the Fed will do, you get richer. If you can get the new money first, you get richer. If you are holding money when old money is destroyed, you get richer. The economy works best when the growth in the money supply exactly matches the growth in economic activity. The Fed targets a positive inflation rate for several reasons, but one of them is that it makes real wages fall at a steady rate, and therefore workers become cheaper over time, encouraging hiring. If more wages were keyed to the inflation rate with automatic raises, the exercise would be pointless. Always-inflation monetary policy means that everyone who works gets a pay cut, all the time. It's a stupid accounting trick, and it only works on paper. In practice, it means that the lowest-paid workers, with the least wage-bargaining power, are constantly slipping closer to poverty. But hey, they can always find a job that is decreasingly able to pay all their bills, right? Low unemployment is not inherently bad. It is bad when you are screwing with the numbers just to hide bigger problems in your economy that may be contributing to a high unemployment rate.
AnimalMuppet 8y ago
I think the problem was in dnautic's phrasing. I initially read it as "No mention of ending (inflation, which is a deliberate state-driven policy to steal from the poor to give to the rich)". But after reading the follow-up from dnautic (peer to this comment), I now think the intended meaning was "No mention of (ending inflation), which is (a deliberate state-driven policy to steal from the poor to give to the rich)". That is, dnautic (if I understand correctly) is saying that the problem is ending inflation, rather than that inflation is the problem.
- dnautics 8y ago
  Nope. Inflation is the problem with contemporary capitalism.

dnautics 8y ago

His arguing for inflation, exactly. And read the quote. The way it works is by stealing from workers. > "let's say we have a deflationary economy, doesn't that lead to high unemployment which is a feedback to more deflation" I suppose in a deflationary economy the equilibrium state is no one will have a job?

mindslight 8y ago

> why is low unemployment bad? Low unemployment isn't inherently bad as an indicator, but attempting to force low unemployment with monetary policy is. In this context, lowering unemployment means increasing the financial pressure on workers so they accept lower wages. Meanwhile technological progress is eliminating many traditional positions, so workers end up stuck between a rock and a hard place - the screws are being turned on them so they go out and look for a job harder, yet there's nothing to be found!

logfromblammo 8y ago
Inflation is the Keynesian economist's tool for cutting wages without letting the wage-employees know that their wages are being cut. Monetary inflation (and monetary deflation) benefit those closest to the monetary authority, those with information advantage, and those with pricing power at the expense of everyone else. If you know what the Fed will do, you get richer. If you can get the new money first, you get richer. If you are holding money when old money is destroyed, you get richer. The economy works best when the growth in the money supply exactly matches the growth in economic activity. The Fed targets a positive inflation rate for several reasons, but one of them is that it makes real wages fall at a steady rate, and therefore workers become cheaper over time, encouraging hiring. If more wages were keyed to the inflation rate with automatic raises, the exercise would be pointless. Always-inflation monetary policy means that everyone who works gets a pay cut, all the time. It's a stupid accounting trick, and it only works on paper. In practice, it means that the lowest-paid workers, with the least wage-bargaining power, are constantly slipping closer to poverty. But hey, they can always find a job that is decreasingly able to pay all their bills, right? Low unemployment is not inherently bad. It is bad when you are screwing with the numbers just to hide bigger problems in your economy that may be contributing to a high unemployment rate.

AnimalMuppet 8y ago

I think the problem was in dnautic's phrasing. I initially read it as "No mention of ending (inflation, which is a deliberate state-driven policy to steal from the poor to give to the rich)". But after reading the follow-up from dnautic (peer to this comment), I now think the intended meaning was "No mention of (ending inflation), which is (a deliberate state-driven policy to steal from the poor to give to the rich)". That is, dnautic (if I understand correctly) is saying that the problem is ending inflation, rather than that inflation is the problem.

dnautics 8y ago
Nope. Inflation is the problem with contemporary capitalism.