32 ms·

>It's not like the restaurant owner has the option of just deciding to pay twice or three times the labor costs, and trust that their customers will be happy to

by jolux 6y ago

>It's not like the restaurant owner has the option of just deciding to pay twice or three times the labor costs, and trust that their customers will be happy to cover the difference, if their competitors don't have to do the same. This feels a bit backwards. We don’t know that their competitors aren’t already paying more, we only know that some people can’t seem to get labor at the price they were paying before. I think the numbers here are currently inconclusive, but I conjecture that what we’re seeing is small business owners losing labor monopsonies that they had come to rely on, and consequently a more competitive labor market. Of course competition causes upward pressure on prices, that’s the whole point. This is tangential but I think America has been too scared of inflation for too long. There’s nothing wrong with a bit of inflation, especially if it means we can get closer to full employment. We haven’t even been meeting the fed’s (very low) target for quite a while.

cratermoon 6y ago
> I think America has been too scared of inflation for too long This is true! The Federal Reserve, since the Carter administration, has acted like even the slightest bit of inflation is impending doom.
- jolux 6y ago
  Blame the Phillips curve ;)
- specialist 6y ago
  I've concluded that over steer (over correction) is the norm. My hunch is one big cause is the mismatch of time scales between tenure (employment) and policy outcomes. Meaning that most policy and decision makers have moved on to new roles and jobs before the consequences of their decisions become clear. So very little learning can happen.
  - deleted 6y ago
    [deleted]
- vl 6y ago
  Feds tried to induce inflation for the last 20 years, it’s good for them since they can just print more money. They largely failed to do so since dollar is so well propped by international demand.
  - imtringued 6y ago
    >it’s good for them since they can just print more money. That's not good because it means they failed to keep up their mandate. >They largely failed to do so since dollar is so well propped by international demand. Actually, the international demand is forcing deficit spending. If money leaves the US and then comes back in the form of treasury bonds then pretty much the only way to tap into the money is to let the government get into debt. If driving yields to near zero was good enough to cause inflation we wouldn't be in this mess.
- jfengel 6y ago
  Remarkably, since the tail end of the Bush administration, it's the opposite: the Fed has desperately tried to get inflation up to its 2% target level, and mostly missing. The reasons are debatable, but I'd argue that it's mostly because the mechanisms they're using end up inflating the stock market instead of consumer goods. There are economists terrified of any inflation, but it's an attitude that's more popular with some ideologues than with mainstream economists. You hear a lot about them on TV and the Internet, but not nearly as much in real economics talks. Those ideologues punch above their weight in Congress, but not at the Fed. The Fed governors aim for a small, controlled level of inflation. Mostly that's to prevent people from just sitting on their money: money stuffed into a mattress doesn't grow the economy. Money in bank accounts isn't much better, since they can be withdrawn at any time. So a little inflation nudges people to either spend their money or invest it. Such is the theory.
  - medvezhenok 6y ago
    The reason is quite clear - the Fed cannot transfer money effectively to the poor/middle class; it's fiscal policy that can do that (and labor unions to some degree, which were gutted in the 80s). Inflation doesn't happen when you give more to the people that don't consume (and sustained inflation only happens when there is an actual shortage of some good, and arguably we have overcapacity for everything today so inflation will only happen under either a commodity price shock or complete breakdown of supply lines (transitory inflation can happen like it is now - from the COVID shock))
    - jfengel 6y ago
      That's absolutely correct, but it has been remarkable the way there's been no money flowing to the poor and middle class. Supply-side economics clearly doesn't work, but it wasn't totally insane. If money was pumped into corporations you'd expect at least some of it to turn into more conventional demand. Buy a private jet or a yacht (built by workers and maintained by more workers), or start a company that pays wages, or something. Instead, all of the money just gets shuffled among each other. It's not just that trickle-down doesn't work; it's that it doesn't seem to trickle at all. Even to non-Chicago economists that's a little surprising. Chicago School turns out to be more than just incorrect, but utterly at odds with reality. Rich people simply don't behave the way they imagine they do. About the closest it comes is messing with the real estate market -- mostly in the form of pricing lower-class renters out. That benefitted the existing homeowners, and maybe that's helped stem middle class decline a tiny bit, but there are too many other forces working against them. Instead, it just trickles more money back up. It'll be interesting to see what happens as COVID eases off. That's a very unusual kind of shock, and I'm surprised it hasn't been even more economically disastrous than it is. Part of it is that the government has done a weak form of the right thing, pumping money directly to consumers. If not for that we'd have seen a deflationary spiral of truly catastrophic proportions.

by jolux 6y ago

cratermoon 6y ago

> I think America has been too scared of inflation for too long This is true! The Federal Reserve, since the Carter administration, has acted like even the slightest bit of inflation is impending doom.

jolux 6y ago
Blame the Phillips curve ;)
specialist 6y ago
I've concluded that over steer (over correction) is the norm. My hunch is one big cause is the mismatch of time scales between tenure (employment) and policy outcomes. Meaning that most policy and decision makers have moved on to new roles and jobs before the consequences of their decisions become clear. So very little learning can happen.
- deleted 6y ago
  [deleted]
vl 6y ago
Feds tried to induce inflation for the last 20 years, it’s good for them since they can just print more money. They largely failed to do so since dollar is so well propped by international demand.
- imtringued 6y ago
  >it’s good for them since they can just print more money. That's not good because it means they failed to keep up their mandate. >They largely failed to do so since dollar is so well propped by international demand. Actually, the international demand is forcing deficit spending. If money leaves the US and then comes back in the form of treasury bonds then pretty much the only way to tap into the money is to let the government get into debt. If driving yields to near zero was good enough to cause inflation we wouldn't be in this mess.
jfengel 6y ago
Remarkably, since the tail end of the Bush administration, it's the opposite: the Fed has desperately tried to get inflation up to its 2% target level, and mostly missing. The reasons are debatable, but I'd argue that it's mostly because the mechanisms they're using end up inflating the stock market instead of consumer goods. There are economists terrified of any inflation, but it's an attitude that's more popular with some ideologues than with mainstream economists. You hear a lot about them on TV and the Internet, but not nearly as much in real economics talks. Those ideologues punch above their weight in Congress, but not at the Fed. The Fed governors aim for a small, controlled level of inflation. Mostly that's to prevent people from just sitting on their money: money stuffed into a mattress doesn't grow the economy. Money in bank accounts isn't much better, since they can be withdrawn at any time. So a little inflation nudges people to either spend their money or invest it. Such is the theory.
- medvezhenok 6y ago
  The reason is quite clear - the Fed cannot transfer money effectively to the poor/middle class; it's fiscal policy that can do that (and labor unions to some degree, which were gutted in the 80s). Inflation doesn't happen when you give more to the people that don't consume (and sustained inflation only happens when there is an actual shortage of some good, and arguably we have overcapacity for everything today so inflation will only happen under either a commodity price shock or complete breakdown of supply lines (transitory inflation can happen like it is now - from the COVID shock))
  - jfengel 6y ago
    That's absolutely correct, but it has been remarkable the way there's been no money flowing to the poor and middle class. Supply-side economics clearly doesn't work, but it wasn't totally insane. If money was pumped into corporations you'd expect at least some of it to turn into more conventional demand. Buy a private jet or a yacht (built by workers and maintained by more workers), or start a company that pays wages, or something. Instead, all of the money just gets shuffled among each other. It's not just that trickle-down doesn't work; it's that it doesn't seem to trickle at all. Even to non-Chicago economists that's a little surprising. Chicago School turns out to be more than just incorrect, but utterly at odds with reality. Rich people simply don't behave the way they imagine they do. About the closest it comes is messing with the real estate market -- mostly in the form of pricing lower-class renters out. That benefitted the existing homeowners, and maybe that's helped stem middle class decline a tiny bit, but there are too many other forces working against them. Instead, it just trickles more money back up. It'll be interesting to see what happens as COVID eases off. That's a very unusual kind of shock, and I'm surprised it hasn't been even more economically disastrous than it is. Part of it is that the government has done a weak form of the right thing, pumping money directly to consumers. If not for that we'd have seen a deflationary spiral of truly catastrophic proportions.