6 ms·

On the flip side the costs of many essentials are going up and the fewer people employed at the higher prices will be buying less with their 2021 $15 than they

On the flip side the costs of many essentials are going up and the fewer people employed at the higher prices will be buying less with their 2021 $15 than they could've with their 2019 $15, but if people are satisfied with simply seeing a higher numerical value on their paycheck so be it. https://www.wsj.com/articles/consumers-adjust-to-higher-prices-11620552601 https://www.wsj.com/articles/consumers-adjust-to-higher-pric...

whimsicalism 5y ago
> 2021 $15 than they could've with their 2019 $15 Still far more than they would have been buying with the $7.25/hr of course. These wage increases are almost certainly net welfare enhancing due to diminishing marginal utility of the dollar.
- arcticbull 5y ago
  Not to mention, the Fed has tools to counter inflation, which they will almost certainly deploy.
  - zodiakzz 5y ago
    Noob question: What does that consist of (other than halting currency printing)?
    - arcticbull 5y ago
      The Fed doesn't print currency - thats Treasury, although the Fed holds and distributes it to depository institutions! They control the money supply by reducing the fractional reserve lending rate at banks (reducing supply of loans), increasing interest rates (reducing demand for loans) and unwinding their balance sheet by selling back purchased assets (largely t-bills, reducing circulating supply directly). The money supply of centrally banked economies is mostly debt/demand driver, not supply driven. Money is created when lent, and destroyed when repaid. By tweaking parameters, the Fed is able to manage circulating supply. It's actually a really elegant system, IMO.
      - temp20160423 5y ago
        The last sentence is only true if you believe the Fed will actually sell back the assets. When I look at this chart, https://fred.stlouisfed.org/series/WALCL https://fred.stlouisfed.org/series/WALCL, I have very little confidence that the Fed will sell a meaningful portion back (notice the Fed already gave up BEFORE covid when we supposedly had one of the best economies in recent times). In fact, it looks to me that the assets held by the Fed are growing exponentially and definitely growing faster than our productivity growth.
        imtringued 5y ago
        2018 to 2019 was a 15% decrease of the Fed's balance sheet. That was actually quite a decent pace. At $0.6 trillion/year it would take 12 years to unwind the 2021 balance sheet. That's worrying but not impossible.
    - imtringued 5y ago
      Paradoxically, the default state of fiat currency is deflation, because the primary means of money creation is debt. If inflation is 2% every year that means future debts must overshadow past debts. If you raise interest rates people stop borrowing money because it becomes too expensive. The interest rate itself acts as a productivity gate. "You must be this productive to obtain financing." If you stop borrowing money, then the only place for the money to go is to pay off debts, which contracts the money supply and you get deflation which is strong enough to counteract past inflation. The vast majority of dollars were "printed" this way.
  - listenallyall 5y ago
    Not if Powell refuses to acknowledge inflation is happening, or will be soon. https://www.pbs.org/newshour/economy/chairman-powell-says-federal-reserve-is-in-no-hurry-to-raise-interest-rates https://www.pbs.org/newshour/economy/chairman-powell-says-fe...
    - arcticbull 5y ago
      CPI is the benchmark against which inflation is measured. It's the definition, so if CPI isn't going up, there's nothing to acknowledge. IMO it will go up, there will be a transient spike that will dissipate.
      - listenallyall 5y ago
        You're at least half-right, CPI did go up... https://news.ycombinator.com/item?id=27129927 https://news.ycombinator.com/item?id=27129927
        arcticbull 5y ago
        Yup but the 2% target is over a long timeframe. Transient spikes are fine. There was a big drop last year.
        listenallyall 5y ago
        Whether the current spike is "transient" is yet to be seen
    - whimsicalism 5y ago
      Ah yes, the perennial HN "secret inflation" theory
      - ajmadesc 5y ago
        Inflation has been capital's Boogeyman for the middle class since the 80s
  - sand500 5y ago
    I always found inflation to be this arbitrary intangible number. Consumer price index is probably a better metric here than inflation for majority of Americans. Basically comparing how much the price of stuff people spend money on is increasing vs how much their income is increasing.
perl4ever 5y ago
It seems to me that printing money must at some point cause significant inflation. I might be right or wrong. But I see no connection between that and generous unemployment benefits, since they are a drop in the bucket compared to the trillions spent on other things.

whimsicalism 5y ago

> 2021 $15 than they could've with their 2019 $15 Still far more than they would have been buying with the $7.25/hr of course. These wage increases are almost certainly net welfare enhancing due to diminishing marginal utility of the dollar.

arcticbull 5y ago
Not to mention, the Fed has tools to counter inflation, which they will almost certainly deploy.
- zodiakzz 5y ago
  Noob question: What does that consist of (other than halting currency printing)?
  - arcticbull 5y ago
    The Fed doesn't print currency - thats Treasury, although the Fed holds and distributes it to depository institutions! They control the money supply by reducing the fractional reserve lending rate at banks (reducing supply of loans), increasing interest rates (reducing demand for loans) and unwinding their balance sheet by selling back purchased assets (largely t-bills, reducing circulating supply directly). The money supply of centrally banked economies is mostly debt/demand driver, not supply driven. Money is created when lent, and destroyed when repaid. By tweaking parameters, the Fed is able to manage circulating supply. It's actually a really elegant system, IMO.
    - temp20160423 5y ago
      The last sentence is only true if you believe the Fed will actually sell back the assets. When I look at this chart, https://fred.stlouisfed.org/series/WALCL https://fred.stlouisfed.org/series/WALCL, I have very little confidence that the Fed will sell a meaningful portion back (notice the Fed already gave up BEFORE covid when we supposedly had one of the best economies in recent times). In fact, it looks to me that the assets held by the Fed are growing exponentially and definitely growing faster than our productivity growth.
      - imtringued 5y ago
        2018 to 2019 was a 15% decrease of the Fed's balance sheet. That was actually quite a decent pace. At $0.6 trillion/year it would take 12 years to unwind the 2021 balance sheet. That's worrying but not impossible.
  - imtringued 5y ago
    Paradoxically, the default state of fiat currency is deflation, because the primary means of money creation is debt. If inflation is 2% every year that means future debts must overshadow past debts. If you raise interest rates people stop borrowing money because it becomes too expensive. The interest rate itself acts as a productivity gate. "You must be this productive to obtain financing." If you stop borrowing money, then the only place for the money to go is to pay off debts, which contracts the money supply and you get deflation which is strong enough to counteract past inflation. The vast majority of dollars were "printed" this way.
- listenallyall 5y ago
  Not if Powell refuses to acknowledge inflation is happening, or will be soon. https://www.pbs.org/newshour/economy/chairman-powell-says-federal-reserve-is-in-no-hurry-to-raise-interest-rates https://www.pbs.org/newshour/economy/chairman-powell-says-fe...
  - arcticbull 5y ago
    CPI is the benchmark against which inflation is measured. It's the definition, so if CPI isn't going up, there's nothing to acknowledge. IMO it will go up, there will be a transient spike that will dissipate.
    - listenallyall 5y ago
      You're at least half-right, CPI did go up... https://news.ycombinator.com/item?id=27129927 https://news.ycombinator.com/item?id=27129927
      - arcticbull 5y ago
        Yup but the 2% target is over a long timeframe. Transient spikes are fine. There was a big drop last year.
        listenallyall 5y ago
        Whether the current spike is "transient" is yet to be seen
  - whimsicalism 5y ago
    Ah yes, the perennial HN "secret inflation" theory
    - ajmadesc 5y ago
      Inflation has been capital's Boogeyman for the middle class since the 80s
- sand500 5y ago
  I always found inflation to be this arbitrary intangible number. Consumer price index is probably a better metric here than inflation for majority of Americans. Basically comparing how much the price of stuff people spend money on is increasing vs how much their income is increasing.

perl4ever 5y ago

It seems to me that printing money must at some point cause significant inflation. I might be right or wrong. But I see no connection between that and generous unemployment benefits, since they are a drop in the bucket compared to the trillions spent on other things.