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I agree with your points but want to add that higher wages don't lead to high inflation directly. Higher spending does. If you have high wages and high savings
by bravo22 5y ago
I agree with your points but want to add that higher wages don't lead to high inflation directly. Higher spending does. If you have high wages and high savings it wouldn't lead to inflation in the same way that high wages and high spending would.
- handrous 5y agoHigher costs for any inputs, not just wages, can drive it as well, no? Even if spending remains flat, that is, prices go up and people just buy less stuff while spending about the same amount of money, or even spending less?
- bravo22 5y agoIf people buy less stuff that's a drop in demand and an increase in supply translating to lower prices. If input costs like energy go up, which affect virtually every item, then that can lead to higher inflation because the aggregate spending across everything can't drop.
- handrous 5y agoYes, I'm saying that rising input costs can cause inflation even in the face of falling spending, let alone flat spending. It's not just wages or spending that can cause inflation, right? Any inputs, including wages, can cause it, independent of spending. [EDIT] that is, yes, falling spending would have a "cooling" effect, but if costs for, say, productive land, go up fast enough, you can still see inflation in the face of falling spending.
- deleted 5y ago[deleted]