5 ms·

Turns out, this is what happens when you give everyone more money. I'm not against a higher minimum wage. I'm less for these 'covid' checks that go out that a

Turns out, this is what happens when you give everyone more money. I'm not against a higher minimum wage. I'm less for these 'covid' checks that go out that a lot of people don't need. But, both of these things mean higher prices for everyone else. For people upset at this comment: It's literally taught in ECON 101.

deleted 5y ago
[deleted]
dendriti 5y ago
You think that policy decisions should be made based on your understanding of Econ 101?
- silisili 5y ago
  I think that anyone should take basic econ classes, you learn a lot. Unfortunately, it's not one of those classes you can 'have a different understanding of' with any seriousness.
  - pigeonhole123 5y ago
    Well you see, to be critical of a paradigm, for example modern monetary theory, you have to have a PhD in that paradigm. That’s why you can’t say that god doesn’t exist unless you’re a priest or a theologian. Makes sense to me
    - _gcnk 5y ago
      No, you absolutely can. Priests are "qualified" through reading religious texts of dubious validity. If anything, they should be trusted less. I don't know if it's even possible to answer whether a god exists, but it's quite easy to find the flaws in religious stories, and if anyone can answer that question, it's certainly not them.
      - thefr0g 5y ago
        So you got what he meant to say?
- kortilla 5y ago
  That would be one class further than the knowledge being used to make the current decisions.
sofixa 5y ago
As I've pointed out a few times here, people should really continue and not just stop with Econ 101 and think they know everything. Economies are extremely complex, and studying them starts with dumbing them down to rough basics to get an idea of how things work, and then build on top of that. Furthermore, nobody should forget that the subject of such policies is people. Not just numbers on a spreadsheet going up or down, but real life people who could need to eat, might have children to take care of, need a roof over their heads etc.
- silisili 5y ago
  1) I'm not against people making more money. I'm definitely for it. I'm against a COVID check I keep getting and don't need, just because I'm married and my coworker is not. 2) I definitely don't think I know everything, or anything really. 3) When a very basic idiom taught in entry level economics proves true again and again, I'm not sure how much complexity is required to prove it false. At that point it just feels like fighting for the point of fighting. I don't want to debate goods and bads, economic complexities, etc. I am just stating what is taught in entry level classes appears to be correct.
  - 314 5y ago
    Does Econ101 dig into the differences between demand-side and supply-side inflation? Or what happens when you try to hide the deflationary effects of debt destruction through money printing? I ask because I'm unfamiliar with the basic curriculum in economics, although in the sciences some of the early concepts that we are taught include: * Correlation is not causation * Confirmation bias should be overcome by posing relevant testable questions rather than relying on anecdotes.
    - pram 5y ago
      Yes the aggregate demand/supply model covers demand and supply shocks, which can correspond to inflationary and recessionary conditions.
  - soylentnewsorg 5y ago
sumedh 5y ago
> this is what happens when you give everyone more money. or this is what happens when central banks reduce and keep interest rates at record low levels and destroy savings kept in a bank.
- silisili 5y ago
  Definitely agree with this. Sadly, it's become political suicide. Doing so would evaporate the housing market, and by extension, the Blackrocks and Berkshires.
- mise_en_place 5y ago
  It is a combination of inappropriate fiscal and monetary stimulus that led us to this current predicament. And it is far from over, because inflation is a lagging indicator, meaning it will not be fully realized until much much later. The addiction the American economy has to stimulus is not unlike a heroin addict. If you were to cut government spending drastically, or raise interest rates dramatically, the economy would suffer terrible withdrawals and most likely cease to function. Conversely, if you stay the course and continue with both fiscal and monetary stimulus, the economy will overdose, most likely causing it to cease to function. I do not envy our politicians and central bankers. They are screwed either way. And I wouldn’t be surprised if a lot of them flee the country when the US Balkanizes.
  - imtringued 5y ago
    There is no room for moral interpretations in economics. The economy is not a living being. Interest rates are low because investors and savers accept them to be low. If they were truly too low then companies would borrow and invest until full employment happens and wages go up at which point inflation would go up and so would the interest rate. No such thing happens. Germany has a debt brake and low debt to GDP because they are scared of the interest boogeyman and the only thing that happened is that the yield is zero or negative for every duration up to 30 year government bonds. A lot of people want to save money nowadays which puts downward pressure on interest rates. If you were to raise interest rates then savers would save even more and the economy wouldn't die from withdrawal effects, it would die from a plain lack of money in the real part of the economy because saving money would be more profitable than doing real work.
it_citizen 5y ago
Except that it is not that simple and that a lot of things that people are taught in ECON101 is wrong, oversimplified to a fault, or biased by an ideology or another. Assuming that printing money automatically leads to inflation is assuming a lot of things such as all actors constantly making decisions based on the total supply of money, factories running at 100% of their capacity, the money being reinjected into the real economy and a ton of other over simplifications. To the best of my knowledge, there is no serious work proving the existence of a direct cause-effect relationship between money printing and inflation in the real world. (Using historical data instead of an oversimplified model) Actually, the euro zone increased its money supply by 5 since the 2000s, prices have only been multiplied by 1,4. Hyperinflation is a different story, but those things are not caused by printing a few trillions.
- pram 5y ago
  The concept is called velocity of money/circulation. It's actually taught in econ 101. It's distinct from money supply. For example you can have increasing supply and stable/declining velocity if no one is circulating it, so there being more money doesn't necessarily mean inflation in those conditions.
- kungito 5y ago
  Is this taking into account the fact that more countries use euro as a currency? Or is this x5 because 50% of that is from there being more countries in eurozone?
  - nosianu 5y ago
    The countries that joined since 2000 are not exactly large economies compared to all the giants (in comparison) already with the Euro: https://en.wikipedia.org/wiki/Enlargement_of_the_eurozone#Historical_enlargements https://en.wikipedia.org/wiki/Enlargement_of_the_eurozone#Hi...
- SamReidHughes 5y ago
  This is not complicated. Giving people money not to work results in more money and less production. But there's a bunch of people with money, so demand is higher than it'd otherwise be.
shimfish 5y ago
Or maybe it's what happens when there's a global shipping shortage and a breakdown in the supply chain. Or maybe it's a combination of a lot of things. But chances are it wasn't because of stimulus checks.
Hammershaft 5y ago
None of that is taught in ECON 101. You are extending supply and demand to a domain (money supply & inflation) that is significantly more complex and is taught fully only at high level econ.
rvba 5y ago
2300 billion pumped to "save the stock market" (Probably much more https://www.washingtonpost.com/business/2020/04/29/federal-reserve-has-pumped-23-trillion-into-us-economy-its-just-getting-started/ https://www.washingtonpost.com/business/2020/04/29/federal-r...? ) while 400 billion to give people some money for food ( https://www.cnbc.com/2021/02/26/stimulus-checks-how-congress-plans-to-pay-for-bidens-relief-plan.html?&ampcf=1 https://www.cnbc.com/2021/02/26/stimulus-checks-how-congress... ). Are the prices increasing since the hedge funds are investing there (after exiting normal stock market), or because suddenly people started to eat more? Central banks just gave a lot of empty money to the rich: central bank is now holding thr bag of overpriced stock, while the rich exited and invest in resources. This you wont even learn in advanced econ lessons, because actions of central banks are barely questioned. Do you truely belive that poor people suddenly started to eat more? Other reasons can be a drop in production (e.g. due to Brexit nobody wants to do bavk braking farm work), rising population and aspirations (people from third world also want smartphones, cars and good food), biofuel - which means less area used for food production.. but no, people who received some stimulus chcecks suddenly started to eat more.
bojangleslover 5y ago
Staggeringly obvious—not sure why you're getting downvoted.
Cthulhu_ 5y ago
> Turns out, this is what happens when you give everyone more money. Do explain. The cost of essentials is not affected by how much money people have to spend on it. I mean, richer areas may attract more high-end grocery stores like Whole Foods or whatever, but the base price of food - what this index is about - is not affected by that. If people can't afford groceries anymore, is that because they have too much money?
- silisili 5y ago
  I don't want to debate or argue. I'll reply only to attempt to be helpful, but feel free to call me an idiot, I won't engage. There are two issues at play here. One is that everyone has more money, and two is how everyone got more money. Skipping one altogether, two explains most cost increases. When wages rise, it cost more to make everything. Because labor costs are higher. The farmer wants more money, the butcher wants more money, the drivers want more money, the stockers want more money, and the sellers well, they always want more money. When you double their wages, as what's been happening in the lower wage section recently, those costs affect the product. This is what many people miss about the minimum wage debate. If a guy stocking cans at the grocery makes 10 and hour, and the guy digging coal out of a mine makes 20 an hour, what happens when minimum wage goes up to 20? Of course the coal diggers want more money too, or else they'll take the easier job. This alone accounts for 'essentials.' Going back to one again. The issue isn't that an individual person has more money. It's that -everyone- does. So it's not a rich person buying up extra, it's people that normally wouldn't buy a product enter the market. Regardless what others have alluded to, a rise in demand always means a rise in prices. It's basic supply demand curves that have been studied forever. An anecdote, rather unrelated: Supply demand curves aren't always what they seem. A pizza place could turn a profit selling pizzas for a few bucks. Demand initially surges, then recedes as people get sick of it. Turns out, it's worth more to price it so that people only sometimes buy it.

deleted 5y ago

[deleted]

dendriti 5y ago

You think that policy decisions should be made based on your understanding of Econ 101?

silisili 5y ago
I think that anyone should take basic econ classes, you learn a lot. Unfortunately, it's not one of those classes you can 'have a different understanding of' with any seriousness.
- pigeonhole123 5y ago
  Well you see, to be critical of a paradigm, for example modern monetary theory, you have to have a PhD in that paradigm. That’s why you can’t say that god doesn’t exist unless you’re a priest or a theologian. Makes sense to me
  - _gcnk 5y ago
    No, you absolutely can. Priests are "qualified" through reading religious texts of dubious validity. If anything, they should be trusted less. I don't know if it's even possible to answer whether a god exists, but it's quite easy to find the flaws in religious stories, and if anyone can answer that question, it's certainly not them.
    - thefr0g 5y ago
      So you got what he meant to say?
kortilla 5y ago
That would be one class further than the knowledge being used to make the current decisions.

sofixa 5y ago

As I've pointed out a few times here, people should really continue and not just stop with Econ 101 and think they know everything. Economies are extremely complex, and studying them starts with dumbing them down to rough basics to get an idea of how things work, and then build on top of that. Furthermore, nobody should forget that the subject of such policies is people. Not just numbers on a spreadsheet going up or down, but real life people who could need to eat, might have children to take care of, need a roof over their heads etc.

silisili 5y ago
1) I'm not against people making more money. I'm definitely for it. I'm against a COVID check I keep getting and don't need, just because I'm married and my coworker is not. 2) I definitely don't think I know everything, or anything really. 3) When a very basic idiom taught in entry level economics proves true again and again, I'm not sure how much complexity is required to prove it false. At that point it just feels like fighting for the point of fighting. I don't want to debate goods and bads, economic complexities, etc. I am just stating what is taught in entry level classes appears to be correct.
- 314 5y ago
  Does Econ101 dig into the differences between demand-side and supply-side inflation? Or what happens when you try to hide the deflationary effects of debt destruction through money printing? I ask because I'm unfamiliar with the basic curriculum in economics, although in the sciences some of the early concepts that we are taught include: * Correlation is not causation * Confirmation bias should be overcome by posing relevant testable questions rather than relying on anecdotes.
  - pram 5y ago
    Yes the aggregate demand/supply model covers demand and supply shocks, which can correspond to inflationary and recessionary conditions.
- soylentnewsorg 5y ago

sumedh 5y ago

> this is what happens when you give everyone more money. or this is what happens when central banks reduce and keep interest rates at record low levels and destroy savings kept in a bank.

silisili 5y ago
Definitely agree with this. Sadly, it's become political suicide. Doing so would evaporate the housing market, and by extension, the Blackrocks and Berkshires.
mise_en_place 5y ago
It is a combination of inappropriate fiscal and monetary stimulus that led us to this current predicament. And it is far from over, because inflation is a lagging indicator, meaning it will not be fully realized until much much later. The addiction the American economy has to stimulus is not unlike a heroin addict. If you were to cut government spending drastically, or raise interest rates dramatically, the economy would suffer terrible withdrawals and most likely cease to function. Conversely, if you stay the course and continue with both fiscal and monetary stimulus, the economy will overdose, most likely causing it to cease to function. I do not envy our politicians and central bankers. They are screwed either way. And I wouldn’t be surprised if a lot of them flee the country when the US Balkanizes.
- imtringued 5y ago
  There is no room for moral interpretations in economics. The economy is not a living being. Interest rates are low because investors and savers accept them to be low. If they were truly too low then companies would borrow and invest until full employment happens and wages go up at which point inflation would go up and so would the interest rate. No such thing happens. Germany has a debt brake and low debt to GDP because they are scared of the interest boogeyman and the only thing that happened is that the yield is zero or negative for every duration up to 30 year government bonds. A lot of people want to save money nowadays which puts downward pressure on interest rates. If you were to raise interest rates then savers would save even more and the economy wouldn't die from withdrawal effects, it would die from a plain lack of money in the real part of the economy because saving money would be more profitable than doing real work.

it_citizen 5y ago

Except that it is not that simple and that a lot of things that people are taught in ECON101 is wrong, oversimplified to a fault, or biased by an ideology or another. Assuming that printing money automatically leads to inflation is assuming a lot of things such as all actors constantly making decisions based on the total supply of money, factories running at 100% of their capacity, the money being reinjected into the real economy and a ton of other over simplifications. To the best of my knowledge, there is no serious work proving the existence of a direct cause-effect relationship between money printing and inflation in the real world. (Using historical data instead of an oversimplified model) Actually, the euro zone increased its money supply by 5 since the 2000s, prices have only been multiplied by 1,4. Hyperinflation is a different story, but those things are not caused by printing a few trillions.

pram 5y ago
The concept is called velocity of money/circulation. It's actually taught in econ 101. It's distinct from money supply. For example you can have increasing supply and stable/declining velocity if no one is circulating it, so there being more money doesn't necessarily mean inflation in those conditions.
kungito 5y ago
Is this taking into account the fact that more countries use euro as a currency? Or is this x5 because 50% of that is from there being more countries in eurozone?
- nosianu 5y ago
  The countries that joined since 2000 are not exactly large economies compared to all the giants (in comparison) already with the Euro: https://en.wikipedia.org/wiki/Enlargement_of_the_eurozone#Historical_enlargements https://en.wikipedia.org/wiki/Enlargement_of_the_eurozone#Hi...
SamReidHughes 5y ago
This is not complicated. Giving people money not to work results in more money and less production. But there's a bunch of people with money, so demand is higher than it'd otherwise be.

shimfish 5y ago

Or maybe it's what happens when there's a global shipping shortage and a breakdown in the supply chain. Or maybe it's a combination of a lot of things. But chances are it wasn't because of stimulus checks.

Hammershaft 5y ago

None of that is taught in ECON 101. You are extending supply and demand to a domain (money supply & inflation) that is significantly more complex and is taught fully only at high level econ.

rvba 5y ago

2300 billion pumped to "save the stock market" (Probably much more https://www.washingtonpost.com/business/2020/04/29/federal-reserve-has-pumped-23-trillion-into-us-economy-its-just-getting-started/ https://www.washingtonpost.com/business/2020/04/29/federal-r...? ) while 400 billion to give people some money for food ( https://www.cnbc.com/2021/02/26/stimulus-checks-how-congress-plans-to-pay-for-bidens-relief-plan.html?&ampcf=1 https://www.cnbc.com/2021/02/26/stimulus-checks-how-congress... ). Are the prices increasing since the hedge funds are investing there (after exiting normal stock market), or because suddenly people started to eat more? Central banks just gave a lot of empty money to the rich: central bank is now holding thr bag of overpriced stock, while the rich exited and invest in resources. This you wont even learn in advanced econ lessons, because actions of central banks are barely questioned. Do you truely belive that poor people suddenly started to eat more? Other reasons can be a drop in production (e.g. due to Brexit nobody wants to do bavk braking farm work), rising population and aspirations (people from third world also want smartphones, cars and good food), biofuel - which means less area used for food production.. but no, people who received some stimulus chcecks suddenly started to eat more.

bojangleslover 5y ago

Staggeringly obvious—not sure why you're getting downvoted.

Cthulhu_ 5y ago

> Turns out, this is what happens when you give everyone more money. Do explain. The cost of essentials is not affected by how much money people have to spend on it. I mean, richer areas may attract more high-end grocery stores like Whole Foods or whatever, but the base price of food - what this index is about - is not affected by that. If people can't afford groceries anymore, is that because they have too much money?

silisili 5y ago
I don't want to debate or argue. I'll reply only to attempt to be helpful, but feel free to call me an idiot, I won't engage. There are two issues at play here. One is that everyone has more money, and two is how everyone got more money. Skipping one altogether, two explains most cost increases. When wages rise, it cost more to make everything. Because labor costs are higher. The farmer wants more money, the butcher wants more money, the drivers want more money, the stockers want more money, and the sellers well, they always want more money. When you double their wages, as what's been happening in the lower wage section recently, those costs affect the product. This is what many people miss about the minimum wage debate. If a guy stocking cans at the grocery makes 10 and hour, and the guy digging coal out of a mine makes 20 an hour, what happens when minimum wage goes up to 20? Of course the coal diggers want more money too, or else they'll take the easier job. This alone accounts for 'essentials.' Going back to one again. The issue isn't that an individual person has more money. It's that -everyone- does. So it's not a rich person buying up extra, it's people that normally wouldn't buy a product enter the market. Regardless what others have alluded to, a rise in demand always means a rise in prices. It's basic supply demand curves that have been studied forever. An anecdote, rather unrelated: Supply demand curves aren't always what they seem. A pizza place could turn a profit selling pizzas for a few bucks. Demand initially surges, then recedes as people get sick of it. Turns out, it's worth more to price it so that people only sometimes buy it.