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I agree this is bad. But there’s good reasons for it. Namely, at least some experts think a portion of current inflation is temporary and will soon pass. You ca

by 55555 5y ago

I agree this is bad. But there’s good reasons for it. Namely, at least some experts think a portion of current inflation is temporary and will soon pass. You can always give employees a raise but it’s very difficult to cut their pay. They don’t take kindly to it. Some managers say you may as well just fire them if you’re going to cut their pay. So what is an employer to do in the face of potentially temporary inflation?

deleted 5y ago
[deleted]
twoxproblematic 5y ago
Inflation is not transitory, you have been fed a noble lie for the good of social harmony.
bfrog 5y ago
Deflation seems like such an impossibility, it’s hard to see how the genie goes back in the bottle here.
- R0b0t1 5y ago
  To wit, inflation only briefly dipped below 0 once, in '08, at -0.38%, possibly a rounding error. The value of money only goes down.
  - WalterBright 5y ago
    Deflation happened often in the US during the gold standard years.
    - WalterBright 5y ago
      It's not a matter of opinion, it's factual.
    - R0b0t1 5y ago
      We are no longer on the gold standard and have not been for ages.
      - WalterBright 5y ago
        I didn't know that, thanks for letting me know.
- scsilver 5y ago
  By the next generation moving and staying in cities rather than sprawling suburbs. It concentrates public resources and hugely reduces transportation costs. Combined with most services like medicine, finance, and education, getting remottified and automated, deflation is possible. I think ownership is going to get really expensive, we can't have abandoned building hogging space.
- WalterBright 5y ago
  Deflation happens when you're on the gold standard, and the supply of gold isn't keeping up with demand.
  - oarabbus_ 5y ago
    Deflation occurs on the supply-side when spending/credit/lending decreases significantly, it doesn't need to have anything to do with the gold standard. We had CPI-measured deflation as recently as May 2020, were we on the gold standard then? Or were there velocity of money explanation for the deflationary activity?
    - WalterBright 5y ago
      I'd be surprised if the CPI accurately measured inflation. Economies are chaotic systems, but the long term trends are predictable.
      - dwohnitmok 5y ago
        > Economies are chaotic systems, but the long term trends are predictable. A nitpick: these are contradictions in terms. Chaotic systems are precisely those systems which are not predictable in the long run. Perhaps you mean stochastic?
        WalterBright 5y ago
        You are pedantically correct. But it's like the weather. We can predict long term climate reasonably accurately, but we can't predict next week's weather.
        dwohnitmok 5y ago
        I was pedantic earlier, but this is wrong in a more profound way: > But it's like the weather. We can predict long term climate reasonably accurately, but we can't predict next week's weather. No we can predict medium term (decades) climate reasonably but over even longer timescales even general predictions about climate can break down (centuries or millennia), as is the nature of chaotic systems. This is true as well of economic "laws" and why I agree that economics is chaotic. Those laws that hold at the millisecond level are different than those that hold at the second level, which are in turn different on the time scale of years, which are different from those of decades, and in turn centuries and millennia. There are general patterns whose efficacy and predictive ability are more resilient than the rest but those too are eventually worn down by the relentless march of chaos.
- bruce511 5y ago
  The opposite of inflation is not deflation, it is stability (ie the lack of inflation). Deflation is much worse than inflation, and quite difficult to actually make happen, so you don't need to worry about that. In fact even steady, regular, inflation is not bad, but employers just need to understand the need for inflation based increases for all staff every year. Employers in the US are not used to that, and have been generally slow to keep up, but will eventually figure it out. And yes, there won't be the same number for all, so expect plenty of cherry-picking example articles for years to come. And generally workers (and customers) will be losers, because, well Capitalism. In most countries there is stable, regular, inflation and somehow they cope. The US has some catching up to do, but they'll figure it out. Albeit that the impacts of naked capitalism will be more pronounced there.
irrational 5y ago
You can always raise prices for the products you sell, but it’s very difficult to cut those prices later.
- bruce511 5y ago
  Eh? Your logic seems backwards to me. Who's going to complain if you lower your prices (or have a never ending special?) So perhaps you are suggesting that you cannot practically reduce prices because you become addicted to the extra income?
  - irrational 5y ago
    Gas went from $3.50 - $5 overnight where I live. I guarantee it will not drop back down to $3.50 that quickly. Did my income rise to cover the extra $45 it now costs to fill up my truck? No. Same with everything else. Prices are going up like gangbusters, but my income is static. Those rising prices MAY come down someday, but probably not back to where they used to be.
    - bruce511 5y ago
      Ah, I understand, you're saying that from a consumer perspective prices go up, but are slow to come down. That is clearly the case. Ultimately inflation works by driving prices up. So the extra $45 will ultimately be made up on your income side, basically by you putting your prices up, thus fueling the cycle. Inflation on basic necessities like energy and food have more knock ons than non essentials. Ultimately the fuel vendor is covering not just the increase in fuel to him, but also the increases needed for his staff.
dec0dedab0de 5y ago
you can't cut their pay, but you can have bonuses be variable based on company performance. People don't get as mad about a bonus being smaller if they know it affected the whole company.
deleted 5y ago
[deleted]
__blockcipher__ 5y ago
Here's a good heuristic: if those same experts are ones that denied that inflation was a risk before it actually happened, you can take their opinion with a grain of salt. I saw many classical economist types denying that printing trillions of dollars and flagellating the global supply chain would lead to inflation. They were proven very, very wrong.
bastawhiz 5y ago
If you don't give a raise that matches inflation, you are cutting pay. Even if inflation drops to 2% next year, the value of the money you're paying to your employee doesn't go up. If inflation is 7% this year and I raise your $100,000 salary to $107,000, an inflation rate of 2% next year doesn't mean I'm overpaying you by $5,000. It means that I once again need to give you a 2% raise for you to get the exact same amount of value for your labor. The inflation rate would need to rubber band to a negative rate for anyone to shed tears for the employers.
- seanmcdirmid 5y ago
  > The inflation rate would need to rubber band to a negative rate for anyone to shed tears for the employers. Deflation would probably cause lots of layoffs, tears would be shed for many.
- missedthecue 5y ago
  Using this logic, how does inflation ever end? If your landlord doesn't raise rents, he's getting a paycut. If your utility company doesn't raise rates, they're getting a paycut! If the grocer doesn't raise prices, he's also getting a paycut. But now we're back to you. Everyone else has raised prices to compensate so now you've got to charge more for labor again which eats into their margins and the vicious cycle continues. Sooner or later, someone will have to blink or this will continue to get even further out of hand.
  - bastawhiz 5y ago
    You should take it up with the economists that spend their lives thinking about this stuff. All I know is that inflation has been positive (numerically) for essentially my entire life and most of the country's history leading up to my birth. I doubt it was designed to "end".
  - wickedsickeune 5y ago
    I believe it doesn't exactly work this way; because the initial driver of the inflation was someone (let's say the landlord in your example) raised their prices. Yes everyone else should raise their prices to adapt, but it's not everyone. One can argue that the higher prices (eg by landlords) were due to increased demand with supply that couldn't keep up. Still, this doesn't mean that they are permanent, since supply can improve, or demand can return to normal, stopping the inflationary cycle. If you assume that demand cannot go down (eg for high perf chips, not land, which more and more industries utilise now), then I can't think of a reason that supply can't go up in the long term (unless the supplier is profiteering).

by 55555 5y ago

deleted 5y ago

[deleted]

twoxproblematic 5y ago

Inflation is not transitory, you have been fed a noble lie for the good of social harmony.

bfrog 5y ago

Deflation seems like such an impossibility, it’s hard to see how the genie goes back in the bottle here.

R0b0t1 5y ago
To wit, inflation only briefly dipped below 0 once, in '08, at -0.38%, possibly a rounding error. The value of money only goes down.
- WalterBright 5y ago
  Deflation happened often in the US during the gold standard years.
  - WalterBright 5y ago
    It's not a matter of opinion, it's factual.
  - R0b0t1 5y ago
    We are no longer on the gold standard and have not been for ages.
    - WalterBright 5y ago
      I didn't know that, thanks for letting me know.
scsilver 5y ago
By the next generation moving and staying in cities rather than sprawling suburbs. It concentrates public resources and hugely reduces transportation costs. Combined with most services like medicine, finance, and education, getting remottified and automated, deflation is possible. I think ownership is going to get really expensive, we can't have abandoned building hogging space.
WalterBright 5y ago
Deflation happens when you're on the gold standard, and the supply of gold isn't keeping up with demand.
- oarabbus_ 5y ago
  Deflation occurs on the supply-side when spending/credit/lending decreases significantly, it doesn't need to have anything to do with the gold standard. We had CPI-measured deflation as recently as May 2020, were we on the gold standard then? Or were there velocity of money explanation for the deflationary activity?
  - WalterBright 5y ago
    I'd be surprised if the CPI accurately measured inflation. Economies are chaotic systems, but the long term trends are predictable.
    - dwohnitmok 5y ago
      > Economies are chaotic systems, but the long term trends are predictable. A nitpick: these are contradictions in terms. Chaotic systems are precisely those systems which are not predictable in the long run. Perhaps you mean stochastic?
      - WalterBright 5y ago
        You are pedantically correct. But it's like the weather. We can predict long term climate reasonably accurately, but we can't predict next week's weather.
        dwohnitmok 5y ago
        I was pedantic earlier, but this is wrong in a more profound way: > But it's like the weather. We can predict long term climate reasonably accurately, but we can't predict next week's weather. No we can predict medium term (decades) climate reasonably but over even longer timescales even general predictions about climate can break down (centuries or millennia), as is the nature of chaotic systems. This is true as well of economic "laws" and why I agree that economics is chaotic. Those laws that hold at the millisecond level are different than those that hold at the second level, which are in turn different on the time scale of years, which are different from those of decades, and in turn centuries and millennia. There are general patterns whose efficacy and predictive ability are more resilient than the rest but those too are eventually worn down by the relentless march of chaos.
bruce511 5y ago
The opposite of inflation is not deflation, it is stability (ie the lack of inflation). Deflation is much worse than inflation, and quite difficult to actually make happen, so you don't need to worry about that. In fact even steady, regular, inflation is not bad, but employers just need to understand the need for inflation based increases for all staff every year. Employers in the US are not used to that, and have been generally slow to keep up, but will eventually figure it out. And yes, there won't be the same number for all, so expect plenty of cherry-picking example articles for years to come. And generally workers (and customers) will be losers, because, well Capitalism. In most countries there is stable, regular, inflation and somehow they cope. The US has some catching up to do, but they'll figure it out. Albeit that the impacts of naked capitalism will be more pronounced there.

irrational 5y ago

You can always raise prices for the products you sell, but it’s very difficult to cut those prices later.

bruce511 5y ago
Eh? Your logic seems backwards to me. Who's going to complain if you lower your prices (or have a never ending special?) So perhaps you are suggesting that you cannot practically reduce prices because you become addicted to the extra income?
- irrational 5y ago
  Gas went from $3.50 - $5 overnight where I live. I guarantee it will not drop back down to $3.50 that quickly. Did my income rise to cover the extra $45 it now costs to fill up my truck? No. Same with everything else. Prices are going up like gangbusters, but my income is static. Those rising prices MAY come down someday, but probably not back to where they used to be.
  - bruce511 5y ago
    Ah, I understand, you're saying that from a consumer perspective prices go up, but are slow to come down. That is clearly the case. Ultimately inflation works by driving prices up. So the extra $45 will ultimately be made up on your income side, basically by you putting your prices up, thus fueling the cycle. Inflation on basic necessities like energy and food have more knock ons than non essentials. Ultimately the fuel vendor is covering not just the increase in fuel to him, but also the increases needed for his staff.

dec0dedab0de 5y ago

you can't cut their pay, but you can have bonuses be variable based on company performance. People don't get as mad about a bonus being smaller if they know it affected the whole company.

deleted 5y ago

[deleted]

__blockcipher__ 5y ago

Here's a good heuristic: if those same experts are ones that denied that inflation was a risk before it actually happened, you can take their opinion with a grain of salt. I saw many classical economist types denying that printing trillions of dollars and flagellating the global supply chain would lead to inflation. They were proven very, very wrong.

bastawhiz 5y ago

If you don't give a raise that matches inflation, you are cutting pay. Even if inflation drops to 2% next year, the value of the money you're paying to your employee doesn't go up. If inflation is 7% this year and I raise your $100,000 salary to $107,000, an inflation rate of 2% next year doesn't mean I'm overpaying you by $5,000. It means that I once again need to give you a 2% raise for you to get the exact same amount of value for your labor. The inflation rate would need to rubber band to a negative rate for anyone to shed tears for the employers.

seanmcdirmid 5y ago
> The inflation rate would need to rubber band to a negative rate for anyone to shed tears for the employers. Deflation would probably cause lots of layoffs, tears would be shed for many.
missedthecue 5y ago
Using this logic, how does inflation ever end? If your landlord doesn't raise rents, he's getting a paycut. If your utility company doesn't raise rates, they're getting a paycut! If the grocer doesn't raise prices, he's also getting a paycut. But now we're back to you. Everyone else has raised prices to compensate so now you've got to charge more for labor again which eats into their margins and the vicious cycle continues. Sooner or later, someone will have to blink or this will continue to get even further out of hand.
- bastawhiz 5y ago
  You should take it up with the economists that spend their lives thinking about this stuff. All I know is that inflation has been positive (numerically) for essentially my entire life and most of the country's history leading up to my birth. I doubt it was designed to "end".
- wickedsickeune 5y ago
  I believe it doesn't exactly work this way; because the initial driver of the inflation was someone (let's say the landlord in your example) raised their prices. Yes everyone else should raise their prices to adapt, but it's not everyone. One can argue that the higher prices (eg by landlords) were due to increased demand with supply that couldn't keep up. Still, this doesn't mean that they are permanent, since supply can improve, or demand can return to normal, stopping the inflationary cycle. If you assume that demand cannot go down (eg for high perf chips, not land, which more and more industries utilise now), then I can't think of a reason that supply can't go up in the long term (unless the supplier is profiteering).