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Are you still talking about inflation? Inflation is change in nominal prices, it doesn't affect the cost of living.
by lottin 5y ago
Are you still talking about inflation? Inflation is change in nominal prices, it doesn't affect the cost of living.
- xyzzyz 5y agoAs it turns out, people are paid in nominal dollars, not real ones, and what happens id the nominal prices go up, while wages stay stagnant in nominal terms, so they fall in real terms.
- lottin 5y agoPrices can only go up if there is buying pressure, which means an increase in disposable income must precede the increase in prices.
- xyzzyz 5y agoYes, printing a whole lot of new money tends to do that. As it happens, though, wage workers are not the first one who get a hold of that new paper. It does, in a way, trickle down to them. It’s only after the prices go up, and competitors start offering higher wages, they get any leverage to get a raise in their current job. This means that and wages will, on the whole, lag after inflation.
- lottin 5y agoThat's not how monetary policy works. The "new paper" that is "printed" by the central bank is traded for a financial asset, typically a bond. The counterparty which previously had a bond, now has cash. It's unclear how the counterparty can take advantage of this situation at the expense of everybody else (which is what you suggest is happening).
- anm89 5y agoOut of all the arguments I'm seeing on here, this feels particularly bad faith. Throughout my maybe decade and a half in the macro world I've never heard anyone even attempt to make this argument. Inflation clearly affects cost of living because wages are stickier than prices. You don't walk into work every monday morning and get your wages increased by CPI.
- lottin 5y agoIf you think prices are going up with a corresponding increase in disposable income, you need to explain how this is possible at all. I don't think it's impossible, but it certainly is incompatible with an often-cited theory of inflation.
- anm89 5y agoI don't even understand what you are trying to say. > If you think prices are going up I don't think prices are going up. I factually know prices are going up. We keep track of this data > you need to explain how this is possible at all. sure. Let's say I have a grocery store. I pull off the price sticker from last week and put a new one on this week. I don't even understand how this is a question. You can argue the root causes all you want but just writing the words "there is no inflation" isn't an argument.
- lottin 5y agoSorry about the confusion, I meant to say "if you think prices are going up without a corresponding increase in disposable income", not "if you think prices are going up with a corresponding increase in disposable income".