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As 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
by xyzzyz 5y ago
As 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).