4 ms·

If their salaries went up 10% then they would save some of that money. Prices would rise 3%. And then when their salaries went up 3% the prices would go up 1%.

If their salaries went up 10% then they would save some of that money. Prices would rise 3%. And then when their salaries went up 3% the prices would go up 1%. And then their salaries would go up 1$ forcing the prices to go up 0.3% and then you'd reach a limit.... Well that's what I think. Do you have any proof backing up your statement that I'm wrong and "the cycle would repeat" or are you just repeating talking points from someone else?

PaulHoule 4y ago
You might be right about the limit. What I'll say though is that there is a real lack of thinking about "second order effects" of policy from people that are quick to subsidize things. It is interesting right now to see Britain stuck in a place where it seems to have gotten stuck several times since 1900 in which (1) the economy is screwed up, (2) prices are rising, (3) workers in critical industries are on strike, (4) the effects approximate a general strike, (5) strikes screw up the economy more... And politicians are screaming "can't you just take one for the society as a whole" and "if we give you a raise this year prices will go up and you'll ask for a raise next year..." In Britain it is worse than the US because they are so dependent on trade and have a non-dominant currency. It is not unusual at all for them to have violent swings in prices of fuel, food, and other imports, and when you consider the "wage-price" spiral inside the country you also have to consider the effect of Britons having more nominal money in their pocket to spend on imports, how that effects exchange rates, etc.