4 ms·

The USA problem (one of) is that your second point: wage go up -- isn't happening.

listenallyall 4y ago
Historically, inflation was usually a function of higher labor costs, therefore wages and prices often rose together. Our current inflation is a result of external factors, so prices are skyrocketing but wages are rising much less quickly.
- WalterBright 4y ago
  > Historically, inflation was usually a function of higher labor costs That's the wage-price spiral theory of inflation, and is faulty. Inflation is always a monetary phenomenon, where the money supply increases faster than the value in the economy. Increasing wages (without increasing productivity) does not increase the supply of money, and so the increased pay means there is less money for other purposes, which depresses prices. As always, the Law of Supply & Demand is at work here.
  - gruez 4y ago
    >Inflation is always a monetary phenomenon, where the money supply increases faster than the value in the economy. This feels trivial to disprove. For instance: 1973 oil shocks causes prices of oil to go to the moon. Inflation occurs, because prices are driven up by the price of oil. No money printing has occurred.
    - WalterBright 4y ago
      There was a lot of deficit spending (money printing) going on then. The proof that oil shocks don't cause inflation is simple - when the oil prices come back down, there is no corresponding deflation.
      - DSMan195276 4y ago
        How are you defining inflation such that it's not dependent on the price of goods? If it is dependent on the price of goods then obviously the price of oil going up produces inflation, since the price goes up without any change to the fuel itself.
        WalterBright 4y ago
        Inflation is a general price increase. Increasing the price of one commodity does not increase the money supply which is necessary for a general price increase.
        DSMan195276 4y ago
        Why would that be necessary? Increases in the price of fuel (or a variety of other things) impact the price of just about everything else, so why would that not qualify as a general price increase? Beyond that, the price of one commodity going up _does_ change the general price of things if you're using an average. I mean if you want to redefine inflation to simply be "how much the money supply has increased" then be my guest, but if that doesn't actually translate to how much more things cost then I don't see how useful that measure is. For the past year the money supply has been trending downward, so are you suggesting we didn't have any inflation last year?
        WalterBright 4y ago
        > so why would that not qualify as a general price increase? Because, unless there is a corresponding increase in the supply of money, the money spent on the oil isn't available to spend on other things. So those other things will experience a decline in prices, due to the inevitable Law of Supply & Demand.
        Georgelemental 4y ago
        Ah, but perhaps oil is a necessary component to manufacture many different things, so those other products will be forced to increase in lroce as well despite reduced demand.
  - listenallyall 4y ago
    > That's the wage-price spiral theory No, it's not. Wage-price spiral assumes two-way causation: that higher wages cause higher prices, AND that higher prices lead to higher wages.
    - WalterBright 4y ago
      What do you think higher labor costs will result in?
      - listenallyall 4y ago
        I already said, higher wages or labor costs result in higher prices. But the other half of that spiral -- that higher prices are the cause of increased labor costs -- is not something I claimed.
giantg2 4y ago
I generally agree. We see that with the real wage charts over the past 50 years. However, I will say that it seem the lower paid end of the wage spectrum has seen some pretty significant growth in the past 3 years. At least at my local Walmart and Lowes it went from about $10-12/hr starting to $13-15.
TheSpiceIsLife 4y ago
One step further, the problem isn't so much that wages aren't going up right now, it's that they've tended to stagnate for quite the extended period already... and that governments and (some) big businesses / industries are basically colluding to ensure virtually none of the gains in profits are spent on wages, or social services (health, housing, etc) that would make a difference.
- WalterBright 4y ago
  If you're wondering where all the money went, consider the enormous growth in the government. Yes, you get to pay for it, one way or another.
  - djbusby 4y ago
    Record profits?
    - WalterBright 4y ago
      For 40 years?
      - piva00 4y ago
        More-or-less, yes? Since the advancement of neoliberalism there's been a markedly increase in the wealth gap in all developed countries, the money has been concentrating at the top for the past... 40 years.
        WalterBright 4y ago
        Those calculations always completely overlook the growth in government.
        piva00 4y ago
        Can you provide some sources and comparisons then?

Historically, inflation was usually a function of higher labor costs, therefore wages and prices often rose together. Our current inflation is a result of external factors, so prices are skyrocketing but wages are rising much less quickly.

WalterBright 4y ago
> Historically, inflation was usually a function of higher labor costs That's the wage-price spiral theory of inflation, and is faulty. Inflation is always a monetary phenomenon, where the money supply increases faster than the value in the economy. Increasing wages (without increasing productivity) does not increase the supply of money, and so the increased pay means there is less money for other purposes, which depresses prices. As always, the Law of Supply & Demand is at work here.
- gruez 4y ago
  >Inflation is always a monetary phenomenon, where the money supply increases faster than the value in the economy. This feels trivial to disprove. For instance: 1973 oil shocks causes prices of oil to go to the moon. Inflation occurs, because prices are driven up by the price of oil. No money printing has occurred.
  - WalterBright 4y ago
    There was a lot of deficit spending (money printing) going on then. The proof that oil shocks don't cause inflation is simple - when the oil prices come back down, there is no corresponding deflation.
    - DSMan195276 4y ago
      How are you defining inflation such that it's not dependent on the price of goods? If it is dependent on the price of goods then obviously the price of oil going up produces inflation, since the price goes up without any change to the fuel itself.
      - WalterBright 4y ago
        Inflation is a general price increase. Increasing the price of one commodity does not increase the money supply which is necessary for a general price increase.
        DSMan195276 4y ago
        Why would that be necessary? Increases in the price of fuel (or a variety of other things) impact the price of just about everything else, so why would that not qualify as a general price increase? Beyond that, the price of one commodity going up _does_ change the general price of things if you're using an average. I mean if you want to redefine inflation to simply be "how much the money supply has increased" then be my guest, but if that doesn't actually translate to how much more things cost then I don't see how useful that measure is. For the past year the money supply has been trending downward, so are you suggesting we didn't have any inflation last year?
        WalterBright 4y ago
        > so why would that not qualify as a general price increase? Because, unless there is a corresponding increase in the supply of money, the money spent on the oil isn't available to spend on other things. So those other things will experience a decline in prices, due to the inevitable Law of Supply & Demand.
        Georgelemental 4y ago
        Ah, but perhaps oil is a necessary component to manufacture many different things, so those other products will be forced to increase in lroce as well despite reduced demand.
- listenallyall 4y ago
  > That's the wage-price spiral theory No, it's not. Wage-price spiral assumes two-way causation: that higher wages cause higher prices, AND that higher prices lead to higher wages.
  - WalterBright 4y ago
    What do you think higher labor costs will result in?
    - listenallyall 4y ago
      I already said, higher wages or labor costs result in higher prices. But the other half of that spiral -- that higher prices are the cause of increased labor costs -- is not something I claimed.

giantg2 4y ago

I generally agree. We see that with the real wage charts over the past 50 years. However, I will say that it seem the lower paid end of the wage spectrum has seen some pretty significant growth in the past 3 years. At least at my local Walmart and Lowes it went from about $10-12/hr starting to $13-15.

TheSpiceIsLife 4y ago

One step further, the problem isn't so much that wages aren't going up right now, it's that they've tended to stagnate for quite the extended period already... and that governments and (some) big businesses / industries are basically colluding to ensure virtually none of the gains in profits are spent on wages, or social services (health, housing, etc) that would make a difference.

WalterBright 4y ago
If you're wondering where all the money went, consider the enormous growth in the government. Yes, you get to pay for it, one way or another.
- djbusby 4y ago
  Record profits?
  - WalterBright 4y ago
    For 40 years?
    - piva00 4y ago
      More-or-less, yes? Since the advancement of neoliberalism there's been a markedly increase in the wealth gap in all developed countries, the money has been concentrating at the top for the past... 40 years.
      - WalterBright 4y ago
        Those calculations always completely overlook the growth in government.
        piva00 4y ago
        Can you provide some sources and comparisons then?