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Somehow that feels like an entirely avoidable problem. "Do we need to increase unemployment to bring inflation down" What kind of inflammatory nonsense is thi

Somehow that feels like an entirely avoidable problem. "Do we need to increase unemployment to bring inflation down" What kind of inflammatory nonsense is this? We could clearly observe that the largest driver for inflation in the US is Energy/Oil generating record revenues for Oil/Gas companies around the globe. I just 48 hours ago read this headline: Saudi oil giant Aramco posts record $161 billion profit for 2022

bequanna 4y ago
Unfortunately, inflation is more complicated than that. Think of it more like a system of reactions that feed off each other: wage increases, pro-active price increases by retailers, etc. It doesn’t necessarily matter what started accelerating inflation, but it is important to stop the system from gaining too much momentum and slow it down if it does. Lowering employment and slowing spending with monetary policy are the best tools we currently have to do this. Of course, the Federal Government could also rein in the outrageous deficit spending, which would help greatly but this is too politically difficult.
- rsaesha 4y ago
  Inflation is not caused by wage increases. Very much the opposite: wage increases are caused by inflation, but it tends to lag 1 or 2 years behind because that's usually how long it takes to the average worker to realize his purchasing power has been depreciated and decides to negotiate inflation reparation.
  - bequanna 4y ago
    This is incorrect. It is commonly accepted that wage increases tied to inflation (many of which were union contracts) prolonged the stagflation of the late 70s.
    - danaris 4y ago
      A lot of negative things about unions are "commonly accepted;" that doesn't make them true. It's possible that those wage increases did have a negative effect, but especially in this time of massively increased anti-union propaganda, I think that anything negative about them being claimed as "commonly accepted" deserves a [Citation Needed].
    - rsaesha 4y ago
      Wrong. In a high inflation economy, salaries lags behind prices increases. This is because revenue of companies typically follow inflation indexes with a much shorter delay. First the workers need to feel they are getting shafted and this takes time. Like, first they burn through savings, then they see news 'inflation double digits', then they see pay increase in single digits and this takes 1~2 years. Then they feel a reduction in quality of life. Then they negotiate adjustment and if companies refuses sometimes they strike, sometimes they leave for another job, sometimes they take the shaft. On a wide scale, the reduction of purchasing power causes the demand for non essential goods to drop massively, while the demand for essential goods remains stable. The reason for this is simple: people cut the luxury if they have been shafted at their job. But they can't cut essential goods. So it's better to be a company that sells essentials goods in a high inflation scenario eg: oil and gas, meaning people can't cut you from their budget.
      - belltaco 4y ago
        Not fully true. https://en.wikipedia.org/wiki/Wage-price_spiral https://en.wikipedia.org/wiki/Wage-price_spiral
        deleted 4y ago
        [deleted]
        rsaesha 4y ago
        From your source: Criticism The Socialist Worker argues that it is a myth used to prevent wage increases.[6] Tribune magazine also sees the concept as rhetoric intended to hold down worker wages.[7] Milton Friedman criticised the concept of wage-price spirals, arguing "It's the external manifestation of inflation, but not its source... the inflation arises from one and only one reason: an increase in a quantity of money."[8] Wage-price spirals will break naturally if the quantity of money is not increased, albeit in the meanwhile "there will for a time be a continuation of inflation" as well as "some measure of recession and unemployment".[8]
- jsemrau 4y ago
  Increasing unemployment at a time of record credit card debt - https://www.lendingtree.com/content/uploads/2023/02/ccs-chart-4-6-745x602.png https://www.lendingtree.com/content/uploads/2023/02/ccs-char... record auto loan debt - https://ycharts.com/indicators/us_auto_loan_debt https://ycharts.com/indicators/us_auto_loan_debt record mortgage debt - https://ycharts.com/indicators/us_mortgage_debt https://ycharts.com/indicators/us_mortgage_debt will not end well
chiefalchemist 4y ago
The largest driver of inflation is The Fed. The shameless and relentless expansion of the money supply...devalues what's in circulation...bingo...inflation. And now The Fed final jams on the brakes and a few bodies are gonna go through the front window. Why is anyone surprised? Funny, I was under the impression we elected The Fed to mitigate such things.
pas 4y ago
record profits mean corporations were able to raise prices successfully, because people had the money to spend of course the problem is that there is a logical gap between that and what people will actually have in their wallets in the future but, considering that profits are distributed as dividends, invested and/or simply spent in other ways it means there's going to be more aggregate demand, which will push up prices even more. hence the usual decision to raise rates. which then pushes up unemployment, because it's what empirically almost always happens.

bequanna 4y ago

Unfortunately, inflation is more complicated than that. Think of it more like a system of reactions that feed off each other: wage increases, pro-active price increases by retailers, etc. It doesn’t necessarily matter what started accelerating inflation, but it is important to stop the system from gaining too much momentum and slow it down if it does. Lowering employment and slowing spending with monetary policy are the best tools we currently have to do this. Of course, the Federal Government could also rein in the outrageous deficit spending, which would help greatly but this is too politically difficult.

rsaesha 4y ago
Inflation is not caused by wage increases. Very much the opposite: wage increases are caused by inflation, but it tends to lag 1 or 2 years behind because that's usually how long it takes to the average worker to realize his purchasing power has been depreciated and decides to negotiate inflation reparation.
- bequanna 4y ago
  This is incorrect. It is commonly accepted that wage increases tied to inflation (many of which were union contracts) prolonged the stagflation of the late 70s.
  - danaris 4y ago
    A lot of negative things about unions are "commonly accepted;" that doesn't make them true. It's possible that those wage increases did have a negative effect, but especially in this time of massively increased anti-union propaganda, I think that anything negative about them being claimed as "commonly accepted" deserves a [Citation Needed].
  - rsaesha 4y ago
    Wrong. In a high inflation economy, salaries lags behind prices increases. This is because revenue of companies typically follow inflation indexes with a much shorter delay. First the workers need to feel they are getting shafted and this takes time. Like, first they burn through savings, then they see news 'inflation double digits', then they see pay increase in single digits and this takes 1~2 years. Then they feel a reduction in quality of life. Then they negotiate adjustment and if companies refuses sometimes they strike, sometimes they leave for another job, sometimes they take the shaft. On a wide scale, the reduction of purchasing power causes the demand for non essential goods to drop massively, while the demand for essential goods remains stable. The reason for this is simple: people cut the luxury if they have been shafted at their job. But they can't cut essential goods. So it's better to be a company that sells essentials goods in a high inflation scenario eg: oil and gas, meaning people can't cut you from their budget.
    - belltaco 4y ago
      Not fully true. https://en.wikipedia.org/wiki/Wage-price_spiral https://en.wikipedia.org/wiki/Wage-price_spiral
      - deleted 4y ago
        [deleted]
      - rsaesha 4y ago
        From your source: Criticism The Socialist Worker argues that it is a myth used to prevent wage increases.[6] Tribune magazine also sees the concept as rhetoric intended to hold down worker wages.[7] Milton Friedman criticised the concept of wage-price spirals, arguing "It's the external manifestation of inflation, but not its source... the inflation arises from one and only one reason: an increase in a quantity of money."[8] Wage-price spirals will break naturally if the quantity of money is not increased, albeit in the meanwhile "there will for a time be a continuation of inflation" as well as "some measure of recession and unemployment".[8]
jsemrau 4y ago
Increasing unemployment at a time of record credit card debt - https://www.lendingtree.com/content/uploads/2023/02/ccs-chart-4-6-745x602.png https://www.lendingtree.com/content/uploads/2023/02/ccs-char... record auto loan debt - https://ycharts.com/indicators/us_auto_loan_debt https://ycharts.com/indicators/us_auto_loan_debt record mortgage debt - https://ycharts.com/indicators/us_mortgage_debt https://ycharts.com/indicators/us_mortgage_debt will not end well

chiefalchemist 4y ago

The largest driver of inflation is The Fed. The shameless and relentless expansion of the money supply...devalues what's in circulation...bingo...inflation. And now The Fed final jams on the brakes and a few bodies are gonna go through the front window. Why is anyone surprised? Funny, I was under the impression we elected The Fed to mitigate such things.

pas 4y ago

record profits mean corporations were able to raise prices successfully, because people had the money to spend of course the problem is that there is a logical gap between that and what people will actually have in their wallets in the future but, considering that profits are distributed as dividends, invested and/or simply spent in other ways it means there's going to be more aggregate demand, which will push up prices even more. hence the usual decision to raise rates. which then pushes up unemployment, because it's what empirically almost always happens.