5 ms·

Inflation is a serious problem. It is not just wage growth. Most Americans are seeing declining real wages because of the high rates of inflation

_heimdall 3y ago
That's by design. When the economy is improving people are getting better off. Once it gets ahead of itself and inflation rises the only way it can slow back down is for people to feel more pain.
bugglebeetle 3y ago
Much of inflation is being driven by corporate concentration and failed tax policy: https://scholarworks.umass.edu/econ_workingpaper/343/ https://scholarworks.umass.edu/econ_workingpaper/343/ While much of wage growth is being driven by a plague-induced labor shortage and in response to the above. Cranking the interest rate dial to 11 solves very little besides impoverishing workers to preserve the dysfunctional status quo for the wealthy and business owners. This is quite obvious in how they’re handling all these bank failures.
- astrange 3y ago
  The idea that raising interest rates actually causes inflation is called neo-Fisherism; it's currently being practiced in Türkiye[0] where it isn't working. [0] formerly known as Turkey
  - bugglebeetle 3y ago
    Raising interests rates doesn’t cause inflation, but it also doesn’t fix it when inflation is the result of corporate concentration and cartel like behavior around pricing.
    - astrange 3y ago
      Personally I think we should've used the low interest rate period to actually build some inflation-fighting housing and transit; instead we've just sort of noticed it's a problem now that it's too late.
      - xp84 3y ago
        100% agree. Sadly we were told the federal and state governments "couldn't afford to" borrow lots of money at near-0% to build such things. "The Debt" was just too big of a concern. eyeroll
danaris 3y ago
Sure, inflation is a problem. But there are different causes for inflation, and different remedies based on those. If inflation is caused by rapid wage growth, then pushing to cool that growth can help. If, on the other hand, inflation is caused by widespread corporate greed increasing prices to juice profits, trying to cool wage growth won't touch it, and will instead make the situation worse.
- astrange 3y ago
  Why did companies suddenly become greedy in 2021 when they weren't greedy from 1980 through 2020? Why are they less greedy again in 2023?
  - bugglebeetle 3y ago
    They didn’t become greedy, an exogenous shock (COVID) caused real price spikes, which then subsided. Companies then decided the price spikes were a new floor, which they could get away with because of corporate concentration, resulting from lack of regulatory oversight and a congress that is asleep at the wheel/paid off by said corporations.
- carlosjobim 3y ago
  Inflation can never be caused by wages, since wages are the last thing to increase in price, after everything else has increased. Wage-driven inflation is a propaganda myth.
- _heimdall 3y ago
  Fun fact - inflation was historically a measure primarily focused on increaseds in the money supply. The definition of inflation as an increase in prices is a modern take, starting in the 80s and 90s. [1] Price changes are a potential side effect of inflation, but prices can be impacted by plenty of other factors including changes in supply and demand. Price changes alone are a pretty meaningless measure without context. Factor in how easily the inflation measures are manipulated and the numbers aren't even reliable measures. [1] https://www.clevelandfed.org/publications/economic-commentary/1997/ec-19971015-on-the-origin-and-evolution-of-the-word-inflation https://www.clevelandfed.org/publications/economic-commentar...
r00fus 3y ago
Using the prime rate to control this specific type of inflation (mainly by corporations using "supply chain issues" to raise prices usuriously) is like using an AA gun on a mosquito swarm (mostly ineffective but causing massive collateral damage).
- DiggyJohnson 3y ago
  What other options do they have besides the AA gun though?
  - r00fus 3y ago
    The FED has few other tools but the USG is more than the FED. Look up Nixon's price freeze. Legislative or executive branches could enact windfall profits acts. The list is quite long in fact, but requires either a working congress or sympathetic & unrepentant executive. That is, unless, of course, the mosquito swarm is a useful excuse to actually do the collateral damage you want.
- juve1996 3y ago
  Congress won't legislate so this is what we're left with.

_heimdall 3y ago

That's by design. When the economy is improving people are getting better off. Once it gets ahead of itself and inflation rises the only way it can slow back down is for people to feel more pain.

bugglebeetle 3y ago

Much of inflation is being driven by corporate concentration and failed tax policy: https://scholarworks.umass.edu/econ_workingpaper/343/ https://scholarworks.umass.edu/econ_workingpaper/343/ While much of wage growth is being driven by a plague-induced labor shortage and in response to the above. Cranking the interest rate dial to 11 solves very little besides impoverishing workers to preserve the dysfunctional status quo for the wealthy and business owners. This is quite obvious in how they’re handling all these bank failures.

astrange 3y ago
The idea that raising interest rates actually causes inflation is called neo-Fisherism; it's currently being practiced in Türkiye[0] where it isn't working. [0] formerly known as Turkey
- bugglebeetle 3y ago
  Raising interests rates doesn’t cause inflation, but it also doesn’t fix it when inflation is the result of corporate concentration and cartel like behavior around pricing.
  - astrange 3y ago
    Personally I think we should've used the low interest rate period to actually build some inflation-fighting housing and transit; instead we've just sort of noticed it's a problem now that it's too late.
    - xp84 3y ago
      100% agree. Sadly we were told the federal and state governments "couldn't afford to" borrow lots of money at near-0% to build such things. "The Debt" was just too big of a concern. eyeroll

danaris 3y ago

Sure, inflation is a problem. But there are different causes for inflation, and different remedies based on those. If inflation is caused by rapid wage growth, then pushing to cool that growth can help. If, on the other hand, inflation is caused by widespread corporate greed increasing prices to juice profits, trying to cool wage growth won't touch it, and will instead make the situation worse.

astrange 3y ago
Why did companies suddenly become greedy in 2021 when they weren't greedy from 1980 through 2020? Why are they less greedy again in 2023?
- bugglebeetle 3y ago
  They didn’t become greedy, an exogenous shock (COVID) caused real price spikes, which then subsided. Companies then decided the price spikes were a new floor, which they could get away with because of corporate concentration, resulting from lack of regulatory oversight and a congress that is asleep at the wheel/paid off by said corporations.
carlosjobim 3y ago
Inflation can never be caused by wages, since wages are the last thing to increase in price, after everything else has increased. Wage-driven inflation is a propaganda myth.
_heimdall 3y ago
Fun fact - inflation was historically a measure primarily focused on increaseds in the money supply. The definition of inflation as an increase in prices is a modern take, starting in the 80s and 90s. [1] Price changes are a potential side effect of inflation, but prices can be impacted by plenty of other factors including changes in supply and demand. Price changes alone are a pretty meaningless measure without context. Factor in how easily the inflation measures are manipulated and the numbers aren't even reliable measures. [1] https://www.clevelandfed.org/publications/economic-commentary/1997/ec-19971015-on-the-origin-and-evolution-of-the-word-inflation https://www.clevelandfed.org/publications/economic-commentar...

r00fus 3y ago

Using the prime rate to control this specific type of inflation (mainly by corporations using "supply chain issues" to raise prices usuriously) is like using an AA gun on a mosquito swarm (mostly ineffective but causing massive collateral damage).

DiggyJohnson 3y ago
What other options do they have besides the AA gun though?
- r00fus 3y ago
  The FED has few other tools but the USG is more than the FED. Look up Nixon's price freeze. Legislative or executive branches could enact windfall profits acts. The list is quite long in fact, but requires either a working congress or sympathetic & unrepentant executive. That is, unless, of course, the mosquito swarm is a useful excuse to actually do the collateral damage you want.
juve1996 3y ago
Congress won't legislate so this is what we're left with.