6 ms·

Which is a good thing if you want inflation to eventually fall. Wage growth is the primary sustainer of inflation, which leads to the classic wage/price spiral

by boc 3y ago

Which is a good thing if you want inflation to eventually fall. Wage growth is the primary sustainer of inflation, which leads to the classic wage/price spiral wherein employees negotiate automatic increases in salary to keep up with predicted inflation. Inflation in the US today is still transitory in nature, but you can look at other countries to see examples of entrenched inflation. I’m not saying it’s a good outcome for society short-term, but if everyone kept getting raises to keep up with inflation, businesses would respond by continuing to raise prices.

aaomidi 3y ago
And other lies we tell ourselves. We are getting to a point where the majority of people can’t actually start their lives because of wealth inequality. Wealth inequality has only gotten worse in the U.S. in the past 10 years. The truth of the matter is, life does not have inherent value in the U.S. (and generally the world mainly because the U.S. drives world economic models). We’re entering an era where not as much human labor is going to be necessary, and our response to that is effectively starve out billions rather than spread the gains between our race. At some point this is either going to go full dystopia, where you’re only value is what you create and what you were born with. Or it’s going to go into a revolution with the heads of the rich on spikes. I know which one would at least feel better for the majority of people.
- titzer 3y ago
  When Elon's wealth peaked at $300 billion (at least on paper), I calculated that with $3 million being an extremely comfortable retirement, he could retire 100,000 times. It's an absolutely obscene inequality. And billionaires crow about taxes. Like, literally, if they took NINENTY NINE PERCENT of that wealth away, he could only retire ONE THOUSAND TIMES. STFU billionaires.
  - cscurmudgeon 3y ago
    Did you make a similar observation in the opposite direction when his wealth dwindled? https://www.cbsnews.com/news/elon-musk-net-worth-worst-loss-of-fortune-in-history-guinness-book-of-world-records/#textSome20estimate20he20lost20upin2020002C20according20to20Guinness https://www.cbsnews.com/news/elon-musk-net-worth-worst-loss-... https://twitter.com/paulg/status/1591291952464801794 https://twitter.com/paulg/status/1591291952464801794 I see this common pattern. 1. Stock goes up: "Oh no, they are stealing from us" 2. Stock goes down: Silence > And billionaires crow about taxes. Not just billionaires. Even non-millionaires crow about taxes. Fix the leaky bucket first before filling it up is a good strategy.
    - ceejayoz 3y ago
      > Did you make a similar observation in the opposite direction when his wealth dwindled? Did it dwindle enough for the point to no longer be valid? (No, not anywhere near close.)
      - cscurmudgeon 3y ago
        Please define "valid" Valid for what?
        ceejayoz 3y ago
        Does Musk's loss of half his on-paper fortune change the "I calculated that with $3 million being an extremely comfortable retirement, he could retire 100,000 times. It's an absolutely obscene inequality." calculus meaningfully? He can now retire comfortably 50,000 times. It's a good illustration of just how huge that fortune is, and how little someone needs that much money.
        cscurmudgeon 3y ago
        What does retirement got to do with whether his wealth is his or not t keep? > It's a good illustration of just how huge that fortune is, and how little someone needs that much money. A lot of that money is illiquid wealth that he helped create. Should he give that up to a corrupt politician to distribute "fairly" (cough buy votes for power cough) or should he invest in venues that better humanity. He doesn't have a Scrooge McDuck type vault with gold coins. I have some questions below, not to attack, but to understand this view. 1. Should no one have wealth beyond a limit set up by some politician? (lets leave aside what is a "fair" limit and assume politicians have omniscience in this regard) 2. If yes to #1, what incentive would that give for entrepreneurs to create? 3. Do you think wealth is not created? In the world, has wealth remained constant since 1000 AD (an example date). Wouldn't that imply value of human knowledge, creativity and effort is zero?
        ceejayoz 3y ago
  - b112 3y ago
    That wealth is not sitting in a bank account somewhere. It is in the form of corporate ownership, stocks, it is part of the economy. Some of it is never raw cash. Are you purposing the governement take 99% of ownership of endless corporations? That's pretty much what would happen, if you taxed 99% of billionaire's wealth. And if you did that, who would the governement sell the shares to? Remember, you just taxes those nasty billionaires, taking 99% of their wealth, so there is no one to sell those shares to. And next year, there are no billionaires left. And likely the economy has crashed, because yeah, the government knows how to run large corporations well. All that "billionaire" means, is that the person directs private enterprise. Get over it. We need leaders, and they're it.
    - titzer 3y ago
      Hello me from 2003. I would have written almost this exact comment twenty years ago. In the meantime what I've learned is that: 1. Billionaires have 10 fingers and 24 hours just like the rest of us. They are not superhuman, superintelligent, or even particularly good at anything. Many are on top of their organization simply by inheritance or successfully navigating internal organizational politics. 2. Greed is a real disease. It's a mental illness. We don't call it that anymore. But what would you call an obsession with acquiring thousands of times more wealth than is necessary to have a full and complete life? Many lifetimes!? There's some kind of serious pathology there. 3. Billionaires either inherit huge amounts of money or they create organizations that funnel money up to them. The day-to-day earnings of the organization are the operation of a huge pyramid of people who do real work. They're taxing the produced wealth of their org they sit atop of. 4. Most organizations can coast for months or years without any real leadership, but would sputter and stop instantly if the people at the bottom stop working. Our age's conceit is to think the guy with the rudder in the fog is the leader when there are dozens of slaves doing the rowing and fish are jumping in the boat. 5. Billionaires never get screwed. Ever. They have bad ideas all the time. They can literally fuck up until the cows come home and still get mega payouts and people still lionize them.
      - jntvjnvutnuvt 3y ago
        You completely misunderstand where billionaire wealth comes from. They are billionaires on paper, not from funneling money from workers to their bank accounts.
  - WalterBright 3y ago
    If all the wealth of the US billionaires was confiscated (all of it) it would fund the government for 9 months. And then what? Where are you going to get the money to fund the government? Countries that have tried confiscating all the wealth from their wealthy have made things worse for the rest of the country, not better. As for Musk, if he didn't make a lot of money, SpaceX never would have been possible. His wealth is all invested in his companies, and he uses it to create more companies.
    - aaomidi 3y ago
      There’s a lot of actions that’s not just “confiscating their wealth”. For example, requiring employers over a certain revenue to have a workers council, and a seat at the board. Creating stronger union protections. Not weakening them. Requiring sick pay, paid time off, etc etc. Limiting the abuse of using contract workers to avoid doing benefits.
      - WalterBright 3y ago
        Other countries do that, which is why they have anemic economies compared to the US.
        aaomidi 3y ago
        While doing better on nearly every other social aspect. Also, the U.S. economy can’t be compared with anywhere else because we are the reserve currency. The control we have over our economy is literally not possible anywhere else. When we didn’t have this control, our economic policies led to the great fucking depression.
        WalterBright 3y ago
        > our economic policies led to the great fucking depression That policy was, specifically, tying the exchange rate of the dollar to gold while inflating the hell out of the dollar - Fed policy enacted in the 1914 Federal Reserve Act. This disconnect between the dollar's value and gold's value eventually caused a run on the banks which collapsed them, as you could buy gold for half price. The depression did not start to recover until the government halted gold purchases. > While doing better on nearly every other social aspect. Debatable. I've lived in foreign countries.
silviot 3y ago
That's exactly what Karl Marx said in "Value, price and profit".
BoiledCabbage 3y ago
> Wage growth is the primary sustainer of inflation, Except it's not in practice. Yes that's what's taught in academia, but is very often very wrong. Supply shortages was the primary cause of our inflation two years ago. Energy inflation then took over and also was the primary driver of inflation in the 1970s. It's just a convenient short-circuit to blame it on wage inflation.
- boc 3y ago
  I mean I'll take my downvotes but it's not a controversy within the economics field that broad wage gains perpetuate inflation. It's also not just something "taught in academia". Concerns about wage growth is a primary reason why the Fed has been raising rates aggressively. They need to slow down economic activity so that wage gains cool. It's just politically toxic to say that explicitly, so they talk about other macro factors when pressed about it. Read between the lines here and you'll see that the Fed has been laser-focused on the wage-price spiral effect: https://www.bloomberg.com/news/articles/2023-03-01/best-bet-for-fed-s-soft-landing-is-a-reverse-wage-price-spiral#xj4y7vzkg https://www.bloomberg.com/news/articles/2023-03-01/best-bet-...
  - BoiledCabbage 3y ago
    > it's not a controversy within the economics field that broad wage gains perpetuate inflation Yes I agree that is what is commonly taught. A causes B. And it's true A (broad wage gains) can and do cause B (inflation). However it does not mean that B is usually caused by A. And that's the actual slight of hand that's happening here. To understand simply look at these two graphs. Monthly inflation since April of 2020 and us unemployment rate since then. https://www.statista.com/statistics/273418/unadjusted-monthly-inflation-rate-in-the-us/ https://www.statista.com/statistics/273418/unadjusted-monthl... Notice annual inflation (presented monthly) grew enormously beginning around June of 2020. Peaking at 9% plus in June of 2022. It is now steadily falling and down around 5% and likely will continue to fall. Now take a look at us unemployment during that same time. Unemployment shot up around the same time in 2020 (which should've caused significant disinflation according to the direct interpretation above which it didn't). It also has been consistent at around 3.5-3.6 percent for the past almost year+ and inflation has consistently fallen. https://data.bls.gov/timeseries/LNS14000000 https://data.bls.gov/timeseries/LNS14000000 Looking at it, there is essentially no correlation with our actual experienced inflation and our actual experienced unemployment rate. If anything at times it was negatively correlated (the opposite of what was above). Hence the reason I say, that it is the commonly spouted economic orthodoxy and it is what is taught and discussed, but you can see clearly it was not the cause of our recent inflation. Nor was it the cause of our 1970s inflation, and other instances of inflation. Frankly I'm shocked that economic orthodoxy hasn't caught up to this - and I'm starting to see some rumblings that following this episode in the 2020s it will. But if it does, the update will be motivated by popular culture / media discussion prompting it, which is extremely disappointing to see for any science field - regardless of whether it's a hard science or soft science. So in short - A implies B, does not mean that B implies A. And that's essentially what is being discussed here. We experienced tons of inflation and it wasn't driven by wage growth. Stomping out wage growth is not solving he underlying problem. Energy costs and fixing the supply side is what would (and will address the root cause). Energy has mostly fixed itself (from it's peak) and supply is much better but still having some issues.
WalterBright 3y ago
Myths about the cause of inflation: 1. wage/price spiral 2. cost push 3. demand pull 4. speculators 5. profiteers 6. Vladimir Putin 7. Arab oil cartels 8. unions The actual cause of inflation is the government helicoptering money all over the economy that has just been printed. I.e. the Law of Supply & Demand applies to money just as it applies to everything else.
- daniel-cussen 3y ago
  [dead]
- boc 3y ago
  So when the government printed trillions of dollars continuously from 2000 until 2019 yet we had record low inflation... was that just a fluke? A multi-decade rebuke of your theory?
  - WalterBright 3y ago
    The 2008 banking collapse vaporized a zillion dollars. We would have had deflation without the deficits.

by boc 3y ago

aaomidi 3y ago

And other lies we tell ourselves. We are getting to a point where the majority of people can’t actually start their lives because of wealth inequality. Wealth inequality has only gotten worse in the U.S. in the past 10 years. The truth of the matter is, life does not have inherent value in the U.S. (and generally the world mainly because the U.S. drives world economic models). We’re entering an era where not as much human labor is going to be necessary, and our response to that is effectively starve out billions rather than spread the gains between our race. At some point this is either going to go full dystopia, where you’re only value is what you create and what you were born with. Or it’s going to go into a revolution with the heads of the rich on spikes. I know which one would at least feel better for the majority of people.

titzer 3y ago
When Elon's wealth peaked at $300 billion (at least on paper), I calculated that with $3 million being an extremely comfortable retirement, he could retire 100,000 times. It's an absolutely obscene inequality. And billionaires crow about taxes. Like, literally, if they took NINENTY NINE PERCENT of that wealth away, he could only retire ONE THOUSAND TIMES. STFU billionaires.
- cscurmudgeon 3y ago
  Did you make a similar observation in the opposite direction when his wealth dwindled? https://www.cbsnews.com/news/elon-musk-net-worth-worst-loss-of-fortune-in-history-guinness-book-of-world-records/#textSome20estimate20he20lost20upin2020002C20according20to20Guinness https://www.cbsnews.com/news/elon-musk-net-worth-worst-loss-... https://twitter.com/paulg/status/1591291952464801794 https://twitter.com/paulg/status/1591291952464801794 I see this common pattern. 1. Stock goes up: "Oh no, they are stealing from us" 2. Stock goes down: Silence > And billionaires crow about taxes. Not just billionaires. Even non-millionaires crow about taxes. Fix the leaky bucket first before filling it up is a good strategy.
  - ceejayoz 3y ago
    > Did you make a similar observation in the opposite direction when his wealth dwindled? Did it dwindle enough for the point to no longer be valid? (No, not anywhere near close.)
    - cscurmudgeon 3y ago
      Please define "valid" Valid for what?
      - ceejayoz 3y ago
        Does Musk's loss of half his on-paper fortune change the "I calculated that with $3 million being an extremely comfortable retirement, he could retire 100,000 times. It's an absolutely obscene inequality." calculus meaningfully? He can now retire comfortably 50,000 times. It's a good illustration of just how huge that fortune is, and how little someone needs that much money.
        cscurmudgeon 3y ago
        What does retirement got to do with whether his wealth is his or not t keep? > It's a good illustration of just how huge that fortune is, and how little someone needs that much money. A lot of that money is illiquid wealth that he helped create. Should he give that up to a corrupt politician to distribute "fairly" (cough buy votes for power cough) or should he invest in venues that better humanity. He doesn't have a Scrooge McDuck type vault with gold coins. I have some questions below, not to attack, but to understand this view. 1. Should no one have wealth beyond a limit set up by some politician? (lets leave aside what is a "fair" limit and assume politicians have omniscience in this regard) 2. If yes to #1, what incentive would that give for entrepreneurs to create? 3. Do you think wealth is not created? In the world, has wealth remained constant since 1000 AD (an example date). Wouldn't that imply value of human knowledge, creativity and effort is zero?
        ceejayoz 3y ago
- b112 3y ago
  That wealth is not sitting in a bank account somewhere. It is in the form of corporate ownership, stocks, it is part of the economy. Some of it is never raw cash. Are you purposing the governement take 99% of ownership of endless corporations? That's pretty much what would happen, if you taxed 99% of billionaire's wealth. And if you did that, who would the governement sell the shares to? Remember, you just taxes those nasty billionaires, taking 99% of their wealth, so there is no one to sell those shares to. And next year, there are no billionaires left. And likely the economy has crashed, because yeah, the government knows how to run large corporations well. All that "billionaire" means, is that the person directs private enterprise. Get over it. We need leaders, and they're it.
  - titzer 3y ago
    Hello me from 2003. I would have written almost this exact comment twenty years ago. In the meantime what I've learned is that: 1. Billionaires have 10 fingers and 24 hours just like the rest of us. They are not superhuman, superintelligent, or even particularly good at anything. Many are on top of their organization simply by inheritance or successfully navigating internal organizational politics. 2. Greed is a real disease. It's a mental illness. We don't call it that anymore. But what would you call an obsession with acquiring thousands of times more wealth than is necessary to have a full and complete life? Many lifetimes!? There's some kind of serious pathology there. 3. Billionaires either inherit huge amounts of money or they create organizations that funnel money up to them. The day-to-day earnings of the organization are the operation of a huge pyramid of people who do real work. They're taxing the produced wealth of their org they sit atop of. 4. Most organizations can coast for months or years without any real leadership, but would sputter and stop instantly if the people at the bottom stop working. Our age's conceit is to think the guy with the rudder in the fog is the leader when there are dozens of slaves doing the rowing and fish are jumping in the boat. 5. Billionaires never get screwed. Ever. They have bad ideas all the time. They can literally fuck up until the cows come home and still get mega payouts and people still lionize them.
    - jntvjnvutnuvt 3y ago
      You completely misunderstand where billionaire wealth comes from. They are billionaires on paper, not from funneling money from workers to their bank accounts.
- WalterBright 3y ago
  If all the wealth of the US billionaires was confiscated (all of it) it would fund the government for 9 months. And then what? Where are you going to get the money to fund the government? Countries that have tried confiscating all the wealth from their wealthy have made things worse for the rest of the country, not better. As for Musk, if he didn't make a lot of money, SpaceX never would have been possible. His wealth is all invested in his companies, and he uses it to create more companies.
  - aaomidi 3y ago
    There’s a lot of actions that’s not just “confiscating their wealth”. For example, requiring employers over a certain revenue to have a workers council, and a seat at the board. Creating stronger union protections. Not weakening them. Requiring sick pay, paid time off, etc etc. Limiting the abuse of using contract workers to avoid doing benefits.
    - WalterBright 3y ago
      Other countries do that, which is why they have anemic economies compared to the US.
      - aaomidi 3y ago
        While doing better on nearly every other social aspect. Also, the U.S. economy can’t be compared with anywhere else because we are the reserve currency. The control we have over our economy is literally not possible anywhere else. When we didn’t have this control, our economic policies led to the great fucking depression.
        WalterBright 3y ago
        > our economic policies led to the great fucking depression That policy was, specifically, tying the exchange rate of the dollar to gold while inflating the hell out of the dollar - Fed policy enacted in the 1914 Federal Reserve Act. This disconnect between the dollar's value and gold's value eventually caused a run on the banks which collapsed them, as you could buy gold for half price. The depression did not start to recover until the government halted gold purchases. > While doing better on nearly every other social aspect. Debatable. I've lived in foreign countries.

silviot 3y ago

That's exactly what Karl Marx said in "Value, price and profit".

BoiledCabbage 3y ago

> Wage growth is the primary sustainer of inflation, Except it's not in practice. Yes that's what's taught in academia, but is very often very wrong. Supply shortages was the primary cause of our inflation two years ago. Energy inflation then took over and also was the primary driver of inflation in the 1970s. It's just a convenient short-circuit to blame it on wage inflation.

boc 3y ago
I mean I'll take my downvotes but it's not a controversy within the economics field that broad wage gains perpetuate inflation. It's also not just something "taught in academia". Concerns about wage growth is a primary reason why the Fed has been raising rates aggressively. They need to slow down economic activity so that wage gains cool. It's just politically toxic to say that explicitly, so they talk about other macro factors when pressed about it. Read between the lines here and you'll see that the Fed has been laser-focused on the wage-price spiral effect: https://www.bloomberg.com/news/articles/2023-03-01/best-bet-for-fed-s-soft-landing-is-a-reverse-wage-price-spiral#xj4y7vzkg https://www.bloomberg.com/news/articles/2023-03-01/best-bet-...
- BoiledCabbage 3y ago
  > it's not a controversy within the economics field that broad wage gains perpetuate inflation Yes I agree that is what is commonly taught. A causes B. And it's true A (broad wage gains) can and do cause B (inflation). However it does not mean that B is usually caused by A. And that's the actual slight of hand that's happening here. To understand simply look at these two graphs. Monthly inflation since April of 2020 and us unemployment rate since then. https://www.statista.com/statistics/273418/unadjusted-monthly-inflation-rate-in-the-us/ https://www.statista.com/statistics/273418/unadjusted-monthl... Notice annual inflation (presented monthly) grew enormously beginning around June of 2020. Peaking at 9% plus in June of 2022. It is now steadily falling and down around 5% and likely will continue to fall. Now take a look at us unemployment during that same time. Unemployment shot up around the same time in 2020 (which should've caused significant disinflation according to the direct interpretation above which it didn't). It also has been consistent at around 3.5-3.6 percent for the past almost year+ and inflation has consistently fallen. https://data.bls.gov/timeseries/LNS14000000 https://data.bls.gov/timeseries/LNS14000000 Looking at it, there is essentially no correlation with our actual experienced inflation and our actual experienced unemployment rate. If anything at times it was negatively correlated (the opposite of what was above). Hence the reason I say, that it is the commonly spouted economic orthodoxy and it is what is taught and discussed, but you can see clearly it was not the cause of our recent inflation. Nor was it the cause of our 1970s inflation, and other instances of inflation. Frankly I'm shocked that economic orthodoxy hasn't caught up to this - and I'm starting to see some rumblings that following this episode in the 2020s it will. But if it does, the update will be motivated by popular culture / media discussion prompting it, which is extremely disappointing to see for any science field - regardless of whether it's a hard science or soft science. So in short - A implies B, does not mean that B implies A. And that's essentially what is being discussed here. We experienced tons of inflation and it wasn't driven by wage growth. Stomping out wage growth is not solving he underlying problem. Energy costs and fixing the supply side is what would (and will address the root cause). Energy has mostly fixed itself (from it's peak) and supply is much better but still having some issues.

WalterBright 3y ago

Myths about the cause of inflation: 1. wage/price spiral 2. cost push 3. demand pull 4. speculators 5. profiteers 6. Vladimir Putin 7. Arab oil cartels 8. unions The actual cause of inflation is the government helicoptering money all over the economy that has just been printed. I.e. the Law of Supply & Demand applies to money just as it applies to everything else.

daniel-cussen 3y ago
[dead]
boc 3y ago
So when the government printed trillions of dollars continuously from 2000 until 2019 yet we had record low inflation... was that just a fluke? A multi-decade rebuke of your theory?
- WalterBright 3y ago
  The 2008 banking collapse vaporized a zillion dollars. We would have had deflation without the deficits.