4 ms·

I think a big problem, especially with companies, is that as soon as any cost of some input touches a new price level, that price now starts to get baked into t

I think a big problem, especially with companies, is that as soon as any cost of some input touches a new price level, that price now starts to get baked into the planning. Even if it was only for a very short blip, and even if the actual average costs later go down. It gets very sticky, but only in the up direction. Have you talked to any kind of building work contractor, insurance company, etc. lately? They've all jacked up their prices just because their supply prices touched a certain level and now they have to plan for it. And to be sure, some of them are using the cover of inflation to test how willing people are to pay more. Inflation really is a vicious cycle. And I don't think we've in recent memory seen prices actually decrease after an inflationary cycle. Do things pegged with CPI even allow for negative inflation?

nine_zeros 3y ago
This is accurate. Once the unit price is calculated with the temporarily higher input price, they are not going to reduce the unit price for as long as possible, even if input prices go down. And what's worse? The FED does not want negative CPI. They want slowly rising CPI. A negative CPI is deflation, something they want to absolutely avoid. They don't want prices to go down. They only want them to rise up slower. Which leads to us humans always stuck on the hedonic treadmill. If one is relying on wages, one is absolutely fcuked in this system. The only way to keep up is to keep switching jobs to a higher pay.
- jliptzin 3y ago
  It’s a pretty easy problem to solve, just have wages increase automatically on an annual basis in line with changes to the CPI. That would be in addition to any raises due to good job performance or a promotion. Or even on a monthly basis during periods of high inflation. Obviously, companies avoid this simple solution because they make money on the delay between raising the price of the product they sell and when they actually start raising their worker salaries. Ideally, they want you to keep your head down and never ask for a raise.
  - nine_zeros 3y ago
    Yep. Companies want all the burden to fall on employees while the profits go to execs and shareholders. Any solution that would be fair to the employees will immediately be met with resistance.
  - brnaftr361 3y ago
    I think just about everywhere I've worked has a cost of living raise, even entry level at restaurants. In any case this is somewhat of a contraindication to the economic planning undertaken by the Federal Reserve and their aims with inflation, which is to increase the monetary base to allow expansion. What you're proposing would, I believe in theory, close that gap as it costs employers more without necessarily increasing revenue whereas, with the current modality, things remain closer to baseline. However, if instead of diffusing the cash through the government, it was directly granted to citizens by the government/FR one might would presume similar results as the current modality, just more beneficial to the individual. However this takes on some degree of complication: there are manifold ways to disburse it, for instance we could make a straight cut for every individual, weigh it based on income, weigh it based on wealth, and one could justify weighing in either direction - presumably the wealthy are better arbiters of economy than are the needy... But also the needy are needy and it may help alleviate some degree of disparity. Also, inflation is difficult to measure. The CPI is not a great mark. Expanding the monetary base by 2% on paper may not result in a 2% increase in CPI. CPI is, I reckon, used as a check on the dollar's relative value, which can change dynamically as a result of cultural, economic, and political shifts on top of monetary policy. So resultsay vary, but considering market behavior over the pandemic, I think it points to a rapid dissemination of whatever money is given. I think that would probably, actually be a really efficient means to deal with inflation, however a lot of that money is actually doled out in subsidies, grants, et cetera. So a new system of public goods funding would necessarily have to be set up.
  - kepler1 3y ago
    I'm glad you just solved all of our country's problems by declaring that raising workers' wages is the solution to everything. I'm sure that's got no downsides to it, huh? Why didn't we think of that before?
HDThoreaun 3y ago
> I don't think we've in recent memory seen prices actually decrease after an inflationary cycle. This absolutely happens with individual goods. Egg prices are back to normal. Car prices are going down.

nine_zeros 3y ago

This is accurate. Once the unit price is calculated with the temporarily higher input price, they are not going to reduce the unit price for as long as possible, even if input prices go down. And what's worse? The FED does not want negative CPI. They want slowly rising CPI. A negative CPI is deflation, something they want to absolutely avoid. They don't want prices to go down. They only want them to rise up slower. Which leads to us humans always stuck on the hedonic treadmill. If one is relying on wages, one is absolutely fcuked in this system. The only way to keep up is to keep switching jobs to a higher pay.

jliptzin 3y ago
It’s a pretty easy problem to solve, just have wages increase automatically on an annual basis in line with changes to the CPI. That would be in addition to any raises due to good job performance or a promotion. Or even on a monthly basis during periods of high inflation. Obviously, companies avoid this simple solution because they make money on the delay between raising the price of the product they sell and when they actually start raising their worker salaries. Ideally, they want you to keep your head down and never ask for a raise.
- nine_zeros 3y ago
  Yep. Companies want all the burden to fall on employees while the profits go to execs and shareholders. Any solution that would be fair to the employees will immediately be met with resistance.
- brnaftr361 3y ago
  I think just about everywhere I've worked has a cost of living raise, even entry level at restaurants. In any case this is somewhat of a contraindication to the economic planning undertaken by the Federal Reserve and their aims with inflation, which is to increase the monetary base to allow expansion. What you're proposing would, I believe in theory, close that gap as it costs employers more without necessarily increasing revenue whereas, with the current modality, things remain closer to baseline. However, if instead of diffusing the cash through the government, it was directly granted to citizens by the government/FR one might would presume similar results as the current modality, just more beneficial to the individual. However this takes on some degree of complication: there are manifold ways to disburse it, for instance we could make a straight cut for every individual, weigh it based on income, weigh it based on wealth, and one could justify weighing in either direction - presumably the wealthy are better arbiters of economy than are the needy... But also the needy are needy and it may help alleviate some degree of disparity. Also, inflation is difficult to measure. The CPI is not a great mark. Expanding the monetary base by 2% on paper may not result in a 2% increase in CPI. CPI is, I reckon, used as a check on the dollar's relative value, which can change dynamically as a result of cultural, economic, and political shifts on top of monetary policy. So resultsay vary, but considering market behavior over the pandemic, I think it points to a rapid dissemination of whatever money is given. I think that would probably, actually be a really efficient means to deal with inflation, however a lot of that money is actually doled out in subsidies, grants, et cetera. So a new system of public goods funding would necessarily have to be set up.
- kepler1 3y ago
  I'm glad you just solved all of our country's problems by declaring that raising workers' wages is the solution to everything. I'm sure that's got no downsides to it, huh? Why didn't we think of that before?

HDThoreaun 3y ago

> I don't think we've in recent memory seen prices actually decrease after an inflationary cycle. This absolutely happens with individual goods. Egg prices are back to normal. Car prices are going down.