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Since CPI (inflation) has gone up 30%+ since 2018 this seems eminently reasonable- in fact Inwoukd think inflation linked salaries would work quite well (unless

Since CPI (inflation) has gone up 30%+ since 2018 this seems eminently reasonable- in fact Inwoukd think inflation linked salaries would work quite well (unless governments will buy into the MMT idea and actually tax the wealthy)

hgomersall 2y ago
Why do you think the MMT idea is to tax the wealthy? If anything, the MMT idea is that the wealthy are not special and that tax needs to be broad base to achieve its purpose of freeing resources to be purchased by the state. The problem with the wealthy is their marginal propensity to consume is low compared to the masses. One might want to tax the wealthy for other reasons, but I'm not sure it can be easily motivated by MMT reasoning.
- lifeisstillgood 2y ago
  So my laypersons understanding is that a) Governments printed money massively to handle 2008/covid (on the order of tens trillions dollars) b) MMT says governments print money to spend it buying the services they want (ie roads, nurses, etc) then tax back the same amount thus having net no inflation and able to print the same amount again next cycle / year. c) if people can take the system so that they don’t pay tax but instead keep the money then governments cannot print same amount of money / end up causing inflation c) wealthiest in society are pulling away, tax rates for capital vs labour are not equal, the massive QE has ended up in hands of capital owners and as we don’t tax Wealth then each cycle of spend-tax means more is staying in private hands, it getting destroyed so more government spending must either be cut or raise inflation. So my limited understanding says “money is just tokens, tokens should equal productive capacity (multiplied by some thing something velocity), and if governments want to spend more tokens than are being destroyed through tax, either raise tax rates n those paying tax, or tax those not paying tax (ie tax wealthy) In the end it all comes back to rentierism- and that comes back to a land tax
  - hgomersall 2y ago
    You make some interesting points, but not MMT. It's actually quite an easy view to fall into which I also did for a bit based on a few, but nowhere near enough, snippets of MMT along with much prior baggage. The core point of MMT is that monetarily sovereign states should primarily consider the resources available to buy with little to no consideration of the financial side, since such states are never financially constrained. The focus of the government then is all about making sure such resources are properly managed. That means the primary role of taxation is to free resources (read people) that can be purchased. It recognises a potential cause of inflation is a lack of things the state needs being available to purchase by the state leading the state to out-compete the private sector using its greater financial power. Conversely, if things are available to buy, then the state can use its financial might to buy up those things. This is most notable in the primary policy prescription of MMT of the Job Guarantee - acting as an employer of last resort and providing a job to anyone that wants one (and in the process, rendering the minimum wage somewhat moot). The JG is especially interesting when you realise what you're actually doing is anchoring the value of the currency to X units per hour of unskilled labour. At that point, spending is all relative to that price anchor. Things can and should float relative to it in response to supply and demand, but that fundamentally the JG wage is the financial control point. It's kind of funny how little consideration is given in the mainstream to establishing a proper value for the currency given how much hand-wringing is performed over inflation fears.
    - thrw42A8N 2y ago
      How many hours of unskilled labor equal one hour of principal software engineer labor? Imho the answer is NaN/infinite - the unskilled person won't be able to do in years what the engineer does in minutes while picking today's lunch restaurant. Sounds very much like 9 women delivering a baby in a month.
      - hgomersall 2y ago
        You can make the same argument about principle software engineers. How many php front end developers does it take to write a kernel driver? Of course, the question actually being asked is what the relative pay of the different positions are, since that's how money works.
Voultapher 2y ago
Wouldn't linking salaries to inflation be a feedback loop? Inflation is driven by various factors, but if for example like in 2020 the government of the biggest economy in the world decided to print billions of dollars to have "more money", something is gonna have to give. And in practice that something was everyone's money is now worth less.
- bryanlarsen 2y ago
  Yes, it's a feedback loop, but it's a highly damped feedback loop.
- carlosjobim 2y ago
  No, it is a myth that inflation is caused by higher salaries. As you know, salaries are the last thing to increase with inflation. It's not boats that make the tide rise.
  - f1shy 2y ago
    Yes and no. Inflation is very directly coupled with emission, not salaries. BUT if you have base inflation due to emission, and then do autoindexing, the win of the emission ist totaly lost. Is the primary source of hyperinflation.
    - haccount 2y ago
      So the right way is to use emission but make sure peoples wages don't increase competitive with inflation. Making marginal people poor and padding the pockets of people who have better options for fighting for higher wages? I'm in the later category so I wouldn't suffer but the entire concept sounds a bit evil tbh and an encouragement for inflation because corporations will get away paying their low ranking slaves less.
      - f1shy 2y ago
        Of course is absolutely evil! Look any 3rd world country. The whole idea of inflation via emission is to dissolve people money: at the time of emission local money is say X for a dollar, the gov. uses the money at that value, pays salaries, etc, but at the time the people actually uses the money, it is X*2 for a dollar. That is the whole game. Horrible, yes, but the daily reality for most people in 3rd World countries.
kulahan 2y ago
Not that it would happen often, but could you imagine the outrage of people losing salary during periods of deflation? No way this works long-term imo, but maybe I'm missing some ideas to balance it.
- deleted 2y ago
  [deleted]
- elashri 2y ago
  How often do you think we see periods of deflation compared of inflation? I mean deflation not a decrease of inflation rate.
  - kulahan 2y ago
    Probably not often, as indicated by the first few words of my sentence.
  - b112 2y ago
    The less common a thing, the more one must be prepared and consider it lest everyone frwak out.
  - gen220 2y ago
    Deflation favors debt payors instead of debt issuers/servicers, and our whole economy is constructed to favor the latter group, because having a "healthy" system of debt supports faster economic growth than a system with no debt. (in theory). The whole raison d'etre of free-floating govt-supplied fiat currency is to make deflation impossible. We haven't had real deflation since bretton woods, when we gave up the gold standard.
    - Sohcahtoa82 2y ago
      > Deflation favors debt payors instead of debt issuers/servicers Wouldn't that be the other way around? If I take out a $30K loan to buy a new car, and I'm paying $500/month, then if the economy happens to go through an extreme amount of deflation a year later and now brand new cars are only $10K, then as the payer, I'm still paying $500/month and $30K total, except that amount is worth a lot more. Whereas if massive inflation happens, the payer gets a huge benefit, assuming their salary keeps up with the inflation.
ozim 2y ago
Yeah I would like to have a word with banks offering saving accounts in EUR. This year it got back to 2% where pre-pandemic it was as low as 0.25%. Somehow banks are not that quick to make interest higher- unless you pay interest to them
ta1243 2y ago
Minimum wage in Germany in 2017 was €8.84 [1], that would be €11.07 today [0] Minimum wage is currently €12.41, 12% higher than in 2017 after inflation. [0] https://www.in2013dollars.com/europe/inflation/2017?amount=884 https://www.in2013dollars.com/europe/inflation/2017?amount=8... [1] https://en.wikipedia.org/wiki/Minimum_wage_in_Germany https://en.wikipedia.org/wiki/Minimum_wage_in_Germany

hgomersall 2y ago

Why do you think the MMT idea is to tax the wealthy? If anything, the MMT idea is that the wealthy are not special and that tax needs to be broad base to achieve its purpose of freeing resources to be purchased by the state. The problem with the wealthy is their marginal propensity to consume is low compared to the masses. One might want to tax the wealthy for other reasons, but I'm not sure it can be easily motivated by MMT reasoning.

lifeisstillgood 2y ago
So my laypersons understanding is that a) Governments printed money massively to handle 2008/covid (on the order of tens trillions dollars) b) MMT says governments print money to spend it buying the services they want (ie roads, nurses, etc) then tax back the same amount thus having net no inflation and able to print the same amount again next cycle / year. c) if people can take the system so that they don’t pay tax but instead keep the money then governments cannot print same amount of money / end up causing inflation c) wealthiest in society are pulling away, tax rates for capital vs labour are not equal, the massive QE has ended up in hands of capital owners and as we don’t tax Wealth then each cycle of spend-tax means more is staying in private hands, it getting destroyed so more government spending must either be cut or raise inflation. So my limited understanding says “money is just tokens, tokens should equal productive capacity (multiplied by some thing something velocity), and if governments want to spend more tokens than are being destroyed through tax, either raise tax rates n those paying tax, or tax those not paying tax (ie tax wealthy) In the end it all comes back to rentierism- and that comes back to a land tax
- hgomersall 2y ago
  You make some interesting points, but not MMT. It's actually quite an easy view to fall into which I also did for a bit based on a few, but nowhere near enough, snippets of MMT along with much prior baggage. The core point of MMT is that monetarily sovereign states should primarily consider the resources available to buy with little to no consideration of the financial side, since such states are never financially constrained. The focus of the government then is all about making sure such resources are properly managed. That means the primary role of taxation is to free resources (read people) that can be purchased. It recognises a potential cause of inflation is a lack of things the state needs being available to purchase by the state leading the state to out-compete the private sector using its greater financial power. Conversely, if things are available to buy, then the state can use its financial might to buy up those things. This is most notable in the primary policy prescription of MMT of the Job Guarantee - acting as an employer of last resort and providing a job to anyone that wants one (and in the process, rendering the minimum wage somewhat moot). The JG is especially interesting when you realise what you're actually doing is anchoring the value of the currency to X units per hour of unskilled labour. At that point, spending is all relative to that price anchor. Things can and should float relative to it in response to supply and demand, but that fundamentally the JG wage is the financial control point. It's kind of funny how little consideration is given in the mainstream to establishing a proper value for the currency given how much hand-wringing is performed over inflation fears.
  - thrw42A8N 2y ago
    How many hours of unskilled labor equal one hour of principal software engineer labor? Imho the answer is NaN/infinite - the unskilled person won't be able to do in years what the engineer does in minutes while picking today's lunch restaurant. Sounds very much like 9 women delivering a baby in a month.
    - hgomersall 2y ago
      You can make the same argument about principle software engineers. How many php front end developers does it take to write a kernel driver? Of course, the question actually being asked is what the relative pay of the different positions are, since that's how money works.

Voultapher 2y ago

Wouldn't linking salaries to inflation be a feedback loop? Inflation is driven by various factors, but if for example like in 2020 the government of the biggest economy in the world decided to print billions of dollars to have "more money", something is gonna have to give. And in practice that something was everyone's money is now worth less.

bryanlarsen 2y ago
Yes, it's a feedback loop, but it's a highly damped feedback loop.
carlosjobim 2y ago
No, it is a myth that inflation is caused by higher salaries. As you know, salaries are the last thing to increase with inflation. It's not boats that make the tide rise.
- f1shy 2y ago
  Yes and no. Inflation is very directly coupled with emission, not salaries. BUT if you have base inflation due to emission, and then do autoindexing, the win of the emission ist totaly lost. Is the primary source of hyperinflation.
  - haccount 2y ago
    So the right way is to use emission but make sure peoples wages don't increase competitive with inflation. Making marginal people poor and padding the pockets of people who have better options for fighting for higher wages? I'm in the later category so I wouldn't suffer but the entire concept sounds a bit evil tbh and an encouragement for inflation because corporations will get away paying their low ranking slaves less.
    - f1shy 2y ago
      Of course is absolutely evil! Look any 3rd world country. The whole idea of inflation via emission is to dissolve people money: at the time of emission local money is say X for a dollar, the gov. uses the money at that value, pays salaries, etc, but at the time the people actually uses the money, it is X*2 for a dollar. That is the whole game. Horrible, yes, but the daily reality for most people in 3rd World countries.

kulahan 2y ago

Not that it would happen often, but could you imagine the outrage of people losing salary during periods of deflation? No way this works long-term imo, but maybe I'm missing some ideas to balance it.

deleted 2y ago
[deleted]
elashri 2y ago
How often do you think we see periods of deflation compared of inflation? I mean deflation not a decrease of inflation rate.
- kulahan 2y ago
  Probably not often, as indicated by the first few words of my sentence.
- b112 2y ago
  The less common a thing, the more one must be prepared and consider it lest everyone frwak out.
- gen220 2y ago
  Deflation favors debt payors instead of debt issuers/servicers, and our whole economy is constructed to favor the latter group, because having a "healthy" system of debt supports faster economic growth than a system with no debt. (in theory). The whole raison d'etre of free-floating govt-supplied fiat currency is to make deflation impossible. We haven't had real deflation since bretton woods, when we gave up the gold standard.
  - Sohcahtoa82 2y ago
    > Deflation favors debt payors instead of debt issuers/servicers Wouldn't that be the other way around? If I take out a $30K loan to buy a new car, and I'm paying $500/month, then if the economy happens to go through an extreme amount of deflation a year later and now brand new cars are only $10K, then as the payer, I'm still paying $500/month and $30K total, except that amount is worth a lot more. Whereas if massive inflation happens, the payer gets a huge benefit, assuming their salary keeps up with the inflation.

ozim 2y ago

Yeah I would like to have a word with banks offering saving accounts in EUR. This year it got back to 2% where pre-pandemic it was as low as 0.25%. Somehow banks are not that quick to make interest higher- unless you pay interest to them

ta1243 2y ago

Minimum wage in Germany in 2017 was €8.84 [1], that would be €11.07 today [0] Minimum wage is currently €12.41, 12% higher than in 2017 after inflation. [0] https://www.in2013dollars.com/europe/inflation/2017?amount=884 https://www.in2013dollars.com/europe/inflation/2017?amount=8... [1] https://en.wikipedia.org/wiki/Minimum_wage_in_Germany https://en.wikipedia.org/wiki/Minimum_wage_in_Germany