11 ms·

Prices always go up. Sometimes faster, sometimes slower. We can slow it, but it's a fool's errand to make them go down. When I was a kid, I could get an ice

by fizx 2y ago

Prices always go up. Sometimes faster, sometimes slower. We can slow it, but it's a fool's errand to make them go down. When I was a kid, I could get an ice cream cone for a 50 cents. That's never coming back. Now that we've slowed inflation to a manageable level, we need to grow wages to catch up. I never heard a good plan on that from either side.

SuperNinKenDo 2y ago
There's a reason the term "deflation" exists, and it's not simply a theoretical concept. Constant inflation is a political choice, entirely so in the age of fiat currency, whatever you think of it. The reason you never hear a good plan for growing wages to catch inflation is because inflation is a form of intentionally regressive taxation. For reasons of macroeconomic theories meeting special interests with socio-political leverage.
- teeray 2y ago
  > There's a reason the term "deflation" exists Which has always been treated as a spooky four-letter word in economics. I remember the news stories in 2008 when we had a brief period of deflation and the headlines were particularly apocalyptic (even despite the overall grim economic news of the time).
  - TheFlyingFish 2y ago
    Isn't the problem with deflation that it de-incentivizes investment (why accept risk when you can just stuff your mattress with money and grow your wealth risk-free), which tanks the economy? Lowering prices sounds nice, but my understanding has always been that it would come at the cost of less actual wealth overall.
    - sethammons 2y ago
      which should disproportionately affect the wealthy. Another way of saying that: we pay higher prices with inflation so the wealthy are more wealthy. That money goes somewhere.
    - _DeadFred_ 2y ago
      And hence we had the destruction of the entire tech industry because people never buy computers because tomorrow you can get a better one for cheaper.
    - SuperNinKenDo 2y ago
      That's the macroeconomic argument I alluded to. Of course, what this argument amounts to is that economic growth should be fueled in part by devaluing the money of the working and lower-middle class, who earn their money through wages and have limited means of preserving its value through capital investment, while the wealthy, who have more opportunity to invest in capital and use leverage, are largely shieled from, or on the extreme end even benefit from, its effects. Hence, a regressive tax. The most obvious argument against this notion is that many things are effectively deflationary anyway, such as computers, which at least until recently were deflationary in the extreme. Not only did they tend to get ever cheaper over time, but while getting cheaper they have and continue to become more powerful, at times by miles in the space of a few years. And yet, people still buy computers, and firms still engineer and manufacture them, because at some point it doesn't matter that if you wait 6 months you can get a vastly better computer for half the price, at some point you have to actually buy a computer.
      - cyberax 2y ago
        > That's the macroeconomic argument I alluded to. Of course, what this argument amounts to is that economic growth should be fueled in part by devaluing the money of the working and lower-middle class You have it literally backwards. Like 100% backwards. In a normal healthy economy, salaries grow faster than inflation. So workers living on their wages are not affected. Transient periods of high inflation might even benefit them, as they also devalue their fixed _debts_. It's the rich people who are affected by the inflation, they are forced to invest money, rather than just leave them sitting in a risk-free account. Conversely, deflation primarily causes pain for the working class (that's how Hitler came to power!), because it slows down the economy and makes their debts grow. While rich people can just enjoy having a risk-free real income growth.
        SuperNinKenDo 2y ago
        I don't have it literally backwards, because that's not what happens. You do have your Hitler argument completely backward though. Weimar Germany was undergoing runaway _hyper-inflation_, not deflation. Interest rates move in the same direction as inflation with some lag, so the idea that poor people benefit due to reduction in debt is weak at best, but given that the rich rely on debt so heavily themselves, any positive effect on the poor would be even greater for the rich barring some special reason I can't think of. As for rich people being the ones affected by inflation, it does in fact change their incentives dramatically, so that's true as far as that goes, however it doesn't actually result in loss of wealth for them as again, they are the ones with the capacity to invest it in assets to protect or grow its value, and the ability to use leverage to use money now that they don't even have yet, in exchange for devalued money in the future. It might have some effect of weeding out the truly incompetently or indigently rich, but of that group the ones who don't have smarter family around to save them from themselves will be those who probably come from lower class backgrounds anyway.
- cyberax 2y ago
  > There's a reason the term "deflation" exists, and it's not simply a theoretical concept. Yeah. The last time deflation happened in Europe, it resulted in Hitler coming to power. Not kidding, Hitler came to power after a period of _deflation_ in Germany.
  - SuperNinKenDo 2y ago
    See my other comment, but unless I'm taking crazy pills, you have that completely backward. Weimar Germany was notoriously _hyper-inflationary_.
    - plumarr 2y ago
      And it was followed by a deflationist policy in the years preceding the Nazi takeover : https://en.wikipedia.org/wiki/Heinrich_Br%C3%BCning#Historic_evaluation https://en.wikipedia.org/wiki/Heinrich_Br%C3%BCning#Historic...
      - SuperNinKenDo 2y ago
        I don't think moderate deflation after a period of hyper-inflation is much of an argument. It's just a weird little gotcha that someone who doesn't want to abandon their priors will whip out. Not compelling at all. It's like claiming a failed medical intervention is the cause of a death because it had some negative effects that might have even made things worse, but the patient was already sick and dying. Many cancer patients die from the effects of chemotherapy before the cancer itself gets them, it doesn't mean cancer is actually good.
        cyberax 2y ago
        > It's just a weird little gotcha that someone who doesn't want to abandon their priors will whip out. Do you want a mirror? And why that episode was minor?
        SuperNinKenDo 2y ago
nradov 2y ago
Deflation isn't necessarily a problem. Prices for some things like computers and consumer electronics are constantly deflating. Compare the price of a large HDTV today versus 20 years ago. Or do the same with rechargeable batteries or solar panels, etc. Of course much of that deflation was driven by economies of scale in Asian manufacturing hubs and we can argue about whether that's a good thing, but the deflation itself was good.
- _DeadFred_ 2y ago
  Apparently America draws the line of where it's bad somewhere between computers/TVs and food for the poor/working class.
- oceanplexian 2y ago
  Look at anything that the wealthy consider valuable: Jewelry, gold, real estate- all have undergone astronomical inflation. You can’t go buy a nice oak table for less than you did 20 years ago. Or high quality tools (To get something like old Craftsman I need to import tools from Germany at 10x the price). No one notices because of the insidious nature of inflation. “Cheap TVs!” appear to be deflating and are the bread and circuses. Meanwhile a massive amount of wealth is being stolen.
usaar333 2y ago
Wages generally kept track with inflation since before covid: https://fred.stlouisfed.org/series/LES1252881600Q https://fred.stlouisfed.org/series/LES1252881600Q I really don't understand the dynamic here.
- profmonocle 2y ago
  The problem is people don't really see wage increases and inflation as things that balance each other out. They think of raises as something earned that will improve their lifestyle - when inflation cancels that out, it can feel like you were cheated out of that reward. Even if you understand intellectually that a pay increase is a cost of living adjustment, that doesn't mean it isn't disheartening to see your new earnings being eaten up by inflation.
  - jazzkingrt 2y ago
    Additional point: wage increases not uniformly distributed, whereas costs are moreso.

by fizx 2y ago

SuperNinKenDo 2y ago

There's a reason the term "deflation" exists, and it's not simply a theoretical concept. Constant inflation is a political choice, entirely so in the age of fiat currency, whatever you think of it. The reason you never hear a good plan for growing wages to catch inflation is because inflation is a form of intentionally regressive taxation. For reasons of macroeconomic theories meeting special interests with socio-political leverage.

teeray 2y ago
> There's a reason the term "deflation" exists Which has always been treated as a spooky four-letter word in economics. I remember the news stories in 2008 when we had a brief period of deflation and the headlines were particularly apocalyptic (even despite the overall grim economic news of the time).
- TheFlyingFish 2y ago
  Isn't the problem with deflation that it de-incentivizes investment (why accept risk when you can just stuff your mattress with money and grow your wealth risk-free), which tanks the economy? Lowering prices sounds nice, but my understanding has always been that it would come at the cost of less actual wealth overall.
  - sethammons 2y ago
    which should disproportionately affect the wealthy. Another way of saying that: we pay higher prices with inflation so the wealthy are more wealthy. That money goes somewhere.
  - _DeadFred_ 2y ago
    And hence we had the destruction of the entire tech industry because people never buy computers because tomorrow you can get a better one for cheaper.
  - SuperNinKenDo 2y ago
    That's the macroeconomic argument I alluded to. Of course, what this argument amounts to is that economic growth should be fueled in part by devaluing the money of the working and lower-middle class, who earn their money through wages and have limited means of preserving its value through capital investment, while the wealthy, who have more opportunity to invest in capital and use leverage, are largely shieled from, or on the extreme end even benefit from, its effects. Hence, a regressive tax. The most obvious argument against this notion is that many things are effectively deflationary anyway, such as computers, which at least until recently were deflationary in the extreme. Not only did they tend to get ever cheaper over time, but while getting cheaper they have and continue to become more powerful, at times by miles in the space of a few years. And yet, people still buy computers, and firms still engineer and manufacture them, because at some point it doesn't matter that if you wait 6 months you can get a vastly better computer for half the price, at some point you have to actually buy a computer.
    - cyberax 2y ago
      > That's the macroeconomic argument I alluded to. Of course, what this argument amounts to is that economic growth should be fueled in part by devaluing the money of the working and lower-middle class You have it literally backwards. Like 100% backwards. In a normal healthy economy, salaries grow faster than inflation. So workers living on their wages are not affected. Transient periods of high inflation might even benefit them, as they also devalue their fixed _debts_. It's the rich people who are affected by the inflation, they are forced to invest money, rather than just leave them sitting in a risk-free account. Conversely, deflation primarily causes pain for the working class (that's how Hitler came to power!), because it slows down the economy and makes their debts grow. While rich people can just enjoy having a risk-free real income growth.
      - SuperNinKenDo 2y ago
        I don't have it literally backwards, because that's not what happens. You do have your Hitler argument completely backward though. Weimar Germany was undergoing runaway _hyper-inflation_, not deflation. Interest rates move in the same direction as inflation with some lag, so the idea that poor people benefit due to reduction in debt is weak at best, but given that the rich rely on debt so heavily themselves, any positive effect on the poor would be even greater for the rich barring some special reason I can't think of. As for rich people being the ones affected by inflation, it does in fact change their incentives dramatically, so that's true as far as that goes, however it doesn't actually result in loss of wealth for them as again, they are the ones with the capacity to invest it in assets to protect or grow its value, and the ability to use leverage to use money now that they don't even have yet, in exchange for devalued money in the future. It might have some effect of weeding out the truly incompetently or indigently rich, but of that group the ones who don't have smarter family around to save them from themselves will be those who probably come from lower class backgrounds anyway.
cyberax 2y ago
> There's a reason the term "deflation" exists, and it's not simply a theoretical concept. Yeah. The last time deflation happened in Europe, it resulted in Hitler coming to power. Not kidding, Hitler came to power after a period of _deflation_ in Germany.
- SuperNinKenDo 2y ago
  See my other comment, but unless I'm taking crazy pills, you have that completely backward. Weimar Germany was notoriously _hyper-inflationary_.
  - plumarr 2y ago
    And it was followed by a deflationist policy in the years preceding the Nazi takeover : https://en.wikipedia.org/wiki/Heinrich_Br%C3%BCning#Historic_evaluation https://en.wikipedia.org/wiki/Heinrich_Br%C3%BCning#Historic...
    - SuperNinKenDo 2y ago
      I don't think moderate deflation after a period of hyper-inflation is much of an argument. It's just a weird little gotcha that someone who doesn't want to abandon their priors will whip out. Not compelling at all. It's like claiming a failed medical intervention is the cause of a death because it had some negative effects that might have even made things worse, but the patient was already sick and dying. Many cancer patients die from the effects of chemotherapy before the cancer itself gets them, it doesn't mean cancer is actually good.
      - cyberax 2y ago
        > It's just a weird little gotcha that someone who doesn't want to abandon their priors will whip out. Do you want a mirror? And why that episode was minor?
        SuperNinKenDo 2y ago

nradov 2y ago

Deflation isn't necessarily a problem. Prices for some things like computers and consumer electronics are constantly deflating. Compare the price of a large HDTV today versus 20 years ago. Or do the same with rechargeable batteries or solar panels, etc. Of course much of that deflation was driven by economies of scale in Asian manufacturing hubs and we can argue about whether that's a good thing, but the deflation itself was good.

_DeadFred_ 2y ago
Apparently America draws the line of where it's bad somewhere between computers/TVs and food for the poor/working class.
oceanplexian 2y ago
Look at anything that the wealthy consider valuable: Jewelry, gold, real estate- all have undergone astronomical inflation. You can’t go buy a nice oak table for less than you did 20 years ago. Or high quality tools (To get something like old Craftsman I need to import tools from Germany at 10x the price). No one notices because of the insidious nature of inflation. “Cheap TVs!” appear to be deflating and are the bread and circuses. Meanwhile a massive amount of wealth is being stolen.

usaar333 2y ago

Wages generally kept track with inflation since before covid: https://fred.stlouisfed.org/series/LES1252881600Q https://fred.stlouisfed.org/series/LES1252881600Q I really don't understand the dynamic here.

profmonocle 2y ago
The problem is people don't really see wage increases and inflation as things that balance each other out. They think of raises as something earned that will improve their lifestyle - when inflation cancels that out, it can feel like you were cheated out of that reward. Even if you understand intellectually that a pay increase is a cost of living adjustment, that doesn't mean it isn't disheartening to see your new earnings being eaten up by inflation.
- jazzkingrt 2y ago
  Additional point: wage increases not uniformly distributed, whereas costs are moreso.