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I think you're conflating productivity growth with distribution. Technology increased wealth, but whether workers shared in those gains depended heavily on barg

by siavosh 2mo ago

I think you're conflating productivity growth with distribution. Technology increased wealth, but whether workers shared in those gains depended heavily on bargaining power and institutions.

cluckindan 2mo ago
Everything changed with floating currency. Inflation became a tool for centralization of ownership.
- smallmancontrov 2mo ago
  The Robber Barons were able to r>g their empires just fine in gold-backed currency. The Cantillon Pump is only one of several major "rich get richer" mechanisms in the economy. It is not the most important, and it does not consistently run in the same direction (wages can inflate faster than assets).
- WalterBright 2mo ago
  Inflation is caused by deficit spending. It is a tool for government to increase spending without raising taxes.
  - barrkel 2mo ago
    Inflation is an increase in the cost of living. It can be caused by deficit spending. It can also be caused by supply shocks. For example, if you restrict building new housing, the price of housing will increase, both rents and house prices. If you tariff imports, a basket including those goods will rise in price to the degree those imports are not substituable. If you start a war in the Middle East, oil prices will rise, and increased energy costs can feed into lots of different things, raising prices.
    - WalterBright 2mo ago
      Sigh. It is always the result of deficit spending. Bob earns $20 every day. He buys 5 eggs $2/ea and 5 apples $2/ea every day. Now, due to supply shocks, egg prices double. He still has only $20, and so he now buys fewer eggs and fewer apples. What happens when he buys fewer apples? The price of apples goes down, due to the Law of Supply and Demand. There is no inflation. What happens when this economy is flooded with dollars? The Law of Supply and Demand again, meaning the value of each dollar drops. That means the dollar price of eggs and apples rise, as well as his wages. Oil prices rising means people have less money to spend meaning prices of other things drop. Another way to look at it is the US had zero net inflation from 1800-1914. From 1914 to today a dollar is worth 3 cents of a 1914 dollar. That isn't due to supply shocks, and there certainly were plenty of supply shocks before 1914. 1914 is when the Fed was created and empowered to print money with no backing.
      - smallmancontrov 2mo ago
        People had to put up with deflationary shocks and yet robber barons built their empires all the same. Hard money doesn't stop r>g, it doesn't stop expected returns from growing increasingly burdensome, and it doesn't stop assets from appreciating relative to wages. It doesn't actually deliver the things we care about. It delivers plenty of things we don't care for, though. History provides the most lurid examples, but we have modern ones too. In the US, Clinton balanced the budget and the macroeconomic consequences broke something very important (audience participation: what was it? Hint: we call them "dual deficits" for a reason). We quickly took our finger off the stove, though, so it was only a lesson for the observant. Germany on the other hand kept its debt brake in place, which mechanically suppressed investment (macro 101 quiz time again: why?) with staggering consequences, leading to one of the most underinvested economies in Europe and almost completely shutting them out of the digital revolution, in which I privately suspect they'd have otherwise participated fabulously. In any case, had Clinton installed a debt brake, that would have been us. HackerNews, YCombinator, and all the ZIRP babies around these parts would have been among the most affected. The Magnificent 7 would not have all been in the US. So no, deficits aren't the root of all evil and the appropriate deficit is considerably north of 0. That said, it's south of where we have it. Interest rates are the gauge. Is money being pushed in (low rates) or pulled in (high rates)? We are transitioning from the former regime to the latter regime, partly due to imperial retreat, partly due to crisis-level spending in a time of no crisis which is wildly irresponsible. The US is clearly headed for a debt crisis. But the answer is belt-tightening and either gentle-repression-over-time like we did after WWII (fat chance) or an inflation spike followed by a rate hike (probably several) until the bond market is happy again. It's going to be bumpy, but not as bumpy as the hard money counterfactual.
  - cluckindan 2mo ago
    I believe inflation is caused by people with too much money spending it frivolously and overpaying for everything.

by siavosh 2mo ago

I think you're conflating productivity growth with distribution. Technology increased wealth, but whether workers shared in those gains depended heavily on bargaining power and institutions.

cluckindan 2mo ago

Everything changed with floating currency. Inflation became a tool for centralization of ownership.

smallmancontrov 2mo ago
The Robber Barons were able to r>g their empires just fine in gold-backed currency. The Cantillon Pump is only one of several major "rich get richer" mechanisms in the economy. It is not the most important, and it does not consistently run in the same direction (wages can inflate faster than assets).
WalterBright 2mo ago
Inflation is caused by deficit spending. It is a tool for government to increase spending without raising taxes.
- barrkel 2mo ago
  Inflation is an increase in the cost of living. It can be caused by deficit spending. It can also be caused by supply shocks. For example, if you restrict building new housing, the price of housing will increase, both rents and house prices. If you tariff imports, a basket including those goods will rise in price to the degree those imports are not substituable. If you start a war in the Middle East, oil prices will rise, and increased energy costs can feed into lots of different things, raising prices.
  - WalterBright 2mo ago
    Sigh. It is always the result of deficit spending. Bob earns $20 every day. He buys 5 eggs $2/ea and 5 apples $2/ea every day. Now, due to supply shocks, egg prices double. He still has only $20, and so he now buys fewer eggs and fewer apples. What happens when he buys fewer apples? The price of apples goes down, due to the Law of Supply and Demand. There is no inflation. What happens when this economy is flooded with dollars? The Law of Supply and Demand again, meaning the value of each dollar drops. That means the dollar price of eggs and apples rise, as well as his wages. Oil prices rising means people have less money to spend meaning prices of other things drop. Another way to look at it is the US had zero net inflation from 1800-1914. From 1914 to today a dollar is worth 3 cents of a 1914 dollar. That isn't due to supply shocks, and there certainly were plenty of supply shocks before 1914. 1914 is when the Fed was created and empowered to print money with no backing.
    - smallmancontrov 2mo ago
      People had to put up with deflationary shocks and yet robber barons built their empires all the same. Hard money doesn't stop r>g, it doesn't stop expected returns from growing increasingly burdensome, and it doesn't stop assets from appreciating relative to wages. It doesn't actually deliver the things we care about. It delivers plenty of things we don't care for, though. History provides the most lurid examples, but we have modern ones too. In the US, Clinton balanced the budget and the macroeconomic consequences broke something very important (audience participation: what was it? Hint: we call them "dual deficits" for a reason). We quickly took our finger off the stove, though, so it was only a lesson for the observant. Germany on the other hand kept its debt brake in place, which mechanically suppressed investment (macro 101 quiz time again: why?) with staggering consequences, leading to one of the most underinvested economies in Europe and almost completely shutting them out of the digital revolution, in which I privately suspect they'd have otherwise participated fabulously. In any case, had Clinton installed a debt brake, that would have been us. HackerNews, YCombinator, and all the ZIRP babies around these parts would have been among the most affected. The Magnificent 7 would not have all been in the US. So no, deficits aren't the root of all evil and the appropriate deficit is considerably north of 0. That said, it's south of where we have it. Interest rates are the gauge. Is money being pushed in (low rates) or pulled in (high rates)? We are transitioning from the former regime to the latter regime, partly due to imperial retreat, partly due to crisis-level spending in a time of no crisis which is wildly irresponsible. The US is clearly headed for a debt crisis. But the answer is belt-tightening and either gentle-repression-over-time like we did after WWII (fat chance) or an inflation spike followed by a rate hike (probably several) until the bond market is happy again. It's going to be bumpy, but not as bumpy as the hard money counterfactual.
- cluckindan 2mo ago
  I believe inflation is caused by people with too much money spending it frivolously and overpaying for everything.