10 ms·

Inflation doesn't work that way. You can't legislate it into existence, and you can't legislate it away. If you could, it would be an easy problem to solve.

by Dove 14y ago

Inflation doesn't work that way. You can't legislate it into existence, and you can't legislate it away. If you could, it would be an easy problem to solve. Inflation occurs when you add to the money supply more than you add to the economy. The California gold rush caused inflation. Countries with hyperinflation have governments that are printing money at incredible rates. That's completely orthogonal to minimum wage. If you say I must have a $1000/hr job, it's in current dollars. Even if my employer wanted to pay me more, he can't -- he doesn't have the money to! Even if everyone wanted to switch over to doing that, they couldn't; there isn't enough money in the system! If everyone woke up tomorrow and agreed that a dollar was worth 1000x less, they'd all be 1000x poorer and nobody could afford anything. No, the minimum wage doesn't change the value of a dollar. It just changes who's allowed to earn one.

sergiosgc 14y ago
It's not the money supply. It's the money flow, which you can model as a product of money supply and money circulation speed. A $1000USD minimum wage will increase circulation speed and from there induce inflation.
- Dove 14y ago
  Let me get this straight. You think a minimum wage increase will increase the velocity of money, which will cause inflation, which is a good thing. That's the argument? Is that argument . . . original?
  - sergiosgc 14y ago
    Don't read too much into my comment. Your argumentation was based on the the fact that inflation only occurs when you add monetary mass. I just pointed that that's a naive view. Contrary to your statement, you can legislate inflation into existence by creating conditions for increased money flow. I did not say anything about the benefits of increasing minimum wage. In general it is known that the absence of minimum wage creates unsustainable imbalances of income society-wide. However, I don't know the US economy well enough for an informed opinion. Your current imbalance of income is huge, but that's only one data point.
  - superuser2 14y ago
    No, it's not original. It's called the "multiplier effect" and it's a pretty standard economic principle. See Forbes: http://www.forbes.com/sites/timworstall/2013/02/25/overestimating-the-effect-of-a-minimum-wage-rise/ http://www.forbes.com/sites/timworstall/2013/02/25/overestim...

by Dove 14y ago

sergiosgc 14y ago

It's not the money supply. It's the money flow, which you can model as a product of money supply and money circulation speed. A $1000USD minimum wage will increase circulation speed and from there induce inflation.

Dove 14y ago
Let me get this straight. You think a minimum wage increase will increase the velocity of money, which will cause inflation, which is a good thing. That's the argument? Is that argument . . . original?
- sergiosgc 14y ago
  Don't read too much into my comment. Your argumentation was based on the the fact that inflation only occurs when you add monetary mass. I just pointed that that's a naive view. Contrary to your statement, you can legislate inflation into existence by creating conditions for increased money flow. I did not say anything about the benefits of increasing minimum wage. In general it is known that the absence of minimum wage creates unsustainable imbalances of income society-wide. However, I don't know the US economy well enough for an informed opinion. Your current imbalance of income is huge, but that's only one data point.
- superuser2 14y ago
  No, it's not original. It's called the "multiplier effect" and it's a pretty standard economic principle. See Forbes: http://www.forbes.com/sites/timworstall/2013/02/25/overestimating-the-effect-of-a-minimum-wage-rise/ http://www.forbes.com/sites/timworstall/2013/02/25/overestim...