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Question for the economists in this thread. Everyone seems to be saying that a lack of at least some inflation is bad but also that wages going up to meet it is bad. Isn't this a system automatically doomed to fail? Eventually in such a setup no one can afford anything and the economy collapses.
Inflation is fine as long as wages rise with it.
The issue is our economy is entirely built around low interest rates and low inflation. It's been that way for a generation. This benefit asset-holders like home owners and the wealthy. Hence why they are doing everything possible to avoid wage-growth. They don't care about inflation, what they are terrified of is wage growth and higher interest rates.
If wages rise together with inflation you get hyper inflation.
No, that's nonsense. Wages going up are not going to cause 1,000% inflation per year.
I hate to agree with the other guy, but we just saw massive inflation during pandemic because corps refuse to eat ANY loss in profit. It's all fucking greed.
A big part of that was greed, but not due to rising wages as the poster suggests. Real wages (which means inflation adjusted) did rise sharply in the immediate time after the pandemic recession, but stabilized by 2022.
There were legitimate bottleneck issues that caused some prices to rise. Companies then saw that they had a once in a century opportunity to raise them even more and blame bottlenecks. Despite what a lot of people think, companies can't raise prices arbitrarily in most circumstances. They'll just lose customers. This particular situation, though, meant that everyone could do it at once and customers would just have to bear it.
But it will and there's plenty of precedent, like Weimar Republic.
That's not how that works. That's not at all how that works.
Right... Well, enlighten us all! Maybe you'll get a prize or something for disproving economists!
Waving your hands around and saying "Wiemar Germany inflation" is the economic equivalent of "Rome fell because feminisim/immigration/too many homosexuals/not enough homosexuals/Christianity/didn't use Heron's steam engine/lack of Starbucks". It's brought out by people with an agenda and a willingness to twist any historical fact to make things fit that agenda.
No, that was because of high volumes of money printing to pay debts.
Yeah, debts to workers.
Are you just making up "facts" as the contradictions flow? Or did someone else make up these "facts" and you just parrot them?
Debts to other countries. Apparently, you don't know the first thing about how that happened.
Inflation doesn't prevent wealth hoarding. In fact it benefits non-cash assets which the rich hoard plenty.
How does reducing the value of cash prevent hoarding of gold (which would be worth more cash then)?
But then they just hoard real estate.
Inflation is easier to handle and not as bad for the economy as deflation, so that's where we are always at.
2% inflation and 2.5%-3% wage gains where the difference is made up by productivity gains would be the ideal.
The thing people are scared of is a wage-price spiral where inflation is 10% so wages have to rise 10% which increases employer costs so they raise prices 10% so wages have to rise 10% etc. High inflation that becomes self-perpetuating.
Wages rising faster than inflation is good, but the risk of a wage-price spiral is what people are afraid of with rising wages.
The problem is credit. People and government buying things not with money but credit. Basically IOUs from a parent to a child. In this metaphor it's like our shitty fucking parents paying home security bills amd groceries with credit cards and using cash for the casinos.
I honestly don't get it. Why do prices have to go up even if wages don't? It seems like some people say that some kind of inflation is absolutely necessary no matter what.
It's nearly impossible for us to maintain the value of money. More is printed every day, much is destroyed at a rate that can't be tracked, and the economy is fucking complex. Because of all that it will either be in an inflationary or deflationary state at any given moment
Generally speaking inflation is better overall than deflation, so we try to keep a low inflation rate going so it's not out of control and doesn't enter deflation
Because profit.
They don't HAVE to go up, but inflation is helpful to the economy and deflation is harmful. With deflation everyone stops spending because their dollar will buy more tomorrow, and that lack of activity hurts the economy.
With a little bit of steady inflation it encourages spending, but wages tend to keep up so it doesn't actually hurt people.
Also those times when inflation outpaces wage growth are theoretically helpful (in a market that doesn't have other failures) because if wage growth has stalled that means the value of that labor to the employer has decreased, and inflation helps reset that value calculation without making it a normal thing for companies to reduce your wage at an annual review, think of how hard that would be to budget for.
I really want to know where people got the idea that people would stop spending because their money is supposedly worth 2% more after a year. The only examples I see given are things like economic downturns (i.e. credit freezes and layoffs), where there is deflation because people are spending less for reasons other than deflation. To give an example of deflation not being harmful, just look at technology. Technology gets better and cheaper all the time, but it's not like nobody is buying technology, quite the opposite in fact.
I've read that it's a debt problem more than anything else. The world runs on credit, and inflation decreases the debt burden. When dollar value goes down thanks to the inflation, the value of the debt also goes down so it becomes easier to pay off (at least for those who do get inflation raises...). So essentially the rich get richer thanks to inflation.
That's factored into the interest rate of loans. Inflation only decreases the debt burden when inflation increases higher than the average rate AND the one who needs to pay is actually getting more money. What's the difference between a loan with a 6% interest rate when there's 2% inflation and a loan with a 2% interest rate when there's 2% deflation?