There is almost full unanimity among economists, academicians, various commentators and voters that inflation is about general increases in the prices of goods and services. There is this “conformed belief” that a fall in unemployment or a rise in economic activity is seen as a “potential” inflationary trigger. Some other triggers, such as rises in commodity prices or workers’ wages, are also regarded as potential threats. If inflation is just a general rise in prices, as the popular thinking has it, then why is it regarded as bad news? What kind of damage does it do? Read my article: http://www.readoo.in/2015/03/are-you-an-apoplithorismosphobic/ to discuss the horrendous imbecility of ergonomical economists who egonomistically do bad economics for good politics.
nobody takes psychologists seriously. They come out with all kinds of studies which normal people either agree with or find ridiculous. Please tell me what the difference is between an economist and a psychologist? They are both dismal sciences and not taken seriously by true scientists.
A little inflation is not harmful in an economy where there is a lot of debt. A lot of inflation is very bad and can lead to an inflationary spiral which ends with people hauling cash in wheel barrows to buy a loaf of bread. If you have increasingly higher and higher inflation, no one wants to own debt , bonds, mortgages etc.. Everyone wants to borrow when there is no one to lend, and no one wants to save. Zero inflation and deflation is more or less ideal, however, it seems unachievable over longer periods without holding the value of money constant. It is impossible now to hold the value of money constant, (a gold standard is no longer tenable) and the next best system is to let money float freely according to supply and demand. Thus all modern economies make use fiat currency, which works surprisingly well.. The Fed has a preference for a small steady inflation rate because that gives them a little more leeway in the use of monetary policy to handle small economic bumps. The Fed considers a little deflation to be potentially more dangerous than a little inflation. Their methods allow them to hit inflation targets only very approximately, so that is still another reason why they favor an inflation target around 2 percent rather than trying to aim at zero.
check out my nickel a quarter thread. The whole thing can be adjusted with a gradual increase in the minimum wage. My idea is a $.05/hr raise every three months. We've already tried trickle down and zero interest rates. Corp is not going to invest in cap x and the government can't make them do so as long as there is no demand (check out Spain, they spent billions building new roads, airports and bridges. Now they have good infrastructure but no demand to use it.) For crying out loud, many corporations no longer pay tax, so there is not much of a tax credit carrot to dangle in front of their mouth to get them going. No, as much as I hate the minimum wage and realize it is just taking money out of one pocket and putting it in another, it could be a useful tool to increase demand. If you are sitting on cash and you are not going to invest, then we the people are going to force you to pay the few remaining employees you still have more. We are at a stalemate and somebody needs to blink first, and a nickel an hour isn't going to kill you. As one astute poster pointed out, it is about what we have been doing anyway.
In this case, taking money out of one pocket and putting it in another is exactly what needs to be done, and if you can do it so the average pea brain can't figure it out, then it will even be possible to do it in those places where it won't get done otherwise. We have to get the minimum wage up, but it's only happening in progressive areas of the country that were already doing much better than the laggards. Subtle means will be needed to get this kind of stuff accepted in Mississippi, central Arkansas, and all the other fried-chicken-franchise States, the same way you have to trick a Jehovah's Witness into accepting a blood transfusion.
yes, but just remember, it is happening at Walmart and McDonalds with no help or mandate or law or decree from the federal govenment. Kind of messes up Pelosi and the democrats who think all men (especially white men) are greedy and evil. So now all we are arguing about is speed. I doubt if the confederate slave states refuse to progressively raise their minimum wage like the progressive democrats in progressive cities like Seatle and progressive states like California it will have much progressive affect on our progressive GDP.
Inflation can be described as getting less for your endeavors and labor than in the past. The spread between wages and "things". You need some experience, or age, to really appreciate this but sometimes low wages alone is enough.
but I agree, the minumum wage which most of us Milton Freidman conservative kitchen table economists abhor, is a useful tool we should use right now. Today. While the time is right. Tomorrow is too late. And I like it very gradual so it doesn't cause trauma to the hamburger stand owner. What do you think? A nickel a quarter? Does that sound about right? I really don't think those old white dying out of touch republicans appreciate what a ground swell of economic activity it would create.
I don't think that empirical studies make sense to me anymore, because they are vulnerable to mismanagement of knowledge and quantification of values. To my observation, values are subjective and cannot be measured. The very fact that "normal people" agree to disagree such studies is that they like spoon feeding and will blindly believe with whatever "study" suggests. The difference; psychologist: s/he does operant conditioning and jumps to the "astrological conclusions" like economists do, today. Economics, to my knowledge, is simply a praxeological science and must deal with the analysis of "human action". Read: Ludwig von Mises.
When it comes to deflation, mainstream economics becomes not the science of common sense, but the science of nonsense. Most economists today are quick to say, “a little inflation is a good thing,” and they fear deflation. Of course, in their personal lives, these same economists hunt the newspapers for the latest sales. The person who epitomizes this fear of deflation best is Janet, chairman of the Federal Reserve. Her interpretation of the Great Depression has greatly biased her view against deflation. It is true that the Great Depression and deflation went hand in hand in some countries; but, we must be careful to distinguish between association and causation, and to correctly assess the direction of causation. A recent study by Atkeson and Kehoe spanning a period of 180 years for 17 countres found no relationship between deflation and depressions. The study actually found a greater number of episodes of depression with inflation than with deflation. Over this period, 65 out of 73 deflation episodes had no depression, and 21 out of 29 depressions had no deflation. The main argument against deflation is that when prices are falling, consumers will postpone their purchases to take advantage of even lower prices in the future. Of course, this is supposed to reduce current demand, which will cause prices to fall even further, and so on, and so on, until we have a deflation-depression spiral of the economy. The direction of causation is clear: deflation causes depressions. You can find this argument in almost all introductory economics textbooks. Deflating the deflation myth: https://mises.org/library/deflating-deflation-myth The St. Louis Fed recently wrote: “While the idea of lower prices may sound attractive, deflation is a real concern for several reasons. Deflation discourages spending and investment because consumers, expecting prices to fall further, delay purchases, preferring instead to save and wait for even lower prices. Decreased spending, in turn, lowers company sales and profits, which eventually increases unemployment.” There are several problems with this argument. The first is that, regardless of how low prices of consumer goods are expected to fall, people will always consume some quantity in the present and in order to do so, they therefore need to spend in the present on investment to ensure the flow of consumer goods into the future. We can see that many high technology products have had brisk demand despite living in a deflationary environment. Apple has been able to sell its latest version of the iPhone, although most people expect the same phone to be much cheaper in six months. The second mistake with this argument is that it assumes that we base our expectations only on the past. Falling prices makes us anticipate prices to continue to fall. Of course, our expectations are based on a multitude of factors, of which past prices is just one. I am sure that the economists at the Fed are surprised that we did not react to lower interest rates as we did after the dot com bubble of 2001. Human actions simply cannot be modeled as you would the reactions of lab rats in a biology experiment. A third mistake is that if we are consuming less, we must be saving more. Investment must therefore be higher. Therefore increased saving that can lead to deflation does not reduce aggregate demand but simply alters the composition of demand. The demand for consumption goods will decline, to be replaced with demand for capital goods. If anything, this will lead to growth and more consumption goods in the future, since the economy has more capital to work with. Inflation is much worse than deflation because it robs wage earners and the poor. Central banks are the primary cause of inflation and are the main reason for the growth of income inequalities, as the rich get richer and the middle class sinks toward poverty. This income trend has been self-evident and growing since the demise of the Bretton Woods system in 1971 and its replacement with fiat currencies. Central bank power depends on the ability to generate inflation. This is why central banks have been so generous supporting economic research in so many academic institutions that serve to theoretically justify the central bank’s current inflationary policies. The common fallacy of “a little inflation being good” has been expounded by the media and economists for a reason. Inflation is theft as you sleep, since it robs the value of the dollars in your wallet. Two-percent inflation over 35 years reduces the value of money in your pocket by 50 percent. If anything, evil has a new face; it is called a central bank. Read: Deflation, the biggest myth: https://mises.org/library/deflation-biggest-myths Many times deflation follows a period of central bank inflation. Deflation is part of the deleveraging process that is necessary following such an excessive policy by the central bank. As Austrian economists have always said, “fear the boom, not the bust.” Delaying the deflation by extending the bubble or creating new bubbles by printing more money only delays the adjustment making it much more painful. The real solution is to end fractional reserve banking and central banking. A world without fractional reserve banking and central banks would be a world of gentle deflation, which should be hailed as indicative of one of mankind’s greatest achievements: the raising of living standards for all.