If you have debt, inflation eats away at that debt. If you’re paying 5% per year on that debt, but inflation goes up 3%, you’re actually only paying 2% on that debt. That’s good for people who have debt, and bad for the people who invested the initial money for that debt. With deflation, it’s the opposite.
This assumes your wages go up with inflation, though. Over the long term, that does tend to happen, but there are certainly periods where that is not true.
That became something of a meme post-2008 financial disaster, and it was true then. It’s not true anymore. That’s what I meant by it not being true in certain time periods. It depends on where you put the start and end dates.
1982-84 CPI Adjusted Dollar - aka, a measure that eliminates housing, healthcare, and energy costs. Like, the two main drivers for CoL in the US.
And, it’s still more than kinda true now. Ever wonder why homelessness is jumping up? Or why healthcare bankruptcies are extremely common? Is it because the wage growth outpaces those costs?
I don’t believe so.
Oh, that also only tracks “Full time workers”… Something like 60% of Americans are NOT full time workers. They work 39.5 hrs, just enough to put them under “full time”.
The CPI represents all goods and services purchased for consumption by the reference population. BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups (food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services). Included within these major groups are various government-charged user fees, such as water and sewerage charges, auto registration fees, and vehicle tolls.
Energy is a little more complicated, but it should be included in the graph above:
Has the BLS removed food or energy prices in its official measure of inflation?
No. The BLS publishes thousands of CPI indexes each month, including the headline All Items CPI for All Urban Consumers (CPI-U) and the CPI-U for All Items Less Food and Energy. The latter series, widely referred to as the “core” CPI, is closely watched by many economic analysts and policymakers under the belief that food and energy prices are volatile and are subject to price shocks that cannot be damped through monetary policy. However, all consumer goods and services, including food and energy, are represented in the headline CPI.
So, do you have a more comprehensive set of data? Because when people were posting about this circa 2012, the above link is what they pointed to. Now that it’s not showing the same answers, people suddenly don’t like it.
Edit: a more robust way to make a similar argument is to point out the disparity between wages and productivity since the 1960s. That’s a huge gap, it’s only gotten wider, and it’d take a long time to fix without a revolution.
If money should never become an asset worth holding, how can inflation be better than deflation for the working class?
It’s deflation that turns money into an asset worth holding and thus slows down economies. Too much inflation isn’t good either, for different reasons. A slight and stable inflation is the sweet spot.
Proportionately, the rich hold a lot more money assets than the poor, who generally don’t hold any or very little.
Indeed, the rich do proportionately hold a lot more money than the poor, but it isn’t much. The rich mostly have shares in corporations, bonds and real estate.
Inflation is generally worse for workers because the rich have more pricing power. If both your living expenses and your income after taxes increased by 20%, you’d even end up with more money than before, assuming your living expenses were a fraction of your income. Unfortunately, prices haven’t risen equally; the cost of living increase has generally outpaced real wage growth. The rich have been able to set higher prices; workers haven’t been able to extract high enough wage raises.
Neither high inflation nor deflation are good for workers. What workers need is pricing power through strong unions and political support.
My understanding is that a slight and stable increase in the money supply is beneficial regardless of the monetary system in use, because it incentivizes economic activity. That said, I’m only somewhat familiar with our current fractional-reserve banking system and don’t know enough about other systems, historical or hypothetical, to present my understanding as fact.
Forgive my admitted ignorance. If money should never become an asset worth holding, how can inflation be better than deflation for the working class?
Proportionately, the rich hold a lot more money assets than the poor, who generally don’t hold any or very little.
If you have debt, inflation eats away at that debt. If you’re paying 5% per year on that debt, but inflation goes up 3%, you’re actually only paying 2% on that debt. That’s good for people who have debt, and bad for the people who invested the initial money for that debt. With deflation, it’s the opposite.
This assumes your wages go up with inflation, though. Over the long term, that does tend to happen, but there are certainly periods where that is not true.
Not in the US. We haven’t seen a real pay increase since the early 1980s.
That became something of a meme post-2008 financial disaster, and it was true then. It’s not true anymore. That’s what I meant by it not being true in certain time periods. It depends on where you put the start and end dates.
As of now, median wages are significantly better off in real terms than any time in the 1980s: https://fred.stlouisfed.org/series/LES1252881600Q
1982-84 CPI Adjusted Dollar - aka, a measure that eliminates housing, healthcare, and energy costs. Like, the two main drivers for CoL in the US.
And, it’s still more than kinda true now. Ever wonder why homelessness is jumping up? Or why healthcare bankruptcies are extremely common? Is it because the wage growth outpaces those costs?
I don’t believe so.
Oh, that also only tracks “Full time workers”… Something like 60% of Americans are NOT full time workers. They work 39.5 hrs, just enough to put them under “full time”.
Oh, also, you’re wrong that this excludes housing and healthcare:
https://www.bls.gov/cpi/questions-and-answers.htm
Energy is a little more complicated, but it should be included in the graph above:
https://www.bls.gov/cpi/factsheets/common-misconceptions-about-cpi.htm
So, do you have a more comprehensive set of data? Because when people were posting about this circa 2012, the above link is what they pointed to. Now that it’s not showing the same answers, people suddenly don’t like it.
Edit: a more robust way to make a similar argument is to point out the disparity between wages and productivity since the 1960s. That’s a huge gap, it’s only gotten wider, and it’d take a long time to fix without a revolution.
A more comprehensive set of data?
I dunno. Not my job to try and prove capitalism is Good, Actually.
In other words, what do you use to back up your assertion that wages have not matched inflation?
It’s deflation that turns money into an asset worth holding and thus slows down economies. Too much inflation isn’t good either, for different reasons. A slight and stable inflation is the sweet spot.
Indeed, the rich do proportionately hold a lot more money than the poor, but it isn’t much. The rich mostly have shares in corporations, bonds and real estate.
Inflation is generally worse for workers because the rich have more pricing power. If both your living expenses and your income after taxes increased by 20%, you’d even end up with more money than before, assuming your living expenses were a fraction of your income. Unfortunately, prices haven’t risen equally; the cost of living increase has generally outpaced real wage growth. The rich have been able to set higher prices; workers haven’t been able to extract high enough wage raises.
Neither high inflation nor deflation are good for workers. What workers need is pricing power through strong unions and political support.
Only if you enjoy living on debt.
My understanding is that a slight and stable increase in the money supply is beneficial regardless of the monetary system in use, because it incentivizes economic activity. That said, I’m only somewhat familiar with our current fractional-reserve banking system and don’t know enough about other systems, historical or hypothetical, to present my understanding as fact.
The problem is “incentivizing economic activity”… Economic activity, honestly, shouldn’t happen unless it’s somehow benefiting human life.
Sectors like banking and ad tech do nothing to benefit human life. They serve to extract resources from people, and thats all.