Three Economic Things That Do Not Exist

[eridani]

http://delong.typepad.com/sdj/2011/05/three-economic-things-that-do-not-exist.html

The Inflation Monster Under the Bed: I’m glad to see Greg Mankiw agreeing with me on the absence of any inflation risk in the current environment. Maybe he should have a word with everyone else in his party.... ages have gone nowhere. Commodity prices, on the other hand, have gone up.... So here are a couple of questions.

Do you see any sign that workers are about to (or are even able to) demand higher wages to compensate for the higher prices of gas and food?

Do you any sign that employers are getting ready to make more generous wage offers?

Have you heard anything about companies feeling that they have room to raise prices by substantially more than the rise in their raw material costs?

[AtheistCrusader]

1. There are only two companies I know of 'voluntarily' raising wages. MSFT and GOOG.

[Sherman A1]

2. There is an inflation monster, but it is all supply sided

and has nothing to do with wages or salaries unless you are in that upper 1%, which is once again where the benefits of any increases in productivity seem to be going.

I know we are suffering hour cuts at my place of employment. It's doing more with less on steroids.

[orangeapple]

3. I just wish I shopped

where these economists who see no inflation shop.

I hear the Ipad2 is twice as nutritious!

[eridani]

5. He means hyperinflation due to currency policy, not inflation due to

---commodities rising in price.

[orangeapple]

6. inflation isn't due to prices rising

prices rising are a symptom of inflation.

Your nose runs because you have a cold. You don't have a cold because your nose runs.

Inflation of the money supply is the government's policy. We must never lose sight of this, or we'll forever be treating symptoms instead of the underlying condition.

"Today an ounce of gold sells for $300, more or less. Now suppose that a modern alchemist solves his subject's oldest problem by finding a way to produce unlimited amounts of new gold at essentially no cost. Moreover, his invention is widely publicized and scientifically verified, and he announces his intention to begin massive production of gold within days. What would happen to the price of gold? Presumably, the potentially unlimited supply of cheap gold would cause the market price of gold to plummet. Indeed, if the market for gold is to any degree efficient, the price of gold would collapse immediately after the announcement of the invention, before the alchemist had produced and marketed a single ounce of yellow metal.

What has this got to do with monetary policy? Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation." - Benjamin Bernanke, 2002


He's doing exactly what he said he would, the people protecting their purchasing power in gold, etc. were just paying attention to him.

[Po_d Mainiac]

4. Garbage article. n/t

[Name removed]

9. Deleted message

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[customerserviceguy]

7. What's coming is called 'stagflation'

We suffered with it mightily in the early to mid 1970's when the cost of the Vietnam War finally arrived.

[Pale Blue Dot]

8. Answers:

Do you see any sign that workers are about to (or are even able to) demand higher wages to compensate for the higher prices of gas and food?

Thanks to the continuing decline in Unions and the high unemployment rate, workers aren't in a position to demand anything.

Do you any sign that employers are getting ready to make more generous wage offers?

Why the hell would they? See above.

Have you heard anything about companies feeling that they have room to raise prices by substantially more than the rise in their raw material costs?

You mean, like the oil companies? Food producers? Shipping companies? And besides, what does this question have to do with anything? If raw material costs are going up, then prices will rise. Period.

What a shit article.

[golfguru]

10. BullSh*t article

Cheapening dollar helps the economy? Give me a break.
It only helps a handful of manufacturers because they
can then hire cheap labor and export goods.

OTOH it hurts every single person on fixed income, every
person who has managed to skimp and save a few dollars for
future needs (kid's education, retirement, etc). By reducing
the buying power of every worker's paycheck it reduces their
standard of living. Bond holders get screwed since at maturity
those bonds have less buying power.

[Art_from_Ark]

11. I am often reminded of a commercial I saw back in the late '60s or early '70s

It was a plug for the Payroll Savings Plan wherein a certain amount would be deducted from an enrollee's paycheck each month to buy a US Savings Bond. One testimonial was given by a postal worker who chirped "Last year, I was able to save $300 with the Payroll Savings Plan". At the time, $300 was close to a month's income for some people like elementary school teachers, so it was a considerable amount of money.