The Gaming Den

Dominicius wrote:While inflation does reduce debt of the average citizens it also reduces their overall wealth because unlike the fed they are not allowed to print their own money.

This is false. Most people have very little in the way of dollar denominated wealth. Their financial assets are negative. They have dollar denominated debts, and actually own stuff. Cars, houses, personal computers, clothing, cans of beans, whatever. Absolutely none of that wealth becomes less valuable when the dollar goes down in value.

Normal people work for a living and when they have extra money they invest in non-financial assets. Inflation is good for normal people. While inflation makes the nominal cost of a hamburger go up, it also makes the nominal paycheck for a burger flipper go up. People who make money and spend it are not affected by inflation at all. The average 30 year-old person has debts that are seventeen times higher than their savings. And don't forget that a lot of "savings" are in things like stocks that rise with inflation anyway. If the Teaparty was actually interested in populism, they'd be demanding a higher inflation target, like William Jennings Bryan.

But let's step back a bit and talk about what the Fed does and doesn't do. Most of the shit Paulites rant about are things the Fed doesn't do. They don't print money and make themselves rich. They don't cause secret inflation. They don't puppet the economy on invisible strings. They don't set fiscal policy. All they do is to raise and lower interest rates and tighten and loosen the over all money supply.

And they do all these things through two dials. The first is how many dollars they print versus how many dollars they burn each month. And the second is the interest they charge on lending the dollars they print to banks. That's it. That's all they control.

And what they are supposed to use those powers for is to keep inflation and unemployment low. When there is more, cheaper money to be had, people build more factories and buy more houses (reducing unemployment). When it's harder to borrow money, goods and services are competing for scarcer dollars, keeping prices from rising (reducing inflation). These two mandates are at odds with one another, and navigating between them is a complex technical problem, which is why the Fed doesn't (usually) set interest rates to negative or three digit numbers.

Now, the part about the Fed that is legitimately shady: Remember how I said they loaned all those dollars they printed to banks? Yeah, they do that. And the banks turn around and lend those dollars they just bought to people, corporations, and the US government at slightly higher interest rates. Essentially, the Federal Reserve allows every dollar it prints to be purchased by a plutocrat for ninety nine cents. That's corrupt, but it's not new.

Remember, the Federal Reserve System got started as a compromise during a period in which banks were basically making up their own money. The Federal Reserve is a collection of those banking interests who were forced to agree amongst each other how much money was actually needed and distribute that money around in a way they could agree upon. And further, it forced the whole committee to be beholden to the federal government, which had granted itself the power to fire the chairman if it got too uppity or insane.

That is and was a legitimate step forward in transparency, accountability, and functionality. The US Federal Reserve is a functional and internationally trusted system. If you go to Africa some time, you'll find that people are still a little shaky on whether they should accept Euros, but American Dollars are still considered money. Hell, I was actually robbed, and the robbers left my Czech Crowns in my bag while taking my local currency and American Dollars.

Of course, it doesn't make it perfect, and the entrenched plutocrats who get to buy dollars for ninety nine cents are still bullshit. And the whole world would be better off if the Federal Reserve simply lent that money out directly to real people. But it doesn't make the Fed evil. It just makes it a relic from 1913.

-Username17

Juton wrote:From this it seems that Sanders went looking, but couldn't find what he was looking for. And Bernake flat out says he won't release that information (around 1:20). So you have a congressman asking the Fed chair for information, and the fed chair declining to give that information.

Whoa, slow down there.

Bernie Sanders is an admitted socialist and God bless him for that. However, he also has kuh-raaaaAAAAzy ideas like the Fed keeping a higher inflation target--5%, can you imagine?!--and that the Fed should directly give money to people. It's no surprise that the Fed would resist him because people like him would use the Fed's defacto negative money loans as a line of attack.

So that seems to be a pretty big smoking gun that the Fed is evil and uses its secrecy to push unpopular policies. Unfortunately, this misses something pretty big. The fact remains that the Very Serious People (which includes the actual financial chairs like Paul Ryan, a supply-side wingnut) don't agree with his kuh-raaaaAAAAzy worldviews. They actually agree with laissez-faire bullshit artists like Greenspan and Bernanke over these issues. So when you're looking at things from the Very Serious Peoples' perspective he's not the Liddy to the Fed's Nixon, he's the Orly Taitz to the Fed's Obama. If Sanders pushes enough he'll probably get what he wants (and indeed, people always end up finding out what the Fed does) but in the meantime his Congressional colleagues don't really give a shit. If the Fed was actually doing something that party leaders didn't want then his tune would change pretty quickly, but Bernanke's vulgar monetarist views align pretty nicely with the economic center-right to far right's blinkered economic philosophy.

If you think that the situation is fucked up, I don't blame you. However, the problem remains as always with Congress. They're the ones willing to side with the Fed over Sanders.

Lago PARANOIA wrote:Whoa, slow down there.

Bernie Sanders is an admitted socialist and God bless him for that. However, he also has kuh-raaaaAAAAzy ideas like the Fed keeping a higher inflation target--5%, can you imagine?!--and that the Fed should directly give money to people. It's no surprise that the Fed would resist him because people like him would use the Fed's defacto negative money loans as a line of attack.

Remember, I'm not trying to argue the Fed or any of its particular policies are evil, or even wrong, just that it's secretive. In particular I was trying to show that even a senator (my bad in calling him a congressman previously) couldn't get some of the information he wanted. Previously you've made the assertion that a representative can get whatever information they want from the Fed, I think the clip I linked to refutes this.

FrankTrollman wrote:

Dominicius wrote:While inflation does reduce debt of the average citizens it also reduces their overall wealth because unlike the fed they are not allowed to print their own money.

This is false. Most people have very little in the way of dollar denominated wealth. Their financial assets are negative. They have dollar denominated debts, and actually own stuff. Cars, houses, personal computers, clothing, cans of beans, whatever. Absolutely none of that wealth becomes less valuable when the dollar goes down in value.

Normal people work for a living and when they have extra money they invest in non-financial assets. Inflation is good for normal people. While inflation makes the nominal cost of a hamburger go up, it also makes the nominal paycheck for a burger flipper go up. People who make money and spend it are not affected by inflation at all. The average 30 year-old person has debts that are seventeen times higher than their savings.

Can I get some clarification here, especially the bolded part?

I'm 34. The job I have now (government job, btw) is the first I've ever had where I had pay raises built in. Before that, any pay raise I got I had to fight for, and it often came with an accompanying increase in workload and responsibility. I cannot ever point to a time when inflation caused my paycheck to go up (perhaps someone else can?).

So I'm wondering where this idea comes from. Wages are not normally inflation-adjusted. So inflation is literally making every $1000 paycheck you get less valuable. Am I just really behind the curve, and all these Joe Schmoes are going to their boss each year and saying, "Hey, inflation's at around 2%, time to give me a raise"? And even if their wages are going up to match inflation...that's treading water. How is that good?

Can I get a hand-raise from people who's wages have matched inflation on a yearly basis?

I'm also well behind the curve on debt, apparently...I currently have about 5K in the bank, and my debt is a LOT less than 85K. But then, I'm about to buy a house, so that's going to change pretty soon. Did that 17x figure include mortgages?

And finally...while inflation is great for people with shit-tons of debt or who spend all their income and live paycheck-to-paycheck...is that really something we want people to be doing? It sounds suspiciously like putting your money into hard assets (like guns and cans of beans) and waiting for the financial collapse.

PoliteNewb wrote:

FrankTrollman wrote:

Dominicius wrote:While inflation does reduce debt of the average citizens it also reduces their overall wealth because unlike the fed they are not allowed to print their own money.

This is false. Most people have very little in the way of dollar denominated wealth. Their financial assets are negative. They have dollar denominated debts, and actually own stuff. Cars, houses, personal computers, clothing, cans of beans, whatever. Absolutely none of that wealth becomes less valuable when the dollar goes down in value.

Normal people work for a living and when they have extra money they invest in non-financial assets. Inflation is good for normal people. While inflation makes the nominal cost of a hamburger go up, it also makes the nominal paycheck for a burger flipper go up. People who make money and spend it are not affected by inflation at all. The average 30 year-old person has debts that are seventeen times higher than their savings.

Can I get some clarification here, especially the bolded part?

I'm 34. The job I have now (government job, btw) is the first I've ever had where I had pay raises built in. Before that, any pay raise I got I had to fight for, and it often came with an accompanying increase in workload and responsibility. I cannot ever point to a time when inflation caused my paycheck to go up (perhaps someone else can?).

So I'm wondering where this idea comes from. Wages are not normally inflation-adjusted. So inflation is literally making every $1000 paycheck you get less valuable. Am I just really behind the curve, and all these Joe Schmoes are going to their boss each year and saying, "Hey, inflation's at around 2%, time to give me a raise"? And even if their wages are going up to match inflation...that's treading water. How is that good?

Can I get a hand-raise from people who's wages have matched inflation on a yearly basis?

I'm also well behind the curve on debt, apparently...I currently have about 5K in the bank, and my debt is a LOT less than 85K. But then, I'm about to buy a house, so that's going to change pretty soon. Did that 17x figure include mortgages?

And finally...while inflation is great for people with shit-tons of debt or who spend all their income and live paycheck-to-paycheck...is that really something we want people to be doing? It sounds suspiciously like putting your money into hard assets (like guns and cans of beans) and waiting for the financial collapse.

In most jurisdictions that I am aware of, minimum wage is pegged to the Consumer Price Index, so as inflation goes up, so do wages. Same goes for most union jobs, which may or may not be a significant portion of jobs where you live. I never myself worked a union job but, on average, I have had yearly raises that were higher than CPI without any change in workload. Of course, YMMV.


Edited for clarity.

PoliteNewb wrote:I'm 34. The job I have now (government job, btw) is the first I've ever had where I had pay raises built in. Before that, any pay raise I got I had to fight for, and it often came with an accompanying increase in workload and responsibility. I cannot ever point to a time when inflation caused my paycheck to go up (perhaps someone else can?).

It's not always explicitly called a 'pay raise for inflation' and frequently employers will do their best not to give you one. The best way to get market appropriate pay is to jump employers. At least, in any field where experience is a selling point, so that's less true for minimum wage burger flippers, who are getting paid minimum wage no matter who they work for or how long they've been flipping at that establishment. The recent recession makes that harder to do, what with the lack of jobs, so it's less true now, too.

PoliteNewb wrote:And even if their wages are going up to match inflation...that's treading water. How is that good?

That's a contextless comparison. We're talking about inflation, so the alternative is unemployment, since that is what inflation is meant to fight. How is "being paid the same" not better than "being unemployed?"

But ultimately, you're right about the treading water bit; minimum wage is not enough (and it's too low, anyway); we need some sort of mechanism for employees to get more money out of their employers. Private sector wages have been basically inflation-adjusted flat for 30 years, so we have been treading water for longer than I have been alive while the upper class has been skyrocketing into ridiculous uber-wealthiness.

PoliteNewb wrote:And finally...while inflation is great for people with shit-tons of debt or who spend all their income and live paycheck-to-paycheck...is that really something we want people to be doing? It sounds suspiciously like putting your money into hard assets (like guns and cans of beans) and waiting for the financial collapse.

Yes. We want people spending paycheck-to-paycheck (and taking out reasonable debts) because our economy is driven by demand and the more money people are spending now the bigger the economy is tomorrow.

Now, that seems dangerous at the individual level, and it is. But things that are dangerous for individuals are not the same things that are dangerous for societies. The number of people who get crushed by their debts and the harm that causes to the economy is less than the growth caused by people throwing their cash everywhere.

The ideal situation is a social safety net that everyone pays into for life emergencies, and then they draw out of it when those emergencies happen. The individual saving cash for a rainy day is a terrible thing for society; that's money being set on fire now and pulled out of their ass later. It's a fundamentally inefficient mechanism for handling emergencies, in the same way that everyone throwing money under their mattress to cover health risks is inefficient. If you have a giant collective pool, you can set the rate at which everyone pays into the pool to a number that makes you likely to deplete the pool given your expected expenditures. It's the most efficient mechanism for handling things like that, because all the money is being spent now, which is good for the economy.

DSMatticus wrote: It's not always explicitly called a 'pay raise for inflation' and frequently employers will do their best not to give you one. The best way to get market appropriate pay is to jump employers.

So...inflation is NOT good for people who can't get their employers to give them a raise, and who can't jump jobs (for a variety of reasons, but often because they can't get a better one anywhere they can afford to move to).

That's actually most people I know.

DSM wrote: That's a contextless comparison. We're talking about inflation, so the alternative is unemployment, since that is what inflation is meant to fight. How is "being paid the same" not better than "being unemployed?"

So inflation is good for people who don't get laid off, and shitty for everyone else (who would have kept their job and NOT had their buying power devalued)?

Inflation affects everyone. Unemployment affects people who get laid off.

But ultimately, you're right about the treading water bit; minimum wage is not enough (and it's too low, anyway); we need some sort of mechanism for employees to get more money out of their employers. Private sector wages have been basically inflation-adjusted flat for 30 years, so we have been treading water for longer than I have been alive while the upper class has been skyrocketing into ridiculous uber-wealthiness.

This I agree with. Which is why I don't see more inflation as an answer. It has served to largely obscure (for most people) the fact that wages are stagnant. Most people are not economists; having a stable value to the dollar enables them to know if they're getting a good deal or a shitty one. Anything that makes that process less transparent is bad for working joes.

I'm going to say pretty much fuck everything else you said, because it bears no resemblance to life as I'm familiar with it. When you're ready to bring about the awesome socialist revolution, let me know. In the meantime, I'm trying to look out for myself, and while inflation may be great for society (when society is tailored for inflation to be great), right now it's undermining what I'm trying to do: save money, reduce my debt, and get ahead in life. You seem to be telling me "fuck it, max up your credit cards and let that debt get devalued...and when you run into an emergency, look for the SOCIAL SAFETY NET".

Most professional jobs have (at least) a cost-of-living pay raise every year which is more or less pegged to inflation. If a business doesn't track its wages/salaries to inflation periodically, it quickly finds itself in a position where nobody will work for them for the monies they are offering.

Possible exception: freelance writing, which still goes for pennies or fractions of a penny per word.

Your problem is that you live in a free market utopia. As someone who recently moved from the freemarket utopia of Texas to the socialist shithole of New Jersey, it turns out that socialist shitholes have entire classes of people who get raises all the time, and expect them.

It has to do with things like Unions, and state minimum wage laws, and expected inflation laws, and shit like that.

I don't know why all the people in shitholes are living better lives than in the utopias though, I have no idea.

FrankTrollman wrote:Explanations.

Thanks.

That actually puts many of my suspicions to rest while still confirming a few. I was about to ask if part of the money gets filtered out by the banks but you've actually answered that as well. On an unrelated note, is job outsourcing as much of a problem in America as many people claim it is or is it less scary than it seems?

Inflation is an increase in the cost of goods and services accompanied by an increase in wages. That is what it is. Claiming that inflation would be bad if you didn't get a corresponding increase in wages is bullshit. Inflation would also be super duper awesome if the costs at the grocery store didn't go up.

Yes, it is entirely possible that during a period of inflation you will either luck out or get screwed, because wages and prices are sticky, and only jump in discrete intervals. So the period right before a price jump is awesome if you're the guy paying the price, and shitty if you're the guy receiving the price.

But on average, it averages out. Because that is what inflation means, and that is what an average is. And while it can suck or rock for specific people, what it really does is benefit people with financial debts at the cost of people who have financial savings. And since the people with net financial debts outnumber the people with net financial savings by over 4 to 1, inflation is defacto good for a majority of people.

-Username17

Dominicius wrote:On an unrelated note, is job outsourcing as much of a problem in America as many people claim it is or is it less scary than it seems?

That's... complicated.

Companies really do relocate to other places if they can get things done cheaper or better there. And in the last 30 years, a lot of companies got lured into the obvious appeal of getting cheap labor in India or China. Real companies really relocated real jobs to foreign soil. And real Americans lost their jobs.

But like a lot of things, it's more complicated than that. First of all, America also gets jobs from foreign countries. ArcelorMittal is the largest steel producer in the United States, and it's an Indian company. Indians literally pay Americans to do heavy manufacturing for them. Secondly, a lot of jobs can't be meaningfully outsourced. Transportation, warehousing, services of most kinds, and retail are all physically fixed in the area they are servicing by definition, and will never go overseas no matter what a Bengali is willing to work for.

But the biggest thing is that while there was an ultimately quite destructive fad of businesses trying to outsource a bunch of things that didn't work for in the nineties, the reality is that where it makes sense to produce things actually has relatively little to do with how much the workers there make. In 2011, the average German autoworker was paid $67.14 an hour. That's almost double what their US counterparts took home. Still, Germany produced a lot more cars than the US did last year, because despite the higher wages it simply makes sense to hire workers there.

And that's because of all the other things like connection to shipping, proximity of parts suppliers, sources of energy, stability of the government and so on. Workers in Somali make hardly any money at all, and Nerf recently moved their factories to the United States rather than there.

-Username17

PoliteNewb wrote: So...inflation is NOT good for people who can't get their employers to give them a raise, and who can't jump jobs (for a variety of reasons, but often because they can't get a better one anywhere they can afford to move to).

That's actually most people I know.

PoliteNewb wrote: So inflation is good for people who don't get laid off, and shitty for everyone else (who would have kept their job and NOT had their buying power devalued)?

Inflation affects everyone. Unemployment affects people who get laid off.

No. That's not how it works. You are not an island. Inflation is used to encourage spending which creates economic growth. Inflation is good for society (especially anyone with debt), and you are a part of society. Not only is it totally selfish to say "inflation costs me money for the sake of society," (so do taxes) it's totally bass ackwards because high unemployment means the economy crumbles around you and wages get driven down by the increased employer bargaining power.

What you're really complaining about is that previous employers stealth cut your wages by refusing to raise them with inflation, and that's a legitimate problem, but suggesting that that makes inflation bad is a complete and total failure to identify the problem. The actual problem was that you had no bargaining power with your employee due to weak employee rights and/or a weak economy. Getting rid of inflation solves neither of those; actually, the removal of inflation as a tool of monetary policy means our recessions are going to be worse and longer, and it gives employers more power as more people bargain for fewer jobs, which means they can fuck you over even harder and more blatantly because it's take it or get fired.

Totally unsurprisingly, your idea that hobbling the U.S. economy will make your personal situation better is just wrong. If your boss wants to screw you over, getting rid of inflation does not stop him because the thing that is letting him screw you over is his disproportionate power in wage negotiation.