Visual Inflation/Deflation For Dummies

[CA renter]

[quote=AN]CAR, has there ever been a time where there’s nominal wage decline but the economy as a whole experience inflation?[/quote]

We’ve certainly had periods where wage increases ran behind inflation, so there were real wage declines.

http://monetaryfreedom-billwoolsey.blogspot.com/2010/02/wages-nominal-and-real-in-great.html

Some (like myself) would argue that in just these past few years, prices have risen while wages declined. We also have to consider rising unemployment when considering what happens to wages, as the lower-end employees tend to be laid off sooner than the higher ones, making it look like wages are steady or rising, when in fact they might be declining. I haven’t looked into the methodology yet, so not sure if they take unemployment into account and how that might affect wages as different populations are laid off at different times.

[an]

[quote=CA renter][quote=AN]CAR, has there ever been a time where there’s nominal wage decline but the economy as a whole experience inflation?[/quote]

We’ve certainly had periods where wage increases ran behind inflation, so there were real wage declines.

http://monetaryfreedom-billwoolsey.blogspot.com/2010/02/wages-nominal-and-real-in-great.html

Some (like myself) would argue that in just these past few years, prices have risen while wages declined. We also have to consider rising unemployment when considering what happens to wages, as the lower-end employees tend to be laid off sooner than the higher ones, making it look like wages are steady or rising, when in fact they might be declining. I haven’t looked into the methodology yet, so not sure if they take unemployment into account and how that might affect wages as different populations are laid off at different times.[/quote]
Key word here is inflation adjusted wages vs nominal wages. Since debt of things like houses are usually bought with fixed rate, as long as nominal wages are rising, wouldn’t it make servicing these debts easier?

[an]

[quote=CA renter][quote=AN]CAR, has there ever been a time where there’s nominal wage decline but the economy as a whole experience inflation?[/quote]

We’ve certainly had periods where wage increases ran behind inflation, so there were real wage declines.

http://monetaryfreedom-billwoolsey.blogspot.com/2010/02/wages-nominal-and-real-in-great.html

Some (like myself) would argue that in just these past few years, prices have risen while wages declined. We also have to consider rising unemployment when considering what happens to wages, as the lower-end employees tend to be laid off sooner than the higher ones, making it look like wages are steady or rising, when in fact they might be declining. I haven’t looked into the methodology yet, so not sure if they take unemployment into account and how that might affect wages as different populations are laid off at different times.[/quote]
Key word here is inflation adjusted wages vs nominal wages. Since debt of things like houses are usually bought with fixed rate, as long as nominal wages are rising, wouldn’t it make servicing these debts easier?

[an]

[quote=CA renter][quote=AN]CAR, has there ever been a time where there’s nominal wage decline but the economy as a whole experience inflation?[/quote]

We’ve certainly had periods where wage increases ran behind inflation, so there were real wage declines.

http://monetaryfreedom-billwoolsey.blogspot.com/2010/02/wages-nominal-and-real-in-great.html

Some (like myself) would argue that in just these past few years, prices have risen while wages declined. We also have to consider rising unemployment when considering what happens to wages, as the lower-end employees tend to be laid off sooner than the higher ones, making it look like wages are steady or rising, when in fact they might be declining. I haven’t looked into the methodology yet, so not sure if they take unemployment into account and how that might affect wages as different populations are laid off at different times.[/quote]
Key word here is inflation adjusted wages vs nominal wages. Since debt of things like houses are usually bought with fixed rate, as long as nominal wages are rising, wouldn’t it make servicing these debts easier?

[an]

[quote=CA renter][quote=AN]CAR, has there ever been a time where there’s nominal wage decline but the economy as a whole experience inflation?[/quote]

We’ve certainly had periods where wage increases ran behind inflation, so there were real wage declines.

http://monetaryfreedom-billwoolsey.blogspot.com/2010/02/wages-nominal-and-real-in-great.html

Some (like myself) would argue that in just these past few years, prices have risen while wages declined. We also have to consider rising unemployment when considering what happens to wages, as the lower-end employees tend to be laid off sooner than the higher ones, making it look like wages are steady or rising, when in fact they might be declining. I haven’t looked into the methodology yet, so not sure if they take unemployment into account and how that might affect wages as different populations are laid off at different times.[/quote]
Key word here is inflation adjusted wages vs nominal wages. Since debt of things like houses are usually bought with fixed rate, as long as nominal wages are rising, wouldn’t it make servicing these debts easier?

[an]

[quote=CA renter][quote=AN]CAR, has there ever been a time where there’s nominal wage decline but the economy as a whole experience inflation?[/quote]

We’ve certainly had periods where wage increases ran behind inflation, so there were real wage declines.

http://monetaryfreedom-billwoolsey.blogspot.com/2010/02/wages-nominal-and-real-in-great.html

Some (like myself) would argue that in just these past few years, prices have risen while wages declined. We also have to consider rising unemployment when considering what happens to wages, as the lower-end employees tend to be laid off sooner than the higher ones, making it look like wages are steady or rising, when in fact they might be declining. I haven’t looked into the methodology yet, so not sure if they take unemployment into account and how that might affect wages as different populations are laid off at different times.[/quote]
Key word here is inflation adjusted wages vs nominal wages. Since debt of things like houses are usually bought with fixed rate, as long as nominal wages are rising, wouldn’t it make servicing these debts easier?

[Arraya]

[quote=CA renter]
To be sure, deflation would wipe out a lot of inflation-induced “wealth,” but is that the end of the world?

I would like to see the govt make direct loans during the deflationary period, and agreed with their moves to backstop higher FDIC limits on deposits, etc. Govt work programs would also be useful during the deflationary period.

IMHO, deflation can be painful, but quick (as long as there is no/little intervention), and the process of healing can beging quickly. Again, things would not go to zero, and people would not stop buying necessities just because the price of stocks or houses is going down. There are plenty of people who would love to jump in at lower prices, which would form a *natural* bottom, as opposed to this tenuous, artificial “bottom” the govt is trying to form.

We need to hit the reset button every once in awhile in order to maintain a healthy economy. It keeps things in check, too (fewer bubbles and misallocation of capital), as people won’t expect the govt to bail them out of their foolish “investments” every time they make a mistake.[/quote]

Define end of the world;)

IMO, deflation is unavoidable and will bring an incredible amount of social stress. The likes of which we have never seen before. All they are doing now is delaying the inevitable while making things worse and wishing for a miracle.

[Arraya]

[quote=CA renter]
To be sure, deflation would wipe out a lot of inflation-induced “wealth,” but is that the end of the world?

I would like to see the govt make direct loans during the deflationary period, and agreed with their moves to backstop higher FDIC limits on deposits, etc. Govt work programs would also be useful during the deflationary period.

IMHO, deflation can be painful, but quick (as long as there is no/little intervention), and the process of healing can beging quickly. Again, things would not go to zero, and people would not stop buying necessities just because the price of stocks or houses is going down. There are plenty of people who would love to jump in at lower prices, which would form a *natural* bottom, as opposed to this tenuous, artificial “bottom” the govt is trying to form.

We need to hit the reset button every once in awhile in order to maintain a healthy economy. It keeps things in check, too (fewer bubbles and misallocation of capital), as people won’t expect the govt to bail them out of their foolish “investments” every time they make a mistake.[/quote]

Define end of the world;)

IMO, deflation is unavoidable and will bring an incredible amount of social stress. The likes of which we have never seen before. All they are doing now is delaying the inevitable while making things worse and wishing for a miracle.

[Arraya]

[quote=CA renter]
To be sure, deflation would wipe out a lot of inflation-induced “wealth,” but is that the end of the world?

I would like to see the govt make direct loans during the deflationary period, and agreed with their moves to backstop higher FDIC limits on deposits, etc. Govt work programs would also be useful during the deflationary period.

IMHO, deflation can be painful, but quick (as long as there is no/little intervention), and the process of healing can beging quickly. Again, things would not go to zero, and people would not stop buying necessities just because the price of stocks or houses is going down. There are plenty of people who would love to jump in at lower prices, which would form a *natural* bottom, as opposed to this tenuous, artificial “bottom” the govt is trying to form.

We need to hit the reset button every once in awhile in order to maintain a healthy economy. It keeps things in check, too (fewer bubbles and misallocation of capital), as people won’t expect the govt to bail them out of their foolish “investments” every time they make a mistake.[/quote]

Define end of the world;)

IMO, deflation is unavoidable and will bring an incredible amount of social stress. The likes of which we have never seen before. All they are doing now is delaying the inevitable while making things worse and wishing for a miracle.

[Arraya]

[quote=CA renter]
To be sure, deflation would wipe out a lot of inflation-induced “wealth,” but is that the end of the world?

I would like to see the govt make direct loans during the deflationary period, and agreed with their moves to backstop higher FDIC limits on deposits, etc. Govt work programs would also be useful during the deflationary period.

IMHO, deflation can be painful, but quick (as long as there is no/little intervention), and the process of healing can beging quickly. Again, things would not go to zero, and people would not stop buying necessities just because the price of stocks or houses is going down. There are plenty of people who would love to jump in at lower prices, which would form a *natural* bottom, as opposed to this tenuous, artificial “bottom” the govt is trying to form.

We need to hit the reset button every once in awhile in order to maintain a healthy economy. It keeps things in check, too (fewer bubbles and misallocation of capital), as people won’t expect the govt to bail them out of their foolish “investments” every time they make a mistake.[/quote]

Define end of the world;)

IMO, deflation is unavoidable and will bring an incredible amount of social stress. The likes of which we have never seen before. All they are doing now is delaying the inevitable while making things worse and wishing for a miracle.

[Arraya]

[quote=CA renter]
To be sure, deflation would wipe out a lot of inflation-induced “wealth,” but is that the end of the world?

I would like to see the govt make direct loans during the deflationary period, and agreed with their moves to backstop higher FDIC limits on deposits, etc. Govt work programs would also be useful during the deflationary period.

IMHO, deflation can be painful, but quick (as long as there is no/little intervention), and the process of healing can beging quickly. Again, things would not go to zero, and people would not stop buying necessities just because the price of stocks or houses is going down. There are plenty of people who would love to jump in at lower prices, which would form a *natural* bottom, as opposed to this tenuous, artificial “bottom” the govt is trying to form.

We need to hit the reset button every once in awhile in order to maintain a healthy economy. It keeps things in check, too (fewer bubbles and misallocation of capital), as people won’t expect the govt to bail them out of their foolish “investments” every time they make a mistake.[/quote]

Define end of the world;)

IMO, deflation is unavoidable and will bring an incredible amount of social stress. The likes of which we have never seen before. All they are doing now is delaying the inevitable while making things worse and wishing for a miracle.

[CA renter]

[quote=Arraya]
Define end of the world;)

IMO, deflation is unavoidable and will bring an incredible amount of social stress. The likes of which we have never seen before. All they are doing now is delaying the inevitable while making things worse and wishing for a miracle.[/quote]

Totally agree with prolonging the inevitable and making it worse.

The reason I’d go along with direct, govt loans and work programs would be to help ameliorate the social problems, and to allow the more productive parts of the economy to be somewhat sustained through the deflation, even if it’s slower/lower than some might like.

[CA renter]

[quote=Arraya]
Define end of the world;)

IMO, deflation is unavoidable and will bring an incredible amount of social stress. The likes of which we have never seen before. All they are doing now is delaying the inevitable while making things worse and wishing for a miracle.[/quote]

Totally agree with prolonging the inevitable and making it worse.

The reason I’d go along with direct, govt loans and work programs would be to help ameliorate the social problems, and to allow the more productive parts of the economy to be somewhat sustained through the deflation, even if it’s slower/lower than some might like.

[CA renter]

[quote=Arraya]
Define end of the world;)

IMO, deflation is unavoidable and will bring an incredible amount of social stress. The likes of which we have never seen before. All they are doing now is delaying the inevitable while making things worse and wishing for a miracle.[/quote]

Totally agree with prolonging the inevitable and making it worse.

The reason I’d go along with direct, govt loans and work programs would be to help ameliorate the social problems, and to allow the more productive parts of the economy to be somewhat sustained through the deflation, even if it’s slower/lower than some might like.

[CA renter]

[quote=Arraya]
Define end of the world;)

IMO, deflation is unavoidable and will bring an incredible amount of social stress. The likes of which we have never seen before. All they are doing now is delaying the inevitable while making things worse and wishing for a miracle.[/quote]

Totally agree with prolonging the inevitable and making it worse.

The reason I’d go along with direct, govt loans and work programs would be to help ameliorate the social problems, and to allow the more productive parts of the economy to be somewhat sustained through the deflation, even if it’s slower/lower than some might like.

[Author]

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