What this country needs is some inflation.

[techs]

I'm old enough to remember the 1960's, 1970's inflation and while that amount of inflation was bad, some inflation could help the US solve many problems.

People with fixed mortgages benefit when there is wage inflation. I remember how people went from barely paying their mortgages to having it become a small part of their budget.

While adjustable rate mortgages would be an even bigger problem, we could get several million homes out from being underwater. Then, at least, the mortgage problem would be manageable.

 

[bfdd]

Inflation right now would be lulz. It would hurt a lot more than help, though I agree it isn't exactly a bad thing.

 

[Infohawk]

You would risk stagflation. If prices increased but employment / wages did not, many people would suffer now. Retirees would be ruined. (Most of them lower their exposure to stocks in retirement to the extent they have anything beyond social security anyway.)

 

[Fanatical Meat]

I think that was the quantative easing goal but yes I don't really fear it now.

 

[glenn1]

While all else being equal inflation is better than deflation, hoping for an increase in the inflation rate is foolish IMHO. Price stability is far better and actually more likely to lead to wage inflation than price inflation.

 

[Jhhnn]

While all else being equal inflation is better than deflation, hoping for an increase in the inflation rate is foolish IMHO. Price stability is far better and actually more likely to lead to wage inflation than price inflation.

How, exactly, do you arrive at that conclusion, other than by leap of faith?

 

[dullard]

Techs, you are assuming the inflation comes with wage increases. That isn't necessarilly true.

What we really need is wage increases.

Inflation to scare those who are sitting on weath (individuals, companies, and a few municipalities) into spending will help, but not much. While wage increases will help tremendously.

 

[bfdd]

we don't need wage increases either ffs. Americans are already loaded, we need to figure out how to live within our means and if anything see wages fall(especially on the higher end).

 

[Anarchist420]

We need a recession. There needs to be a corrective bust without any govt interference.

While all else being equal inflation is better than deflation,

No. Government increasing the money supply is not good.

hoping for an increase in the inflation rate is foolish IMHO.

Agreed

Price stability is far better and actually more likely to lead to wage inflation than price inflation.

Wages are prices (for labor).

 

[techs]

Techs, you are assuming the inflation comes with wage increases. That isn't necessarilly true.

What we really need is wage increases.

Inflation to scare those who are sitting on weath (individuals, companies, and a few municipalities) into spending will help, but not much. While wage increases will help tremendously.

Inflation invariable comes with wage inflation. Or at least it used to.

And yes, the biggest problem in the housing market is that wages have not increased. The whole mortgage system was historically based on the fact that wages rose so that mortgages would become easier to meet as time went by.

What happened in the 2000's was that despite huge deficits and two wars and an overstimulated economy wages stagnated. I personally know quite a large number of people who were halfway thru paying off their mortages in the early 1990's and their monthly mortgage payment was a small fraction of their income due to wage inflation.

In fact by the time homeowners children were ready for college 18 years later mortgages were a small enough part of expenses that families now had the money to pay for college.

 

[Jhhnn]

Techs, you are assuming the inflation comes with wage increases. That isn't necessarilly true.

What we really need is wage increases.

Inflation to scare those who are sitting on weath (individuals, companies, and a few municipalities) into spending will help, but not much. While wage increases will help tremendously.

Aggregate wage increases, yes, which means more people employed. It does no good for wages to rise if that increase is not spent back into the economy. It's like the tax cut portion of the stimulus for people who had jobs & were worried about the future- they saved it instead of spending it.

That's also why tax cuts at the top are futile- they don't need to spend or invest in hiring or expansion, so therefore they don't. The economy already has excess productive capacity vs real demand. Their incomes far exceed their usual rate of spending.They buy govt securities & hoard liquidity instead, other than the part they're pumping offshore a la the Romneys. Giving them a tax cut is like burning money. Their actions contribute to a savings glut & a liquidity trap. Those who have money, lots of it, need to be persuaded to dis-save, and taxes are the only way to do that in the current situation. Spending that money to hire people & companies to do actual work will create demand & create more of the wealth of infrastructure we all share.

 

[Pr0d1gy]

The problem with all of this is you think that America is an actual economy where supply and demand determine prices and costs. The truth is it is all rigged, insider trading is the rule instead of the crime, and lawmakers are working for the rich investors and business owners instead of the other 99% of the people in America. This is not an economy, it is a Ponzi Scheme.

 

[dullard]

Inflation invariable comes with wage inflation. Or at least it used to.

You have it backwards.

Wage inflation invariably comes with overall inflation. People want raises, they get raises, prices must go up for the companies to stay in business, but that is ok since their customers just got raises and can afford higher prices, so people want raises to account for the increasing prices, etc. It is a self-fullfilling circle.

But the reverse isn't true. Prices can go up without any increase in wages. Think about an increase in oil prices. That causes fuel to go up, agriculture prices to go up, plastic parts to go up, shipping on everything to go up. Every one of us pays a significant amount more. But the only people with more money are the oil drillers which are a small handful of weathy people here and a bunch of foreigners. The average Joe pays more and gets no wage increase.

Wages on the bulk of the population haven't gone up for decades. We've been living in a bubble economy ever since (1990s bubble in tech stocks kept us going, 2000s bubble in housing kept us going, 2010s bubble in government spending kept us going). The only cure is a true way to convince those with money to start spending that money. Spend it, don't invest it or stick it in offshore accounts. I'm personally in favor of a new wealth tax with a matching income tax reduction for that reason (highly encourages spending by those with wealth and lets the new people earning that spend money not to pay as much tax on their new found earnings so they themselves become more wealthy). Although I know that will never happen. The current state of politics is to eliminate all wealth taxes (cut the death tax, cut the capital gains tax, cut local property taxes, let people and corporations hold trillins offshore and give periodic tax cuts to get it back in, etc).

 

[PokerGuy]

A 'wealth tax' is absurd, it's basically saying "yeah, I know you already paid taxes on the money you earned, but since you managed to earn a lot of it, we're going to tax you again on the same money". I'm 100% opposed.

 

[dullard]

A 'wealth tax' is absurd, it's basically saying "yeah, I know you already paid taxes on the money you earned, but since you managed to earn a lot of it, we're going to tax you again on the same money". I'm 100% opposed.

Of course is isn't absurd. We already have plenty of wealth taxes (property tax and estate taxes for example, most states car registrations are wealth taxes as well).

You didn't read my post correctly anyways. I said cut income tax. In the extreme, make it all wealth tax and no income tax. There is no need for double taxation with a wealth tax.

Sales taxes harm those who spend and reduce spending therefore reducing economic growth. Plus if you don't eliminate income taxes, you have double taxation.

Income taxes reduce hard work and thus reduce economic growth.

Wealth taxes reduce people/companies just sitting on cash. Thus they encourage economic growth. You can earn all you want tax free (or nearly tax free) as long as you buy goods/services and let the next person earn all he wants, etc.

Now tell me, my last big purchase was $10k in foreign stocks last month. How does that help the American economy? Would me spending that $10k be better for our economy? I'll let you think about it.

 

[the DRIZZLE]

Of course is isn't absurd. We already have plenty of wealth taxes (property tax and estate taxes for example, most states car registrations are wealth taxes as well).

You didn't read my post correctly anyways. I said cut income tax. In the extreme, make it all wealth tax and no income tax. There is no need for double taxation with a wealth tax.

Sales taxes harm those who spend and reduce spending therefore reducing economic growth. Plus if you don't eliminate income taxes, you have double taxation.

Income taxes reduce hard work and thus reduce economic growth.

Wealth taxes reduce people/companies just sitting on cash. Thus they encourage economic growth. You can earn all you want tax free (or nearly tax free) as long as you buy goods/services and let the next person earn all he wants, etc.

Now tell me, my last big purchase was $10k in foreign stocks last month. How does that help the American economy? Would me spending that $10k be better for our economy? I'll let you think about it.

You have it backwards. The US has been saving too little for decades. People are saving now because we are coming out a credit bubble, which is exactly what they should be doing. In the long run savings and investment will produce more economic growth then spending today so a wealth tax would be a move in the wrong direction. In fact some economists favor a progressive consumption tax which is the polar opposite of a wealth tax.

 

[Anarchist420]

I (hope and) don't think that a significant wealth tax would ever happen anywhere, because I can't think of any Democrat candidate that has ever even mentioned it. Either it's politically unfeasible and/or the Democrats are (fortunately) too economically illiterate to realize that higher marginal income tax rates are nowhere near as potentially progressive. I think that if there was a wealth tax that gave the govt significant revenue, then most of those who would be wealth taxed would renounce their citizenship and move elsewhere.

 

[techs]

I (hope and) don't think that a significant wealth tax would ever happen anywhere, because I can't think of any Democrat candidate that has ever even mentioned it. Either it's politically unfeasible and/or the Democrats are (fortunately) too economically illiterate to realize that higher marginal income tax rates are nowhere near as potentially progressive. I think that if there was a wealth tax that gave the govt significant revenue, then most of those who would be wealth taxed would renounce their citizenship and move elsewhere.

No problem. Of course they would have to pay a tax as they leave.
Oh, and I hope they like it in China or Russia.

 

[Exterous]

Oh, and I hope they like it in China or Russia.

I could be wrong but I think there might be more than just those two countries they could choose to move to

 

[GrGr]

You already have stagflation.

Between the rich hoarding $31 trillion dollars in tax havens + the trillions in forex exchanges around the world (inflation), and the deflation of living standards and wages in the US you have nowhere to go really but deeper into recession. The US government (that is you working Americans) can never live up to actually supporting all those dollars to their supposed value (the dollar bill is a representative of US Government Credit). So you are, very simply, bankrupt.

So to keep the rich 'rich' and the giant on clay feet (the US Government) stumbling along, you are selling out your country, and middle and working classes, bit by bit in various ways.

Edit: the 'various' ways include politically (becoming more and more fascist and corrupt), financially (impoverishing the majority of the people), ethically (might makes right, corrupt judges and law enforcement, torture, police brutality and other zillions of problems associated with fascist states) and so on.

 

[dmcowen674]

What this country needs is some inflation

I'm old enough to remember the 1960's, 1970's inflation

Careful what you wish for

7-26-2012

http://news.yahoo.com/u-midwest-drought-fears-worsen-grain-prices-jump-191921587.html

Midwest drought worsens, food inflation to rise



Scattered rain brought some relief to parts of the baking U.S. Midwest on Wednesday, but most of the region remained in the grips of the worst drought in half a century as the outlook for world food supplies and prices worsened.


The U.S. Agriculture Department forecast that food prices would now out-pace other consumer costs through 2013 as drought destroys crops and erodes supplies.


"The drought is really going to hit food prices next year," said USDA economist Richard Volpe, adding that pressure on food prices would start building later this year.


"It's already affecting corn and soybean prices, but then it has to work its way all the way through the system into feed prices and then animal prices, then wholesale prices and then finally, retail prices," Volpe said in an interview.


Food prices will rise more rapidly than overall U.S. inflation


The prices have markets around the world concerned that food riots could occur as in the past.

 

[MooseNSquirrel]

We are having horrible droughts.

Your wish will be granted.

 

[Nemesis 1]

I'm old enough to remember the 1960's, 1970's inflation and while that amount of inflation was bad, some inflation could help the US solve many problems.

People with fixed mortgages benefit when there is wage inflation. I remember how people went from barely paying their mortgages to having it become a small part of their budget.

While adjustable rate mortgages would be an even bigger problem, we could get several million homes out from being underwater. Then, at least, the mortgage problem would be manageable.

Than you should recall . a candy bar went from 5cents to 50cents cars went from $1800 to $4000 and wages basicly rouse by a few percentage points. The only people who gained were homeowners(buyers).