There’s a lot of talk about inflation and its causes. Is it corporate greed? Supply chain issues? One clear base cause of inflation less talked about is having an inflationary currency supply. Any other inflation caused by supply chain issues, corporate greed, lack of market competition, etc is just added on top of that. Fiat inflationary currency is a rather new invention in terms of the human timeline. In the US, Nixon is the start of it. Central banks aim for 2-3% inflation in “good years”. The money supply expands, the portion of that supply a single dollar represents, and therefore its value, decreases. This isn’t a conspiracy, it’s government policy, and both parties gleefully support it because it benefits their rich donors.
Think of it: in the last 50 years, everything has gotten cheaper to produce thanks to increasing mechanization, outsourcing to cheap labor/low regulation countries, and extremely efficient supply chains. Yet so many things “cost more” than they did 50 years ago. Even basics like bread. What used to be 5c in the US in the 50s now costs $5.00. How is that the case? Shouldn’t it cost less? Where is that “extra efficiency” going if not to lower prices? The answer: bread is the same value it’s always been, the money has gotten less valuable. This is how they keep working class people running on a treadmill, never able to achieve economic mobility.
Inflationary currency devalues the currency you worked hard to earn by increasing the supply. It hits the middle class the worst because they have more of their net wealth in cash, often in the form of emergency funds, savings, and putting together enough money for a down payment on a home. Rich people have their money in assets which aren’t harmed by currency inflation. Actually, even worse, it inflates the value of those assets! If the dollar loses value (all other things being equal), it takes more dollar to buy a share in Amazon, just like it takes more dollars to buy a loaf of bread. Poor people live hand to mouth, so their net wealth is not impacted much, but inflationary currency prevents them from saving and “moving up”. If you want to identify the causes of increasing wealth disparity, the inability of people to save money and theft of value from the middle class via money supply expansion is a major one.
I think there’s a lot of historical inaccuracies in your post as far as what the intention behind inflation was.
Keep in mind this was an idea developed at the end of the Great depression to prevent wealth hoarding and economic stagnation.
Inflation isn’t the issue. And the people I usually find pointing to it as the issue are libertarians who are angling to go back to the gold standard.
As someone else said wages not going up is the issue. And we could have avoided a lot of inequality in the world today had they tied minimum wage to inflation to begin with during the new deal.
I think that was an oversight. Because the intention of minimum wage was always that it’d be livable.
Keep in mind this was an idea developed at the end of the Great depression to prevent wealth hoarding and economic stagnation.
Nixon? Just chilling in the oval office, decided to depeg our currency from gold and shock the European markets dependent on our gold peg? And he did it all to help us plebs what a nice guy. He was a sleeper commie playing 4D chess on the world this whole time! The great depression ended in 1939. Nixon took office in 1969.
Idk why only so many right or libertarian people seem to care about this issue and why people on the left don’t as much. I generally would say I am left leaning. To me, there seems to be a real natural class consciousness that ought to arise out of understanding how inflationary currency works and how the US uses it as a tool of imperialism.
FDR
You thought Nixon was president during the Great depression?
https://www.history.com/this-day-in-history/fdr-takes-united-states-off-gold-standard
No, I specifically pointed out he was not the president during the great depression.
From your link:
The government held the $35 per ounce price until August 15, 1971, when President Richard Nixon announced that the United States would no longer convert dollars to gold at a fixed value, thus completely abandoning the gold standard
I’m saying Nixon took the USD off the gold standard and changed the USD to an inflationary currency (and effectively ended Bretton Woods) https://en.wikipedia.org/wiki/Nixon_shock
Freezing inflation wouldn’t change the fact that a dollar invested in an asset will have a higher rate of return than a dollar that’s just sitting under your mattress doing nothing.
That is a desired feature of the economy – that people are rewarded for investing their money instead of just keeping it out of circulation indefinitely.
The real problem here is that ordinary people can’t afford assets because the wealthy have basically all of them. Tax the heck out of the wealthy, to the point where they must sell their assets.
Then ordinary people can buy those assets.
Probably using financing, which is aided by inflationary currency by the way.
Suppose you buy a 300k house on a fixed-rate 30-year mortgage. Let’s check back in 20 years. That house is worth way more than 300k now, but your outstanding principal is something like 150k, which in 2044-dollars is chump change. Your monthly payments at that point are a breeze compared to now.
Yes, assets are protected from inflation more than cash is. Yes, the rich have all the assets, so they’re protected from inflation.
No, the solution is not to eliminate inflation.
The solution is to take back the assets which have been stolen from the working class over the past 60 years. Tax the wealthy. Severely.
This works because people consider their own labor to have a fixed value. i.e.: they are willing to work a full week to just barely survive. They don’t participate, or consider themselves to participate, in the ever-increasing value of their product, but just trade their daytime liberty for food and rent. Aggravated by propaganda like “you should be glad to have any job,” and “you need to do whatever it takes to survive.”
The counter to this is organization. Wages negotiated by leaders insulated from the threat of immediate eviction or starvation, who understand growing productivity, and can negotiate on an equal footing with the organized representatives of capital.
Ah, so the problem with capitalism is the proletariat’s inability to handle basic addition and substraction. No, yeah, I think you guys cracked this. Nobody had thought of that before for some reason.
Do you not know how education works? Just because “people” have been talking about it for 150 years doesn’t mean you just shut up. There’s 10,000 people never heard it before today, and we can all use a little drip of socialism to counter the firehose of capitalism.
No, yeah, this technique of blending common sense platitudes about collective bargaining with patronizing QAnon-level tirades that assume everybody else is an idiot is really working. I think you guys are going to finally tip the balance any day now.
Agreed workers need to unionize but your first paragraph is preposterous.
This works because people consider their own labor to have a fixed value.
No they don’t. Do they not choose to apply to one place over the other? Scrutinize the benefits they offer, the location, the pay? Do they not make “lateral moves” to increase their wages? Do they not expect to make more as they gain more experience and knowledge? Do employers not generally pay “senior” employees more than new ones? Plenty of workers realize their labor does not have a fixed value.
The idea that only a special class of people can negotiate on their behalf is reductive and dis-empowering. Workers are capable of negotiating individually and as a union. And if my working conditions suck, and my union sucks at bargaining, I’ll go find a job elsewhere or consider joining a different union.
There’s a lot of talk about inflation and its causes. Is it corporate greed?
Yes
One clear base cause of inflation less talked about is having an inflationary currency supply. Any other inflation caused by supply chain issues, corporate greed, lack of market competition, etc is just added on top of that.
In the sense of you add a million to two, the “base” is two and the million is “just added on top of that,” sure. Monopolization and price gouging are by far the larger factors.
How is that the case? Shouldn’t it cost less? Where is that “extra efficiency” going if not to lower prices? The answer:
Corporate pockets.
Poor people live hand to mouth, so their net wealth is not impacted much, but inflationary currency prevents them from saving and “moving up”.
Complete nonsense. And extra 2% interest is not the root cause of poverty. You actually missed the real way in which inflation can hurt the poor which is when corporations don’t increase wages with inflation, which is effectively a pay cut. This is a form of class warfare which they are able to do because they are more powerful and better organized, as a class, than labor is.
There’s a great book, Capital In The 21st Century, that goes into a lot of detail on why inflation is common in modern economies despite there being large stretches of time just a few centuries ago without any noticeable inflation.
The author’s argument is that inflation benefits governments that are in debt. If the government owes a trillion dollars that has to be paid off over a 100 year loan, the government has the tools to raise inflation over that time span to where a trillion dollars is no longer a lot of money. And during that 100 years the government can just keep paying the minimum interest payment and let the rest of the loan become worthless overtime.
For us regular folk, we can get some of the same advantages with fixed interest loans over 30 years, etc.
with fixed interest loans over 30 years
I don’t know how common super long term mortgage contracts are around the world, they don’t exist in Canada anyway…
25 - 30 years is the norm in Australia for a mortgage. But a fixed interest rate can only be set for 1 - 5 years at a time.
