The complaints of inflation are insane.

[Bamspeedy]

It's almost like there are these things called unions that can bargain collectively for higher wages

If any company, union or not hasn't been upping their pay in last 6-9 months, workers have been voting with their feet.

Any company that wants to keep their workers, pays attention to what the competitors are paying, union or not.

Have to remember, though that chip company that got a new contract after a long strike, the workers were striking because of 7 day work weeks. They were in a union yet working 7 days..... I've never been asked to work 7, let alone 6 days in a week in 20+ years I've been there.

Those working in the store have said they get paid more than Kroger (union), at least they were until most recent negotiations couple months ago. Currently some positions pay less than Kroger, some pay more.

I work warehouse, and for 5 months They've been paying us 200/week extra just to show up every day (weekly 'perfect attendance' bonus), on top of the $5/hour they ADDED to my shift premium.

 

[Traitorfish]

If any company, union or not hasn't been upping their pay in last 6-9 months, workers have been voting with their feet.

Any company that wants to keep their workers, pays attention to what the competitors are paying, union or not.

I think you might be underestimating the extent to which the hierarchies of the corporate world are filled by short-sighted dopes. Just because something is sensible or even necessary doesn't mean they'll do it; they're motivated by the need to shore up their own position within the company even when this is to the detriment of the company as a whole, which is itself a product of the fact that the feedback loop between positive outcomes from the companies and positive outcomes for employees has pretty badly broken down in a lot of industries.

 

[amadeus]

In what way do you imagine anything that is happening right now discredits coherent, stock-flow consistent models of the monetary economy?

What discrediting?

That dollars can be injected into the economy without some consequences, no matter the mathematical wizardry because it always comes down to people. I'm not saying the answer is to free-wheel the whole capitalist model; I've been on record here for economic supports during this crisis, this crisis that is not ending.

I think you might be underestimating the extent to which the hierarchies of the corporate world are filled by short-sighted dopes. Just because something is sensible or even necessary doesn't mean they'll do it; they're motivated by the need to shore up their own position within the company even when this is to the detriment of the company as a whole, which is itself a product of the fact that the feedback loop between positive outcomes from the companies and positive outcomes for employees has pretty badly broken down in a lot of industries.

I would agree and extend this to any bureaucratic organization.

 

[Gorbles]

This is only true if you kept your money under the mattress.

If you even have money to put under the mattress. Wages not keeping up with inflation is the pain point a lot of people will be suffering from.

And while, sure (@ the thread in general, not you Samson), inflation isn't to blame, it's going to be hard to rationalise that as the rich get richer and governments reward themselves for what has been in various cases an obvious lack of competence (with regards to the pandemic).

It's almost like there are these things called unions that can bargain collectively for higher wages

Ideally, yep.

It's not much of a point to someone who isn't represented by one though, and has little option to get the ball rolling. It's not a short term goal, even in the situations it's feasible.

You can explain money theory to someone living on nothing but rice as much as you want. It doesn't help them, nomatter how true it might be. So once again, it's an optics problem. I hate it being an optics problem, but it is. There needs to be convincing that inflation isn't to blame and that the real problems lie elsewhere.

 

[Birdjaguar]

Lots of demand and not enough supply is a part of it. People feeling trapped at home is another piece; spending money can replace going our freely.

 

[Hygro]

That dollars can be injected into the economy without some consequences.

Who are you consuming that told you this is an MMT claim?

 

[Bamspeedy]

I think you might be underestimating the extent to which the hierarchies of the corporate world are filled by short-sighted dopes. Just because something is sensible or even necessary doesn't mean they'll do it; they're motivated by the need to shore up their own position within the company even when this is to the detriment of the company as a whole, which is itself a product of the fact that the feedback loop between positive outcomes from the companies and positive outcomes for employees has pretty badly broken down in a lot of industries.

Sure, you'll have some short sightedness everywhere, from corporate world to mom and pop shops, and in unions (no teamwork="that's not my job")

There is a myth among store level employees that a manager will 'look for reasons' to fire long term employees so they can 'save' money by paying a new hire instead of the higher wages of a long term employee. But that's entirely a myth. Store managers are given budgets by number of worked hours, not a dollar amount to avoid that exact situation, and what manager in his right mind will get rid of someone who shows up everyday and does his job to then spend time and money hiring and training someone new, only to have that person quit in a week.

I know my employer does wage surveys every year of 'similar jobs' (major employers such as warehouses and factories) in the area and take those in consideration for cost of living increases every year. Fall of 2021 they had to bump pay sooner instead of waiting until end of year, because that is what the labor market required. Instead of, for example, me leaving for another company for thousands of sign on bonuses, I got that (in the form of perfect attendance bonuses) by staying where I was at.

 

[Hygro]

I was watching some Jon Stewart clip on the third inflation narrative, that it's caused by corporate greed.

The argument is very compelling: as inflation is the collective sum of each individual company choosing to raise prices, and most companies are doing so during times of record profits, they are informally colluding to raise prices to get away with it. This is on the backdrop of increased demand from 2 years of stimulus and the consequent rising wages as employee bargaining power and mobility increased in response to a) the technological shift to remote work and, bigger, b) the aforementioned stimulus.

For firms to raise prices when they don't "have to" means they have some monopoly pricing power, else competition stops them. This makes sense given that the limited supply chain is already promised to existing firms.

It comes back to a supply shortage.

 

[Lexicus]

I was watching some Jon Stewart clip on the third inflation narrative, that it's caused by corporate greed.

The argument is very compelling: as inflation is the collective sum of each individual company choosing to raise prices, and most companies are doing so during times of record profits, they are informally colluding to raise prices to get away with it. This is on the backdrop of increased demand from 2 years of stimulus and the consequent rising wages as employee bargaining power and mobility increased in response to a) the technological shift to remote work and, bigger, b) the aforementioned stimulus.

For firms to raise prices when they don't "have to" means they have some monopoly pricing power, else competition stops them. This makes sense given that the limited supply chain is already promised to existing firms.

It comes back to a supply shortage.

Actually, I think the "corporate greed" narrative is likely too simple and probably self-defeating in many cases. The other side of competition is that firms "compete" to offer the highest returns to investors, and those that fail to raise prices out of a sense of fairness may be strangled by capital moving to competitors who aren't so scrupulous.

It is sort of true that this whole dynamic is driven by "greed" on some level, but this strikes me as another example of liberals moralizing what is a structural problem. Capital pursues the highest returns - but liberalism also insists that this pursuit of the highest return is what leads to the highest possible social good.

What just-in-time production actually means is that in the name of increasing efficiency, firms have systemically stripped supply chains of all resilience to shocks or disruptions to improve their balance sheet positions. To my mind, the takeaway is not "corporate greed is bad", it's "markets don't always lead to socially optimal outcomes" or "profitability and social good are not synonyms"

 

[Hygro]

Though not always applicable, I think often to the Selfish Gene and the 80s multi-match, multi-opponent prisoner's dilemma situation in which Tit-for-Tat won.

Just-in-time production was a defection move that could defeat a more robust system during times of economic calm, as well as global-demand shortage recessions. This could last decades. Interruptions to that would be things like plague and war.

The question is what costs us more? Some kind of subsidizing domestic resiliency to supply chain problems so that the 5-10% of the time we need them to scale for us, they are here? Or just let there be a shortage + inflation every 40 years?

 

[Lexicus]

The question is what costs us more? Some kind of subsidizing domestic resiliency to supply chain problems so that the 5-10% of the time we need them to scale for us, they are here? Or just let there be a shortage + inflation every 40 years?

Would a buffer stock of labor solve the problem, or would a bunch of different buffer stocks be needed?

 

[amadeus]

Who are you consuming that told you this is an MMT claim?

I've only ever done the most cursory readings, but I thought the central tenet was to: print money, spend it on public works, then tax the money back before anyone cottons on.

What just-in-time production actually means is that in the name of increasing efficiency, firms have systemically stripped supply chains of all resilience to shocks or disruptions to improve their balance sheet positions. To my mind, the takeaway is not "corporate greed is bad", it's "markets don't always lead to socially optimal outcomes" or "profitability and social good are not synonyms"

I think you are correct in the flow, but not in the final analysis. Is it a social good for firms to spend money on warehousing and inventory to prepare for such extraordinary contingencies? I'm talking about only in the private sector, not anything like the strategic oil reserve, etc.

Just off the top of my head, I think the optimal solution in this case is to have a kind of FDIC-like entity that, if a factory or something should have to furlough its wage-earning employees as a result of egregious supply disruptions then the social insurance aspect of that would kick in and pay the workers until they could return to work.

 

[Lexicus]

I've only ever done the most cursory readings, but I thought the central tenet was to: print money, spend it on public works, then tax the money back before anyone cottons on.

Just off the top of my head, I think the optimal solution in this case is to have a kind of FDIC-like entity that, if a factory or something should have to furlough its wage-earning employees as a result of egregious supply disruptions then the social insurance aspect of that would kick in and pay the workers until they could return to work.

This sounds like it could be a step on the road to serfdom

 

[El_Machinae]

There will always be a trade off. More steel beams in my bridge means less chance of collapse. Less steel in my bridge means more bridges. It's a calculation. We pretend that modern capitalism provides the optimal incentive structure to solve that equation, but it often doesn't. Very often, in fact, you can track the failure to some well-known incentive failure. And then, frustratingly, other people's incentives don't properly match up to make up for the failure.

Every single person who uses that bridge has incentive for it to not collapse. And yet, that bridge collapses due to mal-investment that comes out of bad incentives.

 

[Hygro]

I've only ever done the most cursory readings, but I thought the central tenet was to: print money, spend it on public works, then tax the money back before anyone cottons on.

MMT is a named collection of consistent economic arguments that constitute a Theory of Money.

The school of MMT economists have always argued that the government spending money has consequences. That's the whole point. And they are the first to say it's inflationary. Obviously there's no "cottoning on" because they are telling you the truth, not "what you need to know", which is probably why people so deeply misunderstand it, starting with other economists. The MMT people built the theory on existing materials, most of it mainstream despite all of their and their opponents claims to the contrary. Here are the fundamental differences:

1) Money is created by spending into existence (government) and loaning it into existence (banks). This creates money supply of a currency.
2) Money is uncreated by taxing it out of existence (government) or the loan payed back (banks). This creates money demand of that currency.
3) Investment decisions drive the economy, and the business cycle. They are made both by ROI on the borrowing-buy-sell phase (this is the mainstream) and from the value and expectations of changing asset prices (this is less mainstream).
4) Businesses choose their prices based on, sure supply/demand, but fundamentally input costs.
5) Government bonds are government money but better insured and an interest rate
6) Banks lend to retail based on the profit potential of the loan, not arbitrarily on how much reserves they have

From those basic patches on what they teach in university, the originators of the brand "MMT" also came up with a bunch of policy prescriptions they feel maximize utility and macroeconomic output.

 

[El_Machinae]

I'd recommend delving more into introductory MMT, for interest. It's a theory, a framework. Not a policy description. I think Hygro here has given me quite the 'ah ha' regarding macro-economics, and also regularly allows me to see what the Austrians are missing (too often, they can't tell that money is both a trade commodity and a legal entity, at the same time).

It's a bit like digging into why photons can be described both as a particle and a wave. More things just make sense after that. If one person keeps on applying Newtonian physics, he's useful most of the time. But if he cannot pivot to QM and Relativity, he's missing something.

My main contention with all the introductory material out that is that I really do think that debt provides price-support for modern currency much more than taxes does. In practical terms, anyway.

 

[Hygro]

Oh I agree with your last point greatly.

 

[Hygro]

Would a buffer stock of labor solve the problem, or would a bunch of different buffer stocks be needed?

I was thinking subsidies for industries that seek relocation for lower wages. The smallest possible to maintain firms large enough to scale. We could do tariffs as well but who wants that.

 

[amadeus]

Props to @Lexicus for referencing Dana Carvey's McLaughlin Group sketches. I still call Pat Buchanan "Patty-patty buke-buke."

This sounds like it could be a step on the road to serfdom

I was just brainstorming an idea that would mitigate the negative effects of JIT without resulting in returning to massive warehousing and sometimes wasteful inventory work.

The school of MMT economists have always argued that the government spending money has consequences. That's the whole point. And they are the first to say it's inflationary. Obviously there's no "cottoning on" because they are telling you the truth, not "what you need to know", which is probably why people so deeply misunderstand it, starting with other economists.

Some of this is going over my head, but tell me where I'm wrong here: the policy prescriptions recommended by MMT proponents have been to use the printing press to generate money to spend on public investment to "smooth out" bumps in the economy, which seems like a fairly mainstream Keynesian idea. The point of divergence as I've understood it is that once that money is out there, the government should tax it back to prevent price inflation. Is that it?

 

[Kaitzilla]

Props to @Lexicus for referencing Dana Carvey's McLaughlin Group sketches. I still call Pat Buchanan "Patty-patty buke-buke."


I was just brainstorming an idea that would mitigate the negative effects of JIT without resulting in returning to massive warehousing and sometimes wasteful inventory work.


Some of this is going over my head, but tell me where I'm wrong here: the policy prescriptions recommended by MMT proponents have been to use the printing press to generate money to spend on public investment to "smooth out" bumps in the economy, which seems like a fairly mainstream Keynesian idea. The point of divergence as I've understood it is that once that money is out there, the government should tax it back to prevent price inflation. Is that it?

As near as I can tell, MMT as a lens and economic theory disregards government debts and deficit worries as artificial.

https://stephaniekelton.substack.com/p/how-do-you-solve-a-problem-like-inflation

“Do I believe the solution to all our problems is to simply spend more money? No, of course not. Just because there are no financial constraints on the federal budget doesn’t mean there aren’t real limits to what the government can (and should) do. Every economy has its own internal speed limit, regulated by the availability of our real productive resources—the state of technology and the quantity and quality of its land, workers, factories, machines, and other materials. If the government tries to spend too much into an economy that’s already running at full speed, inflation will accelerate. There are limits. However, the limits are not in our government’s ability to spend money, or in the deficit, but in inflationary pressures and resources within the real economy. MMT distinguishes the real limits from delusional and unnecessary self-imposed constraints.”

Bravo!

I said years ago that the delusional and unnecessary self-imposed constraints were the only way for our system to function, but sure let's cast them off why not.

Now that we see reality more clearly and the politicians are ready to spend whatever it takes, what are our enlightened thoughts about our tiny inflation problem?

...Taxes should be part of the inflation-fighting toolkit, but the goal is to build them into legislation (as needed) ahead of time, not to reach for them in an act of desperation after prices begin to accelerate. As I wrote with my colleague Randall Wray many years ago, MMT does not rely on raising taxes to fight inflation after it takes hold.6

So what is the MMT solution to dealing with inflation ex post—i.e. once the problem is here? There isn’t one. And I’d suggest running fast and far from anyone who offers you a quick and easy prescription for dealing with any and all inflation.

Mainstream economists, of course, offer just such a solution. The Federal Reserve will fix it! After all, it’s already their job (dual mandate), and they can act quickly and “independently,” tightening policy without fear of any backlash at the ballot box. I don’t know of a single MMT economist who agrees with this view...

Ah, inflation is complicated and no one has a good fix for it once it is occuring.

Shrug.