Question on Inflation...

[Hugin]

I've been wondering.

Which of these is more likely to lead to Inflation?

Overall, the RWers argument against a Minimum Wage Hike is that
a rapid influx of money into the economy by Minimum Wage earners
will cause Inflation.
(They'll suddenly be able to afford such luxuries as Health Care.)

If you choose number one... It blows the whole idea of "Supply Side
Economics" out of the water. The myth of "SSE" is that the money will
eventually "trickle down" to the lower income brackets. Causing Inflation.

If you choose number two... How can it be argued that huge annual salary
increases for CEOs is not going to cause Inflation? How is giving $465 Million
a year to one person any better hedge against Inflation than giving $465 to
a Million people in one year?

If you choose number three... Is there any more threat of Inflation from this
choice? I don't think so... Maybe some economist can explain it to me.

How come we never hear anyone yelling, "Inflation! Inflation! Inflation!" when
the first two categories are brought about?

[PeaceProgProsp]

1. Most likely to cause inflation: huge government spending

during "war."

That's what caused inflation under Johnson and Nixon.

When the government becomes a huge market participant for goods and services, it tends to drive up inflation.

[Hugin]

2. Deficit spending?

Makes sense...

Then how's an increase in the Minimum Wage an Inflationary threat as
all of the RWers are claiming?

[existentialist]

3. Deficit spending

Deficit spending is caused by spending money that you don't have. Where the government is concerned that ties directly into tax cuts too because if the government had more money, it could spend more without borrowing. Therefore, of the possible answers offered tax cuts for the rich is the best answer, the Laffer curve notwithstanding.

[Hugin]

4. I should add that choice to the selections.

[Warpy]

5. The bottom two lead to very specific types of inflation

because we all know the rich may pay more for their 3 hots and a cot per day, but even that is quite limited in scope.

What they bid up and tend to inflate beyond all reason is investments: fine art, antiques, rare wines, and STOCKS. The one thing Stupid's tax cuts did was support the stock market, which, as every wingnut "knows," is what has kept us out of a severe post Clinton recession.

:sarcasm:

The inflation we're seeing now has absolutely nothing to do with too much money chasing too few goods, the classic reasoning behind ordinary inflation. As in the 70s when OPEC tripled the price of oil and drove economy wide inflation, now the fall in the dollar is driving oil prices as well as the cost of importing all the stuff that used to be made here. The dollar is sliding because of Stupid's reckless tax cuts to the rich and corporate that have devastated the treasury.

Raising the minimum wage to, say, fifty bucks an hour overnight would do exactly what the Chicken Littles of the far right say it would, cost jobs and be inflationary. However, a modest proposal to double it would in all likelihood CREATE jobs as people at the bottom increased their demand for goods and services.

Remember, no rich man ever gave you a job he didn't have a customer waiting for.

[Hugin]

7. Thank you for your studied reply.

Reading over my OP I'm always frustrated by the fact I can't
write exactly what I'm trying to convey.

But, your reply makes sense based on my question.

[wuushew]

6. Inflation is completely avoidable

Printing money is supposedly justified by the cheap excuse that is serves as a lubricant to economic growth. However historically wages have always lagged in their response to overall inflation. Inflation is no friend of the worker. Perpetual growth is a abhorrent myth which will soon be deflated after two centuries of non-stop resource consumption by Amerikan society. I would very much to see a steady state economy and its lack of fluctuation in the value of currency.
In such a society determining the distribution of "pie" would be much easier politically, freed of the lie of the rising tide. I do not believe the argument that inflation is good for debtors either, since the guestimated risk of inflation is already factored into interest rates.

Changing prices are inherently inefficient as they impede the the functioning of supply/demand relationship by introducing unnecessary questions of price uncertainty. Who benefits by the value of material inventory losing value? Why should such things be forced to be sold prematurely to avoid loss or relabeled during time consuming inventory counting? Who is served by the effort to change the price of goods in printed advertisements and on billboards? Certainly no one is served by the ever decreasing utility of essentially worthless metallic pennies which would be much better used as electrically conductive components in machinery or structural material in buildings or vehicles.

Who wants to see the value of the dollar fall to that of the yen or peso? Americans already have such a poor mental grasp of the value of numbers that it is essentially impossible to describe the size of national debt without clever analogies. Can people conceptualize values beyond a trillion?


Why cannot the supply of money directly increase in relation to the size of a country's population? How the money is distributed should be the only relevant question. The equality of this issue would be addressed by increased levels of democratic socialism.

[newportdadde]

8. Option 4: "Fed prints money out of its ass and high energy costs"

[ProfessorGAC]

9. None Of Those

None of those have any appreciable leverage on inflation.

The biggest issue is an artificially inflated economy created by deficit spending that disguises the lack of real growth. This puts a higher velocity to the money supply, but with no concommitant increase in productivity. That, tautologically, results in higher prices. (It does not, by the way, require printing of new money. Borrowing of cash by the gov't doesn't require new money, just a change in the direction of flow.)

So, neither tax cuts nor high salaries of executives have anything to do with inflation. But, as i've written in other threads, there is not one instance, in the entire industrialized world over modern history, of inflation, employment, growth, or productivity being negatively affected by an increase in the statutory wage floor. Not once. So, it doesn't have any affect on inflation either. (Maybe if minimum wage were raised to $100k per year, but we're a light year from that.)
The Professor

[Hugin]

10. Thank you for your input...

Your first sentence would seem to be the crux of the matter.

"The biggest issue is an artificially inflated economy created by deficit spending that disguises the lack of real growth."

A real problem.

I'm convinced that high energy prices will compound this effect for individuals. That is being
hidden as well, lately I've been seeing "energy surcharges" added as a separate item on things
I've bought. Those "energy surcharges" are excluded from the calculations of how much those items
cost. It's a tricky maneuver, but, it'll eventually catch up when people start wondering where the
money went.

[ProfessorGAC]

11. Actually That's Another Problem

The petro industry is 80% of a trillion dollars as an industry. When their retail prices go up 20% in a year, that $160 billion dollars represents 1.3% nominal growth. So, with no real growth at all, the cost of gasoline pushes nominal growth to nearly a third of total nominal growth.

It's all so illusory.
The Professor